EPR Properties Planning a Share Buyback

More news from EPR Properties (EPR):

EPR Properties Provides Update Regarding the Impact of COVID-19
Announces $150 Million Share Repurchase Program

KANSAS CITY, Mo. — March 24, 2020

EPR Properties (EPR) a leading experiential net lease real estate investment trust, today provided the following update regarding the evolving impact of COVID-19.

Company CEO Greg Silvers stated, “As we are all keenly aware, our nation and the world continue to navigate through the unprecedented challenges brought on by COVID-19. Our top priorities are taking care of our employees and all of our key stakeholders, to make sure everyone stays healthy and to position the Company to best navigate these difficult times. As we all work together to mitigate the spread of the virus, many of our tenants are temporarily closing their operations. While this period will impact our tenants’ businesses, we are committed to working with them as appropriate for our long-term mutual benefit.”

Mr. Silvers continued, “We have the ability to withstand the situation as we currently view it, given the Company’s strong balance sheet and liquidity position, including a precautionary draw on our line of credit. Also, in response to the market dislocation of our stock price, our Board of Trustees has authorized a limited share repurchase program which we will selectively deploy while carefully considering our liquidity position. By placing a pause on acquisitions and development, we are intensely focused on maximizing our financial flexibility and capacity until we have better visibility to the depth and duration of this situation.”

Key Updates:

* Strong Liquidity Position – As of March 24, 2020, the Company had cash of approximately $1.25 billion, including $750 million borrowed by the Company on March 20, 2020 under its Revolving Credit Facility as a precautionary measure to increase its cash position and preserve financial flexibility considering the current uncertainty in the global markets.

* Share Repurchase Program – Today the Company announced that its Board of Trustees (the “Board”) approved a limited share repurchase program in response to the extraordinary dislocation in the Company’s stock price. The Company may repurchase up to $150 million of the Company’s Common Shares, but is not required to repurchase a minimum number of Common Shares. The share repurchase program is scheduled to expire on December 31, 2020, unless extended or earlier terminated by the Board.

* Reduced Capital Needs – The Company has no debt maturities until 2023. Additionally, as previously disclosed, the Company revised its 2020 anticipated investment spending to include only previously committed investment spending totaling approximately $100.0 million.

Mr. Silvers concluded, “Despite the current environment, we continue to firmly believe in the long-term advantages of our portfolio and our strategy. Once the country emerges from this pandemic, we believe the demand for affordable out-of-home entertainment will be stronger than ever, as people re-engage, socialize and enjoy the experiences that our properties provide.”

From Business Wire

Charles here.

I’m not privy to any inside information here. But if EPR is announcing a share buyback, then that means they are not worried about the health of their tenants, particularly AMC, the movie theater chain.

So, either management is delusional… or, more likely, their tenants have given them assurances that either government or insurance money will be keeping them afloat.

We’ll see how this shakes out. EPR was being priced as if it were going out of business. My rationale for buying was that, even if the company had to reduce its dividend for a while, the shares were cheap enough to warrant buying. And shares are down by roughly half since I first mentioned it.

If the REIT is talking buybacks, then it is likely to assume the dividend is safe. Unless management has quite literally lost its mind, which would seem doubtful.

I also really like the fact that management isn’t growing for the sake of growth. It makes NO sense to buy additional properties when the company’s own shares trade at such a deep discount. Assuming the company has the liquidity — and it appears it does — aggressively buying back shares is the only move that makes sense.

Again, we’ll see how this plays out. But at current prices, the shares are down about 75% from recent highs. Even if the worst case scenario were to unfold, EPR is cheap.

Disclosures: Long EPR