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EPR Properties (NYSE: EPR) is a real estate investment trust, or REIT, that specializes in experiential properties. It owns movie theater properties, waterparks, ski resorts, eat-and-play properties, and more.
Thanks to solid results in its business, as well as the somewhat lower interest rate environment, EPR recently reached a new 52-week high. However, the fact remains that conditions are not yet favorable for growth -- the keyword being "yet." This company has a massive, long-tailed opportunity for patient investors, and an excellent dividend yield for those willing to buy and hold.
EPR Properties in a nutshell
As of the end of 2024, EPR Properties owned 346 locations in the U.S. and Canada. Movie theaters make up 37% of the rental income, accounting for the largest share, and are also the largest ongoing risk factor since the future of the movie industry isn't exactly certain. However, EPR is actively seeking to reduce this exposure, and it has done a great job of it so far. Its next largest property type is eat-and-play properties, which account for another 24%. TopGolf is one of its largest tenants.
Recent results have been strong. EPR's revenue increased by 3% year over year in the fourth quarter despite little growth in the investment portfolio. (More on that in a bit.) Adjusted funds from operations (FFO), the real estate equivalent of earnings, were 5% higher than a year ago, and EPR increased its monthly dividend rate by 3.5%.
Treading water, for now
As mentioned, EPR's properties have been performing rather well for the most part, and revenue is rising. However, while the company has typically grown rapidly through acquisitions and developments, it has sharply pumped the brakes on growth in recent years.
At first, this was due to the pandemic-era uncertainty. But in the years since the pandemic era, rising interest rates and pressure on EPR's stock price has made the cost of capital unattractive. In other words, it doesn't make good financial sense for EPR to take on debt or sell more shares to raise growth capital right now.
EPR is still deploying some capital, spending about $264 million on investments in 2024, but this mainly came from the company's excess cash flow, proceeds from selling a few movie theater properties, and cash on hand. And it represents a slow year for the company. For context, EPR spent $572 and $795 million in 2018 and 2019, respectively. Plus, EPR is guiding for $200 million to $300 million for 2025, so it's expecting another slow year for growth.