Company's Q3 2025: Contradictions Emerge on Acquisitions, Yields, and Credit Reserves

Date of Call: October 30, 2025

Financials Results

• Revenue: Total revenue $182.3M, vs $180.5M in prior year
• EPS: FFO as adjusted $1.37 per share, up 5.4% YOY; AFFO $1.39 per share, up 7.8% YOY; 9M FFO as adjusted $3.81 vs $3.64 prior year (+4.7%)

Guidance:

• 2025 FFO as adjusted guidance raised to $5.05–$5.13 per share (midpoint +4.5% YoY)
• 2025 investment spending narrowed to $225M–$275M
• 2025 disposition proceeds increased to $150M–$160M
• Percentage rent/participating income narrowed to $22.5M–$24.5M
• G&A expense guidance raised to $54M–$56M
• Q4 FFO expected to be lower than Q3 due to seasonality

Business Commentary:

• Financial Performance and Guidance:
• EPR Properties reported a 5.4% increase in FFO as adjusted per share versus the same quarter last year.

• The increase is due to disciplined deployment strategies that expand the portfolio of experiential properties, partly driven by strong Box Office performance.

• Investment Spending and Pipeline:

• The company spent $54.5 million in the quarter, all in the experiential portfolio, with a year-to-date investment spending of $140.8 million.

• The investment spending is primarily focused on experiential assets, with a pipeline of actionable investments expected to be completed over the next 90 to 120 days.

• Capital Recycling and Dispositions:

• EPR Properties sold approximately $133.8 million of assets up to Q3, with an increase in 2025 disposition guidance to the range of $150 million to $160 million.

• The strategic capital recycling program involves planned noncore theater dispositions and reinvestment in growth experiential sectors.

• Canadian Fitness Center Investment:

• The company made its first investment with Canadian fitness firm, Altea Active, providing approximately $20 million in mortgage financing.
• This investment reflects EPR's strategic focus on the fitness and wellness space, leveraging relationships to gain access to high-quality opportunities in Canada.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted a 5.4% increase in FFO as adjusted per share, raised full-year FFO guidance to $5.05–$5.13, and said the balance sheet is 'in great shape' with leverage below target and ability to deploy $400M–$500M in 2026 without additional recycling. These statements and guidance raises indicate constructive outlook and confidence.

Q&A:

• Question from Bennett Rose (Citigroup Inc., Research Division): Could you talk more about the $6M mortgage note reserve and what happens with the underlying property?
  Response: It was a prudent full reserve on a single small borrower under CECL; the tenant's performance will be monitored and the company can take control of and sell the related assets if necessary.

• Question from Bennett Rose (Citigroup Inc., Research Division): If you want to stay leverage-neutral in 2026, how large could acquisition volumes be (excluding Genting)?
  Response: Management expects to deploy roughly $400M–$500M in 2026 while remaining at or below the midpoint of its leverage target (~5.3x); the Genting transaction is optional and would only modestly delever (~0.3 turns).

• Question from Kathryn Graves (UBS Investment Bank, Research Division): What is the duration/structure of the Altea Active mortgage financing and how does it fit your investment mix?
  Response: Structured as a long-term (~20-year) mortgage/synthetic lease to provide growth capital and tax-efficient financing in Canada; intended as a long-term partnership and consistent with their bespoke experiential financing strategy.

• Question from Kathryn Graves (UBS Investment Bank, Research Division): Are you seeing increased competition and cap-rate compression from private players?
  Response: There is competition, especially in larger deals, but cap rates are broadly stable and the firm's granular, relationship-driven sourcing helps them remain competitive.

• Question from Upal Rana (KeyBanc Capital Markets Inc., Research Division): What larger investment opportunities are you seeing today?
  Response: Broad-based opportunities across verticals with several >$100M assets available (management estimates ~3%–5% of market); pipeline has meaningfully increased since H1.

• Question from Upal Rana (KeyBanc Capital Markets Inc., Research Division): What is the ATM/equity issuance strategy and timing?
  Response: Equity is not required to execute the 2026 plan; the ATM will be an opportunistic tool to raise capital at attractive prices to further delever or expand dry powder.

• Question from Jana Galan (BofA Securities, Research Division): Color on smaller ($25M–$75M) deals and yield differentials vs. larger deals?
  Response: Smaller bespoke deals remain common and less competitive with yields 'comfortably in the 8s'; larger deals are more competitive and may compress yields by a few dozen basis points.

• Question from Jana Galan (BofA Securities, Research Division): Is the yield on the Altea mortgage representative of Canadian market or comparable to U.S. yields?
  Response: Yield was quoted in U.S. dollars and is similar to comparable U.S. yields; structure reflects Canadian tax/currency considerations but pricing is in line with U.S. expectations.

Contradiction Point 1

Acquisition Opportunities and Strategy

It involves differing perspectives on the availability and attractiveness of acquisition opportunities, which directly impact the company's growth strategy and capital deployment.

What major investment opportunities are you seeing in the current market? - Upal Rana(Analyst)

2025Q3: We are seeing broad-based opportunities across several verticals, with potential deals over $100 million. There's about 3%-5% in the market right now, indicating a change from the first half of the year. - Gregory K. Silvers(CEO)

Are there significant assets for sale at reasonable prices that you’re interested in acquiring? - Robert Chapman Stevenson(Janney Montgomery Scott)

2025Q2: We are still seeing a robust amount of opportunities, but we are being discerning in how we deploy our capital. We feel that there are really good opportunities, but we are being careful. - Gregory K. Silvers(CEO)

Contradiction Point 2

Property Yields and Cap Rates

It involves changes in reported yields and cap rates for property investments, which are critical indicators for investors in evaluating the potential returns of acquisitions.

Does the Altea mortgage loan yield reflect the Canadian market more accurately? - Jana Galan(BofA Securities, Research Division)

2025Q3: The yield is in U.S. dollars and similar to what we'd get in the U.S. The mortgage structure is due to tax considerations in Canada. - Gregory Zimmerman(CIO)

Have you noticed changes in bid-ask spreads or cap rates across sectors? - Unidentified Analyst(Green Street)

2025Q1: Minimal changes are observed across sectors. Bid-ask spreads remain consistent, and cap rates stay within the 8s. - Greg Silvers(CEO)

Contradiction Point 3

Investment Opportunities and Competition

It involves changes in reported investment opportunities and competition within the market, which are crucial for investors to understand the potential for future acquisitions.

Have you noticed increased competition from private equity in the acquisition market? Are cap rates stable? - Kathryn Graves(UBS Investment Bank, Research Division)

2025Q3: There is some competition, but it's not as pronounced as in retail. Cap rates have remained stable, and larger investments might encounter more competition. - Gregory Silvers(CEO)

How could the macroeconomic environment impact the tenant base and future investment activity? - Unidentified Analyst(RBC Capital Markets)

2025Q1: Despite macroeconomic challenges, there's resilience in affordable entertainment and leisure options. We expect continued consumer demand for these experiences, which drives our investment strategy. - Greg Silvers(CEO)

Contradiction Point 4

Investment Opportunities and Capital Allocation

It involves differing perspectives on the availability and scale of investment opportunities, which is crucial for understanding the company's growth strategy and capital allocation decisions.

What major investment opportunities are you seeing in the market today? - Upal Rana (KeyBanc Capital Markets Inc., Research Division)

2025Q3: We're seeing broad-based opportunities across several verticals, with potential deals over $100 million. There's about 3%-5% in the market right now, indicating a change from the first half of the year. - Gregory Silvers(CEO)

Where are the best investment opportunities given the improved cost of equity and strong balance sheet? - Rob Stevenson (Janney Montgomery Scott)

2024Q4: We're bullish on fitness and wellness, and we see opportunities in all verticals. - Greg Zimmerman(CIO)

Contradiction Point 5

Credit Loss Reserves and Provisions

It involves differing statements on credit loss provisions, which are critical for financial forecasting and risk management.

Can you provide more details on the credit losses you're reserving for? Can you share any details regarding the underlying property associated with the $6 million mortgage note? - Bennett Rose (Citigroup Inc., Research Division)

2025Q3: It's a small tenant that we've reserved for, though we have assets related to it. We can consider selling if needed. The macroeconomic factors contributing to the reserve are part of the CECL regulations. - Gregory Silvers(CEO)

What are your assumptions for credit losses this year? - Michael Goldsmith (UBS)

2024Q4: Credit loss on mortgages is baked in at about 1% of EBITDA, or $5 million. - Mark Peterson(CFO)