Entertainment Properties Trust Reports Third Quarter Results

Entertainment Properties Trust Reports Third Quarter Results

Company Announces Name Change to EPR Properties as Part of Strategic Evolution

KANSAS CITY, Mo.--(BUSINESS WIRE)-- Entertainment Properties Trust (NYS: EPR) today announced operating results for the third quarter and nine months ended September 30, 2012.

Total revenue was $82.8 million for the third quarter of 2012, representing a 9% increase from $76.0 million for the same quarter in 2011. Net income available to common shareholders was $28.1 million, or $0.60 per diluted common share, for the third quarter of 2012 compared to $25.7 million, or $0.55 per diluted common share, for the same quarter in 2011. Funds From Operations (FFO) for the third quarter of 2012 was $44.4 million, or $0.94 per diluted common share, compared to $37.6 million, or $0.80 per diluted common share, for the same period in 2011. FFO as adjusted for the third quarter of 2012 was $45.1 million, or $0.96 per diluted common share, compared to $40.5 million, or $0.86 per diluted common share, for the same period in 2011, an increase of 12% per share.

Total revenue was $239.6 million for the nine months ended September 30, 2012, representing a 7% increase from $224.0 million for the same period in 2011. Net income available to common shareholders was $74.3 million, or $1.58 per diluted common share, for the nine months ended September 30, 2012 compared to $52.4 million, or $1.12 per diluted common share, for the same period in 2011. Funds From Operations (FFO) for the nine months ended September 30, 2012 was $127.8 million, or $2.72 per diluted common share, compared to $107.7 million, or $2.30 per diluted common share, for the same period in 2011. FFO as adjusted for the nine months ended September 30, 2012 was $128.7 million, or $2.74 per diluted common share, compared to $118.4 million, or $2.52 per diluted common share, for the same period in 2011, an increase of 9% per share.

David Brain, President and CEO, commented, "The continuing strength of our operations and lower cost of capital allowed us to realize 12% growth in FFO as adjusted per share in the third quarter and once again increase our FFO guidance for the full year. We also continue to successfully build our pipeline for ongoing earnings growth as we enhanced our portfolio with attractive investments across each of our target categories."

"Additionally, I am also pleased to announce that effective November 12, we will be updating our name to EPR Properties to reflect the Company's ongoing strategic evolution," Mr. Brain continued. "While our entertainment segment continues to be our largest and drives solid returns, we have also created a high quality portfolio of education and recreation properties. We will continue to seek properties in select categories that require unique industry knowledge, while offering the potential for stable and attractive returns, and this name change reflects the alignment of our brand to our proven strategy."

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

Portfolio Update

As of September 30, 2012, the Company's real estate portfolio consisted of 113 megaplex theatres (including two joint venture properties) totaling approximately 8.9 million square feet, and restaurant, retail and other destination recreation and specialty properties totaling 4.9 million square feet. The Company also owned 38 public charter schools, five vineyards totaling approximately 529 plantable acres and eight wineries totaling approximately 640,000 square feet. In addition, the Company had six entertainment properties (including four megaplex theatres), one education property and one recreation property under construction at September 30, 2012. At September 30, 2012, the Company's overall real estate portfolio was 98% leased.

As of September 30, 2012, the Company's real estate mortgage loan portfolio had a carrying value of $411.8 million and included financing provided for entertainment, education and recreation properties, including ten metropolitan ski areas covering approximately 6,100 acres in six states. Additionally, the Company had $191.4 million in land held for development.

Investment Update

The Company's investment spending in the third quarter of 2012 totaled $54.3 million and included investments in each of its three primary operating segments.

Entertainment investment spending of $14.6 million related primarily to investments in build-to-suit construction of 11 megaplex theatres and 9 other entertainment properties that are subject to long-term triple net leases or mortgages.

Education investment spending of $27.5 million related primarily to investments in build-to-suit construction of 12 public charter schools that are subject to long-term triple net leases or mortgages. On August 15, 2012, the Company also completed a sale of a public charter school property for $4.5 million that was leased to Imagine. There was no gain or loss on this sale.

Recreation investment spending of $9.6 million related primarily to build-to-suit construction of a golf-entertainment complex which is subject to a long-term triple net lease.

Subsequent to the end of the quarter, the Company closed on $22.0 million of financing related to an existing live-performance anchored entertainment retail center in Charlotte, North Carolina known as the North Carolina Music Factory. The 183,000 square foot project is anchored by two live performance venues leased to Live Nation, and includes additional dining and entertainment tenants.

Investment spending to date of $224.3 million combined with the outlook for spending over the remainder of the year puts the Company well on track toward delivering its expected total 2012 investment spending of $275.0 million to $300.0 million.

Progress on Vineyard and Winery Sales

The Company continues to make progress toward selling its remaining vineyard and winery investments. During September and October of 2012, the Company entered into non-binding agreements with two separate buyers to sell the remaining assets at one of its unleased vineyard and winery properties. As a result, the Company reduced the carrying value of this property to $20.8 million and recorded impairment charges of $3.1 million in the third quarter of 2012. It is expected that these sales will close during the fourth quarter of 2012.

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 September 30, 2012. Combined unrestricted cash and credit line capacity at September 30, 2012 was approximately $425.0 million. In addition, as discussed below, the Company continues to reduce its cost of capital.

As previously announced, on August 8, 2012, the Company issued $350.0 million of 5.75% senior unsecured notes due in 2022. The Company used the net proceeds from this issuance to prepay in full mortgage notes payable totaling approximately $167.6 million with a weighted average interest rate of 6.25%, and to repay the then outstanding principal balance under our unsecured revolving credit facility. In conjunction with these prepayments, the Company expensed the remaining $0.5 million of unamortized fees related to these loans.

On October 12, 2012, the Company issued 5.0 million shares of 6.625% Series F cumulative redeemable preferred shares resulting in net proceeds of approximately $120.7 million, after the underwriting discount and expenses. The Company may not redeem the Series F preferred shares before October 12, 2017, except in limited circumstances to preserve the Company's REIT status or in connection with a change of control. In conjunction with this offering, the Company issued a notice of redemption to the registered holders of all 4.6 million outstanding shares of its 7.375% Series D cumulative redeemable preferred shares announcing its intent to redeem such shares on November 5, 2012 at $25 par plus accrued dividends for a total of approximately $115.8 million. As a result of this redemption, the Company expects to recognize a charge of $3.9 million in the fourth quarter of 2012 representing the original issuance costs of the Series D preferred shares and other redemption related expenses.

Dividend Information

On September 14, 2012, the Company declared a regular quarterly cash dividend of $0.75 per common share, which was paid on October 15, 2012 to common shareholders of record on September 30, 2012. This dividend represents an annualized dividend of $3.00 per common share, an increase of 7% over the prior year. The Company also declared and paid second quarter cash dividends of $0.3594 per share on its 5.75% Series C cumulative convertible preferred shares, $0.4609 per share on its 7.375% Series D cumulative redeemable preferred shares and $0.5625 per share on its 9.00% Series E cumulative convertible preferred shares.

Guidance Update

The Company is increasing its guidance for FFO as adjusted per share to $3.64 to $3.69 from $3.57 to $3.67. In addition, the Company now expects 2012 investment spending to total $275 million to $300 million.

The Company is introducing its 2013 guidance for FFO per diluted share of $3.77 to $3.92. The Company is also introducing 2013 investment spending guidance of $275 million to $325 million, approximately one-third of which is expected to relate to carry-over spending on theatre and public charter school build-to-suit projects initiated in 2012.

Quarterly Supplemental

The Company's supplemental information package for the third quarter and nine months ended September 30, 2012 is available on the Company's website at www.eprkc.com.