EPR Properties (EPR) Q1 FY26 earnings call: guidance and Q&A

How much of the increased AFFO guidance came from Q1 performance, accelerated investment, or better cap rates on investments?

Mark Peterson explained that Q1 performance contributed $0.01-$0.02. The Six Flags transaction closing better than anticipated and other investments coming in sooner with better cap rates contributed significantly. The Margaritaville conversion also added nearly $0.02 in straight-line rent benefit.

“really, the increase is due to a couple of things. One, obviously, we raised our investment spending and paid for that via the capital raise, but there was probably $0.01 out of that increased guidance. And then I think more broadly, we got a benefit from being fairly conservative with respect to the Six Flags transaction at the end of the year because we weren't sure -- for sure it would close and when exactly it would close. So I think the ultimate outcome of that was better than anticipated. And I think the remaining investments, not just the increase for the year, but the remaining investments are coming in a little bit sooner than planned and at a better cap rate. The last thing I'll mention that impacted our FFOAA guidance was the Margaritaville conversion to a -- from a note to a lease. We got incremental straight-line rent from that, and that was probably a little under $0.02 in terms of straight-line benefit converting from a mortgage to now a 20-year lease with escalators that had some straight-line impact.”

asked by Jana Galan · answered by Mark Peterson

Is the Margaritaville purchase option conversion a key example of the convertible mortgage strategy?

Ben Fox confirmed that the Margaritaville conversion is exactly representative of the types of structures they enter into, using mortgages as pathways to real estate ownership.

“Yes. Jana, that's exactly right. Really, the mortgages that we use, as I mentioned, are pathways to real estate ownership. And so that conversion of the Margaritaville is exactly representative of the types of structures we enter into. And so as opportunities present themselves, we will convert those and use those selectively.”

asked by Jana Galan · answered by Benjamin Fox

How many convertible mortgage opportunities does EPR have, and what could that look like over the next few years?

Ben Fox stated that the majority, probably more than 80%, of their mortgage book is convertible, indicating significant future opportunities within the existing portfolio and for new structures.

“Yes. It's a good question. And really, if you look at our mortgage book, the majority of those, probably more than 80% are convertible, right? So what we're highlighting here is with this transaction in Margaritaville, that is just an example of the opportunities that sit within the existing portfolio as well as the types of structures that you could see us enter into in the upcoming quarters and years.”

asked by Bennett Rose · answered by Benjamin Fox

Does EPR see Six Flags as a potential partner for future non-core asset shedding, and would EPR be willing to lean into more such deals?

Greg Silvers confirmed a demonstrated partnership with Six Flags and stated they would definitely consider future opportunities. He noted that real estate solutions are being explored across the attraction space, and EPR's leadership position will likely create more opportunities with Six Flags and other participants.

“Smedes, it's Greg. I think -- again, I think, clearly, we've demonstrated a partnership with them. So we'll definitely take a look at that. I think they're exploring. And I think real estate solutions are being explored across the board in the attraction space. And I think our team has demonstrated our ability to be a market leader in that space, whether that's with Six Flags or with other participants.”

asked by Bennett Rose · answered by Gregory Silvers

Are there any cap rate compression or increased competition in Fitness & Wellness, Attractions, and Eat & Play, and are these still the top acquisition focus areas?

Greg Silvers confirmed these are still top acquisition segments. He stated that cap rates remain stable, and EPR's position as a market leader ensures they get the "first call" on these assets, helping them maintain their pipeline despite competition.

“I would say, yes. I mean, again, especially on our flow business, I mean, clearly, with what we did with Attractions this year, that was a big anchor transaction, but our flow business, I think those are still the top. And as Ben commented in his opening comments, I think our cap rates remain stable. I think, again, our position as kind of a leading market participant here makes us get the first call usually on these type of assets.”

asked by Justin Haasbeek · answered by Gregory Silvers

Will future dispositions mainly come from the early education segment, or are other asset types being considered?

Greg Silvers indicated that early education would likely be the bulk of dispositions, but they also hope to capitalize on opportunities to sell some theater assets, demonstrating interest in that space.

“I think it's going to -- you're going to see that probably will be a bulk of that. I think you will also see us, as I mentioned earlier, hopefully capitalize on some really interesting opportunities on our theater side to sell some assets, so that we can show some real kind of interest in that. So -- but we'll have to go from there.”

asked by Michael Carroll · answered by Gregory Silvers