EPR Properties Stock

Hello, and welcome to the EPR Properties Q3 2026 Earnings Call. [Operator Instructions] Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time.

I will now hand the call over to Brian Moriarty, Senior Vice President, Corporate Communications.

Thank you. Thanks for joining us today for our third quarter 2026 earnings call and webcast. Participants on today's call are Greg Silvers, Chairman and CEO; Ben Fox, Executive Vice President and CIO; and Mark Peterson, Executive Vice President and CFO.

We'll start the call by informing you that this call may include forward-looking statements identified in the Private Securities Litigation Act of 1995 by such words as will be, intend, continue, believe, may, expect, hope, anticipate or other such comparable terms. The company's actual financial condition and the results of operations may vary materially from those contemplated by such forward-looking statements. Discussion of those factors that could cause results to differ materially from these forward-looking statements are contained in the company's SEC filings, including the company's reports on Form 10-K and 10-Q. Additionally, this call will contain certain references to non-GAAP measures, which we believe are useful in evaluating the company's performance. A reconciliation of these measures to the most directly comparable GAAP measures are included in today's earnings release and supplemental information furnished to the SEC under Form 8-K. If you wish to follow along, today's earnings release, supplemental and earnings call presentation are all available on the Investor Center page of the company's website, www.eprkc.com.

Now I'll turn the call over to Greg Silvers.

Thank you, Brian. Good morning, everyone, and welcome to our third quarter 2026 earnings call and webcast. Our focus this year has been on accelerating growth, and our third quarter results demonstrate continued momentum across the business. Revenue increased 12%, while FFO as adjusted per share increased 8.8% compared with the same period in 2025. These results were supported by a strong in-place portfolio and a robust pace of investment activity.

Our investment spending remained strong throughout the quarter as we continue to broaden our experiential portfolio and establish important new relationships. We entered the live venue category through a build-to-suit development in Portland, Oregon with industry leader Live Nation. We have long discussed the strong sustained demand fundamentals of live performance and our team worked diligently to identify the right initial opportunity.

We also acquired a Life Time fitness and wellness property in Irvine, California, further expanding both the depth and quality of our fitness and wellness portfolio. Our portfolio coverage incrementally increased during the quarter to 2.1x. We're also pleased to see box office running well ahead of last year. The third quarter capped off a record summer and year-to-date box office was up approximately 20% through September, driven by a broad mix of genres and compelling titles that continue to bring audiences back to theaters. Our results underscore that the consumer continues to demonstrate that they value and prioritize experiential offerings.

We continue to draw on multiple sources of capital to fund our growth. During the quarter, we recycled capital through the sale of a private school property, entered into forward sale agreements under our ATM program and executed a new credit agreement that includes a $600 million term loan. With our credit facilities and forward equity in place, we have the capacity to fund a strong pipeline of opportunities. Given our capacity and our activity to date, we're pleased to raise our investment spending earnings guidance, which represents an increase of 8% at the midpoint over 2025. As our portfolio expands and diversifies, we remain well positioned to capitalize on the continued growth of experiential real estate.

With that, I'll turn the call over to Ben for a closer look at the business and our performance.

Thank you, Greg. As Greg just highlighted, this quarter marked several notable firsts for EPR. Our first investment in the live performance venue with Live Nation and our first acquisition of a fitness facility leased to Life Time. Both transactions highlight not only our continuing investment momentum, but also the accelerating diversification of our portfolio. During the quarter, we invested $172.4 million at an average initial cash yield of approximately 8.3%, bringing our year-to-date investments to $664.5 million. That volume includes a new experiential category, live venues, along with continued additions to our fitness and wellness, eat & play and experiential lodging portfolios. Two of this quarter's investments stand out for their exceptional A+ real estate, Life Time in Irvine, California and Onelife Fitness at Tysons Galleria in Virginia, both occupy world-class locations that we believe support their long-term success. In addition to these investments, we expect to invest another $21 million this year in experiential development and redevelopment projects already underway.

As we noted last quarter, our theater exposure continues to decline as our experiential investment volume accelerates. Theaters now represent roughly 1/3 of our portfolio, and we expect that share to continue trending toward our long-term goal of approximately 20%. Given our investment pace and the depth of our pipeline, we are pleased to once again increase our 2026 investment spending guidance to a range of $675 million to $725 million.

Two points on our pipeline and the current investment environment. First, the breadth of our pipeline is unparalleled in recent memory, and we look forward to sharing some of the exciting opportunities we're pursuing in the coming quarters. Second, on cost of capital and investment spreads, three factors are working in our favor. Our transactions generally have rate protection built in prior to closing, which provides a buffer during periods of market volatility. As we've said before, our biggest competition is debt, not net lease. In this market, debt capital has repriced even faster, so our clients are receptive to conversations on pricing. And because our business is relationship-driven with a proprietary pipeline, we enjoy higher average entry yields, which give us a natural cushion.

Turning to the portfolio. At the end of the third quarter, our portfolio totaled $7.6 billion of gross investment value across 350 properties, which were 99% leased or operated. By ABR, 96% is in our core experiential categories represented by 296 properties operated by 61 clients, which remain 99% leased or operated. The remaining 4% is our education portfolio, made up of 54 properties leased to four operators, which were 100% leased at quarter end. Portfolio health remains sound with unit level rent coverage increasing to 2.1x. While data indicate pockets of strain among the lowest income consumers, people's enduring preference for experiences over things continues to support our portfolio. Our portfolio also benefits from diversification across multiple demographic dimensions with experiences that appeal to many generations and income levels.

Theaters are a great example. Not only do they span all of these demographics, but they also have historically proven resilient in economic downturns. And most importantly, as Greg has said many times, content drives performance. People want to see cool stuff. This year's box office, which is up 20% year-to-date and on track for its best year since 2019, demonstrates exactly that. We've talked about who goes to the movies before, but with the strength we continue to see across our theater portfolio, a few points are worth repeating. Gen Z accounts for 40% of all moviegoers and in multiple polls, Gen Alpha has said it prefers the big screen. Format matters. People can't replicate IMAX and other premium large-format screens at home, and the industry has created real urgency around seeing certain films in these formats. Our portfolio over-indexes to exactly those experiences. 71% of our theaters have recliners, 84% offer enhanced food and beverage and 69% have premium large-format screens. These features help our theaters generate roughly 8% of North American box office gross with only 3% of screens.

Finally, the industry has coalesced around a 45-day theatrical window, which supports exhibitors and spare studios a second marketing push after films leave theaters. Some films will run longer, including the upcoming Netflix release of Narnia with a 7-week window. And it's not just the movies. Young people are lining up for concerts, comedy shows and other live events. They want to get out of the house, and they are hungry for shared experiences. We're capitalizing on this momentum through partnership with industry leaders like Live Nation, whose venue will host concerts and comedy shows.

Turning to other areas of our portfolio. Our eat & play segment remains resilient, strengthened by the quality of our locations despite broader industry moderation. Topgolf's positive momentum since the sale continues. Expense reductions and revenue initiatives are delivering results, and our Topgolf portfolio remains very healthy. Attractions performed well in the third quarter with several parks outperforming. As we saw in ski during the winter, geographic diversification and attractions helped offset isolated summer weather events. Our fitness and wellness portfolio continued with solid performance in the third quarter with stabilizing trends at several recently renovated and expanded properties. Finally, our education portfolio continues to face industry-wide headwinds, including higher labor costs, grant funding challenges and regulatory pressure. Despite this backdrop, this portfolio remains resilient.

Moving on to dispositions. Reflecting our commitment to accretive capital recycling. In the third quarter, we completed the sale of the British School of Chicago to a public net lease peer, transacting at a cap rate in the low 7% range. Following this sale, we are updating our 2026 disposition guidance to approximately $86 million as we do not anticipate any additional dispositions prior to year-end.

In summary, our portfolio remains resilient. Our diversification is accelerating, and we are very excited about the investment opportunities in front of us.

With that, I'll turn it over to Mark for a review of our financial performance.

Thank you, Ben. Today, I'll discuss our strong financial performance for the third quarter, provide an update on our balance sheet and close by discussing the increases in our earnings and investment spending guidance for the year. FFO as adjusted for the quarter was $1.49 per share versus $1.37 in the prior year, an increase of 8.8% and AFFO for the quarter was $1.54 per share compared to $1.39 in the prior year, an increase of 10.8%. Please note that this quarter, we have revised our definition of AFFO to no longer deduct maintenance capital expenditures. This change was made to be consistent with most other triple net REITs and is immaterial. All prior periods have been recast to reflect this change and reconciliations from the previous definition to the new definition are included in the supplemental and press release.

Before I walk through the key variances, I want to explain two items excluded from both FFO as adjusted and AFFO. First, during the quarter, we had disposition proceeds of $74 million, which included the sale of a private school property for net proceeds of $68.2 million and a gain of $30.5 million was recognized. Second, as discussed last quarter, we entered into a new amended and restated $1.6 billion credit agreement. And in connection with this, we recognized $605,000 of costs associated with loan refinancing or payoff.

Now moving to a few key variances. Total revenue for the quarter was $204.1 million versus $182.3 million in the prior year, an increase of $21.8 million or 12%. This increase was primarily due to the impact of investment spending as well as rent and interest bumps. Percentage rents and participating interest for the quarter were $9.8 million, up from $7 million in the prior year, primarily due to higher percentage rent recognized from our attraction and theater properties. Both other income and other expense relate primarily to our consolidated operating properties, including our four operating theaters and The Kartrite Resort & Indoor Waterpark. The increase in other income and other expense versus prior year is due primarily to better performance at our theater properties as a result of strong box office during the quarter.

On the expense side, interest expense net increased by $7.1 million due to an increase in average borrowings and the weighted average interest rate on our outstanding debt as well as a decrease in capitalized interest versus the prior year. FFO as adjusted for the 9 months ended September 30 was $4.16 per share compared to $3.81 in the prior year, an increase of 9.2%. And AFFO for the same period was $4.26 per share compared to $3.88 in the prior year, an increase of 9.8%.

Turning to the next slide, I'll review some of the company's key credit ratios. As you can see, our coverage ratios continue to be very strong with fixed charge coverage at 3.5x and both interest and debt service coverage ratios at 4.0x. Our pro forma net debt to annualized adjusted EBITDAre was 4.9x at quarter end, which is below the low end of our targeted range of 5X to 5.6x. Pro forma net debt is calculated by subtracting the estimated net proceeds from all forward sale agreements under our ATM program from net debt. Additionally, our pro forma net debt to gross assets was 40% on a book basis at quarter end, and our common dividend continues to be very well covered with an AFFO payout ratio of 60% for the third quarter.

Now let's move on to debt and capital market activities and our balance sheet, which is in great shape to support our continued growth. At quarter end, we had consolidated debt of $3.3 billion, of which $2.8 billion is fixed rate debt with an average blended coupon of approximately 4.4%. During the quarter, upon maturity, we repaid in full $179.6 million of senior unsecured notes that were originally issued in a private placement transaction.

As discussed in our last call, on July 17, we entered into a new amended and restated $1.6 billion credit agreement that, among other things, extended the maturity date and reduced the interest rate on our $1 billion revolving credit facility and established a new $600 million delayed draw term loan facility that was fully drawn at quarter end. The term loan is due in 2032 with interest based on our current credit ratings at SOFR plus 115 basis points. Additionally, during the quarter, we entered into two forward sale agreements under our ATM program for initial gross sales proceeds of $66.6 million or an average sale price of $6.79 per share. No forward sale agreements were settled during the quarter. And as of quarter end, we had total estimated net proceeds from unsettled forward sale agreements of $134.6 million, representing just under 2.3 million common shares.

Our liquidity position remains strong, and we are well positioned to support our continued growth. In addition to the amount available under forward sale agreements that I just discussed, at quarter end, we had $52.4 million of cash on hand and no balance on our $1 billion revolver. As far as upcoming debt maturities, we have $450 million of debt coming due in December and then nothing comes due until June of next year.

Turning to guidance. We are increasing our 2026 FFO as adjusted per share guidance to a range of $5.49 to $5.57 from a range of $5.41 to $5.57, representing an increase versus the prior year of 8% at the midpoint. We expect a slightly higher percentage increase in AFFO per share. We are also increasing our 2026 guidance for investment spending to a range of $675 million to $725 million from a range of $600 million to $700 million. We are revising disposition proceeds to $86 million for the year from a range of $50 million to $100 million. We are increasing our percentage rent and participating interest income guidance to a range of $21.5 million to $24.5 million from a range of $18.5 million to $22.5 million, primarily due to higher amounts expected related to our theater and attraction properties. Please note that the midpoint of this range implies that fourth quarter percentage rent and participating interest income will be approximately $6 million. This is lower than the prior year's fourth quarter amount of nearly $8 million due to the recognition of a part of one tenant's percentage rent in the third quarter of this year versus the fourth quarter in the prior year. We are revising our G&A expense guidance to a range of $57 million to $59 million from a range of $56 million to $59 million due primarily to an increase in expected noncash share-based compensation expense.

Finally, our guidance for other income and other expense has been updated to a range of $44 million to $50 million and a range of $43 million to $49 million, respectively. The net increase in this guidance of $1 million reflects the additional contribution expected from our operating theaters given the strong box office performance as well as additional gains anticipated related to our Canadian FX hedges, which is booked to other income. Guidance details can be found on Page 23 of our supplemental.

Now with that, I'll turn it back over to Greg for his closing remarks.

Thank you, Mark. As you've heard today, the experience economy continues to demonstrate strength and resilience, and EPR is uniquely positioned to take advantage of this trend as it is the only diversified REIT that focuses solely on the experiential economy. So far this year, we've delivered post-COVID highs in investments and sector-leading FFO as adjusted per share growth. During the quarter, we utilized multiple tools in our tool shed, including opportunistically raising equity through our ATM program, recycling capital through dispositions and thoughtfully refinancing our debt with a new term loan execution. Our focus remains on prudently deploying capital to acquire high-quality properties that are valued by the consumer and deliver accretive earnings growth to our shareholders.

With that, why don't I open it up for questions. Operator?

[Operator Instructions] We'll take our first question from Anthony Paolone with JPMorgan.

My first question relates to what you described as an unparalleled pipeline of deals. So can you talk a bit more about just what's in that? How much is maybe acquisition opportunities versus build-to-suits, portfolios, areas that you would invest in, et cetera?

Sure, Tony. So, by breadth, we really are talking about all those things that you've mentioned. It's that the diversity of opportunities we're seeing is really, really exciting, right? So we've talked about fitness and wellness before. And even within that category, we're really seeing opportunities that stretch all the way from things that we've talked about from golf to fitness facilities and everything in between. And then beyond that, we're seeing opportunities in a lot of our other verticals, like eat & play, attractions, live entertainment, all of them have activity and the conversations have just been very engaging and encouraging.

Tony, I would add, I think part of what, again, that's going on right now is we're seeing a really continued focus on people even in these categories, continuing to focus on spending money on these experiential properties and the consumers continues to be highly supportive of this. And so our operators and our tenants are continuing to invest and grow their businesses. So that's creating opportunities even in the face of some of the challenges that are generally going in the economy.

And then on the point of development versus acquisitions, we're seeing a split. And consistent with this year, there are a number of acquisitions that we can expect for the coming year. Development, there's always a high hurdle. And in the current rate environment, that hurdle is probably even a little bit higher, but we are exploring those opportunities and as discussed on the call, have a pipeline of those already in place.

Okay. And then just my second one is as it relates to your more recent theme park acquisitions this year. How did they do this summer? How are they performing and also your appetite to do more in that space?

Again, Tony, I will let Ben chime in. I think, again, as we anticipated, this was a transitory year. So we -- consistent with that, I think we think these are performing in line with kind of where we anticipated. It doesn't mean there was -- we anticipated some degree of challenges as you change the operator and things. I think as we move into this coming year, you'll see a ramp-up. Remember, we committed to the capital -- additional capital going into those properties, and I think that will do.

I think likewise, again, the overall attractions industry has been incredibly resilient over time and continues to demonstrate that. We've had certain events toward the end of the season this year that has brought attention to that. I think everyone in the industry, any sort of event that occurs is like that we've seen is tragic and all of our operators are very much in the focus of that. Safety is of utmost importance to them, and they have demonstrated programs of inspection and safety. And literally, if you look over the billions of people that have written rides and things of that, they have a great overall track record of safety. So we'll have to see how -- if that impacts our belief on kind of the -- what we would do in the future. But right now, everything is playing out the right way. I think we thought it would be, and we'll see about opportunities as we go forward.

But Ben, I don't know if you had anything to add to that.

I think that covers it very well. That's exactly what we're seeing.

Our next question comes from James Feldman with Wells Fargo.

You've got Conor here on with Jamie. Given your first investment in Live Nation for a performance venue this quarter, can you talk through what makes performance venues attractive from both a credit and real estate perspective? And can you describe what your runway to grow exposure here looks like?

Again, I'll let Ben give more details, but I think, Conor, first of all, again, if you go -- if you just look about the resilience of it, I mean, live performance has been -- it has been incredible as far as its strength in the underlying experiential economy. I think the model for how musicians make their money has substantially changed to where they're all out and supported on that road.

And let's be candid, Live Nation is the 800-pound gorilla in that market. So I think they've announced a multibillion-dollar expansion program that they're looking for to increase the depth and breadth of their venues. That doesn't mean we're going to be able to do all of those. But I think we're excited about the underlying dynamics of demand compared with the ability to partner with a world-class operator. And I think that just opens up a whole another opportunity for growth for us. But Ben?

Yes. That's exactly what we're seeing. And then what's very exciting is you look at the growth that Live Nation some of the other operators are having, there's a void still of midsized venues. If you think about 4,000 seat, right? So you have the larger amphitheater and then there's smaller local, but that midsize still is an underserved market. And it's really a sweet spot in that it's the perfect size that attracts headline performances and you can command very attractive pricing and there's just a lot of unmet demand. So that gives us a lot of encouragement about the pipeline and the future opportunity in this sector.

And just to note, when we say very attractive pricing, we think that's very attractive pricing for ourselves. The cost of the tickets, I know everyone is complaining about the cost of tickets, but very attractive pricing is relative to which side of the equation you're sitting on. So we think it's very attractive from our perspective.

You also mentioned credit. We have Live Nation credit. So that's important to point out as well.

Really appreciate the insight. And then maybe given the tick up in rent coverage in the portfolio to 2.1x this quarter, can you walk us through what you're seeing that's driving this increase? And are there any specific sectors or types of tenants driving that?

I think overall, clearly, there's no doubt that the overall rent coverage is being helped by the theater and the performance of that. But I think overall in experiential, I think there's some really good data points. I think -- and I'd reference you guys to McKinsey's report on the State of the Consumer in 2026, where they wrote that the experience economy has become one of the structural forces reshaping global consumer markets rather than viewing experiences as discretionary indulgences, consumers are increasingly treating them as an important part of how they choose to spend both their time and money.

So what we're seeing is people are choosing experiences over stuff and they're continuing to demonstrate that with their spending patterns. And whether you look at credit card data or spending data from the various banks, we're continuing to see experiential spending up and to the right. So we think we're in the right categories, and we think we're the only REIT that offers that level of exposure. So we feel really well with how we're positioned.

Our next question comes from Rob Stevenson with Huntington.

Greg or Ben, the new Live Nation asset, press reports have that opening next summer. Is that still accurate? And can you talk about how big of an investment that is? And if there's a period of free rent or that starts to get rent to you guys next summer?

That time line is still accurate. And in line with our other practice, we're not going to disclose the specific transaction economics, but that time line for opening is consistent.

Okay. And then, Mark, you have roughly $50 million in cash and $135 million available under the ATM. How much additional debt can you issue from here and still stay in your targeted leverage range? Just curious as to how much dry powder, so to speak, you have to deploy here without having to go back to the market and issue more equity.

Yes. Let's just kind of roll forward where we're at. As I mentioned, $50 million of cash, so kind of $35 million of excess as we kind of roll forward to the rest of the year, that should cover our investment spending, which remaining is about $35 million. So we kind of finished the year, that's covered. We have zero on our line today. We do have $450 million of debt due in December, and we can take that down with our lines since we have zero on it or -- and of course, we have those proceeds from the forwards. But we probably don't need the forward equity until next year, so we can kind of have that in the tank for next year's spending. And as that line gets to about that mid-4s, you start to look at potentially a bond transaction that would pay down that line. Typically, that gets to $450 million, $500 million, we look to the market to pay down the line.

In terms of leverage, we finished the quarter here, third quarter at 4.9x pro forma. Just even with the refinancing of the debt in fourth quarter, should that happen, we finished the year around 5x. That's without taking down any forward equity. So we're in great shape kind of approaching next -- going into next year when our leverage range is 5 to 5.6 and being at the lower end of the range. So I think we have plenty of capacity to support the growth.

Our next question comes from Upal Rana with KeyBanc Capital Markets.

Ben, you touched on this briefly, but given the increase in cost of capital, how much have investment yields moved on a like-for-like basis? You mentioned the sellers are open to pricing adjustments, but are you get enough to preserve your targeted spreads?

It's a good question, Upal. And we are very comfortable with maintaining our spreads like we talked about, our average entry yield is already very attractive. And conversations are probably in the neighborhood in terms of movement these days of 25 basis points, give or take. And we're also seeing movement on escalators and that we're able to drive more attractive lease increases in a lot of our conversations.

Yes. Upal, I think these conversations are dynamic. I mean a lot of the deals that we closed this year were based upon the cost of capital that we had done previous to the year. And as we move forward, we are -- and I think over the years, we've demonstrated our commitment to accretive growth. And therefore, if we're able to either expand or contract that to hit that. And so I think the good thing is what I talked about earlier, we're in markets that are demonstrating growth and fundamental consumer support.

So our operators are looking to deploy capital, and there is a cost of capital to do that if they want to grow. So I think, as Ben said, they're more receptive to at least continuing their growth. And for us to be there, there's a cost for us doing that, and we've had these discussions, and we'll have more of them.

And ultimately, as Greg highlighted, we're going to remain disciplined in our deployment, and we're not going to sacrifice spread for volume.

Okay. Great. That was helpful. And then maybe last quarter, you mentioned some of the percentage rent strength was timing related rather than incremental full year upside. With the percentage rent guidance raised this quarter, what changed relative to those assumptions? And was that really The Odyssey and Spider-Man or any kind of other experiential categories?

Yes, you're right about a little bit of timing between Q3 and Q4. But overall, the overall increase of $2.5 million is really a combination of theater performance particularly the Regal percentage rents and a couple of other smaller amounts. And we also saw strength overall in the attraction space, particularly with our Canadian assets. So those are really the two primary areas that drove the increase for the year of $2.5 million at the midpoint.

Our next question comes from Smedes Rose with Citigroup.

Yes, I wanted to ask just a little bit about maybe just the Life Time fitness acquisition. I think you said it's at Tysons Corner. So we clearly see a lot of other REITs that have, frankly, a better cost of capital relative to you buying those assets. I was just wondering, could you talk a little bit about the pricing on that specific opportunity and kind of maybe how it came to you and maybe the competitive landscape when it comes to those kinds of facilities?

First of all, let's be clear, the Tysons Galleria asset was not -- Life Time was in Irvine, California. So -- that's quite all right. I just want to make sure that we get that. But second of all, I think as we've talked about, all of ours are relationship driven. I think for us, without displaying any sort of particular that we said our cap rates were average in the 8s, and these are consistent with that. So I think our ability to source those deals is really a long time kind of us working with people and Ben's relationships and other people's relationships here.

So I think we are, like I said, uniquely positioned to kind of take advantage of some of that. We continue to be, I think, fluid and be able to kind of respond in very quickly and timely manners. And so it positions us to kind of take advantage of some of these deals. And like Ben talked about, we probably have -- again, you talk about that cap rate with probably again, I don't know if they report but maybe the best life time of performance west of the Mississippi. So I think we feel pretty good about our ability to continue to consistently do things that, as you say, others should be able to beat us, but they don't.

It wasn't. It's not a criticism. It was just observation. I wanted to ask you also on the build-to-suit opportunities, you mentioned that it's sort of a higher bar. But I guess just in general, what sort of spread to your typical going-in cap rates would you look for on a development opportunities?

Yes, Smedes. The higher bar is really that development projects always multiple factors come into play. It's not just for us, but it's for the operators as well, right? So when they're looking at projects, the cost of capital and their cost to build, so construction costs, everything comes into play. And so that's really what we're talking about with the higher bar. In terms of spreads, it's very consistent with where we always target and the kind of 50 to 75 basis point premium to in place.

The other thing I would point out is, again, they are all -- and add on to what Ben said, like I said, there are challenges, like I said, even with -- like we talked about with the live performance, again, the credit quality of the tenant, where do -- where are the escalators at? It's a combination of what Ben and his team put together to what we think is the overall risk reward of that. But as he said, yes, the bar is a little higher on an unproven asset. So we kind of get some level of support to rationalize where that is.

Our next question comes from Mitch Germain with Citizens Bank.

I know you guys talked about declining theater exposure. And I'm curious if there is a thought around maybe capitalizing on some of the momentum and pursuing asset sales on some of your portfolio? Or is that decline just going to be through your deployment into other sectors?

Yes. I think, Mitch, it's a good question. I think it would be open to both. I think let's -- from a data standpoint, I think there are some things that are very positive going on. We just -- in the last quarter, we got messaging of one of our net lease peers has bought a theater in a build-to-suit theater for Cinemark below 8 cap. So yes, that's an encouraging data point and to see other net lease peers starting to tip their toe back into the water. That's exciting. So that may create an opportunity for us.

As we've talked about in that space, we have two large master leases, which -- with Regal and AMC, which means we wouldn't want to break those. But to do that, we have to be a rather large transaction. But we are -- it is not we're not opposed to selling theaters. We actively look at it. We need to get value for what we thought. And like I said, when we're starting to see 8 or below 8, it's beginning to get quite interesting in how we can redeploy capital. But we'll just have to see how that plays out.

That's helpful. And maybe just one last one for Mark. Obviously, you guys increased your percentage rent in Regal in the most recent guidance. I'm just curious, without asking for specific commentary on the forward outlook, is there anything that you would consider to be somewhat onetime in nature that's in that number that we need to consider thinking about 2027?

Not really. There was one time in '25, but not really in '26. And we do expect box office to be higher next year than this year. So we would expect Regal percentage rents to go up next year. So without getting too specific, we do expect an increase in percentage rents in '27.

Our next question comes from Michael Goldsmith with UBS.

This is Anna on for Michael. Just I was wondering if you could help us understand how much of the guidance increase was driven by 3Q outperformance? And then I guess, sort of relatedly, maybe the variables that would push you towards the low end versus the high end of this updated guidance?

Yes. I mean this quarter was a little bit higher, some of which was timing, some of which was performance. It's probably easier to look at what drives the full year guidance than trying to identify the quarter. And if you look at the full year guidance, we're up $0.04, a little over $0.03 of that is percentage rents. As you saw, we increased our other income and other expense, and that net is $1 million higher than it used to be, primarily driven by theater performance on the operating side. And then going the other way, G&A guidance was up $0.5 million, so call it $0.05. That's really the drivers of the $0.04 increase for the year. And like I said, some of that's outperformance from Q3, but some of that was that timing of percentage rents Q3 to Q4. So I think it's really better to look at full year is a lot easier to understand.

Our last question comes from Jana Galan with Bank of America Securities.

Congrats on a great quarter. Mark, thank you for highlighting the maintenance CapEx change in AFFO. I believe in the up, you also changed the top tenant contributions from percent of revenue to percent of ABR. I'm just wondering if there's anything to highlight on ground leases there or if this was just to be more comparable with peers who report on ABR? And if there's any other kind of changes you made in terms of the presentation?

Really, you're right. We split from total revenue to ABR. Total revenue has straight-line rent and so forth, and we thought a much better representation of sort of cash rents was to use ABR, and that's more consistent with what peers show. So you're right, we did make that change -- it didn't significantly change the lineup in terms of percentages and so forth, but that was a change we made in terms of the sub. And we've kind of moved to more of an ABR than a GAAP revenue type presentation.

With respect to AFFO, we did some work looking at peers and noted that most of our peers, the vast majority do not subtract maintenance CapEx from AFFO. So we made that change. And then to make sure everyone understood, recast prior periods and so forth, it didn't really have a whole lot of impact on growth. It's fairly immaterial. But we do think to be more consistent with the peer group, that made a lot of sense. It does affect -- it does reduce our payout ratio a little bit, but that's the right way to look at it on a comparative basis to our peer set. And it has mildly increases AFFO, as I mentioned, sort of on a near material basis. But those were the two changes we thought were good changes that we made this quarter.

There are no more questions. So I will now turn the call back over to Greg Silvers, Chairman and CEO, for any closing remarks.

I just want to say thank you to everyone. I hope everyone has a great balance of the year, and we look forward to talking to you in the new year. Thanks, everyone.

Thank you for joining EPR Properties Q3 2026 Earnings Call. This concludes today's call. You may now disconnect.

Hello, and welcome to the EPR Properties Q2 2026 Earnings Call. [Operator Instructions] Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time.

I will now hand the call over to Brian Moriarty, Senior Vice President of Corporate Communications.

Thank you. Thanks for joining us today for our second quarter 2026 earnings call and webcast. Participants on today's call are Greg Silvers, Chairman and CEO; Ben Fox, Executive Vice President and CIO; and Mark Peterson, Executive Vice President and CFO.

I'll start the call by informing you that this call may include forward-looking statements as defined in the Private Securities Litigation Act of 1995, identified by such words as will be, intend, continue, believe, may, expect, hope, anticipate or other comparable terms. The company's actual financial condition and the results of operations may vary materially from those contemplated by such forward-looking statements.

Discussion of these factors that could cause results to differ materially from these forward-looking statements are contained in the company's SEC filings, including the company's reports on Form 10-K and 10-Q. Additionally, this call will contain references to certain non-GAAP measures, which we believe are useful in evaluating the company's performance.

A reconciliation of these measures to the most directly comparable GAAP measures are included in today's earnings release and supplemental information furnished to the SEC under Form 8-K. If you wish to follow along, today's earnings release, supplemental and earnings call presentation are all available on the Investor Center page of the company's website, www.eprkc.com.

Now I'll turn the call over to Greg Silvers.

Thank you, Brian. Good morning, everyone, and welcome to our second quarter 2026 earnings call and webcast. Over the last several quarters, we've highlighted our focus on accelerating growth, and the second quarter marked a significant step forward in executing that strategy. For the quarter, revenue increased 10.1% and FFO as adjusted per share increased 12.7% compared with the same period in 2025. These results demonstrate the strength of our platform and the continued momentum we are building across the business.

On the investments front, we set a new post-COVID high for investment activity in a single quarter, totaling more than $440 million. In addition to our previously announced acquisition of the Six Flags 7 property portfolio, we further diversified our experiential portfolio with additional investments in attractions and fitness and wellness. As part of these investments, we are pleased to welcome Netflix as a new partner through our acquisition of Netflix House in King of Prussia, Pennsylvania.

These properties allow Netflix to deepen customer connections by transforming popular digital intellectual property into physical immersive experiences. This level of investment spending reflects both the depth of our opportunity set and our disciplined approach to deploying capital into durable experiential assets. It also reinforces our confidence in the portfolio's long-term growth trajectory as we move through the balance of the year.

Turning to our portfolio. Tenant performance remains solid as we maintain coverage of 2x across the portfolio. The box office is up approximately 10% year-to-date, driven by a compelling mix of major studio tentpole releases and lower budget breakout films that have broadened attendance and reinforce the enduring appeal of the shared theatrical experience. Notably, titles such as Backrooms and Obsessions, both from filmmakers who built early audiences on YouTube, demonstrate how new creator-driven voices are expanding the theatrical audience and generating outsized box office results.

Outside of theaters, fitness and wellness continues to be resilient as consumers increasingly treat it as a protected nondiscretionary category. Our Eat & Play tenants are also reporting steady healthy trends. We also continued to strengthen our financial position, establishing a new $1.6 billion credit agreement that addresses our maturities later this year and ensures our balance sheet remains a source of strength in support of the pace of our investment growth.

With that, I'm also pleased to report that we're increasing both our 2026 investment spending and earnings guidance. At the midpoint, our updated earnings guidance represents a 7.2% increase over 2025. We believe this underscores our confidence in the durability of our growth.

Finally, I want to note that this summer offered an extraordinary reminder of the power of congregate entertainment. The FIFA World Cup, the largest in history, shattered the all-time attendance record as millions of fans traveled across North America and spent at record levels, not for a thing, but to be present for a moment. This is the same consumer impulse that is at the heart of our business, the demand for shared location-based experiences that cannot be replicated at home. We built this company around that enduring demand, and this summer afforded a powerful reminder of its continued relevance.

Now I'll turn the call over to Ben, who will review the business in greater detail.

Thank you, Greg. As Greg just noted, the second quarter marked another strong step forward in our growth strategy, building on the momentum we established at the start of the year. During the quarter, we invested $440.8 million at an average initial cash yield of approximately 8.5%, bringing our year-to-date total investments to $492.2 million. This investment volume is inclusive of our previously announced acquisition of 7 theme parks formerly operated by Six Flags as well as 2 additional attractions properties, a new investment in golf and a new investment in Hot Springs.

On the Netflix House investment, not only is Netflix, an A-rated corporate credit, but is one of the leading streaming platforms, our partnership with them further validates the powerful role, the physical experiences play in an increasingly digital world. Equally noteworthy is the continued diversification of our portfolio and the corresponding decrease in our theater concentration from 36% reported last quarter to roughly 1/3 of the portfolio today.

Beyond these investments, as of June 30, we expect approximately $92 million in additional investment for existing experiential development and redevelopment projects, of which approximately $65 million is anticipated to be funded throughout the remainder of 2026. Given the velocity of investment activity in the first half of the year and the expanded breadth and depth of our pipeline, we're pleased to increase our 2026 investment guidance to $600 million to $700 million.

We continue to expect investment activity for 2026 to be tilted more toward acquisitions than development. To reiterate a theme from the first quarter, our investment pipeline is sourced almost exclusively from nonmarketed investments generated by direct relationships our investment team has established over many years and demonstrating that EPR is the partner of choice for experiential real estate, approximately half of our investment pipeline represents repeat relationships. On market pricing, we continue to see investment yields holding steady despite volatility in the debt capital markets.

Turning now to an update on the portfolio. At the end of the second quarter, our portfolio represented $7.5 billion of gross investment value, consisting of 346 properties, which were 99% leased or operated. 95% of this value reflects investments across our core experiential categories. These 291 properties are operated by 57 clients and continue to be 99% leased or operated. The remaining 5% of the portfolio represents our Education segment comprised of 55 properties leased by 5 operators. At the end of the quarter, these properties were 100% leased.

The portfolio remains resilient with unit level rent coverage steady at 2x. As consumers redefine wellness and human connection as essential rather than discretionary, we expect to see these trends translate into continued strength in the portfolio. Within our theater segment, the second quarter saw a continuation of the outperformance witnessed in the first quarter. Ticket sales are approximately 10% above the same point in 2025 as the industry demonstrates sustainable growth.

What's especially encouraging is that younger moviegoers are helping fuel the comeback. 87% of Gen Zers and 82% of millennials saw at least one movie in a cinema during the past 12 months.

Within the Eat & Play segment, rent coverage is stable with positive trends emerging at Topgolf from early operational enhancements post separation from Callaway. Attractions delivered strong performance in the second quarter with a reversal of some of the prior year's negative weather impact and the removal of certain geopolitical variables, which adversely impacted 2025.

Our Fitness and Wellness segment continues to deliver solid performance with stabilizing trends at some of our recently renovated and expanded properties. Lastly, our education portfolio continues to remain healthy despite industry-wide labor headwinds. Pivoting to dispositions. As referenced on the first quarter's call, the pace of dispositions is moderating given our renewed focus on opportunistic sales relative to defensive sales.

This shift is reflective of the general health of our portfolio and the outstanding work done by the asset management team in reducing legacy vacancies. Accordingly, we are maintaining our disposition guidance of $50 million to $100 million.

In summary, our company benefits from durable demographic and consumer spending tailwinds. These same forces fueling our growth also reinforce the stability of our portfolio. We see significant opportunities ahead and look forward to continuing to expand and diversify.

With that, I'll turn it over to Mark for a review of our financial performance.

Thank you, Ben. Today, I will discuss our strong financial performance for the second quarter, provide an update on our balance sheet and close by discussing the increases in our earnings and investment spending guidance for the year. FFO as adjusted for the quarter was $1.42 per share versus $1.26 in the prior year, an increase of 12.7% and AFFO for the quarter was $1.43 per share compared to $1.24 in the prior year, an increase of 15.3%.

Now moving to a few key variances. Total revenue for the quarter was $196.1 million versus $178.1 million in the prior year, an increase of $18 million. This increase was primarily due to the impact of investment spending as well as rent and interest bumps. Percentage rents and participating interest for the quarter were $4.8 million, up slightly from $4.6 million in the prior year as an increase in percentage rent accrued related to the Regal lease was partially offset by a decrease in percentage rent related to our Northern California ski property that was impacted by unfavorable weather conditions.

Additionally, during the quarter, we recognized $500,000 in defeasance fee income related to the prepayment in full of a $10.8 million mortgage note receivable secured by an Eat & Play property. On the expense side, interest expense net increased by $5 million due to an increase in average borrowings and a decrease in capitalized interest versus the prior year. Partially offsetting this was an increase in interest income related to short-term investments.

Lastly, equity and loss from joint ventures for the quarter was $1 million compared to $1.7 million in the prior year and was due to better performance at our 2 RV Park joint ventures. FFO as adjusted for the 6 months ended June 30 was $2.67 per share compared to $2.45 in the prior year, an increase of 9% and AFFO for the same period was $2.71 per share compared to $2.44 in the prior year, an increase of 11.1%.

Turning to the next slide, I will review some of the company's key credit ratios. As you can see, our coverage ratios continue to be very strong with fixed charge coverage at 3.4x and both interest and debt service coverage ratios at 4.0x. Our pro forma net debt to annualized adjusted EBITDAre was 5.1x at quarter end, which is at the low end of our targeted range of 5 to 5.6x. Pro forma net debt is calculated by subtracting the estimated net proceeds from all forward sales agreements under our ATM program from net debt.

Additionally, our pro forma net debt to gross assets was 41% on a book basis at quarter end, and our common dividend continues to be very well covered with an AFFO payout ratio of 65% for the second quarter.

Now let's move on to the debt and capital markets activities and our balance sheet, which is in great shape to support our continued growth. At quarter end, we had consolidated debt of $3.3 billion, of which $3 billion is either fixed rate debt or debt that has been fixed through interest rate swaps with an overall blended coupon of approximately 4.4%. During the quarter, we entered into 2 forward sales agreements under our ATM program for initial gross sales proceeds of $23.4 million or an average sale price of $59.70 per share.

No forward sales agreements were settled during the quarter. As of quarter end, we had total estimated net proceeds from unsettled forward sales agreements of $69.5 million, representing just under 1.2 million common shares. Subsequent to quarter end, on July 17, we were pleased to also enter into a new amended and restated $1.6 billion credit agreement that, among other things, extends the maturity date and reduces the interest rate on our $1 billion revolving credit facility and establishes a new $600 million delayed draw term loan facility that is due in 2032 with interest based on our current credit ratings at SOFR plus 115 basis points.

Our bank group, which was expanded as part of this financing was very supportive of these new facilities. We want to thank them once again for their confidence in our long-term strategy. Our liquidity position remains strong, and we are well positioned for continued growth. At quarter end, we had $16.2 million in cash on hand and $640 million available on our $1 billion revolver.

In addition to the amount available under our revolver as well as positive cash flow and disposition proceeds expected over the back half of the year, we have the cash available to draw down on our new term loan facility and unsettled forward sales agreements that I just discussed. These liquidity sources significantly exceed our anticipated outflows, including those for our expected investment spending and debt maturities over the balance of the year. This provides us with significant financial flexibility as we move forward.

Turning to guidance. We are increasing our 2026 FFO as adjusted per share guidance to a range of $5.41 to $5.57 from a range of $5.37 to $5.53, representing an increase versus the prior year of 7.2% at the midpoint. We expect a similar percentage increase in AFFO per share. We are also increasing our 2026 guidance for investment spending to a range of $600 million to $700 million from a range of $500 million to $600 million.

The increase in earnings guidance reflects this increase in investment spending as well as other favorable impacts from our investment activity to date and strong portfolio performance. We are confirming disposition proceeds of $50 million to $100 million and our percentage rent and participating interest income guidance of $18.5 million to $22.5 million. We are also confirming our G&A expense guidance of $56 million to $59 million.

Finally, our guidance for consolidated operating properties has been updated by providing a range for both other income and other expense of $40 million to $50 million with no change to the expected net difference. Guidance details can be found on Page 23 of our supplemental.

Now with that, I'll turn it back over to Greg for his closing remarks.

Thank you, Mark. We are very pleased with the pace and quality of our investments to date, and our focus remains on supporting our strong growth trajectory. The performance and momentum across our businesses allows us to confidently increase our investment guidance and demonstrates our ability to source attractive transactions in this competitive landscape. We remain focused on executing our strategy and advancing our growth objectives in the quarters ahead.

With that, why don't we open it up for questions?

[Operator Instructions] Our first question will come from Jana Galan at Bank of America. [Operator Instructions]

Congrats on an excellent quarter. Maybe starting on the transaction environment and the initial yields were about 50 bps higher this quarter. I know, Ben, in your remarks, you said that pricing is about the same. I guess maybe if you can help us understand, was it the mix? Was it portfolios? How are you able to kind of bump that up 50 basis points?

I think what we've said historically is in the low to mid-8s. And so we're hovering in the same general vicinity. Really, the mix is holding pretty steady as is the pricing.

And would that be similar kind of on the forward pipeline?

Yes.

Great. And then maybe just quickly, Mark, if you can help us understand the magnitude of the guidance increase given the strong second quarter outperformance?

Yes. Some of the second quarter performance is timing, particularly percentage rents was a little higher in Q2 than we expected, which turns around if you look at our guidance for the year. But overall, if you look at our guidance for the year, we're up $0.04. I'd say $0.035 of that or so is due to the investment spending and better performance in the portfolio, i.e., less bad debt expense that we envisioned and then about $0.005 from that defeasance fee that I called out in my comments from the prepayment of a mortgage loan. So that's really what the $0.04 is about.

We did have some, like I said, some timing in the first quarter related to percentage rents that were a little outsized from what we had anticipated. Then managed properties was a little higher, but we think that turns around in the back half and really comes in line with what we had anticipated.

Our next question will come from John Kilichowski with Wells Fargo. [Operator Instructions]

Can you hear me?

Yes.

Awesome. I just want to make sure I got that right. So you're trading well north of where you issued on the ATM in this quarter. And I'm curious today, how does that impact, how you're thinking about funding the rest of your pipeline with access to more capital? And is there room to take up that acquisition pipeline now that the second half may look better than the first half just from an accessibility to capital point of view?

John, again, that's something we'll evaluate. Again, it's in conjunction with finding deals not only that we like, but that are -- can get done within the time frame. I think Ben and his team are actively in the market looking and searching out quality deals. I think Mark and his team are doing a great job of providing an attractive capital source and capital cost. Those 2 work in conjunction. As we've seen, when we have the availability and both of those things come together, we've accelerated. So I will continue to look at those opportunities.

Yes. I'll just add to that. If you look at our cash flow over the last 6 months, it's pretty balanced in terms of uses and sources. On the use side, we've got investment spending, some bond maturities. And on the source side, we've got some the term loan and disposition proceeds and excess cash flow and the potential to settle some ATM shares. Those are about equal, and we start the year at -- we start the -- ended the quarter at $360 million. We have that $640 million availability in liquidity kind of through the end of the year and really our plan is fully funded.

As far as leverage, that's the other thing you consider when looking at equity. We are at 5.1x at the end of 6/30, including our forward equity. That number only grows to about 5.2x, raising no more equity. I think what that tells you, we have a lot of flexibility here to decide when and how we access the market for equity and/or debt given our leverage profile, given our liquidity profile over the remainder of the year.

Okay. That was very helpful. Then my second one, Mark, you kind of highlighted earlier on the percentage rent side that 2Q ran a little bit above expectations, but the guide remains flat. I'm curious what that is implying now for the second half, especially given the strength that we're seeing in the box office, how is that impacting your outlook on percentage rent for the rest of the year?

Yes. June came in a little bit higher, particularly for Regal, really strong June. We'll see how July plays out. July is anticipated to be lower than previous year, although strong. There's innings to play on that. I mean Spider-Man is out and Friday could be a $100 million day, which moves the needle on percentage rents. So we kept it the same, but there's potential for some upside should Spider-Man perform over -- really tomorrow is the last day of the lease.

Today's previous tomorrows, but I mean, as Mark said, John, that could be in excess of $100 million. As we've said, $100 million, that's -- since we're across the barrier, we will fall right to the bottom line of where we're at. I think it's -- given the short time period, we decided just to not move things. We'll see how it plays out.

The upside could be -- would be fairly modest, but could be if things play out, like you said, over -- see how things go tomorrow.

Congrats on the quarter.

One thing I'd add to that is we projected a lot of increase in the box office, we anticipated a lot of that. So it wasn't like a surprise to us that the box office is doing well.

Our next question comes from Rob Stevenson with Huntington. [Operator Instructions]

Mark, what are the bigger variables that pushes you towards the $5.41 of FFOAA at the low end versus the upper end at $5.57?

Yes. There's quite a few things. You think about percentage rents, there's still innings to play. It's not just about Regal. Nearly 2/3 of our rent is -- percentage rent is from other tenants. Obviously, we have operating properties in the third quarter is its primary operating season. So we'll see how that goes up or down. Obviously, the timing of acquisitions -- forward acquisitions and cap rate, those are some of the variables. G&A can vary in terms of incentive comp. So there are several variables that could impact that, but we do feel confident in that midpoint in terms of our guidance.

Okay. And then, Greg or Ben, can you give us any indication as to how the -- I know it's early, but how the former Six Flags Park assets are doing versus what they were doing over the last couple of years directionally?

Yes. I think, listen, being open a month, what we're really looking at is kind of almost guest reviews certainly. There seems to be some really positive momentum in terms of kind of cleanliness, friendliness, availability of rides. The initial indications seem positive, talking with our operator, they seem still very positive.

As we talked about, any major changes since they only got control of the parks in April will come after the season. This really was kind of getting the operations up and moving and controlling certain things that they can control. But things have been positive so far, Ben, I don't know if you have anything to add on that.

That's right, across those. And then with our other Attractions, we are seeing continued strength and a little bit of outperformance relative to the prior year.

Okay. And then last one for me. How many of these Netflix houses are there today? And is this a concept that they're looking to expand? Is there an opportunity for you to expand with them, if that's the case?

I think there's 3 total. Again, we're -- Ben and his team are in constant contact, again, with all of our tenants, and we'll have to just see how it plays out. But I think it's evidence of our ability to kind of -- even when new concepts come in, we're on top of it quickly and see if it's something that we think grows with us. And so we'll continue to stay in contact with them.

Our next question will come from Nicholas Joseph with Citi. [Operator Instructions]

The 2x coverage has been pretty consistent for several quarters now. Have there been any changes in the underlying composition of that metric?

Yes, Nick, the definitely, as we talked about, the ski was a little softer this year because of the weather, but the theaters are stronger. So you have that kind of nice balance. There's also -- again, it's a pretty tight range, but yes, you're having some things come a little bit. There's no doubt that theaters are coming up a little bit. Where there has been some softness where that ski or we talked about earlier in the first quarter, some softness in Eat & Play, that's manifesting that. But given their size, it's not huge. It's a pretty tight band, but...

That's very helpful. And then maybe just more broadly, as you have obviously a lot of exposure across different consumers in different parts of the economic spectrum. What are you seeing from the consumer right now just on the relative strength across different economic classes?

It's really interesting. It's surprisingly resilient. I mean if you think about ski being kind of a higher end, again, that's really been a reflection of lack of ski of snow, but it's the hanging in there. You saw Vail reported that season passes were down 10%, but that's still relatively strong. I think on -- if you look at the theater business, the thing that we're always and continuing to be mindful of is not only our ticket sales up, but the food and beverage spend continues to be strong.

I think it's really -- it's been kind of a very, very positive kind of feeling. The other side of that is, like I said, we've seen continued strength. I mean, with that consumer, and you see that reflected in like AMC's recent reporting yesterday about the best quarter ever that they had. And so I think it seems -- I'd characterize it as resilient. But I mean, Ben, I don't know if you have any other additional thing to add to that.

That's right. I think that resilience is really across the board. I mean even middle-income consumers are demonstrating the propensity to spend on experiential activities, and our portfolio is benefiting from that consumer spending.

Our next question will come from Mike Carroll with RBC Capital Markets. [Operator Instructions]

I want to circle back to guidance and Mark's comments on the recent increase. I know I think you said that the increase is largely due to the recent investment activity and the outperformance due to better operating performance. Where is the better operating performance coming from?

I mean if I just look at the individual guidance lines, it looks like the percentage rents and the other income and expenses were unchanged. So you just -- are you expecting that those to come in at the higher end and you're just trying to be conservative on that front? Or was the increase largely driven by the acquisition activity?

When I talk about performance portfolio, we build in a bad debt reserve or a general reserve, if you will, for things like bad debt, and that's really coming in better than expected. So I'd say part of that increase is investment activity. When I talk about portfolio performance, really less issues in the portfolio than we conservatively estimated.

Mark, can you give us a little detail on that? Like how -- what is the typical bad debt that you expect? I'm assuming that's what you just assume as the historical averages? And where is that coming in right now?

Yes. We called out in the original plan about 50 to 75 basis points. It's probably more like in terms of 40 basis points. In terms of when I call bad debt, bad debt or anything that impacts earnings, it's lower than anticipated.

Okay. Great. And then I know also you said that percentage rents were higher in 2Q '26 than you expected, and it was largely due to timing. I guess what drove that? Did you just have some tenants that paid earlier and that's not going to reoccur in the back half of the year? So 2Q was just abnormally high. I know you talked a little bit about the Regal lease, but that happens every year. And I don't know if I would say that's temporary. It seems like if it's from that, that would be like a true increase.

Well, Regal is a little different in that it depends on the dollar value of box office during the quarter. In June, June this year was bigger than June last year, and so we hit the threshold earlier and accrued more into June. July could be strong, but it's still expected to be less than a year ago. Overall, we'll see how July shakes out, but we're kind of budgeting -- planning on sort of as we planned.

There's a little bit of timing between June and July versus the prior year, and it's all about box office. That's the primary thing driving the year-over-year timing with respect to Regal, which is the primary tenant that's causing that change.

Yes. Again, if you look, Michael, June was quite a bit bigger than June last year and July this year is a little bit smaller than July of last year. So that flips the timing of when you get that. So that timing just kind of rolled in that way. But the net-net to the year is virtually kind of where we projected.

Exactly. Which is up over prior year because we anticipated a box office increase.

Okay. And then where is the box office coming in at versus your expectations? I mean, is it exceeding your expectations right now?

Again, as I said, right now, we would say that we're pretty close to where our expectations were for the Regal lease. Now the overall year, again, is up. And so that's positive. But remember, half the year is last year for Regal. Again, some of that was overcoming what was some softness in the second half of last year with outperformance this year, but our team does a really good job of kind of where that's at.

I think as I said earlier, our variable really will be kind of how well -- I think Spider-Man does plus or minus. It's not going to be a huge variable. I mean we're talking, Mark, $0.5 million top so it's not a huge number, but our guys are really good at projecting this. I think depending upon how that first kind of opening days, what they're talking now, Spider-Man could easily be the best opening of the year so far, which is -- and also the best opening since 2019. No, we didn't forecast that good. So if it comes in, we could have some upside to that.

Our next question will come from Spenser Glimcher with Green Street. [Operator Instructions]

Of your investment opportunity set. Can you just give us a sense of what you're seeing in terms of competition for assets? And what segments or industries are you seeing more of in terms of buying opportunities irrespective of them getting across the finish line and being added to the portfolio?

Yes. Similar to last quarter, we're really seeing opportunities across all of our verticals. Probably if you were to kind of drill a layer down, maybe a slight pickup in fitness and wellness, broadly speaking. The competitive landscape remains very consistent as well, where we're not seeing a lot of the traditional net lease REITs or other net lease investors. It's primarily family offices or alternative forms of capital.

Okay. Great. And then you also talked about opportunistic divestments. So can you just provide some color on whether there's still a continuation of developer interest in theater assets? Because I know you've had success in the past divesting these theaters for redevelopment or densification purposes.

Yes. That dynamic persists. We do have very high-quality real estate throughout the portfolio. Then also within some of our segments, notably in Education, which we're looking to reduce, there are opportunities there where there's strong investor interest.

I think, Spenser, one of the challenges, just to be candid with you is they've done a great job of selling things that are vacant, although we only have one vacant theater. Now these are leased theaters. So we would have to either, a, pull them out of a master lease or get the tenant to give up their lease rights. We get calls every day about the quality of some of these real estate where people would like to redevelop them. It's just -- and attaching that from its existing lease sometimes creates more challenges.

Our final question will come from John Kilichowski with Wells Fargo. [Operator Instructions]

I don't know that John is there.

No problem. We have one final question from Upal Rana with KeyBanc Capital Markets. [Operator Instructions]

Just want to go back to the funding, your future investments. Mark, you talked about this a little bit already. But how are you thinking about the preference or the ideal mix on your funding strategy going forward? And I also wanted to get an update on your appetite to issue more equity given the higher share price as your issuance so far has been a little bit more on the modest side.

Yes. We generally tend to think about it for incremental investments, debt and equity, kind of 60% equity, 40% debt roughly. That's how we look at it. The good news is with our leverage and our liquidity, we don't -- we're not compelled to raise equity. That said, we continue to look at the pipeline continues to be strong. It does make sense at this price, it is accretive to incrementally raise equity at today's price to fund additional pipeline. But I think the bottom line is that incremental capital will be used for incremental investing because we're not really compelled to fund the current plan using equity.

Okay. Great. That was helpful. And then maybe just on Topgolf. You mentioned there were some encouraging improvements from positive trends there from the operational announcements. Maybe you could talk a little bit more on what you're seeing there?

Yes, Upal. The new CEO, David, he's taken several steps to address different opportunities he saw within that business. They range from a headcount reduction to create operational efficiencies as well as better utilization of the existing footprint. A lot of those initiatives are starting to bear fruit, and we expect that trend to continue in a positive direction as more and more of those initiatives take hold.

Yes. I think, Upal, one of the things that they specifically we've followed up on is there's more thinking about dynamic pricing and how that affects during the day and early in the evening, and they've seen that show up with greater foot traffic with foot traffic counts. Those are always kind of real positives as we -- as data points that we see. With that said, I want to reiterate that the strength of our portfolio continues to be very, very resilient. And so we feel very good about where we're at. It's just there's a lot of tuck-ins. So when we see positives, we want to share that.

There are no more questions. So I will now turn the call back over to Greg Silvers, Chairman and CEO, for any closing remarks.

Thank you, Sophie. Thank you, everyone, for your time and attention. We look forward to talking to you next quarter. Thanks, everyone. Bye-bye.

We'll get started here today. Good afternoon, everyone. My name is Upal Rana. I'm the senior REIT analyst at KeyBanc Capital Markets. Thank you for joining the EPR presentation. We are joined here by Greg Silvers, chairman and CEO. I'll have him introduce the rest of the team.

Sure. Thank you. To my right is Ben Fox, who is our Chief Investment Officer; and to my left is Mark Peterson, who is our Chief Financial Officer.

Great. Greg, for those in the room who are not familiar with EPR, maybe you can give us a quick overview of the company, what you own, how the portfolio is structured and maybe what differentiates EPR from the rest of the net lease REITs.

Sure. First of all, it feels a little bit like my college classes, everybody sitting in the back of the room. There's plenty of seats up here in the front. We won't call you out. But EPR, we're organized as a net lease REIT. Again, that's our primary, but our focus is different than most of what I would call the retail world.

Our focus is on what we call experiential assets. Those are generally not where you're buying a product, but you're creating an experience. We deal in the world of memories. And so whether that's the movie theaters, whether it's amusement parks, whether it's water parks, whether it's ski properties, whether it's Eat & Play attractions, Fitness & Wellness. That is our focus. So we're unique in that way. We're the only diversified experiential REIT that's out there and have delivered what we think are really strong and exciting returns and feel like our unique space gives us an opportunity to recreate those returns for the foreseeable future.

Great. And the experiential economy has been a popular secular trend recently. Can you talk about the durability and the resilience of your portfolio today, especially in today's economic environment?

Sure. I think, first of all, remember, when we talk about the experience of economy, if you look at now what will be '24 to '25 the experience economy grew by 7%. In the face of what was a challenged consumer, it continued to grow. People -- the economy of experiences as opposed to the economy of stuff has continued to be valued and continue to grow in value with the consumer. Our overall portfolio has been incredibly resilient.

Our coverage, which is 4-wall EBITDAre compared to our rent has been remarkably stable over the last 2 years, generally in and around 2x. So again, it's -- we really haven't seen the degradation. The consumer seems to be hanging in very well with our properties. And if you look across the board, I mean, in different areas, the theater space right now, box office is up 12% through May 31. So again, if you look across a lot of our categories, we're seeing actually positive trends. So notwithstanding that, we're not acknowledging the stress in the consumer. It's just not manifesting itself in our experiential properties.

Great. It seems like growth has been a central part of the EPR story lately. The company has had a great start to the year. You beat earnings, raised guidance. Our earnings is implying about 6.5%, which is at the high end of some of the net lease peers. You've also raised investment guidance up to $550 million. What's driving that acceleration? And how sustainable is that?

Again, I think for us, it's really getting a cost of capital that makes driving investment volumes greater. As we came in this year, we created a focus on driving those volumes. The opportunity set is there. Like I said, we are unique in the property types that we pursue. So we think that we're uniquely positioned to take those. So last year, we did probably $270 million, $280 million. This year, our targeted range right now is close to $550 million.

So again -- but last year, we did 5.1% growth. This year, I think right now at our guidance range, midpoint is about 6.5%. So I think we're well positioned not only to continue to replicate that and given our size that with the investment volumes that we're able to attract that we could do that for the foreseeable future.

And I wanted to touch on your recent acquisition, the $300 million Six Flags acquisition. It was one of the company's largest post-COVID. The Six properties have already closed, there's one left. Can you give us the latest update on where things stand how those parks are performing relative to your underwriting and how that's impacting your growth this year?

Sure. They opened all within the last 2 weeks. So the performance to date is looking really well. I mean, again, it's nice. So remember, those are parks that generally Memorial Day to Labor Day are kind of the -- they have certain weekends after that, but that's primarily. Now again, I'm probably the only person who's out reading Yelp reviews of amusement parks, but -- and it seems like things are going quite well. I think what we suspected was that Caesars -- Six Flags and Cedar Fair merged, and they created a company of about 55 parks that some of those were not getting the attention that they needed.

So when Six Flags came to us and talked to us about a transaction, we selected some parks to do to work with operators that we felt had a strong underlying consistency in their performance that just needed someone that, that was their priority to that. So we worked with various operators who could meet all 3 of the criteria. One, they had expertise in running parks of this size; two, they could bring capital not only to pay for the operations, but to prefund both deferred maintenance and maintenance capital reserves for the parks.

And so the operators that we worked with were able to do that. I think clearly, they've got a real focus on making these parks stronger. Like I said, we bought them at, we think, are very, very attractive pricing, and we feel like we're well positioned as it moves into their operating season.

Great. That was helpful. And then maybe we can touch on the golf segment. It's been a meaningful new vertical for the company. EPR has acquired 5 property golf course late last year in Dallas for $91 million, which is part of the health -- the Fitness & Wellness category. Topgolf is part of the Eat & Play categories as one of your largest tenants. So how are you thinking about the golf thesis and what the pipeline looks like there?

Yes. And we'll segregate those just a little bit for one, what we call traditional golf, which really has caught our attention mainly because of the supply-demand dynamics. There's been about -- since about 2008, there's been about 4,000 golf courses that have come offline. And so the demand dynamics have totally changed. And therefore, we are able to what we think purchase non-replicable assets that have tremendous amount of demand. And so we feel like we're able to buy these attractively. We like the setup.

The operators, again, consistent with what we've said before, bringing capital. They're committed to the property, signing long-term leases. So we feel like we're in a good position. On our Topgolf -- again, it's been very, very resilient for us, high coverages.

Again, when we think about Topgolf, there's a lot of noise. But remember, this is a company for the first 15 years, they never even marketed. They just opened the doors and people showed up and waited in long lines. So now they're having to get out there and compete for time. So they're dynamically pricing. They're looking at their marketing. But the underlying fundamentals as far as foot traffic and everything remain very high. So we're pleased with both of those options.

Great. So beyond Six Flags and Golf, what else are you seeing that's the most compelling new opportunities today? Are there any other verticals or property types that you're actively exploring?

Yes. But I'm going to -- as you guys have heard enough from me, I'm going to let Ben, who runs our investments kind of give us a little bit about what he's finding exciting now.

I think what we're finding exciting, Greg, right, is that there are just ample opportunities across all of the sectors. And I think a theme that Greg is touching upon, whether it's in golf or attractions is the experience economy is benefiting from secular tailwinds from demographics, whether that's Gen Z on one end or the baby boomers on the other end, whether that's across Fitness & Wellness, other experiences of Eat & Play, attractions, consumers are voting with their wallets and they are choosing to spend on these experiences.

And with that, there are a lot of entrepreneurs and existing businesses looking to continue to capitalize on this spending, and we are the partner of choice given the depth of our investment team's relationships and breadth. We're often the first and many times the only call being received in order to partner with these operators as they look to grow their businesses and expand.

Yes. And Ben, maybe we can touch on that a little bit more on just the sourcing of the deals. Is there something that you guys do that's unique in terms of sourcing more of these deals and top of funnel opportunities?

Yes. Well, that's really what the team has done so well is foster relationships over multiyear periods, right?

Hang on, just get a picture. We got to look good here.

The -- it's the rare exception for us to have a shiny package put in front of us. Most of the time, it's our team working with folks in the industry who might be new to doing sale leaseback or using net lease capital, and we are working with them and creating these relationships, some of which take 2, 3 years to develop, and it creates a very attractive moat for our business in these relationships.

Got it. That was really helpful. And then maybe we can touch on capital recycling a little bit. You've had some success in reducing some exposure to theaters and some of your education portfolio. Maybe you can talk a little bit about the progress you've made over the last few years and what's really left to do there?

Yes. I'll take a little bit. I think part of our -- kind of our capital planning really comes into form as we talk about 3 buckets. If you think about our free cash flow, which is about $140 million, if you talk about dispositions, capital recycling and then you talk about raising equity, and we talked about in the first quarter, we raised about $50 million on our ATM program. So you look at those 3 buckets. And of those, the dispositions is really that in the ATM is one that we can expand greater. We've said there's 2 categories that we're looking to reduce our exposure into.

One is our education which really is not as much as a risk issue as it just strategically doesn't fit in an experiential focus. So we're committed to kind of recycling that capital and then lowering our theater concentration. So in the last couple of years, we've done a significant amount in the theater side. We've probably sold 35 theaters. This year coming through, I think you'll see us a little bit more on the education side, selling some of that. But all of that is to build that pod upon which we can reinvest. There's been really good in our education side, a real good spread for us to sell and then redeploy that capital. So we think that creates really good opportunistic recycling.

Great. That was helpful. And then maybe we can just touch on the theater segment of the portfolio. It's typically one of the largest segments within the portfolio. And it seems like the industry is starting to pick back up again since COVID. Maybe you can talk about some of the dynamics of the theater industry and relative to your portfolio and what's sort of changing there?

Sure. I think there's just generally some overall positives that have occurred in the last couple of years as we've kind of gotten through COVID and then through the strikes. We've got a much more recognition of how streaming in the theater system are going to exist. And you've got all of the studios now recognizing that they actually exist quite comfortably. So this last year, we've had Paramount announced that they want to do 30 films a year.

You had Universal who was a different in the shorter window period. They used to say that some period would be 17 days. They announced that they're going back to a full release window, 45-day window. You have Netflix, who just announced they're going to do their first full theatrical release with Narnia. So again, another part of content you have. And then what you've also seen is what were some smaller studios now really gaining traction with what you saw over the last weekend, 2 weekends with Obsession and Backrooms, two A24 studios that releases that did both get over $100 million. So I think what fundamentally the ecosystem has realized is that the consumer doesn't punish you for releasing to theaters and then showing on the streaming platform. So it gets the studios 2 bites at the apple, 2 revenue sources.

So they're all sort of embracing that mantra. So again, what it really has is created a really kind of positive outlook in the space. And so the forecast not only for this year, but next year and beyond is for escalating box office, which should play very well to our underlying portfolio.

And then maybe you can talk about where is the theater business today relative to -- prior to the COVID, maybe some of the economics and maybe there's a food and beverage component, the foot traffic content that you've already touched on.

Sure. It's really -- if you look at the business on an EBITDA standpoint, from a Box Office standpoint, in 2019, we had $11.3 billion Box Office. But we also had a food and beverage component that was about $4.20. That's per person. If you forward now, we have a box office this year that's expected to be about $9.5 billion, but a food and beverage component that's $8.75. And notwithstanding what you may know or believe that it's a pretty high-margin business in that food and beverage. That Coke has got a lot of good margin in it.

And so actually, from an EBITDA standpoint, those 2 are equal. The EBITDA from an $11.3 billion Box Office with a 45% margin and a food and beverage now at $9.5 billion with [ 8 75 ] with an 80% margin. The total amount of EBITDA that those 2 sites correct, are equal. So we are back -- we will be back to the same level of EBITDA that we achieved pre-COVID this year. So again -- and now as we start to move past that, like this year's expectation is somewhere between [ $9.5 billion and $9.7 billion ] Box Office next year, say, $10 billion. Now we're moving ahead as far as where we're at as total EBITDAre contribution.

Great. And how do you expect the theater business to trend for the rest of the year in terms of content?

It should be -- I mean, again, the content is pretty well laid out right now. What's really exciting from somebody who's in this business is the depth and breadth of the content. So if you think about just in June, we really have it's not dominated by a superhero. Really, you've got family product with Toy Story and Minions. Then you've got full on dramas with a Steven Spielberg film called Disclosure Day followed up by another Christopher Nolan product called the Odyssey.

So again, and now we just had two $100 million horror pictures in there. So it's really expanding the depth and breadth of the offerings, which is really -- it's -- we've always said it's a content business, meaning the more content flows, the greater the box office results will be.

Great. That was really helpful. And maybe, Ben, if we can bring you back in. Could you walk us through how EPR underwrites new investment? What are some of the key attributes you look at and how you decide to pursue or pass on certain properties?

The underwriting process is really rigorous. And to put it in perspective, the underwriting team and investment team, I'd say probably 80% of our team has a CFA, right? That's the starting point. And in terms of the process, before we enter into any new industry where often we talk about the demographic themes and that. So we write a white paper on the industry covering all of those dynamics from a macro perspective, down to a micro, thinking about the landscape of operators, total addressable market and even down to the unit level economics.

So that we set a very strong framework within which we construct our investments. When you then fast forward into reviewing the actual opportunities, given those relationships we talked about earlier, we see a really great breadth of opportunities, which allows us to be selective in what we're pursuing with a very high focus on the credit of the operator, those unit level economics that we have already kind of identified what works and what doesn't. And then, of course, heavy emphasis on the underlying real estate and finding those opportunities that check the boxes across all of those categories.

Okay. Great. That was helpful. Maybe we can touch on tenant health today. Coverage remains pretty solid at 2x. Are there any tenants you're monitoring or anyone on your watch list? Maybe you can discuss some of the metrics you monitor to stay ahead of any kind of potential credit issues.

I mean, generally speaking, like I said, it's -- we're in a pretty good space right now. Again, coming out of COVID, we kind of dealt with a lot of issues. We're always on the theater space looking at AMC. They're performing on a unit level basis. But when you ask about how we monitor and I'll let Ben add if you want, it's not only looking at your properties, but it's looking at your tenant, so is -- and then your industry.

What's the industry doing? What's your property doing, what is your tenant doing? Because your tenant -- you can have great properties, but your tenant gets in trouble, you can have a not so great property, but -- I mean, you can have a great tenant but a not so great property and then the industry. So those are the ways by which somebody gets our attention. But I think overall, we feel like we're in as good a place as we've been for a while.

And maybe we can touch on the consumer a bit with tariffs, elevated gas prices and a bit of an uneven performance across income cohorts. Are you seeing any impact from guest visitation or spending from your tenant locations?

We haven't yet. Like I said -- and we do this generally through conversations with our tenants. Again, it's easy to look at the theater business is reported daily, kind of what Box Office is doing. So as I said, it's up 12% through last Sunday. So again, it's clearly doing but it has a history of outperforming during recessions. If you go back and match it to every recession, the theater business outperforms. The attractions business has just really, as I said, got started. It's really kind of a Memorial Day to Labor Day kind of business. Now when we talk to our tenants, they're actually excited because they think that most of our properties are located somewhere 2 to 3 hours in and around major metropolitan areas and that people will be doing more staycations, we're not driving as far. So they're actually encouraged by that. But knock on wood, right now, we're not seeing it, but we're very mindful of that out being out there, and we're monitoring.

Maybe you can touch on some of the different types of Gen Z versus some of the boomers or millennials. How are they kind of playing into how your portfolio fits together?

Yes. And I'll let Ben add -- I think for us, it's really important to understand that those are the 2 largest demographic groups and therefore -- and what makes them very interesting is, one has all the money and the other one wishes they had all the money. And so there are -- and what we're seeing now is multigenerational opportunities, meaning if you go to our ski properties, you will see multigenerations there. Somebody is putting the bill for it, but they're there, and that's the way they're coming together and especially what we see in Fitness & Wellness. It's 2 different perspectives.

One, for millennials, most of their lives, they have incorporated fitness and wellness into their lives. It's no longer consumer discretionary. It is just what they do. For those of us who are a little bit older, we just want to live longer. So we're doing everything that we can to do that. And that's more on the wellness side of that. So some of our business is focused on different aspects of that. But it's a way to lean into those -- both of those phenomenas that allows us to capture both ends of that spectrum. But Ben, I don't know if you have anything more.

No, I think that's exactly right. And just to add on that, really, the wellness side captures all of it. And when you think about the Gen Z and the youngest cohort, even Alpha, and the concept of iPad kids and the children wanting to be plugged in, the opposite is really happening, right? They are 40% of attendance in movie theaters. They are craving and seeking in real-life experiences and the properties in which we invest, facilitate that human connection where groups of friends can gather away from devices and cannot be disintermediated through the Internet or artificial intelligence.

That was really helpful. And maybe we can bring Mark into the conversation. Maybe let's talk about the balance sheet a little bit. We've talked about the company is on its way to growing earnings. Maybe you can discuss your funding strategy and your overall balance sheet strategy today.

Sure. Maybe given that there's only 6 minutes left, it tells you maybe our balance sheet is in great shape, and there's not a whole lot of questions. But we are in great shape. We finished the quarter at 4.8x leverage. Our range that we generally operate is 5 to 6x. So we're underlevered at the end of Q1. We had nothing drawn on our line of credit and $68 million of cash in the bank. If you roll forward our investment guidance on the use side and our debt maturities. We do have debt maturities in August and December this year on the use side. And then on the source side, the cash flow that Greg talked about, the $140 million of cash flow on an annual basis and you run it through that dispositions. It kind of points to at least one debt deal, call it, $500 million would put us at about $300 million on our line at the end of the year.

So one debt deal is kind of what in our plan, and we still end up in the low 5s, below the midpoint of our leverage. Now given the growth and given the pipeline that we have, we would look to raise -- we raised $50 million of equity, as Greg said, in the first quarter. We would look to incrementally raise more equity should our stock price allow and potentially also look at a second bond deal or debt deal. That could be in the nature of a term loan because we have that capacity pre-COVID. We had a term loan. So we have that source. And of course, we could do a second public bond. So we have a lot of flexibility. We don't need to raise equity, which is a good place to be, but we will look to incrementally raise equity if the price makes sense to accretively raise that and do additional volume.

We've got a few minutes left. If anyone has any questions, please feel free to raise your hand or ask away.

Sure. I know you got questions.

Okay. So first thing, let me make sure I heard you right that the movie theater is not going away the dinosaur.

Not going away the dinosaur.

High gas prices. You answered the first half of my question, which I think is that in the short term, because it's mostly Memorial Day to Labor Day, it's a little too early to figure that out. What about thinking longer term? If gas prices stay high for the next 6 months, does that change or influence the type of acquisitions we'll be looking at?

Again, we'll factor it in, it may end up how we -- what we pay for them. I don't think -- I think we think these trends are long-term trends that people are not giving up these activities. It may factor into what we pay for them as that. But I wouldn't see us changing up what we're buying.

What's your embedded combined rent growth?

Generally, it's about 1.5% to 2%. That's kind of changed. If you said that's -- remember, this is our 28th year. So again, over time, that's changed here lately. We're probably accelerating that a little bit, probably 2% to 2.5%. But if you look at the whole kind of portfolio.

And weighted average lease term?

12.

Anyone else? Okay. Maybe I can add one more question on my side. I kind of have to ask AI question.

Sure.

How are you guys utilizing AI in either asset management or underwriting? Or could it be a potential differentiating factor in the future for the company?

Again, I think we're trying to incorporate it in both of those areas. I mean, again, one example is we generally have a report that talks about what's going on in our tenants or our industries and our asset managers used to kind of compile these reports. Now it's like the push of a button, and it's daily. So that's amazing. And we're using it in assistance with our underwriting. So I would say it's more of an enhancement. I don't think we've eliminated any positions as a result of it. But I think we are seeing how it can be a tool that can expedite what we're doing and get further efficiencies.

Got it. Okay. And maybe tying it all together, what should investors and the people in this room take away about EPR and where it's heading?

I think it's really positive. I give you 4 numbers that you could take away 65, 71, 51, 65. These are not our ages. These are -- that's our 2-year, our 3-year, our 4-year and our 5-year total shareholder return. That's top of the group. That's an average on any year, if you look at it, of at least 13%. That is what we have delivered consistently. And the best indication of what we are going to do in the future is what we've done in the past. If you look at pre-COVID in 2019, that was our 20th anniversary, 1999 to 2019, the #2 TSR of all REITs.

So again, being in what we do and being able to own a space to underwrite it, to identify and to deliver on that allows us to produce these kind of results. So we want to thank you for your time and attention. And as always, if you have any questions, don't hesitate to reach out to us. Thank you.

Hello, and welcome to the EPR Properties First Quarter 2026 Earnings Call. [Operator Instructions] Also, as a reminder, this conference call is being recorded today. If you have any objections, please disconnect at this time.

I will now hand the call over to Brian Moriarty, Senior Vice President of Corporate Communications.

Thank you, operator. Thanks for joining us today for our first quarter 2026 earnings call and webcast. Participants on today's call are Greg Silvers, Chairman and CEO and Ben Fox, Executive Vice President and CIO; and Mark Peterson, Executive Vice President and CFO.

I'll start the call by informing you that this call may include forward-looking statements as defined by the Private Securities Ligation Act of 1995, identified by such words as will be, intend, continue, believe, may, expect, hope, anticipate or other such comparable terms.

The company's actual financial condition and the results of operations may vary materially from those contemplated by such forward-looking statements. Discussion of those factors that would cause results to differ materially from these forward-looking statements are contained in the company's SEC filings, including the company's reports on Form 10-K and 10-Q.

Additionally, this will contain references to certain non-GAAP measures, which we believe are useful in evaluating the company's performance. A reconciliation of these measures to the most directly comparable GAAP measures are included in today's earnings release and supplemental information furnished to the SEC under Form 8-K. If you wish to follow along, today's earnings release, supplemental and earnings call presentation are all available on the Investor center page of the company's website, www.eprkc.com.

Now I'll turn the call over to Greg Silvers.

Thank you, Brian. Good morning, everyone, and welcome to our first quarter of 2026 Earnings Call and Webcast. In previous quarters, we've discussed our focus on accelerating growth. For the quarter, we delivered a 5.9% increase in FFO as adjusted per share versus the prior year and have established strong momentum as we accelerate on our investment spending for the year.

The centerpiece of our investments was our announced acquisition of a Seven Park regional portfolio from Six Flags. This $315 million portfolio is our largest acquisition in the post-COVID era and we're pleased to own parks that have demonstrated success in the past and offer significant opportunities for the future. These properties comprise more than 1,600 acres across 6 states and Canada, include 418 attractions and have established guest bases that draw approximately 4.5 million visitors annually. We are delighted to be partnering with proven operators Enchanted Parks who operate the U.S. parks and La Ronde operations to operate La Ronde in Montreal. These parks have become staples in their communities and have established multigenerational patronage by delivering fun, excitement and lasting memories.

Supporting both the stability of our portfolio and our confidence in our investment outlook is the sustained growth in consumer spending in the experience economy. As we highlight in our investor presentation, personal consumption expenditures in most of the categories we invest in have been growing for many years and most recently increased 7% from 2024 to 2025.

In an environment with a variety of macroeconomic cost currents, our overall portfolio coverage remains stable and resilient with most tenants reporting steady or improving results. We're pleased to see box office running ahead of last year, supported by a variety of genres and titles.

Additionally, Fitness & Wellness continued to demonstrate resilience as many consumers view this category as an essential part of their lifestyle. This reordering of priorities where consumers increasingly treat Fitness & Wellness as protected nondiscretionary spending reinforces the durability of the segment and supports the long-term thesis behind our investments in this category.

Lastly, I'm pleased to report that we're increasing both our investment spending and earnings guidance. Last year, we delivered 5.1% growth in FFO as adjusted per share, with today's update, the midpoint of our 2026 guidance for FFO as adjusted per share represents 6.5% growth. This significant growth reflects the strength of our investments to date, our future pipeline, the quality of our portfolio and the momentum we've established.

As our portfolio continues to expand and diversify, we anticipate additional opportunities to capitalize on the experiential movement and strengthen our competitive advantage.

Now I'm going to turn over the call to Ben Fox, who is joining us for his first call as CIO. We look forward to his leadership and contributions in the coming years. Ben, please take it from here.

Thank you, Greg. I appreciate that. I am very pleased with the positive momentum we have demonstrated to date with our investment activity. In the first quarter, we completed $51.3 million of investments, including the previously announced acquisition of a VITAL Climbing Gym located on the Lower East Side of Manhattan as well as already committed development capital.

Subsequent to quarter end, we completed the acquisition of 6 properties from Six Flags Entertainment representing the substantial majority of this $315 million 7 property transaction. We expect the remaining property, La Ronde located in Canada to close in Q2. This is a notable investment, which further diversifies the portfolio alongside best-in-class operators, and it underscores the value proposition we are uniquely positioned to deliver.

Our deep roster of client relationships enabled us to provide Six Flags with a one-stop solution as it sought to reduce its operating footprint. By bringing trusted, proven operating partners to the table, we helped Six Flags achieve its objectives while acquiring irreplaceable real estate.

In addition to these highlighted investments, as of March 31, we expect approximately $71 million in additional investment for existing experiential development and redevelopment projects, substantially all of which should fund over the balance of this year.

Given the acceleration in our investment velocity, we're pleased to increase our investment guidance to $500 million to $600 million, which represents our highest investment expectation since COVID. This increase is reflective of the depth and breadth of opportunities we're seeing across all our verticals. We expect investment activity for 2026 to be weighted more towards acquisitions than development. We also expect to continue employing convertible or other similar mortgage structures selectively where it makes sense for both us and our clients.

Significantly, this increase in investment cadence demonstrates the depth and quality of relationships our investments team has created allowing us to generate attractive proprietary deal flow across the experience economy.

Before turning to the portfolio update, I want to spend a minute discussing the competitive landscape and pricing. Although the net lease sector is generally a competitive market, we're seeing cap rates holding steady for the investments we target. Again, this is reflective of the unique relationships we have in the insights that our underwriting and asset management teams provide. If anything, the continued volatility in the capital markets is providing an uplift in both the number of opportunities we're seeing and the corresponding conversion ratio for turning these opportunities into closed investments.

Turning now to an update on the portfolio. At the end of the quarter, our portfolio represented $7.1 billion of gross investment value, consisting of 335 properties, which were 99% leased or operated. 94% of this value reflects investments across experiential assets. These 280 properties are operated by 54 clients and continue to be 99% leased or operated. The remaining 6% of the portfolio represents our Education segment comprised of 55 properties leased by 5 operators. At the end of the quarter, these properties were 100% leased.

Importantly, the portfolio remains very healthy with 2x unit level rent coverage. This coverage demonstrates the resiliency that our portfolio diversification creates. Moreover, it's also reflective of resilient consumer spending patterns and the continued prioritization of experiences.

Notably, within our Theater segment, the first quarter saw a 25% increase in North American box office grows, benefiting from an increase in both attendance and the number of films released. The current film slate sets the rest of the year up favorably compared to last year.

Several recent announcements have continued to remove uncertainty while demonstrating the enduring power of theatrical exhibition. First, both the Writers & Screen Actors' Guilds have reached new 4-year agreements, removing any concern of strikes for the foreseeable future.

Second, Amazon MGM has announced a commitment to 15 theatrical releases in 2027, with a standard theatrical window of 45 days. Following this move, Universal reversed course on its previous 17-day window, now committing to the standard window of at least 45 days.

And most recently, Netflix announced on Friday that the upcoming release of Narnia, which initially was slated for a 2-week release exclusively in IMAX will be getting a wide release in both IMAX and standard formats for a 49-day theatrical window before moving to streaming. These moves reflect Studio's recognition that theatrical releases serve a dual purpose, generating box office economics upfront while meaningfully enhancing the value of films, streaming window downstream.

Within the Eat & Play segment, our operators performed in line with the prior year, seeing a small amount of attendance volatility, offset by higher average spending per visit. Geographic diversification produced incremental gains in our Ski portfolio with significant outperformance in the Mid-Atlantic and East Coast properties more than offsetting the historically poor snowfall across the Western United States.

Our Fitness & Wellness segment continues to deliver solid performance and we're continuing to see incremental gains at some of our recently opened properties. Lastly, our Education portfolio continues to perform well and coverage in this segment remains strong.

Touching upon dispositions, the asset management team has done an outstanding job over the past several years on risk management and on resolving vacancies. Although dispositions targeting proactive risk management, will remain a core element of our asset management strategy. The emphasis over the near term will be on generating accretive proceeds through sales of noncore assets.

Accordingly, we are increasing our disposition guidance by $25 million on the lower and upper bounds to a new range of $50 million to $100 million. In summary, our portfolio continues to be resilient and we remain enthusiastic about the investment landscape. We are encouraged by the depth of our investment pipeline at this point in the year and have confidence in our revised investment guidance.

With that, I'll turn it over to Mark for a review of our financial performance.

Thank you, Ben. Today, I will discuss our strong financial performance for the first quarter, provide an update on our balance sheet and close by discussing the increases to our earnings and investment spending guidance for the year.

FFO as adjusted for the quarter was $1.26 per share versus $1.19 in the prior year an increase of 5.9%. And AFFO for the quarter was $1.29 per share compared to $1.21 in the prior year, an increase of 6.6%.

Before I walk through the key variances, I want to explain 2 items excluded from FFO as adjusted and AFFO. First, during the quarter, we exercised our purchase option to convert a $70 million mortgage note receivable secured by an experiential lodging property into a wholly owned rental property subject to a long-term triple net lease. At the time of the conversion, we recognized a $1 million gain on real estate transactions and the $1.3 million benefit for credit losses.

Second, benefit for credit losses was $5.6 million for the quarter, and related to the conversion I just discussed as well as changes to our expected -- our current expected credit losses in our third-party model based on improvements to both property level performance and certain relevant economic conditions.

Now moving to the key variances. Total revenue for the quarter was $181.3 million versus $175 million in the prior year, an increase of $6.3 million. This increase was mostly due to the impact of investment spending as well as rent and interest bumps. This was partially offset by dispositions and a decrease in percentage rents and participating interest, which was $2.5 million for the quarter versus $5.1 million in the prior year. This decrease was mostly due to out-of-period percentage rent and participating interest totaling $2.9 million recognized in the first quarter of 2025.

Both other income and other expense relate primarily to our consolidated operating properties, including the Kartrite Hotel and Indoor Water Park and our 4 operating theaters. The decrease in other income and other expense versus prior year is due primarily to the sale of 2 operating theater properties in the first quarter of 2025.

On the expense side, interest expense net increased by $1.7 million due to an increase in average borrowings and a decrease in capitalized interest versus the prior year.

Turning to the next slide. I'll review some of the company's key credit ratios. As you can see, our coverage ratios continue to be very strong with fixed charge coverage at 3.3x in both interest and debt service coverage ratios at 3.9x. Our pro forma net debt to annualized adjusted EBITDAre was 4.8x at quarter end, which is below the low end of our targeted range of 5 to 5.6x. Pro forma net debt is calculated by subtracting from net debt. The estimated net proceeds from the forward sales agreement we executed during the quarter that I will discuss shortly.

Additionally, our pro forma net debt to gross assets was 39% on a book basis at quarter end, and our common dividend continues to be very well covered with an AFFO payout ratio of 70% for the first quarter.

Now let's move to our capital market activities and balance sheet, which is in great shape to support our continued growth. At quarter end, we had consolidated debt of $2.9 billion, of which all is either fixed rate debt or debt that has been fixed through interest rate swaps with an overall blended coupon of approximately 4.4%. Our liquidity position remains strong with $68.5 million of cash on hand at quarter end and no balance drawn on our $1 billion revolver.

Additionally, in March, we were pleased to enter into a forward sales agreement under our ATM program to sell an aggregate 797,422 common shares for initial gross proceeds of $47.5 million or an average sale price of $59.52 per share. We can settle the outstanding shares anytime before March 1, 2027 for the gross proceeds subject to various adjustments.

As of today, we have not settled any of these shares. We are increasing our 2026 FFO as adjusted per share guidance to a range of $5.37 to $5.53 from a range of $5.28 to $5.48, representing an increase versus the prior year of 6.5% at the midpoint. We expect a similar percentage increase in AFFO per share. We are also increasing our 2026 guidance for investment spending to a range of $500 million to $600 million from a range of $400 million to $500 million and increasing disposition proceeds to a range of $50 million to $100 million from a range of $25 million to $75 million.

We are confirming our percentage rent and participating interest income guidance of $18.5 million to $22.5 million which continues to be very heavily weighted to the back half of the year. We are also confirming our G&A expense guidance of $56 million to $59 million and the guidance for our consolidated operating properties, which is provided by giving a range for other income and other expense. Guidance details can be found on Page 23 of our supplemental.

Finally, we were pleased to have increased our monthly common dividend by 5.1% to $3.72 per share annualized which began with the dividend payable April 15 to shareholders of record as of March 31. We expect our 2026 dividend to be well covered with an AFFO payout ratio below 70% based on the midpoint of guidance.

Now with that, I'll turn it back over to Greg for his closing remarks.

Thank you, Mark. As discussed today, both our investments and earnings are accelerating and reflect the resiliency and opportunity of our experiential focus. We've also demonstrated our ability to utilize multiple sources of capital to fuel this growth with the initial execution of our ATM program, along with opportunistically recycling capital with planned asset sales. All of these positives reinforce our conviction that EPR's unique platform and asset classes position us to deliver outsized shareholder returns.

With that, operator, why don't we open it up for questions?

[Operator Instructions] Our first question will come from Jana Galan with BofA.

Congrats on a really nice first quarter. Mark, for the increase in AFFO guidance, can you help parse out how much came from a slightly better first quarter? And then how much you're seeing from the acceleration in investment activity? Or is it maybe also better yields on that investment activity?

Yes, we did -- we were a little better for the quarter, about $0.01 or $0.02. But then as you look forward, really, the increase is due to a couple of things. One, obviously, we raised our investment spending and paid for that via the capital raise, but there was probably $0.01 out of that increased guidance.

And then I think more broadly, we got a benefit from being fairly conservative with respect to the Six Flags transaction at the end of the year because we weren't sure -- for sure it would close and when exactly it would close. So I think the ultimate outcome of that was better than anticipated. And I think the remaining investments, not just the increase for the year, but the remaining investments are coming in a little bit sooner than planned and at a better cap rate.

The last thing I'll mention that impacted our FFOAA guidance was the Margaritaville conversion to a -- from a note to a lease. We got incremental straight-line rent from that, and that was probably a little under $0.02 in terms of straight-line benefit converting from a mortgage to now a 20-year lease with escalators that had some straight-line impact.

And then maybe just one for Ben, on the strategy to kind of employ more convertible or other mortgage structures as a way to invest in assets. Just curious, is kind of the first quarter purchase option that you guys exercised kind of a key example of what this would look like?

Yes. Jana, that's exactly right. Really, the mortgages that we use, as I mentioned, are pathways to real estate ownership. And so that conversion of the Margaritaville is exactly representative of the types of structures we enter into. And so as opportunities present themselves, we will convert those and use those selectively.

Our next question will come from Bennett Rose with Citi.

I just wanted to follow up on that on these convertible mortgage opportunities. Could you maybe just talk a little bit about sort of how many you have and kind of what that could look like over the next couple of years as we choose to go down that path?

Yes. It's a good question. And really, if you look at our mortgage book, the majority of those, probably more than 80% are convertible, right? So what we're highlighting here is with this transaction in Margaritaville, that is just an example of the opportunities that sit within the existing portfolio as well as the types of structures that you could see us enter into in the upcoming quarters and years.

Okay. And then I just wanted to ask you on your -- the acquisition of theme parks from Six Flags, do you guys see them, I guess, as a potential partner going forward? Is it your sense that Six Flags may want to shed more what they would consider noncore assets? And is that something you would be willing to lean into more at this juncture?

Smedes, it's Greg. I think -- again, I think, clearly, we've demonstrated a partnership with them. So we'll definitely take a look at that. I think they're exploring. And I think real estate solutions are being explored across the board in the attraction space. And I think our team has demonstrated our ability to be a market leader in that space, whether that's with Six Flags or with other participants.

So I think us carving out our leadership position will ultimately probably create more opportunities, which I think we think we find very attractive.

Our next question comes from Upal Rana with KeyBanc Capital Markets.

Just on the Six Flags transaction, could you walk through the strategy behind...

We kind of cut you off, but I think you're saying what was the strategy? So I think our put was, again, long term, we look at these as incredibly stable assets. If you look over time, that these are -- they're market-dominant that you just cannot create has been reported. These assets were -- have had multibillion dollars spent on them that we can buy very attractively, which we think create long-term stability. They're very much part of the communities and where they exist.

So we feel like this is a really strong anchors to an experiential portfolio. I think, again, as we said, there's really been no new parks built in decades. So we feel the durability and the resilience of these are quite good. And we will continue, as I said, to explore opportunities.

Okay. Great. That was helpful. And then maybe in your prepared remarks, you mentioned you're encouraged by your pipeline that you're seeing. Maybe you could talk a little bit about that and what types of deals you're seeing and any kind of sizes?

I'll let Ben add a little bit to this, but I think what we're encouraged is kind of what I talked about in the beginning. Experiential spending continues to accelerate. And we continue to see multiple reports about how people are valuing experiences over things and continuing to prioritize those.

So again, whether it's Attractions, Fitness, Eat & Play, across the board, we're seeing strength. And so therefore, I think we would say that almost all of our categories, as we said, we're not growing theaters, but all of our categories, our pipeline of opportunities is expanding, but I'll let Ben if you want to add anything.

I think that's exactly right. It really is across the board. And just the ability to get a lot of our relationships to the table is increasing, and there's a general increased willingness to transact and derisk capital markets exposure.

[Operator Instructions] Our next question comes from Justin Haasbeek with UBS.

This is Justin on for Michael Goldsmith. Are you seeing any cap rate compression or increased competition in your top 3 acquisition segments of Fitness & Wellness, Attractions and Eat & Play? And are those still your top 3 in terms of acquisition focus?

I would say, yes. I mean, again, especially on our flow business, I mean, clearly, with what we did with Attractions this year, that was a big anchor transaction, but our flow business, I think those are still the top. And as Ben commented in his opening comments, I think our cap rates remain stable. I think, again, our position as kind of a leading market participant here makes us get the first call usually on these type of assets.

So I think there's always going to be competition. But again, everyone in this space knows who we are, and we're going to get that call. So I think that bodes well for us continuing to grow that pipeline more and more.

Okay. Great. And does the strong box office performance in the first quarter here, does that change how you think about your exposure? And has there been any private market interest in theaters? Has that changed at all?

There's -- again, I -- first of all, I should answer the first one. I don't think it's changed our interest in the sense that we still believe that increasing our diversity is a strategic objective of ours. I think there's no doubt that there continues to be getting an improving interest in the theater space as this continues, especially with some of the things that Ben mentioned in his comments, you've got the studios now kind of embracing much more on a theatrical forward kind of direction whether it's embracing the windows, whether that's Netflix now starting to use theatrical. So I think there's a lot more positive feeling about it. So we're seeing more interest in there. We'll see if that plays out to a ability for us to transact. But there's no doubt that we're getting more inbound calls on our portfolio.

Our next question will come from Michael Carroll with RBC Capital Markets.

Greg, can you talk a little bit about the current macro uncertainty and how that has impacted the experiential space? I guess, mainly, have you received any calls from potential sellers looking to further derisk, I guess, their company and maybe doing a deal with you just given the potential volatility that could be caused in the capital markets?

I think, as Ben said, we're getting inbound calls of people who are -- again, I think the idea of it used to be at the beginning or the end of last year, wait until rates improve. And now I think that volatility in that market has helped in that sense. I think though, the underlying the thing that's got us is the underlying support and resiliency of the activities. I mean as we said, our coverage remains very strong against this backdrop.

So I think it gives us confidence to move forward that the consumer is still there. And I think there is, as Ben noted, some people who on the capital side are looking at saying, Okay, it doesn't look like rates are going materially down, and there is a risk with where we're at of them going up. So let's see if we can lock in transactions. But Ben, I don't know if that's consistent.

That's very consistent with what we're seeing.

Okay. And then on the disposition side, I know that you modestly increased your target. I mean should we think about those sales still mainly be coming from the early education segment? Is that the focus? Or is there other sales outside of that, you can look at?

I think it's going to -- you're going to see that probably will be a bulk of that. I think you will also see us, as I mentioned earlier, hopefully capitalize on some really interesting opportunities on our theater side to sell some assets, so that we can show some real kind of interest in that. So -- but we'll have to go from there.

Okay. And then on the theater side, if you sell assets, I mean, can you -- I'm assuming you can't do much out of AMC given that's now in a master lease, right, unless you do a bigger JV. So should we think about those potential sales being with smaller operators.

One-offs or things offs and other opportunities there, but you're exactly correct. It will not -- probably not be out of the master lease.

There are no more questions. So I will now turn the call back over to Greg Silvers, Chairman and CEO, for any closing remarks.

Thank you, guys. I appreciate the time and attention today. We look forward to talking to you as we go through the rest of the year and appreciate your interest. Thank you all. Thank you.

Thank you for joining EPR Properties First Quarter 2026 Earnings Call. This concludes today's call. You may now disconnect.

Welcome to Citi's 2026 Global Property CEO Conference. I'm Smedes Rose of Citi Research. We're pleased to have with us EPR and CEO, Greg Silvers. This session is for Citi clients only and disclosures have been made available at the corporate access desk. [Operator Instructions]. Greg, I'm going to turn it over to you and ask you to introduce your colleagues that you're with today, give a few opening remarks about the company and tell us a few reasons why investors should buy your stock, and then we'll go into some Q&A.

Thanks, Smedes. I appreciate, first of all, let me thank Citi and everything you guys do, putting on this event. We really appreciate the ability to participate. To my left is Mark Peterson, our Executive Vice President and CFO. To my right, I'd like to introduce everyone to our Executive Vice President and Chief Investment Officer, Ben Fox, who has just recently succeeded Greg Zimmerman, who announced and formally retired earlier this month. And to his right is Brian Moriarty, our Senior Vice President of Corporate Communications. .

As far as things that I think make EPR attractive, a couple of ideas, one mainly is a, we believe, a strong value proposition. When you think about a 6% dividend, 5% growth and still an opportunity for multiple expansion. So again, when you look at it on the short term or any time during the last 5 years, we have consistently delivered outsized results and have been at the top of the group.

Secondly, I think is, again, when we think about the spaces that we're in, if you look at the latest BAE data on consumer spending, experiential spending went up 7% from '24 to '25. So even in a period of time where there is a question about the consumer, we actually had increased spending in the experiential.

And my third thing would probably be the team. We have a unique team that has really developed long-standing relationships that allows us to uniquely identify, underwrite and secure and acquire these assets. So I think all of those things are really what kind of drives our value proposition.

When you talk about the consumer experiential spending, do you know what the sort of major categories of that are? Are we talking theme parks?

I think it's a general. I'll let Brian work with that data.

It's government data. So it's personal consumption expenditures, and it cuts across everything that you'd kind of consider experiential, whether it's theaters, clubs, business and wellness, fitness and wellness, GMs, attractions, just really kind of the broad.

But not restaurants, I assume .

No, the restaurants per se. We thought that was a little bit too broad -- so we don't include that. .

Okay. So this is your data that you're cutting from the .

Yes, we look the BA data. We try to align it as closely as possible to the Smedes that we focus on. It's not perfect. But it's a pretty good assimilation.

Proxy. And that spending was up 7%.

Correct.

Okay. Interesting. Okay. All right. So just in terms of recapping the reasons that you noted, so valuation, you mentioned 5% AFFO growth, 6% dividend yield. Consumer experiential spending is up, and you have a tenured team.

And the relationships to kind of harness into that those verticals and categories of experiential.

Okay. So this will be -- we're going to go over some tried and the ground here, but of the questions that typically come up. The first, I think your largest tenant is Topgolf. Now I think 60% owned by private equity. Was that the outcome that you were kind of hoping for with that tenant? And kind of maybe talk about your relationship with them and with the new majority owner?

Sure. I think it's a very good outcome for us in this sense. And you should know, we spent time with Leonard Green before they announced the deal they wanted to talk to us. I think, one, Callaway was really born as a manufacturer. And I think they struggled with the consumer facing actual experience part of the business, where Leonard Green has a lot of experience with multiunit retail, and in the kind of experiential fitness and wellness space. They were the lead on the lifetime fitness. So they've been in these categories. I think the 60-40 ownership split is really attractive in the sense that, a, Callaway is very mindful of their credit rating and will not let their intent is to not lever up the entity. And so both in Leonard Green and Callaway informs that they intend to keep this below 2x levered. .

Again, I think that speaks well. And if you talk to Leonard Green, they have indicated the same thing we talked to them about that they needed to slow the growth down and focus on fewer quality locations, not multiples of locations. So they're headed back to doing 3 to 5 locations a year that meet a very defined criteria. The other thing they do is they recently announced the hiring of their new CEO, who is the former CEO who just kind of turned around Checky Cheese and they've recurred them cause 1 of the issues they talked to us about, and we thought they could improve their F&B operations, and that's one of his strengths.

So everything they're doing so far is very much closely aligned with kind of our thoughts on where things are going. And candidly, if you go look in the second half of the year, their performance was quite strong. So it looks like they're on the right track.

Topgolf's performance.

Above projections, if you look at Callaway in their presentations. .

Okay. And I mean do you think that they'll kind of regroup a little bit and potentially shut some locations.

Yes, I don't think there's anything -- I mean, again, I think the question is we have a pretty high standard on what success looks like, a really high coverage. I think all of their locations that we're aware of are making money, it's just they may not be making as much money as they make on our locations, which have been demonstrably high coverage. .

Okay. And I know you have 2x coverage portfolio-wide, but is it higher for just the Topgolf.

They are higher than that.

And it's been sort of consistently higher.

Yes.

Okay. All right. So anything else we should talk about for Topgolf anybody? Any concerns I don't want to go down the list of it. Let's talk about movie theater exposure. I think it's still about 35% of your EBITDA comes from AMC and Regal, like I said to name to and Cinemark. Maybe just kind of talk about where you are there. There's some media stories about AMC sort of doing debt restructuring, how would that or maybe not impact you? And kind of what are your thoughts there?

Again, we'll talk to. I think one of the things we've talked with people about is, first of all, I think people sometimes forget that -- of that group, we talk about a movie, but Cinemark is BB credit and Regal is a single B credit. So again, those are on par with kind of the gaming companies out there. Having people forget that. They're doing that well. And then for AMC, the thing that's interesting for us about basically they're extending their maturities, they're taking their maturities out to 2031 and lowering their debt rate. So they're in the market to do that. .

What's interesting for us and as we look forward, it doesn't really have any effect on us other than, I would say, some degree of positivity is S&P's is rating that as B, with a on recovery, which means an expectation of 90% to 100% full recovery of any amounts related to that.

We think we actually sit in front of that, meaning we have the same obligor and we are secured with hard assets. They are secured with our leases. So again, when I think we believe it looks -- it's a very positive that they're getting new money into the company that it's at a rate lower than the rate that they're replacing. So it doesn't have any direct impact on us, but again, extending their maturities and getting new investors in at more favorable rates, generally a positive for us.

Yes. Okay. And you've decided to no longer kind of do the North American box office forecasting. What was kind of the reasoning behind that? .

Again, primarily, it created a lot of confusion, and I say this. Most everybody we're really trying to track Regal. And Regal because they're the major percentage rent contributor there is a lease year, not a calendar year. So people were confusing, a, at what period of time there was, there is a lot of third-party resources out there that do the full year. And so we were giving a full year forecast. That's duplicative of what other experts are doing, and it was confusing the idea that people were trying to see, how is that impacting into Regal. What we said this year is that Regal's number should be up over last year. That would imply implicitly that we think for the Regal year that box office will be higher than it was. It's just -- there's -- we don't want to create a confusion and how people kind of react to things that really have no impact. .

Okay. I guess over time, what would you like to see theater exposure be reduced to?

We've said that we like at 20% or below. That's generally kind of what it represents in the experiential world.

And what do you think the time frame is to get there?

I think it's probably kind of somewhere in the next 3 to 5 years as we work through things and grow others.

Okay. And that's primarily by adding versus selling.

Yes. I mean we've sold 33 theaters over the last year -- over the last 1.5 years. So we've done -- we're doing both, and we'll continue to look and do both. So again, it's not -- if there's an opportunity to sell and accelerate that, we'll take a look at that. So it's really about pulling both levers.

Okay. But just in terms of identified assets to sell, you've kind of worked through theaters, right?

No, we [indiscernible] people all the time. If anybody here today would like to buy some theaters, we're open to for a discussion. We've said we want to reduce those. So I mean, again, in the first -- I think we talked about it on our call, we sold 2 theaters here recently. So again, we're continuing to actively look at that. Those were 2 operating theaters.

I think 1 difference is we're down to 1 vacant theater where we were working through those. And so now we're only down to 1 vacant theater. So that's why the pace of those theaters are selling is slowing, I should say.

Okay. And then anything with consolidation of theater or moviemakers in Hollywood, does that have any impact you think or... .

Again, it's always interesting. What's really been -- I don't know if anybody saw the Bloomberg article that was published Monday from Ted Sarandos from Netflix, who said this was after they decided they were out. He said the one interesting thing that we didn't appreciate that we've come to change our opinion is we're going to look at the movie theater business differently, and maybe we should be in that. That is a change. And so again, that's an exciting development that maybe Netflix is going to begin to look.

Remember, they've started dabbling in that this year, they're going to release a Narnia moving into the theaters. They did Cape Pop Demons, if I get that right. I'm not sure that. But my kids are no longer that aged where they did that in the theaters. So we're starting to see them dabble. So this may be a new revenue generation opportunity for them, which is pretty exciting.

Okay. Okay. I just wanted to switch back one second to Topgolf. Would you be willing to commit more capital into that sector right now?

We'll have to see. Again, if we can get some really, really strong coverage assets that we like, like I said, we did 2 years ago, we did King of Persia .We did suburban Los Angeles. If we could get kind of high coverage with really strong performing and to 20 acres of really quality, we'll take a look at it. I can't say we're not being presented anything right now, but I wouldn't say we're adverse as we grow to grow a small additions with them. .

Okay, okay. Maybe let's circle up on the other issue that comes up a lot, which is the Sullivan County. I don't know how much you can say on that. But maybe kind of recap where you were and where we are maybe what -- what a couple of the different again. .

As we talked about on our call, we don't really have any meaningful update. What occurred for those who don't know is we were approached by the tenant of our ground lease in Sullivan County. They were structuring a deal with the county to do municipal bonds to basically refinance their existing debt and take us out of the ground lease. That process then got a little bit more convoluted in the sense that they decided to add a guarantor on there, then they had to -- they had a parent kind of M&A deal that they were -- anyway, they get delayed twice.

They now have been awarded -- again, team has been awarded the downstate license. We don't know if they're going to try to finance everything together and do that. We just haven't had meaningful discussions with them, Smedes. So it's not part of our plan. It would be positive for us if it did happen, but it's not needed for our capital plan nor do we have it built in there. So all the estimates that you're looking at and dealing with do not have its status quo.

Okay. So right, just you've received your rent -- what is that annually?

How much is it . $10 million, $12 million.

Okay. And they were looking at the buyout was like $200 million is the hungry.

Okay. All right. So that potentially is on the come.

It could be. It could be very favorably.

Okay. Maybe we can just switch a little bit then to -- you've talked for a while now about an accelerating pipeline, acquisition opportunities. You've got a much better cost of capital, obviously, which allows you probably to be more aggressive in that arena. Maybe just talk about the pipeline first, kind of where are you seeing opportunities? Kind of what kind of pricing are you seeing? And how are they coming to you?

Sure. And I'll give a little bit and then I'll let Ben speak to this. I think overall, we've said all along, the 3 bigger categories were fitness and wellness attractions and even play I think all of those were still -- I mean one of the things that's always interesting when we have somebody new is I think Ben has really kind of energize the team, new faces, getting things in everybody moving. And really through the 6 months, he's here has been really accelerating building that pipeline and position us through the third and fourth quarter to kind of take advantage of that. But Ben, if you want to give a little more color on that? .

Thank you. It's really right. It's just taking a lot of the momentum and deals but get deals, right? And so the team has been very active, having conversations. And as you saw in the fourth quarter, we announced an acquisition in the fitness and wellness arena of golf courses. And putting that into the market just really unleashed a lot of inbound inquiries and also provided access to our team to invitation-only events, where the investment professional leading that transaction was able to participate with operators in the sector and a very exclusive invitation-only environment.

And those kind of conversations have been happening. And as that dovetails with our improving cost of capital is really unlocking incrementally more opportunities and the pipeline just continues to build both in depth and depth across the verticals that Greg mentioned and really across the spectrum.

Where roughly do you think your weighted average cost of capital is? And kind of what's kind of the spread to where you're investing ballpark?

Yes. Again, I'll let Mark. I think we're somewhere in the neighborhood of about 100 basis points on issuing new capital. But Mark...

Yes, high 50s, low 60s. You do the math, $6. 40 with the cost of debt, probably puts us in the low 7s. And then if we do, call it, 8.25, you had 100 basis points of spread in initial spread and of course, IRR would be even higher. So we're kind of in the -- right at the cost here in the green light area in terms of cost of capital that works for incremental. .

You put in an ATM program rate and I think you've used it yet. How are you thinking or how you.

I can't tell you if we had .

What we did say is, here's the thing. We start the year with $90 million of cash, nothing drawn on our line of credit. 4.9x levered. So we started in a great place. When we look at our plan, as we said on the call, we could do it entirely without raising equity and still be below the midpoint of our debt range, which is 5% to 5.6%, so below 5.3% at the end of the year. And kind of looking at sources and uses, we've got free cash flow of roughly $150 million. We do have one bond deal in our plan to refinance the debt that's due. We have about $630 million of debt due in August and December. .

And then we have a modest amount of dispositions that will help fund that. So if you do all the math, we finished the year about $300 million drawn on the line of credit, assuming no equity and at a leverage point that's below the midpoint. Now that said, opportunistically, we could raise equity as we just said, the cost of capital works either for delevering or to support incremental volume. We look at both of those opportunities should they present themselves. And we think with our range of earnings, we think we can handle that, particularly if some of it on a forward basis.

Okay. And what was the acquisitions guidance for this year?

$400 million to $500 million. So in my math, I was using $450 million just midpoint. .

Okay. And so what -- how does the first quarter look on kind of how -- what have you identified so far at that $400 million to $500 million?

Again, what we said in our call was that, that number was more front-loaded. So again, to the front half of this, we've announced that we did roughly $35 million. We also have -- we came into the year with roughly $85 million of build-to-suit either projects that have started or will start. So again, when you start to think about that, we're probably sitting at $119 million, $120 million and so we're -- I think we're under a good place.

Okay. Okay. And maybe just talk a little bit more within kind of the fitness and wellness space with some other companies pursuing similar kinds of assets, I guess, maybe talk about what does fitness and wellness mean for you guys? What do you look for because you're not really doing like lifetime fitness [indiscernible]

We looked at that deal . I mean, that deal was presented to us again. So it's not.

What made you pass on it.

Because we probably weren't ready to do 10 in Okay. And again, there was -- I'll be candid, we bid on a number less than somebody said, I'll take them all. And that was, I think, kind of the easiest thing for them to do. I'm probably speaking out of turn. But again, lifetime is an operator that we would be interested in the lifetime in the space. It's not what we would think as commodity space, but as a much more community and sense of place. We did announce, as I said, a new vital acquisition on the Lowry side.

Again, we continue to look in the, what I would say, the wellness space as we think about the 2 major demographic groups that are driving that, the millennials, which hopefully, a lot of people here I'm in the other one, which are the boomers, which again, wellness means something different in that side of the space. It's a lot more of the think of, like I said, the Hot Springs, the spa, the golf, things of that nature. And we're leaning into both sides of those. And I think our team has developed kind of the relationships that allow us to access both. We talked about kind of in the golf space. We've been quite successful early on in that and getting kind of the -- how we define what we want to do in there. We've also -- if you look in that kind of spa fitness area, we've been very, very good at kind of these kind of concepts, whether it's vital, Mirabeau. If you think about last year, I want to speak this top 4 hot springs resorts in the country we had 3 of the 4.

So again, so I think we've been very good at both identifying and securing those and we continue to look at developing that.

I wanted to circle back just for -- on the golf for a moment. I think that's something you did in the fourth quarter, some Texas courses. Golf has had kind of a boom and bust kind of history, big picture. I'm sure yours will be great. But just how do you think about valuation of the golf course, like what you're willing to pay? And I guess, underneath, how do you think about just so real estate? And maybe this is a broader question because concepts, themes, brands all come and go over time. So you might get -- if you're just stuck with the real estate, how do you think about that underlying.

I think the golf space has really changed and really changed over the last probably 10 years. If you think about supply demand, there's probably 2,000 courses that have been eliminated. And the only thing that's really growing in golf right now, I would say, is destination golf. And by destination golf, it's the Bandon Dunes, it's that kind -- that's not the space that we're in, candidly. That's very expensive. What really happened is you can't build a golf course reasonably priced now. We can. We can buy golf courses, generally speaking, 50% of original cost. It's about running and operating and partnering with people who can do that. I don't think -- what we're seeing is the idea of changing and getting the operating metrics to a, call it, a 24% to 28% kind of margin business and getting our rent to kind of a 10% to 12%, 14% business. So we have that kind of 2x cover. That's with an appropriate maintenance CapEx reserve as part of that. .

So that you really are -- like I said, the dynamics have changed, and you're correct, Smedes, that these are $30 million courses that we're buying for $15 million. Now again, when somebody originally may have done those as part of a home development, they looked at it and said, I'm willing to spend $30 million to sell homes. Those are not getting built anymore. There's not. There's no -- very few non-destination courses being built in the U.S. right now. But there is opportunity to recap some of those, purchase them right and be part of that. If you look at -- I'll give you an example of hours, the one before in Georgia that we bought before this group. It's a 2,000 home development. If you own a home, you have to be a member of the club. Every time you sell the home, a new membership is sold. And if you don't pay your dues, it becomes a lean on your house.

Okay. You know what, we like that structure. That's a pretty good credit structure. We're happy with that. And we think those are -- there are opportunities. Now that, of course, it's a beautiful course. He spent a ton of money doing it, but he did it to sell houses. And now he's sold all the houses and he's willing to sell it at -- and we're able to get the right operator in there and make those numbers work. So we think there are ways in the space to be smart, to be thoughtful. If you look at demand, demand is very, very strong right now. And I think the supply dynamics are really good.

Did demand to play golf is strong? Or you mean to for the houses that sales force .

Stronger than it's been in the last 20 years. again, across multiple demographic groups. If you look and if you; a, if you can look at the numbers, if you look at the number of people who are on waiting list to join private clubs, it's never been higher in the existence of track. .

Okay. So you mentioned you're sort of underwriting to 2x coverage on a golf course. And that's assuming they can get the margin up to like the 28%? Or are you going in at 2x and then hoping that gets better?

That's from the go and hoping that things could get so if you get that better. .

Okay. Okay. And what sort of cap rates are you going .

What we said is kind of low to mid 8s.

Low to mid-8s. And is there anyone else discovering this renaissance at golf.

Clearly, right now, there is a large almost -- there's probably 8 private equity-backed golf owners out there, large out there. They range from Apollo at the biggest in to Arcus, to all of these things. I think from a public, the only guy who's really [indiscernible] the Gulf, I think VICI does it, but with destination golf. They're doing the Cabot and things like that, but I don't think they're just doing normal play golf. .

Yes. I mean they got a few courses kind of as part of their legacy...

I know they did the Cabot thing, but I think that it's more destination.

That would be in your destination comments .

Mentioned land value, which I want to go back to, which was another area of our portfolio, which is our attraction space, which most people don't realize or maybe they do, but when you think about amusement parks in this country, most of them are in and around major metropolitan areas and their 200 to 300-acre tracks of land, generally located on major thoroughfares interstates. It represents probably one of the more interesting land bank plays. Now we can't access it until the lease is done. But from a land bank play, it's incredible relative to what you have in the overall investment. .

Just kind of on that, some of the major public theme park companies have been undergoing some challenges, there has been talks about maybe selling some of their smaller assets. I mean, do you think you -- are you participating in conversations around that. Could you be a beneficiary there?

We would always think we would participate in there in the sense that we're very -- we know and deal with those. We're Six Flags largest landlord, United parts, which is kind of the Busch Gardens, we've known that group. I mean there's -- the interesting thing where Park Renita, which just sold to the Herschend family, again, we're probably the only REIT that participates in all those conversations just because we've known those group for years.

So if you look at Richard Zimmerman, who used to run Six Flags, I've known for years, the gentleman who just John Reilly, who just become the CEO used to be the CEO of Palace Entertainment, which was owned by Park Greneda. So again, if you noticed -- I mean, we know this is a world that we -- that's what I talked about on our value proposition. You know and work with everybody in these industries. So if Six Flags said I want to reposition some of my assets, some of the kind of less than $20 million EBITDA assets, we would probably be a call they would make, and we would probably -- we would be the one who would probably help put that deal together.

Okay. And you bought a traction, and I think you said Virginia during the fourth quarter.

Yes.

Okay. Okay. And then you have 1 in New Jersey, I think that's relatively new as well. So you're happy with the way that's performed. .

Above 20 covers and exceeding our underwriting. .

You see what .

Exceeding our underwriting. .

Okay. Okay. It sounds like everything is above 2x. So what's bringing down the if you think about .

We talked about this theaters when we last repeat. -- they're kind of probably kind of 1.7 to 1.8, and that was what they were in 2019, but that's if you think about 35%, 37%, that's the math.

Okay. All right. Do you suspect that coverage will get better for theaters.

Yes. I mean if you think about -- the interesting thing about the theater business is going back to that is what's kind of changed is the food and beverage spend is like is phenomenal. If you think in 2019, on average, the per rep customer per spin was about $4 in a quarter. Cinemark reported last week that it was $8.75. That is 80% -- probably a public but it's 80% margin business.

So it has meaningfully changed on EBITDA contribution relative to the overall box office and therefore, literally on an EBITDA contribution the $11 billion box office needs to be low 9s to be the exact same EBITDA than we were before.

As a New York resident, I can tell you, it's astounding what they charge a B, we participate. So Well, we .

I'm sure they appreciate that. .

We have a few minutes left, and I did want to ask you kind of how you're thinking about AI internally and is it helping you underwrite, find deals where is the puck moving in real estate or other efficiencies that you might be finding internally?

Again, I think it's operational efficiency. I think we're using it in our asset management and our underwriting. I don't think it's helping us necessarily find deals, but it's helping us. I'll give you an example. We used to have people, I like to come into the office and say, what happened to any of our tenants over the last 24 hours. That used to be a lot of asset managers looking in check now it's one button push and AI synthesizes all that data and says, okay, look, any of your name tenants that came out or anything that happened in your industry, we can have that information for you.

So in our asset management, it's every -- in our underwriting, it's able to support our underwriting, both in terms of model building, but also in terms of the research that we look at. I don't think we're looking at eliminating anything, but I do think operational efficiency is being -- it's helped candidly in our legal and how we're looking at things in that nature.

So efficiency, and we're deploying it. I think everyone has AI at their desk or AI component at their desk. So we're trying to be thoughtful about it.

Yes, we've heard a few times that people are kind of reducing their legal bills.

We're trying. We're trying.

It seems like it's coming for all of us 1 way or the other. As you we can kind of close out here unless there's any questions from the audience, but we have 2 closing questions. One, as you think about the net lease space, just yourselves with traditional net lease space, what do you think same-store NOI can be in 2027?

'27, probably 1.5%, 2%.

1.5% to 2% go with 1.75%.

Yes.

And do you think there'll be more fewer or the same number of net lease companies -- public net lease companies a year from now?

My guess is the same.

The same Okay. Well, thanks for your time today. We appreciate you being here.

I appreciate it. Thanks.

Hello, and welcome to the EPR Properties Q4 and Year-End 2025 Earnings Call. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question-and-answer session. Also as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time.

I will now hand the call over to Brian Moriarty, Senior Vice President of Corporate Communications.

Okay. Thank you, Jenny. Thanks for joining us today for our fourth quarter and year-end 2025 earnings call and webcast. Participants on today's call are Greg Silvers, Chairman and CEO; Greg Zimmerman, Executive Vice President and CIO; Mark Peterson, Executive Vice President and CFO; and Ben Fox, Executive Vice President.

The start of the call are informing you that this call may include forward-looking statements as defined in the Private Securities Litigation Act of 1995, identified by such words as will be, intend, continually may expect hope, anticipate or other comparable terms. The company's actual financial condition and the results of operations may vary materially from those contemplated by such forward-looking statements. Discussion of those factors that could cause results to differ materially from these forward-looking statements are contained in the company's SEC filings, including the company's reports on Form 10-K and 10-Q.

Additionally, this call contains references to certain non-GAAP measures, which we believe are useful in evaluating the company's performance. A reconciliation of these measures to the most directly comparable GAAP measures are included in today's earnings release and supplemental information furnished to the SEC under Form 8-K. If you wish to follow along, today's earnings release, supplemental and earnings call presentation are all available on the Investors interface at the company's website, www.eprsacey.com.

Now I'll turn the call over to Greg Silvers.

Thank you, Brian. Good morning, everyone, and welcome to our fourth quarter and year-end 2025 earnings call and webcast. The fourth quarter kept a year of solid execution and clear progress toward accelerated growth. Our resilient portfolio benefited from durable tenant performance and steady consumer demand contributing to strong financial performance, including FFO as adjusted per share increase of 5.1% and AFFO per share increase of 6.2%.

During the fourth quarter, we announced transactions which significantly expanded our portfolio of championship golf courses along with premier regional water park acquisition, further diversifying our attraction sector. As we move into 2026, we expect to build on our strong industry relationships while substantially increasing our investment spending. We are actively pursuing opportunities across multiple target property types with a flexible approach that encompasses both potential portfolio scale acquisitions and smaller strategic transactions position us to capitalize on attractive opportunities as they arise.

Turning to industry and tenant performance. Our portfolio of properties continues to demonstrate broad stability. For the year, North American box office grew 1% and we anticipate further growth in 2026, supported by an increased number of wide release titles. Performance across our other property sectors remained steady, demonstrating the strength and resilience of our diversified portfolio.

As we expand the diversity of our experiential portfolio, we're seeing a balancing effect, strength in certain sectors helping to offset periodic softness in others, reinforcing overall portfolio resilience. Our strategic capital recycling program continued to deliver meaningful results in 2025. By executing targeted dispositions, we strengthened portfolio qualities, reduced concentration and unlock capital to deploy into higher returning experiential investments. We will continue to use a disciplined opportunistic recycling as a proven lever for driving value creation.

Our balance sheet remains one of our most important competitive strengths. During the fourth quarter, we successfully closed a $550 million public debt offering and established a $400 million aftermarket equity program. Two significant capital market initiatives that bolster our financial flexibility and fund our growing investment pipeline. Reflecting the confidence we have in our earnings trajectory and conservative payout ratio, we are also pleased to announce a 5.1% increase to our monthly dividend to common shareholders. In summary, we've built a robust pipeline of high quality experiential investments. Our strong balance sheet and expanded operator relationships now give us access to larger opportunities and our disciplined approach to capital allocation positions us to capitalize on the significant investment opportunities we anticipate in 2026.

Now I'll turn the call over to Greg Zimmerman to go over the business in greater detail.

Thanks, Greg. At the end of the quarter, our total investments were approximately $7 billion with 333 properties that are 99% leased or operated. During the quarter, our investment spending was $147.7 million. 100% of the spending was in our experiential portfolio. Our experiential portfolio comprises 278 properties with [ 34 ] operators and accounts for 94% of our total investments or approximately $6.6 billion. And at the end of the quarter was 99% leased are operated. Our education portfolio comprises 55 properties with 5 operators, and at the end of the quarter, was 100% leased.

Turning to coverage. The most recent data provided is based on the December trailing 12-month period. Overall portfolio coverage remains strong at 2x. Turning to the operating status of our tenants. 2025 box office was $8.7 billion, a 1% increase over 2024. Q4 box office was $2.2 billion compared to $2.4 billion in Q4 of 2024. Q4 performance was led by strong results from Zootopia 2 which grows $337 million in Q4 and has exceeded $420 million to date. Wicked: For Good gross $335 million. Avatar: Fire and Ash gross $250 million in Q4 and picked up an additional $147 million after the first of the year. Five Nights at Freddy's 2 also outperformed.

The slate for 2026 looks solid with the Super Mario Galaxy Movie, The Mandalorian and Grogu, Toy Story 5, Minions 3, Moana, The Odyssey, Spider-Man, [ Brand-new Day ], Avengers, Doomsday and Dooms Eye. Analysts expect box office to increase in 2026. Going forward, we will be moving away from providing annual estimates for box office performance. We initiated the practice after pandemic as theaters were opening, box office was recovering, and we were navigating the writers and actor strikes. With all the dislocation, we thought it was helpful to share our perspective. The business is stabilizing, so this is no longer necessary.

Additionally, it's important to highlight that the bulk of our theater rent is not tied to fluctuations in box office. The only significant percentage rent component of our theater rent comes from Regal, which is based on a lease year rather than a calendar year, and our estimate of legal percentage rent is embedded in our percentage rent guidance.

A couple of points related to box office. First, higher-margin F&B spending increasingly constitutes a higher percentage of exhibitors overall revenue. As such, it is not necessary to reach 2019 box office levels for us to have comparable coverage.

Second, as we have consistently noted the number of major releases directly correlates to box office, an increased number of major releases typically drives increased box office gross. Over time, major releases tend to generate an average performance in the range of $70 million.

Turning now to an update on our other major customer groups. Our East Coast ski and Midwest key operators got off to a great start with above-average snow, and that strength continued through the win. Our Northern California asset opened late because of lack of snow, but conditions have improved significantly with recent snowfall. We will see if snowball continues to hold throughout the season. Alyeska has had strong demand throughout the season augmented by its membership program and inclusion in the iConnetwork.

Our Eaton play coverage remains strong even with some continuing macro pressures on consumers and expense increases. In direct, Kansas City location to open well in November, Schonburg, Illinois is expected to open in the second quarter of 2026. Our second PIN stack located in Northern Virginia is also expected to open in Q2. Of note, in early January, Topgolf Callaway announced the completion of its sale of a 60% interest in TopGolf to Leonard Green Partners, the transaction valuing top off at around $1.1 billion. We view this positively because TopGolf now has a focused private equity majority on. Many of our attractions are closed for the season. The Cartes Outdoor Winter Park and Hotel de Glass opened in December and are benefiting from sustained domestic travel within Canada.

We are quite pleased with the performance metrics at enchanted forest water supplier in our operator's first full year of ownership. With the indoor water park and family entertainment center fully opened at Bavarian in, we saw significant year-over-year increases in revenue and [ EBITDA ].

We are bullish on the fitness and wellness space. Since 2024, we have invested approximately $150 million in this vertical including golf, Fitness and Hot Springs. All 3 of our Hot Springs assets delivered strong year-over-year performance. Our education portfolio continues to perform well. Our customers' trailing 12-month revenue for Q3 was essentially flat with EBITDA down due to expense increases. Average remains strong. Our investment spending continues to be entirely within our broadening range of experiential asset types.

In Q4, we invested $147.7 million, bringing our total for 2025 to $288.5 million. This includes funding for projects that we have closed on but are not yet open. In addition, we have committed approximately $85 million to experiential development and redevelopment projects, which we expect to fund in 2026. Q4 investment spending was anchored by our acquisition of a 5-property portfolio of championship golf courses in the Dallas Metroplex for approximately $90.7 million. The properties will be leased and operated by advanced golf Partners, a leading golf course operator. This investment follows our extensive research into the golf space and adds to the additional golf investment we made earlier in 2025.

Given our deep relationships, the increased focus on fitness and wellness among multiple generations and demographics and the wide range of investment opportunities, including golf, climbing gyms, traditional gyms, hot springs and spas, we are excited about the potential for continued growth in this space.

We also acquired the Ocean Breeze water park in Virginia Beach, Virginia, in a sale-leaseback transaction for approximately $23.2 million. Ocean Breeze will be leased and operated by an affiliate of Premier Parks, a long-time strategic partner. We kicked off the investment spending for 2026 with the first quarter acquisition of the Vital climbing Lower East Side in Essex Crossing for approximately $34 million.

As I noted before, we are particularly bullish on the fitness and wellness space and excited to grow our relationship with this outstanding operator by adding a high-quality Manhattan location along with our existing vital climbing location in Williamsburg, Brooklyn. As demonstrated by our investments in Q4 and already in Q1, we are increasing our investment spending cadence. We are seeing high-quality opportunities for both acquisition and build-to-suit development in our targeted experiential categories.

Our disciplined deployment strategy has enabled us to expand the depth and breadth of our portfolio of experiential properties over the past several years. Our investment spending throughout 2025 and heading into 2026 and reflects our deep relationships and high-quality opportunities. We are announcing investment spending guidance for funds to be deployed in 2026 in the range of $400 million to $500 million.

During the quarter, we sold 2 leased theater properties for alternative uses and 2 land parcels for net proceeds of $16.1 million and recognized a gain of $5.3 million. Additionally, as announced on our Q3 call, we received $18.4 million in proceeds from a partial paydown on a mortgage note relating to the gravity house and Steamboat Springs. In the past 5 years, we have sold 33 theaters. We have one remaining vacant theater. Disposition proceeds totaled $168.3 million in 2025 and we are announcing 2025 -- 2026 disposition guidance in the range of $25 million to $75 million.

I'll now turn it over to Mark for a discussion of the financials.

Thank you, Greg. Today, I'll discuss our financial performance for the fourth quarter and the year, provide an update on our balance sheet and close with introducing 2026 guidance. FFO as adjusted for the quarter was $1.30 per share versus $1.23 in the prior year, an increase of 5.7% and AFFO for the quarter was also $1.30 per share compared to $1.22 in the prior year, an increase of 6.6%.

Before I walk in the key variances, I want to point out that we had disposition proceeds totaling $34.5 million for the quarter and recognized a gain on sale of $5.3 million, for the year, disposition proceeds totaling $168.3 million, I recognized a gain on sale of $39.5 million as we continue to make progress reducing our investments in theater and education properties and recycling those proceeds into other experiential assets. Note that these gains are excluded from FFO's adjusted and AFFO.

Now moving to the key variances. Total revenue for the quarter was $183 million versus $177.2 million in the prior year. Within total revenue, rental revenue increased $7.9 million versus the prior year, mostly due to the impact of investment spending, rent and interest funds and higher percentage rents and participating interest. Percentage rents and participating interest for the quarter were $7.8 million versus $4.9 million in the prior year, and the increase was due primarily to higher percentage rent recognized from our attraction and cultural properties as well as from one of our early childhood education tenants. We also had higher participating interest related to our Northeast Ski property.

Both other income and other expense were related primarily to our consolidated operating properties, including the Kartrite Hotel and Indoor Water Park and our 4 operating theaters. The decrease in other income and other expense versus prior year is due primarily to the sale of 3 operating theater properties in the first half of 2025.

On the expense side, G&A expense for the quarter increased to $14.6 million versus $12.2 million in the prior year due primarily to higher payroll and benefit expense, particularly incentive compensation. Equity and loss from joint ventures for the quarter was $2.4 million compared to $3.4 million in the prior year. This better performance is due to our decision to exit our joint venture in Brokerage, Louisiana in late 2024. And as well as improved results at our 2 remaining RV Park joint ventures.

Shifting to full year results, FFO adjusted was $5.12 per share at the high end of guidance versus [ $4.87 ] in the prior year, an increase of 5.1% and AFFO was $5.14 per share compared to [ $4.84 ] in the prior year, an increase of 6.2%.

To the next -- turning to the next slide, I'll review some of the company's key credit ratios. As you can see, our coverage ratios continue to be very strong with fixed charge coverage at 3.4x and both interest and debt service coverage ratios at 4x. Our net debt to annualized adjusted EBITDA RE was 4.9x at year-end, which is below the lower end of our targeted range. Additionally, our net debt to gross assets was 39% on a book basis at year-end, and our common dividend continues to be very well covered with an AFFO payout ratio of 68% for the fourth quarter and the full year.

Now let's move on to our capital market activities and balance sheet, which is in great shape to support our expected growth. At year-end, we had consolidated debt of $2.9 billion of which all is either fixed rate debt or debt that has been fixed through interest rate swaps with an overall blended coupon of approximately 4.4%.

In November, we closed on $550 million of new 5-year senior unsecured notes at a coupon of 4.75%. And at year-end, we had $90.6 million of cash on hand and no balance drawn on our $1 billion revolver. Additionally, in December, we finalized our new ATM program. While no equity issuance is required to fund our plan for 2026, given that we project to be below the midpoint of our targeted leverage range at year-end without any such issuance.

This program provides us with an additional tool in our toolbox to issue equity opportunistically, including forward sales. We are introducing our 2026 FFOs adjusted per share guidance of $5.28 to $5.48, representing an increase versus the prior year of 5.1% at the midpoint. We expect a similar percentage increase in AFFO per share -- due primarily to the timing of expected percentage rents, which are heavily weighted to the last 3 quarters of the year, as well as the fact that the first quarter is off-season for our operating properties, we expect results for the first quarter of '26 to be lower than the full year divided by 4 by about $0.11 per share. We are also providing our 2026 guidance for investment spending of $400 million to $500 million and disposition proceeds of $25 million to $75 million.

We expect the percentage rent to participate interest of $18.5 million to $22.5 million. As you can see on the slide, I have provided a reconciliation of the prior year amount to the midpoint of this guidance. The changes include out-of-period percentage rents and participating interest of $3.5 million recognized in 2025 that does not repeat lower projected percentage rents in 2026 of $1.1 million related to our Northern California speed property due to delayed snowfall for the season. With lower projected percentage rents of [ $0.4 million ] related to certain properties having base rent increases in '26, causing the breakpoint for percentage rents to increase. These decreases were offset by a projected net increase of $1 million in percentage rent for other tenants, including Regal.

We expect G&A expense of $56 million to $59 million. In addition, guidance for our consolidated operating properties is provided by giving a range for other income and other expense. Guidance details can be found on Page 23 of our supplemental. Finally, based on our expected 2026 performance, we are pleased to announce a 5.1% increase in our monthly dividend, beginning with the dividend payable April 15 to shareholders of record as of March 31. We expect our 2026 dividend to be well covered with an AFFO per share payout continuing to be about 70% based on the midpoint of guidance.

Now with that, I'll turn it back over to Greg for his closing remarks.

Thank you, Mark. 2025 was a very solid year as we delivered strong per share earnings and our portfolio delivered the resilience that we anticipated. In 2026, we expect to increase our investment spending materially over the levels we achieved in 2025, which should result in another year of strong per share earnings growth. As we begin the year, we are excited about our investment pipeline, our balance sheet and the team to create value out of this combination.

I would also like to take a minute to express my sincere appreciation to Greg Zimmerman who has participated in his last earnings call as he is retiring from EPR. Greg provided leadership in a steady hand as we navigated COVID and then emerged on the other side. He has my business partner, colleague and friend, and he will be missed. Ben Fox will now officially take over the role of Chief Investment Officer, and we are excited about his leadership and vision for our future.

With that, why don't I open it up for questions? Jenny?

[Operator Instructions]. Our first question will come from Michael Goldsmith with UBS. [Operator Instructions]. Michael Goldsmith with UBS, you may ask your question.

Consistent with last quarter, where you pointed to $400 million to $500 million in acquisitions, you put this out formally with your guidance. Can you just talk a little bit about what you're targeting, what you have line of sight in because it represents an acceleration. So just trying to get a sense of what you're looking at, what you have line of sight in and just your confidence level of hitting that $400 million to $500 million in acquisitions?

Thank you. Clearly, I think line of sight or anything, while we don't want to comment on specific. We wouldn't put it out there if we didn't have great confidence in it. Again, if you look historically, we've been successful in not only hitting our numbers, but raising those throughout the year. So I think -- and I'll let Greg comment that we feel really good about where we're positioning for the beginning of the year. I think we're looking at opportunities across most, if not all of our sectors. I think, again, we feel like we have particular unique access to the areas that we invest in. But let me Greg.,,

No, I regret. And I will also say that developing a pipeline is usually a multiyear process. So we've been building up to this with line of sight to the fact that we turn on investment spending this year. So again, as Greg mentioned, we're very confident about it, and that's why we're...

Got it. And then second question, just TopGolf is one of your top tenants and they've been taken private by private equity. Have you had conversations with the letter green and just trying to get an understanding of what they are going to do with the company now that they have their hands on it and just the path and your comfort level with your specific locations that you own.

Yes. Michael, and we've had multiple conversations with them. So as you can imagine, both as they were evaluating it as an opportunity and now subsequently I think the thing that we're encouraged is, in fact, what they told us is they're very much in line with what we have said that the growth pattern needs to slow down to 3 to 5 units a year where they can hit kind of the demographic and relocation requirements that we kind of agree with them.

As we said all along, our units continue to demonstrate very, very strong coverage I think it's an integral part of the value equation that they saw. I think there are opportunities that they're going to very much look at being -- they have a long history of multi-unit retail and even in the fitness and wellness space. So I think they're very, very focused on kind of the food and beverage and promotional opportunity sets. And you've seen that the early impact of the second half of last year, where TopGolf was already addressing some of those and saw some very, very positive numbers going into the second half of the year in the fourth quarter.

And then I would also add, Michael, they're going to -- we're very pleased. We're going to continue the refresh program, which benefits us greatly. They do a handful of our units are here with the next refresh for us to keep them up.

Our next question will come from John Kilichowski with Wells Fargo. [Operator Instructions]. John Kilichowski with Wells Fargo. You may ask your question.

My first question is just on where you see your cost of capital today. You're trading back close to a range where we were end of the third quarter. When does it start making sense to take ATM.

Sure, John. Great question. And I'll join in as Mark. I think we'd probably see it now in the kind of upper 50s or low 60s at kind of low 7s, low mid-7s. I think that works. We can make that work. we're doing things in the low to mid-8s. So there's 100 basis points of spread. I think it's important for us to let people know that we could execute that way and get back on that flywheel of issuing equity.

As Mark talked about in his comments, we don't need to. And in fact, we'll still be not even near the midpoint of our leverage range, we're doing the plan that we have executed. But what it does mean is maybe we can do more, maybe we can even further delever. I think the -- it gives us a lot of options, and we are clearly entering the zone where it makes sense. But Mark?

I think, as Greg said, I think we'll be kind of opportunistic about it, particularly if we're headed to the higher end of spending, investment spending. As Greg said, I think as you get to the high 50s, low 60s or low to mid-7s type of cost of capital. And as Greg said, we get nearly 100 basis points out of the gate. And then, of course, on an IRR basis, it's quite a bit higher than that. when you factor in our rent bumps. So I feel good about that and the opportunity that lies ahead.

That was very helpful. And maybe just along the same lines, if we could do sort of a sensitivity analysis, let's say, if your cost of capital got 50 bps better from here on a blended basis, where does that take maybe the high end of your investment guide. This is a better buying opportunity here. I'm just curious how much more you think you could do if you just had a little bit of improvement on that cost of capital.

Yes. Clearly, there's -- we think there's opportunity out there. And John, I think, again, it's probably not as linear as we're laid it out that it's [ 50 ] basis points. It's really about are the right opportunities and the risk and reward. I think overall, you're hearing our excitement about the opportunity set out there. I think there are there continues to be good opportunities. I think we're excited about those. We're excited about where our cost of equity seems to be trending. And so hopefully, that combination will allow us to continue to grow and grow that base. But to speculate on a kind of a sensitivity table would probably be not productive for us right now.

Our next question will come from Smedes Rose with Citi Global Markets. [Operator Instructions]. Smedes Rose from Citi Global Markets, you may ask your question.

I was just wondering if you had any updates on what's going on in Sullivan County in terms of the ability to sell the ground lease that kind of came up a while ago. That would be my first question.

Thanks, Smedes. I would say we've not had really any meaningful conversations with them. I mean, again, this is there -- when I say that, meaning our operator, -- it's their call on how they want to proceed. It's not built into our plan. Our plan is utilizing our existing kind of cash flow dispositions, things that we've done. But the easiest thing to say, Smedes, is no, we've not had any meaningful conversations with the operator.

Okay. And then I was just wondering, when we look in a sort of park world, there seems to be I guess, a certain amount of disruption going on and some new management changes. I'm just wondering, are they showing up on your radar screen as a possible solution to some of the issues they might be facing?

I think it's a very reasonable approach. I mean if you think about the names that are being dropped around we partner with many, if not all, of those names that are being brought around. So I think it's something -- we think that business is actually very, very dull over time, very stable cash cow kind of business. It needs to be a smart, thoughtful and well-covered kind of thoughtful business. But again, -- we play in that field. I don't know, Greg, if you want to...

Well, we agree. And as we announced, we acquired something in the fourth quarter. So yes, we're enthusiastic about the traction expense.

All right. Thank you. And best wishes to you, Greg, going forward.

Our next question comes from Anthony Paolone with JPMorgan. [Operator Instructions]. Anthony Paolone with JPMorgan. You may ask your question.

Just, Greg, going back to the opportunity set that you talked about, can you be a little bit more specific and maybe how much of it is development -- redevelopment versus buying existing assets? And maybe kind of the range of cap rates and like what would take you into the ADS versus where you'd probably be maybe in the 7s if something is perhaps a bit higher quality or different.

Sure. And I think it's going to gear at least early part of this year, going to be more on the acquisition side. So I would say, and I'm looking at Greg and Ben, probably 70-30 acquisitions. Right now, I think, again, where you would look at -- most of our stuff has been in the 8 where you would look at something below that potentially would be a, a much lower advance rate. It's really going to be risk returned or if you had a credit, you had a much, much higher credit scenario to where you would think lower 7s, but a better growth profile.

But I would say most of our stuff are right now that we're looking at has at least an initial [ 8 ] handle on it.

And Tony, obviously, development deals are going to carry a higher cap rate because there's more risk adjusted, there's more risk. So that's kind of the way we look at it.

Okay. Got it. And then my only other question, maybe for Mark and just on the spending here. If you look at Page 19 of the supplemental, there's about $63 million of spending outlined there. Is that different than the $85 million that you guys talked about in the presentation? Or you put those together?

I'll take that question, the $63 million is only related to those projects that have been started at the end of the year. So and then the difference between that and the $85 million is projects that haven't been started, but that we have commitments, some line of sight to. So if you're looking at kind of spending sort of what's spoken for kind of head into the year, $85 million is the number to use. And then if you add, for example, the vital climate gem that we did, we're sort of sitting at around $119 million right now and sort of spoken for spending. And as Greg said, I think the amounts that we'll add to get to the midpoint of guidance of $450 million will be mostly acquisition-oriented.

Our next question comes from Michael Carroll with RBC Capital Markets. [Operator Instructions]. Michael Carroll, RBC Capital Markets. You may ask your question. I guess,

Mark, just sticking with the guidance ranges that you provided in the investment. With that remaining investments to get back up to that $450 million with guidance, when do you assume that gets completed? Is it just kind of ratably throughout the year? Or do you kind of have a back-end weighted? What's kind of implied in that guidance range?

Yes, it's actually, frankly, weighted more towards the first half of the year, the way we see things kind of laying out.

Okay. And then on the legal percentage rents what you put in guidance, what did you assume would be the box office, at least for the Regal lease year ended July by 2026 versus the prior year? Is it kind of a similar box office, so we're expecting a percent of the transfer Regal to be kind of in line with what it was last year?

No, I think it's slightly up, consistent with kind of analysts. But as you can see, it's probably kind of 2% over where they were last year as our number is up slightly over there.

Yes. When we lay out that percentage rent slide, you can see once you cut through the prior period and so forth to get to about $1 million of net growth amongst all our tenants and a good chunk of that is legal because we do expect box office to be higher next year.

And again, Mike, the Regal lease year ends in July. So you're not going to have the advantage of default season.

Got that. And then just last one for me on -- you mentioned and talked a little bit about the investment opportunities you have across all your property types. I mean are there any specific property types where you're seeing bigger opportunities or other types of activity that you could pursue?

I think as we've talked about, we've hit several things. I would say the top 3 continue to be fitness and wellness attractions and Eaton play. Again, when you look at those, we're still seeing an occasional opportunity in gaming, but not as much ski and we're opportunistic. So those other 3, I think, are going to be where the -- and a part of what our investment is going to come from.

And Mike, again, I would -- when we say fitness and wellness, that's a very broad category for us. So obviously, we've done a couple of golf deals now. We did a climbing gym deal this quarter. We did a regular fitness deal last quarter, and we have done hospice deals. So we see a lot of opportunity to expand the aperture in that space.

Our next question comes from Upal Rana with KeyBanc Capital Markets. [Operator Instructions]. Upal Rana with KeyBanc Capital Markets. You may ask your question.

Just curious on how the transaction market looks like in terms of larger deals. Are you seeing more or less out there?

Again, I think we're starting to see, as we said, I don't know we're seeing more. We're seeing our ability to participate in larger deals more. And, Upal, I think -- so that's beneficial to us. But I think it feeds into what -- when you look at what we've done, we're talking about 2 years in a row of delivering 5% plus kind of earnings growth. It's getting back into what is our kind of normal trajectory of delivering outsized value for our shareholders. And now we're going to be able, as we aim generated a lot of proceeds from dispositions or to getting close to our ability to issue equity through our ATM program, it's going to allow us to participate in some of these deals, which will further that growth so that the idea that we've been done it, we did 5% last year, we're doing 5% this year. Let's get on that track of what we delivered 20 years before COVID.

Great. That was helpful. And then -- it looks like negotiations start to begin to start up again on Sagasta with the contracts that were negotiated in '23, expiring in May for writers and in June for the doctors. So the environment certainly is much different today than it was 3 years ago. So I just wanted to get your take on those negotiations and how that would play out?

Again, it's -- I think we think it's still really early, but I think you're correct. I think the it's really early. I think it's going to still be about AI and the ability to do that, but they set a nice framework to deal with that. And everybody, I think, at this point, saw how negatively the market was impacted by a strike and much like what we've seen in some other areas like baseball, people have tried to avoid strikes because they have long-lasting effects and everybody is saying the right thing about wanting to avoid that.

Our last question comes from Upal Rana -- apologies that is Jana Galan with Bank of America Merrill Lynch. [Operator Instructions]. Jana Galan with Bank of America Merrill Lynch.

I know it's a much smaller part of your portfolio, but curious if you could just provide an update on the education portfolio and kind of any change in trends there between early childhood and the private school.

Again, I think if anything, the strength of that portfolio has continued to be demonstrated over the last several years. I think one area that as we think about dispositions this year, maybe an area that we start to think about. I mean last year was all about kind of cleaning up the theater portfolio and getting through that I think the strength of that will allow us to capture good value if we want to do that and could be another lever that we pull to accelerate growth.

Great. And also wanted to congratulate Greg.

There are no more questions. So I will now turn the call back over to Greg Silvers, Chairman and CEO, for any closing remarks.

I just want to thank you all. As we said, we're excited about the year. Look forward to talking through the year and look forward to delivering on the guidance that we've set forward. Thanks, everyone. Thank you.

Welcome to EPR Properties Q3 2025 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. If you have any objections, please disconnect at this time. I would now like to turn to Brian Moriarty, Senior Vice President.

Thanks for joining us today for our third quarter 2025 Earnings Call and Webcast. Participants on today's call are Greg Silvers, Chairman and CEO; Greg Zimmerman, Executive Vice President and CIO; and Mark Peterson, Executive Vice President and CFO. I I'll start the call by informing you that this call may include forward-looking statements as defined in the Private Securities Litigation Act of 1995, identified by such words as will be intend, continue, believe, may, expect, hope, anticipate or other such comparable terms. The company's actual financial condition and the results of operations may vary materially from those contemplated by such forward-looking statements.

Discussion of those factors that could cause results to differ materially from these forward-looking statements are contained in the company's SEC filings, including the company's reports on Form 10-K and 10-Q. Additionally, this call will contain references to certain non-GAAP measures, which we believe are useful in evaluating the company's performance. A reconciliation of these measures to the most directly comparable GAAP measures are included in today's earnings release and supplemental information furnished to the SEC under Form 8-K. If you wish to follow along, today's earnings release, supplemental and earnings call presentation are all available on the Investor Center page of the company's website, www.eprkc.com. Now I'll turn the call over to Greg Silver.

Thank you, Brian. Good morning, everyone, and welcome to our third quarter 2025 earnings call and webcast. The third quarter marked another period of steady progress as we continue to position the company for accelerated growth and expansion. We are pleased to report a 5.4% increase in FFO as adjusted per share versus the same quarter last year and an increase at the midpoint in our FFO as adjusted guidance for the current year. Our disciplined deployment strategy is enabling us to expand our portfolio of experiential properties.

Our team is leveraging both existing relationships and new partnerships and we have a pipeline of investments that are actionable over the next 90 to 120 days. However, given the fluidity of timing, we felt it prudent to not raise investment spending guidance at this time. Larger opportunities are now accessible, and we're moving decisively to capture them as we look towards 2026. During the quarter, we also made continued progress on our strategic capital recycling program. This program has largely been focused on planned noncore theater and opportunistic education dispositions with targeted reinvestment in growth experiential sectors. Our work here has materially strengthened our portfolio and provided for accretive reinvestments.

Turning to our portfolio and industry health. Our third quarter consolidated coverage remained strong at 2.0, reflecting continued portfolio stability. At the box office, we anticipate a robust fourth quarter and expect 2025 to set a new post-COVID high. The continued recovery of the Box Office has led to a significant increase in percentage rent from our Regal lease. We believe this percentage rent feature has strong upside in the future as we anticipate continued growth at the Box Office. We continue to be pleased with the resilience that our tenants have exhibited as consumers prioritize experiences. At the same time, to mitigate potential economic pressures on consumers, many of our tenants have launched new initiatives. These include EngoPass programs with bundled discounts, dynamic daypart pricing and group discount offerings.

We are also seeing widespread adoption of enhanced technology across our tenant base, which has the potential to both improve the customer experience and create greater efficiencies. I'd also like to remind everyone that we've successfully navigated many economic cycles over the past 25 years. During this time, we've witnessed the importance of the resilience of congregate value-oriented entertainment and leisure in the daily lives of consumers. Lastly, I would like to comment on the status of the proposed transaction involving the sale of our Cat Skills Land affiliated with the Resorts World Gaming property. We've been advised that the bond transaction, which we understand would be used to fund the exercise of the purchase option will be delayed pending the recently announced proposed merger among gaming entities.

While our tenant has indicated their desire to complete a bond transaction and option exercise in 2026, the timing and outcome of such a transaction remains uncertain. Regardless of whether the option is exercised, our strong balance sheet and clear visibility into future opportunities positions us to materially accelerate investment spending in 2026. Now I'll turn it over to Greg Zimmerman to go over the business in greater detail.

Thanks, Greg. At the end of the quarter, our total investments were approximately $6.9 billion with 330 properties that are 99% of these store operated. During the quarter, our investment spending was $54.5 million. 100% of the spending was in our experiential portfolio. Our experiential portfolio comprises 275 properties with 53 operators and accounts for 94% of our total investments. or approximately $6.5 billion. And at the end of the quarter was 99% leased store operated.

Our education portfolio comprises 55 properties with 5 operators and at the end of the quarter was 100% leased. Turning to coverage. The most recent data provided is based on its [indiscernible] trailing 12-month period. Overall portfolio coverage remains strong at 2x. Turning to the operating status of our tenants. Q3 box office was $2.4 billion, down from $2.7 billion in Q3 2024. 7 titles grossed over $100 million. led by Superman Jurassic World, Rebirth and a Fantastic 4 1st steps.

The Q3 2025 comparison was difficult because Q3 2024 was anchored by the strong performance of from Deadpool and Wolverine, Despicable Me, Twisters and Beetle Juice Field use. The slate for the fourth quarter is anchored by 3 films projected to gross over $200 million, Zootopia 2, Wicked: For Good, and Avatar Fire & Ash. Box Office through the first 3 quarters was $6.5 billion, a 4% increase over the first 3 quarters of 2024.

Our estimate of North American box office for calendar year 2025 is between $9 billion and $9.2 billion, an increase of approximately 6% at the midpoint from 2024. Turning now to an update on our other major customer groups. And ready Carbon opened strongly in Oklahoma City in July. The Kansas City location opens in mid-November and Chamber Illinois is expected to open in the second quarter of 2026. Our second end stack located in Northern Virginia is also expected to open in Q2. Notwithstanding macro pressures on consumers, our play coverage remains strong and above precoded levels, and metrics are stable when compared to Q3 2024.

We saw increased EBITDAR across our attractions portfolio, buoyed by strong performance in our Canadian assets and at enchanted forest world Safari. As we have said for some time, we see a lot of momentum and investment potential in the [indiscernible] space. We are very pleased with the performance of all 3 of our Hot Springs investments. driven by attendance growth and the $90 million expansion at the Springs Resort in Pagosa Springs, EBITDAR and revenue for the portfolio are up year-over-year. Both Iron Mountain Hot Springs and Murrieta Hot Springs Resort continue their attendance and revenue growth. Because of the strong performance at Iron Mountain Hot Springs, in Q3, we funded $18.25 million in according financing, which reflects our conservative acquisition underwriting practices.

Our underwriting thesis was that this asset would continue to grow and outperform expectations. We work with our operator to include an according feature, which contemplated additional investment once the assets achieved agreed upon metrics. The expansion of our Jellystone Cosi Resort near Pittsburgh, helped drive overall growth in our experiential lodging portfolio with gains in EBITDAR and revenue across the portfolio in Q3 over Q3 2024. Our ski properties experienced revenue growth over the summer month, it's too early differentiation on the upcoming ski season. Our education portfolio continues to perform well.

Our customers' trailing 12-month revenue for Q2 was essentially flat with EBITDA down due to expense increases. Our investment spending for Q3 was $54.5 million entirely in experiential assets and includes funding for projects that we have closed but are not yet open. Our year-to-date investment spending is $140.8 million. During the quarter, in addition to the $18.25 million accordion funding in Iron Mountain Hot Springs, we made our first investment with the high-end Canadian fitness firm, Altea Active, providing approximately $20 million in mortgage financing secured by their club and Winnipeg, Manitoba.

We are excited to start a new relationship with 1 of the best fitness operators in Canada and to provide growth capital to Altea as they look to expand their brand. We anticipate continuing to increase our investment spending cadence in the coming quarters. We continue to see high-quality opportunities in both acquisition and build-to-suit development in our target experiential categories. As Greg noted, our disciplined deployment strategy has enabled us to expand the depth and breadth of our portfolio of experiential properties. As we have mentioned frequently, we are especially bullish on the fitness and wellness space. And given our deep relationships, the increased focus on fitness and wellness among multiple generations and demographics and the wide range of investment opportunities from hot springs to spas to fitness.

Our investment spending this quarter reflects these deep relationships and high-quality investment opportunities. As we approach year-end, we are narrowing our investment spending guidance for funds to be deployed in 2025 from the range of $200 million to $300 million to the range of $225 million to $275 million. We have committed over $100 million for experiential development and redevelopment projects that have closed, but are not net funded to be deployed over the next 15 months. We anticipate approximately $25 million of this amount will be deployed in Q4, which is included at the midpoint of our 2025 guidance.

Our team is leveraging both existing relationships and new partnerships to develop a pipeline of investments actionable over the next 90 to 120 days. given that some could fall into 2026, we did not think the timing was right to raise investments on any guidance now. As we look forward into 2026, we are also seeing larger opportunities and are moving decisively to capturing. As we noted on our Q2 call early in Q3, we sold our last vacant AMC theater in Hamilton, New Jersey to the Children's Hospital of Philadelphia. We also sold a vacant [indiscernible] in Q3. Combined net proceeds were approximately $19.3 million with a combined gain of approximately $4.6 million. In the past 4 years, we have sold 31 theaters. We have 1 remaining vacant theater.

Subsequent to the end of the quarter, we received approximately $18 million in a pay down of our mortgage with Gravity house, resulting from their sale of their asset in [indiscernible] France. Through the end of Q3, we sold approximately $133.8 million of assets. We are increasing our 2025 disposition guidance to the range of $150 million to $160 million from a range of $130 million to $145 million. I now hand it over to Mark for a discussion both on the [indiscernible].

Thank you, Greg. Today, I will discuss our financial performance for the third quarter, provide an update on our balance sheet and close with an update on 2025 guidance. Need FFO as adjusted for the quarter was $1.37 per share versus $1.30 in the prior year, an increase of 5.4% and AFFO for the quarter was $1.39 per share compared to $1.29 in the prior year, an increase of 7.8%. Before I walk through the key variances, I want to explain 2 offsetting items excluded from FFO as adjusted and AFFO. First, with regard to dispositions for the quarter, net proceeds totaled $19.3 million.

We recognized a net gain on sale of $4.6 million. Also included in gain on sale for the quarter was a $3.5 million gain related to the exercise of an early termination option of a ground lease. Second, provision for credit losses net was $9.1 million for the quarter, and related to fleet reserving 1 mortgage note receivable for $6 million related to our only investment with 1 small borrower and changes our estimated current expected credit losses mostly due to macroeconomic conditions. Now moving to the key variances. Total revenue for the quarter was $182.3 million versus $180.5 million in the prior year. Within total revenue, rental revenue increased $6.2 million versus the prior year, mostly due to the impact of investment spending, rent bumps and higher percentage rents.

Percentage rents for the quarter were $7 million versus $5.9 million in the prior year, and the increase was due primarily to higher percentage rent recognized from 1 of our theater tenants offset by lower percentage rents recognized from our attraction properties. Both other income and other expense related primarily to our consolidated operating properties, including the Cartright hotel and indoor water park and our 4 operating theaters. The decrease in hub income and other expense versus prior year is due primarily to the sale of 3 operating theater properties in the first half of this year. On the expense side, G&A expense for the quarter increased to $14 million versus $11.9 million in the prior year due primarily to higher estimated incentive pay, including noncash share-based compensation spend.

Interest expense net for the quarter increased by $371,000 compared to the previous year, due primarily to an increase in our weighted average interest rate on outstanding debt due to additional borrowing on our unsecured revolving credit facility to pay off lower-rate senior unsecured notes at their maturity last quarter. Equity and income from joint ventures for the quarter was $2.9 million compared to a loss of $851,000 in prior year. This increase is due to our decision to exit our joint ventures in Broadridge, Louisiana and St. Pete, Florida in late 2024 as well as better performance at our 2 RV Park joint ventures.

FFO as adjusted for the 9 months ended September 30 was $3.81 per share compared to $3.64 in the prior year, an increase of 4.7%. And AFFO for the same period was $3.83 per share compared to $3.61 in the prior year, an increase of 6.1%. Turning to the next slide, I read some of the company's key credit ratios. As you can see, our coverage ratios continue to be very strong with fixed charge coverage at 3.6x in both interest and debt service coverage ratios at 4.2x. Our net debt to annualized adjusted EBITDAR was 4.9x at quarter end, which is below the low end of our targeted range. Additionally, our net debt to gross assets was 38% on a booked basis at quarter end, and our common dividend continues to be very well covered with an AFFO payout ratio of 64% for the third quarter.

Now let's move to our balance sheet, which is in great shape to support our expected growth. At quarter end, we had consolidated debt of $2.8 billion, of which $2.4 billion is either fixed rate debt or debt that has been fixed through interest rate swaps with an overall blended coupon of approximately 4.3%. During the quarter, we amended our unsecured revolving credit facility agreement to remove the SOFR index adjustment, which decreased our all-in interest rate by 10 basis points. Our liquidity position remains strong with $13.7 million cash on hand at quarter end and $379 million drawn on our $1 billion revolver. While our leverage is below the low end of our range and our 2025 guidance continues to have no equity issuance assumed, we plan to finalize our new ATM program in Q4.

We currently have a direct share purchase plan in place for equity issuance, but the ATM program will provide us with an additional tool in our toolbox for raising such capital. We are increasing our 2025 FFO as adjusted per share guidance to a range of $5.05 to $5.13 from a range of $5 to $5.60, represented an increase over the prior year of 4.5% at the midpoint. Please note that as in prior years, our fourth quarter FFO as adjusted per share is expected to be lower than our third quarter primarily due to the seasonality related to the Carrie Potel and into a water park and our joint venture RV properties. We're also narrowing our 2025 investment spending guidance to a range of $225 million to $275 million from a range of $200 million to $300 million.

We are increasing guidance for disposition proceeds for 2025 to a range of $150 million to $160 million from a range of $130 million to $145 million. On the next slide, we are narrowing our percentage rent and participating interest income to a range of $22.5 million to $24.5 million from a range of $21.5 million to $25.5 million. and raising the low end of our estimate for G&A expense to a range of $54 million to $56 million from a range of $53 million to $56 million. We are also updating the guidance for our consolidated operating properties, which is provided by giving a range for other income and other expense. Guidance details can be found on Page 23 of our supplement. Now with that, I'll turn it back over to Greg for his closing remarks. Thank you, Mark.

As our results demonstrate, our portfolio continues to be strong and resilient. We have executed on a very aggressive capital recycling plan this year with our guidance implying over $150 million of sales. Notwithstanding this capital recycling, we are projecting to deliver over 4.5% growth in FFO as adjusted. As a result of recycling and cash flow generation, we have positioned ourselves to materially accelerate our capital deployment in 2026. We are very pleased and excited as we bring 2025 to an end and look forward to 2026. With that, why don't I open it up for questions? Sophie? .

[Operator Instructions] We'll take our first question from Smedes Rose from Citi.

I wanted to ask a little bit more about the credit losses that you're reserving for? You mentioned a $6 million mortgage note and then just some changes -- expectations around the broader macro economy. Could you maybe just talk about that a little more? And any sort of incremental detail around what happens with the underlying property there?

Sure, Smedes. I think, first of all, again, it's a small tenant that we will -- we will see how they continue to perform. We just thought it was prudent to reserve that. If not, we have assets related to that, that we can look to take control of and so then the larger macro issue is just -- I'm going to get this wrong, it's [indiscernible] how that works. And there's a lot of factors that go into that. Mark, maybe you can give some more detail on that.

Yes. So there's macroeconomic indicators that go into that can move up and down as it does every quarter, sometimes positive, sometimes negative. So really, I think just the outsized number this quarter was really the $6 million note as Greg said, that we determined we needed to reserve. Again, it's the only investment we have with that small tenant. .

Okay. And then I just wanted to ask you, too, you've talked a little bit about accelerating acquisition volumes in 2026. Could you maybe just put some sort of scope around that in terms of where you think volumes could go and let's putting aside the whole getting thing for a minute. But if you wanted to stay leverage-neutral for '26 .

Well, I think that's the question. And I think we need to be really clear about this that we -- in this acceleration plan, [indiscernible] was never requirement for us to do that. Again, and Mark can detail this, we've significantly moved leverage down to below -- at or below the low end of our leverage range. So when we think about taking that up to what is our natural kind of in the midpoint of that at $5.3 million -- and looking at our cash flow generation, we feel comfortable that we can go to that $400 million to $500 million range without any additional need of capital recycling. .

So when we talk about those levels, we're very comfortable without [indiscernible] or without any transaction involving that property being able to do that -- so I think the narrative that we need that to occur in order to allow us to do those levels is factually inaccurate. But Mark, maybe.

Yes. And just to add to that, if you just do the math, forget Genting, do the math on, say, $500 million investment spending when you utilize our cash flow, a little bit of disposition kind of do the math. you end up still probably below the midpoint of our targeted leverage range, again, because we're beginning so low at about 5x. So we'll be below [5.3%], if you do the math. The Genting thing purely becomes an opportunity to delever our balance sheet by about 0.3 turns if you do the math on that.

So again, as Greg said, we view Genting as an opportunity not an overhang, not necessary to execute our plan, but would provide us additional dry powder, but again, not necessary to execute our plan next year to grow significantly.

We'll take our next question from Kathryn Graves with UBS.

My first -- I'm wondering if you could just provide some capital on the duration of the mortgage financing investment with Altia Active? And then maybe just talk a bit about how that kind of investment fits within your larger array of investments that you have available to you?

Sure. Greg, do you want to...

Yes. So it's structured as a mortgage mostly because of implications of Canadian currency, et cetera. And the idea is to provide growth capital for patio as they grow their business, is structured as I believe, 20 years mortgage -- so longer mortgage, not short-term financing, and we expect to be in a long-term partnership with Altia.

I would say I would echo what Greg said. What we found often in Canada is for taxation purposes, mortgage structures, allowing you to have a more efficient structure. And so we've leaned into that. But I would tell you that mortgage is probably more like a synthetic mortgage it reads like the lease -- synthetically I'm sorry .

Got it. That's helpful. And then my second question, a little bit more retail-focused peers have reported seeing increased competition for deals from private players, say offices, et cetera. And I'm wondering if you also seen any of this competition in your acquisition landscape or whether you're asset class and sort of the uniqueness of it, maybe it helps buffer from some of that competition. And then -- has that also allowed cap rates to kind of stay where they are? Have you seen some compression more recently in your current pipeline? .

I'll let Greg also jump in. But I would say always, I think there's competition out there. I don't think it's as many debt play in our spaces as do in the retail space. But I do think there is -- as we talked about, there's been increased deal flow. I think that's starting to work in our favor. And I think cap rates have fairly -- been fairly stable, right?

Yes. I think cap rates are stable And again, we'll run into all those kind of investors in larger deals. But as we say repeatedly, we've got a pretty granular approach, our team is out all over the country in Canada looking for deals. So that's how we're able to find great assets like Altia Active And some of our Hot Springs resorts. So I think we're pretty comfortable that in that space, we've got a very nice run rate. And as we increase our ability to participate in larger ticket deals, we'll probably run into more of the competitors [indiscernible].

We'll take our next question from Upal Rana with KeyBanc Capital Markets.

Could you touch on the larger investment opportunities that you're seeing in the market today?

Well, without disclosing any specific, I think it's pretty broad-based. I think we're seeing nice large opportunities in several of our verticals, so it's not limited to kind of 1 area. And like I said, we think of those as over $100 million and over. And I think there's probably somewhere between 3% and 5% in the market right now. So I think it's again, somewhat of a change from what we've seen from the first half of the year, no doubt. .

So it's both exciting. And as we talked about in the spaces that we play, we're very much known to all the players. And so we're seeing all these deals, and we're excited about the opportunity set.

Okay. Great. That was helpful. And then I appreciate the ATM program status update you provided. Could you provide some color on your strategy and how you plan to issue equity in terms of what your pricing is and when.

Yes. As we mentioned, we're not dependent on equity for next year's plan with just debt financing and our free cash flow, et cetera. we'd be under the midpoint of our range. That said, opportunistically, we may decide to raise equity. Certainly, the price has to be at a point where it makes sense, and that would just allow us to delever further and provide more dry powder. And our ATM program will allow us to do that in an effective way. Currently, we have a direct share purchase plan and we can also dribble out stock, but we are excited about the ATM program and the ability to do forward type deals and so forth.

So -- but it's entirely contingent on the market and the market is in a good place, a good price for us and does it make sense to issue equity to lower our leverage.

Our last question comes from Jana Galan with Bank of America Merrill Lynch.

Thank you for quantifying the larger deals on the market that you're looking at. Can you also give some color on the smaller ones and then maybe kind of yield differential between the large and smaller investment opportunities?

Yes. And I'll let Greg also join in. I mean, we've made a lot of our path over the last several years of kind of what we would say is the $25 million to $75 million deals, and those are still very much out there. Those are the, what I would say, much more of the bespoke relationship deals that we have, and those have always been part of what we have done.

I think those are less -- they're less competitive in the -- again, because of the bespoke maker, how we get those deals. But I think those are still comfortably in the 8s. I think it gets a little more competitive when you get into larger deals and people looking for volume. It doesn't mean that those are materially moving that may be 25 basis points. But I think we feel like we're in a position to be competitive with those given our understanding of those deals. But Greg, probably...

No, I think it's perfect.

Great. And then just maybe on the new ATM mortgage loan and maybe it's due to the discussion you had about the way it was structured. But just curious on the yield there. is that more representative of the Canadian market?

No. I mean the number we quoted is in U.S. dollars. And so if you use U.S. dollars, the yields we're getting are similar to what we would get in the U.S. .

This completes the allotted time for questions. I will now turn the call back over to Greg Silvers for any closing remarks.

Thank you, everyone. We appreciate your time and attention. Look forward to talking to you guys many times in the call, and have a great day. Thank you.