Executive Summary / Key Takeaways

• Strategic Portfolio Refinement: EPR Properties is actively transforming its portfolio by divesting non-core theater and education assets, reinvesting proceeds into a diversified range of high-growth experiential properties like hot springs, fitness, and golf, aiming for enhanced stability and predictable cash flows.
• Robust Financial Performance: The company demonstrated strong financial health in Q3 2025, with FFO as adjusted per share increasing by 5.4% year-over-year, supported by rising rental and mortgage income, leading to an upward revision of its 2025 FFO as adjusted guidance to $5.05 to $5.13 per share.
• Leveraging Tenant-Level Technology: While not a technology developer itself, EPR strategically benefits from its tenants' widespread adoption of enhanced technologies, such as dynamic pricing and improved food & beverage offerings, which boost per-patron profitability and strengthen lease coverage in the experiential sector.
• Strong Liquidity and Capital Flexibility: With a conservative balance sheet, ample liquidity from its $1 billion revolving credit facility, and a planned ATM program, EPR is well-positioned to accelerate investment spending in 2026 without immediate reliance on equity issuance, despite the delay in the Genting transaction.
• Resilient Experiential Demand: The investment thesis is underpinned by the enduring consumer demand for out-of-home experiences, which has historically shown resilience across economic cycles, providing a stable foundation for EPR's specialized property portfolio.

Forging an Experiential Future: EPR's Strategic Evolution

EPR Properties, established in 1997, has consistently positioned itself as a leading diversified experiential net lease REIT. Its core mission revolves around enhancing shareholder value through predictable and increasing Funds From Operations As Adjusted (FFOAA) and dividends per share. The company's strategy focuses on long-term investments in the Experiential sector, leveraging deep industry knowledge and relationships to identify properties that offer sustained performance across various economic cycles. This approach is rooted in rigorous underwriting, scrutinizing industry and property cash flow criteria, alongside the credit metrics of its tenants.

The company's journey has seen a deliberate evolution, particularly in response to market dynamics and a strategic imperative to refine its portfolio. A significant shift began around 2021, marked by a concerted effort to reduce exposure to traditional theater properties and opportunistic divestitures within its education segment. By the end of Q3 2025, EPR had successfully sold 31 theaters over four years, with only one vacant theater remaining, demonstrating a clear commitment to this capital recycling program. This strategic pruning has allowed for targeted reinvestment into higher-growth experiential sectors, materially strengthening the portfolio and providing for accretive returns.

EPR's competitive positioning is distinct within the broader net lease REIT landscape. Unlike more diversified peers such as Realty Income Corporation (O), W. P. Carey Inc. (WPC), or National Retail Properties (NNN), EPR maintains a qualitative edge through its specialized focus on experiential real estate. This niche concentration allows for deeper market insights and stronger tenant relationships, which can translate into more resilient cash flows, particularly as consumers increasingly prioritize out-of-home leisure. While competitors like Realty Income benefit from broader diversification and scale, EPR's strength lies in its ability to capitalize on specific consumer trends in recreation, fostering tenant loyalty due to the unique nature of its properties. This specialized underwriting for discretionary spending venues differentiates EPR, potentially offering superior cash flow stability and enhanced pricing power within its targeted segments.

Leveraging Technology for Experiential Advantage

While EPR Properties does not develop proprietary technology in the traditional sense, its competitive moat is significantly enhanced by its strategic alignment with and investment in properties whose tenants effectively leverage technology to drive performance. The company's rigorous underwriting process implicitly favors operators who demonstrate a commitment to technological innovation that improves the customer experience and operational efficiencies. This widespread adoption of enhanced technology across EPR's tenant base is a critical differentiator.

For instance, many of EPR's tenants have implemented sophisticated programs such as annual pass offerings with bundled discounts, dynamic daypart pricing, and group discount initiatives. These are not merely marketing tactics; they are technologically enabled strategies that optimize revenue management, attract diverse customer segments, and enhance customer loyalty. In the theater industry, the evolution of per-patron profitability is a prime example. From 2019 through 2024, per-patron ticket prices increased by approximately 26%, while food & beverage (F&B) spending per patron surged by about 60%. With F&B margins at around 82% compared to ticket margins of approximately 46%, this significant boost in higher-margin F&B spending, facilitated by modern ordering and inventory systems, meaningfully elevates gross profit per patron. This means that a North American box office gross of around $9.5 billion today is estimated to generate rent coverage levels in EPR's portfolio equivalent to those achieved with an $11.3 billion box office in 2019, underscoring the power of technology-driven profitability.

Furthermore, EPR's investment strategy actively seeks out opportunities in sectors that are embracing technological advancements to enhance the consumer experience. The company's "especially bullish" stance on the fitness and wellness space, for example, is partly driven by the industry's adoption of technology to personalize experiences and improve operational models. This strategic focus on properties with technologically forward-thinking tenants contributes directly to EPR's competitive moat, supporting stable lease revenues and long-term growth by ensuring its assets remain relevant and profitable in an evolving consumer landscape.

Financial Performance and Operational Strength

EPR Properties delivered a strong financial performance in the third quarter of 2025, reflecting the effectiveness of its strategic initiatives. Total revenue for the quarter increased by $1.8 million to $182.3 million compared to Q3 2024, primarily driven by the impact of new investment spending, scheduled rent bumps, and higher percentage rents. Rental revenue alone saw a $6.2 million increase. Percentage rents for Q3 2025 reached $7 million, up from $5.9 million in the prior year, largely due to increased contributions from a key theater tenant, partially offset by some attraction properties. Mortgage and other financing income also rose, benefiting from new mortgage notes funded in 2024 and additional investments in existing receivables, including a $1.8 million participating interest income from a ski property after a resolved calculation dispute.

For the nine months ended September 30, 2025, net income available to common shareholders of EPR Properties surged to $189.9 million, a substantial increase from $136.4 million in the same period of 2024. This translated to diluted earnings per share of $2.48, up from $1.80. The company's FFO as adjusted per share for Q3 2025 increased by 5.4% year-over-year to $1.37, while AFFO per share rose by 7.8% to $1.39. These figures underscore the company's operational effectiveness and its ability to generate robust cash flows. The company's gross profit margin stands at 97.58%, operating profit margin at 50.86%, and EBITDA margin at 70.79% on a trailing twelve-month basis, indicating strong profitability. Annual operating cash flow was $393.14 million, with free cash flow per share at $5.47, demonstrating significant cash generation capabilities.

The strategic capital recycling program has also contributed to these results. The company recognized a higher gain on the sale of real estate and early ground lease terminations for the three and nine months ended September 30, 2025, stemming from the disposition of various theater and early childhood education properties. Furthermore, the decision to exit joint ventures in Breaux Bridge, Louisiana, and St. Pete Beach, Florida, due to performance volatility and expense pressures, led to increased equity in income from joint ventures for Q3 2025 and a decreased equity in loss for the nine-month period. This strategic pivot away from operating properties aims to reduce volatility and enhance the stability of reported earnings.

Liquidity and Capital Structure

EPR Properties maintains a conservative and flexible capital structure, providing ample liquidity to support its growth initiatives. As of September 30, 2025, the company reported $13.7 million in cash and cash equivalents and had $379 million outstanding on its $1 billion unsecured revolving credit facility. This facility, which matures on October 2, 2028, with two six-month extension options, was recently amended in September 2025 to remove the SOFR index adjustment for U.S. dollar loans, effectively decreasing the all-in interest rate by 10 basis points.

The company's total debt outstanding at quarter-end was $2.8 billion, with a significant 99% being unsecured. Approximately $2.2 billion of this comprised unsecured senior notes with interest rates ranging from 3.60% to 4.95%. EPR was in full compliance with all debt covenants as of September 30, 2025, including limitations on debt to adjusted total assets (not to exceed 60%) and a debt service coverage ratio (not less than 1.50 times). This strong adherence to financial covenants underscores its disciplined financial management.

The company successfully repaid $300 million of senior unsecured notes on April 1, 2025, utilizing its revolving credit facility, with no further debt maturities scheduled until August 2026. To further enhance its capital-raising capabilities, EPR plans to finalize a new ATM program in Q4 2025, providing an additional tool for opportunistic equity issuance, though no equity issuance is assumed in its current 2025 guidance. The net debt to adjusted EBITDAre ratio of 4.9x at quarter-end, which is below the low end of its targeted range, further highlights the company's strong balance sheet and capacity for future investments.

Outlook and Growth Trajectory

EPR Properties' outlook for 2025 and beyond is characterized by anticipated growth, strategic capital deployment, and a continued focus on its experiential portfolio. The company increased its 2025 FFO as adjusted per share guidance to a range of $5.05 to $5.13, representing a 4.5% increase at the midpoint over 2024. This positive revision is underpinned by expectations of continued portfolio strength and efficient capital sourcing. Investment spending guidance for 2025 has been narrowed to $225 million to $275 million, with over $100 million already committed for experiential development and redevelopment projects slated for deployment over the next 15 months. Management explicitly anticipates materially accelerating investment spending in 2026, leveraging its strong balance sheet and improved cost of capital to pursue larger opportunities.

A key driver for this optimistic outlook is the continued recovery of the North American box office. The company projects the calendar year 2025 Box Office to reach between $9 billion and $9.2 billion, a 6% increase at the midpoint from 2024, setting a new post-COVID high. This recovery is expected to significantly boost percentage rent from the Regal lease, which management believes holds strong upside potential. The film slate for Q4 2025, anchored by major releases like Zootopia 2, Wicked: For Good, and Avatar: Fire & Ash, is expected to contribute to a robust finish to the year.

The company's strategic pivot towards high-growth experiential sectors is already yielding results. Recent investments include accordion financing for the high-performing Iron Mountain Hot Springs and mortgage financing for Altea Active, a Canadian fitness firm. EPR is "especially bullish" on the fitness and wellness space, seeing ample investment opportunities. The dividend remains well-covered, with an AFFO payout ratio of 64% for Q3 2025, supporting the company's recent 3.5% increase in its monthly common dividend. While the proposed sale of Catskills Land affiliated with the Resorts World Gaming property faces delays due to a pending merger, management emphasizes that its acceleration plan for 2026 investment spending is not contingent on this transaction.

Risks and Challenges

Despite a compelling growth narrative, EPR Properties faces several risks inherent to its business model and the broader economic environment. Global economic uncertainty, including inflationary pressures and potential reductions in discretionary consumer spending, remains a significant concern, as it could impact tenant performance and, consequently, lease revenues. The company also has notable tenant concentration risk, with Topgolf, AMC (AMC), and Regal Cinemas collectively representing a substantial portion of its total revenue (14.1%, 13.5%, and 12%, respectively, for the nine months ended September 30, 2025). Defaults by any of these major tenants could materially affect financial results.

Operating in the experiential real estate industry also presents specific challenges, such as the impact of labor strikes on motion picture production or theatrical releases, which can directly affect theater tenant revenues. Furthermore, changes in U.S. trade policies, including tariffs on imported construction materials, could increase development project costs and impact tenant profitability. The company's decision to exit operating properties highlights the volatility and expense pressures, particularly from rising insurance costs, associated with direct operations. This was underscored by a $6.2 million provision for credit losses in Q3 2025 to fully reserve one mortgage note receivable and broader changes in expected credit losses due to macroeconomic conditions. The delay in the Genting transaction, while not critical to 2026 investment plans, introduces uncertainty regarding a potential deleveraging opportunity. Lastly, the company's exposure to foreign currency exchange risk on its Canadian properties and investments requires active management through derivative instruments.

Conclusion

EPR Properties stands as a compelling investment in the specialized experiential real estate sector, demonstrating a clear and effective strategy for growth and value creation. Its disciplined capital recycling program, marked by the strategic divestiture of non-core assets and targeted reinvestment into high-potential experiential properties, is fundamentally reshaping its portfolio for enhanced resilience and predictable cash flows. The company's robust financial performance, highlighted by strong FFOAA growth and a conservative balance sheet, provides a solid foundation for its ambitious expansion plans.

EPR's strategic advantage lies not only in its rigorous underwriting and deep industry relationships but also in its ability to capitalize on tenant-level technological advancements that boost profitability and strengthen lease coverage. With a clear outlook for accelerated investment spending in 2026, supported by ample liquidity and an improving cost of capital, EPR is well-positioned to continue its trajectory of predictable earnings and dividend growth. While macroeconomic headwinds and tenant concentration risks warrant careful monitoring, the enduring consumer demand for out-of-home experiences, coupled with EPR's focused strategy and operational acumen, underpins a strong investment thesis for long-term value.