Episode summary
Roller Coasters, REITs, and Rotten Tomatoes | Barron's Streetwise
Barron's Streetwise
· · 34 min · Hosts: Jack
Summary
REITs have been a surprisingly strong pocket of the market, and the analyst argued that EPR Properties helps explain why. EPR is a niche experiential net lease REIT that owns assets like movie theaters, amusement parks, Top Golf, ski resorts, and other entertainment properties. The analyst said the company has been recovering as the box office improves, tenant-credit worries fade, and investment activity accelerates, while its dividend yield remains roughly 6.5%. He also pointed to EPR’s spread investing model: it bought a Six Flags portfolio for $315 million at an 8.5% cap rate, versus a much lower borrowing cost, creating a margin that can support earnings growth.
The host’s amusement-park story made the maintenance issue vivid, but the analyst emphasized that EPR’s tenants generally handle taxes, insurance, and maintenance under triple net leases. He said that structure gives the company predictable cash flow and room to keep deploying capital. EPR’s current pipeline is about $1 billion, and the analyst said its total addressable market could be as large as $100 billion, leaving room for growth if the balance sheet stays flexible.
On movies, the analyst said the box office is rebounding faster than many expected, helped by higher consumer spending on premium formats and concessions. She expects North American box office to finish the year up around 20%, with IMAX and Cinemark among her preferred stocks. She argued that IMAX still has international growth, market-share gains, and a stronger release slate, while theaters may gradually return to slower-growth but dividend-paying businesses.
Key takeaways
- The analyst said EPR Properties offers a roughly 6.5% dividend yield and benefits from buying experiential assets at spreads of about 150 basis points.
- EPR’s Six Flags deal was a key example: $315 million at an 8.5% cap rate versus an estimated 7% cost of capital, creating earnings accretion.
- The analyst said EPR’s pipeline is about $1 billion and its addressable market could reach $100 billion, leaving substantial room to grow.
- The box office is recovering faster than expected, with the analyst projecting the North American market could end the year up around 20%.
- The analyst favored IMAX and Cinemark, saying premium screens and rising concession spending are helping margins and support a return to dividends.
Notable quotes
“investors are looking for some more safety, some predictable cash flows, uh they'll they'll turn to REITs”
“the company put up a lot of money for capex. They're going to do some improvements. They're going to do, you know, plenty of maintenance”
“the box office this year is up almost 20% year-over-year um cumulatively”
“The theaters didn't raise ticket price very much directly, but people want to go see things on premium screens and IMAX”
“IMAX has been on our best ideas list for um quite a while, for the last couple years”
How the episode opens
Investors are looking for some more safety, some predictable cash flows, uh they'll they'll turn to REITs. Um and the other aspect is, you know, these are businesses that are coming out of the pandemic that are now finally stabilizing. Supplies come down a lot and so from the operating and fundamental standpoint of REITs, they're starting to uh to to grow again.
Hello and welcome to the Baron Street Wise podcast. I'm Jack How and the voice you just heard is Opel Rana. He's an analyst with Key Bank Capital Markets covering REITs, real estate investment trusts.
They've been on a tear this year. We'll talk about which REITs Opal still likes, including a weird one. And later, we'll hear from Wed Bush analyst Alicia Ree about the box office and her favorite movie stocks.
Let's get into it. Listening in is our audio producer, Emily Sumland. Hi, Emily.
Hi, Jack. — I was away last week. A little end of summer getaway, as you know. I don't think I think we pulled it off. I don't think listeners knew. — You were sorely missed here at Barrens.
I think we I think we fooled them. Um, I experienced some sheer terror. I experienced two minutes of absolute white knuckle terror while I was away.
And you know, common sources of fear, right? Spiders, snakes, heights, uh, none of those clowns. It actually ranks pretty high on the list.
Wasn't clowns. It was maintenance. Capex is is probably how I would describe it.
And it happened at a place called Great Escape. Do you know what that is? in an amusement park.
It is. It's in the It's in the north of New York State. It's up towards the Aderondex near Lake George. And it is, I would say, an aging and and strange amusement park.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- reits
- real estate stock upgrade
- imax
- box office
- rotten tomatoes
Companies and tickers mentioned
- IMAX
- IMAX
- Rotten Tomatoes
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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