Shares of real estate investment trust (REIT) EPR Properties (NYSE: EPR) fell 13% in July, according to data from S&P Global Market Intelligence. Through the end of the month, it was off by nearly 60% for the year. That's a disastrous showing, given that the average REIT, as measured by Vanguard Real Estate ETF, was lower by "just" 12 over the same span.
EPR Properties, formerly known as Entertainment Properties Trust, is among the worst-positioned REITs in the face of COVID-19. The vast majority of its portfolio is built around experiential properties like movie theaters, entertainment centers, and amusement parks. When the U.S. started to shut nonessential businesses and ask residents to socially distance, its lessees were some of the hardest hit. To put a number on that, in April the REIT collected just 15% of its contractual rents.
The stock has waxed and waned along with the progress in the fight against COVID-19. When states began to reopen for business, the future started to look a little brighter, but that didn't last very long, as cases began to spike anew. Notably, movie companies pushed out big theatrical releases, causing EPR's movie theater tenants (which account for roughly 50% of its rents) to push out their reopening dates. That's a major issue for EPR, and investors are well aware of it. At this point, there's no clear end in sight for the pain, and investors are reacting as you'd expect by avoiding the company's stock.
EPR's earnings are likely to be bad reading for some time because of its unique focus on entertainment-related assets. That won't change until there's a better way to deal with COVID-19. Investors should expect continued volatility here, largely driven by news around the coronavirus.
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