Market Overview

EPR Properties Reports Second Quarter 2018 Results

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Company Reports Record Quarterly Revenue and Earnings
Increases
Earnings Guidance for 2018

EPR Properties (NYSE:EPR) today announced operating results for the
second quarter and six months ended June 30, 2018.

Three Months Ended June 30, 2018

  • Total revenue was $202.9 million for the second quarter of 2018,
    including a $45.9 million prepayment fee received from Och-Ziff Real
    Estate ("OZRE") as further discussed below, and represents a 37%
    increase from $147.8 million for the same quarter in 2017.
  • Net income available to common shareholders was $85.5 million, or
    $1.15 per diluted common share, for the second quarter of 2018
    compared to $74.6 million, or $1.02 per diluted common share, for the
    same quarter in 2017.
  • Funds From Operations (FFO) (a non-GAAP financial measure) for the
    second quarter of 2018 was $139.0 million, or $1.84 per diluted common
    share, compared to $85.0 million, or $1.15 per diluted common share,
    for the same quarter in 2017.
  • FFO as adjusted (a non-GAAP financial measure) for the second quarter
    of 2018 was $141.8 million, or $1.87 per diluted common share,
    compared to $94.9 million, or $1.29 per diluted common share, for the
    same quarter in 2017, representing a 45% increase in per share results.

Six Months Ended June 30, 2018

  • Total revenue was $357.8 million for the six months ended June 30,
    2018, representing a 29% increase from $276.9 million for the same
    period in 2017.
  • Net income available to common shareholders was $109.0 million, or
    $1.47 per diluted common share, for the six months ended June 30, 2018
    compared to $122.5 million, or $1.78 per diluted common share, for the
    same period in 2017.
  • FFO (a non-GAAP financial measure) for the six months ended June 30,
    2018 was $200.1 million, or $2.67 per diluted common share, compared
    to $158.9 million, or $2.30 per diluted common share, for the same
    period in 2017.
  • FFO as adjusted (a non-GAAP financial measure) for the six months
    ended June 30, 2018 was $235.8 million, or $3.12 per diluted common
    share, compared to $171.4 million, or $2.48 per diluted common share,
    for the same period in 2017, representing a 26% increase in per share
    results.

"We are pleased to announce another quarter of record revenues and
earnings, as well as an increase in our annual earnings guidance,"
stated Company President and CEO Greg Silvers. "This ongoing strong
performance is supported by our differentiated portfolio of high quality
assets and the underlying strength of each of our investment segments.
We also continued our successful capital recycling efforts, allowing EPR
to earn attractive prepayment fees and to reinvest the proceeds in
accretive opportunities. Additionally, with the completion of a $400
million bond offering our balance sheet is strong and well positioned
for future growth."

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

 
Three Months Ended June 30,
2018   2017
Amount   FFO/share Amount   FFO/share
FFO available to common shareholders $ 139,037 $ 1.84 $ 84,979 $ 1.15
Costs associated with loan refinancing or payoff 15 9
Transaction costs 405 0.01 218
Litigation settlement expense 2,090 0.03
Termination fee included in gain on sale 3,900 0.05
Impairment of direct financing lease - allowance for lease loss
portion (1)
7,298 0.10
Gain on early extinguishment of debt (977 ) (0.01 )
Gain on insurance recovery (included in other income) (606 )
Deferred income tax expense 235 50
Impact of Series C and Series E Dilution   (0.01 )    
FFO as adjusted available to common shareholders $ 141,782   $ 1.87   $ 94,871   $ 1.29  
Dividends declared per common share $ 1.08 $ 1.02
FFO as adjusted available to common shareholders payout ratio 58 % 79 %
 
 
Six Months Ended June 30,
2018 2017
Amount FFO/share Amount FFO/share
FFO available to common shareholders $ 200,061 $ 2.67 $ 158,873 $ 2.30
Costs associated with loan refinancing or payoff 31,958 0.43 14
Transaction costs 1,014 0.01 275
Litigation settlement expense 2,090 0.03
Termination fee included in gain on sale 5,820 0.08
Impairment of direct financing lease - allowance for lease loss
portion (1)
7,298 0.10
Gain on early extinguishment of debt (977 ) (0.01 )
Gain on insurance recovery (included in other income) (606 )
Deferred income tax expense 663 0.01 684 0.01
Impact of Series C and Series E Dilution   (0.03 )    
FFO as adjusted available to common shareholders $ 235,786   $ 3.12   $ 171,381   $ 2.48  
Dividends declared per common share $ 2.16 $ 2.04
FFO as adjusted available to common shareholders payout ratio 69 % 82 %
(1)   Impairment charges recognized during the three and six months ended
June 30, 2017 total $10.2 million and related to our investment in a
direct financing lease, net, consisting of $2.9 million related to
the residual value portion and $7.3 million related to the allowance
for lease loss portion.
 

Portfolio Update

The Company's investment portfolio (excluding property under
development) consisted of the following at June 30, 2018:

  • The Entertainment segment included investments in 151 megaplex theatre
    properties, seven entertainment retail centers (which include seven
    additional megaplex theatre properties) and 11 family entertainment
    centers. The Company's portfolio of owned entertainment properties
    consisted of 13.3 million square feet and was 99% leased, including
    megaplex theatres that were 100% leased.
  • The Recreation segment included investments in 18 ski areas, 21
    attractions, 31 golf entertainment complexes and ten other recreation
    facilities. The Company's portfolio of owned recreation properties was
    100% leased.
  • The Education segment included investments in 65 public charter
    schools, 67 early education centers and 14 private schools. The
    Company's portfolio of owned education properties consisted of 4.7
    million square feet and was 98% leased.
  • The Other segment consisted primarily of the land under ground lease,
    property under development and land held for development related to
    the Resorts World Catskills casino and resort project in Sullivan
    County, New York.

The combined owned portfolio consisted of 21.2 million square feet and
was 99% leased. As of June 30, 2018, the Company also had a total of
$268.1 million invested in property under development.

During the three months ended June 30, 2018, Six Flags Entertainment
Corporation ("Six Flags") completed their acquisition of the leasehold
interest in five of the Company's attraction properties which were
previously operated by Premier Parks, LLC. As a result, Six Flags
operates six of the Company's attraction properties at June 30, 2018.

Investment Update

The Company's investment spending for the three months ended June 30,
2018 totaled $129.9 million (bringing the year-to-date investment
spending to $238.5 million), and included investments in each of its
primary operating segments:

  • Entertainment investment spending during the three months ended June
    30, 2018 totaled $23.8 million, including spending on build-to-suit
    development and redevelopment of megaplex theatres, entertainment
    retail centers and family entertainment centers.
  • Recreation investment spending during the three months ended June 30,
    2018 totaled $88.6 million, including investment spending on
    build-to-suit development of golf entertainment complexes and
    attractions, an acquisition of an attraction property described below
    and the redevelopment of ski areas.

    On June 22, 2018, the
    Company acquired one attraction property located in Pagosa Springs,
    Colorado for approximately $36.4 million. The property is a natural
    hot springs resort and spa on approximately eight acres and is subject
    to a long-term, triple-net lease.
  • Education investment spending during the three months ended June 30,
    2018 totaled $17.5 million, including spending on build-to-suit
    development and redevelopment of public charter schools, early
    education centers and private schools.

Early Childhood Education Tenant Update

In July 2018, the Company entered into a new lease agreement with
Children's Learning Adventure USA ("CLA") related to 21 open schools
which replaces the prior lease arrangements and provides for a one-month
term for rent of $1.0 million expiring on August 31, 2018. The Company
may agree to extend this lease, in its sole discretion, if the Company
believes CLA is making adequate progress towards a satisfactory
restructuring. CLA made all of the $4.2 million of scheduled rent
payments under the prior lease arrangements covering the period of March
through July, 2018. If the new lease is not extended, CLA will be
required to expeditiously vacate these properties, in which case the
Company intends to lease some or all of the 21 schools to other
operators.

CLA also agreed to relinquish control of four of the Company's
properties that were still under development as the Company no longer
intends to develop these properties for CLA. During the three months
ended June 30, 2018, the Company obtained independent appraisals of
these four properties and reduced the carrying value of these assets to
$9.8 million, recording an impairment charge of $16.5 million. The
charge is primarily related to the cost of improvements specific to the
development of CLA's prototype.

CLA continues to negotiate with third parties regarding a restructuring
that would permit CLA to continue operation of the CLA properties. In
addition, the Company is actively pursuing other alternatives for these
properties, including replacement tenants and operators.

Cappelli Legal Settlement

During the three months ended June 30, 2018, the Company entered into a
settlement agreement with affiliates of Louis Cappelli whereby each of
the parties fully settled all disputes between and among them relating
to previously disclosed litigation in which the Company was a defendant.
The terms of the settlement agreement include, among other terms, the
Company's payment of $2.0 million to the plaintiffs, the mutual release
of all parties, and the dismissal of the final pending New York state
court case with prejudice.

Capital Recycling

On May 7, 2018, Boyne USA, Inc. ("Boyne") purchased seven ski properties
from OZRE that partially secured the Company's mortgage note receivable
due from OZRE. Following the acquisition by Boyne, OZRE made a partial
prepayment to the Company of approximately $175.4 million on this
mortgage note receivable, leaving a carrying value of $74.6 million at
June 30, 2018 that is secured by the remaining six ski properties. In
connection with the partial prepayment of this note, the Company
recognized a prepayment fee totaling $45.9 million that is included in
mortgage and other financing income.

On June 4, 2018, Vail Resorts, Inc. announced it intends to acquire four
ski properties from OZRE. This sale is expected to close by the end of
the year. These four properties partially secure the Company's mortgage
note receivable from OZRE and in conjunction with this sale it is
expected that OZRE will prepay the entire remaining note balance. In
connection with this prepayment, the Company is entitled to receive a
prepayment fee, the amount of which is dependent upon the timing of the
note repayment, and is currently estimated to be approximately $15.0
million.

On May 29, 2018, the Company received a partial prepayment of $8.0
million on one mortgage note receivable that is secured by the
observation deck of the John Hancock Tower in Chicago, Illinois. In
connection with the partial prepayment of this note, the Company
recognized a prepayment fee of $1.4 million that is included in mortgage
and other financing income.

During the second quarter of 2018, the Company completed the sale of two
entertainment parcels located in Illinois for net proceeds totaling $4.2
million and recognized a gain on sale of $0.5 million.

Disposition proceeds and mortgage note pay-offs (excluding principal
amortization) totaled $247.4 million for the six months ended June 30,
2018.

Subsequent to quarter end, the Company completed the sale of four public
charter schools leased to Imagine Schools Inc. for net proceeds of $43.4
million. In connection with this sale, the Company will recognize a $5.5
million gain on sale during the third quarter of 2018. Additionally
subsequent to quarter end, the Company sold one public charter school
property, pursuant to a tenant purchase option, for total net proceeds
of $11.9 million and will recognize a gain on sale of $1.9 million
during the third quarter of 2018.

Balance Sheet Update

Excluding prepayment penalties from earnings, the Company had a net debt
to adjusted EBITDA ratio (a non-GAAP financial measure) of 5.6x at June
30, 2018. The Company had $3.0 million of unrestricted cash on hand and
$30.0 million outstanding under its $1.0 billion unsecured revolving
credit facility at June 30, 2018.

On April 16, 2018, the Company issued $400.0 million in senior unsecured
notes due April 15, 2028. The notes bear interest at an annual rate of
4.95%. The Company used the net proceeds from the note offering to pay
down its unsecured revolving credit facility.

Dividend Information

The Company declared regular monthly cash dividends during the second
quarter of 2018 totaling $1.08 per common share. This dividend
represents an annualized dividend of $4.32 per common share, an increase
of almost 6% over the prior year, and would be the Company's eighth
consecutive year with a significant annual dividend increase.

The Company also declared second 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 $0.359375 per share on its 5.75% Series G cumulative
redeemable preferred shares.

2018 Guidance

The Company is increasing its 2018 guidance for FFO as adjusted per
diluted share to a range of $5.97 to $6.07 from a range of $5.75 to
$5.90. In addition, the Company is narrowing its 2018 investment
spending guidance to a range of $450.0 million to $650.0 million from a
range of $400.0 million to $700.0 million and increasing its 2018
disposition proceeds guidance to a range of $450.0 million to $500.0
million from a range of $350.0 million to $450.0 million.

FFO as adjusted guidance for 2018 is based on FFO per diluted share of
$5.40 to $5.45 adjusted for estimated costs associated with loan
refinancing or payoff, litigation settlement expense, transaction costs,
termination fees related to public charter schools and deferred income
tax expense. FFO per diluted share is based on a net income per diluted
share range of $3.41 to $3.51 less estimated gain on sale of real estate
of a range of $0.21 to $0.26 and the impact of Series C and Series E
dilution of $0.06, plus estimated real estate depreciation of $2.04 and
impairment of rental properties of $0.22 (in accordance with the NAREIT
definition of FFO).

Quarterly Supplemental

The Company's supplemental information package for the second quarter
and six months ended June 30, 2018 is available on the Company's website
at http://investors.eprkc.com/earnings-supplementals.

   

EPR Properties
Consolidated Statements of Income
(Unaudited,
dollars in thousands except per share data)

 
Three Months Ended June 30, Six Months Ended June 30,
2018   2017 2018   2017
Rental revenue $ 137,019 $ 123,410 $ 269,943 $ 234,196
Other income 646 1,304 1,276 1,996
Mortgage and other financing income 65,202   23,068   86,616   40,702  
Total revenue 202,867 147,782 357,835 276,894
Property operating expense 7,334 6,072 14,898 12,422
General and administrative expense 12,976 10,660 25,300 21,717
Litigation settlement expense 2,090 2,090
Costs associated with loan refinancing or payoff 15 9 31,958 14
Gain on early extinguishment of debt (977 ) (977 )
Interest expense, net 34,079 32,967 68,416 63,659
Transaction costs 405 218 1,014 275
Impairment charges 16,548 10,195 16,548 10,195
Depreciation and amortization 37,582   33,148   75,266   61,225  
Income before equity in income from joint ventures and other items 91,838 55,490 122,345 108,364
Equity in (loss) income from joint ventures (88 ) 59 (37 ) 51
Gain on sale of real estate 473   25,461   473   27,465  
Income before income taxes 92,223 81,010 122,781 135,880
Income tax expense (642 ) (475 ) (1,662 ) (1,429 )
Net income 91,581 80,535 121,119 134,451
Preferred dividend requirements (6,036 ) (5,952 ) (12,072 ) (11,904 )
Net income available to common shareholders of EPR Properties $ 85,545   $ 74,583   $ 109,047   $ 122,547  
Per share data attributable to EPR Properties common shareholders:
Basic earnings per share data:
Net income available to common shareholders $ 1.15   $ 1.02   $ 1.47   $ 1.79  
Diluted earnings per share data:
Net income available to common shareholders $ 1.15   $ 1.02   $ 1.47   $ 1.78  
Shares used for computation (in thousands):
Basic 74,329 73,159 74,238 68,621
Diluted 74,365 73,225 74,273 68,689
 

EPR Properties
Condensed Consolidated Balance Sheets
(Unaudited,
dollars in thousands)

   
June 30, 2018 December 31, 2017
Assets

Rental properties, net of accumulated depreciation of $810,604 and
$741,334 at June
30, 2018 and December 31, 2017, respectively

$ 4,853,188 $ 4,604,231
Land held for development 31,076 33,692
Property under development 268,090 257,629
Mortgage notes and related accrued interest receivable 641,428 970,749
Investment in direct financing leases, net 58,305 57,903
Investment in joint ventures 4,999 5,602
Cash and cash equivalents 3,017 41,917
Restricted cash 11,283 17,069
Accounts receivable, net 97,804 93,693
Other assets 135,034   109,008
Total assets $ 6,104,224   $ 6,191,493
Liabilities and Equity
Accounts payable and accrued liabilities $ 122,359 $ 136,929
Dividends payable 32,801 30,185
Unearned rents and interest 79,121 68,227
Debt 2,983,975   3,028,827
Total liabilities 3,218,256   3,264,168
Total equity $ 2,885,968   $ 2,927,325
Total liabilities and equity $ 6,104,224   $ 6,191,493
 

EPR Properties
Reconciliation of Non-GAAP Financial
Measures

(Unaudited, dollars in thousands except per
share data)

   
Three Months Ended June 30,

Six Months Ended June 30,

2018   2017 2018   2017
FFO: (A)
Net income available to common shareholders of EPR Properties $ 85,545 $ 74,583 $ 109,047 $ 122,547
Gain on sale of real estate (473 ) (25,461 ) (473 ) (27,465 )
Impairment of rental properties 16,548 16,548
Impairment of direct financing lease-residual value portion (1) 2,897 2,897
Real estate depreciation and amortization 37,359 32,906 74,823 60,786
Allocated share of joint venture depreciation 58   54   116   108  
FFO available to common shareholders of EPR Properties $ 139,037   $ 84,979   $ 200,061   $ 158,873  
 
FFO available to common shareholders of EPR Properties $ 139,037 $ 84,979 $ 200,061 $ 158,873
Add: Preferred dividends for Series C preferred shares 1,940   1,941   3,880   3,882  
Diluted FFO available to common shareholders of EPR Properties $ 140,977   $ 86,920   $ 203,941   $ 162,755  
 
FFO per common share:
Basic $ 1.87 $ 1.16 $ 2.69 $ 2.32
Diluted 1.84 1.15 2.67 2.30
Shares used for computation (in thousands):
Basic 74,329 73,159 74,238 68,621
Diluted 74,365 73,225 74,273 68,689
 
Weighted average shares outstanding-diluted EPS 74,365 73,225 74,273 68,689
Effect of dilutive Series C preferred shares 2,110   2,063   2,104   2,058  
Adjusted weighted average shares outstanding-diluted 76,475   75,288   76,377   70,747  
 
Other financial information:
Straight-lined rental revenue $ 2,060 $ 4,009 $ 3,934 $ 9,060
Dividends per common share $ 1.08 $ 1.02 $ 2.16 $ 2.04
(1)   Impairment charges recognized during the three and six months ended
June 30, 2017 total $10.2 million and related to our investment in
direct financing leases, net, consisting of $2.9 million related to
the residual value portion and $7.3 million related to the allowance
for lease loss portion.
 
  (A)   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, the Company calculates FFO as net income available to
common shareholders, computed in accordance with GAAP, excluding
gains and losses from sales 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.
The Company has calculated FFO for all periods presented in
accordance with this definition. In addition to FFO, the Company
presents FFO as adjusted. Management believes it is useful to
provide FFO as adjusted as a supplemental measure to GAAP net income
available to common shareholders and earnings per share. FFO as
adjusted is FFO plus costs (gain) associated with loan refinancing
or payoff, transaction costs, retirement severance expense,
litigation settlement expense, preferred share redemption costs,
termination fees associated with tenants' exercises of education
properties buy-out options, impairment of direct financing lease
(allowance for lease loss portion) and provision for loan losses,
and by subtracting gain on early extinguishment of debt, gain (loss)
on sale of land, gain on insurance recovery and deferred tax benefit
(expense). FFO and FFO as adjusted are non-GAAP financial measures.
FFO and FFO as adjusted do not represent cash flows from operations
as defined by GAAP and are not indicative that cash flows are
adequate to fund all cash needs and are 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. It should also be noted that not all REITs
calculate FFO or FFO as adjusted the same way so comparisons of each
of these non-GAAP measures with other REITs may not be meaningful.
 

The conversion of the 5.75% Series C cumulative convertible preferred
shares would be dilutive to FFO per share for the three and six months
ended June 30, 2018. Therefore, the additional 2.1 million common shares
that would result from the conversion and the corresponding add-back of
the preferred dividends declared on those shares are included in the
calculation of diluted FFO per share for the three and six months ended
June 30, 2018. The conversion of the 5.75% Series C cumulative
convertible preferred shares and the 9.00% Series E cumulative
convertible preferred shares would be dilutive to FFOAA per share for
the three and six months ended June 30, 2018. Therefore, the additional
2.1 million and 1.6 million common shares that would result from the
conversion and the corresponding add-back of the preferred dividends
declared on those shares are included in the calculation of diluted
FFOAA per share for the three and six months ended June 30, 2018.

The conversion of the 5.75% Series C cumulative convertible preferred
shares would be dilutive to FFO and FFOAA per share for the three and
six months ended June 30, 2017. Therefore, the additional 2.1 million
common shares that would result from the conversion and the
corresponding add-back of the preferred dividends declared on those
shares are included in the calculation of diluted FFO and diluted FFOAA
per share for the three and six months ended June 30, 2017. The effect
of the conversion of our 9.0% Series E cumulative convertible preferred
shares and the additional 1.6 million common shares that would result
from the conversion do not result in more dilution to per share results
and are therefore not included in the calculation of diluted FFO and
FFOAA per share data for the three and six months ended June 30, 2017.

Net Debt to Adjusted EBITDA Ratio

Net Debt to Adjusted EBITDA Ratio is a supplemental measure derived from
non-GAAP financial measures the Company uses to evaluate its capital
structure and the magnitude of its debt against its operating
performance. The Company believes that investors commonly use versions
of this ratio in a similar manner. In addition, financial institutions
use versions of this ratio in connection with debt agreements to set
pricing and covenant limitations. The Company's method of calculating
Net Debt to Adjusted EBITDA Ratio may be different from methods used by
other REITs and, accordingly, may not be comparable to such other REITs.
Reconciliations of debt and net income (both reported in accordance with
GAAP) to Net Debt, EBITDAre, Adjusted EBITDA, and Net Debt to Adjusted
EBITDA Ratio (each of which is a non-GAAP financial measure) are
included in the following tables (unaudited, in thousands):

  June 30,
2018   2017
Net Debt: (B)
Debt $ 2,983,975 $ 2,792,920
Deferred financing costs, net 36,020 34,086
Cash and cash equivalents (3,017 ) (70,872 )
Net Debt $ 3,016,978   $ 2,756,134  
 
Three Months Ended June 30,
2018 2017
EBITDAre and Adjusted EBITDA:
Net income $ 91,581 $ 80,535
Interest expense, net 34,079 32,967
Income tax expense 642 475
Depreciation and amortization 37,582 33,148
Gain on sale of real estate (473 ) (25,461 )
Impairment of rental properties 16,548
Impairment of direct financing lease - residual value portion 2,897
Costs associated with loan refinancing or payoff 15 9
Gain on early extinguishment of debt (977 )
Equity in loss (income) from joint ventures 88   (59 )
EBITDAre (for the quarter) (C) $ 180,062   $ 123,534  
 
Gain on insurance recovery (606 )
Litigation settlement expense 2,090
Impairment of direct financing lease - allowance for lease loss
portion
7,298
Transaction costs 405 218
Prepayment fees (47,293 )  
Adjusted EBITDA (for the quarter) $ 135,264   $ 130,444  
 
Adjusted EBITDA (1) (D) $ 541,056   $ 521,776  
 
Net Debt/Adjusted EBITDA Ratio 5.6 5.3
(1)   Adjusted EBITDA for the quarter is multiplied by four to calculate
an annual amount.
 
  (B)   Net Debt represents debt (reported in accordance with GAAP) adjusted
to exclude deferred financing costs, net and reduced for cash and
cash equivalents. By excluding deferred financing costs, net and
reducing debt for cash and cash equivalents on hand, the result
provides an estimate of the contractual amount of borrowed capital
to be repaid, net of cash available to repay it. The Company
believes this calculation constitutes a beneficial supplemental
non-GAAP financial disclosure to investors in understanding our
financial condition. The Company's method of calculating Net Debt
may be different from methods used by other REITs and, accordingly,
may not be comparable to such other REITs.
 
(C) NAREIT developed EBITDAre as a relative non-GAAP financial measure
of REITs, independent of a company's capital structure, to provide a
uniform basis to measure the enterprise value of a company. Pursuant
to the definition of EBITDAre by the Board of Governors of NAREIT,
the Company calculates EBITDAre as net income, computed in
accordance with GAAP, excluding interest expense (net), income tax
expense (benefit), depreciation and amortization, gains and losses
from sales of depreciable operating properties, impairment losses of
depreciable real estate, costs (gain) associated with loan
refinancing or payoff and adjustments for unconsolidated
partnerships, joint ventures and other affiliates.
 

 

 

Management provides EBITDAre herein because it believes this
information is useful to investors as a supplemental performance
measure as it can help facilitate comparisons of operating
performance between periods and with other REITs. EBITDAre does
not represent cash flow 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 or cash flows or liquidity as defined by GAAP.

 
(D) Management uses Adjusted EBITDA in its analysis of the performance
of the business and operations of the Company. Management believes
Adjusted EBITDA is useful to investors because it excludes various
items that management believes are not indicative of operating
performance, and that it is an informative measure to use in
computing various financial ratios to evaluate the Company. The
Company defines Adjusted EBITDA as EBITDAre (defined above)
excluding gain on insurance recovery, retirement severance expense,
litigation settlement expense, impairment of direct financing lease
(allowance for lease loss portion), the provision for loan losses,
transaction costs and prepayment fees, and which is then multiplied
by four to get an annual amount.
 

 

The Company's method of calculating Adjusted EBITDA may be
different from methods used by other REITs and, accordingly, may
not be comparable to such other REITs. Adjusted EBITDA is not a
measure of performance under GAAP, does not represent cash
generated from operations as defined by GAAP and is not indicative
of cash available to fund all cash needs, including distributions.
This measure should not be considered as an alternative to net
income for the purpose of evaluating the Company's performance or
to cash flows as a measure of liquidity.

 

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 $6.7 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.

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 Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E 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, expected dividend payments, and our results of
operations and financial condition.
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," "pipeline," "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. Except as required by law, 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.

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