EPR Properties: That's Entertainment

06/01/2015 8:00 am EST

Focus: REITS

Khoa Nguyen

Investment Analyst, Investing Daily

Avengers: Age of Ultron has already collected $875 million in ticket sales worldwide and this summer is expected to be a blockbuster bonanza thanks in part to sequels such as Jurassic World and Mission: Impossible-Rogue Nation, notes Khoa Nguyen, editor of Global Income Edge.

That's great news for EPR Properties (EPR), a specialty REIT that invests in entertainment, recreation, and education-related properties in the United States and Canada.

Roughly two-thirds of the REIT’s operating income is generated by its entertainment segment, which consists of 135 megaplex theaters, nine entertainment retail centers, and six family entertainment centers.

Entertainment retail centers are large complexes that combine movie theaters, restaurants, fitness centers, and leisure activities. Family entertainment centers include performance theaters and sports venues.

Its recreation segment may be its most cyclical. This group includes ten metro ski parks, four waterparks, and 11 golf complexes. This segment may feel the biggest pinch when the economy dips, but when times are good it also sees the biggest gains.

EPR’s education segment is also a growing business. It makes up about 19% of operating income and owns 62 public charter school properties, five early education centers, and two private schools.

All of its education properties are leased with no significant expirations in the next few years, adding to its stability. EPR currently has three public charter schools, eight early education centers, and one private school under construction.

Just within the past five quarters, EPR expanded its portfolio from 180 locations at the end of 2013 to 230 locations as of March 31, 2015. Management expects to pump $500 million into capital spending annually for the next two years.

EPR trades at a 10% discount to its all time high of about $66 and still pays out a nice 6.1% yield. This is a good play for when consumers’ disposable income picks up and more dollars are spent on movies and theme parks.

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