Why Has EPR Properties Performed So Well in 2021?

We're less than six weeks into 2021, and EPR Properties (EPR -0.10%) has already gained 20%. There are a few potential explanations, but good news from its top tenant, AMC Entertainment (AMC), is probably the biggest factor. In this Fool Live video clip, recorded on Feb. 2, Fool.com contributor Matt Frankel, CFP, talks with fellow contributor Brian Feroldi and Industry Focus host Jason Moser about the entertainment REIT's strong performance. 

Matt Frankel: Ed says, "What do you think about EPR? Will it turn the corner?" They're talking about EPR Properties; ticker symbol is E-P-R there. The entertainment read. They're a big TopGolf landlord. They have some ski resorts, some of those indoor waterparks. Unfortunately these days, movie theaters. EPR, they're not heavily short of stock, believe it or not. They got a big lift last week because AMC is their biggest tenant. AMC got a big lift last week. Honestly, out of all the short squeeze stocks, AMC is doing the best job of taking advantage of the situation. They raised capital at least once last week. I said GameStop's (NYSE: GME) insane if they don't sell new shares at $300 a pop.

Jason Moser: I'm not sure why they're not doing that. I can't figure that out. Maybe they just know they know; they're probably like eh, you know.

Frankel: I get it. [laughs] I mean, AMC has to know that it's not worth $20 a share.

Moser: I know.

Frankel: But they're still doing some secondary raises and things like that to whittle down their debt. Well, first, earlier in the week, they said bankruptcy is off the table, which is what led to them being involved in this first squeeze, in my opinion. A lot of people said they were going to go bankrupt; they've now raised enough money they don't have to. Now, they're able to sell shares at five times what they are worth to be able to pay down their debt. That's a pretty fortunate environment. They're doing a good job of taking advantage.

That's why you're seeing EPR get this nice lift, because AMC is, all of the sudden, looking like it's not going to go bankrupt. Not only that, but they're in a better financial shape than we would have originally thought. EPR's getting a lift because of that. I think EPR will be just fine long term. People want to get out and do stuff and that's what their whole business is based around. Their balance sheet looks great; they have a ton of cash on hand; they have enough money that even at the March and April 2020 rent collection rates; they could have lasted for five or six years. Their rent collection's picked up considerably since then.

EPR, their business is doing fine. There's a lot of unanswered questions when it comes to the movie theater portion of their portfolio, even now that we know AMC is not going bankrupt. Are people still going to go to movie theaters as much as before?

Moser: What do you think about that? Do you think people will?

Frankel: I want to see what happens after 2021, because in 2021, you're going to see a lot of movies get released direct to consumer, like through HBO Max, for example. They're already planning a bunch of direct releases. Disney (NYSE: DIS)+ is another one doing that. If that continues, then movie theaters may take a hit long term. I want to see movie theaters really repurpose their space.

I see Brian, and I'll shut up in a second to let him talk. [laughs] It's insane that movie theaters haven't figured out how to host live sporting events there. Why you can't have a Super Bowl party at your AMC? That would fill every seat. A UFC party or something like that. Repurpose the space to do other things that people want to gather and watch. Don't just show movies.

Brian Feroldi: I get involved in esports in some way. That would sell out stadiums.

Frankel: Have a massive esports night once a week at your local AMC. That would put a ton of people in the seats. I don't know why the movie theater industry hasn't thought a better job of pivoting. Hopefully, 2020 scares them into doing it.