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EPR Properties (EPR -0.13%)
Q3Â 2019 Earnings Call
Oct 30, 2019, 8:30 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good afternoon, ladies and gentlemen, and welcome to the Third Quarter 2019 EPR Properties Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.
I would now like to turn the conference over to host Mr. Brian Moriarty, Vice President of Corporate Communications. Sir, you may begin.
Brian Moriarty -- Vice President of Corporate Communications
Thank you, operator. Hi, everyone and welcome. Thanks for joining us today for our third quarter 2019 earnings call. I'll start the call today 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 these factors that could cause results to differ materially from these 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 the Company's -- in today's earnings release and supplemental information furnished to the SEC under Form 8-K. If you wish to follow along today's earning release, supplemental and earnings call presentation are all available on the Investor Center page of the Company's website www.EPRCasey.com.
Now I'll turn the call over to the company's President and CEO. Greg Silvers.
Greg Silvers -- President and Chief Executive Officer
Thank you, Brian. With me on the call today are the Company's CFO, Mark Peterson and making his debut, our CIO, Greg Zimmermann. I'll start with our quarterly headlines and then pass the call to Greg to discuss the business in greater detail. Mark will then follow with a review of the Company's financial summary. So let's get started. Our first headline, strong quarter anchored by continued demand for experiential assets. Our focus on the experiential economy continues to sustain solid portfolio performance and consistent rent coverage. As evidenced by the third quarter box office results and the positive results in our attraction properties, the consumer continues to support our tenants and properties devoted to the experiential economy. This trend of increasing consumer demand for our tenant offerings should translate into opportunities to fuel our future growth.
Our second headline, record low bond yield and spread. During the quarter we issued new 10-year senior notes in the largest size and at the lowest yield and spread in the Company's history. And we completed the redemption of higher-priced senior notes that were due in 2022. As a result, we have lowered our cost of debt and significantly extended our average debt maturity.
Our third headline, well positioned balance sheet with ample capacity. In addition to our debt activity, we continued to raise common equity during the quarter and we have nearly $120 million of unrestricted cash on hand at quarter end and nothing outstanding on our $1 billion line of credit. Clearly, we are well positioned for growth.
Our fourth headline, increasing earnings and investment spending guidance. Consistent with the strong results year-to-date and our forecast for the remainder of the year, along with a robust pipeline of attractive opportunities in the experiential space, we are increasing our guidance for FFO as adjusted per share as well as investment spending. Mark will provide the detail on guidance in his comments.
With that, I'll turn it over to Greg Zimmerman and then rejoin you after Mark's comments for questions.
Greg Zimmermann -- Executive Vice President and Chief Investment Officer
Thanks, Greg. At the end of the third quarter, our total investments were nearly $7.2 billion, with 416 properties in service that were 99% occupied. During the quarter, investment spending was $118.1 million and our proceeds from dispositions were $294.4 million. Our Company level rent coverage was 1.89 times, demonstrating the continuing strength and consistency of our portfolio. At quarter end, our entertainment portfolio comprised approximately $3.4 billion of total investments with two properties under development, 195 properties in service and 26 operators.
Our occupancy was 99% and our rent coverage was 1.76 times. Strong movie product continues to be the key driver of solid box office results, with the third quarter box office up by approximately 3% year-over-year. The momentum is anticipated to extend with the fourth quarter, expected to exceed 2018, which should drive 2019 box office close to the 2018 all-time high. The fourth quarter opened strongly with the Joker's record breaking opening weekend to be followed by a strong film slate including Star Wars: The Rise of Skywalker, Frozen 2 and Jumanji: The Next Level. Our entertainment investment spending totaled $10.9 million in the third quarter, consisting primarily of development and redevelopment projects across our portfolio of theaters, entertainment retail centers and family entertainment centers.
At quarter end, our recreation portfolio comprised approximately $2.3 billion of total investments, 83 properties in service and 19 operators. Our occupancy was 100% and our rent coverage was approximately 2.28 times. The operators in our attractions portfolio, which is part of our recreation segment have delivered solid results this season with visits and revenue through the August trailing 12 months period, up approximately 4% and 7% respectively versus the trailing three-year average.
Investment spending in our recreation segment totaled approximately $89.6 million, which included $68.7 million of new mortgage loans for recreational properties, $6.6 million on the Kartrite Water Park Hotel and the balance consisting primarily of build-to-suit development of golf entertainment complexes and attractions.
The primary new investment was $64.2 million mortgage loan as opposed to the traditional REIT hotel operating structure secured by the recently opened Margaritaville Nashville Hotel in the heart of Nashville's SoBro district, one of the country's hotest experiential destinations, within walking distance of Bridgestone Arena, the Ryman Auditorium and the Nashville Convention Center. On the disposition front, on July 1st as previously announced, we received payment in full on our $189.8 million Schlitterbahn mortgage note. This pay-off was facilitated by CEDAR Fair's purchase of two of the Schlitterbahn Group's Texas Water Parks for $261 million, including both the operating business and the real estate.
Also, in the third quarter, Vail Resorts closed on their previously announced acquisition of Peak Resorts. Vail operates our Northstar California Resort and as reflected in our supplemental, with the addition of the six Peak Resorts investments, Vail is now our fifth largest customer. At quarter end, our Education portfolio comprised approximately $1.3 billion of total investments, 137 properties in service and 55 operators. Our occupancy was 98% and our rent coverage was 1.51 times.
We continue to make excellent progress on the transition of our CLA schools to Creme de la Creme. Through the end of October, we have successfully transferred 17 of our 21 properties to Creme and they anticipate taking over the remaining four CLA schools during the fourth quarter. Investment spending in our education segment totaled approximately $17.6 million primarily consisting of acquisitions, built-to-suit developments and redevelopments of public charter schools, private schools and early childhood education centers.
During the quarter, we received $104 million in disposition proceeds related to the sale of four operating charter schools, one early childhood education center and the pay-off of a mortgage note secured by charter school. These proceeds included $11.3 million of termination fees and $1.8 million of prepayment fees. The transactions reflect the strength of a municipal bond market available to charter schools.
The consumer continues to evident strong demand for experiences. We have a deep pipeline of opportunities to expand our already broad-based portfolio of the experiential assets. We continue to shift our focus from non-experiential areas of business toward experiential properties, and asset class that we have been successfully investing in for over 20 years and one that will be the primary growth forever going forward.
With that, I turn it over to Mark for discussion of the financials.
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
Thank you, Greg. I'll begin today by discussing our financial performance for the quarter. FFO as adjusted for the quarter was $1.46 per share versus $1.58 per share in the prior year. During the third quarter of 2018, we recognized $20 million in prepayment fees related to the pay-off of a mortgage note that was secured by ski properties. If you exclude this income, our FFO as adjusted per share for the quarter increased by about 10% versus prior year. Note that FFO as adjusted per share amounts for both periods include the impact of education related lease termination fees, which I'll discuss later in my comments.
Total revenue for the quarter, increased by about 18%, when you exclude the $20 million of prepayment fees from the prior year that I just discussed. This revenue increase was driven primarily by revenue from new investments and that of dispositions. Percentage rents and participating interest for the quarter totaled $3.6 million versus $2.7 million in the prior year. As previously reported, we received payments in full on mortgage notes receivable totaling $189.8 million, related to the Schlitterbahn Water Parks on July 1st and during the quarter. We also received $17.8 million related to the early pay-off of mortgage notes secured by charter school, which as anticipated, included a prepayment fee of $1.8 million. Note, also that the Kartrite Resort Indoor Water Park opened during the second quarter and continues to be operated under the traditional REIT lodging structure, which impacts other income included in total revenue as well as other expense.
Finally, about $7.5 million of the revenue increase relates to the adoption of the new leased accounting standard, which is offset by higher property operating expense as I have discussed on previous calls. The income tax benefit of $0.6 million versus income tax expense of $0.5 million in the prior year, related primarily to the deferred tax benefit resulting from the operations of the Kartrite. Additionally, transaction costs were $6 million for the quarter and related primarily to the transfer of nine CLAs to Creme. As a reminder, deferred taxes and transaction cost are excluded from FFO as adjusted. Severance expense was $1.5 million for the quarter and $1.9 million year-to-date. This expense was result of a shift in resources from non-experiential areas of our business toward experiential properties.
Finally, during the quarter we also completed property sales for net proceeds totaling $86.8 million and recognize a combined gain on sale of these properties of $14.3 million. Included in the property sales were three charter school property sold pursuant to tenant purchase options for net proceeds of $59.4 million and the related termination fees totaling $11.3 million included in gain on sale have been added to FFO to get to FFO as adjusted. These fees were higher than anticipated as an operator of one larger public charter school elected to exercise this option that was not in our plan. I'll have more on both are expected disposition and termination fee levels later when I discuss a revised guidance for review.
Now, let's move to our balance sheet and capital markets activities. Our debt to adjusted EBITDA ratio was 5.2 times at quarter end. Our net debt to gross assets was 40% on a book basis and 32% on a market basis at September 30th. At quarter end, we had total outstanding debt of $3.1 billion, all of which is either fixed rate debt or debt that has been fixed through interest rate swaps with a blended coupon of approximately 4.3%. During the quarter, we issued $500 million of new 10-year unsecured notes at a coupon of 3.75% and redeemed all $350 million of our 5.75% senior unsecured notes at the make whole cost.
Strong investor demand allowed us to upsize the amount on the notes beyond our original plan as we took advantage of a very attractive coupon, the lowest in the Company's history. Additionally, we paid in full a secured mortgage notes payable totaling $18.6 million and fixed the interest rate on our only remaining secured debt of $25 million for a period of five years at 1.39%, which was lower than the previous variable rate. We are pleased, now we have a weighted average debt maturity of approximately seven years and no debt maturities until 2023. We think extending our average debt duration as well as fixing variable interest rate debt in today's low interest rate environment makes a lot of sense.
Also, during the quarter, we once again took advantage of the market support of our experiential strategy and issued approximately $52 million in common equity on our direct share purchase plan as well as another $17 million subsequent quarter end at a combined average price of $76.59. This brings our year-to-date issuance under this plan to approximately $306 million. The decision to take on the additional long-term debt proceeds versus using our line of credit, as well as raising incremental equity, both of which were not in our previous plan had the impact of reducing near-term earnings. However, with low leverage $116 million of unrestricted cash in the bank at quarter end, nothing outstanding on our $1 billion line of credit, and no near-term debt maturities. Our balance sheet is now even better positioned to fund our growing pipeline of opportunities as we finish the year and move into 2020.
Based on the results to date and our expectation for the fourth quarter, we are raising our guidance for 2019 FFOs adjusted per share to a range of $5.44 to $5.52, from a range of $5.32 to $5.48, and raising our guidance toward the upper end for investment spending to a range of $775 million to $825 million from a range of $700 million to $850 million. We are also increasing our expected disposition proceeds for 2019 to a range of $400 million to $475 million from a range of $300 million to $400 million. Guidance can be found on Page 30 of our supplemental. There you will also see that we are raising our guidance for 2019 termination and prepayment fees related to education properties by a total of $8.2 million to what we have earned through [Indecipherable]. Note that this means that we are expecting no additional such fees in the fourth quarter.
Note that overall, our guidance for the full year 2019 FFO as adjusted per share is increasing by $0.08 at the midpoint, which is to reflect $0.10 more in education related fees and $0.03 more related to the strength of our core business, offset by $0.02 related to the impact of additional capital raising activities and $0.03 related to higher dispositions than previously expected. Finally, note that when you exclude the non-education related prepayment fees of $71.3 million, we receive for the full year 2018 or $0.93 per share, the midpoint of our increased FFO as adjusted per share guides for 2019 at $5.48 reflects about 6% growth.
Now with that, I'll turn it back over to Greg for his closing remarks.
Greg Silvers -- President and Chief Executive Officer
Thank you, Mark. As we've discussed today, the third quarter was very productive for EPR, whether that be from asset performance, investments or balance sheet management. We continue to position the Company to take advantage of the many opportunities that the experiential economy is creating.
With that, I'll open it up for questions. Sarah?
Questions and Answers:
Operator
[Operator Instructions] Your first question comes from the line of Craig Millman from KeyBanc Capital Markets. Your line is open.
Craig Millman -- KeyBanc Capital Markets -- Analyst
So, you guys are bringing down leverage here kind of bolstering capacity, raising 2019 investment spending a bit. I mean, could you talk about -- I know you're not going to give guidance here for '20. But I mean, are you guys anticipating a ramp in investment spending in '20 and that's why you're trying to kind of lower leverage here in anticipation that in case there's any market choppiness or can you give some insight into the -- I know you hit on a little bit, but maybe a little bit more insight into what you're seeing on the opportunity front that prompted the extra capital raises?
Greg Silvers -- President and Chief Executive Officer
Sure. And this is Greg Silvers. Since we have two Greg's, we'll be probably kind of have to distinguish ourselves. But I think it's a little of both. I think one, I think we think the opportunity set is, is getting stronger. I think also just kind of prudent balance sheet management and understanding the way the 10-year is bounced around the day when we have a price that works for us and works for our tenants. It's prudent of us to take advantage of that and we're always looking forward as in the way that we're preparing for. I think, overall -- I do believe that we've got a -- we've kind of, over the last couple of years changed the dynamic to where we're kind of run rate, somewhere around that $700 million to $800 million maybe more millions of, of investment spending, and I think you're going to see that, at least coming out as forward. But Greg, I don't know if you anything to add to that?
Greg Zimmermann -- Executive Vice President and Chief Investment Officer
No, I don't. I mean I think we have a robust pipeline and we need to be prepared.
Craig Millman -- KeyBanc Capital Markets -- Analyst
I mean, given where the stock is, is there anything else baked into guidance for potential incremental capital raises to give you even more capacity?
Greg Silvers -- President and Chief Executive Officer
At the midpoint, no. But in the range, we could decide to raise capital if we decided to, as we did this quarter, to kind of kind of create a war chest. But no, our guidance doesn't assume any more equity issuance for me in the fourth quarter, beyond the $17 million we already did in the fourth quarter.
Craig Millman -- KeyBanc Capital Markets -- Analyst
Got you. Okay and, Greg, the other Greg, maybe can you talk about kind of the areas where you're seeing the best opportunity flow among your kind of different segments?
Greg Zimmermann -- Executive Vice President and Chief Investment Officer
Sure, I think we're seeing -- as Greg mentioned, I think we're seeing opportunities across all of our investment opportunities. We're still seeing opportunities in theaters, opportunities in family entertainment centers, experiential lodging, a lot of opportunities as reflected in our -- in our investment in Nashville, which is one of the -- one of the hottest experiential places in the country with $15.2 million visits a year. So those are the kind of opportunities we're looking for and we're seeing them.
Craig Millman -- KeyBanc Capital Markets -- Analyst
And then on CLA, could you guys just talk about -- I know, it may be a little bit early, but just how those transition schools are doing in terms of retaining students?
Greg Silvers -- President and Chief Executive Officer
[Speech Overlap] Yes, this is Greg Silvers, I think you can interpret the rate at which we -- we originally forecast that would be March of 2020 and we pulled that number back. I think that's a reflection of the success that this new operators enjoy and the fact that they wanted to accelerate it. So, I don't think that we don't report on individual kind of assets or tenants. But I think their actions are indicating that they're successful with this and want to get them under their umbrella faster and I think that bodes well for their performance.
Craig Millman -- KeyBanc Capital Markets -- Analyst
I mean, when you guys recut the rents, I guess, could you give us a sense of where you thought pro forma coverages would come in versus maybe where CLA original coverage kind of indicated on the $20 million?
Greg Zimmermann -- Executive Vice President and Chief Investment Officer
Right, remember -- if you remember correct, our coverages on those properties were actually not bad. We just had a tenant that was setting structure from other properties that were own. So, I think we would think that those coverages would at least be where they were at before, which was around the [Indecipherable] range if not increasing, with what we think is an operator that's not stressed as CLA was.
Craig Millman -- KeyBanc Capital Markets -- Analyst
Great, thank you.
Greg Silvers -- President and Chief Executive Officer
Thank you.
Operator
Your next question comes from the line of Nick Joseph from Citi. You may ask your question
Nick Joseph -- CITI -- Equity Research Senior Analyst
Thank you. Can you just walk through what makes the Margaritaville Nashville Hotel attractive from an experiential standpoint?
Greg Zimmermann -- Executive Vice President and Chief Investment Officer
Sure. This is Greg Zimmerman. One thing we like about it is, it has a lot of -- it has a lot of amenities. It's got the Margaritaville brand, it's got a rooftop bar. It is right in the heart of the Sobro district near Broadway and downtown Nashville. So, it's walkable to Ryman Auditorium, it's walkable to the Bridgestone Arena where the Predators play in it's walkable to the convention center and Broadway Street. So, there are 15 million visits a year in Nashville, 44% are for leisure travel and the average stay is all four nights. So, for us, it's exactly the kind of experiential lodging that we're looking to invest in.
Greg Silvers -- President and Chief Executive Officer
And the other thing I would add, Nick is, as, as we talked about -- again, we got this into a fixed income and type investment, being a mortgage. So, our commitment to stay out of the variability of a -- of a hotel model, I think we've honored in the way that we've done this. We think that on an -- on an LTV basis, this asset is worth significantly on the lower end of the leverage relative to it. It's also where the Sirius Margaritaville Station is actually broadcasting from this hotel. So again, it's got a lot of experiential lifestyle brand to it and we think that it's consistent kind of being in an entertainment district with directionally what we said the strategic focus of our efforts in this area are directed.
Nick Joseph -- CITI -- Equity Research Senior Analyst
Thanks, that's helpful. And then maybe just on gaming, can you gave an update on where you are in terms of entering that space and if you bid on any assets and is there any in the pipeline currently today?
Greg Silvers -- President and Chief Executive Officer
We don't talk about specifics, whether we're bidding or not. Again, we continue to make progress in that area. We were just out at the G2E conference and had 17 or 18 meetings. So, I think, hopefully in the near-term, we'll have something. There's nothing and as Mark said, there's nothing in our guidance that would indicate that we have something planned. But it's -- we're making efforts, people are very interested in talking to us. So hopefully that will translate into opportunities sooner rather than later.
Nick Joseph -- CITI -- Equity Research Senior Analyst
Thank you.
Operator
Your next question comes from the line of Tony Paolone from JP Morgan. Your line is open.
Anthony Paolone -- JP Morgan -- Analyst
Okay, thank you and good morning. Just a clarifying question for Mark. The $0.03 of strength from the core business, is that just investment activity or is that like percentage rents like on the NOI side, like what is the $0.03?
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
It's a combination of a number of things. One of the things was Kartrite ramped a little better during the quarter than we had anticipated. So that was one of the major things behind that. But there's a number of things. It's kind of everything else besides what's indicated there, but Kartrite was the main -- the main kind of driver there.
Anthony Paolone -- JP Morgan -- Analyst
Okay, some of it is kind of organic, and some of it just being the dollars out the door and the investment income is that just trying to [Speech Overlap]
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
Yeah, dollars out of the door. We're pretty consistent. I mean, we're raising our guidance $25 million at the midpoint, so investment spending is slightly higher, but I just think we had better kind of performance, kind of driven by Kartrite particularly since that's an operating asset, it did a little better during the quarter than we had planned.
Anthony Paolone -- JP Morgan -- Analyst
Okay. And then, as you look at crush categories, in education, it seems like there's almost three distinct businesses within the category. What's the -- and you commented a couple times, I guess about the pivot toward more experiential assets. Like what -- how should we think about just education as we look out the next, year or two? Could there be more sales candidates in that bucket? Do you want to be in all three of those subcategories and how are you thinking about that?
Greg Silvers -- President and Chief Executive Officer
Again, I think at this time, it's a fair question, Tony. I think we are -- we've clearly said that the charter, especially the charter school opportunity is very competitive with the municipal bond market and we don't see the risk reward return for that. So again, right now we're seeing that naturally come down with these sales. I don't know that we're prepared to talk about anything about accelerating that, but what we have said is, at least for the foreseeable future, we're not going to be devoting a lot of time or investment dollars in that area given that risk reward equation right now.
Anthony Paolone -- JP Morgan -- Analyst
Okay. And so if we -- I know you're not giving the 2020 guidance, but this did turn out to be a pretty heavy year in terms of dispositions and paybacks on mortgages and such. Do you think this level of portfolio recycling is something you continue with into the future?
Greg Silvers -- President and Chief Executive Officer
I think it's abnormally high this year. If you look at the Schlitterbahn asset, that's an asset that we had owned for 14 years. I think given the noise around that, we were happy with the outcome. We had always maintained that the value was there and what Cedar Fair paid kind of demonstrated that. But those -- if you go back and look I think we kind of -- our cost of capital is working now. So it's not -- we will probably be doing more dispositions in kind of portfolio improvement, but I don't think they're going to raise to near the level that we saw this year.
Anthony Paolone -- JP Morgan -- Analyst
Okay. And can you walk through yields that you're achieving on the major types of investment buckets that you could capital into?
Greg Silvers -- President and Chief Executive Officer
I think consistent with what we've said, most of our properties are trading or again kind of mid 7's to low 8's. As we've said, on the cost, some of those kind of a very thing that can get down to the low 7's or 7, and then we're seeing theater transactions that are trading below 7. So in that space, given our cost of capital that creates a very attractive spread and given our relationships and Greg's work in this area, we've been able to harvest a lot of those opportunities and continue to be excited about those that are being presented to us.
Anthony Paolone -- JP Morgan -- Analyst
I know your build-to-suit those same kinds of levels...
Greg Silvers -- President and Chief Executive Officer
No, they're generally as always -- they're generally going to be 50 basis points to a 100 basis points wide of that, just to accommodate for the risk associated with kind of a build-to-suit.
Anthony Paolone -- JP Morgan -- Analyst
Okay, great. Thank you.
Greg Silvers -- President and Chief Executive Officer
Thank you, Tony.
Operator
Your next question comes from the line of Rob Stevenson from Janney. Your line is open.
Robert Stevenson -- Janney Montgomery Scott LLC -- Analyst
Good morning guys. Original Greg, in terms of lodging deals going forward, the first one I think were the resort was it a JV, Nashville's in a note. Is that likely to be one of those two type of structures likely to be, how do you approach lodging and I guess also possibly gaming going forward or is there a likelihood -- is there value and is there likelihood that you're going to wind up having the stuff on balance sheet as an ownership position at some point?
Greg Silvers -- President and Chief Executive Officer
Sure. First of all, Rob, first, it's the only time I've been called the original OG. I'm going take advantage of that. But I actually think if you look at our portfolio, we have all three and if you look at what we did it like Pagosa Springs that's in a lease. If you look at what we did here in Nashville to mortgage, if you look -- I think what you will see us be either in the lease or the mortgage, our preference is to be in the lease. But there are there are certain times where for tax reasons or otherwise that may not be worth, but what we want to be is in a fixed income like instrument as opposed to the variability of the hotel remodel. So, to go back, our preference will be to the lead to the triple net lease and be in that fashion. Occasionally, we may have mortgages. I doubt you'll see us a significant amount in the hotel REIT model.
Robert Stevenson -- Janney Montgomery Scott LLC -- Analyst
Okay, and then...
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
That would also apply for the casino space [Speech Overlap]
Greg Silvers -- President and Chief Executive Officer
Yeah, I think that if we were in the casino space, it would be in the net lease space right in a lease structure.
Robert Stevenson -- Janney Montgomery Scott LLC -- Analyst
Okay. This quarter the Regal exposure went up, how comfortable are you in continuing to increase the exposure over all movie theaters and sort of do you guys have at this point from a diversity standpoint, not specifically to AMC or Regal operator-wise, but just how much you guys are sort of willing to do at the upper end in terms of theaters within the portfolio?
Greg Silvers -- President and Chief Executive Officer
Again, like I -- I think we've always said, if we can find high quality theaters, we'd like that business, it's been a very-very stable business for us for 22 years and last year we set an all-time record in Box Office. So I think, we like the space, it's not as much exposure to AMC, Regal or Cinemart it's about finding the right asset with really good coverage and often this involves theaters that have been recently renovated and so, if we like the trajectory, we like that exposure we'll continue to invest in that space.
Robert Stevenson -- Janney Montgomery Scott LLC -- Analyst
All right. And then last one for me, how many TopGolf do you still have under construction? Are there any more behind this in the pipeline?
Greg Silvers -- President and Chief Executive Officer
I think we have at most speak out of turn, but a couple that are still...
Greg Zimmermann -- Executive Vice President and Chief Investment Officer
We just put one in service.
Greg Silvers -- President and Chief Executive Officer
Okay.
Greg Zimmermann -- Executive Vice President and Chief Investment Officer
That was our last...
Greg Silvers -- President and Chief Executive Officer
Okay. So but as we've said we pretty much see almost every TopGolf opportunity. We are being not because the opportunities are good, but because we are managing exposure a little more selective. I would think that we will have TopGolf in the future as part of that and that will continue. It probably won't be as robust given the level of where we have to the exposure, but we will selectively add new assets to our portfolio when we think the opportunity is really strong.
Robert Stevenson -- Janney Montgomery Scott LLC -- Analyst
Okay, thanks guys.
Greg Silvers -- President and Chief Executive Officer
Thank you.
Greg Zimmermann -- Executive Vice President and Chief Investment Officer
Thank you.
Operator
Your next question comes from the line of Brian Hawthorne from RBC Capital Markets. Your line is open.
Brian Hawthorne -- Research Associate
Hi, on the lease exploration schedule in Education, the ones that are due the [Indecipherable] whatever million that's due this year, is that all tied to CLA?
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
Yes, that's the eighth that were left as of quarter end, so we had taken that number down from 17 as you saw last quarter, down to eight and then since that time another four have been converted. So those are moving from kind of near-term leases, all the way to subsequent to 2038. So that's exactly what that is. And so those should by the end of the year that should be zero.
Brian Hawthorne -- Research Associate
Okay, great. And then with TopGolf going public, and now you said that your investment won't be as robust with them, but does -- potentially going public, I guess, does that change your ability to invest in them at all?
Greg Silvers -- President and Chief Executive Officer
Again, I think, remember our limitation is a self-imposed limitation on an exposure. I think -- so, I think we'll just have to evaluate whether or not they go public is probably not as big an issue in that. I mean clearly people will have a view to their profitability at that point. But trust me, we have that view already because we get kind of those level of financial details. So it's really kind of managing exposure, which we set kind of when they were the only participant in this type of space. What may change some of that is as more operators get in there and there is more ease of transferring operations and different operator options we may take a broader view of that.
Brian Hawthorne -- Research Associate
Okay. Thanks for taking my questions.
Greg Silvers -- President and Chief Executive Officer
Thank you.
Greg Zimmermann -- Executive Vice President and Chief Investment Officer
Thank you.
Operator
Your next question comes from the line of Joshua Dennerlein from Bank of America. Your line is open.
Joshua Dennerlein -- Bank of America Merrill Lynch -- Equity Research Analyst
Good morning, guys. Just maybe one big picture from me. How comfortable are you with your tenant industry concentration, the level there, I guess relatively appears pretty high?
Greg Silvers -- President and Chief Executive Officer
I think generally speaking we feel really good about the experiential sectors that we're in. I mean if you look, if you look at any metric, what we're spending on these type of expenditures as opposed to traditional retail is doing nothing, but accelerating. So as compared to some of our competitors who are more focused in the retail space, we actually think we're more -- we're well positioned and that the durability of that is going to only become more valuable.
Joshua Dennerlein -- Bank of America Merrill Lynch -- Equity Research Analyst
Alright, thank you guys. That's from me.
Operator
Your next question comes from the line of John Massocca from Ladenburg Thalmann. Your line is open.
John Massocca -- Ladenburg Thalmann -- Analyst
Good morning.
Greg Silvers -- President and Chief Executive Officer
Good morning John.
John Massocca -- Ladenburg Thalmann -- Analyst
So I know you kind of commented a little bit already on the Margaritaville investment you made during the quarter. But maybe how much of the Margaritaville kind of underlying revenue is tied to kind of rooms? I'm just trying to think is there another like revenue driver there besides some of the traditional kind of lodging drivers that maybe -- it's kind of going to be underlying the interest payments to you guys?
Greg Silvers -- President and Chief Executive Officer
Yeah, I think there is a significant F&B component to this. Again, there is a rooftop kind of bar lounge, like I said, there is a lot of activity planned there. So I think this is not at all positioned as kind of traditional business traveler. This is tapping into what we think is an exciting and dynamic entertainment district, and that there is not only a lot of activity in the actual lodging offering, but there is a lot of activity going in and around the area, which is kind of significantly driving demand for what we think is this experiential our lifestyle brand.
John Massocca -- Ladenburg Thalmann -- Analyst
Okay. And then you commented on a little bit, but to the extent you can. So maybe provide some more color on the LTV on the loan, I mean is it sub 50 or lower than that, just kind of how you guys got comfortable maybe on the security of the interest?
Greg Silvers -- President and Chief Executive Officer
I think it's probably, I think what we would say is that on a relative to appraisal that in that 55% to 65% range we feel very comfortable in this space.
John Massocca -- Ladenburg Thalmann -- Analyst
Okay. And then given the commentary on the severance charge, what are maybe some of the non-experiential assets or investment verticals you guys are moving away from?
Greg Silvers -- President and Chief Executive Officer
I mean what we've talked about John pretty openly is that we're spending less and less and not devoting resources to the charter schools space. So there is no doubt that our focus is more and has continued to trend more toward the experiential assets for the reasons I said earlier about whether it's broadening the diversity of our product or the durability of that product as we've seen and you look and like I said it a number of studies correlated to the economy that these assets actually outperform. There is -- so it's primarily in that -- in what I would say broadly the education space, but more specifically in the charter school space.
John Massocca -- Ladenburg Thalmann -- Analyst
Okay. With the other two kind of sub verticals, would still be giving investments or is education in general, kind of being moved away?
Greg Silvers -- President and Chief Executive Officer
Again I think it's primarily in the charter school because even in the other two, those are long-term leases, we don't -- I mean -- you know there is a lot of focus that we've had, like I've said in the charter school space in the turnover in that, the termination fees and the volatility that brings. Whereas in the other space, the other parts of our education, those are long-term leases without that volatility. So we still think that and it's not nearly -- there is not a municipal bond market in those other two spaces. So I would say it's right now focused in the charter school space.
John Massocca -- Ladenburg Thalmann -- Analyst
Okay, understood. And then, sorry if you guys already commented on this, but I know you talked about the education assets, their own kind of near-term lease expirations, but maybe the three theater assets, any potential there for releasing or how you guys feel about those assets going forward. I know it's a relatively small number, but just any commentary?
Greg Zimmermann -- Executive Vice President and Chief Investment Officer
Yeah, two of the three were already extended in the fourth quarter.
John Massocca -- Ladenburg Thalmann -- Analyst
Okay, perfect. That's it from me. Thank you.
Greg Zimmermann -- Executive Vice President and Chief Investment Officer
Thanks, John.
Operator
[Operator Instructions] The next question comes from the line of Collin Mings from Raymond James. Your line is open.
Collin Mings -- Raymond James -- Analyst
Thanks. Good morning everyone.
Greg Silvers -- President and Chief Executive Officer
Good morning, Collin.
Greg Zimmermann -- Executive Vice President and Chief Investment Officer
Good morning, Collin.
Collin Mings -- Raymond James -- Analyst
First one, just a big picture question, Greg, just you made a point in the past of just how focused you are on data. And I'm just curious, just recognizing the broader tailwinds for your experiential focus. Are there any subsets where maybe you've seen some weakness or as you've done more due diligence on again we've spoken in the past a lot about potential areas of future growth that you may be decided to take a step back from engaging in, just kind of curious as you paint this broader brush around experiential just, some more nuanced trends you might be picking up on there?
Greg Silvers -- President and Chief Executive Officer
Yeah. To date, it's been, like I said, really strong. I think what we're trying to and focus on as always in an economic, we're always trying to underwrite that downturn. So trying to see how things are -- how they operate. I think where we are at least -- not concerned, but aware and following is the higher price point activities.
Again if you think about the movies they're almost countercyclical. A lot of these things are low-cost alternatives and so we're very closely aware of where the various price points of the offerings that we have? And as you move up into higher points of kind of, what the cost of the activity is, that you see some more correlation to economic downturn as opposed to counter-cyclical.
Collin Mings -- Raymond James -- Analyst
Got it. Okay, that's helpful color there. And I just want to go back to Rob's question earlier, just recognizing it was much smaller, but just curious what the other mortgage investment on the recreation front was during the quarter? And then, just as you look at your pipeline, Just how many other kind of mortgage investment opportunities are currently in the pipeline, and is there anything of the magnitude of Margaritaville?
Greg Zimmermann -- Executive Vice President and Chief Investment Officer
The other mortgage investment was a fitness center in Kansas City that we invested in a Genesis Fitness Center, and then as far as the mortgage versus...
Greg Silvers -- President and Chief Executive Officer
I don't think there is a -- there is a significant -- I mean like I said, a lot of these are tax motivated, as a way to manage that issue, but if you look at these mortgages, they often have escalators and everything else that to the kind of read like leases, but you can get a lot of tax efficiency by using that structure.
Greg Zimmermann -- Executive Vice President and Chief Investment Officer
Like Greg said, we target leases, but we use mortgages in cases, maybe there is a tax issue, but like you said, we try structure those just like leases. So it's hard to predict the mix, but we certainly have done a lot more leases than we've done mortgages and expect that trend to continue, I think.
Collin Mings -- Raymond James -- Analyst
Okay, thank you.
Greg Silvers -- President and Chief Executive Officer
Thanks, Colliln.
Operator
I am showing no further question at this time. I would now like to turn the conference back to Mr. Greg Silvers.
Greg Silvers -- President and Chief Executive Officer
Well, again thank you all for your time this morning. We appreciate you guys all tuning in and we look forward to seeing many of you at NAREIT and talking to you again on our fourth quarter call. Thank you.
Greg Zimmermann -- Executive Vice President and Chief Investment Officer
Thank you.
Operator
[Operator Closing Remarks].
Duration: 46 minutes
Call participants:
Brian Moriarty -- Vice President of Corporate Communications
Greg Silvers -- President and Chief Executive Officer
Greg Zimmermann -- Executive Vice President and Chief Investment Officer
Mark Peterson -- Executive Vice President, Chief Financial Officer and Treasurer
Brian Hawthorne -- Research Associate
Craig Millman -- KeyBanc Capital Markets -- Analyst
Nick Joseph -- CITI -- Equity Research Senior Analyst
Anthony Paolone -- JP Morgan -- Analyst
Robert Stevenson -- Janney Montgomery Scott LLC -- Analyst
Joshua Dennerlein -- Bank of America Merrill Lynch -- Equity Research Analyst
John Massocca -- Ladenburg Thalmann -- Analyst
Collin Mings -- Raymond James -- Analyst
