EPR Properties Reports Fourth Quarter and 2018 Year-End Results

Company Reports Record Annual Revenue and Earnings

Introduces Guidance for 2019

EPR Properties EPR today announced operating results for the fourth quarter and year ended December 31, 2018.

Three Months Ended December 31, 2018

• Total revenue was $166.5 million for the fourth quarter of 2018, representing a 13% increase from $147.7 million for the same quarter in 2017.
• Net income available to common shareholders was $48.0 million, or $0.65 per diluted common share, for the fourth quarter of 2018 compared to $54.7 million, or $0.74 per diluted common share, for the same quarter in 2017.
• Funds From Operations (FFO) (a non-GAAP financial measure) for the fourth quarter of 2018 was $97.7 million, or $1.30 per diluted common share, compared to $78.0 million, or $1.06 per diluted common share, for the same quarter in 2017.
• FFO as adjusted (a non-GAAP financial measure) for the fourth quarter of 2018 was $105.1 million, or $1.39 per diluted common share, compared to $95.9 million, or $1.29 per diluted common share, for the same quarter in 2017, representing an 8% increase in per share results.

Year Ended December 31, 2018

• Total revenue was $700.7 million for the year ended December 31, 2018, including $71.3 million in non-education related prepayment fees, representing a 22% increase from $576.0 million for the same period in 2017.
• Net income available to common shareholders was $242.8 million, or $3.27 per diluted common share, for the year ended December 31, 2018 compared to $234.2 million, or $3.29 per diluted common share, for the same period in 2017.
• FFO (a non-GAAP financial measure) for the year ended December 31, 2018 was $414.3 million, or $5.51 per diluted common share, compared to $327.4 million, or $4.58 per diluted common share, for the same period in 2017.
• FFO as adjusted (a non-GAAP financial measure) for the year ended December 31, 2018 was $460.4 million, or $6.10 per diluted common share, compared to $360.5 million, or $5.02 per diluted common share, for the same period in 2017, representing a 22% increase in per share results.

"The fourth quarter of 2018 capped a successful year in which we executed a significant capital recycling strategy, realized very strong returns on our investments and generated robust revenue and earnings growth," commented Company President and CEO Greg Silvers. "Supported by our healthy balance sheet and liquidity position, we anticipate a reacceleration of our investment activity and portfolio growth in 2019. As the depth and breadth of experiential assets continues to grow, we are seeing increasing opportunities to diversify our asset base and drive accretive growth."

Portfolio Update

The Company's investment portfolio (excluding property under development) consisted of the following at December 31, 2018:

• The Entertainment segment included investments in 152 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 13.4 million square feet and was 98% leased, including megaplex theatres that were 100% leased.
• The Recreation segment included investments in 12 ski areas, 21 attractions, 34 golf entertainment complexes and 13 other recreation facilities. The Company's portfolio of owned recreation properties was 100% leased.
• The Education segment included investments in 59 public charter schools, 69 early education centers and 15 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 22.2 million square feet and was 99% leased. As of December 31, 2018, the Company also had a total of $287.5 million invested in property under development.

Investment Update

The Company's investment spending for the three months ended December 31, 2018 totaled $217.0 million (bringing the full year 2018 investment spending to $572.0 million), and included investments in each of its operating segments:

• Entertainment investment spending during the three months ended December 31, 2018 totaled $27.2 million, including spending on build-to-suit development and redevelopment of megaplex theatres, entertainment retail centers and family entertainment centers as well as a $14.9 million megaplex theatre acquisition.
• Recreation investment spending during the three months ended December 31, 2018 totaled $159.5 million, including spending on build-to-suit development of golf entertainment complexes and attractions, the acquisition of one attraction property and the acquisition of interests in two joint ventures described below.

On December 21, 2018, the Company entered into two joint ventures to acquire two recreation anchored lodging properties located in St. Petersburg, Florida, for a total of approximately $68.5 million ($29.5 million after the Company's pro-rata share of debt at closing), representing a 65% interest in the joint ventures. The Company accounts for these investments under the equity method of accounting.

• Education investment spending during the three months ended December 31, 2018 totaled $16.4 million, including spending on build-to-suit development and redevelopment of public charter schools, early education centers and private schools.
• Other investment spending during the three months ended December 31, 2018 totaled $13.9 million, and was related to the common infrastructure for the Resorts World Catskills casino and resort project in Sullivan County, New York.

Early Childhood Education Tenant Update

In February 2019, the Company entered into agreements (collectively, the "PSA") with Children's Learning Adventure USA ("CLA") providing for the purchase and sale of certain assets associated with the businesses located at the 21 operating CLA properties whereby the Company can nominate a third party operator to take an assignment and transfer of such assets from CLA and to receive certain beneficial rights under various related ancillary agreements for consideration that includes the release of past due rent obligations, previously fully reserved by the Company, and additional consideration of approximately $15.0 million. The transfers of such assets are expected to close from time to time as closing conditions, including that the replacement tenant has obtained all required licenses and permits, for each transfer are satisfied. CLA has agreed to surrender possession of any of those properties that have not been transferred to a replacement operator prior to March 31, 2020 and has agreed to lease and operate each of the 21 properties for an aggregate of approximately $1.0 million per month of minimum rent until the transfer of each property to the Company's replacement tenant or surrender of the property.

CLA is required to file a motion this week with the bankruptcy court ("Court") seeking authorization of the sale of certain assets pursuant to the PSA. A condition to the parties' obligations under the PSA is the Court's approval of the motion. There can be no assurance that this motion will be approved by the Court or that the Court will not require modifications to the PSA as a condition to its approval.

Also in February, the Company entered into new leases of all of the 21 operating properties previously leased to CLA with a replacement tenant, Crème de la Crème ("Crème"), a premium, national early childhood education operator. These leases are contingent upon EPR delivering possession of the properties and include different financial terms based on whether or not CLA delivers Crème the assets associated with the in-place operations of the school.

There can be no assurance as to the outcome of the contemplated transaction or whether some or all of the properties will be transferred to Crème with in-place operations. If some or all of the schools are not transferred to Creme with in-place lease operations, there will be a delay in re-opening such schools and a corresponding reduction in near term rents from Crème.

Impairment Discussion

During the fourth quarter of 2018, the Company recognized an impairment charge related to two guarantees of economic development revenue bonds totaling $24.7 million and secured by leasehold interests and improvements at two theatres in Louisiana. The Company determined a portion of its guarantee fees receivable was no longer recoverable and in addition, determined that its future payment on a portion of the bond obligations was probable, resulting in a total impairment charge of $10.7 million. This charge approximated the difference between the estimated fair value of the Company's collateral and the outstanding debt should these assets eventually come onto its balance sheet. The Company has no other off-balance sheet debt guarantees in its portfolio.

Capital Recycling

During the fourth quarter of 2018, the Company received $28.0 million in proceeds, representing payment in full on the remaining mortgage note receivable of $24.0 million that was secured by the observation deck of the John Hancock Tower in Chicago, Illinois plus prepayment fees totaling $4.0 million that are included in mortgage and other financing income. Prior to the fourth quarter, the Company received a partial prepayment on this note of approximately $8.0 million and recognized a prepayment fee totaling $1.4 million.

Additionally, during the fourth quarter of 2018, the Company received $41.4 million in proceeds, representing payment in full on five mortgage notes receivable that were secured by four charter school properties and land located in Arizona. In connection with these prepayments, the Company recognized prepayment fees totaling $3.4 million that are included in mortgage and other financing income.

Disposition proceeds and mortgage note pay-offs (excluding principal amortization and including prepayment fees) totaled $71.7 million and $471.1 million for the three months and year ended December 31, 2018, respectively.

Balance Sheet Update

Excluding prepayment penalties from earnings, the Company had a net debt to adjusted EBITDA ratio (a non-GAAP financial measure) of 5.5x at December 31, 2018. The Company had $5.9 million of unrestricted cash on hand and $30.0 million outstanding under its $1.0 billion unsecured revolving credit facility at December 31, 2018.

Dividend Information

The Company declared regular monthly cash dividends during the fourth quarter of 2018 totaling $1.08 per common share bringing total declared dividends for the year ended December 31, 2018 to $4.32 per common share, an increase of almost 6% over the prior year. The Company also declared fourth 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.

As previously announced, the Company declared a regular monthly cash dividend to common shareholder of $0.375 per common share for each of the months of January and February 2019. This dividend level represents an annualized dividend of $4.50 per common share, an increase of 4.2% over 2018, and would be the Company's ninth consecutive year with a significant annual dividend increase.

2019 Guidance

The Company is introducing its 2019 guidance for net income per diluted share of a range of $3.01 to $3.21 and FFO as adjusted per diluted share of a range of $5.30 to $5.50. In addition, the Company is introducing its 2019 investment spending guidance of a range of $600.0 million to $800.0 million. Disposition proceeds are expected to total $100.0 million to $200.0 million for 2019.

FFO as adjusted guidance for 2019 is based on FFO per diluted share of $4.87 to $5.02 adjusted for estimated transaction costs, termination fees related to public charter schools, deferred income tax expense and the impact of Series C and Series E dilution. FFO per diluted share is based on a net income per diluted share range of $3.01 to $3.21 less estimated gain on sale of real estate of a range of $0.25 to $0.30 and the impact of Series C and Series E dilution of $0.05, plus estimated real estate depreciation of $2.12 and allocated share of joint venture depreciation of $0.04 (in accordance with the NAREIT definition of FFO).

Quarterly and Year-Ended Supplemental

The Company's supplemental information package for the fourth quarter and year ended December 31, 2018 is available on the Company's website at http://investors.eprkc.com/earnings-supplementals.

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 FFO and FFOAA per share for the three months and years ended December 31, 2018 and 2017. Therefore, the additional 2.1 million common shares 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 FFO per share and diluted FFOAA per share for the three months and years ended December 31, 2018 and 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):

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 approximate $6.9 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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