Shares of real estate investment trust (REIT) EPR Properties Trust (NYSE:EPR) fell roughly 15% in September according to data from S&P Global Market Intelligence. The stock was lower by about 60% through the first nine months of the year. While that's better than the around 80% drop it experienced during the early 2020 bear market, things are obviously still tough for this REIT.
Like many REITs, EPR Properties Trust has had a hard time collecting all of the rent it's owed during the global pandemic. It's been really bad, with the most recent update on collections highlighting that while customers representing 90% of the company's rent roll have reopened for business, EPR still only managed to collect 35% of its contractual rent in August. Not surprisingly, the REIT hasn't paid a dividend since April, which is a huge negative since the REIT structure is specifically designed to generate income for investors.
The problem is that EPR Properties Trust is built around entertainment assets like movie theaters and amusement parks. Experiential assets make up nearly 90% of its rent roll, which is a big issue during a global pandemic that's kept people at home and has resulted in governments forcing non-essential businesses, like those EPR houses, to shut down. Things are not getting any better, either, as COVID-19 cases are on the rise again.
Of particular note here is that about half of the REIT's rents come from properties tied to the movie theater business. This sector has been facing increasing strain as movie makers continue to push out major releases. September, in fact, was another month of bad news for movie theaters.
EPR Properties Trust is probably best viewed as a turnaround stock at this point. That's an investment approach that should be left to more aggressive investors. Although there's probably material recovery potential, what happens from here is still highly uncertain. Income investors, meanwhile, would be better off looking at REITs that have managed through the COVID-19 hit without a dividend cut, like W.P. Carey.