EPR Properties (EPR) 2011 Q4 法說會逐字稿

Good day ladies and gentlemen and welcome to the fourth quarter 2011Entertainment Properties Trust earnings conference call. (Operator Instructions). I would now like to turn the presentation over to your host for today to Mr. David Brain, CEO. Please proceed .

Thank you, Stacy. Good afternoon and thanks all for joining us. This is David Brain. We will start with our usual preface which is as follows. As we begin this afternoon I need to inform you this conference call may include forward-looking statements defined by the Private Securities and Litigation Reform Act of 1995 are 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 results of operations may vary materially from those contemplated by such forward-looking statements. A discussion of factors that could cause actual results to differ materially from those forward-looking statements is contained in the Company's SEC filings including the Company's report on Form 10-K for the year ending December 31, 2011. All right, very good.

Again, I want to say good afternoon to you all and thank you for joining us and making your investment of time with us. This is the earnings call for fourth quarter and year end of 2011. This David Brain the Company's CEO and with me to go through the news of the quarter as usual are Greg Silvers the Company's Chief

Good afternoon.

And Mark Peterson or Chief Financial Officer.

Good afternoon.

Also just to remind you as usual we have slides for you to view to go along with the narrative here and they are available via our website eprkc.com I will start with the headlines for Entertainment Properties Trust for the fourth quarter of 2011 and they are as follows; number One, primary investment categories display mixed but positive trending results; Two, transaction pipeline fills to support 2012 investment guidance; Three, capital costs improve again with new syndicated bank credit agreement; Four, agreement signed for casino development at dormant Sullivan County, New York land; and Five, earnings performance exceeds guidance for 2011, and trends support increased dividend and earnings guidance for 2012. These head lines are consistent with our recent messages as we remained disciplined to make consistent progress on our strategy.

Now, turning to our first headline which is primary investment categories display mixed but positive trending results. Box office revenues a key measure of our primary investment categories; cinemas, only muddled through the fourth quarter of 2011 in quite flat fashion, but demonstrated a big upward kick in early 2012. The fourth quarter ended in just about the same position it ended the prior quarter down about 3%. The good news is that early 2012 returns are quite positive with year-to-date box office up strong double digit about 20%.

Our ski portfolio is looking for a similar late kick to help with what has been an only acceptable seasonal performance. Due to warm weather conditions our ski portfolio tenant revenues are running about 20% behind last year's record year, but trending positive in the last couple of weeks. As you might remember our ski portfolio has been enjoying consecutive record years and growing its cash coverage of rent obligations to well over 2 to 1. As happens with seasonal and weather related businesses not all years are records. Our ski parks mitigate weather risk with robust snow making capacity fueled by controlled proprietary water supplies, and with very strong pre season annual pass sales. These have helped, but weather conditions have been such that revenues are below last year's and rent coverage will decrease but we expect it still to be positive.

Our charter public school portfolio continues to perform with the strong enrollment increases described last quarter for the 2011/2012 school year, and state funding has remained steady at the elementary or high school levels where we have our investments. As we have mentioned here and in other communication it is very important to look beyond the headlines of education funding cuts to see just how disproportionately they are being made at higher education levels.

Going to the second headline this afternoon, transaction pipeline fills to support 2012 investment guidance. It was a bit frustrating as we throughout 2011 lowered our target investment spending due to delays and deferral's, but that tied is clearing turning as of late. We currently have a robust pipeline of largely signed investment opportunities for 2012. These are primarily build-to-suits, which are about equally split between theaters and charter public schools. Further we have signed investment opportunities in the metropolitan ski category, and with some new operators of proven out of the home leisure and recreation properties. I will leave it to Greg to provide you with more details on this, but I will tell you that this position leads us to present you with strong confidence in our 2012 investment guidance of $250 million to $300 million.

Turning to our third headline capital costs improve again with new syndicated bank credit agreement. Last quarter we reported to you a major milestone of progress in connection with our investment grade ratings received in 2010. We renegotiated our revolving credit agreement for the first time since receiving those credit ratings and substantially improved it and lowered our cost of capital. We compounded this success with a new syndicated 5 year term bank credit agreement largely negotiated and arranged in the fourth quarter and finalized at the outset of 2012. This nearly quarter billion dollar facility was priced at an all time record low rate for the Company. Mark will detail this for you in just a moment.

Our fourth headline today is agreement signed for casino development at dormant Sullivan County, New York land. After several announcements of negotiation I am pleased to confirm as recently press released that we have reached an agreement with Empire Resort for the lease of ground of and infrastructure to support their investment in the development of racing, gaming, and hospitality complex at the site of the former Concord resort which we own in the New York Catskills 90 minutes outside of New York City. This is part of a master plan covering 1500 acres that we expect will have many more positive announcements and developments over the coming months and even years. We are excited about the path of progress forming for this asset.

Now turning to our last headline which is earnings performance exceeds guidance in 2011, and trends support increased dividend and earnings guidance for 2012. I am very pleased to bring you news that for 2011 EPR produce $3.43 FFO as adjusted per common diluted share, which is above the guidance range given our last call of $3.37 to $3.42. The even better news is that the cumulative effect of the positive foregoing report and that which you will hear from others on this call this afternoon is that EPR is in great shape and is prepared to increase both our dividend and our per share cash earnings FFO as adjusted guidance for 2012. First we expect to increase our annual common dividend by over 7% from $2.80 to $3.00 per share. Accordingly we are declaring our first quarter dividend of $0.75 per share at this time.

Second we are increasing our FFO as adjusted guidance per diluted share from $3.44 to $3.64. To a range of $3.50 to $3.70 an increase of $0.06 or about 2% on the midpoint of these ranges. Overall the mid point of our new guidance of $3.60 represents an increase of $0.17 or 5% over our 2011 performance level. With that run down of the headline I will turn it over to Greg, and then Mark and I will be back to join you before

Thank you, David. The fourth quarter delivered solid operating results as we continued to lay foundation for a stronger performance in 2012. I would like to spend a minute discussing our portfolio performance and then talk about our achievement for the fourth quarter as well as discuss our expectations for 2012.

With regard to our theater portfolio box office finished down approximately 3% for the year. We had anticipated a flat year; however, several of the holiday films failed to garner the audience that was forecast and as a result Hollywood failed to close the gap. Encouragingly 2012 has started very robust compared to last year with year-to-date performance up approximately 20%. As we indicated last year the first quarter does not define the year for box office; however, it is far easier to have a good year when we are not climbing out of a hole like last year's first quarter performance.

Additionally we are pleased to inform you that we have commenced or will commence shortly 8 to 10 build-to-suit theater projects for 2012 with a total investment of $80 million to $100 million. We spoke many times about the delays associated with these projects; however, we are pleased that our Exhibitor Partners continue to want to grow their portfolios and continue to look toward EPR to supply their capital needs. Several of these projects will include innovative food and beverage concepts as well as premium offerings to recognize and capture diverse customer segments. Along with the excitement for these projects, we are likewise pleased to have several new Exhibitors included in our build-to-suit program which we believe will drive continued growth in the future.

The mild winter that many parts of country have experienced is negatively impacting our ski properties. To date the revenues at our properties are down approximately 20%; however, we do not anticipate any issues with our properties. As you will recall our rent for 2011 off season was escrowed from the results of last year's ski operation and likewise our tenant continues to be current with their rent and on pace this year for replenishing the escrow for 2012 off season. These result are reflective of the coverages that these properties enjoy. Additionally the performance of our properties have been improving as the weather has improved at least from the perspective of a ski park operator, and we hope this trend will continue for the remainder of the season.

Our entertainment retail centers continue to perform well with overall occupancy at 97%. The Company continued to invest in public charter school space with total investment in the quarter of $13.2 million comprised mainly of build-to-suit projects. Additionally we expect to execute commitments in the first quarter for an additional $40 million of investment for 2012 and we anticipate that this number will continue to grow throughout the year.

Further more in December it was announced that nationally public charter school enrollment had surpassed a key milestone of 2 million students in the school year 2011/2012 . This overall increase in student enrollment for this academic year is 13% and continues to validate the point that school choice as demonstrated by public charter schools continues to gain parental support. As a Company we have met this continued growth in the public charter school sector with expanded underwriting resources and relationships to identify quality schools that successfully combine strong academics, sound financial management, solid business operations and superior facilities. We are confident that this combination meets the need of the student, the parents, the communities, and the investors of our Company.

Our capital spending for the quarter was approximately $31 million down from the number we anticipated. As we indicated in our previous call our capital plan for 2011 was impacted by the timing considerations of our tenants and our unwillingness to pursue deals that failed to meet our investment criteria. Last year we saw a significant number of theater transactions priced into the 7% to 8% cap range, and while we are pleased that investors are recognizing the value of the theater investment not all of these were good theaters or worthy of the price paid.

As we have said before not all theaters are equal and some level of discernment is necessary to achieve the long lasting investment profile that we desire. As a result we were unsuccessful on several standing inventory transaction, and while that impacted our investment spending we believe we are better served to maintain our discipline. As we indicated previously we are happy with the theaters that we are developing all with 15 to 20 year terms and cap rates in the 9.5 to 10.25 range. Furthermore, we anticipate closing approximately $75 million of other entertainment and recreational assets by the end of the first quarter.

With regard to the Concord development in December we executed an option agreement with an affiliate of Empire Resorts where Empire has the right to lease certain land owned by us in Sullivan County, New York for the development of a regional destination casino resort, hotel and harness racetrack. The option agreement defines the land parcel and the economic terms of the lease which the parties expect to be executed following the satisfaction of certain conditions including site plan approval from local authorities and the finalization of the master development agreement. I am pleased to report to you that we are making progress on satisfying all these conditions.

With regard to annual capital spending we are affirming our previously stated capital spending guidance of $250 million to $300 million, and with the robust start to the year we are highly confident in meeting those targets. With that I

Thank you, Greg. I would 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 increased to $42.6 million or $0.91 per share from $40.4 million or $0.86 per share in the prior year. FFO as adjusted per share for the quarter increased from $0.86 for the prior year to $0.90 in the current period an increase of about 5%.

Now let me walk through the rest of the quarters results and explain the key variance from the prior year. Our total revenue increased 4% compared to the prior year to $77.6 million. Within the revenue category rental revenue increased by $1.2 million versus the prior to $57.8 million point, and resulted primarily from new investments as well as base rents increases 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 $0.5 million versus $0.3 million in the prior year. Percentage rents included in rental revenue for the year were $1.6 million versus $1.7 million in the prior year.

Other income increased by $1.4 million primarily due to seasonal revenue from the sale grapes from certain of our vineyard properties which are being operated through a taxable REIT subsidiary. Mortgage and other financing income was $14 million for the quarter up $0.6 million from last year. This increase is due to additional investment in public charter schools properties, metro ski areas, and Schlitterbahn water parks during the year. I would also like to point out that at the end of the last quarter we had 3 newly developed public charter school properties classified as direct financing leases. During the fourth quarter of 2011 the initial lease terms on these properties were amended from 25 to 20 years which changed the classification of these leases to operating. Therefore $21 million was reclassed on the balance sheet from investment in a direct financing lease to rental properties and the income from these properties is included in rental revenue versus financing income subsequent to the end of the third quarter.

Now on the expense side our property operating expense decrease by approximately $1.9 million versus the prior year due to lower bad debt expense primarily associated with our vineyard and winery tenants. This lower bad debt expense in part relates to $0.9 million we collected this quarter on a previously reserved receivable from a winery tenant. Other expense was $2.2 million for the quarter an increase of approximately $1.8 million over last year. This increase is primarily due to cost recognize related to the sale of grapes and other expenses at certain of our vineyard and winery's properties that are being operated through a taxable REIT subsidiary.

G&A expense increased approximately $600,000 versus last year to approximately $5 million for the quarter due primarily to higher payroll expenses including stock grant amortization as well as increases in professional fees and costs associated with our investor relations efforts. The gain associated with loan payoff related to the $9.2 million capital lease obligation we had previously recorded in connection with our Sullivan County, New York land investment. We were able to negotiate a 390,000 lower pay off of this obligation thus recorded a gain for that amount. Note that this gain has been excluded from FFO as adjusted.

Our net interest expense for the quarter decreased by $1.6 million to $17.7 million. This decrease resulted primarily from a decrease in our outstanding borrowings as well as a lower weighted average interest rate versus last year. Finally discontinued operations for the quarter included a gain of $1.2 million related to Toronto Dundas Square. As we continue to settle reserves established related to the purchase and sale of that investment. Note that this gain has been excluded from FFO and FFO as adjusted.

Now turning to our full year results in the next slide. For the year our FFO increased to a $150.3 million compared to last year of a $128.1 million. FFO per share was $3.20 compared to $2.81 last year. While these measures now exclude impairment charges per NAREIT's direction, each of them are also impacted by other charges primarily related to refinancing that have been discussed on this and previous conference calls. Excluding these charges FFO as adjusted per share increased versus the prior year to $3.43 from $3.34 an increase of about 3%. Undoubtedly our 2011 FFO as adjusted was negatively impacted by not being able to redeploy the $220 million of proceeds from selling Toronto Dundas Square as quickly as we originally planned; however, as we deploy the rest of this capital during 2012 our FFO run rate will benefit from replacing one very large six cap asset with multiple new assets that yield 9% to 10%.

Turning to the next slide. I would now like to turn to our discussion of 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 strengthen significantly versus a year ago with interest coverage at 3.8 times, fixed charge coverage at 2.8 times, and debt service coverage at 2.8 times. Our AFFO per share for the quarter was $0.91 and our AFFO payout ratio was 77%.

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 assets ratio was 38% at December 31st. This ratio remains below the midpoint of our previously stated target range of 35% to 45%, and provides us great flexibility in 2012.

Let's turn to the next slide. I will provide a capital markets and liquidity update. As previously announced early in the fourth quarter we expanded our revolving credit facility to $400 million, reduced the interest rate spread to LIBOR plus a 160 basis points a 140 basis point reduction and moved out the effective maturity to 2016.

Turning to the next slide. Last month we announced a new $240 million 5 year term loan facility which includes a $110 million accordion feature. Similar to the revolving credit facility pricing is based on a grid related to the Company's senior unsecured credit ratings which at closing was LIBOR plus 175 basis points. We also fixed the interest rate at closing for 4 years at 2.66% through interest rate swaps.

Turning to the next slide. At quarter end we had total outstanding debt of $1.2 billion of which $921 million was fixed rate long-term debt with a blended coupon of approximately 6.6%. We had $223 million outstanding on our revolving credit facility at year end, but this balance was reduced to $0 in early January with the closing of the term loan. As a result we are in excellence shape from a liquidity perspective as we move into 2012.

Turning to the next slide. We are increasing our guidance for FFO as adjusted per share to $3.50 to $3.70 from $3.44 to $3.64 that was previously announced. This increase in guidance reflects our latest expectations in terms of investment spending, timing, and returns, as well as our recent financing activities. As Greg mentioned previously we are maintaining our 2012 investment spending guidance at $250 million to $300 million. While we generally do not provide details by specific line items or by quarter we think it is helpful to update a couple of assumption contained in our revised 2012 guidance.

First I had reported in our last call that we expected our $14.9 million unconsolidated JV investment in Atlantic EPR 1 which earned a 15% preferred return in 2011 would be refunded to us and refinanced with mortgage debt at the JV level; however, we now expect this investment will be converted to a mortgage note from us to the JV with interest at 9.5%. As a result the negative impact to 2012 earnings per share is now expected to only be about $0.01 versus the $0.04 previously anticipated. And a substantial portion of the earnings from this investment will be reported going forward as mortgage financing income instead of JV income.

Second we now expect G&A expense to be approximately $23 million for 2012 with increases versus 2011 primarily related to payroll and benefits including additional personal as well as legal fees associated with our project in Sullivan County, New York. In addition our G&A expense is expected to be approximately $700,000 higher in the first quarter than the full year number divided by 4 primarily due to certain employee benefit expenses that are recognized in Q1 as in prior years. Note that due to the impact of G&A as well as other items we expect the growth of FFO as adjusted per share versus the prior year to be 1% to 2% in the first quarter as compared to the 5% growth at the midpoint of our revised guidance that we expect for the full year. With that I will turn it over to David for closing remarks.

All right. Very good. Thank you, Mark, thank you, Greg. We will take your questions. We will go to those questions now. To sum up I think you have heard a good view of solid portfolio growth for 2012. We certainly as Mark went through have the balance sheet to support that growth, and our yield now with the dividend increase and that growth profile we think should be a very attractive package to provide a very solid total shareholder return for the year. With all that said, I will turn it over to questions. Stacy, are you there?

(Operator Instructions). Your first question comes from the line of Anthony Paolone with JPMorgan. Please proceed.

Thanks, good afternoon.

Hi, Tony.

My first question is on Concord. If I remember the press release and the filings right there was some option payments that they were going to give you to basically enter into this option to ground lease the land. I'm just wondering if you can lay out how much those are? When they will get brought into income and so forth or if they even if they get brought into income?

This is Greg. Tony, I will take the first part then I will leave the second one or maybe I will take part of that. The option payment was $750,000 which is for a 6 month option on the deal. The issue is that the option payment is refundable if we are not successful in negotiating a master development agreement so we have not taken it into income pending that resolution of that condition.

Just satisfaction of that condition.

Nor on our guidance did we include any of that income. We kind of have in our guidance at least at the mid point Concord at status quo.

That is important. That represents up side to guidance.

Okay. And then what are some of those conditions that need to be satisfied in order to move this thing forward. I think I saw a press release today about Capelli still being in the mix or maybe it was a press report about how he is still trying to get his project done, and I am just wondering if you can give us a little more color on how this is laying out?

I think the conditions are such that Greg outlined kind of two-fold primarily and that is getting the entitlements and the completion of the master development agreement. So that is the time we really start clearing that. Capelli and his agenda is really a whole separate matter. We don't see that necessarily as an issue vis-a-vis proceeding.

So under the time frame you are operating under at this point is this something you anticipate coming to a conclusion over the next few quarters or can this drag out further?

I think as you can imagine, Tony -- it is Greg -- in any sort of large scale kind of casino development like this it is going to take a lot of entitlement and land play and approvals I think you will see that process begin shortly. We will continue and as we are successful -- you are going to have to have environmental approvals, you are going to have to have local township approvals, and as we migrate through those -- and those are all public events so you will be able to follow that procession. And as we are migrate through those you will begin to see that we are making the to get the project done. As we go through those approvals I think we will be presenting to the public bodies time lines for our development.

Now and that will be public record and we will keep you apprised of that.

Okay. Another question for Greg. You eluded to some other entertainment related concepts that were in your pipeline. Can you give us any additional color on that?

Sure, Tony. I think as we have said recently we have done some family entertainment centers, we have done some other kind of, I still think they are entertainment concepts that are driven by the admissions and concessions business that we are used to. I think we will have some announcements as we said we anticipate closing those by the end of the first quarter, so I think over the next 2 to 3 weeks we will have public announcements on who those transactions are with. It is safe to say it they are all within that family entertainment space.

Are those build-to-suits or are those straight up acquisitions?

No, they are standing inventory that you will see the announcements on.

Okay. And on your theater build-to-suits you mentioned some food and other premium offerings being put into the mix there. How do you think about underwriting the success of those? It seems that you have done a lot of straight up theaters over the years you would have that formula down pretty well and understand what those economics look like. But going off into something slightly different here on the premium side how do you get comfort with the underwriting there?

It is a good point, Tony. First of all, we are not doing the initial one with anyone, so we have some underwriting data points to underwrite the performance and how they have done. And as we have said we have been measuring this for several years. AMC has done some conversion of some of our properties, so we have good data on these kind of expanded in theater dining concepts. So we think we have refined our underwriting to where we can properly underwrite this. And as I said initially we are not doing any sort of initial deals with anyone. In fact these are people who are several into their concept, so we are pretty confident they know what they are doing and we are confident we know how to underwrite it.

And, Tony, several of those concepts are already in our portfolio. We are just expanding our investment position.

Okay. And last question for Mark, looking at your debt maturity schedule it looks like you have about $360 million of mortgage coming up over the next 3 years it looks like the blended rate is somewhere with a 6 in front of it. I was wondering with where you think you will refinance that out at if you had to go to the mortgage market today, or is that something you think you will continue to move to unsecured debt?

Yes, we announced that we are moving and have made strides to move toward the unsecured debt model, so we would envision those being refinanced with long-term unsecured debt. As far as the rate it is kind of hard to say because it is over a 3 year period, but today they would probably be in the high sixes so not too great of a difference from where those mortgages stand today. For example the ones that mature in 2012 are about 6.5%.

I think the most indicative thing is where our public debt trades.

All right. If you did want to put mortgages on these again is there a mortgage market at this point for this product type that with would be able to refinance that, and what rate would that be?

There is, it would likely be lower because it is secured and that market is available, but we feel the flexibility of the unsecured debt model provides us is worth going the unsecured route. And frankly we saw the CMBS market come and go while the unsecured debt market remained wide open and that is appealing to us to have the more stable financing vehicle.

Okay. Thank you.

Thank you,Tony.

Your next question comes from the line of Greg Schweitzer with Citigroup. Please proceed.

Afternoon and I am on with Mike Bilerman as well. Just a question on the ski hills. How much do overall sales need to decrease across your ski exposure for the cash flow coverage to go down to 1 times?

Well, it is not a -- they could reduce expenses accordingly, and I think we would have to see something to nearly 30% to 35%.

We don't have a perfect calculation on that because we haven't seen or experience that. As Greg said these guys have shown themselves to be great managers and we expect cost reductions on the way down and keep the coverage positive. So this year as we finish we will give you color on our next call, but we will have more information on that and full sensitivity on the down side.

Do you have a sense of what it is right now?

What I told you what the coverage is?

Yeah.

I think we have a sense that is probably somewhere in the 1.35 range. 1.35 or so, but it has been trending better here over the last couple weeks. We will just have to see how the weather holds.

Okay. Thanks. And then could you comment on the St. Louis Imagine Schools on probation?

Clearly we are disappointed with the academic performance that those schools have achieved, and the resulting probation that they have been put on. However we are working with all the constituent parties there to deliver a solution that we think meets both the needs of ourselves and our investor and the student base there. As you know we have a structured transaction which provides for if need be substitution of properties, potentially substitution of operators. But I think overall what we are trying to do is kind of monitor the situation, work with all the parties, and see what are the best options both for ourselves and for the constituent parties.

Importantly I don't think anybody is complaining about the facilities and the enrollment isn't lacking. The enrollment has been good. There has not been a performance on the part of operator and it is possible that will change.

As you look toward that expectation do you have any of that baked into guidance?

No, we have no expectation of change in rent on those properties.

Okay. And then just one final one on the increase in guidance. Is it possible that you could just break it up and provide a little more clarity on the drivers of that $0.06?

Sure. If you think about it the midpoint of our guidance was now it is at $3.55 previously and now the midpoint is at $3.60. I think the biggest driver is kind of investment spending, timing and character, and term loan update is the biggest chunk of it and that is probably about $0.06. Then I called out two things in my comments that at the highest level provide the remainder of the difference that is a $0.03 improvement related to the Cantera JV, the Atlantic JV I $0.03 up and about a $0.03 down in G&A because we increased our guidance for G&A . So if you start with $3.54 and take the two items I called out and then the $0.06 think of that as investment spending term loan updates combined that is how you kind of get that $0.05 increase at the

Thank you. Very much.

Thank you.

Your next question comes from the line of Jordan Sadler with KeyBanc Capital Markets. Please proceed.

Hi. It is Craig Melman here with Jordan. I just want to clarify on the Concord situation the $750,000 could be potential upside. Could there be any ground rent payments this year, or would you guys basically need to get all the approvals before they would start paying you?

We need to get approvals before the lease actually would commence. So that is one of the conditions before the actual commencement of the lease, but the $750,000 likewise that is not in ours and could be earned if those conditions are satisfied.

The timing of those approval is such that if they are acquired during the year ground rate could commence, but at the same time I am not planning on it.

Keep in mind those $750,000 payments we have gotten one for 6 months, but that will have ability to do another one. There could be more than one $750,000 payment that we ultimately recognize in income.

You guys keep deferring that until all the approvals are in place?

Yes. Until those primary conditions are satisfied right.

Right. Then just a follow-up on the Greg's question on the different components. You had talked about the 150 million of build-to-suits starting in the fourth quarter, and it seems like it got pushed out a little bit now into 1Q. Are we thinking about it right that the timing is still the same, or is the timing a bit delayed than what you had previous thought last quarter.

I think the timing is delayed. I tried to answer in my comments is that several of these project continue to get delayed, and now we are excited about the fact that we are actually breaking ground on them so we will see that delay stop. I think part of the issue for the theater side was as we talked about last year was just a difficult year. We continued to make ground all throughout the year and gain back into it, but then as we said what it should have been fourth quarter when we thought we were going to close strong again as David said we kind of muddled which made people somewhat hesitant and so it is good to get these projects started and that is what we are looking forward to in 2012.

Just to clarify. Have you guys completed at least signing up the 8 to 10 build-to-suit and just waiting to break ground, or are we still waiting on --

No, we have some degree of paper signed either letter of intent or actual signed deals on all 8 or somewhere between 8 and 10 on those, ues.

Those basically won't commence construction until probably Q2 is your feeling?

Things generally start in the spring. People don't -- we have talked about this before, you don't build a theater in February. They start in the spring. But they will begin and we will spend a substantial portion of the money out in 2012

Hey, guys, it is Jordan. Separate question on returns on the entertainment and recreation properties you are talking about closing here. Did you say that they were in the same range as the build-to-suit the 9.5% to 10.25%.

Yes, that is correct.

Okay, they are. And then did you give any color on what they are or are you just purposely sort of holding off?

No, what we said Jordan is they were kind of in the family entertainment space and as we said we are closing those by the end of the first quarter that we will probably have some announcements in the next 2 to 4 weeks to specifically identify them.

Do you own product like this currently?

We do actually. We have some product like that. If you look at what we have done with Pinstripes, but there will also be some new concepts that we are going to

Okay. So we will hang tight on that. Lastly, the Peak deal can you maybe just put a little more color around that. Obviously that space seems to be a little skinny from a credit support perspective this year. What are they doing with the money? Are they sort of buying low hoping to sell high, or sort of being opportunistic or what?

I'm not sure what you mean with the money. Are you talking with regard to their IPO efforts?

No, you lent Peak another $9M

That was to buy a property. We bought the ground lease out from underneath one of the properties that we had.

Nothing to do with operation.

Nothing to do with operations. That was just to solidify our position to buy out a ground lease at one of our sites.

Okay. But the credit support on that deal is a little bit better than it would have been?

Basically the ground lease payment that they were paying to a third party was equal to what we were going to pay for the property, so it was a net no change but it improved our collateral position, Jordan.

Okay. Thanks.

Sure.

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

Hi, good afternoon, guys. I noticed that the Hollywood movie scene going over to China seems to be improving there seems to be some deal that the Obama administration reached to show more movies in China. Was that encouraging news for you guys, or is there anything --

It was. That was just announced with the Chinese Vice President in the US announced that they expanded the number of movies to 40, and he also had in the last 2 days an announcement by Dreamworks that they are doing a joint venture to include Shanghai Media Group as a joint venture partner for studio production, and as you will recall Shanghai Media Group is the parent entity of Shanghai Film Group which is our joint venture partner and theater development in China.

So it is very encouraging. It continues to be a very robust area and product enhancements particularly international products, particularly American product we think it will be very successful has been successful and we will continue to support the theaters in place and the development over

Okay. All right. Sounds good. So we could see more from you guys you think in China?

Yes, I think that has not been obviously a front burner issue. But we have a beach head there. We have been gathering data. We have been about hitting the term we said we wanted to have to determine that data, and we are going to make a determination on direction there and we will be back to you with more information hopefully.

Okay. Sounds good. On the relationship with Empire is it just the ground lease is that you guys envision this simply that kind of relationship I guess with Empire?

That is the way the option agreement is drafted is it is a ground lease. They would do the actual development of the -- They are responsible for the financial development of the casino resort and hotel.

Correct.

Okay. Good, got you. When I look at the selling of grapes it looks like selling grapes doesn't have much of a margin is that true?

It is getting better. But certainly it is not a mainstay of ours, but to comment it is better than we planned. We planned for worse. We did a little better that is why the little upside and the market seems to be better and improving. .

Okay. Is that over or do we have more --

That is not an ongoing business. Obviously we are exiting the wine business. We had some vineyards that needed to be harvest and we sold the grapes but that is not an ongoing obviously operating business that we are in.

That is a place holder until sale.

That is a necessary not a desire.

Okay. Got you. I also noticed that the actual rental revenue for the vineyards crept up a few hundred thousand dollars. Is that part of the whole transaction situation?

We actually had some percentage rents at one of our wineries. We have an operator in there at one of our winery that paid us some percentage rents in the fourth quarter, so that is why that popped up.

Okay. Good, thank you. And then on the financing side you guys did I assume that was an unsecured term note, is that right, term loan?

Yes.

And then why that instead of a regular unsecured note was it just obviously the pricing was very good was it just the pricing?

Pricing is pretty good at 2.66% it is hard to turn away from that not something you could probably repeat in the unsecured public market, but that was primary. It also fit well into our maturity ladder.

Okay. All right. But going forward you are going to look at some unsecured notes for these mortgages you were saying?

Yes, we look to this year we have in our plan an unsecured bond offering.

Okay. Great. All right. Thank you,

Thank you, Rich.

At this time I would like to turn the call back over to Mr. Brain for closing remarks.

All right. I want to thank everybody again for joining us. We are pleased to have the report we had for you this year. We always enjoy your contact with the Company and further questions. But at this time we will thank you for joining us, and look forward to talking to you down the

Thank you.

Thank you.

We thank you for your participation in today's conference. This does conclude your presentation. You may now disconnect, and have a great day.