From Waterparks to Charter Schools, EPR Properties Has You Covered

The company is a diverse REIT, which pays monthly dividends. Let's explore some of its operating segments to find out if investors should jump on board.

Jun 18, 2014 at 7:00AM

Flickr / blcarnut.

Are you looking to invest in giant water slides or movie theaters? How about charter schools and wineries? EPR Properties (NYSE:EPR) owns properties in all of these businesses and more.

EPR Properties is a real estate investment trust (REIT) with a portfolio of more than 200 properties in 38 states, D.C., and Canada. It has more than 250 tenants, and 99% of its properties are currently leased. The company has three primary operating segments: entertainment, recreation, and education. 

With a portfolio of 121 theaters, this segment is the company's biggest in terms of overall revenue and investment. While there continues to be skepticism about the future of cinemas, it is unfounded. Why? Because the cinema category is evolving. The last time I went to a movie I had a glass of wine and a slice of pizza. Along with expanded amenities including luxury seating and improvements in technology, the average moviegoer is spending more than double compared to a traditional theater. 

14 ski resorts, five golf complexes, and four water parks, oh my! There is a lof of fun happening at EPR's properties. But what about profits?

Ski property revenue and net income results performed ahead of their five-year average, as the extended winter season brought out more customers. Golf performed strongly. In 2013, TopGolf attendance grew by 52% to 2.25 million visitors, games played grew 83% to 7.6 million and balls hit grew 84% to 151 million. That's a lot of swings!

The Verruckt water slide, scheduled to open June 29, is the world's tallest water slide at approximately 168 feet. The name of the slide means "crazy" in German. Do you think you are crazy enough to try this ride? Its publicity should help increase summer attendances.


Verrückt waterslide at Schlitterbahn             Source: Jill Toyoshiba, The Kansas City Star

Charter schools, which offer new and innovative learning models, provide and alternative choice in public education. The national waiting list approaches one million students. EPR owns 56 public charter schools.

"Imagine" is one of the largest for-profit charter school operators in the nation. But it has been struggling as of late, as regulators have began cracking down on low performing schools. EPR sold four Imagine public charter schools for proceeds of approximately $46 million in April, 2014. 

In May, 2014, the company unveiled plans for a new destination resort called "Adelaar." EPR has teamed with regional gaming and casino operator Empire Resorts and intends to apply for a license to own and operate a new destination gaming resort that will include a four-star hotel. Located 90 miles from New York City and costing an estimated $750 million. Infrastructure investment at Adelaar will include a retail village and water park hotel. However, the casino, the company hotel, and the gaming floor will be funded and controlled by Empire Resorts. 

As of Q1 2014, the Entertainment segment is 63% of overall revenue, while Recreation and Education both contributed 16%. Other properties, which includes two vineyards and wineries, are 5% of revenue.  

Monthly dividends
The company paid its first monthly dividend in May, 2013, joining a short list of other REITs that pay monthly dividends, including Realty Income Group and LTC Properties. The dividend yield is a generous 6.2%. Income investors, especially those who are retired and semi-retired, benefit from receiving a regular stream of supplemental monthly income.

Risks for investors
While the $750 million Adelaar project looks promising, the company might need to raise additional capital to pay for the project, while maintaining its dividend obligations to shareholders. Furthermore, Empire Resorts is a small operator that is not profitable, making it a risky partner.

Foolish takeaways
Overall, EPR Properties is performing well. Its diverse segments and high occupancy rate provide stability for investors. Despite the charter school risks and the Adelaar project uncertainties, investors who are looking for a REIT that is non-traditional should consider adding some shares.

Looking for even more dividend diversification?
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Mike Fee owns shares of Realty Income. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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