EPR Properties: Beyond the Silver Screen – How a REIT is Rewriting Its Story Through Experiential Real Estate

In an era where traditional industries face headwinds, EPR Properties (NYSE:EPR) is proving that reinvention can turn liabilities into opportunities. While the company's theater portfolio once anchored its identity, its aggressive pivot toward experiential real estate – from Topgolf entertainment complexes to wellness resorts – is reshaping its future. Despite lingering concerns over its 38% theater exposure, EPR's strategy of strategic asset reallocation and disciplined capital allocation positions it as a compelling buy, especially at its current valuation.

The Theater Transition: A Necessary Evolution

Theater revenue now accounts for just 44% of EPR's adjusted EBITDAre, down from higher historical levels, thanks to the sale of 27 theaters over four years. While recent box office declines – exacerbated by 2024 Hollywood strikes – temporarily dented theater coverage ratios to 1.5x, management anticipates a rebound as the film slate normalizes in 2025. Crucially, non-theater coverage remains robust at 2.6x, signaling financial resilience even if theaters underperform.

This deliberate shift isn't just about shrinking theater exposure; it's about replacing cyclical revenue with high-margin, recurring cash flows.

The Growth Engine: Topgolf and Beyond

The crown jewel of EPR's diversification is its Topgolf portfolio. With 39 locations generating $25.2 million in Q1 2025 (14.4% of revenue), Topgolf has surpassed traditional theater tenants in profitability. The company's $250 million financing facility for Topgolf's expansion – now over 100 locations globally – ensures this growth driver remains fueled.

But Topgolf is just one piece of EPR's experiential real estate mosaic. Wellness and themed entertainment segments, such as the Diggerland USA construction-themed waterpark and hot springs resorts in Pagosa Springs and Murrieta, are delivering outsized returns. These assets, often with long-term leases (15–20 years) and embedded rent escalators, are less volatile than theaters and better positioned to withstand economic cycles.

Financial Fortitude Amid Headwinds

Despite hurricane-related impairments ($12.1 million in Q3 2024) and theater softness, EPR's adjusted funds from operations (AFFO) per share held steady at $1.29 in Q1 2025. A $1 billion revolving credit facility has bolstered liquidity, and management narrowed 2024 FFO guidance to $4.80–$4.92, a confident signal of stability.

The dividend – currently yielding 6.34% – is another key advantage. At $3.54 annually, it's well-covered by AFFO and underscores management's commitment to shareholders.

Risks, but Not Dealbreakers

No investment is risk-free. Hurricane damage to Florida hotels and rising insurance costs are valid concerns. However, EPR's diversified portfolio and focus on high-demand experiential assets mitigate these risks. The company's technicals also favor a “Strong Buy,” with momentum indicators pointing to further upside.

Why Now?

EPR trades at a discount to peers, reflecting lingering theater-related skepticism. Yet its AFFO growth trajectory, disciplined capital recycling, and a 6.34% dividend make it an overlooked value play. With the earnings call on July 30 likely to highlight progress in its Topgolf and wellness initiatives, now is the time to consider EPR as a long-term growth vehicle.

Investors seeking exposure to experiential real estate's rise – a secular trend fueled by Gen Z and millennials' preference for immersive experiences – should take note. EPR's theater past may still cast a shadow, but its future is written in neon lights: one Topgolf drive, wellness retreat, and themed entertainment project at a time.

Final Take: EPR Properties is more than a REIT with theater exposure. It's a master of reinvention, leveraging experiential real estate to build a moat of recurring cash flows and growth. With strong fundamentals and a compelling dividend, this is a “buy” for investors willing to look past the silver screen and into the next act.