EPR Properties (EPR) Q4 2020 Earnings Call Transcript

EPR Properties (EPR 0.05%)
Q4 2020 Earnings Call
Feb 25, 2021, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Hello, ladies and gentlemen, and welcome to the Q4 2020 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 your host, Mr. Brian Moriarty, vice president, corporate communications.

Brian Moriarty -- Vice President, Corporate Communications

All right. Thank you, and hi, everybody, and welcome. Thanks for joining us for today's fourth quarter and year-end 2020 earnings call. I'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 several 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 in the SEC -- 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 the company's president and CEO, Greg Silvers.

Greg Silvers -- President and Chief Executive Officer

Thank you, Brian. Good morning, everyone, and thank you for joining us on today's fourth quarter and year-end call. We are happy to be with you as we turned the calendar to 2021, and I sincerely hope that everyone is staying healthy and safe. Joining me on the call today are company's CIO, Greg Zimmerman; and company's CFO, Mark Peterson.

I will start the call with an opening statement, then turn the call over to Greg and Mark who will provide more detail. For the overview, clearly, 2020 was a year unlike any other we've experienced since the company was founded in 1997. Early in the onset of the pandemic, we recognized the need to fortify the company's balance sheet to maintain sufficient liquidity for the long term. Key among early actions was to defer an anticipated gaming venue investment of approximately 1 billion, along with deferring other uncommitted investment spending of approximately 600 million.

Additionally, we accessed our unsecured credit facility as a precautionary measure and suspended our monthly dividend to common shareholders. We determined that these actions were prudent due to the extremely challenging environment in which our tenants have been operating. As we speak today, our liquidity remains in a strong position with cash on hand in excess of 500 million. This large reserve of cash reflects the fact that we are to return to normalcy.

However, as we announced in our quarterly disclosure on January 7, we generated positive cash flow in the fourth quarter and anticipate this trend to continue. The recent paydown of our credit facility balance reflects this positive momentum and demonstrates our increased confidence. Throughout 2020, our team was focused on the many challenges brought on by the pandemic, including monitoring tenant performance, assisting in reopening plans and collaborating to develop plans that ensure long-term stability and success for both our tenants and EPR Properties. We have seen the success of this strategy with our nontheater tenants, where approximately 94% are open and rent collections have improved materially.

While our properties are still impacted by locally mandated closures and capacity restraints, performance and customer demand continued to improve, which we believe demonstrates our final thesis of people's desire for experiences. As Greg will discuss in more detail, our theater tenants are still primarily challenged with limited film product, which should subside as we progress through 2021. However, early indications from around the world indicate that when product is available and flowing, there is robust consumer demand. Overall, we are pleased with both the progress and trajectory of our recovery as it is reflected in a continued increase in cash collections as we entered 2021.

Throughout the year, we made continuous progress. And as I've stated before, I'm very proud of how our team has responded to the substantial challenges that they have faced. Looking ahead, as we look forward in 2021, we're encouraged by the accelerated rollout of vaccines. We recognize that the reopening of the U.S.

will continue to be a phased process, yet we also believe that as a society, we are more than ready to return to a sense of normalcy. We also continue to be encouraged by the resiliency displayed by many of our tenants and anticipate that theaters will follow a similar pattern when they open more widely and key titles are consistently released. As the country begins the recovery process, we look forward to getting back on the path to growth. This process requires continued improvement and stabilization of our cash collections, which will allow us to exit our existing debt covenant waivers.

Upon achieving that goal, our focus will turn to reinstituting our common dividend and reinitiating our investment spending program. The timing of achieving these milestones will be entirely dependent on a number of variables, including an effective vaccine deployment. However, as today's results indicate, our progress has measurably improved in the early months of 2021, and we are optimistic that our goals are achievable during the second half of 2021. With that, let me turn it over to Greg Zimmerman for a discussion of our portfolio and its performance.

Greg?

Greg Zimmerman -- Chief Investment Officer

Thanks, Greg. At the end of the first quarter, our total investments were approximately 6.5 billion with 356 properties in service and 94.2% occupied. During the quarter, our investment spending was 22.8 million and was entirely in our experiential portfolio, comprising build-to-suit development and redevelopment projects that were committed prior to the COVID-19 pandemic. For the year, our investment spending was 85.1 million.

Our experiential portfolio comprises 281 properties with 43 operators, is 93.8% occupied and accounts for 91% of our total investments or approximately 5.9 billion of the total 6.5 billion. We have three properties under development. Our education portfolio comprises 75 properties with 12 operators, and at the end of the quarter was 100% occupied. As the vaccine rollout accelerates, people are looking for safe and easily accessible ways to get out of their homes and come back together with friends.

Our operators are working hard to offer entertainment experiences which create memories in safe environments. We're seeing that as consumers become increasingly confident in safety measures and restrictions are reduced, they're returning to our properties. Now I'll update you on the operating status of our tenants, our deferral agreements and our rent payment time lines. 60% of our theaters were open as of February 22nd.

As we have previously noted, Cineworld made the decision to close all of its U.S., U.K. and Ireland theaters because of the lack of tentpole films from Hollywood. Today, none of our 57 Regal theaters are open. Theaters continue to face significant headwinds from the lack of tentpole films and capacity and concessions restrictions implemented by state and local governments.

These challenges will slowly begin to abate during vaccination ramp up and with loosening restrictions throughout the country. Based on the current vaccine -- vaccination cadence, we believe major film releases and box office will begin to accelerate in the second half of 2021. The 2021 film slate was strong before the pandemic. Because a number of films scheduled for 2020 pushed to 2021, we believe the projected film slate will provide a strong content cadence for theaters to ramp up as vaccinations increase, normalcy returns and consumers feel more and more comfortable returning to the movies.

2021 tentpoles currently scheduled for release beginning in May include Black Widow, the Fast & Furious 9, Top Gun: Maverick, Jungle Cruise, Death on the Nile, A Quiet Place Part II, Dune, No Time to Die, Ghostbusters: Afterlife and MI7. Box office strength will continue into 2022 with Jurassic World: Dominion pushing to mid-'22. As demonstrated by consumer behavior in Asia and the Hollywood release schedule, we do not see evidence of structural changes in theater going habits as a result of the COVID-19 pandemic. In Asia, the consumer bounced back quickly.

China's box office continues to perform solidly even in weeks without products. During the Lunar New Year holiday, Detective Chinatown three opened with the highest grossing opening day, $163 million and opening weekend, $398 million, in history outpacing Avengers: Endgame. Over the Lunar New Year holiday, Detective Chinatown three and Hi, Mom each grossed over $620 million. In January, Demon Slayer became Japan's highest grossing movie ever.

Further, as provided by the continued recovery and resilience of our other experiential tenants, which I'll discuss in a moment, customers still want to engage in entertaining, affordable out-of-home experiences. Once they know the operator is open and become comfortable with new protocols, we see that they are returning to experiential assets. We are confident the same will hold true for theaters as vaccinations ramp up and normalcy returns. As we have said throughout the COVID-19 pandemic, the studio's decision to push the vast majority of tentpoles to theatrical release in 2020 and 2022 is the best evidence of their commitment to the exhibition economic model.

The economics are straightforward. Tentpole films cost well over $100 million to produce so the studios need theatrical release to maximize revenue for major pictures. Of the projected top 30 box office films scheduled for release beginning in February 2020, only six films were moved to nontheatrical release and one other, Wonder Woman 1984, was released simultaneously to theaters and HBO Max. In uniquely trying times, studios took the opportunity to test alternative delivery channels and for those with streaming services to add subscribers.

Even when in parts of the country, people could not leave their homes and theaters were either completely shut down or open with capacity and concessions restrictions, these releases had limited success. After a couple of major tests with Wonder Woman 1984's simultaneous theatrical and HBO Max release and the release of Mulan, Trolls World Tour and Soul to premium video-on-demand or streaming video-on-demand, the studios withheld the vast majority of top films from digital-only distribution to preserve theatrical release in 2021. On its recent earnings call, Disney reaffirmed it will release Black Widow theatrically, subject to opening cadence and consumer sentiment about going back to the movies, proving that all things being equal, Disney continues to see the enormous power of theatrical release for major motion pictures. Likewise, Paramount recently publicly confirmed that Top Gun: Maverick will be released theatrically in July, again, subject to vaccination rollout.

In summary, despite the unique challenges presented by COVID-19, Hollywood continues to recognize that consumers still prefer to see movies on the big screen and don't embrace PVOD as a viable value alternative. The decision to push theatrical release dates for the vast majority of major films, even after a unique period of experimentation, demonstrates that theatrical exhibition remains the preferred medium for consumers and the best format to deliver returns to the studios for major releases. I also want to update you on our other major customer groups. Approximately 94% of our nontheater operators are open or for seasonal businesses are closed in the normal course.

These businesses continue operating with appropriate safety protocols to comply with state and local requirements. Performance remains fluid, depending on the impact of COVID-19 in each locale. However, at a high level, our operators are resilient and performance has generally exceeded their expectations in the face of this lengthy pandemic. Furthermore, we are seeing the benefit of owning drive-to value-oriented destinations.

I'll now provide a brief update on each of our property types. The ski season is under way. All of our ski resorts are open, and we're pleased with the results to date. All of our Topgolf locations, all of our Andretti carting locations and all of our family entertainment centers are open.

All but one of our U.S. gyms are open. About 61% of our attractions had opened for normal operations prior to normal seasonal shutdowns. As we have indicated in past calls, a few of our attractions missed all or part of the season due to governmental health and sanitation measures and the financial feasibility of operating with reduced occupancy in a truncated season.

All of our cultural operators are open. Except for the Kartrite Resort & Indoor Waterpark, all of our experiential lodging assets are open. Kartrite remains subject to New York state's phased reopening plans, and we are planning for a Kartrite reopening in summer 2021. Resorts World Catskills is open.

Finally, turning to our education portfolio, all of our early education centers are open. We are seeing a steady increase in demand monthly as COVID restrictions ease and parents return to work. All of our private schools remain open, utilizing a combination of in-person, online and hybrid instruction models. Varying state and local requirements continue to influence each school's instruction model.

Volatility in reopening plans for public school systems has benefited private schools, and we believe parents continue to see the value of private school instruction. We continued progress in executing our strategy to reduce our overall education portfolio. In December, we sold six private schools and four early childhood education centers for net proceeds of $201 million. These assets were sold at cash and GAAP cap rates based on base rents of 8.1% and 9%, respectively.

Note that over the past two years, we also collected average annual percentage rents of 6.3 million from three of the private schools based on total tuition levels. However, these percentage rents were scheduled to expire over the next few years. Overall, the assets included in this sale were an excellent investment for us with an unlevered internal rate of return of 13% over the life of our ownership. Additionally, we sold four experiential properties and two vacant land parcels for net proceeds of around 23 million.

Total disposition proceeds in the quarter were 224 million. During the quarter, we terminated all seven of our AMC transition leases and took back the properties. We are executing our plans for each location. In December, we completed the sale of one of the transition lease properties for an industrial use.

We are in various stages of active negotiation to sell another 5. We anticipate these will result in various uses, including industrial, multifamily, office, retail and theater reuse. We also took over management of two of our theaters. One of the transition lease properties in Columbus, Ohio; and the former Goodrich Savoy in Champaign, Illinois.

We have retained a well-respected experienced theater management company to operate both locations on our behalf and both are open for business. I want to take a moment to update you on the status of our cash collections and deferral agreements. Cash collections have continued to improve in conjunction with reopenings. Tenants and borrowers paid 46% of pre-COVID contractual cash revenue for the fourth quarter versus 29% and 43% in the second and third quarters, respectively.

As Mark will go over, we expect first quarter cash collections to significantly exceed fourth-quarter collections. In January, we collected 66%. And in February, collections are currently 64%. In each case, of pre-COVID contractual cash revenue.

During the quarter, due to the continuing impact from COVID-19, we reserved the outstanding principal loan balance of 6.1 million and the unfunded commitment of 12.9 million for one of our attractions operators. Customers representing approximately 95% of our pre-COVID contractual cash revenue, which includes each of our top 20 customers, are either paying their pre-COVID contract rent or interest or have deferral agreement in place. In those deferral agreements, we have granted approximately 5% of permanent rent and interest payment reductions. However, there can be no assurance that additional permanent rent or interest payment reductions or other term modifications will not occur in future periods in light of the continued adverse effect of the pandemic and financial condition of our customers, particularly with the ongoing uncertainty in the theater industry.

As we've discussed, our exhibition partners have faced and continue to face serious headwinds. It goes without saying that the lack of product and reopening restrictions have weighed heavily on box office performance since early 2020 and continue to dramatically impact projected box office performance. Our goal has been to work diligently with all of our customers to structure appropriate deferral and repayment agreements to facilitate their ability to reopen efficiently and help ensure their long term health, while also protecting our position and rights as landlord. We intended to help them through a period where they have significantly reduced or no cash flow, allowing them to ramp back up to stabilize cash flow.

We individually tailored each deal, considering the variables impacting each business and improved our position through various arrangements. These agreements are generally structured with rent and mortgage payments commencing and ramping up through 2021 and in some cases, after 2021. Repayment of deferred amounts typically commences in 2021 and depending on the deferred amount to allow our customers some breathing room, the deferral repayment period generally extends beyond 2021. The vast majority of our arrangements provide for repayment of all deferred rent.

As we have stated previously, in a few cases, we have provided rent concessions, but we've generally received equal or greater value through additional lease term, additional collateral or other benefits. In most cases, our customers have paid and continue to pay third-party expenses, including ground rent, taxes and insurance. Mark will provide additional color on the revenue recognition and cash collections implications for the first quarter of 2021. I now turn it over to him for a discussion of the financials.

Mark Peterson -- Chief Financial Officer

Thank you, Greg. Today, I'll discuss our financial performance for the quarter and year, which continued to be impacted by the disruption caused by COVID-19, provide an update on our balance sheet and strong liquidity position and close with some estimated forward information. FFO as adjusted for the quarter was $0.18 per share versus $1.26 in the prior year, and AFFO for the quarter was $0.23 per share compared to $1.25 in the prior year. Note that the operating results for the prior year included the public charter school portfolio, which was sold during the fourth quarter of 2019 and are included in discontinued operations.

Total revenue from continuing operations for the quarter was 93.4 million versus 170.3 million in the prior year. This decrease was due to the accounting for the various agreements with customers as a result of the COVID-19 impact similar to what we discussed last quarter. During the quarter, we wrote off 2.4 million in receivables related to putting two additional customers on a cash basis of accounting, bringing the total for the year for such write-offs to 65.1 million, including 38 million of straight-line rent. Additionally, due primarily to the Kartrite Resort & Indoor Waterpark remaining closed due to COVID-19 restrictions, we had lower other income and lower other expense of 7.4 million and 8.7 million, respectively.

Percentage rents for the quarter totaled 3 million versus 6.4 million in the prior year. This decrease related primarily to the closure of properties due to COVID-19 restrictions. I would like to point out, as I did last quarter, that we are defining percentage rents here as amounts due above fixed rent and not payments in lieu of fixed rent based on a percentage of revenue. Therefore, AMC and other theater tenants that were in the fourth quarter making cash payments based on a percentage of their revenue against contractual rents are recognized as minimum rent.

Property operating expense of 16.4 million for the quarter was up slightly versus prior year, but was up about 2.5 million from the last quarter due to increased vacancy, including the terminated AMC leases that Greg described. Transaction costs were $0.8 million for the quarter compared to 5.8 million in the prior year. The decrease is related primarily to lower costs incurred related to the transfer of early education properties to Crème de la Crème. Interest expense increased by 7.9 million from prior year to 42.8 million.

This increase was primarily due to the precautionary measure we took last March to draw 750 million on our 1 billion revolving credit facility, which provided us with additional liquidity during this uncertain time. Due to stronger collections and significant liquidity, including 224 million in net proceeds received from property dispositions in the fourth quarter, we reduced the outstanding balance by 160 million to 590 million at year-end. Subsequent to year-end, we used a portion of our cash on hand to further reduce this balance by 500 million, resulting in a current balance of 90 million on our revolver. As I noted last quarter, we are also paying higher rates of interest on our bank credit facilities, as well as our private placement notes during the covenant relief period.

The next slide lays out fourth-quarter results reflecting the impact of the receivable write-offs I discussed earlier. These write-offs totaled $0.03 per share for the quarter and $0.86 per share for the year. During the quarter, we had other items that were excluded from FFO as adjusted. Gain on sale of real estate was 49.9 million and gain on insurance recovery, which is included in other income, was 0.8 million.

We recognized a total of 22.8 million in impairment charges because of shortening in our expected hold periods on four theaters as we expect to sell each of these properties. In addition, we recognized net credit loss expense of 20.3 million that was due primarily to fully reserving the outstanding principal balance and unfunded commitment related to notes receivable from one borrower, as Greg discussed. We also recognized severance expense of 2.9 million due to the retirement of an executive as previously announced. Our results for the full-year 2020 were clearly impacted by COVID-19 as FFO as adjusted per share was $1.43 versus $5.44 in the prior year, and AFFO per share was $1.89 versus $5.44 in the prior year.

Note again that the prior period results included the public charter school portfolio that was sold during 2019 and those results, including 24.1 million in termination fees, are included in discontinued operations. As discussed last quarter, we have classified our tenants and borrowers into categories based on how we accounted for them in the context of our annualized pre-COVID contractual cash revenue level of 624 million, which consists of cash rent, including tenant reimbursements and percentage rents and interest payments. This annualized cash revenue excludes properties under -- properties operated under a TRS structure. The changes of these classifications from last quarter were not very significant, but include a new category to reflect sold properties, most of which was previously classified under the first category titled, no payment deferral.

There was also a slight increase in the new vacancies category, primarily as a result of the terminated AMC leases. Now let's move to our balance sheet and capital markets activities. Our debt to gross assets was 40% on a book basis at December 31. At year-end, we had total outstanding debt of 3.7 billion, of which 3.1 billion is fixed rate debt or debt that has been fixed through interest rate swaps with a blended coupon of approximately 4.6%.

Additionally, our weighted average debt maturity is approximately five years, and we have no scheduled debt maturities until 2022 when only our revolving credit facility matures. As previously announced, due to the continued pressure on near-term quarterly results, as a result of the impact of COVID-19, during the quarter, we further amended our bank credit facilities and private placement notes to obtain an extension through the end of 2021, subject to certain conditions, of the waivers of the same four covenants temporarily suspended in June. This amendment provides us additional time and flexibility to work with our customers during this period of uncertainty. Note that we can elect to get out of the covenant relief period early, subject to certain conditions, and there was no change in the interest rate schedules from that agreed to previously.

We believe we have sufficient liquidity to see us through the market disruption caused by COVID-19. We had over 1 billion of cash on hand at year-end. Cash flow from operations was positive for the fourth quarter at approximately 6 million. And we expect our operating cash flow to be substantially higher as we move into 2021.

This positive trajectory and our substantial liquidity gave us confidence in our decision, subsequent to year-end, to pay down our 1 billion line of credit to 90 million, while still maintaining about 500 million of cash on hand. In addition, subsequent to year-end, we reduced the balance outstanding on our private placement notes by 23.8 million to 316.2 million as a result of certain property sales and in accordance with the recent amendment to those notes. There was no prepayment penalty on this paydown. As previously announced, due to the uncertainties created by the COVID-19 disruption, we are not providing forward earnings guidance.

However, we would like to update you on the expected ranges of contractual cash revenue that we expect to recognize in our financial statements for the first quarter of 2021, as well as our expected collections for the same period. Because there have been changes in the portfolio due to permanent rent reductions, acquisitions and dispositions, changes in the occupancy levels and other items, we are moving away from reporting against pre-COVID contractual cash revenue to current contractual cash revenue for purposes of our guidance and future reporting. This slide shows a reconciliation of those amounts, which begins with pre-COVID contractual cash revenue, including percentage rents, for both the quarter and annualized of 156 million and 624 million, respectively, and then subtracts out pre-COVID percentage rents of 4 million and 15 million, respectively. From there, we make the additional adjustments to the portfolio I just described, to come to the current contractual cash revenue amount of 136 million for the first quarter and 545 million annualized.

Note that both of these amounts are before the impact of any temporary abatements or deferrals. Accordingly, the expected range we expect to recognize in Q1 of '21 is 98 million to 105 million or 72 to 77% of such contractual cash revenue. Additionally, the expected range we expect to collect in Q1 of 2021 is 87 million to 93 million or 64 to 68% of such contractual cash revenue. Differences from the full amount of contractual cash revenue relate to deferrals granted and the associated accounting, as well as abatements.

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 you can see from our presentation today, the trends remain positive, and we're optimistic about the continued recovery as we progress throughout 2021. No one is happier than EPR to put 2020 behind us, and we look forward like many consumers to begin again enjoying the experiences that our properties offer. With that, why don't I open it up for questions.

Questions & Answers:

Operator

[Operator instructions] Your first response is from Ki Bin Kim, Truist. Please go ahead.

Ki Bin Kim -- Truist Securities -- Analyst

Thanks, and good morning. So first, good job on getting the collections up to 66%. Obviously, it implies that you're getting a good degree of rents from your movie theater tenants. Could you just help us better understand what the collection trends are within theaters versus nontheaters?

Mark Peterson -- Chief Financial Officer

Sure. In the fourth quarter, we reported 46%, and theaters were about 21% and nontheaters was about 71%. In January and February, that's moved significantly, theaters are up to -- in the 40s, 49% for January and the other was 84%. So we're seeing an increase in both categories, but particularly in the theater category.

Ki Bin Kim -- Truist Securities -- Analyst

OK. And in regards to AMC, could you set some baseline expectations in terms of what we should expect for longer-term rent structures. I realize in the second quarter, you renegotiated a deal to lower AMC's rents by 21%. But I'm just curious, given all that's happened within the past couple of quarters, if that's still realistic or if that has to be revisited?

Greg Silvers -- President and Chief Executive Officer

Again, Ki Bin, we've not -- as we said, we haven't revisited those agreements. And those agreements are still in place that we referenced before.

Ki Bin Kim -- Truist Securities -- Analyst

Got it. All right. Thank you.

Greg Silvers -- President and Chief Executive Officer

Thank you.

Operator

Thank you. Your next response is from Anthony Paolone from J.P. Morgan.

Anthony Paolone -- J.P. Morgan -- Analyst

Thanks, Good morning Mark, appreciate that bridge from that original $624 million. Just a couple of questions. In the new 545, how does that -- how do we think about, in the past, you talked about maybe a 5 to 7% haircut when all is said and done. How much of that is dialed into the 545 at this point versus what may happen in the future?

Mark Peterson -- Chief Financial Officer

Yes. Sure. So that 5 to 7% we've been referencing is based on that 609 million kind of the number without percentage rents there. And you see 24 million of permanent rents, that's about 4% of 609.

And then there's another 1% that was -- that is now in vacancies. Remember, we terminated -- we gave haircut on the transitional leases for AMC, and now those are vacant. So there's another 1% of cuts that are sitting in the 17. So the 5%, to answer your question, is in the 545 million.

It's what's happened to date. It's in two places on the schedule, permanent rent cuts, 4% there; another 1% in vacancies. So that's where we stand today. We're 95% through our deferral agreements, and we feel good about where we are.

We've talked about 5 to 7%, but we're through, like I said, 95% and feel pretty good about that. And we'll see if any other cuts are necessary. Sitting here today, we think we're in pretty good shape.

Anthony Paolone -- J.P. Morgan -- Analyst

OK. And then the opex piece, I think, was running, give or take, $60 million. How should we think about that against the 545. Is there any change on that side?

Mark Peterson -- Chief Financial Officer

There's a little bit of change as we sell properties. You saw a bit of an elevation on property operating expenses. It was kind of running around 14, and then it went to 16 here in the fourth quarter. As we -- as Greg Zimmerman mentioned, as we sell those properties, that should come back down.

So we think it's kind of temporary inflated, but that kind of gives you a sense that it's a little bit high in the fourth quarter, but should come back down as we go into '21.

Anthony Paolone -- J.P. Morgan -- Analyst

OK. And then just last item around dispositions. The five theaters that it sounds like you have in the market for sale, can you give us some sense as to maybe what proceeds could be from those? And then also, anything else of size that you think you might look to sell this year?

Greg Silvers -- President and Chief Executive Officer

Yes. And I'll jump in on that. I think the -- what we can reference, the one that's sold, and I'll ask Greg to comment, I think of the seven that we've rented, we sold one. I think, and Greg, correct me if I'm wrong, that's sold for a six cap.

Greg Zimmerman -- Chief Investment Officer

That's correct.

Greg Silvers -- President and Chief Executive Officer

For industrial use. And as Greg said, I think there's -- the other -- we have process of the other remaining six under LOI or contract, and we'll see how those progress throughout the year. Now the thing about it is, and I think that the positive reflection that we've seen is, that we own quality real estate. And that there's going to be a very demand for this, as Greg mentioned, whether that's industrial, multifamily, different uses.

And they're all not going to be six caps, but we think, overall, we're going to have a good reuse of our properties, and that's kind of what these have done and was part of Greg's strategy and our asset management team. So again, I don't think we're going to comment about the other ones other than to say that we have -- they're either under contract or under LOI, and that gave us the confidence to go ahead and terminate the AMC leases, but we will see how those play out. But Greg, do you have anything else to add to that?

Greg Zimmerman -- Chief Investment Officer

Yes. Tony, the only other thing I would add is that in each of the instances, we've had multiple offers to choose from. So it's been pretty fulsome, and we're very pleased with the response. And as Greg said, I think it really demonstrates the quality of our real estate.

Anthony Paolone -- J.P. Morgan -- Analyst

OK. And anything else of size this year, you think, you'll do.

Greg Silvers -- President and Chief Executive Officer

Not at this time that we're talking about. I mean we're always looking as we did with our -- with some of our education assets, but nothing to talk about now.

Anthony Paolone -- J.P. Morgan -- Analyst

OK. Thank you.

Operator

Thank you. Your next response is from Rob Stevenson of Janney. Please go ahead.

Rob Stevenson -- Janney Montgomery Scott -- Analyst

Good morning guys. Just a follow-up on the last question. Is that six cap rate based on pre-COVID NOI or current NOI. What is that based on?

Greg Silvers -- President and Chief Executive Officer

That was pre-COVID NOI. That's based on the number that was part of that 609 million.

Rob Stevenson -- Janney Montgomery Scott -- Analyst

OK. And then what does it look like just in terms of sort of rough dollar value in terms of what does it look like price-wise to sell a theater for industrial use in general versus where you could have sold that theater pre-COVID as a theater. I mean is it basically pretty similar? Are you taking much of a hit, you're actually making more money because of the demand for industrial and infill locations? What does that sort of look like?

Greg Silvers -- President and Chief Executive Officer

I would say of the -- and using -- and Greg, I'll ask you to come in. But using kind of these first six as an example, I would say it's really location dependent. I mean, again, I would say industrials are probably clearly selling for above kind of theater cap rates. But I would say if you blended it all, it's probably at or near kind of where theaters were selling on a pre-COVID basis.

Greg, maybe you have some thoughts?

Greg Zimmerman -- Chief Investment Officer

No, I would agree. I would also say, I think multifamily in certain locations is strong right now as well. But generally, I agree with what you said. Yes.

Rob Stevenson -- Janney Montgomery Scott -- Analyst

OK. And then you guys continue to sell the education segment down. How low does that exposure go? And if you're to hazard a guess, is EPR in that business three, five years from now? Is this just a temporary thing for source of capital and where you could sell the assets and once the acquisitions start ramping back up again, it's going to be a disproportionate amount of education? Or is education sort of winding down as a major investment for you guys?

Greg Silvers -- President and Chief Executive Officer

Yes. I would say as a major investment, you're correct. I mean when we determined to focus on experiential, we announced that we wouldn't grow in that area and then over time, we could sell out of that. So I would say there's no rush to do it.

I mean this was a tenant exercise option to purchase these assets. So I -- but I wouldn't see us -- those assets being any material part of our portfolio as we look out over the medium to longer term.

Rob Stevenson -- Janney Montgomery Scott -- Analyst

OK. And then last one for me. As you and the board, Greg, think about getting back to an acquisition environment, is there anything that's occurred over the last year that would dampen the enthusiasm to move into the casino business in a significant way relative to where your desires were, call it, 13 months ago?

Greg Silvers -- President and Chief Executive Officer

Rob, I would say, if anything, it's kind of proven out our thesis. We talked about when we looked at the space that we like the regional plays and the drive-to destinations, and I think if you see the trends and how that business has responded, I think we would still be very interested in that space.

Rob Stevenson -- Janney Montgomery Scott -- Analyst

OK. Thanks guys appreciate it.

Operator

Thank you. Your next response is from of Katy McConnell of Citi. Please go ahead.

Katy McConnell -- Citi -- Analyst

Great, thanks. Good morning. So if we look at the new vacancy component in the revenue bridge that you provided, what are your thoughts around backfill prospects and what rent adjustments can look like there based on any releasing progress you've made so far?

Greg Silvers -- President and Chief Executive Officer

I think -- and Mark, and then I'll let you comment. I think in that vacancy are the five properties that I just mentioned that we have under contract. So there's going to be a significant amount of those to be part of capital recycling. There will be some releasing.

But I do think right now, the majority of that are properties that I think we are evaluating whether we're going to release that or kind of dispose of those assets. But Mark, maybe you have more color?

Mark Peterson -- Chief Financial Officer

No, I'd agree. A lot of that vacancy increase was those terminated leases. And I think, as Greg said, five of those are under contract or LOI. So we expect that really to result in sales and vacancies will go down because the properties will be sold.

Katy McConnell -- Citi -- Analyst

OK. And then can you talk about how traffic and sales trended in 4Q relative to pre-COVID levels for the markets where your theaters have reopened so far? And how impactful do you think the reopening of New York theaters could be having on your portfolio?

Greg Silvers -- President and Chief Executive Officer

Greg, do you want to take that since --

Greg Zimmerman -- Chief Investment Officer

Yes. Obviously, I think the trends, both with New York reopening and with vaccinations ramping up, are good. We're feeling very positive that the release schedule will hold, cautiously optimistic that Black Widow and Fast & Furious 9 will drop in May. And I think as we've said all along, what we need is continued product and the ability for our exhibition partners to open and remain open without having to go into further lockdown.

So we see a lot of positive trends. Particularly, when you look at what's happened in China, I think people are -- there's a lot of pent-up demand to get back and do things. So --

Greg Silvers -- President and Chief Executive Officer

And I would add on to that. It's just kind of an indication just because it's time. I think if you look at kind of our expectations coming into the ski season and talking with our operators, I would say that, across the board, they've exceeded expectations as far as consumer demand coming back to the product. So we -- it's across all of our experiential properties; when available to operate, the consumer is speaking with their feet and returning in strong numbers.

Greg Zimmerman -- Chief Investment Officer

And I would add to that, Greg, very much impacted by the fact that we have drive-to value destinations. So we're just not being negatively impacted by air travel constraints.

Katy McConnell -- Citi -- Analyst

OK, thank you.

Operator

Thank you. Your next response is from Joshua Dennerlein of BoA. Please go ahead.

Joshua Dennerlein -- Bank of America Merrill Lynch -- Analyst

Hey, good morning guys. I was looking at Page 29 of your sup where you have minimum rent, percentage rate and, I guess, like rental revenues total there. Just wanted to clarify, is that minimum rent a cash number or GAAP?

Mark Peterson -- Chief Financial Officer

On Page 29, we're reconciling GAAP revenue there.

Joshua Dennerlein -- Bank of America Merrill Lynch -- Analyst

GAAP revenue. OK. I guess my question around this is related to how to think about that minimum rent going forward, are we kind of that ex drop there? And then how to kind of think about that percentage rent? I know you have a lot more percentage rent going forward with the AMC restructuring. So just kind of frame all that, would be really helpful.

Mark Peterson -- Chief Financial Officer

Well, the AMC was in percentage rent for their contract in fourth quarter. Their contract moves away from percentage rent and more to fixed rent. So with respect to AMC. Secondly, the rent that theaters are paying, anyone that's on a percentage rent basis, that's not what we're calling percentage rent here.

We're defining percentage rent here as amounts over base, right? So if they're paying some portion of the minimum rent through kind of a variable arrangement based on sales, we're not deeming that percentage rent. Now that said, percentage rent this year, I think, was around, I think it was, 8.6 million. Get that real quick. Sorry -- it was, yes, 8.6 million for this year as a whole.

Next year, we do expect percentage rents, but a lot of that 8.6 million in 2020 was driven by private schools, right? They had -- we had significant percentage rents, as Greg said, it averaged about -- over 6 million in the last two years. So that will drop. At the same time, we do have an early ed tenant that's paying a base amount and then paying percentage rents over that base amount. So that will go up.

So the long story short, I think percentage rents, it's fairly similar, but for different reasons. I think there is potential upside for that -- to that just because of, as certain of our attraction properties get back to normal, they could hit percentage rent limits, but it's hard to say right now. But -- so anyway, percentage rent, just keep in mind, it's over base amounts. It's not -- and then like I said, with respect to AMC, they've really transitioned, have transitioned per their agreement that we went over from a percentage rent or a variable rent basis to a fixed basis.

Joshua Dennerlein -- Bank of America Merrill Lynch -- Analyst

OK. OK. So it was a little bit different than what I was thinking. OK.

Mark Peterson -- Chief Financial Officer

Yes.

Joshua Dennerlein -- Bank of America Merrill Lynch -- Analyst

Appreciate that. Thanks.

Operator

Your next response is from an John Massocca of Ladenburg Thalmann. Please go ahead.

John Massocca -- Ladenburg Thalmann -- Analyst

Good morning. Maybe building a little bit on that last comment. I mean, is AMC paying their full contractual rents as of kind of current in 1Q '21.

Greg Silvers -- President and Chief Executive Officer

John, we don't comment on any particular tenant. What we will say is that all of our tenants are paying in conformance with agreements that we've entered into. And our cash collections reflect that.

John Massocca -- Ladenburg Thalmann -- Analyst

OK. I thought to give a try. And then you also kind of mentioned in the prepared remarks that you had taken over operations at a couple of theaters. Can you maybe provide some color on why you decided to do that? And if there may be maybe more of that going forward?

Greg Silvers -- President and Chief Executive Officer

Again, and I'll let Greg comment on this after. I think part of the issue was when we began this, clearly, there was more concern about some theater tenants and their ability to withstand the pressures of COVID. So we felt the need to create a, for lack of a better term, a backstop that we knew we had good properties, and we knew that this business would return. So we felt the need to create the ability to operate our properties through management companies.

It's necessary. And so we have taken what we think are two good performers, and we've set that up to allow not only ourselves to understand that we can do this if necessary, but also to give confidence to investors that we are not in a position to where if theater companies are saying, you have to take my terms, no, we don't. We have the capability and we have the resources for good properties to make these work. And so when we were negotiating with people and even into the transition leases, I mean this -- one of the theaters that we took over, and Greg can come in, is probably a top 100 theater in the country.

And so we wanted to demonstrate that we're going to approach this from a position of strength. And I think you will see that in our negotiations. But Greg, I don't know if you have anything else to comment on that?

Greg Zimmerman -- Chief Investment Officer

No, I think you covered it. I mean, obviously, both theaters are strong in their markets. And we're learning a lot. And we will also be able to make sure that we're getting reasonable rents as they turn in -- turn back into operating theaters with someone else in the future.

Greg Silvers -- President and Chief Executive Officer

Yes. And I think, as Greg pointed out there, John, I think the long-term -- our long-term objective would be, as we get back to normalcy, we'll find somebody who will lease these properties, but it will not be at some draconian cut that people may think they had leverage to do. We will get them back to what we think are very reasonable and respectable rent levels.

John Massocca -- Ladenburg Thalmann -- Analyst

Very helpful. And then one last detail one. In terms of the collection, I know the guidance is based on the new kind of base rent number, but were the reported January and February collections also based on that number?

Greg Silvers -- President and Chief Executive Officer

Yes. And I'll let Mark comment on this. But the 66 and 64, I think, are apples-to-apples from what you saw the 46 at. Is that a fair statement, Mark?

Mark Peterson -- Chief Financial Officer

Yes. The only change there is we adjusted for sales because, obviously, we had sold the spring portfolio, but we didn't adjust for permanent rent cuts and vacancy and so forth, like we did in the new contractual. So 68 -- 66 and 64, as Greg said, are essentially on a pre-COVID basis. Only adjustment there was really for net activity, which is really the sales of -- for the education portfolio primarily.

And then the new basis is based on that 545 annualized or that quarterly amount, that 64 to 68% is based on the new basis.

John Massocca -- Ladenburg Thalmann -- Analyst

So basically, we go through the walk to try to get what it would be on the new basis, it would just be take out that sales component, but everything else is --

Mark Peterson -- Chief Financial Officer

Well, it's effectively that bridge that I showed. So to get to the new basis -- so let me make it clear. 46% was pre-COVID, really didn't have sales to deal with. We then sold right at the end of the year the spring portfolio.

When we say pre-COVID in the press release, we say 66% and 64%, it's effectively pre-COVID, nothing to do with permanent rent cuts, nothing to do with vacancies. It's pre-COVID, and that -- so that's consistent. When you move to the new, now we're just talking about guidance now, and we give a range of 64 to 68%. That is now off that revised new contractual amount that does take into account not only disposition activity, but the other things there, vacancy and so forth.

So that's really the bridge. Effectively, the -- like I said, 66, 64 old basis, only adjusted for sales of properties, whereas now we're bridging to a new contractual amount. It doesn't make sense for us to be quoting forever pre-COVID. If we've given permanent rent cuts, if we kept saying pre-COVID, we'd never get to 100% because we gave permanent rent reductions.

We want -- and the same thing with vacancies. We needed to take that into account going forward in our guidance, and we'll kind of have a -- that's why we established this new kind of current contractual revenue.

John Massocca -- Ladenburg Thalmann -- Analyst

OK. Very helpful. That's it for me. Thank you very much.

Mark Peterson -- Chief Financial Officer

Thanks, John.

Operator

Thank you. Your next response is from Todd Thomas with KeyBanc Capital. Please go ahead.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Hi, thanks. Good morning. Just circling back to the theaters. I was just curious, how should we think about the risk of future rent reductions or deferrals, in general, for the theaters at this point.

Do you think that that risk is largely off the table? Or is there still some potential risk there moving further into '21?

Greg Silvers -- President and Chief Executive Officer

Again, Todd, I think what I can say is we have -- we've entered into agreements with most -- well, with all of our major theater tenants. And so we feel pretty good about where we're at. Now again, now when you get into the crystal ball and how the rest of the year and vaccine deployment and how quickly it ramps up, I think the -- we don't know. I mean what I can tell you is where we sit right now, we feel pretty good about where we positioned ourselves with our major key theater tenants.

And we'll have to go from where we're at. But Greg, I don't know if you want to add anything to that?

Greg Zimmerman -- Chief Investment Officer

No, I think you covered it, Greg.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

OK. And then sorry if I missed this, but do you have any visibility on the reopening of your Regal theaters? Do you have a sense for what the time line is like at this point for them to reopen their theaters?

Greg Silvers -- President and Chief Executive Officer

I think, Todd, it's going to flow with product flow. As we see, in the second and third quarter, products start to flow, I mean they've been fairly consistent with their comments that if there's product, they're going to open up. I think they mentioned they could be open within two weeks when product begins to flow. So I think they're -- they've just made the decision up to now that from a cost effect standpoint, it's cheaper for them to be closed without product and respond very quickly.

So I think, as Greg pointed out, we see that product begin to flow in spring, that's consistent with kind of dates kind of firming and hardening up. And I think you'll see them kind of respond to that with opening schedule.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

OK. And then, Mark, I think you said Kartrite is scheduled to open this summer. I think previously the open was intended to be around April 1st. Can you just provide an update there? Is there anything concrete at this point that you can share?

Mark Peterson -- Chief Financial Officer

Greg Zimmerman, do you want to take that one? I think what -- it's moved from April to kind of more of a June type of kind of early summer, but Greg, I'll let you comment on that.

Greg Zimmerman -- Chief Investment Officer

Yes, that's right, probably June. And it's almost all related to the pace of the reopening schedule in New York state. So that's what we're planning on.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

OK. All right, great. Thank you.

Greg Zimmerman -- Chief Investment Officer

Thanks.

Operator

I'm showing no further questions at this time. I would now like to turn the call back over to Greg Silvers.

Greg Silvers -- President and Chief Executive Officer

Thank you all for joining us today. Again, as I said earlier, we're really excited about putting 2020 behind us. We look at -- we're enthusiastic and optimistic about 2021. And we look forward to talking to you on our completion of our first quarter and talking about our results then.

So everyone, stay safe and healthy. Thank you. Bye-bye.

Greg Zimmerman -- Chief Investment Officer

Thank you.

Operator

[Operator signoff]

Duration: 61 minutes

Call participants:

Brian Moriarty -- Vice President, Corporate Communications

Greg Silvers -- President and Chief Executive Officer

Greg Zimmerman -- Chief Investment Officer

Mark Peterson -- Chief Financial Officer

Ki Bin Kim -- Truist Securities -- Analyst

Anthony Paolone -- J.P. Morgan -- Analyst

Rob Stevenson -- Janney Montgomery Scott -- Analyst

Katy McConnell -- Citi -- Analyst

Joshua Dennerlein -- Bank of America Merrill Lynch -- Analyst

John Massocca -- Ladenburg Thalmann -- Analyst

Todd Thomas -- KeyBanc Capital Markets -- Analyst

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