EPR Properties Reports Fourth Quarter and 2012 Year-End Results

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EPR Properties Reports Fourth Quarter and 2012 Year-End Results

Increases 2013 Earnings and Investment Spending Guidance

KANSAS CITY, Mo.--(BUSINESS WIRE)-- EPR Properties (NYS: EPR) today announced operating results for the fourth quarter and year ended December 31, 2012.


Total revenue was $83.4 million for the fourth quarter of 2012, representing an 11% increase from $75.4 million for the same quarter in 2011. Net income available to common shareholders was $18.8 million, or $0.40 per diluted common share, for the fourth quarter of 2012 compared to $31.9 million, or $0.68 per diluted common share, for the same quarter in 2011. Funds From Operations (FFO) for the fourth quarter of 2012 was $41.0 million, or $0.87 per diluted common share, compared to $42.6 million, or $0.91 per diluted common share, for the same period in 2011. FFO as adjusted for the fourth quarter of 2012 was $45.1 million, or $0.96 per diluted common share, compared to $42.4 million, or $0.90 per diluted common share, for the same period in 2011, an increase of 7% per share.

Total revenue was $321.8 million for the year ended December 31, 2012, representing an 8% increase from $298.3 million for the year ended December 31, 2011. Net income available to common shareholders was $93.2 million, or $1.98 per diluted common share, for the year ended December 31, 2012 compared to $84.3 million, or $1.80 per diluted common share, for the year ended December 31, 2011. Funds From Operations (FFO) for the year ended December 31, 2012 was $168.8 million, or $3.59 per diluted common share, compared to $150.3 million, or $3.20 per diluted common share, for the year ended December 31, 2011. FFO as adjusted for the year ended December 31, 2012 was $173.8 million, or $3.69 per diluted common share, compared to $160.8 million, or $3.43 per diluted common share, for the year ended December 31, 2011, an increase of 8% per share.

David Brain, President and CEO, commented, "The fourth quarter was a continuation of the positive momentum we have been reporting throughout the year, allowing us to deliver an 8% annual increase in FFO as adjusted per share and complete approximately $300 million in total annual investments. We are optimistic about the year ahead as we maintain a strong investment pipeline, and when combined with our strong balance sheet, we believe that we are well-positioned to grow earnings and support our increased dividend level."

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

 
Three Months Ended December 31,
2012 2011
Amount FFO/shareAmount FFO/share
 
FFO$41,037$0.87$42,595$0.91
Transaction costs31233
Costs associated with loan refinancing or payoff, net150(390)(0.01)
Preferred share redemption costs 3,888  0.09     
FFO as adjusted$45,106 $0.96 $42,438 $0.90 
 
Dividends declared per common share$0.75$0.70
FFO as adjusted payout ratio78%78%
 
 
Year Ended December 31,
20122011
AmountFFO/shareAmountFFO/share
 
FFO$168,839$3.59$150,291$3.20
Transaction costs4040.011,7300.04
Costs associated with loan refinancing or payoff, net6270.015,9980.13
Preferred share redemption costs 3,888  0.08  2,769  0.06 
FFO as adjusted$173,758 $3.69 $160,788 $3.43 
 
Dividends declared per common share$3.00$2.80
FFO as adjusted payout ratio81%82%
 

Portfolio Update

As of December 31, 2012, the Company's portfolio of entertainment properties consisted of 10.7 million square feet and was 98% leased, including 113 megaplex theatres that were 99% leased. The Company's portfolio of education properties consisted of 2.3 million square feet, including 38 public charter schools, and was 100% leased. The Company's portfolio of recreation properties was 100% leased. The combined portfolio consisted of 13.9 million square feet and was 98% leased.

As of December 31, 2012, the Company's real estate mortgage loan portfolio had a carrying value of $455.8 million and included financing provided for entertainment, education and recreation properties. Additionally, the Company had $196.2 million in land held for development.

Investment Update

The Company's investment spending in the fourth quarter of 2012 totaled $95.9 million and included investments in each of its three primary operating segments. Total investment spending for 2012 was $298.1 million.

Entertainment investment spending of $35.7 million in the fourth quarter of 2012 related primarily to $22.0 million of financing provided to North Carolina Music Factory, an existing live-performance anchored entertainment retail center in Charlotte, North Carolina, as well as investments in build-to-suit construction of eight megaplex theatres and five other entertainment properties that are subject to long-term triple net leases or mortgages.

Education investment spending of $12.8 million in the fourth quarter of 2012 related primarily to investments in build-to-suit construction of nine public charter schools that are subject to long-term triple net leases or mortgages.

Recreation investment spending of $42.7 million in the fourth quarter of 2012 related primarily to the purchase of the Wisp ski resort in McHenry, Maryland, and funding mortgage note agreements with Peak Resorts, Inc. (Peak) for additional improvements at existing properties and Peak's acquisition of a metropolitan ski resort in Ohio. Additionally, the Company funded build-to-suit construction of three golf-entertainment complexes for TopGolf that are subject to long-term triple net leases or mortgages.

Other investment spending totaled $4.7 million in the fourth quarter of 2012 and related primarily to the land held for development in Sullivan County, New York. The Company continues to progress with the development of a planned casino and resort property in Sullivan County, and the Company obtained important local approvals for its comprehensive development plan subsequent to year-end.

Progress on Vineyard and Winery Sales

The Company continues to make progress toward selling its remaining vineyard and winery investments. During the fourth quarter of 2012, the Company completed the sale of the remaining vineyard and winery assets at its Buena Vista property and the sale of the Carneros custom crush facility for total proceeds of $32.0 million. The Company recognized a net loss on the sales of $0.7 million. In addition, the Company has two agreements pending for the sale of another leased winery as well as three other unleased vineyard and winery properties. In conjunction with these agreements, the Company recorded impairment charges of $8.0 million during the fourth quarter of 2012. While there is no assurance that these transactions will close, the carrying value of vineyard and winery assets is expected to be down to approximately $28.0 million subsequent to these sales.

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 December 31, 2012. Combined unrestricted cash and credit line capacity at December 31, 2012 was approximately $371.0 million.

As previously announced, on October 12, 2012, the Company issued 5.0 million shares of 6.625% Series F cumulative redeemable preferred shares in a registered public offering at a purchase price of $25.00 per share resulting in net proceeds of approximately $120.6 million, after underwriting discounts and expenses. Additionally, on November 5, 2012, the Company redeemed all 4.6 million outstanding shares of its 7.375% Series D cumulative redeemable preferred shares for a total aggregate redemption price of approximately $115.8 million.

Dividend Information

The Company is announcing a dividend for the first quarter of 2013 of $0.79 per common share. This dividend is payable on April 15, 2013 to shareholders of record as of March 28, 2013 and represents an annualized dividend of $3.16 per common share, a 5.3% increase over the prior year.

In addition, our Board has approved the payment of dividends to common shareholders on a monthly basis beginning in the second quarter of 2013. Accordingly, it is expected that the first monthly dividend will be payable on May 15, 2013 to common shareholders of record on April 30, 2013. No changes in timing are anticipated related to dividends on preferred shares.

Guidance Update

The Company is increasing its 2013 guidance for FFO per diluted share to $3.79 to $3.94, from the previous guidance of $3.77 to $3.92, and increasing its 2013 investment spending guidance to $300 million to $350 million, from the previous guidance of $275 million to $325 million. Approximately one-third of the expected investment spending in 2013 relates to carry-over spending on build-to-suit projects initiated in 2012.

Quarterly and Year-End Supplemental

The Company's supplemental information package for the fourth quarter and year ended December 31, 2012 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 December 31,Year Ended December 31,
2012 20112012 2011
Rental revenue$61,031$57,025$238,440$224,253
Tenant reimbursements4,7804,37018,57517,965
Other income434106769427
Mortgage and other financing income17,117 13,947 64,002 55,633 
Total revenue83,36275,448321,786298,278
Property operating expense6,9155,64725,28324,216
Other expense4083901,6811,947
General and administrative expense5,3965,04523,17020,173
Costs associated with loan refinancing or payoff, net150(390)6273,700
Interest expense, net20,06217,65876,65671,481
Transaction costs312334041,727
Impairment charges6,87210,87018,684
Depreciation and amortization13,192 11,527 50,254 45,755 
Income before equity in income from joint ventures and discontinued operations30,33635,338132,841110,595
Equity in income from joint ventures358 616 1,025 2,847 
Income from continuing operations$30,694$35,954$133,866$113,442
Discontinued operations:
Income (loss) from discontinued operations441778864(346)
Impairment charges(1,107)(13,039)(17,372)
Transaction costs(3)
Gain (loss) on sale or acquisition of real estate(747)1,236 (27)19,545 
Net income29,28137,968121,664115,266
Add: Net income attributable to noncontrolling interests(47)(25)(108)(38)
Net income attributable to EPR Properties29,23437,943121,556115,228
Preferred dividend requirements(6,503)(6,003)(24,508)(28,140)
Preferred share redemption costs(3,888) (3,888)(2,769)
Net income available to common shareholders of EPR Properties$18,843 $31,940 $93,160 $84,319 
Per share data attributable to EPR Properties common shareholders:
Basic earnings per share data:
Income from continuing operations$0.43$0.64$2.25$1.77
Income (loss) from discontinued operations(0.03)0.04 (0.26)0.04 
Net income available to common shareholders$0.40 $0.68 $1.99 $1.81 
Diluted earnings per share data:
Income from continuing operations$0.43$0.64$2.24$1.76
Income (loss) from discontinued operations(0.03)0.04 (0.26)0.04 
Net income available to common shareholders$0.40 $0.68 $1.98 $1.80 
Shares used for computation (in thousands):
Basic46,85046,72646,79846,640
Diluted47,09046,96747,04946,901
 
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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 December 31,Year Ended December 31,
2012 20112012 2011
Net income available to common shareholders of EPR Properties$18,843$31,940$93,160$84,319
Loss (gain) on sale or acquisition of property747(1,236)27(19,545)
Real estate depreciation and amortization13,31811,77351,16249,009
Allocated share of joint venture depreciation150118581452
Impairment charges7,979  23,909 36,056 
FFO available to common shareholders of EPR Properties$41,037 $42,595 $168,839 

 

$150,291 
FFO per common share attributable to EPR Properties:
Basic$0.88