EPR Properties Reports First Quarter Results

  EPR Properties Reports First Quarter Results

Business Wire

KANSAS CITY, Mo. -- April 30, 2013

EPR Properties (NYSE:EPR) today announced operating results for the first
quarter ended March 31, 2013.

Total revenue was $83.4 million for the first quarter of 2013, representing a
9% increase from $76.8 million for the same quarter in 2012. Net income
available to common shareholders was $35.3 million, or $0.75 per diluted
common share, for the first quarter of 2013 compared to $15.4 million, or
$0.33 per diluted common share, for the same quarter in 2012. Funds From
Operations (FFO) for the first quarter of 2013 was $48.3 million, or $1.03 per
diluted common share, compared to $40.3 million, or $0.86 per diluted common
share, for the same period in 2012. FFO as adjusted for the first quarter of
2013 was $44.1 million, or $0.94 per diluted common share, compared to $40.4
million, or $0.86 per diluted common share, for the same period in 2012, an
increase of 9% per share.

David Brain, President and CEO, commented, "I am pleased to report that we
have continued our positive forward momentum with a strong start to 2013,
realizing 9% year over year growth in FFO as adjusted. We made ongoing
progress in the expansion of each of our primary investment segments,
investing in new assets with strong fundamentals. While we are seeing some
quarterly variability in the timing of our capital spend, we believe we have
ample current investment commitments and opportunities in our pipeline to meet
our annual guidance.”

A reconciliation of FFO to FFO as adjusted follows (unaudited, dollars in
thousands, except per share amounts):

                      Three Months Ended March 31,
                         2013                       2012
                         Amount       FFO/share     Amount       FFO/share
                                                                     
FFO                      $ 48,314       $  1.03       $ 40,270       $  0.86
  Transaction costs      318            0.01          158            —
  Gain on early
  extinguishment of      (4,539   )     (0.10   )     —             —       
  debt
FFO as adjusted          $ 44,093      $  0.94      $ 40,428      $  0.86 
                                                                     
Dividends declared                      $  0.79                      $  0.75
per common share
FFO as adjusted                         84      %                    87      %
payout ratio
                                                                             

Portfolio Update

As of March 31, 2013, the Company's portfolio of entertainment properties
consisted of 10.7 million square feet and was 99% leased, including 113
megaplex theatres that were 100% leased. The Company's portfolio of education
properties consisted of 2.4 million square feet, including 38 public charter
schools, and was 100% leased. The Company's portfolio of recreation properties
was 100% leased. The Company's overall portfolio consisted of 13.7million
square feet and was 98% leased.

As of March 31, 2013, the Company's real estate mortgage loan portfolio had a
carrying value of $468.6 million and included financing provided for
entertainment, education and recreation properties. Additionally, the Company
had $38.4 million in property under development and $197.7 million in land
held for development.

Investment Update

The Company's investment spending in the first quarter of 2013 totaled
approximately $38.7 million, and included investments in each of its four
operating segments.

Entertainment investment spending in the first quarter of 2013 totaled $14.7
million, and related primarily to investments in build-to-suit construction of
six megaplex theatres and one family entertainment center that are subject to
long-term triple net leases or long-term mortgage agreements.

Education investment spending in the first quarter of 2013 totaled $15.1
million, and related to investments in build-to-suit construction of five
public charter schools and an acquisition of an early childhood education
center located in Peoria, Arizona, that are subject to long-term triple net
leases or long-term mortgage agreements. The new early childhood education
center represents an extension of the Company's Education segment.

Recreation investment spending in the first quarter of 2013 totaled $7.4
million, and related to fundings under the Company's mortgage notes for
improvements at existing ski and waterpark properties. In addition, the
Company's recreation investment spending related to build-to-suit construction
of three TopGolf golf entertainment facilities as well as funding improvements
at the Company's ski property located in Maryland.

Other investment spending in the first quarter of 2013 totaled $1.5 million
and related to the land held for development in Sullivan County, New York.

In addition to the first quarter investment spending, the Company expects to
spend approximately $250.0 million related to existing commitments and
previously approved investments over the remainder of 2013. Beyond these
transactions, the Company has a significant investment pipeline and expects to
complete its 2013 investment spending plan totaling $300.0 million to $350.0
million.

Progress on Vineyard and Winery Sales

The Company continues to make progress toward selling its remaining vineyard
and winery investments. During the first quarter of 2013, the Company sold a
winery and a portion of related vineyards located in Sonoma County,
California, for proceeds of $24.1 million and recognized a gain of $0.6
million.

Balance Sheet Update

The Company's balance sheet remains strong with a debt to gross assets ratio
(defined as total long-term debt to total assets plus accumulated
depreciation) of 41% at March 31, 2013. The Company had $11.8 million of
unrestricted cash on hand and $59.0 million of debt outstanding under its
$400.0 million unsecured revolving credit facility at March 31, 2013.

During the first quarter of 2013, the Company completed a discounted payoff
prior to maturity of one if its loan agreements secured by a theatre property.
The Company made a cash payment of $9.7 million in full satisfaction of the
loan and recorded a gain on early extinguishment of debt of $4.5 million.

Additionally during the first quarter of 2013, the Company added to its
unsecured term loan facility that matures on January 5, 2017, increasing the
size of the facility from $240.0 million to $255.0 million. The additional
$15.0 million bears interest based on a grid related to the Company's senior
unsecured credit ratings, which at closing was LIBOR plus 175 basis points.

Dividend Information

The Company previously announced that it will begin paying a monthly common
share cash dividend beginning in the second quarter of 2013, with the first
monthly dividend payable on May 15, 2013 to shareholders of record as of April
30, 2013. This dividend represents an annualized dividend of $3.16 per common
share, a 5.3% increase over the prior year.

On February 26, 2013, the Company declared a regular quarterly cash dividend
of $0.79 per common share, which was paid on April 15, 2013 to common
shareholders of record on March 28, 2013. The Company also declared and paid
first quarter cash dividends of $0.359375 per share on its 5.75% Series C
cumulative convertible preferred shares, $0.5625 per share on its 9.00% Series
E cumulative convertible preferred shares and $0.4140625 per share on its
6.625% Series F cumulative redeemable preferred shares.

Guidance Confirmation

The Company is maintaining its previously announced 2013 guidance for
investment spending of $300.0 million to $350.0 million and FFO as adjusted
per share of $3.79 to $3.94.

Quarterly Supplemental

The Company's supplemental information package for the first quarter ended
March 31, 2013 is available on the Company's website at www.eprkc.com.

                                               
EPR Properties

Consolidated Statements of Income

(Unaudited, dollars in thousands except per share data)
                                                  
                                                  Three Months Ended March 31,
                                                  2013            2012
Rental revenue                                    $  60,787         $ 57,258
Tenant reimbursements                             4,744             4,822
Other income                                      24                25
Mortgage and other financing income               17,795           14,674   
Total revenue                                     83,350            76,779
Property operating expense                        7,005             6,374
Other expense                                     194               350
General and administrative expense                6,652             6,467
Gain on early extinguishment of debt              (4,539     )      —
Interest expense, net                             19,989            18,141
Transaction costs                                 318               158
Impairment charges                                —                 3,998
Depreciation and amortization                     13,438           11,740   
Income before equity in income from joint         40,293            29,551
ventures and discontinued operations
Equity in income from joint ventures              351              47       
Income from continuing operations                 $  40,644         $ 29,598
Discontinued operations:
Income (loss) from discontinued operations        (3         )      355
Impairment charges                                —                 (8,845   )
Gain on sale or acquisition of real estate        565              282      
Net income                                        41,206            21,390
Add: Net income attributable to                   —                (18      )
noncontrolling interests
Net income attributable to EPR Properties         41,206            21,372
Preferred dividend requirements                   (5,952     )      (6,001   )
Net income available to common shareholders       $  35,254        $ 15,371 
of EPR Properties
Per share data attributable to EPR Properties
common shareholders:
Basic earnings per share data:
Income from continuing operations                 $  0.74           $ 0.51
Income (loss) from discontinued operations        0.01             (0.18    )
Net income available to common shareholders       $  0.75          $ 0.33   
Diluted earnings per share data:
Income from continuing operations                 $  0.74           $ 0.50
Income (loss) from discontinued operations        0.01             (0.17    )
Net income available to common shareholders       $  0.75          $ 0.33   
Shares used for computation (in thousands):
Basic                                             46,854            46,677
Diluted                                           47,047            46,945
                                                                             

                                               
EPR Properties

Reconciliation of Net Income Available to Common Shareholders

to Funds From Operations (FFO) (A)

(Unaudited, dollars in thousands except per share data)
                                                  
                                                  Three Months Ended March 31,
                                                  2013            2012
FFO:
Net income available to common shareholders       $  35,254         $ 15,371
of EPR Properties
Gain on sale or acquisition of property           (565       )      (282     )
Real estate depreciation and amortization         13,468            12,197
Allocated share of joint venture depreciation     157               141
Impairment charges                                —                12,843   
FFO available to common shareholders of EPR       $  48,314        $ 40,270 
Properties
                                                                    
FFO per common share attributable to EPR
Properties:
Basic                                             $  1.03           $ 0.86
Diluted                                           1.03              0.86
Shares used for computation (in thousands):
Basic                                             46,854            46,677
Diluted                                           47,047            46,945
Other financial information:
Straight-lined rental revenue                     $  1,214          $ 801
Dividends per common share                        $  0.79           $ 0.75
                                                                             

      The National Association of Real Estate Investment Trusts (“NAREIT”)
      developed FFO as a relative non-GAAP financial measure of performance of
      an equity REIT in order to recognize that income-producing real estate
      historically has not depreciated on the basis determined under GAAP and
      management provides FFO herein because it believes this information is
      useful to investors in this regard. FFO is a widely used measure of the
      operating performance of real estate companies and is provided here as a
      supplemental measure to GAAP net income available to common shareholders
      and earnings per share. Pursuant to the definition of FFO by the Board
      of Governors of NAREIT, we calculate FFO as net income available to
      common shareholders, computed in accordance with GAAP, excluding gains
      and losses from sales or acquisitions of depreciable operating
      properties and impairment losses of depreciable real estate, plus real
      estate related depreciation and amortization, and after adjustments for
      unconsolidated partnerships, joint ventures and other affiliates.
      Adjustments for unconsolidated partnerships, joint ventures and other
      affiliates are calculated to reflect FFO on the same basis. We have
      calculated FFO for all periods presented in accordance with this
(A)  definition. FFO is a non-GAAP financial measure. FFO does not represent
      cash flows from operations as defined by GAAP and is not indicative that
      cash flows are adequate to fund all cash needs and is not to be
      considered an alternative to net income or any other GAAP measure as a
      measurement of the results of our operations or our cash flows or
      liquidity as defined by GAAP. It should also be noted that not all REITs
      calculate FFO the same way so comparisons with other REITs may not be
      meaningful. In addition to FFO, we present FFO as adjusted. Management
      believes it is useful to provide it here as a supplemental measure to
      GAAP net income available to common shareholders and earnings per share.
      FFO as adjusted is FFO plus charges for loan losses, costs (gain)
      associated with loan refinancing or payoff, net, preferred share
      redemption costs and transaction costs, less gain on early
      extinguishment of debt. FFO as adjusted is a non-GAAP financial measure.
      FFO as adjusted does not represent cash flows from operations as defined
      by GAAP and is not indicative that cash flows are adequate to fund all
      cash needs and is not to be considered an alternative to net income or
      any other GAAP measure as a measurement of the results of the Company's
      operations, cash flows or liquidity as defined by GAAP.
      

The additional 1.9 million common shares that would result from the conversion
of the Company's 5.75% Series C cumulative convertible preferred shares and
the additional 1.6 million common shares that would result from the conversion
of the Company's 9.00% Series E cumulative convertible preferred shares and
the corresponding add-back of the preferred dividends declared on those shares
are not included in the calculation of diluted earnings per share and FFO per
share for the three months ended March 31, 2013 and 2012 because the effect is
not-dilutive.

                                                        
EPR Properties

Condensed Consolidated Balance Sheets

(Dollars in thousands)
                                                             
                                          March 31, 2013     December 31, 2012
Assets                                    (unaudited)
Rental properties, net of accumulated
depreciation of $383,332 and              $  1,858,204       $    1,885,093
$375,684 at March 31, 2013 and
December 31, 2012, respectively
Rental properties held for sale, net      2,788              2,788
Land held for development                 197,740            196,177
Property under development                38,369             29,376
Mortgage notes and related accrued        468,557            455,752
interest receivable
Investment in a direct financing          235,302            234,089
lease, net
Investment in joint ventures              12,287             11,971
Cash and cash equivalents                 11,763             10,664
Restricted cash                           32,614             23,991
Deferred financing costs, net             18,708             19,679
Accounts receivable, net                  38,246             38,738
Other assets                              37,214            38,412
Total assets                              $  2,951,792      $    2,946,730
Liabilities and Equity
Accounts payable and accrued              $  47,798          $    65,481
liabilities
Dividends payable                         43,113             41,186
Unearned rents and interest               19,984             11,333
Long-term debt                            1,383,392         1,368,832
Total liabilities                         1,494,287          1,486,832
EPR Properties shareholders’ equity       1,457,128          1,459,521
Noncontrolling interests                  377               377
Equity                                    1,457,505         1,459,898
Total liabilities and equity              $  2,951,792      $    2,946,730
                                                                  

About EPR Properties

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. Our
total investments exceed $3.2 billion and our primary investment segments are
Entertainment, Recreation and Education. We adhere to rigorous underwriting
and investing criteria centered on key industry and property level cash flow
standards. We believe our focused niche approach provides a competitive
advantage, and the potential for higher growth and better yields. Further
information is available at www.eprkc.com or from Brian Moriarty at
888-EPR-REIT.

          CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

With the exception of historical information, certain statements contained or
incorporated by reference herein may contain forward-looking statements within
the meaning of Section27A of the Securities Act of 1933, as amended (the
“Securities Act”), and Section21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), such as those pertaining to our acquisition or
disposition of properties, our capital resources, future expenditures for
development projects, and our results of operations. Forward-looking
statements involve numerous risks and uncertainties and you should not rely on
them as predictions of actual events. There is no assurance the events or
circumstances reflected in the forward-looking statements will occur. You can
identify forward-looking statements by use of words such as “will be,”
“intend,” “continue,” “believe,” “may,” “expect,” “hope,” “anticipate,”
“goal,” “forecast,” “expects,” “pipeline,” “anticipates,” “estimates,”
“offers,” “plans,” “would” or other similar expressions or other comparable
terms or discussions of strategy, plans or intentions contained or
incorporated by reference herein. While references to commitments for
investment spending are based on present commitments and agreements of the
Company, we cannot provide assurance that these transactions will be completed
on satisfactory terms. In addition, references to our budgeted amounts and
guidance are forward-looking statements. Forward-looking statements
necessarily are dependent on assumptions, data or methods that may be
incorrect or imprecise. These forward-looking statements represent our
intentions, plans, expectations and beliefs and are subject to numerous
assumptions, risks and uncertainties. Many of the factors that will determine
these items are beyond our ability to control or predict. For further
discussion of these factors see “Item 1A. Risk Factors” in our most recent
Annual Report on Form 10-K and, to the extent applicable, our Quarterly
Reports on Form 10-Q.

For these statements, we claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995. You are cautioned not to place undue reliance on our
forward-looking statements, which speak only as of the date hereof or the date
of any document incorporated by reference herein. All subsequent written and
oral forward-looking statements attributable to us or any person acting on our
behalf are expressly qualified in their entirety by the cautionary statements
contained or referred to in this section. We do not undertake any obligation
to release publicly any revisions to our forward-looking statements to reflect
events or circumstances after the date hereof.

Contact:

EPR Properties
Brian Moriarty, 888-EPR-REIT
www.eprkc.com
 
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