EPR Properties (EPR) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the annual meeting of EPR Properties. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference to your speaker today, Craig Evans, Executive Vice President and General Counsel. Please go ahead, sir.

Thank you, Joelle. And good morning, ladies and gentlemen, and welcome to the Annual Meeting of Shareholders of EPR Properties, which I now call to order. I am Craig Evans, Executive Vice President, General Counsel of EPR Properties, and it's my privilege to preside over this year's meeting. On behalf of EPR, we hope you and your families are safe and healthy during these difficult times. With that in mind, on May 15, we encouraged our shareholders to participate by conference call and vote their shares by proxy in the manner described in the proxy statement and notice of annual meeting. We are permitting shareholders to listen to the formal proceedings of the meeting, which will be followed by a brief business update of the company by our President and CEO, Greg Silvers. He will also respond to questions we have received from you. Each shareholder in attendance has signed a registration of attendance form, and this provides shareholders an opportunity to cast a ballot in person even though a proxy was previously filed or to file a new or replacement proxy. If you have submitted a proxy and do not wish to change your vote, you do not need to submit a ballot or a new proxy. Philip Meyer of Computershare has been appointed as inspector of election for this meeting. The inspector of election has taken his oath, which will be included in the minutes of the meeting. I've received an affidavit from representatives of Computershare that certifies that a notice of this annual meeting was sent on April 17, 2020, to all shareholders of record as of March 6, 2020, the record date for this meeting. Notice of this meeting has thus been duly sent to shareholders in accordance with the company's bylaws. I have with me a complete list of the shareholders entitled to vote at this meeting, which is available for inspection by any shareholder for any purpose germane to this meeting. According to both the company's records and in certificate of the inspector, there are 78,582,072 common shares entitled to vote at this meeting. For purposes of determining the existence of a quorum, Mr. Meyer will now report on the number of shares represented at this meeting. Philip?

Mr. Secretary, I wish to report that the owners of more than 86% of the issued and outstanding common shares are present today either in person or by proxy. That number is more than a majority of the stock entitled to vote, and therefore, a quorum is present.

Thank you. Since we have a quorum, we can now proceed. The first order of business is the election of 7 trustees to serve until the annual meeting following EPR's fiscal year ending December 31, 2020. The Board of Trustees has nominated Barrett Brady, Peter C. Brown, James B. Connor, Robert J. Druten, Gregory K. Silvers, Robin P. Sterneck and Virginia E. Shanks for election to the Board of Trustees. EPR Properties has not been notified in the manner provided in its bylaws of any other nominees, and therefore, no other nominees are eligible to stand for election. The second order of business is an advisory vote on the compensation of our named executive officers. The Board of Trustees has recommended approval on a nonbinding advisory basis of the company's named executive officer compensation for fiscal 2019, as described in the proxy statement. The third matter being submitted to the shareholders for action is the approval of an amendment to our Declaration of Trust to permit the company to redeem securities held by shareholders that are unsuitable owners for gaming regulatory purposes. The Board of Trustees has recommended approval of this amendment, as described in the proxy statement. The fourth matter being submitted to the shareholders for action is the ratification of the appointment by the Audit Committee of the Board of Trustees of KPMG LLP as the independent public accounting firm of EPR Properties for the current year. The Audit Committee has recommended ratification of the appointment of KPMG, as described in the proxy statement. For this meeting, is there any discussion regarding the election of trustees, advisory vote on the compensation of our named executive officers, the amendment of the Declaration of Trust or the ratification of the selection of KPMG LLP as our independent public accounting firm for 2019? Hearing none, that concludes the presentation and discussion regarding all matters which require shareholder approval. Representatives of KPMG LLP, David Stank and Mike Roos, are participating in this meeting telephonically and are available to answer questions shareholders may have of KPMG. Are there any questions for KPMG? Seeing none, and there were no questions submitted by e-mail, as we indicated in our press release earlier, we'll move on. We'll proceed to vote on the matters. If you have already submitted a signed proxy card, you do not need to sign a ballot during the meeting unless you wish to change your vote. If you're holding your proxy card and would like to submit it now or if you would like to vote in person on a ballot, please raise your hand now for the inspector of election. The inspector will give you a ballot if you need it. [Voting]

At this time, I'll -- well, scratch that. The polls are now closed. I would now like to recognize Mr. Meyer, our inspector of election for this meeting, to provide the preliminary voting results.

Mr. Secretary, the nominees for election to the Board of Trustees: Barrett Brady, Peter C. Brown, James B. Connor, Robert J. Druten, Gregory K. Silvers, Robin P. Sterneck and Virginia E. Shanks have received the majority of the votes cast by the shareholders entitled to vote at this Annual Shareholders' Meeting. A majority of the common shares voted at the meeting were voted for endorsement of the company's named executive officer compensation for fiscal 2020. A majority of the common shares outstanding on the record date of the annual meeting were voted at the meeting for approval of the amendment to our Declaration of Trust to permit the company to redeem securities held by shareholders that are unsuitable owners for gaming regulatory purposes. A majority of the common shares voted at the meeting were voted for the ratification of the engagement of KPMG LLP as the independent public accounting firm of EPR Properties for its fiscal year ending December 31, 2020.

Thank you. And we accept the report of the inspector of election. We will report the final voting results by Form 8-K filed with the Securities and Exchange Commission within 4 business days. At this point, the Annual Meeting of Shareholders of EPR Properties is adjourned, and I turn the meeting over to Greg Silvers for a brief business update.

Thank you, Craig. Good morning, and thank you for joining us for today's annual meeting. As Craig addressed previously, the health and safety of our shareholders, directors and colleagues are our highest priority. With this in mind, we've chosen to facilitate today's meeting via conference call. The worldwide COVID-19 pandemic has required sacrifice on behalf of all of our key stakeholders. The majority of our tenants adhered to government-mandated shutdowns and closed their doors. These were thriving businesses that took this historical action to fight against a common cause. While this health crisis has had a tremendous impact on our business, as we outlined on our first quarter earnings call, we have taken numerous actions over the past weeks and months to ensure strong liquidity and provide for the long-term viability of the company. Additionally, our team continues to work with our tenants to achieve mutual success as they begin the process of reopening and ramping up to scale. This experience has caused some to ask if we're still committed to experiential real estate. The simple answer is yes. We've assembled over a $6 billion portfolio of experiential assets. And while this pandemic has effectively shuttered our properties in the short term, it's important to remember that normalcy will return and people will once again want to have communal experiences. How are we so confident? Because history shows us, no matter what the challenge, even previous pandemics, that people will come back and once again enjoy shared experiences. Notwithstanding the tremendous impact we've experienced in the recent months, I want to briefly recap 2019. This was a milestone year in the company's ongoing evolution as we made significant progress toward our deliberate migration to refocus on experiential real estate. During the year, we sold our charter school portfolio for approximately $454 million. These investments delivered a strong return as we invested $1.1 billion and earned a 10.5% unlevered IRR, inclusive of the final sale transaction. However, the charter school market has seen structural change, and we decided it was no longer a good fit for the characteristics we needed in our investments. And we, too, are moving toward where we see the most attractive opportunities to create value in the years ahead. This sale activated the company's strategic migration to becoming the leading REIT focused solely on experiential real estate. The experiential real estate opportunity is fueled by the 2 largest population segments: baby boomers, who control approximately 70% of disposable income; and millennials, who have a strong orientation towards experiential lifestyles. Ultimately, this refocus activates our time-tested thesis that people have an innate desire to connect and create memorable experiences. Since 2018, we've made a concerted effort to broaden our traditional investment categories to include the 9 categories we've identified as premier experiential real estate opportunities. During 2019, our acquisition team successfully invested nearly $800 million in most of these categories with significant investments in theater, eat and play, ski, experiential lodging and cultural properties. Some of our notable acquisitions include the Alyeska Resort, a premier 4-season resort in Alaska; and Margaritaville Nashville Hotel, which was named Best New Hotel in USA TODAY's 10Best awards. Our growth will continue to diversify our property types and tenants. As we've highlighted, our broader target experiential opportunity includes an estimated addressable real estate market of $100 billion. We are bullish on the opportunity set for quality experiential investments. Today, we're a singularly focused organization committed to owning the best experiential assets in the business. I am confident that we have the necessary institutional knowledge, broad relationships and deep talent to continue to lean into these exciting trends and to build our leading position. Finally, I want to recognize the dedication and compassion demonstrated by our employees. Our employees are also shareholders, and they have obviously been personally impacted by the events which caused the significant dislocation of our stock price. Also, while working remotely from their homes, our employees have not only persevered in managing the business but also came together to form EPR Cares. The team identified the immediate needs of our community and organized the contributions of our employees to immediately address these needs. While our current challenge is daunting, we will make it through this pandemic and once again gather with our families, friends and colleagues. At that time, as it's been for over 20 years, those gatherings, where experiences and memories are created, will happen at one of our many properties, and we look forward to that time when we can all come together again. Now I would like to address a few shareholder questions that were submitted.

What is the duration of the suspension of our monthly dividend to common shareholders? We took the action to suspend our dividend as a precautionary measure and in concert with the temporary suspension of financial covenants under our bank credit facilities and private placement notes. While the suspension of these covenants is expected to extend through the first quarter of 2021, we expect the situation to remain very fluid, and we'll consider the potential to reinstate the dividend as we assess the company's condition each quarter. When will EPR begin growing the company again? A return to growth will require greater clarity on when businesses reopen and how the consumer responds. With that data, we can consider potential adjustments to our underwriting. We know there will be good opportunities when we get to the other side of this pandemic. But for now, we remain committed to maintaining strong liquidity. With that, our meeting is officially closed. I want to express my sincere thanks and appreciation for all of our stakeholders. Again, we remain committed to keeping EPR strong and viable, and we look forward to your participation as we move throughout the year. So thank you very much and stay safe.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.