Rave Reviews on Wall Street for Cinema REIT

Entertainment Properties Trust’s performance has surged over the past 12 months, thanks to its decision to refocus its strategy largely on its core theater business that is booming due to the success of recent 3-D blockbuster movies. The Kansas City, Mo.-based real estate investment trust (REIT)--the largest public landlord to the nation’s cinema complexes--bought 15 movie theaters for a total of $121 million in December. The REIT is popular with investors because at $2.60 its annual cash dividend is higher than many of its peers. And, Entertainment Properties’ stock has more than tripled to $37.58 a share since hitting a 52-week low last spring.

While other real-estate asset classes like shopping centers and office buildings are seeing rents and occupancy levels decline, the REIT’s 80 megaplex theaters throughout the country are 100 percent occupied on long-term leases to exhibitors like AMC Loews and Regal Cinemas through sale lease-back deals. (The company has never had a vacancy or late rent payment in its 13-year history.)

But, Entertainment Properties has struggled over the past two years because investments in other niche real-estate businesses—like vineyards and a Catskills, N.Y., casino-resort development—underperformed. The REIT, which has taken about $100 million in reserves on its underperforming investments, now is trying to remove itself from or minimize its exposure to them. Its decision to return to the basics will not exclude all of its niche businesses, however. The REIT is planning to keep its 27 charter schools operated by Imagine Schools Inc., and develop more, because demand and political support for alternative schools are growing.