EPR Properties Reports Fourth Quarter and 2012 Year-End Results

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/share

Amount

FFO/share

FFO

$

41,037

$

0.87

$

42,595

$

0.91

Transaction costs

31

233

Costs associated with loan refinancing or payoff, net

150

(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 ratio

78

%

78

%

Year Ended December 31,

2012

2011

Amount

FFO/share

Amount

FFO/share

FFO

$

168,839

$

3.59

$

150,291

$

3.20

Transaction costs

404

0.01

1,730

0.04

Costs associated with loan refinancing or payoff, net

627

0.01

5,998

0.13

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 ratio

81

%

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

2011

2012

2011

Rental revenue

$

61,031

$

57,025

$

238,440

$

224,253

Tenant reimbursements

4,780

4,370

18,575

17,965

Other income

434

106

769

427

Mortgage and other financing income

17,117

13,947

64,002

55,633

Total revenue

83,362

75,448

321,786

298,278

Property operating expense

6,915

5,647

25,283

24,216

Other expense

408

390

1,681

1,947

General and administrative expense

5,396

5,045

23,170

20,173

Costs associated with loan refinancing or payoff, net

150

(390

)

627

3,700

Interest expense, net

20,062

17,658

76,656

71,481

Transaction costs

31

233

404

1,727

Impairment charges

6,872

10,870

18,684

Depreciation and amortization

13,192

11,527

50,254

45,755

Income before equity in income from joint ventures and discontinued operations

30,336

35,338

132,841

110,595

Equity in income from joint ventures

358

616

1,025

2,847

Income from continuing operations

$

30,694

$

35,954

$

133,866

$

113,442

Discontinued operations:

Income (loss) from discontinued operations

441

778

864

(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 income

29,281

37,968

121,664

115,266

Add: Net income attributable to noncontrolling interests

(47

)

(25

)

(108

)

(38

)

Net income attributable to EPR Properties

29,234

37,943

121,556

115,228

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):

Basic

46,850

46,726

46,798

46,640

Diluted

47,090

46,967

47,049

46,901

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

2011

2012

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 property

747

(1,236

)

27

(19,545

)

Real estate depreciation and amortization

13,318

11,773

51,162

49,009

Allocated share of joint venture depreciation

150

118

581

452

Impairment charges

7,979

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