EPR Properties (EPR) 2011 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third quarter 2011 Entertainment Properties Trust earnings conference call. My name is Jerras, and I will be your coordinator for today.

At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this call is being recorded for replay purposes.

And I would now like to hand the call over to your host for today, Mr. David Brain, President and CEO. Please proceed, sir.

Thank you, Jerras. Thank you all for joining us. This is David Brain. I'll start with our preface, usual preface as follows. And that is, this afternoon let me inform you that this conference call may include forward-looking statements defined by the Private Securities Litigation Reform Act of '95, identified by such words as will be, intend, continue, believe, may, expect, hope, anticipate, or other comparable terms. The company's actual financial condition, results of operations may vary materially from those contemplated by any such forward-looking statements. A discussion of the factors that could cause actual results to differ materially from those forward-looking statement contained in the company's SEC filings, including the company's report on form 10-K for the year ending December 31, 2010.

All right. With that said, again I'll say goof afternoon. Thank you for joining us for our earnings call for the third quarter 2011. This is David Brain, the company's CEO. With me to go through the news of the quarter, as usual, Greg Silvers, our company's Chief Operating Officer --

Good afternoon.

-- and Mark Peterson, our Chief Financial Officer.

Good afternoon.

And I'll start as I usually do with the headlines for Entertainment Properties Trust now for the third quarter of 2011. They're available via a webcast on our website if you'd like to see them as well, we have a few slides with pictures, and that's via eprkc.com.

Starting with those headlines, number one for the quarter is primary investment categories continued their robust out-performance trend, two, portfolio rework and renewal continue to progress, three, capital costs improved with new revolving credit line agreement and preferred stock redemption, and a fourth headline, earnings performance supports improved guidance for 2011, and a very positive outlook for 2012.

Now turning to that first headline, primary investment categories continue their robust out-performance trend. During the quarter, our portfolio progressed in a variety of ways. First, we continue to add to our primary investment categories, particularly with public charter school investments as we have guided. Greg has detailed of these additions, which are mainly build-to-suit projects, and entail investment spending over the next several quarters.

Also newsworthy is recent box office performance, as this affects nearly two-thirds of our investments directly or indirectly. Box office performance for the quarter was ahead of the same period of the prior year. Last call I reported progress made in reducing the deficit in box office revenues compared to the prior year from down 18% at the end of the first calendar quarter, to down only 8% at the end of the second quarter. I'm pleased to report that the healthy trend has continued and further progress was made in this regard. Recently the box offices outperformed last year, such that after the end of the third quarter, we are now only off approximately 3% compared to the prior year.

We expect this gap to continue to erode through the balance of the year such that we will finish either flat or up slightly in '11, compared with 2010. Beyond our primary investment categories, our water park investments concluded their operating season in fine fashion, with revenues above our agreed thresholds, such that we were able to enjoy additional income by means of our participation interest. More on this in the comments of others.

Turning to the second headline, portfolio rework and renewal continued to progress. We have, in prior calls, outlined a couple of tactical objectives, selling down our vineyard and winery investments and reinvigoring our -- reinvigorating our land investment in the New York Catskills. Progress was made this quarter on both items. We completed the sale of our vineyard and winery investment in Paso Robles, California, at just about the carrying value to which we had marked it last quarter.

Regarding our Catskills land holdings, we and Empire Resorts, along with MSEG, announced our joint selection of Hart Howerton Partners of New York City to be the master planners for the development of the former Concord Resort property, owned by EPR in Sullivan County, New York. This master plan is a key step in establishing a new vision for the revitalization of the former Concord Resort. We are excited about the path of progress forming to this asset, which we are hopeful contributes to earnings in 2012 and future periods.

Before I leave this topic of portfolio rework, I also want to point out the reopening of the one theater lease expiration to date that has not been extended by the incumbent lessee. The former Grand 24 in Dallas, Texas. Many of you might recall this as the original megaplex theater, [the standard what an AMC conceived] in the mid-'90s, and that started a revolution re-screening America, of which this company was born and prospered. Well, Greg will have the full project description. But overall, the theater is reopened and the project is on a very healthy course to contribute at a level commensurate with its 14-year history.

Our third headline today is capital costs improve with new revolving credit line agreement and preferred stock redemption. During the quarter we completed another major milestone of progress in connection with our investment grade ratings received last year. We renegotiated our revolving credit agreement for the first time since receiving our credit ratings, substantially improving it and lowering our cost of capital.

Also during the quarter we completed the redemption of our Series B preferred issue as outlined in our last call. This also lowers our cost of capital going forward. Mark will have details on this for you in just a moment.

And turning to our fourth and last headline this quarter, earnings performance supports improved guidance for 2011, and very positive outlook for 2012. I am quite pleased to report to you that this quarter's earnings lead us to improve our expectations and prior guidance. With $0.86 of FFO as adjusted per diluted share this quarter, we are on track to deliver toward the top end of our prior earnings guidance for the year [that] was between $3.35 and $3.42 per share. We now foresee achievement of between $3.37 and $3.42 for the year.

I'm also happy to report to you that our expectation for 2012 is an increase in comparable per share results of just over 4%. As always, we continue to formulate plans and endeavor to deliver even more superior results, but a range of $3.44 to $3.64 of FFO per diluted share [is the] 2012 estimate at this time. Combined with our well-supported dividend yield, we believe this represents a compelling investment in today's market.

With that, I'll turn it over to Greg, then to Mark, and I'll be back to join you as we go to questions.

Thank you, David. In the third quarter, we continued to deliver solid operating metrics while also executing on several initiatives, including the continued disposition of our wine assets and the repositioning of the original megaplex theater in Dallas, Texas. I would like to spend a minute discussing our portfolio performance, and then talk about our achievement (inaudible - technical difficulty) third quarter.

With regard to our theater portfolio, box office performance for the third quarter increased 7% on a quarter-over-quarter basis. And we continue to forecast that the full year will be consistent with last year's performance. Additionally, shortly after the completion of the quarter, we were very pleased to introduce the AmStar 14 at the site of the former Grand Theatre in Dallas, Texas. As you will recall, this was the original megaplex theater, opened in 1995, and constructed as a 24-screen theater. After the expiration of the primary term of the lease, we determined that the local market no longer demanded a 24-screen theater. So we took advantage of the flexibility of our building and repositioned the asset into two spaces. One side is a state-of-the-art 14-screen theater complete with all new tenant fixtures, including all digital presentation, while the other side is currently in the final stages of tenant finish for a restaurant and live music venue. We're very pleased with the execution of this strategy, and we think it speaks to both the quality of our locations and the flexibility of the building.

As we indicated in our last call, we're also pleased to report the resurgence of our theater build-to-suit program, with several opportunities scheduled to begin in the fourth quarter. These projects include several existing tenants, as well as new exhibitors to the EPR theater family.

Last quarter I reported to you strong results at our Schlitterbahn assets. These strong revenues resulted in the company booking an additional 400,000 in percentage interest for this investment. As we spoke previously, nothing drives revenues at a water park more than hot, dry days, and we were the beneficiary of such conditions this year, primarily in the Texas facilities.

Our entertainment retail centers continue to perform well, with overall occupancy at 97%.

We also continue to make significant progress in expanding and diversifying our public charter school business. During the quarter, we completed and opened six schools and have one school still under construction. These schools involve a total capital commitment of approximately $50 million. Furthermore, we expect to initiate an additional three to four projects in the fourth quarter.

We have also received the preliminary enrollment numbers for our schools. And I'm pleased to report to you that with our new builds and expansions, we increased our student capacity by approximately 20%, while maintaining our capacity utilization at 89%. These numbers speak to the continue strength of the sector and the demand by the public.

On the disposition front, the company continues to execute on its strategy of exiting the vineyard and winery business. As we discussed on our last call, the company completed its sell of the Eos Winery and Vineyards in Paso Robles, California, at a purchase price of $13.3 million. As the wine sector continues to improve, we are seeing additional interest in the balance of our vineyard and winery assets, and we hope this improvement will aid in the execution of our strategy to exit the business over the next one to two years.

Our capital spending for the quarter was approximately $36 million, comprised mainly of spending related to our public charter school developments. As we spoke last quarter, our capital plan continues to be impacted by the timing considerations of our tenants, with many of our scheduled build-to-suits being pushed into the latter part of the fourth quarter. As such, we are revising our capital plan to $150 million to reflect this timing.

Notwithstanding these timing issues, the resurgence in our build-to-suit program, when coupled with our investments to public charter schools, will significantly drive improvement in capital spending for 2012. In connection with the introduction of next year's guidance, we are also introducing the capital spending target range for 2012, of $250 to $300 million. This number is primarily driven by the significant increase in our build-to-suit projects, including approximately $100 million of carryover projects that are initiated in 2011, and, therefore, subject to less variation than what we experienced this year. However, as this is construction spending, the majority of it will occur after the first quarter due to potential winter weather conditions and the limitations that it places on construction projects.

With that, I'll turn it over to Mark.

I'd like to remind everyone on the call that our quarterly investor supplemental can be downloaded from our website.

Turning to the first slide, FFO for the quarter was $37.6 million, or $0.80 per share. Before we get into the details of the various line items versus the prior year, I'd like to discuss the preferred share redemption cost that, as expected, reduced our FFO per share for the quarter by $0.06.

As we discussed in last quarter's call, we completed the process of redeeming our 7.75% Series B preferred shares on August 31st, for a total of $80 million, plus prorated dividends for the quarter. In conjunction with this redemption, we recognized a charge during the quarter of $2.8 million, or $0.06 per share, consisting primarily of original issuance costs from 2005. This redemption reduces our cost of capital, as well as further improves our fixed charge coverage ratio, which is an important metric in maintaining and advancing our investment grade ratings.

Now turning to the next slide, let me walk you through the rest of the quarter's results and explain the key variances from the prior year. Our total revenue increased 2% compared to the prior year, to $76 million. Within the revenue category, rental revenue was consistent with the prior year at $56.8 million, and resulted primarily from new investments, as well as base rent increased on existing properties, offset by a decline in rental revenue from our vineyard and winery tenants as we exit that business.

Percentage rents for the quarter included in rental revenue were $0.5 million versus $0.7 million in the prior year. Tenant reimbursements increased by approximately $250,000 versus the prior year, primarily due to increases at our Canadian and New York entertainment retail centers.

Mortgage and other financing income was $14.6 million for the quarter, up $1.3 million from last year. This increase is due to our additional investments in public charter school properties, as well as other smaller real estate lending activities. In addition, as Greg mentioned, we recognized approximately $400,000 of participating interest income this quarter related to our investment in the Schlitterbahn Water Parks due to their strong revenue performance this season.

On the expense side, our property operating expense decreased by approximately $700,000 versus the prior year due to lower bad debt expense primarily associated with our vineyard and winery tenants. This decrease was partially offset by increases at our Canadian and New York entertainment retail centers. Other expense was $630,000 for the quarter, an increase of approximately $300,000 over last year. This increase is due to losses recognized upon settlement of foreign currency hedges, as well as expenses incurred related to certain of our vineyard and winery properties which are operated through a taxable REIT subsidiary.

G&A expense increased approximately $500,000 versus last year, to approximately $4.6 million for the quarter, due primarily to higher payroll and benefit-related expenses, including stock rent amortization, as well as increases in professional fees. Our net interest expense for the quarter decreased by $1.3 million to $17.9 million. This decrease resulted primarily from a decrease in our average outstanding borrowings versus last year.

Income from discontinued operations for the quarter of approximately $100,000 relates primarily to the operation of the Eos Vineyard and Winery prior to sale, as well as the operation of the Pope Valley Vineyard and Winery, which was held for sale at September 30th. In addition, the sale of Eos resulted in a $16,000 gain during the quarter.

Turning to the next slide, I would now like to turn our discussion to some of the company's key ratios. Please note that our supplemental summarizes these key ratios on page 16. As you can see, our coverage ratios have continued to strengthen versus a year ago, with interest coverage at 3.7 times, fixed charge coverage at 2.7 times, and debt service coverage at 2.8 times.

Our AFFO per share for the quarter was $0.87, a penny above FFOs adjusted per share, and continues to well support our common dividend, which was increased 8% over the prior year.

Our debt to adjusted EBITDA ratio improved to 4.4 times for the quarter versus 4.5 times in the prior year. In addition, our debt to gross asset ratio was 37% at September 30th. This ratio remains at the lower end of our previously stated target range of 35% to 45% for this important metric, and continues to provide us great flexibility as we move into the remainder of 2011, and beyond.

Let's turn to the next slide, and I will provide a capital markets and liquidity update. On October 13th, we amended and restated our revolving credit facility. The facility was increased from $382.5 million to $400 million, and has an accordion feature that allows us to increase it further by up to $100 million, subject to certain conditions, including lender consent. The facility is priced based on a grid related to our unsecured credit ratings, with pricing at closing of LIBOR plus 160 basis points, 140 basis point reduction in the credit spread from the former facility. The new facility matures in October 2015, with the company's ability to extend it an additional year to 2016. The new facility also contains an investment grade style covenant package.

Turning to the next slide. At quarter end, we had total outstanding debt of $1.1 billion, of which 93 -- $933 million was fixed rate long-term debt with a blended coupon of approximately 6.5%. We had $195 million outstanding under our revolving credit facility at quarter end.

Considering the additional capacity under the new facility, we have $205 million of availability as of September 30th, and our unrestricted cash on hand was $14 million.

Finally, as I previously discussed at the beginning of my comments, we redeemed all of our Series B preferred shares during the quarter.

As we turn to the next slide, we continue to be in great shape with respect to debt maturities with no debt coming due in 2011, and only $65 million in 2012. Excluding our line of credit, in 2015, we level off at around $100 million per year through 2017, with our largest maturity being the $250 million in unsecured notes due in 2020.

Turning to the next slide. As Greg indicated, our guidance for 2011 investment spending is $150 million, as a number of projects initiated in 2011, will be continuing into 2012. Also, as David mentioned, we are tightening our earnings guidance toward the upper end of our previous range. The guidance range for FFO is adjusted per share [is being] revised to $3.37 to $3.42, from $3.35 to $3.42. Including charges incurred to date totally approximately $0.99 per diluted share, our revised guidance for FFO per share is $2.38 to $2.43.

Turning to the next slide, we are also providing guidance for 2012 investment spending of $250 million to $300 million, and FFO per share of $3.44 to $3.64. Roughly one-third of our investment spending is expected to be carryover spending on theater and public charter school build-to-suit projects initiated in 2011.

While we generally do not provide details on specific line items, we think it is helpful to share a few key assumptions contained in our 2012 guidance. First, we expect G&A expense to be between $21 million and $22 million, for 2012. Our G&A expense is expected to be approximately $800,000 higher in the first quarter than the full year number divided by four, primarily due to certain employee benefit expenses that are recognized in Q1, as in prior years.

Second, we are anticipating that at the beginning of 2012, our $14.9 million investment in one of our unconsolidated joint ventures, Atlantic EPR-I, that is currently earning a 15% preferred return will be refunded to us and refinanced with mortgage debt at the JV level. As a result, the only interest in the JV that we are budgeting is our current 36% ownership interest. This change reduces our annual FFO per share run rate on this investment by about $0.04.

Third, we expect to finish 2011, with our leverage level below the midpoint of our stated range of 40%. Therefore, we expect the majority of investing activity for 2012 will be financed with unsecured bonds and/or bank debt.

Finally, the midpoint of our FFO per share guidance includes the Concord project at its status quo. Accordingly, activation of the earnings potential of this investment could drive us toward the higher end of our FFO per share guidance range.

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

All right. Thank you, Mark. Thank you, Greg. We'll turn now to your questions. But before we do, I just want to note two things. First is, EPR held its first investor day recently, on October 5th, in New York City, where we focused on our charter public school investments and that entire industry. If you were there, we thank you for coming, and we welcome your feedback. If you missed it, I want to suggest looking it up via link on our website. You can catch all the -- the whole program that was put on that day.

Secondly, while at NAREIT in Dallas this month, we will be conducting a property tour of the project you heard discussed here this afternoon, the former Grand 24 Theatre, now converted to an AmStar 14 and a Toby Keith live performance venue and restaurant. Please contact the office to be included in that. We'd love to have you as our guest.

Now with that, I guess we'll open it up to questions. And operator, are you there?

Yes, sir.

Okay.

(Operator Instructions) And your first question comes from the line of Jordan Sadler with KeyBanc Capital Markets. Please proceed.

Hi, it's Craig Melman here with Jordan. David, is there any more detail you can provide on the joint venture at Concord, beyond just that you guys take the master plan or maybe what the ultimate structure could look like, or your participation? And maybe Mark can chime in and go into a little bit more color on the last comment he said about some Concord upside potentially in 2012.

Yes. Craig, I mentioned the upside -- [I'll just] take the latter part first. I mean, that's something we expect might contribute to the upside, but it's not in the midpoint of the earnings guidance we gave. But the program I think was somewhat described in the press release in more detail than I gave. If you look up that press release, with regard to the Hart Howerton, their retention, the elements of that, we haven't discussed other than the fact that the joint venture, we agreed with Empire Resorts to move their casino, gaming, racing operation, which is going to be at their expense and their investment onto our property. And we expect to possibly be a ground lesser in that development. And otherwise, we haven't given any details. And I'm really not in a position to until we finish this planning process. It would really be putting the cart ahead of the horse.

Okay. That's fair. I was just checking to see if you guys had anything additional.

Okay.

Then on the investment guidance, I guess if you take the one-third of the midpoint, you're at about $91 million of kind of holdover spending from this year. And I'm just trying to maybe break that into -- make sure my numbers are right. But if you assume like $8 million a school, maybe $32 million of that is related to charter schools. And then, I mean, could there be upwards of $90 million to $100 million of build-to-suits on the theaters?

Yes. I mean, I think overall, I think that's -- I think the breakdown for our planning -- Craig, I'm sorry. It's Greg. The breakdown on our planning would be this is 60% charter schools, 40% theaters. And if you look at kind of the lower end of that, if you look at $150 million this year, when we had really no build to suits coming into the year, that if we carry over 100 from beginning in the fourth quarter, then our -- to hit our lower hand -- the lower end of that number is to do what we did this year. We think we can exceed that, but we -- that's our conservative approach of 250 to 300.

And just a clarification. Does that include any acquisitions potentially of theater assets?

What we have planned in the plan right now is projects identified that are not -- we have no speculative purchases. So if those come about during the year, that number would grow.

All right. Great. Thanks, guys.

And your next question comes from the line of Michael Bilerman with Citi. Please proceed.

Hi, there. It's Greg Schweitzer here with Michael as well.

Hi, Greg.

Hi, Greg.

Hi, Greg.

Hi, there. You've talked recently about cash flow coverage across the theater portfolio around the 1.5 times range. Is that fairly reflective and incorporate the current box office sales environment?

Yes, that's true.

And then what was that ratio a year ago when box office sales for that period were in the positive 5% range?

It was about a one -- if you're going up to -- it was between, let's call it a one five eight, almost a one six. So we're about a one five now, we think, as this continues to migrate to the number that that coverage will reflect that as well, Craig -- Greg.

Okay. And then with respect to lease rollover over the next year or two, have you had any conversations with those tenants or is it still too early?

Well, we have some this year. We've got four properties that roll over. Two we've already executed on the renewal of that. One, like the Grand in San Antonio, we think is going to be a repositioning. We've identified the operator for that. And the other is, we think will be a renewal with the existing operator as well. So we think three of the four will be continuing with the same operator. One we think it will be changing and will be repositioning again probably down for a 24 to a 14.

And what sort of TI dollars are you thinking there?

Still it's about a couple million to do that.

And for next year?

Next year we've got three properties. We have not gotten word yet from the tenants on those. I mean, if we had to forecast those, I think we've got one that we're going to have to reposition, one that's going to definitely be a renewal, and one where it's another operator that we dealt with previously on a renewal. So we're just working with them right now to see kind of what their tenor and tone is.

It's Michael Bilerman speaking. Just the clarification just on Concord, I just want to make sure that I understand your comments correctly. So you're saying that within the high end of the guidance range at $3.64, you're including some FFO benefit from the redeployment of those proceeds from Concord?

No, it's earnings from that asset, Michael.

And so, and you said it's not at the midpoint. So you've included some element within that -- within the upper end of that range?

Yes, it could be that or other upside opportunities that we have, but, yes.

It's not in the midpoint.

Not in the midpoint, right.

But it is, we think, a reasonable possibility, and, thus, it would be in the upside.

Upside above the $3.64 or are you effectively saying --

Again, you're isolating one issue, which is Concord. We think [issues like Concord] --

Well, because you guys -- you guys mentioned it. You guys isolated it.

No, no. I think what --

I understand what you guys are -- what effectively is in guidance.

And I think we're telling you.

I think the point is, at the midpoint of our guidance, Concord is status quo. I think there are a number of things that could drive upside, Concord being a fairly large one because of the size of the investment and the meaningfulness of what a ground lease could do to FFO per share. Obviously, that would depend on the timing and magnitude. And we've set a range that had that in mind towards the upper end, but there's other things, there's other opportunities as well. That just happens to be a fairly large one.

Right. But that one is a fairly large one, not only in terms of income, but then it greatly depends on when it happens during the year. So why don't you --

Sure.

-- just lay out specifically what the annualized impact is of potentially doing something? And then how much of that's included in the upper end of guidance?

Michael, we don't have that to give you now.

But you've included something in your numbers.

No. I said it potentially would drive it to the upper end because it's not included in the midpoint.

But assuming it doesn't happen, could you get to the high end of guidance?

Sure, there are other things that could happen. That's exactly what Mark told you.

Like what?

Additional investment spending, for example, beyond our -- the guidance we've laid out.

Okay. Thank you.

[All right].

And your next question comes from the line of Rich Moore with RBC Capital Markets. Please proceed.

Hello. Good afternoon, guys. The line of credit balance increase was, it looked like primarily the preferred B, I think that was $80 million, right, and then a little extra for investments in the quarter. Does that sound right for the --

Yes, that's correct. S

-- increase?

Yes.

And then so now, would you take that out soon, you think, as far as eliminating the balance and bringing that back down to zero, I guess, with either an equity offering or an unsecured note?

Yes, that's true. I mean, we're finishing the year with a little higher balance than we typically carry. If you kind of roll forward what our guidance implies for the fourth quarter, it'd be about $43 million, $45 million of spending. So that you'd finish with a balance slightly below $250 million. As we go into next year, we certainly are contemplating not carrying a $250 million balance on our line of credit. We would term that out, certainly, along with financing the additional investment spending we expect for 2012.

Okay. So what are you hearing, Mark, in terms of the unsecured marked? I mean, if you were to go out there right now or in the near future, I mean, what kind of response would you get at this point, do you think?

It depends on duration, obviously. The unsecured bond markets would probably right now be somewhere in the neighborhood of 6% to 7%. So at the 10 year, you're looking at something like a 500 basis point spread, which is, we feel, somewhat elevated. The market's not the greatest. No one's issued since August. So we have that opportunity. And, frankly, that still works with our -- the deals that we do.

We have other opportunities, potentially, to look at, even bank term loans, which a number of other people -- another -- other companies have tapped as well, which is more attractive on a spread basis, certainly.

Okay. Good. Thanks. And then from S&P are you hearing anything? Have you talked to them lately about their current rating?

Well, we like to talk to them to provide all the good news that we have in terms -- this quarter we have the line of credit we've completed. We continue to make progress in the wine business by selling off. We're making progress in Concord. So, yes, we're in front of them. As we continue to make progress, we are -- expect to stay in front of them and hope to kind of get them over the hump for t third investment grade rating.

Okay. Good. Thank you. And then I'm curious, David, is there anything going on in China with -- any update going -- with what you have going on in China at this point?

It's still the low order of investment we have. We've opened the third theater, Rich, but there still we have one theater now with more than one year of history and one with more -- one with a half year history and one that's newly open. So we're still what we feel like is very early stage of gathering data, but we don't have any plans for any large scale or further investment at this time. And as soon as we get that, I'll give it to you.

Okay. Very good. Thank you, guys.

Thank you.

And your next question comes from the line of Andrew Dizio with Janney Capital Markets. Please proceed.

Thanks. Good evening, guys.

Hello.

Just following up on the last question. Is there any potential for international investment outside of China and Canada?

I think we get -- it's clearly something that's -- that we have looked at. I mean, we've -- there's plenty of opportunities that we think -- I think it would be -- it's very country dependent and the opportunity dependent.

And Andrew, just to reinforce the, I guess the context of that is we have three kind of primary investment areas going right now, the theaters, our charter public schools, and the ski investments. It's the one we're exploring the opportunities for as we -- would be our theater primarily. It's our longest and strongest suit where we feel best about it.

The charter public schools, of course, is kind of unique to the United States. So there's unlikely opportunity for international investment. That would have to be in a little different format, although we're not closed to the idea of things in education generally, but. And then the ski. But probably likely it would be in theaters. We continue to explore that, and there seem to be, from time-to-time evidence there is -- might be an opportunity, but right now there's not.

Okay. I appreciate that color. And then as you move forward with some more theater build-to-suits, returns to you, [are] they kind of similar to what they've been historically or has that market changed at all?

On our build-to-suit program, I'd say they're consistent with where we've been before. I'd say kind of in the 9.5 to 10.5 range.

Okay, that's helpful. And then just lastly on the charter schools, the stuff you have in progress and the stuff you did through the last quarter, can you talk about how many or if there were any new operators involved in that or where your relationships have expanded?

I think if we -- when we spoke about it a little bit last quarter, Andrew, if you remember, and these were completions of those. We did have three new operators and we continue to expand those relationships. I think we've got a fourth that we think will be introduced as well, as we continue to try to build both geographic and operator diversity, and we can -- we look to expand that even further next year.

Okay. Thanks. I appreciate that.

And your next question comes from the line of Connor Finnerty with Goldman Sachs. Please proceed.

Thanks. Good evening, guys. Hey, David, can you talk a little bit about your outlook for theater supply next year - who's adding, who's closing? Saw some reports on potentially AMC closing up to 100 screens. So can you just talk about kind of your forecast for net supply in '12?

Okay. I might turn this mostly over to Greg, as he stays closest to it. But, yes, I think that we will see, and we've tried to even prepare, Connor, some, I guess some perspective, because we do think there'll be some turbulence as digital really weighs in with its impact and those guys who can't afford to convert to digital and so forth, that there will be even some closings. But not to despair. This is not indicative of a problem systematically with the industry, it's more particular to locations or to operators.

Greg, you might mention about supply overall.

Sure. Yes, I mean, I do think AMC will -- their number of screens will go down, mainly because I think they're -- as they deal with the Kerasotes acquisition that they purchased several years ago. They continue to work down some of that inventory.

I think overall it's going to be pretty much flat on a year-over-year basis. You'll see screens close. But as I said, we're talking about building several. I think the realities of the world is the theaters are not as big as they used to be. I mean, you don't see 24-screen theaters anymore. The top in size you're going to see is 20. Most of them probably going to be in the range of 12 to 16 screens as you kind of do in-fill locations in kind of smaller areas of impact. So I think the net net effect, Connor, will be pretty much flat. But you will see some chains growing and some chains getting smaller.

Okay. And then, Mark, on the potential debt offering or term loan, what have you assumed in guidance for a rate?

Well, I don't think we get that specific. But we have --

I guess what's a range? Or what do you think is an appropriate range?

Yes. I mean, I think if it's 10-year unsecured debt, we're probably looking, like I said, probably at more like a 7%. Term loans, which is five-year paper, or as high as five-year paper, is generally at the line rate or slightly above the line rate, including the credit -- the facility fee. So for us, that'd be somewhere between, on a variable basis, 160 to 195.

Okay.

So those -- and then I said that a five-year -- a five-year bond, unsecured bond, would be somewhere in the 6% range.

Okay. And then just finally on Concord, do you guys need permission from anyone to [start on] that, or is that your discretion for any new buildings?

It's at our discretion. We don't have any -- we don't have any lender on that.

Right. Okay. All right. Thank you, guys.

Okay.

And at this time there are no further questions in queue, and I would like to hand the call back over to Mr. David Brain for closing remarks.

Well, I thank you very much. As always, we very much appreciate people taking the time and to join us. We appreciate your interest. And we always welcome contact directly to the company as well, if you have anything further you'd like to follow up on. So we'll look forward to seeing you next quarter. Thank you very much again.

Thanks, guys.

Thanks.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect. Have a wonderful day.