EPR Properties
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Earnings Call Transcript

Earnings Call Transcript
2023-Q1

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Operator

Good day, and thank you for standing by. Welcome to the EPR Properties First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

And without further ado, I would like to now hand the conference over to your first speaker today, Brian Moriarty, Vice President, Corporate Communications. Brian, please go ahead.

B
Brian Moriarty
Vice President, Corporate Communications

Okay. Thank you, Eric. Thanks for joining us today for our first quarter 2023 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.

We'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 those factors that could cause results to differ materially from those 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.

G
Greg Silvers
Chairman and CEO

Thank you, Brian. Good morning, everyone, and thank you for joining us on today's first quarter 2023 earnings call and webcast. We are pleased to start the year with continued momentum, highlighted by 9% growth in total revenue and 15% growth in FFOAA per share versus the same quarter prior year. We have also collected all scheduled rent from Regal due in 2023 through April, as well as the scheduled deferral payments due from all customers for the same period. These results provide further evidence of our theme of recovery and highlight the resilience of our experiential investments.

Additionally, during the month of April, Cineworld reported that it had entered into a restructuring support agreement with its secured lenders and subsequently filed a plan of reorganization. The proposed timeframe within the plan indicates that Cineworld should emerge from bankruptcy in early July. While we cannot comment on the status of our negotiations, the filing of the proposed plan defines the timeframe for resolution.

At an industry level, we are encouraged by the continued substantial growth in box office revenues, as content production ramps up. Additionally, we are excited to see the significant news of both Amazon and Apple committing to spend $1 billion a year toward movies with theatrical releases. As we've stated many times, this firmly speaks to the importance of theatrical distribution and maximizing economics and building brands.

In reviewing our experiential portfolio, we are seeing sustained demand, highlighted by our eat & play, experiential lodging and ski properties. Additionally, we are pleased to see our overall rent coverage continues to remain above 2019 levels. Our strong liquidity position allows us to deploy capital in a disciplined manner across a variety of experiential properties, including having a committed pipeline that we will fund in the coming quarters.

With a durable income stream and ongoing recovery and additional growth from our investment pipeline, we are encouraged by our outlook for the year.

Now I'll turn the call over to Greg Zimmerman to review the business in more detail.

G
Greg Zimmerman
Executive Vice President and CIO

Thanks, Greg.

At year-end, our total investments were approximately $6.7 billion with 363 properties in service and 98% leased. During the quarter, our investment spending was $66.5 million. 100% of the spending was in our experiential portfolio and included the acquisition of an experiential property and continued funding for experiential development and redevelopment projects commenced in 2022.

Our experiential portfolio comprises 289 properties with 49 operators and accounts for 92% of our total investments or approximately $6.2 billion, and, at the end of the quarter, was 98% occupied. Our education portfolio comprises 74 properties with 8 operators and, at the end of the quarter, was 100% occupied. Our value-oriented drive-to-destinations provide a compelling value proposition for families and we are confident they will continue to prove resilient.

Turning to coverage. The most recent data provided is based on a December trailing 12 month period. Overall portfolio coverage for the trailing 12 months continues to be strong at 2 times. Trailing 12 month coverage for theatres is 1.3 times, with box office for calendar year 2022 at $7.4 billion. Trailing 12 month coverage for the non-theatre portion of our portfolio is 2.7 times.

Now I'll update you on the operating status of our tenants. The first quarter was a continuation of box office recovery and acceleration. Q1 total box office was $1.7 billion, a 28% increase over Q1 2022, led by: Avatar: The Way of Water; Ant-Man and the Wasp: Quantumania; Creed III; and Puss in Boots: The Last Wish. The quarter also had the breakout titles John Wick: Chapter 4 and Cocaine Bear. We were pleased with the performance of the children's offering Puss in Boots and the adult-oriented Tom Hanks film, A Man Called Otto. 11 films grossed over $50 million in the quarter.

Led by the outstanding performance of The Super Mario Bros. Movie, Q2 is off to a robust start. At $146.4 million, Super Mario Bros. generated the second highest grossing opening weekend ever for an animated feature film, which in turn fueled the biggest five-day opening ever for any film at $204.6 million. Its outsized performance continues as the highest grossing 2023 title at $440 million to-date and Universal's third-highest grossing domestic film ever.

Through the past weekend, Southern titles have grossed over $100 million in 2023. Year-to-date box office gross stands at $2.49 billion and trailing 12-months box office gross is approaching $8 billion. Our high-quality theatre portfolio continues to outperform the industry.

The biggest news in 2023 is the widely reported commitment from both Apple and Amazon to spend $1 billion to create content for theatrical release, reinforcing our long-held conviction that theatrical exhibition provides the best platform for studios to drive revenue, create buzz around a title and secure A-List talent.

MGM's Creed III was the highest grossing film ever from Amazon at $156 million to date. Air, the first ever theatrical release from Amazon Studios starring Ben Affleck and Matt Damon, was released over Easter weekend and has grossed over $42 million to date. Air opened on more than 3,500 screens, making it the widest theatrical debut ever for a streaming service. Amazon reportedly spent over $40 million to market the film.

Apple announced that Martin Scorsese's Killers of the Flower Moon with Leonardo DiCaprio and Ridley Scott's Napoleon with Joaquin Phoenix will each have theatrical releases before moving to Apple TV+. With these significant commitments from two of the largest streaming services, we continue to remain confident that the supply of films for theatrical release will continue to grow, driving the ongoing North American box office recovery.

Turning now to an update on our other major customer groups. We continue to see good results and ongoing consumer demand across all segments of our drive-to, value-oriented destinations. Our Eat & Play assets continued their strong post-pandemic performance with portfolio revenue up for Q1 11% and EBITDARM up 4% over Q1 2022. Most of our attractions are closed or on reduced hours in the winter months. City Museum in St. Louis and both Titanic museums had continued growth in attendance, revenue and EBITDARM in Q1 over the same period in 2022. We are commencing construction in Q2 for both the expansion of the Springs Resort and Pagosa Springs and the redevelopment of our Murrieta, California conference center into a new natural hot springs resort.

Performance across our Ski portfolio was good. Despite late season weather impact, December '22 through March 2023 ski season visits were up 11% and revenue was up 8% over the same period in 2021, 2022. Good early season snowfall helped Northstar, but the unseasonably heavy late winter snowfall resulted in closures to much of Lake Tahoe and our Eastern Resorts had unseasonably warm weather at the end of the quarter. EBITDARM was negatively impacted by expense increases, including wages.

Room renovations continue at our Four Season Alyeska resort in Alaska. Alyeska will join the Ikon Pass program for the 2023-2024 season and, to enhance summer offerings, just opened the Veilbreaker Skybridges, two 300-foot suspended bridges spanning two peaks at the resort. Our Margaritaville Hotel Nashville, proximate to all of Nashville's famous downtown destinations, continues its upward trajectory with increases in all metrics. With renovations complete at both a Beachcomber and Bellwether resorts in St. Petersburg, we saw occupancy, RevPAR and EBITDARM growth in the quarter.

Our education portfolio continues to perform well, with year-over-year increases across the portfolio through Q4 2022 of 11% in revenue, 7% in EBITDARM and 18% in enrollment. We noted on our last quarter call that KinderCare acquired Creme de la Creme and we anticipated KinderCare would execute a pre-existing lease termination right for five early education properties. KinderCare has notified us of their intent to terminate those leases at the end of the school year in late June. We have begun marketing all five properties for sale and plan to redeploy the proceeds in experiential assets.

Turning to a quick update on capital recycling. During the quarter, we sold a vacant former main event for net proceeds of $4 million. We continue discussions with multiple parties on our two remaining vacant theatres.

In Q1, our investment spending was $66.5 million. In addition to the continued funding of experiential development and redevelopment projects commenced in 2022, we acquired a newly constructed Vital Climbing Gym in Williamsburg, Brooklyn, on a triple net lease for $46.7 million. Vital Climbing is our second investment in the climbing gym space. Both are in very strong markets with well positioned real estate.

We're maintaining our investment spending guidance for funds to be deployed in 2023 in a range of $200 million to $300 million. As of the end of Q1, we have committed an additional approximately $245 million in experiential development and redevelopment projects, which we expect to fund over the next two years without the need to raise additional capital. We anticipate approximately $132 million of that $245 million will be deployed over the remainder of 2023, and that is the amount included at the midpoint of our 2023 guidance range.

In 2023, cap rates continue to be in the 8% range. In most of our experiential categories, we are seeing high-quality opportunities for both acquisition and build-to-suit redevelopment and expansion. We continue to have a good pipeline with new and existing customers and concepts. Likewise, we continue to exercise discipline, reducing our near-term investment spending and funding the investments primarily from cash on hand, cash from operations and with our borrowing availability under our unsecured revolving credit facility. As we have said for the last several quarters, we are limited by the recovery of our cost of capital, not by opportunity.

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

M
Mark Peterson
Executive Vice President and CFO

Thank you, Greg.

Today, I will discuss our financial performance for the first quarter and provide an update on our balance sheet. We had another strong quarter of results with FFO as adjusted of $1.26 per share versus $1.10 in the prior year, up 15%, and AFFO of $1.30 per share compared to $1.16 in the prior year, up 12%.

Now moving to the key variances by line item. Total revenue for the quarter was $171.4 million versus $157.5 million in the prior year. This increase was due primarily to improve collections from certain customers, which continue to be recognized in revenue on a cash basis. During the quarter, we once again collected all scheduled deferred rent and interest from our customers and recognized $6.5 million as additional revenue from those on cash basis accounting.

At quarter-end, we had approximately $110 million of deferred rent owed to us not on the books, which will continue to be recognized only as cash is received. Regal makes up approximately $82 million of this balance and is subject to the bankruptcy negotiation. Note, also as Greg mentioned, we have already received full rent and deferral payments from Regal in April and have collected all non-Regal deferral amounts owed for April as well. During the quarter, per court order, we also received a portion of Regal's September rent, totaling approximately $1.9 million that was recognized as additional revenue.

Finally, also contributing to the increase for the quarter versus prior year was scheduled rent increases as well as the effect of acquisitions and developments completed over the past year. This increase was partially offset by the impact of property dispositions.

Percentage rents for the quarter totaled $1.8 million versus $3.4 million in the prior year. The decrease versus prior year related to less percentage rent from an early education tenant based on a restructured lease and the timing of certain other percentage rent recognized in the prior year.

Lastly, FFO as adjusted from joint ventures decreased by $1.3 million versus prior year to $70,000 due to the fact that we have more RV park investments this year and they generate losses during their off-season in the first quarter. In addition, although we had better operating performance versus the prior year at our experiential lodging properties in St. Petersburg, Florida, this income was more than offset by a non-recurring government incentive received in the prior year.

Turning to the next slide, I'll review some of the company's key ratios. As you can see, our coverage ratios continue to be strong with fixed charge covered at 3.4 times in both interest and debt service coverage ratios at 4 times. Our net debt to adjusted EBITDAre was 5 times and our net debt to gross assets was 39% on a book basis at March 31. Lastly, our common dividend continues to be very well covered with an AFFO payout ratio for the first quarter of 63%.

Now let's move to our balance sheet, which is in great shape. At quarter-end, we had consolidated debt of $2.8 billion, all of which is either fixed rate debt or debt that have been fixed with through interest rate swaps with a blended coupon of approximately 4.3%. Additionally, our weighted average consolidated debt maturity is five years, with no scheduled debt maturities in 2023 and only $136.6 million due in 2024. We had nearly $100 million of cash on hand at quarter-end and no balance drawn on our $1 billion.

Again this quarter, we are not providing 2023 guidance for FFO as adjusted due to the continued uncertainty related to Regal's bankruptcy. We will provide this guidance subsequent to the resolution of these proceedings.

As we have discussed previously, given our cost of capital and the current inflationary environment, we have consciously decided to continue to limit our near-term investment spending and fund these investments primarily from cash on hand, cash from operations and borrowings under our unsecured revolving credit facility.

Accordingly, we are confirming our 2023 investment spending guidance range of $200 million to $300 million, and we do not anticipate the need to raise additional capital to fund these amounts. Guidance for percentage rent and G&A is unchanged from that provided the last quarter. Guidance details can be found on Page 24 of our supplemental.

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

G
Greg Silvers
Chairman and CEO

Thank you, Mark.

As we shared with you today, the experience economy continues to demonstrate its strength and resilience. Additionally, content providers are again recognizing power of theatrical exhibition to drive revenues and brand recognition. We now have all the major studios and two of the largest -- two of the three largest streaming groups committed to theatrical release, which should bode well for further recovery of box office. For those who bet on the death of the cinema business, I think you're going to be sadly disappointed.

We believe our experiential focus thesis is well supported by a consumer that continues to demonstrate their preference for experience, and we offer the only diversified portfolio to take advantage of those trends.

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

Operator

Yes, thank you. At this time, we'll conduct a question-and-answer session. [Operator Instructions] And our first question comes from the line of Todd Thomas with KeyBanc Capital Markets. Todd, you are live.

T
Todd Thomas
KeyBanc Capital Markets

Hi, thanks. Good morning. I guess first, Greg, you talked about Amazon and Apple's commitment to theatrical exhibition. As you think about the release pipeline, I guess, do we start to see that release schedule accelerate in 2024? Is it a little bit more of an extended timeframe than that? And any sense on whether they're just targeting a lot more volume in content, or will these be sort of larger tempo-type releases? Any sense there?

G
Greg Silvers
Chairman and CEO

Well, I think our thought process, Todd, is that, yes, the volume of overall releases will continue to grow. We're very excited about what 2024 looks like is getting back to kind of more traditional type numbers. I think when you -- if you look at their numbers and they say 10 to 12 films, $1 billion a year, you're talking $100 million production on average. So, I'm sure they will -- as Greg mentioned, the Killers of the Flower Moon is a $200 million production. So, I'm sure there'll be some balance in there, some smaller, some bigger, but they clearly have not hesitated from going after big production number. So, we're excited about seeing them come to the table.

Greg, do you have anything to add?

G
Greg Zimmerman
Executive Vice President and CIO

Well, I would also add, Todd, Air with Matt Damon and Ben Affleck probably won't get that close to $100 million, but it's still a solid film with -- over $40 million to date.

G
Greg Silvers
Chairman and CEO

It's type of adult products that we've missed, candidly, over the last several years.

T
Todd Thomas
KeyBanc Capital Markets

Okay. And then, just in terms of Regal, you disclosed that 12.8% exposure from Regal, that does not include the deferral rent payments. But just curious if there's anything else when we think about Regal's FFO contribution that might be sort of baked in the model? Any operating expenses or other expenses, any other non-cash items or any considerations to the model that we should think about?

G
Greg Silvers
Chairman and CEO

I don't think so at this point, Todd. Other than I would say the one that's probably really kind of out-of-period [be on the] (ph) deferrals was, as Mark mentioned, the September kind of payment for which their court ordered to continue to pay that stub rent period, which I think was $1.8 million for the quarter.

M
Mark Peterson
Executive Vice President and CFO

Yes, $1.9 million, and we backed that out. Also, as noted on that schedule, deferrals and stub rent are backed out of that 12.8%. But -- so, going forward, it's more about the Regal negotiations and the bankruptcy proceedings and where that ends up.

T
Todd Thomas
KeyBanc Capital Markets

Okay. But it's a pretty clean one-for-one move from revenue to FFO in terms of Regal's exposure, that's the way we should think about it?

M
Mark Peterson
Executive Vice President and CFO

Yes.

T
Todd Thomas
KeyBanc Capital Markets

Okay. And then, again, realize the situation is very fluid and that there's some uncertainty around the outcome. But you're negotiating now, they're preparing to emerge in a few months. It seems like balance sheet is in good shape and you've limited investment spend at $200 million to $300 million for the year. Are you anticipating a ramp in investment spend perhaps once you have a better handle on your cost of capital and have a clear sense of how the resolution plays out with Regal?

G
Greg Silvers
Chairman and CEO

Again, I think Todd what we would like to think will happen is once we have -- we've heard a lot of feedback that this is what has depressed our multiple and that if we get resolution of this, that hopefully that will correspond to a expansion in our multiple, which as Greg mentioned, is really the thing that's holding us back, not really opportunity, it's our cost of capital. And I think if we saw that reverse and we had the ability to have a more competitive cost of capital, that we would get more aggressive on the investment pipeline, the execution of it.

T
Todd Thomas
KeyBanc Capital Markets

Okay. And just last question, I guess around the timeline for you, for EPR, reinstating guidance and the mechanics around that, how should we expect that to play out? Will there be a resolution filed from Regal or Cineworld with a defined outcome for all locations and you'll have full certainty around that outcome and then we should expect EPR to file an 8-K with an update surrounding the company's portfolio and reinstate an outlook or guidance for the year? Is that how we should be thinking about it?

G
Greg Silvers
Chairman and CEO

Yes, I think given the importance of this, probably our thinking is we would probably have a conference call to go over the resolution of it so that everybody would be perfectly clear, not only how it ended up, but why and our thinking on that. So, I think it would not just simply be a press release. I think given the importance that people are placing on this, it would be important -- we've maintained all the way through this to be as transparent as possible. So I think it would behoove us to continue that process and kind of have a full disclosure of not only the why, but the how and why we're supportive of whatever resolution that we get to.

T
Todd Thomas
KeyBanc Capital Markets

Okay, great. All right, thank you.

G
Greg Silvers
Chairman and CEO

Thanks, Todd.

Operator

[Operator Instructions] And our next question comes from the line of Rob Stevenson with Janney Montgomery Scott. Rob, your line is open. Please go ahead.

R
Rob Stevenson
Janney Montgomery Scott

Good morning, guys. Greg, given your comments about having more opportunity to cost effective capital today, how should we be thinking about the education segment? Is there an opportunity there to sell chunks of that portfolio at reasonable prices, or is the cash flow to use still more valuable than the cap rates you could sell the assets at today?

G
Greg Silvers
Chairman and CEO

I think it's going to be kind of a balance, Rob, and I'll let Greg comment. This is Greg Silvers. I'll jump in. I think we feel like we're very close to one way or another given the emergence that their plan is to getting resolution on Cineworld one way or the other. And hopefully, I think we'll see us if we have a positive impact to our multiple, then we can be a little more thoughtful of either raising capital or selling. I think we'll see if we don't have that, we'll probably explore that education recycling a little more aggressively. But Greg?

G
Greg Zimmerman
Executive Vice President and CIO

Yes. And Rob, we're obviously constantly evaluating the market on the education portfolio. And then as I mentioned in my comments, we are anticipating getting these five back from KinderCare and we're already marketing those, and we're fairly comfortable that those will transact.

R
Rob Stevenson
Janney Montgomery Scott

Okay. And then I guess how are you and the Board thinking about using some of the cash from this and/or any other sales to buy back some of the preferreds or even maybe some of the common versus making incremental investment these days given the implied yield of the securities as well in excess of what you could probably get on acquisitions?

G
Greg Silvers
Chairman and CEO

Well, again, I think we always look at it. Again, it's like an investment. And I think what most people forget is that buying your own shares back is not leverage neutral. And therefore, you have to kind of look at the total impact. But in every investment committee and in every kind of Board discussion, we are having those discussions about what is the right deployment of capital to drive value. So, those are all things that are taken into consideration.

G
Greg Zimmerman
Executive Vice President and CIO

The other thing just to comment on that, as we invest more, we continue to diversify our portfolio, reduce our theatre exposure on a relative basis. And secondly, we maintain relationships with our tenants, because we have ongoing programs with several of them and to be there for them is important, so that when we get to the other side and our cost of capital improves, we can do even more with them.

R
Rob Stevenson
Janney Montgomery Scott

Okay, that's helpful. And then, last one for me, Mark, while I've got you. Is AMC still on cash basis accounting? And if so, how close are we to hitting the point where it reverts back to normal accrual accounting?

M
Mark Peterson
Executive Vice President and CFO

Yes, they are still on cash basis accounting. They don't have any receivables on or off the balance sheet. As far as getting back on accrual, really want to see continued performance. The box office is undergoing a nice recovery. We're monitoring that. We're monitoring the credit situation of AMC and, of course, Regal who is emerging from bankruptcy. So, I think we just want to see this play out, make sure see the continued box office recovery and see their credit improve as that improves before we make any moves.

From an AFFO point of view, it really doesn't make much difference, because the difference would be recording some straight line rent and most analysts kind of look at more cash flow. So, we're not in a rush to start recording a bunch a straight line rent or even an initial straight line rent entry. So that's kind of our thoughts on how we look at that.

R
Rob Stevenson
Janney Montgomery Scott

Okay. I mean, I think more so than anything else people are looking at it as a signaling impact as to when AMC is maybe not off the watchlist, but basically moved off of the accrual stuff -- off the cash stuff. And so it sounds like that probably more like a '24 event than a '23 event at this point, would you say?

M
Mark Peterson
Executive Vice President and CFO

Yes, they're just going through the approval, which is subject to the court ruling, I'm talking about AMC, to issue additional equity. So, of course, we'd like to see that and reduce their debt. So, we're monitoring that. Hard to predict when exactly that happens, but I think that we have some good prospects with box office improving and the ability to issue capital on their part going forward. So, we'll just have to monitor that.

R
Rob Stevenson
Janney Montgomery Scott

Okay. Thanks guys. I appreciate the time.

G
Greg Silvers
Chairman and CEO

Thanks, Rob.

Operator

Thank you very much. [Operator Instructions] And our next question comes from the line of Eric Wolfe with Citibank. Eric, your line is open. Please go ahead.

E
Eric Wolfe
Citibank

Hi, thanks for taking my questions. First question, I'm just assuming the Regal capital structure gets cleaned up as proposed, I mean, do you think that sort of afterward there will be a sales market for some of those assets? And just in general, what do you think it takes to sort of get a little more liquid market for some of these theatre assets?

G
Greg Silvers
Chairman and CEO

I think what we're seeing generally is the recovery. I think there's no doubt that we'll see better liquidity in the Regal name if they have a better credit profile and emerge from this because what they're proposing is a dramatic reduction in debt that they'll have. And so, I think if you think that backstop against an improving market, I think you'll begin to see liquidity. It will probably be much better in '24 as box office we continue to believe will continue to ramp up. And as the narrative changes from there's an industry issue to there were a guy that had a -- or a company that had a balance sheet problem and over levered themselves, then I think there'll be more interest in the space.

E
Eric Wolfe
Citibank

Got it. A tough one. And then, I guess, as we should think about sort of the quality of different theatre assets, I mean, what do you think we should primarily look to? Should we mainly look to coverage sort of being in dense market locations? And I guess within your own portfolio, would you say that there's sort of a wide range of quality or everything sort of consistent around certain levels of quality?

G
Greg Silvers
Chairman and CEO

I would say it's not as wide as people -- it's not as diverse. I think generally speaking, we're in more major markets and secondary markets, we're not really in the highly rural markets. So I think, it's one of the things when people always talk about -- there's 40,000 screens in the U.S. The reality, about 15,000 to 20,000 of those matter. The other 20,000 of those, Eric, are in small towns all across America that no one -- they don't really affect box office. And what we have always looked at is high grossing, meaning that if you're driving top-line numbers, that's something that's important not only to the exhibitor, but it's also important to the studio and you have a lot of alignment. So top-line revenue generation has always been kind of a key metric for success of a theatre.

Greg, do you have anything?

G
Greg Zimmerman
Executive Vice President and CIO

Well, the other thing I would add, Eric, is that as we repeatedly say we have 3% of the theatres and generate 8.5% of the box office. And I would also say that there are plenty of middle market theatres that cover extremely well.

E
Eric Wolfe
Citibank

Makes sense. And then I guess just last question. As you think about sort of how to improve your equity cost of capital and sort of hopefully improves after there's a resolution around Regal. I guess if not, I mean, is there any thought that's sort of spinning off sort of a percentage of the portfolio, whether theatres or other non -- sort of non-core areas simply just sort of try to help the rest of the portfolio achieve the multiple that would allow you to grow?

G
Greg Silvers
Chairman and CEO

Yes. I mean, I think we're always looking at ways to create value. Again, I think that's part of the Board's not only their task, but their purview. I don't think we have anything to comment on that, but I think our job and the Board's job is to drive value to shareholders. And any avenue to do that, we're going to look at. And if it makes sense, we will look at it very diligently. Just we have no comment on that now.

E
Eric Wolfe
Citibank

Okay. Thank you.

G
Greg Zimmerman
Executive Vice President and CIO

Thanks, Eric.

Operator

Thank you very much. Standby for our next question. And our next question comes from Joshua Dennerlein with BofA Securities. Joshua, your line is open. Please go ahead.

J
Joshua Dennerlein
BofA Securities

Yeah. Good morning, everyone.

G
Greg Silvers
Chairman and CEO

Hi, Josh.

J
Joshua Dennerlein
BofA Securities

I was kind of curious on the -- you mentioned Regal negotiations. I guess just what is the focus? Is it on those three leases that they were originally going to reject, or is it like brand, or kind of just -- kind of what the scope of the negotiation?

G
Greg Silvers
Chairman and CEO

I guess the easy thing would say, all the above. I think it's -- I wish I could tell you that it's one issue that we're incrementally a part of on, but there's not one thing. Greg, you...

G
Greg Zimmerman
Executive Vice President and CIO

No, it's holistic. We're just trying to come to a resolution.

G
Greg Silvers
Chairman and CEO

Yes. It's kind of like in everything. They have a position, we have a position and leverage and who's moving to that and we'll see. I think we feel very comfortable with our approach. We think the market is supporting our approach with continued box office growth. So I think we'll see. In the end, we've tried to create what we think is a reasonable. Invariably, we think we're reasonable. And sometimes they don't necessarily agree with that. But we think our approach is thoughtful and holistic, as Greg said.

J
Joshua Dennerlein
BofA Securities

Appreciate that. And then, maybe moving over to KinderCare, you mentioned that they'll terminate in five weeks, but [indiscernible]. I guess what's driving that?

G
Greg Silvers
Chairman and CEO

I think there's a lot of things, Josh, that can be into that. I mean, remember is really about KinderCare buying another entity. So I think they're rationalizing their store set. Do they have multiple stores in the same market? What makes sense? So, I think there's a lot of things that go into kind of how they want -- as we said, we announced this last -- at our year-end call on what we were talking about, because we wanted to be very transparent. But there's a substantial number -- vast number they took.

So, I think this is what you see behind any major M&A activity and they had the ability to do that. As Mark talked about I think in the last quarter, we also have kind of a rent reset coming into next year, which we think will allow us to kind of move our [rents] (ph) higher. So hopefully, we recover some or all of this that we lost in this and then we'll have the use of the proceeds, as Greg talked about, from selling these properties to drive additional investment.

G
Greg Zimmerman
Executive Vice President and CIO

And Josh, as I mentioned, we're already marketing them and we've already had expressions of interest on all of them. So, we're very comfortable that we'll be able to transact these.

J
Joshua Dennerlein
BofA Securities

Okay. Thanks, guys.

G
Greg Silvers
Chairman and CEO

Thank you.

Operator

Okay. Please stand by for our next question. And our next question comes from the line of John Massocca with Ladenburg Thalmann. John, please go ahead. Your line is open.

J
John Massocca
Ladenburg Thalmann

Good morning.

G
Greg Silvers
Chairman and CEO

Good morning, John.

J
John Massocca
Ladenburg Thalmann

So, as we think about the $245 million you kind of have locked up to invest over the next two years, what's kind of the rough split of that by property type?

G
Greg Silvers
Chairman and CEO

Greg?

G
Greg Zimmerman
Executive Vice President and CIO

By property type...

G
Greg Silvers
Chairman and CEO

By segment...

G
Greg Zimmerman
Executive Vice President and CIO

Yes. No, I understand. I'm just trying to do the math in my head. Fitness and wellness...

G
Greg Silvers
Chairman and CEO

Experiential, eat and play...

G
Greg Zimmerman
Executive Vice President and CIO

Eat and play, yes.

G
Greg Silvers
Chairman and CEO

I think it is pretty well -- pretty balanced.

G
Greg Zimmerman
Executive Vice President and CIO

Experiential lodging, yes. Less so cultural, no gaming, no theatres.

G
Greg Silvers
Chairman and CEO

No theatres, yes. So, across other group, it's pretty balanced.

J
John Massocca
Ladenburg Thalmann

Okay. So, basically, kind of roughly kind of an even -- maybe not even split, but kind of a split between eat and play and kind of experiential lodging is kind of what we should expect?

G
Greg Zimmerman
Executive Vice President and CIO

Well, and fitness and wellness.

G
Greg Silvers
Chairman and CEO

Fitness and wellness, too.

J
John Massocca
Ladenburg Thalmann

Oh, fitness and wellness.

G
Greg Silvers
Chairman and CEO

Yes, Pagosa Springs and Murrieta.

J
John Massocca
Ladenburg Thalmann

Okay. That makes sense. And then as we kind of think about, I mean it's not a huge number, but the kind of stub rents that you were paid in the quarter by a -- I'm sorry, by Regal for September, is that something you could receive more of going forward? Is that just a one-time thing? I know there was kind of a mentioning of a stub rent in prior quarters. I don't know if it's kind of getting paid in increments. Just trying to think if we could expect kind of an additional kind of number to kind of fulfill all that they owed in September?

G
Greg Zimmerman
Executive Vice President and CIO

Yes. So, the court order provided for four stub payments. We got one in December and three this quarter. So the court ordered stub payments are over. This quarter, the total amount of those deferred -- those stub payments was $2.3 million, $1.9 million in rent and the other $0.4 million was deferral repayment. What that leaves is a post-petition receivable for rent from them, from Regal, of about $3.4 million. So, we don't expect stub payments, but upon resolution of the bankruptcy, there's $3.4 million of post-petition rent that we'll see how that gets paid, but that's the amount remaining.

J
John Massocca
Ladenburg Thalmann

Okay. And then big picture, you talked a bit about ski resort properties' performance, and apologies if I missed this detail in the prepared remarks. But I guess given some of the weather pushes and pulls at the end of the ski season, how does that impact maybe coverage? And I guess how do those tenants look in terms of their off-season reserves?

G
Greg Silvers
Chairman and CEO

I think there -- covers was -- again, I think what Greg was talking about was this is one of the weird seasons especially in the West where we had too much snow. So, again, things -- but the beginning of the season was so good it out balanced it. So essentially coverage was very similar to what we've seen in previous years and all reserves are full.

J
John Massocca
Ladenburg Thalmann

Okay. That makes sense. That's it for me. Thank you very much.

G
Greg Silvers
Chairman and CEO

Thanks.

Operator

[Operator Instructions] Our next question is from Mitch Germain with [JPM] (ph) Securities. Mitch, your line is open. Please go ahead.

M
Mitch Germain
JMP Securities

Hey, guys. Good morning. Just a quick question about the non-balance sheet deferrals. I guess you kind of talked about it just recently in the last answer. But is there some sort of schedule for that $100 million or so that's still owed? I mean, how should we think about that coming in over time?

M
Mark Peterson
Executive Vice President and CFO

Yes. So, the $82.4 million of the $110 million is Regal related. So we'll see how that all shakes out in the bankruptcy. The remaining what $38 million -- or 30-ish -- yes, $38 million, that -- or yes, $38 million, that -- most of that subject to a schedule that we're getting paid quarterly. It's running about $500,000 to $600,000 per month. And you see that we got that the last several quarters. So that continues on. The largest part of it really continues on through '24 primarily. And then in addition to that, there's one tenant that's -- in that deferral that's repayment is more EBITDA based. So that one -- we'll see how the EBITDA shakes out and sort of how that comes in, but it's not subject to a schedule.

M
Mitch Germain
JMP Securities

Great. Thank you for that. Anything you could share about the acquisition this quarter?

G
Greg Silvers
Chairman and CEO

Again, Greg, what don't you...

G
Greg Zimmerman
Executive Vice President and CIO

Well, yes, Mitch, we're very enthusiastic about the climbing gym space. It provides a great opportunity for people to come together. We're equally as excited to do business with Vital, which is one of the best climbing gyms in the country. The other one we have is Movement. And then lastly, we're very excited about the real estate. The Movement is in Lincoln Park and this one is in Williamsburg, Brooklyn. So tremendous real estate and we're really excited with the opportunity to do more business with both Movement and Vital.

M
Mitch Germain
JMP Securities

Okay. Thank you.

M
Mark Peterson
Executive Vice President and CFO

And by the way, I just want to update one thing. My non-Regal number for that deferral is $28 million. I was doing some bad math, $110 million in total, $82 million of which is Regal and $28 of which is non-Regal.

M
Mitch Germain
JMP Securities

Thank you.

M
Mark Peterson
Executive Vice President and CFO

You're welcome.

G
Greg Silvers
Chairman and CEO

Thanks, Mitch.

G
Greg Zimmerman
Executive Vice President and CIO

Thanks, Mitch.

Operator

And our next question comes from the line RJ Milligan with Raymond James. RJ, your line is open. Please go ahead.

R
RJ Milligan
Raymond James

Great. Good morning, guys. I wanted to focus on the non-theatre portfolio and it sounds like all the segments have seen good revenue growth. And I'm just curious if there's anybody in the non-theatre portfolio, whether it be people that popped up on a watch list or credit issues? I'm curious how bad debt is trending relative to budget.

G
Greg Silvers
Chairman and CEO

Again, I'll let Mark talk about debt, because I don't think there are any issues. But again, performance wise, we've not seen any sort of degradation either in coverage or in performance. As Greg talked about, we've seen strong revenue growth, strong EBITDA, growth. So, I think we're still -- as I talked about in my comments, the consumer continues to be very supportive of these experiences.

But Mark, I'll let you comment the...

M
Mark Peterson
Executive Vice President and CFO

Yes. I mean, as Greg said, our coverage on the non-theatre portfolio at 2.7 times versus 2.2 times in 2019 pre pandemic. So, it's very strong and we're not seeing really any credit issues in non-theatre business.

R
RJ Milligan
Raymond James

Okay. That's helpful. And then, I'm curious just if you're seeing any theatre transact and at what cap rates or what -- if there is a buyer pool, who's that made up of?

G
Greg Silvers
Chairman and CEO

Again, we're not still seeing -- I mean you're seeing theatres being bought by theatre companies. We've started to see some of that. But we haven't necessarily seen real estate kind of transactions yet. I don't.

G
Greg Zimmerman
Executive Vice President and CIO

No. And I think we'll see that as the box office continues to recover. I mean, all the news this year is just so positive that we expect to see that loosen up. I mean, last year we had 18 $100 million releases. This year, we're going to have 26. Last year, we had 71 films open on 2,000 screens or more. This year, we're going to have over 100. Next year, we'll have even more. Then we have the Apple news, the Amazon news, and then the outsized performance of a lot of films. So, I think it's very positive.

G
Greg Silvers
Chairman and CEO

I think what we would say, RJ, is the narrative had to change and now the narrative is changed, that this industry is not only going to recover but it's going to be valued by studios and by streamers. And when that -- when people start to see that, then the productivity of the boxes will matter and there will be a transaction market. But we're coming out of several years, which these boxes were effectively shut down and people questioned the viability. Well, that's now being disproven. We now have support. The support is coming from the content side, that's got to filter into the real estate side to where -- they now hear that and believe that. And when the numbers start to demonstrate that, then transactions will occur.

R
RJ Milligan
Raymond James

That's it for me guys. Thank you.

G
Greg Silvers
Chairman and CEO

Thank you, RJ.

Operator

Standby for our next question, which will also be our last question, comes from the line of Michael Carroll with RBC. Michael, your line is open. Please go ahead.

M
Michael Carroll
RBC

Yes, thanks. I jumped on late. So hopefully these questions haven't been asked already. So can you talk a little bit about just the transaction market in general and how has it changed over the past six months? I mean, have you seen I guess different or better opportunities kind of with the capital markets dislocation that's been going on?

G
Greg Silvers
Chairman and CEO

I'll let Greg talk about this, but I think generally the answer is yes. I think not only are we seeing our kind of our opportunities with our core group of people that we've dealt with for long-standing relationships, but also new relationships. We talked about Vital. We talked about things that are -- I think what is really difficult for people to understand is the private market is really challenged right now with the debt the way it is. So, if you are out -- what we used to see is a lot of competition from kind of private or family office and we're just not seeing that much. But, Greg?

G
Greg Zimmerman
Executive Vice President and CIO

No, I think you've covered it.

M
Michael Carroll
RBC

And then, Greg, how are you looking at new deal today? I know you're a little tight on, I guess your capital availability given where your cost of capital is. I mean, so what type of deals are you willing to pursue? And how much can you kind of get done here this year if things don't change?

G
Greg Silvers
Chairman and CEO

Yes. I think again, we're kind of very much taken to what we've said all along, and Greg highlighted this, quality real estate with quality relationships. I mean, we're buying 20 -- 15, 20-year relationships. So, we're wanting -- the actual stretching for more yield is less important than the quality. And so, now we're able to get nice attractive yields, as Greg said, but always focused on something we want to be happy with for 20-plus years.

I think as it regards to the capital, I think we're encouraged that as we get resolution of this that our multiple will see kind of a resolution and we'll get that pop that we think we've been told by a lot investors is the overhang for us. I think it could help us to drive further growth as we go forward. I think everybody to a little bit degree has kind of taken a little more long-term view of how much growth they want right now.

But I think for us, the thing that's so really positive is the consumer is still heavily supporting this. And so, our tenants are growing organically. It's not necessarily what we are doing by buying that asset off of somebody who needs to raise capital. Greg and his team are forming these long-lasting relationships. And it's more important to us to get not only a deal but a view towards future deals so that we're not only filling the pipeline for '23, but for '24 and '25. And so, I think that's part of focus...

G
Greg Zimmerman
Executive Vice President and CIO

Yes. And I mean just to give you data points. I mean, we announced last quarter we did a deal with Gravity House. We have a go-forward arrangement with them. We're very excited about it. I think ultimately the fact that we did the Movement Gym led us to the Vital Climbing Gym. So, we're being, to Greg's point, very strategic, and to Mark's point earlier, focused on helping our existing clients grow.

M
Mark Peterson
Executive Vice President and CFO

In terms of volume, you said how much can you get done and our guidance is $200 million to $300 million, we can do that, well, as I said, without raising capital, but as importantly maintaining leverage kind of that low 5. So, all that's consistent with that. And that's really because of our significant cash flow and the way we set our dividend payout ratio so low, we're able to reinvest that cash flow and still grow, but without raising capital and maintaining that low leverage.

M
Michael Carroll
RBC

Okay. Great. And then just last one. I know you talked a little bit about the theatre, I guess, private market valuations. I mean, have you had any discussions with potential JV partners or somebody that might be interested in acquiring a part of your portfolio?

G
Greg Silvers
Chairman and CEO

It's a great question, Mike, but we would not discuss it on an earnings call if we had. So, I'm going to leave that [indiscernible] meaning that we have or haven't, but it's not the venue that we had to disclose that anyway.

M
Michael Carroll
RBC

Okay, great. Thank you.

G
Greg Silvers
Chairman and CEO

Thank you. All right. I think Eric said that was our last caller. So, I want to thank everyone for joining us. I hope everyone takes the opportunity tonight for -- we're based in Kansas City and we're on display today for tonight's NFL draft. So, please take the time to let our city show proud. So, thanks for joining us and have a great day.

G
Greg Zimmerman
Executive Vice President and CIO

Thank you.

M
Mark Peterson
Executive Vice President and CFO

Thank you.

Operator

Thank you for your participation in today's conference. This does conclude our program, and you may now disconnect.