Good day, and thank you for standing by. Welcome to the ERP Q3, 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mr. Brian Moriarty, VP of Corporate Communications. Brian, you have the floor.

Thank you, Stacy, and thanks to everybody for joining us today on the EPR Properties third quarter 2022 earnings call and webcast. Participants on today's call are Greg Silvers, Chairman and CEO; Greg Zimmerman, Executive Vice President and CIO; and Mark Peterson, Executive Vice President and CFO. I'll start the call by informing you that this call may include forward-looking statements as defined in 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 the results of operations may vary materially from these contemplated by such forward-looking statements. Discussion of those factors that could cause results to differ materially from these forward-looking statements, are contained in the company's SEC filings included with the company's reports on Form 10-K and 10-Q. Additionally, this call will contain references to certain non-GAAP measures, which we believe are useful in evaluating the company's performance. A reconciliation of these measures to the most directly comparable GAAP measures are included in today's earnings release and the supplemental information furnished to the SEC under Form 8-K. If you wish to follow along, today's earnings release, supplemental and earnings call presentation are all available on the Investor Center page of the company's website, which is www.eprkc.com. Now, I'll turn the call over to Greg Silvers.

Thank you, Brian. Good morning, everyone. And thank you for joining us on today's third quarter 2022 earnings call this webcast. In the third quarter, we delivered healthy earnings growth as we continue to see resilience at our customers businesses amid sustained consumer demand for the experiences provided by our customers. Additionally, we have yet to see any meaningful impact on demand from inflationary pressures. Today we're also reintroducing rent coverage disclosures. As Greg will highlight, we believe this data demonstrates the strength of the recovery of our non-theater properties, while providing a baseline for our theater portfolio. Even as the recovery is still taking shape, our overall rent coverage is above the 2019 pre-pandemic level. Our theater coverage demonstrates that consumers want to see films in theaters and as studios ramp up their production schedules, we anticipate that coverage will improve as well. In 2019, we introduced our strategic focus on properties which support the experience economy. While we could not have foreseen that our properties would have been tested so severely by a pandemic, we believe the experience economy is alive and well and our investing thesis remains intact, as evidenced by the variety of properties we are highlighting today and have discussed throughout 2022, we are uniquely positioned to gain access to and pursue the broader set of experiential properties within our target set. Everyone is painfully aware of the disruption in the capital markets, and our job as stewards of capital is to be prudent with its deployment. As a result, we've decided to moderate our growth in the near term in response to our increased cost of capital. This moderation is not a reflection of fewer opportunities, rather our discipline given current conditions, we will not grow simply to get larger. Rather, we will demand earnings accretion with our investments. We continue to generate significant excess cash flow, which combined with our undrawn line of credit will support a more limited investment spin without sacrificing our investment grade credit. Lastly, it's clear that the Cineworld restructuring and the broader market turbulence have combined to create a significant dislocation of our stock price. Our current stock price earnings multiple is significantly discounted relative to historical levels, even as we are paying a well covered dividend that is supported by our free cash flow. As we pursue a resolution with Cineworld, we remain focused on the fundamentals of our business. We appreciate the support of our investors who are focused on the fundamentals, and we look forward to delivering strong total shareholder return over the long term. Now I'll turn it over to Greg Zimmerman will cover the business in greater detail.

Thanks, Greg. At the end of the second quarter, our total investments were approximately $6.6 billion with 356 properties in service and 97% leased. During the quarter our investment spending was $82 million, 100% of the spending was an experiential portfolio, and included the acquisition of a project for redevelopment and additional financing for an existing asset. Our experiential portfolio comprises 282 properties with 47 operators and accounts for 91% of our total investments, or approximately $6 billion and at the end of the quarter was 97% occupied. Our education portfolio comprises 74 properties with eight operators and at the end of the quarter was 100% occupied. Well, broadly, there is increasing macro uncertainty and concern around inflation and the possibility of a recession, we believe our value oriented drive to destinations will prove to be resilient because they provide a compelling value proposition for families. To date, we have not seen meaningful impact on our operators from inflation or gas prices, and our expectation is that this will be the case in the event of continuing challenging economic conditions. As noted last quarter, with a stabilization of our portfolio after COVID, we are reinstituting coverage disclosure, we thought it would be helpful to compare our most recent coverage data. The most recent data is based on a June trailing 12-month period except for attractions which is August and ski which is April as noted on the slide. Importantly, overall portfolio coverage exceeded 2019. overall portfolio coverage for the trailing 12 months is two times compared to 1.9 times for 2019. For theatres, trailing-12 month coverage is 1.3 times with Box Office at $7.1 billion for the same period. In 2019, theater coverage was 1.7 times with $11.4 billion in box office. For the non-theater portion of our portfolio, trailing…

Thank you, Greg. Today I will discuss our financial performance for the quarter provide an update on our strong balance sheet and close with updated 2022 earnings guidance. FFO adjusted for the quarter was $1.16 per share versus 86 cents in the prior year and AFFO for the quarter was $1.22 per share compared to $0.92 in the prior year. Now moving to the key variances, total revenue for the quarter was $161.4 million versus $139.6 million in the prior year. This increase was due primarily to improve collections from certain tenants which continued to be recognized in revenue on a cash basis or had previously received abatements. As to Regal, we received all rent and deferral payments for July and August, but as Greg mentioned, we did not receive the rent or the deferral payment for September. Also contributing to the increase for the quarter was scheduled rent increases as well as the effect of acquisitions and developments completed over the past year. This increase was partially offset by the impact of property dispositions. During the third quarter, all deferred rent and interest was collected as scheduled, except Regal September deferral payment that I just mentioned. We collected $4.5 million of deferred rent from accrual basis tenants and borrowers that reduced receivables, leaving a balance on our books that September 30 of $7 million. We expect to collect approximately $5 million of this remaining balance in the fourth quarter. Additionally, during the quarter, we collected $4.6 million of deferred rent and $0.8 million of deferred interest from cash basis customers that were recognized as revenue and receive and which were not included in our guidance. At September 30, we had approximately $123 million of deferred rent owed to us not on the books, which will continue continue to be…

Thank you, Mark. As our quarterly performance indicates the experiential economy continues to perform despite the headwinds of inflation. Our company rent coverage driven primarily by our non-theater portfolio is now above 2019 levels, and we continue to be pleased with the recovery of the exhibition business. Overall, we had a very productive quarter with strong results and quality investments. As Greg discussed with approximately $250 million of future commitments, we are again demonstrating the depth of our investment pipeline, yet we remain prudent in our capital deployment given the backdrop of challenging capital markets. Our confidence is grounded in the resiliency of the experiential sector, and our ability to execute on our strategy. With that, why don't I open it up for questions?

Thank you. At this time, we will conduct a question-and-answer session. [Operator Instructions] Our first question comes from Joshua Dennerlein at BofA. Joshua, go ahead with your question.

Yeah. Good morning, everyone. I'm wanting to kind of share a little bit more on I don't know if there's any more you can kind of share on the discussions with Regal and and how you're thinking about the bankruptcy and kind of risks your assets.

Joshua, that really not in the sense that we're -- it's a legal process, we're actively engaged. It's not good for us to negotiate on an open line like this with without our partner being part of it. We've said before, we feel that we have an above average Regal portfolio, as coverages indicate that the industry is recovering. I appreciate that everyone's questions and concerns and wanting resolution of this sooner rather than later. And wanting to know more details about it. It's just something that until were considerably further in this process, we were really not able to discuss.

Is there any way you can kind of handicap like the timeframe that we might be able to kind of hear some like further details on? Like how long do these processes typically take?

Again, I would love to tell you that there is a defined but if anybody has been involved in bankruptcy before the debtor has a lot going on. We know they have a significant number of landlords that they need to work with and work through. Again, I will tell you, we are wanting to resolve this as expeditiously as we can. But with that said, we're really not in control of the timeframe, they've got a lot of interested parties, both on their capital, their balance sheet side as well as landlords that I think they're working through. And what I can commit to you is as we get more clarity on our situation, we'll be glad to share that.

Okay, and how should we think about coverage as we head into 3Q? Because it's, I know, it's a one quarter lag. Is that going to dip further just based on the commentary on I guess August and September?

I think if you look about, and this is it this is I'm going to quote kind of industry and unless Greg to say this. That was based upon a $7.1 billion, trailing 12 months. I think most people think that for the 12 month calendar year that it will be higher than that numbers, so overall box office should be higher. So hopefully that pretends to better than what we're showing right now. But Greg?

Yeah, absolutely. I think overall box office will be higher. And Joshua, if you look at the three films that are opening, Black Adam is performed extremely strongly out of the gate and Black Panther - Wakanda forever is getting Rev reviews. So we anticipate a really strong end of the year.

Okay. I'll jump back in the queue. Thanks, guys.

Thanks, Joshua.

Next question comes from Nick Joseph with Citi. Nick, go ahead with your question.

Thanks and good morning, everyone. So it's actually Nick Darrant for Nick Joseph right now. And the question is on those 8% yields, I think you mentioned. So is that across the whole portfolio? And then specifically in the experiential portion, how does that trending in '23 and if there's any specific verticals that deviate from that 8%?

Greg, I'll let you take that.

Yeah, Nick. I think it's generally across all of our verticals, the 8% cap rate, some may be slightly under that some may be slightly over that. I don't think that we're seeing any meaningful compression and cap rates for sure, in any of our verticals, and we're seeing slight expansion as the economy slows down. And again, we're not investing in any theater. So we're education, so all of our investments are in our experiential portfolio.

Thanks. And then, just on if you guys are changing your underwriting assumptions on future capital commitments, given sort of where we stand right now. Any color on that would be appreciated.

I think and I'll let Greg comment, as well. I think we've always approached these very conservatively. Again, we never really took into consideration the kind of the bump of whether you call it revenge spending, we were underwriting to what we think our long-term trends. I think there's always as we go into a challenging environment, you probably add a tinge more conservatism. But remember, we're generally leasing these for 15 to 20 years. So you're looking at this over a prolonged period of time in multiple economic cycles. So you're always going to have standard deviations from your mean, underwriting that you want to look at and stress those/ But Greg.

No, I think that's well put.

Thanks.

Thanks, Nick.

Our next question is coming right up. Next is Anthony Paolone with JPMorgan. Anthony, go ahead with your question.

Okay. Thank you. And good morning. I guess just first on Regal, can you give us what the annualized or monthly scheduled rent is? I know you gave like kind of a per share, and we can kind of back into a rough number. But just to kind of make sure we have the right figures there.

Yeah, it's about $7.1 million in terms of regular rent, and the deferral payment previously was about $1.5 million per month.

Okay, in that 1.5, that relates to I think, the $92 million you said that they kind of owed and that they were chipping away at? Is that what that is?

Yeah, correct.

Okay, got it. Just want to understand it. And then just second, with regards to thinking about the guidance in the swing factor for the rest of the year. I guess, $31 million difference between the 123 and the 92 related to Regal. Is any of that factored into the guide?

Sorry, I'm not following, what number you're referring to?

Yeah '23. Yeah, I think you said--

Yeah, I think Tony, if you look at the slide with what's factored in the guide, if you see Mark, I thought did a really good job of telling people what's in and out of the guide. So the rent is in, but the deferral for December is not in.

Right.

I understand what you're saying. We expect the 71 and added the 15 and you're talking about the whole thing. Yeah, we tried to lay that out. As Greg said on the slide, where October November regular rent and deferral payments are in the guide that we got subsequent to the end of the day. or, and then regular rent for December but not the deferral payment because our policy with respect to deferral payments is to not include until we have them in hand.

Okay, I understand. Just sorry, I probably wasn't being very clear, just beyond Regal. Now, just with the other potential deferred rent, you might correct sort of the rest of that $123 million outside of Regal. None of that is contemplated in the guide right now.

So you see right below that on the same slide, non-Regal deferral payments. We did include a $0.5 million in October and a $0.5 million November that we've already received. There could be another $0.5 ,m for December, that's not in our guidance, part of the upside from the midpoint. But that's right, right below that you see the non-Regal cash basis deferral payments on the slide, that's online.

Okay. Got it. And then just last question, just you mentioned yields that kind of aid and they started, they've been at it for a pretty long time. But then you'd also said, reasonably disciplined was sort of this bid, ask spreads. So just wondering, like, where -- what would get you to deploy more capital? Like, is it a nine or is it in half, or kind of, like, how big is that spread right now for you?

I think Tony, and I let Greg comment on this as well. We're very focused on what I would call relationship transactions where we're supporting our existing tenants. Again, it's probably not that quarter point, but also what we feel will fuel future growth, as we move forward. Greg and his team are, are really good at negotiating kind of the ability to see a plethora of deals as we move beyond these turbulent periods. So we're, we're focused, probably not on that next quarter point, but what helps fuel our pipeline as we move forward, either through relationships or relationship agreements that give us access to more product as we get out of this kind of -- get better get beyond this turbulent period?

Yeah. Tony, I think that's absolutely correct. I mean, we're focused on this year, we are expanding Pagosa we bought Marietta in conjunction with our partner at Pagosa. We did additional financing in Alyeska. And going forward, there's a lot of focus on either existing relationships or building new relationships. And I completely agree with Greg that's more important to us in a quarter time.

Okay, great. Thank you.

Thanks, Tony.

[Operator Instructions] Our next question is coming from RJ Milligan with Raymond James. RJ. go ahead with your question.

Thanks, and good morning. We appreciate the updated coverage information. Greg, in the past, you've talked about the profitability of the Regal theaters relative to the other Regal theaters in the country. I was just curious if you could give any color on a coverage levels for those specific assets or at least comment if they're running in trend with the rest of the portfolio and that coverage is above 2019 levels.

Again, I think, well, the coverage is on all theaters are not above 2019 levels. Let's be clear. What we've tried to say is -- and first of all, I think we do have an above average Regal portfolio. So on average, yes, that I think they're running better than most Regal's. And then they're in fact, probably as a percent outperforming their -- what was their percentage of the box office in 2019. When we look at, we look at coverages now, what we talked about earlier if you recall, was coverage about a 10 kind of breakeven at around the $6 billion and we had said at the levels we thought we would be at 125 to 135 where things were being predicted on where box office. Again, I think this points to how well we understand and Greg and his team understands that industry to indicate kind of where we're landing out. I also think that it points to that the theater business is healthier than people think even at these reduced levels. I believe there were a lot of investors when we spoke to them that they thought coverages were like below one at these levels, and we're showing that it's not, we don't have to necessarily get back to $11 billion to have a healthy portfolio because of the strength of our portfolio. And I think that's the message we wanted to convey.

And to be clear, RJ, the coverage is 1.3 times against that $7.1 billion, trailing 12. And in 2019, it was 1.7 times against an $11.4 billion box. And as we said earlier, we do expect the box office to continue its publication through the year, the trailing 12 months number is probably a little low for the full year.

Got it. And then we've heard from some of your peers more of on a one-off basis about, the ability to retain some of these series. I'm just curious, what's the demand out there from either local operators or national operators to take on or re-tenant, what were profitable locations?

Again, I think there's going to be -- its decision to set but it's location by location. I mean, I think Greg and his team this year, we've done a really good job of transferring theatres to non-theaters and selling off for other uses, as we've talked about on previous calls. I think good locations, there's always going to be demand because most of the operators in the studios see this business recovering. Recent announcements by a lot of studios have continued to reiterate that. The streaming model is really just to replacement for the network's and that this is when they need films to perform well in theater, generate excess cash flow. So I think it's just as we've talked about before, production ramping back up and getting back to a level that works, but everybody through this testing period has seen the power of it. But Greg?

No, I think that's right. The only thing I would add is that Paramount just earlier this week reaffirmed that the best model for them economically is theatrical release to streaming.

Theatrical release first. Then just to stream, yes.

With a window. Sorry, yeah. Thanks.

Great, thank you guys.

Thanks RJ.

Our next question comes from Michael Carroll with RBC Capital Markets. Mike, go ahead with your question.

Yep. Thanks. I know last quarter, you guys were pretty optimistic about the 2023 box office. I know there has been some reshuffling with some Marvel movies being delayed and think there's a Star Wars movie that was delayed. How should we think about that? Does that reduce the optimism for 2023, or is that just kind of normal things that we should typically expect, just given that we're so far out still, from some of those movies being released?

Yeah, and I think there's a lot of moving things. It's never I just be candid, it's never great to see what you think is a big title moving out of a year into a different year. But we're still kind of in the early stages of how 2023 will look. So I don't think that I think we still think there's there can be improvement. But as we've said before, it's getting better. It's just not quickly getting better. It's gradually in building the ---

Yeah, I'd say it's just take time to restart the pipeline. And clearly Hollywood is in the midst of doing that. And I think you'll see continued ramp up through '23 and '24, Michael.

Great. I know Greg Zimmerman, you are kind of highlighting, obviously several movie titles. I mean, is there a good way for us to think about it, like how many tenfold type films do we need to see a quarter or a year for that to be a good for a good box off this year? Or is there a way to that we can think about that?

Yeah, probably the best metric is we are probably down about 50% and total titles this year. So as that number of title increases, titles increase, the box office will increase. That's the real issue.

Okay, and I can just sneak one more in there. So can you talk a little bit about that coverage ratio highlighted? I know you have several tenants. I mean, historically, I think that EPRs line was that all your tenants were right around that that average coverage number. I mean, is that true today? I mean, how big is that bands of those individual tenants right around that that average coverage number?

Again, there's there is dispersion. It's again, I think we think on a relative basis of the performance of our properties, that it's all fairly strong. Getting into specific coverages, is very, very -- at least as we're dealing with Regal right now, something that we'd rather not do because we're for specific information it becomes a little problematic. But like I said, overall, the calculation that we did in 2019 and how we talked about it, then is the exact same way as it is right now.

Great, thank you.

Thanks, Michael.

Our next question comes from John Massocca from Ladenburg Thalmann. John, go ahead with your question.

Good morning.

Good morning, John.

So just to clarify, the high end of the new guidance range contemplates collection of all of the rent and deferral payments from cash basis tenants, correct. I did that right.

Yeah, that's correct. That's part of a contribute to the upside along with the fact we may get a portion of September's rent that we didn't collect yet.

And If I'm thinking about this guidance, the high end versus prior guidance, what amounts of kind of cash rent and deferral payment was contemplated in that prior highest number?

Well, no deferral cash basis deferral payments were unless they had been received.

We did not include -- so previously, in our guidance, at the end of June, we counted only deferral payments through June and in our guidance of upper and lower end did not contemplate deferrals, deferral payments, okay. Now if we moved to third quarter, we're including just because we want to talk about will receive subsequent end of the quarter, particularly with respect to Regel's, we're including what we received, not only through September, but also October-November. So the upside to our guidance now, since we are kind of dealing with post quarter and deferral payments really becomes the Regal deferral for one month, which is $1.5 million for December and a $0.5 million for the non-Regal customers for the month of December. And then as I mentioned, there's this September rent payment out there that in our midpoint of guidance, we don't anticipate getting, but we could get a portion of that yet this year. So that that contributes to the upside. And then along with the fact that we do have, manage properties and so forth that there's a band, that those could come in at high or low, which impact the guidance as well.

Okay. Then switching gears a little bit, the Marriott [ph] California investment apologies if I missed that in the prepared remarks, but how is that investment structured? Is that a net lease initially or is that going to be in kind of a JV or operator model? Just kind of how are you looking at that investments from a structure perspective?

Yeah, John, it's a sale leaseback.

That clears up. All right, that's it for me. Thank you very much.

Thanks, John.

That was our final question. So I would now like to turn it back over to Greg Silvers for some closing remarks.

Thank you, and thank you, everyone. For your time and attendance. I want to reiterate, again, I appreciate and understand that we have a lot of questions that go on about our theater portfolio. But as we've met with many of you, we talked about the strength, the resiliency of our non-theater, kind of experiential portfolio. And as these coverages today, we talked about those properties were doing incredibly well. And that coverage indicates we're talking about moving from 22 to 28 overall, and remember, that still represents 62% of our portfolio. So with that, I appreciate your time and attention and we look forward to talk at our yearend call.

Thank you for your participation in today's conference. This does conclude the program you may now disconnect.