EPR Properties (EPR) Q2 2023 Earnings Call Transcript

EPR Properties (EPR -0.32%)
Q2 2023 Earnings Call
Aug 03, 2023, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the Q2 2023 EPR Properties conference call. [Operator instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Brian Moriarty, vice president of corporate communications.

Please go ahead.

Brian Moriarty -- Vice President, Corporate Communications

OK, great. Thanks for joining us today for our second quarter 2023 earnings call and webcast. Participants on today's call are Greg Silvers, chairman and CEO; Greg Zimmerman, executive vice president and CIO; and Mark Peterson, executive vice president and CFO. I'll start the call by informing you that this call may include forward-looking statements as defined by 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. The discussion of these 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 continue references to certain non-GAAP measures, which we believe are useful in evaluating the company's performance. A reconciliation of these measures to the most directly comparable GAAP measures are included in today's earnings release and supplemental information furnished to the SEC under Form 8-K.

If you wish to follow along, today's earnings release, supplemental and earnings call presentation are all available on the Investor Center page of the company's website, www.eprkc.com. Now I'll turn the call over to Greg Silvers.

Greg Silvers -- Chairman and Chief Executive Officer

Thank you, Brian. Good morning, everyone, and thank you for joining us on today's second quarter 2023 earnings call and webcast. During the quarter, our top-line revenue grew approximately 8%, and our FFO as adjusted per share grew approximately 9% versus the same quarter prior year. These results were driven by both a continued strong recovery in our experiential properties and consistent deferral collections.

As we announced on June 28, finalizing the Regal restructuring agreement was a significant step in strengthening our theater portfolio and enhancing our overall company profile. The agreement provides us with significantly -- with a significantly stronger tenant, a long-term master lease, and a percentage rent component, allowing us to participate in a recovering box office. This resolution, we also have more visibility into our earnings outlook, and we're pleased to provide earnings guidance for 2023. Also, as recently announced, Southern Theatres was acquired by Santikos Theaters.

Southern was our fourth-largest theater tenant. And as part of the acquisition, we repaid the remaining deferred rent. This transaction demonstrates renewed confidence in theatrical exhibition and strengthens our theater tenant base. Over the last few weeks, we've witnessed the power of theater exhibition and the validation of studios Apple and Amazon to commit to theatrical exhibition as the primary distribution platform for movie content.

The combination of Barbie and Oppenheimer has become a societal event which has transcended consumer demographics. Separately a low-budget Sound of Frequent blue away box-office expectations, generating over $150 million year to date. This type of outperformance is hard to predict for any single film, yet over time, it is proven to be a consistent occurrence for select films. Through July 31, box office is up 20% versus 2022 and is currently tracking toward $9 billion for 2023.

The writer and actor strikes present a fluid dynamic and may impact box office, depending on the length of time to resolution. In a bit of a positive sign, it has been reported that the Writers Guild in the studios have agreed to meet this Friday, which they have not done for three months. Regardless of this near-term dynamic, any impact is anticipated to be short term as the participants understand that a robust theatrical business is a necessary part of the landscape, providing the primary path to economic viability for movies. Shifting to capital spending, we've completed approximately $100 million of investments to date and are selectively growing our experiential portfolio while being prudent in our capital allocation.

Additionally, we've committed to approximately $224 million of additional experiential development and redevelopment projects over the next two years for which we already have the necessary capital. Now, I'll turn it over to Greg Zimmerman for more details on the quarter.

Greg Zimmerman -- Executive Vice President, Chief Investment Officer

Thank you, Greg. Today, I will discuss our financial performance for the second quarter, provide an update on our balance sheet, and close with providing 2023 earnings guidance. We had another strong quarter of results with FFO as adjusted of $1.28 per share versus $1.17 in the prior year, up 9% and AFFO $1.31 per share, compared to $1.23 in the prior year, up 7%. Now moving to the key variances by line.

Total revenue for the quarter was $172.9 million versus $160.4 million in the prior year. This increase was due to improved collections from cash-basis customers, the effective acquisitions and developments completed over the past year, as well as scheduled rent increases. During the quarter, we collected a total of $7.8 million of deferral payments from customers, of which $7.3 million was from those on cash-basis accounting that was recognized as additional revenue. Per court order, we also received an additional stub payment from Regal related to September 2022 minimum rent of approximately $0.7 million that was recognized as additional revenue this quarter.

I will discuss how we expect cash-basis deferrals in Regal's bankruptcy settlement on July 31 impact the remainder of this year in 2024 when I go over guidance. Percentage rents for the quarter increased to $2.1 million versus $0.5 million in the prior year, primarily due to improved performance at One Ski property. On the expense side, G&A expense for the quarter increased to $15.2 million versus $12.7 million in the prior year, due primarily to higher professional fees, including those related to the Regal resolution, as well as higher payroll costs, including noncash, cash share-based compensation expense. During the quarter, we recognized an impairment charge of $43.8 million, primarily related to eight of the properties surrendered by Regal based on third-party appraisals.

This charge is excluded from FFO as adjusted. Interest expense net for the quarter decreased by $1.7 million compared to prior year due to an increase in interest income on short-term investments and an increase in capitalized interest on projects under development. Lastly, FFOs adjusted from joint ventures for the quarter was $1.5 million versus $3.4 million in the prior year. The decrease was due primarily to non-recurring government incentive received in the prior year at our experiential lodging properties in St.

Petersburg, Florida, as well as higher interest expense resulting from the refinancing of these properties last year. Turning to the next slide, I'll review some of the company's key credit ratios. As you can see, our coverage ratios continue to be strong with fixed charge coverage at 3.5 times and both interest and debt service coverage ratios at 4.1 times. Our net debt to adjusted EBITDAre was five times, and our net debt-to-gross assets was 39% on a book basis at June 30.

Lastly, our common dividend continues to be very well covered with an FFP payout ratio for the second quarter of only 63%. Now, let's move to our balance sheet, which is in great shape. At quarter end, we had consolidated debt of $2.8 billion, all of which is either fixed-rate debt or debt that has been fixed through interest rate swaps with a blended coupon of approximately 4.3%. Additionally, our weighted average consolidated debt maturity is under five years with no scheduled debt maturities in 2023 and only $136.6 million due in 2024.

We had nearly $100 million of cash on hand at quarter end and no balance drawn on our $1 billion revolver. The Regal resolution behind us, we are pleased to provide 2023 FFOs adjusted per-share guidance of $5.05 to $5.15, representing an increase of approximately 9% at the midpoint of -- versus 2022. As we have discussed previously, given our cost of capital and the current inflationary environment, we have consciously decided to limit our near-term investment spending and fund these investments primarily with cash on hand and operating cash flow, as well as disposition proceeds and borrowings under our unsecured revolving credit facility. Accordingly, we are confirming our 2023 investment spending guidance range of $200 million to $300 million, and we do not anticipate the need to raise additional capital to fund these amounts.

Disposition proceeds guidance for 2023 is $31 million to $41 million, and we have increased guidance for percentage rent by $1.5 million at the midpoint, primarily due to better performance of the ski property I discussed previously. Note that, as in prior years, percentage rent is heavily weighted to the fourth quarter. Also note, as discussed in our recent call, that none of the percentage rent expected for 2023 relates to the new Regal master lease, which is based on lease year and is expected to be recognized in 2024. Additionally, we are raising G&A expense guidance by $1.5 million at the midpoint, due to higher professional fees, including those related to the Regal resolution, and to a lesser extent, higher payroll costs, primarily due to incentive compensation.

I also thought it'd be helpful to summarize our expectations for deferral collections and certain other amounts to be recognized as revenue in 2023 and included in our guidance, as well as our expectations for these amounts for 2024. As you can see on the slide, we expect to recognize a total of approximately $35.7 million in 2023 for cash-basis deferral collections, Regal stub rent, Regal prepetition related to the master lease properties for the period from September 1 to September 6, 2022, and the lease termination fee for an education tenant that Greg described. Most of the $19.3 million estimated for the second half of 2023 is expected to be recognized as revenue in the third quarter, due primarily to the collection of the entire remaining deferred rent from Southern Theatres of $11.6 million in connection with the sale to Santikos, as well as those amounts related to Regal's bankruptcy resolution. While additional amounts may be received not shown on the slide related to our rejection damages with Regal that are treated as an unsecured claim, we expect any such amounts will be nominal.

With Regal's bankruptcy resolution and the full deferral repayment by Southern, the deferred rent receivable not on our books, excluding the amount held in advance related to Regal, is reduced to approximately $12.9 million. Of this amount, a $11.5 million relates to one cash-basis attraction tenant whose repayment timing is based on an earnings threshold, which is not expected to be achieved in 2023. The remaining amount of approximately $1.4 million relates to two cash-basis tenants that are paying according to agreed-upon schedules through 2024. And thus, the amounts to be recognized in the fourth quarter and next year for these tenants are expected to be nominal as shown on the slide.

Finally, I want to remind everyone, given that Regal's master lease was effective on July 31, this tenant was moved to accrual basis at that time. As discussed on our previous call, we expect the five theaters surrendered by Regal that we will operate will break even over the remainder of 2023, and this is what is included in the midpoint of guidance. Furthermore, we have also included in guidance the anticipated carrying costs for the 11 surrendered theaters that we intend to sell over time, which will be reflected in property operating expense. Guidance details can be found on Page 24 of our supplemental.

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

Greg Silvers -- Chairman and Chief Executive Officer

Thank you, Mark. As I stated in my opening comments, we are pleased to have delivered a favorable Regal outcome, which, combined with the Santikos acquisition, means that the three of our top four cinema tenants now have very high-quality balance sheets with minimal risk. Given these improvements in credit, the continued success of our non-cinema portfolio, and the demonstrated consumer preference for out-of-home entertainment, we continue to believe that EPR offers a very attractive value for investors with a well-covered dividend and an opportunity for multiple expansion. With that, why don't I open it up for questions? Theresa?

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question comes from Josh Dennerlein of BofA. Your line is open.

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

Yes. Hey, everyone. Good morning.

Greg Silvers -- Chairman and Chief Executive Officer

Good morning, Josh.

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

I just wanted to ask about the writers' strike. At what point would the strikes start to impact your portfolio or the movies being released? I'm just trying to curious if there's any risk to 2023 box office within the strike and certain restrictions around the accessibility to market during the strike.

Greg Silvers -- Chairman and Chief Executive Officer

Josh, what we know right now is there has been limited title movements yet. Again, it's -- it could be a potential if we see -- I mean, the product that we've seen for the balance is generally done for '23, but it really begins with studios if they're going to move product, either, one, to be supported promotionally by the actors; or two, if they have any last minute kind of reshoots. So it's really in the purview of the studios, so we don't know right now. I think the only what we would call bigger title.

We've had one move that we're aware of. Everything else right now is standing pat. Hopefully, as we've talked about, as there is beginning to be some discussions that that will prove very fruitful, and we can quickly move to kind of resolution of this and have little to no impact. But, Greg, I don't know if you have --

Greg Zimmerman -- Executive Vice President, Chief Investment Officer

No, I think you've covered it, Greg.

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

Thanks for that. And for 2023 guides, sorry if I missed this, is there any percentage rent included in your guidance range for the back half of the year?

Greg Silvers -- Chairman and Chief Executive Officer

Yes, yes. Oh, yes. For the back half of the year, yes, we said that for percentage rents for the year are going to be $12 million. And as I said, percentage rent, as it has been historically, is kind of heavily weighted to the fourth quarter.

So we expect about 50% of it in the fourth quarter, and the remainder of what wasn't recognized in the first six months to be in the third quarter. So yes, there's definitely percentage rents in the back half. None related to Regal, if that was your question, those -- that percentage rent is based on lease year, and we expect that to hit next year, depending on box office.

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

OK. Perfect. Yes, that was what I was trying to get at. Appreciate it.

Greg Silvers -- Chairman and Chief Executive Officer

Thanks, Josh.

Greg Zimmerman -- Executive Vice President, Chief Investment Officer

Thanks, Josh.

Operator

Thank you. Our next question comes from Todd Thomas with KeyBanc Capital Markets. Your line is open. Mr.

Thomas, your line is open.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Yes, hi. Sorry about that. Just first question, so appreciate the detail in the earnings slide around the deferred rent payments and other revenue collections in the third quarter and really through 2024. So just to be clear, so after the incremental $11 million you expect to see in 3Q or $0.14, the decrease in 4Q versus 3Q that you're anticipating, that gets us to a relatively clean run rate in the fourth quarter as we think about 2024.

Is that the right way to think about it in terms of the non-recurring items? It'll just leave us with a pretty clean run rate beginning in fourth quarter of this year.

Greg Silvers -- Chairman and Chief Executive Officer

Correct. We only expect about $300,000 to impact as far as deferral is kind of out-of-period stuff to impact the fourth quarter. I think the fourth quarter will give you a clean run rate. But remember, we have some seasonal businesses and so forth and percentage rents heavily weighted to fourth quarter.

So there's other adjustments, rather than just taking it times four to do, but it is a clean number as far as deferrals and stub payments and so forth. And like I said, only a very small number expected to be recognized in Q4.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Got it. OK. And then can you comment a little bit more on the theater sales? It sounds like there is interest from other existing theater operators. I'm just curious if you can discuss the potential timing and how we should think about those carry costs sort of coming off-line.

Greg Zimmerman -- Executive Vice President, Chief Investment Officer

Sure, Todd. It's Greg. So historically, over the last two-and-a-half years, we've sold 10 theaters, six of those were for non-theater use, four for theater use. So that kind of gives you the goalpost.

We needed to wait to market these because Regal hadn't notified the individual theaters that they were closing, and we wanted to be mindful of their employees, etc. So we really only started hard marketing last week, but we were out soft marketing before. I'd say of the 11, we've had interest of some sort in about eight. We're already approaching labor days, so the idea of being able to get something closed this year might be difficult given the timing of real estate transactions.

But I would expect we'll start to see a cadence toward the end of this year and into next year for selling those. And again, if you look at the run rate over the last two-and-a-half years, we saw about three or four a year.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

OK. And do to the discussions that you're having, negotiations at all, are they impacted at all by the strikes that are ongoing right now? Or is that not really a consideration? And then separately on the strikes, Greg, I'm just curious. To the extent that there is a resolution here, if the strikes are extended a little bit further here but you get a resolution, I mean, how quickly does production reramp and the release schedule get back on track to the extent that there are some delays here? Any sense there?

Greg Silvers -- Chairman and Chief Executive Officer

So, Todd, I'll take the first part, and then I'll let Greg answer the second part. Actually, I would say the answer is there's zero impact from the strike. As Greg mentioned in his remarks, the fact that Santikos was willing to buy Southern clearly shows that people are seeing the continued recovery of theatrical exhibition. And obviously, that's amplified by the just unbelievable success of Barbie and Oppenheimer, which, just as I said before, record shattering.

So we actually have quite a bit of interest from theatrical exhibitors for some of these theaters.

Greg Zimmerman -- Executive Vice President, Chief Investment Officer

Yes. I'll echo Greg's comments. I don't think it's actually -- but I think most people in the industry are seeing this as a short-term issue. I mean, if you think about, these have occurred periodically, I think they're more encouraged by all the studios' commitment to theatrical and how it has bounced back.

And I would say there's probably more rather than less optimism right now in the theater space. As far as turning it on and ramping up new production is really about probably right now in the latter half of '24 and '25. Most everything through the first half of '24 is in post production, and so there's just kind of small minor reshoots or voiceover or promotional aspects of it. So I would think we believe that really, right now, if we solved it sooner rather than later, we'd have minimal impact on '24.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

OK, great. Thank you.

Greg Silvers -- Chairman and Chief Executive Officer

Thanks, Todd.

Operator

Thank you. Our next question comes from Eric Wolfe with Citi. Mr. Wolfe, your line is open.

Eric Wolfe -- Citi -- Analyst

Hey, thanks for taking my questions. So I understand your comment about the restructuring agreement not providing any sort of extra percentage rent from Regal this year. But just to confirm that the $12 million that's in your number, that doesn't include any sort of Regal contribution whatsoever. And then if I were to think about -- let's just say the box office next year is $9.4 billion, in line with that presentation you put out, is all of the Regal percentage rent and all of that extra operating income sort of incremental to 2024 or some of that being included in the 2023 guidance?

Greg Silvers -- Chairman and Chief Executive Officer

So none of the percentage rents or operating theater profit is in '23 guidance because the percentage rents, it really will hit sort of second and third quarter next year. And as far as operating theater, while there could be some profitability, we're budgeting that or including in our guidance sort of a breakeven amount this year. And then as Regal transitions to both Cinemark and Phoenix and then as we go into next year though, we definitely expect those to be profitable. And I think in our presentation, we said to the tune of about $6 million.

So none of that's in this year and should hit next year.

Eric Wolfe -- Citi -- Analyst

OK. All right. So I'll -- yes, right now effectively mean it's incremental to it. But -- so if I think about that, the $9.4 million box office, I'm just curious, you outlined in your presentation like $14 million in percentage rents and operating income that would come from that.

I'm talking about the restructuring agreement presentation you put out before. I guess how much variability could there be around that number, assuming there's a $9.4 billion box office? Could that be $10 million or $18 million? Just curious if you assume a certain box-office level, how much variability there would be around some of those numbers? Thanks.

Greg Silvers -- Chairman and Chief Executive Officer

Yes. I think you mentioned a $14 million number that's the deferral and stub payments for '23 in our presentation for Regal. The number we put at that box office of around $9.4 million was $8.7 million --

Greg Zimmerman -- Executive Vice President, Chief Investment Officer

And he's combining the two, $8 million and the $6 million.

Eric Wolfe -- Citi -- Analyst

Oh, the $6 million. OK, gotcha. So first of all, I think one of the benefits is we set that number basically at trailing 12 months, I think, 2022.

Greg Silvers -- Chairman and Chief Executive Officer

Yes. I mean, again, it should be as far as variability. The percentage rent is -- was really based upon Regal maintaining their current market share. So again, there was no -- so could it go up or down? But historically, if you look over years, they've had that market share.

Now they've closed some theaters, so there could be that traffic's going to move to other places, so we could see a little bit of up in that. I would say the variability is going to be in the operating theaters. I mean, again, these are new theaters for these guys to operate. They -- now the good thing is they're getting their hands on them now, and we didn't budget anything.

So they've got four or five months to get their hands on. But we worked with them to kind of come up with those numbers. But I -- so I think if the box office delivers it, it's -- I think we're in good shape there.

Greg Zimmerman -- Executive Vice President, Chief Investment Officer

We put together a schedule in our Regal presentation that kind of showed that variability. So if box office, for example, was at $9.4 million, it was $9 billion. percentage rents instead of $8.7 million is $7.1 million in profitability of the operating theaters. You can see that variability on the chart that we showed in our Regal presentation to kind of vary based on box office.

Now as Greg said, there's other things that could impact the individual performance of theaters versus box office, but the primary indicator of performance for both the percentage rents and operating theater profit is box office.

Eric Wolfe -- Citi -- Analyst

Got it. That that's very helpful. Thank you.

Operator

Thank you for your question. Our next question comes from R.J. Milligan with Raymond James. Your line is open.

R.J. Milligan -- Raymond James -- Analyst

Hey, good morning, guys. So I'm going to take a different stab at the box-office projection questions. But on Slide 7, you guys show the projections for -- it's the median, I guess, for multiple analysts for the box-office projections for '23 and '24, $9 billion and $9.8 billion. I'm curious if you've seen any movement in sort of that mean estimate for '23 or '24, just giving what's going on with the writers' strike.

And I'm curious, and I think Josh asked this question, but how long before you adjust your own internal projections of -- I think it was $9.4 billion for the lease year and $9.8 billion for 2024 to sort of get to your numbers? How long does the strike need to last before you relook at those estimates and say maybe we need to take those down?

Greg Silvers -- Chairman and Chief Executive Officer

Yes. I think, again, I think right now, I'll take the second part of that. First is the $9.4 billion is really about -- that runs from kind of July 31 to next year. As long as we don't see a lot of titles move, that number feels pretty good.

Because if you think about -- that's the first half of the -- last half of this year and first half of next year. So I would say the risk is -- if it is prolonged is to the $9.8 billion, that meaning the second half of next year. But I still think that we feel that the good thing, R.J., is this trajectory is probably at risk of just balancing out, meaning that if we have -- if we thought it was going to be $9 billion and $9.8 billion that it balances to $9.2 billion on both. If you look at currently what's going on, we're not making any changes, because as I said, we've really had one film that we're aware of, of any meaningful expectation that's moved.

And we've had such outperformance to date that we've overcome that. So this year's numbers, we haven't seen really a lot of people move. But if anything, people probably would be moving their number up this year, but they're kind of holding it right now. But, Greg, do you have any?

Greg Zimmerman -- Executive Vice President, Chief Investment Officer

No, I agree. I mean, I think, R.J., the critical point is that whatever movie might have moved has been more than offset by the outperformance of Barbie, Oppenheimer, and --

Greg Silvers -- Chairman and Chief Executive Officer

Sound of Freedom.

Greg Zimmerman -- Executive Vice President, Chief Investment Officer

Sound of Freedom. Thank you. Sorry, yes.

R.J. Milligan -- Raymond James -- Analyst

Got it. But the Barbenheimer duo is not -- would not be in your lease year for renewal when you --

Greg Zimmerman -- Executive Vice President, Chief Investment Officer

Yes. Some of it will be. I mean, right now, we're in the last week -- we're in the Barbenheimer period. And as Greg noted, second highest weekend ever.

So there's still -- we're still benefiting -- again, anytime -- if you talk to somebody in the industry when you're in August, and you have -- even this weekend where we're going to have probably between those two approaching $100 million or over $100 million out of those two films this weekend is a really strong August.

Mark Peterson -- Executive Vice President, Chief Financial Officer

Plus Teenage Mutant Ninja Turtles.

Greg Zimmerman -- Executive Vice President, Chief Investment Officer

Yes. So I mean, we're probably easily going to have above $150 million top 10 film weekend. This is -- would be great in any August.

R.J. Milligan -- Raymond James -- Analyst

Thanks. That's helpful. I want to -- I think it was Todd that commented on the clarity on the deferral and other revenue collections. So that's very helpful.

Thank you. But, Mark, I'm thinking about sort of the 2023 guidance and bridging to 2024. I think that you're going to see, at least according to this, it's about $35 million of lower stub and deferral payments expected '23 versus '24. And then there's, I think, a $17.8 million reduction in a Regal rent.

So that's about $52 million that's going to be coming out of '23 as we look into '24, and then what you need to add back is the operating theater profit and then the percentage rents. What else am I missing?

Mark Peterson -- Executive Vice President, Chief Financial Officer

Yes. Let me take that a little differently because I think maybe the Regal part of that might have been a bit overstated. So if you take the $510 million guidance this year, as you mentioned, we have $35.7 million, most of which is non-recurring, that's worth about $470 million, gets you to $463 million. As far as Regal, if you think about it, we had once you get rid of all those deferrals, which I just did in stub payments and so forth, you end up with really we had seven months of full income in '22 that we don't expect in '23 because the last five months will be the same for both periods.

So you have seven months. So if you take those seven months, it was around $7.3 million a month is what the old rent used to be, and you take about 22% of that because that was the base rent cut, that's worth about $11 million year over year. So base rent going down $11 million. And then you have to add to that, what you said, the percentage rents, let's call that $8.7 million.

We'll take a look at that as we give guidance in February, but that's what we put out, and it seems to be tracking. And operating theater property profits of another $6.3 million, that's $15 million going the other way. So it's actually -- once you back out deferrals and all those noise for Regal, Regal is actually going up next year, again, subject to box office, up about $3.7 million. And then as we mentioned, we're also putting Regal on accrual basis accounting, which is worth about another $2.5 million.

So kind of a $6.2 million increase for Regal. So again, you take the $510 million, subtract the $47 here at $463 million, add in about $0.08 million for the Regal impact, you're kind of sitting at $471-ish million before any growth from this year and next year and all the other puts and takes in G&A and so forth. But that kind of gives you a sort of a starting point.

R.J. Milligan -- Raymond James -- Analyst

That's very helpful. That's it for me, guys. Thank you.

Mark Peterson -- Executive Vice President, Chief Financial Officer

Thanks, R.J.

Operator

Thank you. Our next question comes from Michael Carroll with RBC Capital Markets. Your line is open.

Michael Carroll -- RBC Capital Markets -- Analyst

Yes, thanks. I guess not to belabor the writers' strike, but Greg Silvers, I believe on the June call that you highlighted that if the writers' strike was resolved in 40 to 50 days post that end of June call that there'll be middle to -- minimal to no impact. I guess that would put us into mid-August. So I mean, if we get in through mid-August, and this is not resolved, is that when we should start thinking about this could be having an impact on some of these movie delays?

Greg Silvers -- Chairman and Chief Executive Officer

Yes. I mean, I think we're still consistent with that. And I think what I said was that we thought it's really -- we still believe that it's later in 2024. Now they could move titles.

And remember, we're just moving titles from '23 to '24. And as we see outperformance in '23, if studios want to derisk some of that, they can move that kind of into '24. But I think as we move into the August and September timeframe is when we will start to see if titles are moving. And if or if there's progress in the discussions and they are -- don't feel or they feel that they're good on track.

But, Greg, I don't know if that's consistent with what you think. But -- so I think that logic still holds, Michael.

Michael Carroll -- RBC Capital Markets -- Analyst

OK. That's sounds good. And then the way that we should think about, too, is, I mean, obviously, you have leases that a lot of these theaters, so you're not -- that's not going to impact it, but like the Regal percentage rents, your operating theaters, that's going to be impacted. How much percentage rents do you have outside of that Regal restructuring that could be impacted by some of those movements?

Mark Peterson -- Executive Vice President, Chief Financial Officer

It's very minimal. Our percentage rent, for example, this year is non-theater related.

Michael Carroll -- RBC Capital Markets -- Analyst

OK, great. and then going to back to the investment market, I know you talked a little bit about the 11 assets held for sale, but what about the value for like the high-quality theaters? I mean, is there a market forming where you could potentially sell some of your higher-end type assets, theater assets? Is there starting to be interest out there?

Greg Silvers -- Chairman and Chief Executive Officer

I think there's always. And I think, as Greg talked about, some of these 11 that we'll take -- will probably be sold as theaters. But it's always about highest and best use. And if you look at what the theater that we sold this year, that Greg just reported on, even though it's going to a non-theatre use.

This was , based on previous rents, a low single-digit cap rate that we achieved on that. So I think it's truly about -- and Greg and his team and our asset management team trying to just determine what is the highest and best use. It's always nice as we're starting to see now theater operators come in and starting to bid these properties, but it's the juxtaposition of, OK, does it have a higher and better use and we can put non-theater use versus theater use as competing bids.

Greg Zimmerman -- Executive Vice President, Chief Investment Officer

Yes. And, Michael, to the extent you're talking about selling theaters as theaters for cash flow, we're starting to see some green shoots there. And again, I think the fact that Santikos was willing to buy Southern shows that the theatrical exhibition business is recovering nicely.

Michael Carroll -- RBC Capital Markets -- Analyst

OK, great. Thank you.

Operator

Thank you. Our next question comes from Jyoti Yadav from JMP Securities. Your line is open.

Mitch Germain -- JMP Securities -- Analyst

Hey, guys. It's Mitch here, I think a lot of the Regal and other topics have been covered. I was curious a little bit about some of the dispositions. Greg, I think you said that there were the vacant assets, but I'm curious about potentially considering maybe some non-core or even core dispositions here, in this environment on top of kind of what you're doing with KinderCare and Regal.

Greg Silvers -- Chairman and Chief Executive Officer

Again, like I said, we'll always consider those things. I think we had a lot going on with resolving Regal and getting this and think about we had our fourth largest tenant just changed hands. So over the quarter, we've had a lot going on. I think we've got quite a few dispositions that we're managing right now, but we're going to look at all of those things, Mitch, as we kind of remove the overhang that was a parent for the first half of the year.

But kind of as we go forward, you start to look at some of the things we're talking about. And as I said, our three of our four largest theater tenants now, we're -- if you look at Regal better, we've been talking about that they're going to come out on a sub-3 balance sheet kind of debt to EBITDA. But if you look at the proformas that they presented in their balance, they're actually going to come out sub-2. And we're talking about a Santikos that now may have little to no debt in their entire structure.

So I think, overall, we have spent a lot of time getting that theater portfolio. And Greg and his team and Mark and his team are getting these things into a position that we have fantastic theater tenants into a rising and recovering box office. So I think that was our focus in getting those things right. And now as we move forward, we've got an opportunity to create additional capital.

As Greg has talked about many times, we have good opportunities. And we'll start kind of balancing all of those things out to, whether it's some of our operating education, which Greg relied, is performing very well. And some of these other assets we have a stated intent and continued belief to lower our theater exposure. And as that market comes back and as we're starting to see capital flow into exhibition, we're going to see more and more opportunities.

So we're very encouraged about not only our to raise capital but the ability for the market to recognize the improvements that have been made not only in terms of the exhibition world but in the terms of the quality of the tenants that we have now relative to their -- relative to that recovery. And I think it'll create opportunity. But Greg?

Greg Zimmerman -- Executive Vice President, Chief Investment Officer

I think that's right.

Mitch Germain -- JMP Securities -- Analyst

Great, last one for me. I know that you guys went over some of the puts and takes from '23 to '24. I'm curious how much G&A in '23 was allocated to Regal that kind of doesn't recur heading into '24?

Mark Peterson -- Executive Vice President, Chief Financial Officer

Yes. It's probably around a couple of million dollars actually that was kind of prolonged, and a lot of work went into that. So we do expect G&A to come down next year.

Mitch Germain -- JMP Securities -- Analyst

Thank you.

Greg Silvers -- Chairman and Chief Executive Officer

Thank you, Mitch.

Operator

Thank you. I'm showing no further questions at this time. So I would now like to turn the conference back to Greg Silvers for closing remarks.

Greg Silvers -- Chairman and Chief Executive Officer

Thank you, Theresa, and thank you, all, for joining us. Again, we look forward to talking to you in the coming months. And as always, if you have any questions, be sure to reach out. So thanks, everyone, and have a great day.

Bye-bye.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Brian Moriarty -- Vice President, Corporate Communications

Greg Silvers -- Chairman and Chief Executive Officer

Greg Zimmerman -- Executive Vice President, Chief Investment Officer

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

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Eric Wolfe -- Citi -- Analyst

R.J. Milligan -- Raymond James -- Analyst

Mark Peterson -- Executive Vice President, Chief Financial Officer

Michael Carroll -- RBC Capital Markets -- Analyst

Mitch Germain -- JMP Securities -- Analyst

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