EPR Properties (EPR) 2014 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter 2014 EPR Properties earnings conference call. My name is Jackie, and I will be your operator for today.

(Operator Instructions)

I would now like to turn the conference over to Mr. David Brain, President and CEO. Please proceed.

Great. Thank you very much. Thank you all for joining us. It is good to be with you, again, this afternoon for the EPR 2014 fourth-quarter call.

I'll start by saying I need to inform you the conference call may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, identified by such words as: will be, intend, continue, believe, expect, may, 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, and a discussion of the factors that could cause actual results to differ materially is contained in the Company's SEC filings, including the Company's report on Form 10-K for the year ending 2014.

All right. With that, I will say again this is David Brain. I thank you all for joining us. It is good to be with you, and I usually start the call with EPR headlines for the quarter, or at this time each year for the year preceding, but today is a bit different.

I am going to start with a single thought, and that is that this will be the last EPR call on which I will have the pleasure of joining you, at least as a presenter. I am, today, taking the opportunity to announce my retirement from the Company I have had the distinct privilege and pleasure to co-found and form over the last 18 years.

It's been a long ride. Longer than I might have even envisioned in the beginning, but it has been a great ride. There certainly have been ups and downs, including the tech bubble shortly after our founding, and a few years back, the great recession. But overall, things have gone according to plan, and exceedingly well.

I had the pleasure of leading a highly talented team of people through the years, that enabled us to deliver our shareholders a compound rate of return, since our IPO, of nearly 15%. And consistent upper quartile shareholder returns in the net lease category, for almost any horizon you could pick: five years, three years, certainly last year, 2014, with a 25% total shareholder return, versus a peer average of about half that.

Last year was notable, not only for returns, but also because we set a high-water mark for portfolio growth of over $600 million, achieved a total market cap of approximately $5 billion, earned investment-grade ratings on our bonds from S&P, to move from a split-rated to a fully investment-grade rated company issuer. And we turned the corner on revitalizing some of our lower yielding portfolio elements.

In regard to this latter item, inarguably the most notable event of the year, we made a huge leap forward towards generating substantial productive income from our idle land inventory in the New York Catskills, at the site of the former Concord Hotel, a project now called Adelaar.

With the recommendation of the Casino Siting Board in New York for a full casino license at Adelaar, which will be the closest to New York City, this investment that we have been dragging with no return for the last five years, even as we outperform peers, can now be expected to become a high-performing portfolio element over the next several years. This property for the last five years has been the subject of great discussion and debate, on this call, and otherwise, but vision and persistence has been rewarded.

EPR Properties today is thoroughly well-positioned, with a solid balance sheet, robust tenant and portfolio performance, and an ascending growth profile that has doubled in the last two years. EPR Properties is a performance leader among net lease peers. A market leader in the categories in which we invest. And a thought leader, in pioneering and proving that focus specialty real estate investing, based on knowledge and research, can outperform a diversity-premised portfolio.

You know my friends, it seems there's never a good time to leave a party, but all good things, even the best of things, come to an end. With EPR Properties' hugely positive position and prospects, I am confident in its future and comfortable in my departure. You should be too.

The Board has named my friend, Greg Silvers, as my successor. I've worked with Greg side-by-side for over 15 years, and I am confident he is the right person to leave in charge of EPR as it moves into the future. The Company is in the hands of an immensely talented team of people, that have made me look good for quite some time. And I know will continue to deliver the type of returns you have enjoyed and come to expect from us, or even more.

Now I'll turn it over to my friend, Greg, and then to my friend, Mark, and again thank you all for this privilege.

Thank you, David. Before getting started I would like to thank David personally for his many years of dedication and leadership. David has been a friend to me and a mentor for over 18 years, and we here at EPR have all benefited from his leadership and guidance. I know David will continue to be very active and successful in the business community, and we wish him well.

As always, you may find the slides that accompany this call via our website at eprkc.com. I'll start with the headlines for the quarter, and then provide an update on the portfolio.

The first headline, 2014 finished with record revenues and strong earnings, outpacing guidance. Secondly, we achieved record levels of investment spending. Third, Empire Resorts selected by the New York Gaming Facility Location Board. Fourth, annual dividend increased considerably. And fifth, 2015 earnings guidance increased.

As indicated by the first headline this afternoon, the year finished strong, with record revenues that were up 12% over the prior year, as we continue to benefit from healthy tenant industries. This strong revenue growth also translated into robust earnings growth.

Our year-end reported FFO as adjusted per share of $4.13, was an increase of about 6% over the prior year, and exceeded our guidance. We feel very good about this result. When combined with our dividend yield, and our multiple expansion, we delivered a total shareholder return of about 25% for the year.

Our second headline: achieved record level of investment spending, reflects that our 2014 investment spending of over $600 million demonstrated our accelerating growth, having grown investment spending levels by approximately 67% on average over the past three years. Additionally, these investments were across each of our three primary segments: entertainment, education, recreation, where we continue to see attractive opportunities.

The third headline: Empire Resorts selected by the New York Gaming Facility Location Board, is a significant milestone toward activating and unlocking the potential for this property. Additionally, the Board further clarified that it will not consider opening up the Catskills Hudson Valley region capital region to additional applications. This was an important statement, as it mitigates any lingering concerns about a fourth license being located in Orange County.

Our next headline is: annual dividend increased significantly. Subsequent to the end of the quarter, we announced an increase in our monthly common dividend per share for 2015, that equates to a $3.63 annual dividend. This represents an increase in our dividend of more than 6% over the prior year, as well as the fifth consecutive year with a dividend increase. Additionally, based on recent share prices, this dividend represents a yield of greater than 5.9%.

Our last headline is: 2015 earnings guidance increased. With our low leverage and sound balance sheet, we are extremely well-positioned and have the necessary financial flexibility to pursue high-quality investments.

Now, I'd like to spend a few minutes updating our portfolio. In the fourth quarter of 2014, we continued the positive momentum of the year, with approximately $141 million of investment spending spread across our three investment segments. Additionally during the fourth quarter, and also subsequent to year end, we've disposed of certain assets at prices above our basis, creating opportunities to strengthen our portfolio and redeploy capital.

In the entertainment segment, theater exhibition could not maintain the success of 2012 and 2013, both record box office years. For the year, box office revenues were down approximately 5%, which was consistent with forecast at the beginning of the year. As we discussed at the beginning of last year, 2014 was not a particularly strong film-content year, and most of the experts predicted a slight pullback after consecutive record years.

The good news, however, is that 2015 looks like an outstanding film year, and we are off to an excellent start, with two films setting opening weekend records for January and February, respectively. With regard to our portfolio, although we do not have final year-end numbers for all of our theaters, we expect overall coverage to remain in the [1.7] range, despite the weaker box office.

In 2015, we expect the deployment of the high-amenity theater will continue, as most of our build-to-suit opportunities are of this design. As we have discussed, these amenities have really struck a chord with the consumer, and we continue to see positive results and increased revenue generation associated with these offerings. Accordingly, as these results drive operators to seek new growth opportunities from this format, EPR is well-positioned to be a partner in that growth.

During the quarter, we funded approximately $17 million related to the purchase of a land parcel under a theater, and adjacent retail, as well as the build-to-suit construction of three theaters. Subsequent to the end of the quarter, we also completed the sale of a 16-screen theater in Los Angeles, California, for net proceeds of $42.7 million, and recognized a gain on sale of $23.7 million.

This theater was one of the original theaters we acquired at our IPO, and was in the final year of its lease term. Given the short remaining lease duration, and the announcement of the construction of a competitive theater, we believed it to be an opportune time to realize the gain and redeploy the capital.

In our recreation segment, the cold weather in the Midwest and Northeast, coupled with lower gas prices, have benefited our properties, as overall ski coverage has improved to 1.85, versus last year's coverage of approximately 1.7. Our TopGolf projects continue to create excitement with each new opening, and their performance strengthens our master lease portfolio. Furthermore, with the recent announcement of a strategic partnership with the Golf Channel for marketing and promotion, we expect TopGolf's brand awareness and customer acceptance to only grow.

During the fourth quarter, we had approximately $75 million of investment spending in our recreational segment, related to the continued construction of the waterpark hotel at the Camelback Mountain Resort, which we anticipate will open in the spring, as well as spending related to the build-to-suit construction of 14 TopGolf entertainment facilities.

Also during the fourth quarter, in conjunction with Peak Resorts successfully becoming a publicly traded company, we received approximately $76 million, plus a $5 million fee related to the prepayment of three mortgage notes, and the partial prepayment of a fourth mortgage. The majority of this payment, or $43 million, related to the prepayment of amounts related to property at Mount Snow that is being prepared for future residential development.

As this property did not directly relate to ski operations, nor was it a development opportunity that was a strategic fit for us or we would want to fund, we structured the original mortgage note to be freely prepayable of these amounts related to those parcels. With regard to the prepayment of the other three mortgages, we believe that the benefits that we would enjoy as a result of Peak's equity infusion at their IPO, including stronger property-level coverage, strengthening of our tenants' balance sheet, and the $5 million prepayment fee, outweighed the 2015 FFO impact of accommodating Peak's request for prepayment.

During our previous call, we announced that we had signed a letter of intent for the acquisition of a recreational resort for approximately $135 million. However, we remain very disciplined in our investing process and have not been able to reach agreement on a definitive purchase agreement. And, we do not anticipate that project being part of our investment spending. Nonetheless, we continue to see many opportunities for us to expand our portfolio in the recreation segment, including our continued relationship with TopGolf.

With regard to our education portfolio, 2014 continued the theme of increasing opportunity within the public charter school segment, as the 2014/2015 school year saw the introduction of over 500 schools from the previous year. These schools have a total enrollment of approximately 3 million students, a year-over-year increase of approximately 14%.

In addition, in 2014 we expanded both the number of locations and operators in our early childhood education centers, and our private school enrollments exceeded our pro forma projections for their initial year. These trends strengthen our belief that investments in educational infrastructure create a consistent and reliable investment platform.

During the fourth quarter, we invested approximately $48 million related to the build-to-suit construction of 18 public charter schools, 12 early childhood education centers, and 3 private schools. We continue to see very strong demand for real estate financing solutions within the education space, and believe that our build-to-suit program provides us a competitive advantage in sourcing transactions that strengthen both our portfolio quality, and investment returns.

With regard to the Adelaar casino and resort project located in Sullivan County, New York, as we reported previously, on December 7, 2014, our tenant, a wholly owned subsidiary of Empire Resorts, was selected in a unanimous vote by the New York State Gaming Facility Location Board to apply to the New York State Gaming Commission for a gaming facility license on our site. We are extremely pleased with this result, being the only application selected for the Catskills region.

However, the details of the project, beyond what has been previously publicly disclosed, remain subject to the license application process. As we have communicated previously, we anticipate upon conclusion of this process, we will have a special call to discuss all the particulars of this investment.

Our overall occupancy remains strong at 99%. As we discussed in our last call, our current investment spending guidance remains at $500 million to $550 million. Importantly, given our large composition of investments related to build-to-suit projects, approximately 50% of this estimated investment spending is related to projects that have closed in 2014, but will carry over into 2015. Given this large amount of carryover, we're confident about our ability to deliver this level of spending, and our strong balance sheet supports our plan.

With that, I'll turn it over to Mark for a discussion of the financials, and I will rejoin you for questions.

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

Before I get into our results, I would just like to echo Greg's comments, and thank David for all of his contributions to EPR over many years. He will most certainly be missed.

Now, turning to the first slide, FFO for the fourth quarter increased to $63.5 million, from $63.3 million in the prior year. FFO per share was $1.10 this quarter, compared to $1.23 in the prior quarter. FFO as adjusted for the quarter increased to $65.1 million, versus $49.6 million in the prior year, and was $1.13 per share for the quarter, versus $0.97 in the prior year, an increase of 16%.

Moving to the next slide, there is one item that occurred during the quarter that I would like to discuss before reviewing the other variances versus the prior year. As Greg mentioned, in conjunction with the successful IPO of Peak Resorts, we received $76.2 million in early December, representing full prepayment of three mortgage notes receivable, and partial prepayment of an additional mortgage note receivable.

We also received a prepayment fee of $5 million, which is included in mortgage and other financing income for the quarter. This fee, net of the reduced income subsequent to the payoff, increased FFO as adjusted per share, by a little over $0.07.

We also extended the maturity dates of Peak's remaining mortgage notes, totaling $93.6 million at year end, to December 2034. Additionally, $301,000 of prepaid mortgage fees were written off, which is included in costs associated with loan refinancing or payoff for the quarter.

Now, let me walk through the key line item variances for the quarter versus the prior year. Our total revenue increased 17% compared to the prior year, to another record quarterly amount of $104.7 million. Within the revenue category, rental revenue increased by $10 million versus the prior year, to $75.9 million, and resulted primarily from new investments.

Percentage rents for the quarter included in rental revenue were $363,000, versus $372,000 in the prior year. Mortgage and other financing income was $24.1 million for the quarter, an increase of $5.5 million versus prior year. This increase was due primarily to the prepayment fee of $5 million received from Peak that I discussed previously.

Also during the quarter, we recognized $800,000 in participating interest from Peak, related to prior ski seasons, as we resolve differences related to the calculation. These increases, along with the increase associated with additional real estate lending activities, was offset by the impact of the sale of four public charter schools earlier in the year for approximately $46 million.

On the expense side, our property operating expense increased by $548,000 versus the prior year, due primarily to higher bad-debt expense. G&A expense increased slightly to $6.3 million for the quarter, compared to $6.1 million in the prior year, due primarily to higher payroll-related expenses, including severance pay of approximately $350,000 net, and stock grant amortization. This was offset by lower annual incentive compensation.

Our net interest expense for the quarter decreased by $617,000 to $20 million. This decrease resulted from an increase in our interest capitalized on construction projects and a lower weighted average interest rate. This was partially offset by more outstanding borrowings during the quarter.

Transaction costs were $1.1 million, for both the fourth quarter of 2014 and 2013, and related to terminated transactions. $879,000 gain on sale recognized this quarter related to the sale of our remaining two winery and vineyard properties during the quarter, for net proceeds of $8 million. We still hold two notes related to previously sold winery and vineyard properties, that totaled $5 million at December 31.

The sale of these assets, the pay down of the Peak mortgage notes, the sale of the four public charter schools earlier in the year, and the theater sale that occurred subsequent to year end, discussed by Greg, all at substantial gains, are evidence that we continue to seek and execute asset recycling opportunities where they make good economic sense.

Finally, income tax expense for the quarter primarily relates to the Canadian tax law change that I've discussed on previous calls. $184,000 of this expense is the non-cash deferred income tax that was excluded from FFO as adjusted. The remainder is current tax expense. Subsequent to year end, the Canada Revenue Agency proposed certain changes [to our] 2010 and 2011 tax returns, due to an audit of those years.

We are challenging their assessment, but believe it is prudent for accounting guidelines to book in 2015 an additional current tax reserve of approximately $1.5 million, which has been included in our 2015 FFO as adjusted per share guidance, and this is expected to be booked in Q1. We expect to record approximately $6.5 million in additional deferred tax expense in Q1, also related to this audit. But remember, deferred tax adjustments are excluded from FFO as adjusted.

Now, turning to our full-year results on the next slide, our total revenue increased 12% versus the prior year, to approximately $385 million, and FFO was up 11% to $220 million for the year, compared to the prior year. FFO as adjusted per share increased about 6% versus the prior year, to $4.13, from $3.90. Both of these increases are strong, particularly when you consider the short-term impact of the asset recycling I discussed earlier.

I want to take a minute to point out that as we continually seek to enhance our transparency, we have added actual and service totals for the quarter to page 20 of the supplemental, that provides future investment spending estimates for build-to-suit projects in process.

In the third-quarter supplemental, we anticipated $111.9 million would go into service during the fourth quarter of 2014. We actually placed $92.3 million in service during the fourth quarter, and the variance was due to an unanticipated delay in the completion of our private school in Brooklyn. This school is now anticipated to be put in service during the second quarter of 2015, for approximately $36 million. Offsetting this was a TopGolf facility in Tampa that went into service during the fourth quarter, but was originally anticipated to go into service in the first quarter of 2015 for $15.7 million.

Turning to the next slide, I would now like to review some of the Company's key credit ratios. As you can see, our covered ratios for the year are strong, with fixed-charge coverage at 2.9 times, debt service coverage at 3.3 times, and interest coverage at 3.7 times. We increased our monthly common dividend by 8% in 2014, and our FFO as adjusted payout ratio was 83%. Our previously announced common share dividend for 2015 represents another strong annualized increase of over 6%.

Our debt to adjusted EBITDA was 4.5 times for the quarter annualized, and our debt to gross assets ratio was 39% at December 31. As you can tell by these metrics, our balance sheet is in great shape to fund our strong pipeline.

Let's turn to the next slide, I'll provide a capital markets and liquidity update. At quarter end, we had total offsetting debt of $1.6 billion. All but about $132 million of this debt is either fixed-rate debt, or debt that has been fixed through interest rate swaps, with a blended coupon of approximately 5.4%.

We had $62 million outstanding at quarter end on our $535 million line of credit, and we had $3.3 million of cash on hand. We are in excellent shape with respect to debt maturities. As of December 31, we have scheduled balloon maturities of less than $100 million in each of the next two years.

Turning to the next slide, we are increasing our guidance for a 2015 FFO as adjusted per share to $4.32 to $4.42, from $4.30 to $4.40, and maintaining our guidance for investment spending of $500 million to $550 million. Note that FFO as adjusted for 2015 excludes the $18 million to $19 million charge we expect to take in Q1 related to David's retirement.

We think it is helpful to investors to also share some key assumptions contained in our 2015 guidance. As Greg mentioned, in December, Empire Resorts, our expected casino tenant for Adelaar, received a favorable determination from the New York State Gaming Facility Location Board to allow them to apply for a gaming facility license.

With this decision, the development of this casino resort project has become increasingly more probable. Because of that, we are required by accounting rules to begin capitalizing interest and certain costs on portions of this project. We anticipate capitalized interest related to this project to be approximately $7.5 million for 2015.

As you may recall, we are currently receiving monthly non-refundable lease option payments from Empire Resorts, which by the end of this month are expected to total $4.5 million. These payments are expected to continue at $375,000 per month, until 120 days after Empire Resorts is approved for a gaming facility license. We are deferring these payments, and expect to recognize in the income in the future as part of lease accounting.

While we anticipate a lease agreement being signed by Empire in 2015, we do not, at this time, anticipate recording any lease-related income until years subsequent to 2015. As Greg mentioned, we plan to have a separate call to announce the details of this project at the conclusion of the license application process.

This guidance also reflects the asset recycling I discussed previously, and we have removed the estimated earnings impact of the recreation resort investment that did not close, as Greg discussed. We have also updated the timing of other projects.

Please remember, because the vast majority of our expected investment spending relates to build-to-suit projects that generally have 9 to 12 month build cycles or longer, it is important to understand that most of the earnings impact related to our investment spending is in the year following the actual spending we report. Therefore, new build-to-suit projects that we may add to investment spending over the course of the year are not expected to meaningfully impact FFO per share results in 2015. Additionally, as I discussed last quarter, we expect G&A expense to be approximately $32 million for 2015.

Finally, while we do not typically give quarterly guidance, I did want to give guidance for FFO as adjusted per share for the first quarter of 2015, as the timing of our earnings is often misunderstood. First, as I have indicated in previous years, G&A is generally higher in Q1 by approximately $500,000 than the full year divided by 4.

Second, combined percentage rents and participating interests are generally much lower in the first half of the year versus the latter half. For Q1, we expect about $250,000 in such income, which is about the same as we received in Q1 of 2014. Third, in Q1, we expect to record the additional $1.5 million of current tax expense related to the prior-year Canadian income tax audit I discussed earlier.

Thus, putting all this together, our guidance for Q1 FFO adjusted per share is $0.98 to $1.02 which, at the midpoint, represents an expected increase of over 6% versus the prior year. Now, with that, I'll turn it back over to Greg for his closing remarks.

Thank you, Mark. Before we go to questions, I'd simply like to say that we're very pleased with how the fourth quarter and the year turned out, and we expect to continue to reliably deliver attractive returns with strong investment fundamentals, and appreciate the trust you placed in us. With that, I'll turn it over to the operator for questions.

(Operator Instructions) Craig Mailman, KeyBanc.

Hi guys, I just want to first tell David good luck and congratulate Greg on the promotion. And maybe just staying on that topic, it seems a little sudden. Could you guys give us some background on, David, maybe your thoughts on timing here? Was this always planned, and whether the Board did an external searches before naming Greg CEO?

Craig, thank you, I guess. And I will just tell you, it's timed with both my family life and my enthusiasm with the business as it's moved into 18 years. And I've done 70 of these calls, and sometimes it is good to do something new. And I've been able to make the shareholders our first priority, a bunch of money, we've made some money here, and I think [this is it].

With regard to the search, I think the Board has -- we have a very good feeling about the performance of the Company, and the continuity is a high-priority. And therein, I think the Board reached that decision. All that, I can't tell you exactly how that went down, because I was not a part of all of that.

Okay. Then maybe just moving over to guidance. Mark, there's a bunch of moving parts here. The range went up by $0.02, but is it accurate to say that had it not been for the cap interest on Adelaar, that may not have been the case given the taxes and the resort acquisition falling out of bed?

Maybe it helps if I reconcile for you a little bit, that $0.02. You're right, the recreation resort falloff, that was $0.04 decrease. And then, we did have the two sales, both the Peak paydown, which was a sale of sorts, and the theater subsequent to the end of the year. Both of those, as we stated, were at substantial gains.

But from a run rate perspective, that's about $0.07 hit. Even though we think it was the right thing to do for the business. And then, you're right, the tax is about $0.03.

So, that all adds up to those three things, about $0.14 when you conclude the sales, and Wilderness and the tax. And then we had the Adelaar of $0.13 roughly, which is the $7.5 million and then other timing and so forth. All that combined to the $0.02 increase. The biggest piece is, again, the sales of Wilderness falling out, and tax on the negative side, and Adelaar activation, and the fact that that's becoming probable in terms of capitalizing interest.

Okay. It's helpful to give the guidance. Can you just give us a sense of maybe what the mortgage and financing income will be on a run rate basis when you strip out the $5 million? And it sounds like there's another $800,000 in there related to that. Does that come out as well? Plus the Peak resort, just the repayment of that?

Right. So you take out $76 million in mortgages, at roughly a 10.33% rate. Not roughly, that is the rate. I think it happened December 17, you strip that out of the quarter, and you're right, you pull out the $800,000 percentage rents, which isn't repetitive. And obviously the prepayment fee was a one-time item. I think if you do those things, you can nail down Peak, and the rest is status quo with respect to Schlitterbahn, et cetera.

All right. And then just lastly, can you maybe give a little bit of color of what happened at Wilderness on the decision to walk away?

I think as any of these times when you start to explore and you get to issues with regard to a valuation and you go through your due diligence, you have to find a meeting of the minds, and we weren't able to do that. So, it's not -- I would not say that that project will never show back up again, but that we just couldn't reach agreement on the way we looked at it and the way they were looking at it.

All right, great. Thank you, guys.

Thank you.

Sure.

Nick Joseph, Citigroup.

Hey, it's Michael Bilerman, and David, I guess congratulations on your retirement and Greg, to your ascension to CEO. So, I want to know, David, is did you negotiate with Cramer that Greg gets your quarterly spot on Mad Money?

(Laughter) Yes, but you know -- I don't know. They need a handsome face so they may [look to Greg for it].

That's probably true, Michael. As you know, I have a face for radio. So, we may use David as a stand-in on that.

Cramer loved David, as well.

Right. So, I guess when, David, you said it was time for -- maybe to try something new. It sounds like, at least from the 8-K, you have a three-year non-compete, so I don't know if that is something new, completely different out of industry. And when did you approach the Board that you wanted to retire and for them to seek a new CEO? Or was it the other way around?

Michael, it's one of those things that has been growing over time, and you just, you keep doing the same thing. It's great, but my kids are more out of the house, and there's some projects locally to be involved with. Some are small real estate development, and some are operating companies. It is different things of that nature.

So, I don't think there's an issue with regard to the non-compete, and it's just been a -- you look for an opportunity, and you look for a time, and it's never right. But the Company is, as I stressed, it's in such great shape, and we have a lot of momentum and wind at our back, and so it's a nice time. The stock's running at an all-time high, and it is a good time to leave the party.

So, how did the Board, or what was in the -- and I don't know if the agreement has been signed or not, because the 8-K says it's subject to an agreement, but just help us understand the full payment of severance in terms of, effectively, what would be under a change of control or a termination, not for cause. How did the -- why is that, if you are retiring, nothing, you're not worth it, but I'm just trying to better understand why there is a $19 million payment, $12 million cash, and then $7 million in terms of the accelerated vesting of stock for a CEO that's retiring.

I think -- Michael, it's Greg, I think part of the deal is simply a reward for David being here from the beginning, leading this Company through our 18 years, achieving results that he spoke of earlier that were beneficial to everyone, and the tenure of being there at the beginning, at the birth and carrying us through. As David aptly pointed out, different moments, that it was the right thing to do by the Board. They made that decision, and I think everyone is supportive of that.

Okay. That is helpful. And then just on the -- Mark, you're going through the guidance changes that, the $0.04 on that one deal, that was a $135 million deal. So, what were you effectively -- you were assuming like a -- because you have already (multiple speakers).

Cost of capital. Really what we've -- we take out the lost earnings minus -- we save effectively the cost of capital by not having to raise as much equity and debt going forward. So, that $0.04 is after cost of capital savings, if you will.

So, you're assuming basically a 200 basis point spread on that capital over the year.

Yes, spread to the capital, correct.

Okay. All right, thank you.

Thank you, Michael.

Dan Alcher, FBR.

Hey, thanks, good afternoon everyone, and again, let me extend my congratulations to both David and Greg. Maybe just switching a second to Adelaar; I think we saw that maybe Cuomo -- Governor Cuomo, [whatever you want] to reopen the opportunity for one of the other regions to get a license? Could you maybe just comment a little bit on that? Is that maybe a delay overall for the gaming commission, as they go through the actual license approvals?

I think the issue, what you heard was, yes, in the potential -- another region. However, we don't see that as impacting the Catskill region as we are actually now under the jurisdiction of the licensure board, not the siting board. We've have cleared that hurdle. If they are going to consider a gaming applicant for a site in another region, it would be back under the location board. We feel very comfortable that we are on the right glide path for obtaining the license.

Okay, and can you maybe just share a little bit of timing from where the approval process is, has the license been submitted, what has to be done, what has not been done, and maybe expectations of when that approval might come about?

Sure, I would point you -- I mean the licensing board is actually a public board, and they've put forth some time frames regarding that. I think we've all submitted all of the application material that we have been requested of.

So, again, they put out up to -- some very long things, long terms, but we don't -- no one seems to think it'll take that long. But I don't want to give someone the impression that it's -- we think this is an issue that will get resolved this year. And it really -- the question becomes, when can you start construction? I will tell you right now, we are clearing vegetation and trees and doing -- and beginning to look at infrastructure.

Okay. That's helpful. I remember watching the webcast of the facility location board, and that was an exciting event for a lot of folks watching (multiple speakers).

It was as well for us.

It was for us, yes.

Yes, no, totally. And just a follow-up on Peak, Greg, you went through some of the benefits as to why you let Peak out, if you will. Can you just review those again? I guess one, just stronger equities at the sponsor, maybe that's one of them. But maybe just run through again what the rationale was and why it made good business sense?

Sure. Well, I think what I said was, stronger balance sheet, stronger property coverage, and the $5 million prepayment fee. I think, as that indicates, with stronger coverage, we had control of which projects we were releasing and which we were not. We think that we had a good portfolio. We think we have a better portfolio now.

Candidly, they needed to be, Dan, a certain size in order to have a public float. And so there is a trade-off there. If we want them to be successful in their IPO, then we needed to balance that and allow for that -- allow them to have a use of proceeds that made sense to grow to a certain size.

With that being said, as we talked about, when you think about a $73 million, of which $43 million of it was related to a development area, the other three prepayments that we let happen were very small properties. There was one in the northeast, one in St. Louis, and one in Kansas City. So, we felt good about choosing those properties, and as I said earlier, I think it strengthens our overall portfolio and strengthens our tenant.

All right, thanks, guys. I'll let others take a turn, bye.

Thank you, Dan.

Rich Moore, RBC Capital Markets.

Yes, hi, good afternoon, guys. And, David, I want to add my best wishes, and, Greg, my congratulations. And listen, if you get really bored, you can always come join us over here on the sell side.

Let me ask you guys real quick, if I could, on theaters. It looks like we're going to have good year. The Academy Awards were pretty strong and it looks like the box office is going to be good. Will you see more percentage rent coming from the theaters this year? Will we hit more of the break points than you typically hit in the theater business (multiple speakers)?

I will tell you we think so. Yes, I'm sorry, Rich. First of all, he said he wanted to go do something fun, so he's not going over to the dark side.

Come on, it's just a blast over here.

But second of all, I think we will --

We're hopeful that we will. I think there's an opportunity with some of these theaters. There's an opportunity with what we've seen with some of the higher amenity theaters where we are getting greater revenue per patron spends, that we are excited about reaching some of those points that we think could begin to show benefits.

Okay, so maybe a bump in percentage rents for the year from the theaters.

I don't think we are budgeting that, but we are hopeful of that occurrence.

Okay. And then it sounded like the high amenity theaters are going pretty well. And I know that some of those take up extra space when you see a downsizing from a 24 screen, say, to a 14 screen. Do you have any theater leases coming due this year, or maybe this year, next year where you're worried about some of that downsizing in size from bigger (multiple speakers)?

Not really. I will tell you, we used to talk about that as a concern. Almost every one of our theaters being well located, everybody's taking the advantage.

Because of the fact when you move to a high amenity theater, that you've got an opportunity -- because you take out the number of -- you lower the seat count. So, actually, having a bigger theater where you can preserve a greater number of seats works. Over the last two or three years, we just haven't seen those theaters, them come back to even want to downsize. They just want to rework it into an amenity theater. As far as expirations, we have two lease expirations this year, but both are top 100 theaters, so we don't really see a lot, any opportunity there.

Good, thanks Greg. And then, the land parcel, I guess, the land and the parcel that you bought at the one theater. Is that to add something else besides a theater? (multiple speakers)

No, actually, it was a parcel that was -- it was related to a theater. And the parcel became available, that was a ground lease of a theater. And then it happened to have, believe it or not, a Target on it. So, when I say it's a retail parcel, it is actually a Target ground lease. But it was not subdivided, so when we wanted to buy the parcel underneath the theater, we had to take the whole.

Okay, good. Got you, thanks. And then a couple quickies, if I could. The Series C I assume is anti-dilutive, is that the situation, kind of like it was last year? Or is it dilutive (multiple speakers) [too boot]?

It is to FFO as adjusted. As income grows and our dividend grows, it becomes more dilutive. It's actually, the way we project our earnings for next year from an FFO perspective, it's kind of dilutive over the latter half of the year. And it was dilutive in the fourth quarter just because we had such high income because of the prepayment penalty.

Okay. Good, good. Got you, Mark. And then last thing, the jump in accounts payable. Is there anything interesting in there?

You know, we have a lot of construction activity, so there is a significant amount of draws in accounts payable at the end of the year. That's probably what stands out.

Okay. Great. Thanks very much, guys.

Thanks, Rich.

Dan Donlan, Ladenburg.

Thank you, and good afternoon, and congratulations to everyone. Just had a quick question on the 2015 investment spending guidance. $500 million to $550 million. Is there any acquisition spending, or any acquisitions in that? Because I think in the prospectus you had, I think $39 million of LOIs for two ski resorts.

Yes, we did have some, and as we've -- if someone follows the news, we didn't discuss, but we have closed one ski opportunity, which is the Wintergreen outside Charlottesville, Virginia. So, there is some level of that in there, yes, Dan.

Okay. But -- and so that's -- is that just one or the other, that's just one of the acquisitions, and there's still --?

Yes, that's one. There are others.

Okay.

Yes.

And then as far as the disclosure on the -- the additional disclosure that you guys provided, what is the delta between the -- and I'm sorry if you went through this, but what's the delta between the $92 million that was in service in 2014 versus, I think it was like $100 million from (multiple speakers)? Yes, what's the delta between that, just for my understanding?

It was $112 million versus $92 million. That delta is due to a school, a private school in Brooklyn that we're building. Has been -- the in-service has been delayed a couple of quarters. So, we thought it would go into the fourth quarter of 2014. It's going to go more likely the second quarter of 2015.

That was $36 million. That was offset by a TopGolf facility that we thought would go in service in the first quarter of 2015, that we actually put in service in the fourth quarter of 2014. So, the net of that is what created that variance, so really two things that offset, but the school was a little bit larger than the TopGolf facility.

Okay, I caught part of that in the prepared remarks. So then, just for modeling purposes then, how should we think about these build-to-suits? When should we model them hitting? Is it a fair assumption, the first day of the last months of every quarter or, is it just so random, we want to be conservative and push it maybe towards the back half of every quarter? Or the last month?

You're talking about within a quarter?

Right.

We can't answer that precisely. I would probably just use a mid-quarter approach.

Okay. All right, thank you.

Thanks, Dan.

Nick Joseph, Citigroup.

Hey, it's Michael Bilerman, I just had one other question. Just in terms of David coming off of the Board, what was the rationale there, versus enlarging the Board to eight members? Arguably, if Greg, as CEO, should have a seat on the Board, why are you (multiple speakers)?

Mike, I think it is a pretty well-known common practice that it's not really good to have, particularly immediately following a change, the immediately exiting CEO on the Board. It's kind of like looking over your shoulder, and so forth. But that's a very common practice in Board composition today.

And then, I guess, Peter Brown coming back on the Board as a cofounder of the Company, that's okay?

Peter Brown has been on the Board for, five years?

Yes, but it was two years even after he left. It was several years after he left his position at AMC and a number of years after any involvement here. There was -- there's usually a point of separation there, and it may be I'll be involved down the road, but at this time, I don't think that works really well.

Okay. Thank you.

All right.

Ladies and gentlemen, that concludes our question-and-answer session. With that, I would like to hand the call back to Mr. David Brain for closing remarks.

Well, thank you, and again, thank you to everybody for joining us. It has been an immense pleasure. It always is. And the guys here are at your disposal, and if anybody -- I'm around also to talk to, so thank you very much, again. We will see you down the road.

Thank you guys.

Thank you.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect, and have a great day.