EPR Properties 2026 Q3 Earnings Call

Thank you. Thanks for joining us today for our third quarter 2026 earnings call and webcast. Participants on today's call are Greg Silvers, Chairman and CEO, Ben Fox, Executive Vice President and CIO, and Mark Peterson, Executive Vice President and CFO. We will start the call by informing you that this call may include forward-looking statements identified in the Private Securities Litigation Reform Act of 1995 by such words as will, be, intend, continue, believe, may, expect, hope, anticipate, or other such comparable terms. The company's actual financial condition and the results of operations may vary materially from those 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, including the company's reports on Form 10-K and 10-Q.

Additionally, this call will contain certain references to 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 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, www.eprkc.com. Now I will turn the call over to Greg Silvers.

Thank you, Brian. Good morning, everyone, and welcome to our third quarter 2026 earnings call and webcast. Our focus this year has been on accelerating growth, and our third quarter results demonstrate continued momentum across the business. Revenue increased 12%, while FFO as adjusted per share increased 8.8% compared with the same period in 2025. These results were supported by a strong in-place portfolio and a robust pace of investment activity. Our investment spending remained strong throughout the quarter as we continue to broaden our experiential portfolio and establish important new relationships. We entered the live venue category through a build-to-suit development in Portland, Oregon, with industry leader Live Nation. We have long discussed the strong, sustained demand fundamentals of live performance, and our team worked diligently to identify the right initial opportunity.

We also acquired a Life Time Fitness and Wellness property in Irvine, California, further expanding both the depth and quality of our fitness and wellness portfolio. Our portfolio coverage incrementally increased during the quarter to 2.1 times. We are also pleased to see box office running well ahead of last year. The third quarter capped off a record summer, and year-to-date box office was up approximately 20% through September, driven by a broad mix of genres and compelling titles that continue to bring audiences back to theaters. Our results underscore that the consumer continues to demonstrate that they value and prioritize experiential offerings. We continue to draw on multiple sources of capital to fund our growth.

During the quarter, we recycled capital through the sale of a private school property, entered into forward sale agreements under our ATM program, and executed a new credit agreement that includes a $600 million term loan. With our credit facilities and forward equity in place, we have the capacity to fund a strong pipeline of opportunities. Given our capacity and our activity to date, we are pleased to raise our investment spending earnings guidance, which represents an increase of 8% at the midpoint over 2025. As our portfolio expands and diversifies, we remain well-positioned to capitalize on the continued growth of experiential real estate. With that, I will turn the call over to Ben for a closer look at the business and our performance.

Thank you, Greg. As Greg just highlighted, this quarter marks several notable firsts for EPR. Our first investment in a live performance venue with Live Nation and our first acquisition of a fitness facility leased to Life Time. Both transactions highlight not only our continuing investment momentum, but also the accelerating diversification of our portfolio. During the quarter, we invested $172.4 million at an average initial cash yield of approximately 8.3%, bringing our year-to-date investments to $664.5 million. That volume includes a new experiential category, live venues, along with continued additions to our fitness and wellness, eat and play, and experiential lodging portfolios. Two of this quarter's investments stand out for their exceptional A+ real estate. Life Time in Irvine, California, and Onelife Fitness at Tysons Galleria in Virginia both occupy world-class locations that we believe support their long-term success.

In addition to these investments, we expect to invest another $21 million this year in experiential development and redevelopment projects already underway. As we noted last quarter, our theater exposure continues to decline as our experiential investment volume accelerates. Theaters now represent roughly one-third of our portfolio, and we expect that share to continue trending toward our long-term goal of approximately 20%. Given our investment pace and the depth of our pipeline, we are pleased to once again increase our 2026 investment spending guidance to a range of $675 million-$725 million. Two points on our pipeline in the current investment environment. First, the breadth of our pipeline is unparalleled in recent memory, and we look forward to sharing some of the exciting opportunities we are pursuing in the coming quarters. Second, on cost of capital and investment spreads, three factors are working in our favor.

Our transactions generally have rate protection built in prior to closing, which provides a buffer during periods of market volatility. As we've said before, our biggest competition is debt, not net lease. In this market, debt capital has repriced even faster, so our clients are receptive to conversations on pricing. Because our business is relationship driven with a proprietary pipeline, we enjoy higher average entry yields, which give us a natural cushion. Turning to the portfolio. At the end of the third quarter, our portfolio totaled $7.6 billion of gross investment value across 350 properties, which were 99% leased or operated. By ABR, 96% is in our core experiential categories, represented by 296 properties operated by 61 clients, which remain 99% leased or operated. The remaining 4% is our education portfolio, made up of 54 properties leased to four operators, which were 100% leased at quarter end.

Portfolio health remains sound, with unit-level rent coverage increasing to 2.1 times. While data indicate pockets of strain among the lowest income consumers, people's enduring preference for experiences over things continues to support our portfolio. Our portfolio also benefits from diversification across multiple demographic dimensions, with experiences that appeal to many generations and income levels. Theaters are a great example. Not only do they span all of these demographics, but they also have historically proven resilient in economic downturns. Most importantly, as Greg has said many times, content drives performance. People want to see cool stuff. This year's box office, which is up 20% year to date and on track for its best year since 2019, demonstrates exactly that. We've talked about who goes to the movies before, but with the strength we continue to see across our theater portfolio, a few points are worth repeating.

Gen Z accounts for 40% of all moviegoers, and in multiple polls, Gen Alpha has said it prefers the big screen. Format matters. People can't replicate IMAX and other premium large-format screens at home, and the industry has created real urgency around seeing certain films in these formats. Our portfolio over-indexes to exactly those experiences. 71% of our theaters have recliners, 84% offer enhanced food and beverage, and 69% have premium large-format screens. These features help our theaters generate roughly 8% of North American box office gross, with only 3% of screenings. Finally, the industry has coalesced around a 45-day theatrical window, which supports exhibitors and spares studios a second marketing push after films leave theaters. Some films will run longer, including the upcoming Netflix release of "Narnia" with a seven-week window. It's not just the movies.

Young people are lining up for concerts, comedy shows, and other live events. They want to get out of the house, and they are hungry for shared experiences. We're capitalizing on this momentum through partnership with industry leaders like Live Nation, whose venue will host concerts and comedy shows. Turning to other areas of our portfolio, our eat and play segment remains resilient, strengthened by the quality of our locations despite broader industry moderation. Topgolf's positive momentum since the sale continues. Expense reductions and revenue initiatives are delivering results, and our Topgolf portfolio remains very healthy. Attractions performed well in the third quarter, with several parks outperforming. As we saw in ski during the winter, geographic diversification and attractions helped offset isolated summer weather events. Our fitness and wellness portfolio continued with solid performance in the third quarter, with stabilizing trends at several recently renovated and expanded properties.

Finally, our education portfolio continues to face industry-wide headwinds, including higher labor costs, grant funding challenges, and regulatory pressure. Despite this backdrop, this portfolio remains resilient. Moving on to dispositions. Reflecting our commitment to accretive capital recycling, in the third quarter, we completed the sale of the British School of Chicago to a public net lease peer, transacting at a cap rate in the low 7% range. Following this sale, we are updating our 2026 disposition guidance to approximately $86 million, as we do not anticipate any additional dispositions prior to year-end. In summary, our portfolio remains resilient. Our diversification is accelerating, and we are very excited about the investment opportunities in front of us. With that, I'll turn it over to Mark for a review of our financial performance.

Thank you, Ben. Today, I'll discuss our strong financial performance for the third quarter, provide an update on our balance sheet, and close by discussing the increases in our earnings and investment spending guidance for the year. FFO as adjusted for the quarter was $1.49 per share versus $1.37 in the prior year, an increase of 8.8%. AFFO for the quarter was $1.54 per share compared to $1.39 in the prior year, an increase of 10.8%. Please note that this quarter we have revised our definition of AFFO to no longer deduct maintenance capital expenditures. This change was made to be consistent with most other triple net REITs and is immaterial. All prior periods have been recast to reflect this change, and reconciliations from the previous definition to the new definition are included in the supplemental and press release.