People want to have experiences
EPR Properties is the only major REIT that is a pure-play on experiential properties. In other words, the company owns real estate occupied by tenants who mainly sell experiences, not tangible products. Movie theaters, golf attractions, water parks, ski resorts, and family entertainment centers are some of the main property types EPR owns.
Obviously, this wasn't a great business to be in when the pandemic started. Virtually all of EPR's properties were forced to close temporarily, and the movie theater business (which accounts for nearly half of EPR's contractual rent) isn't close to being back to pre-pandemic levels.
However, this could be one of the biggest winners of the gradual return to normalcy. For one thing, EPR's theater operators -- especially AMC Entertainment (NYSE: AMC) -- are now on solid financial footing.
EPR felt comfortable enough about its cash flow to resume its monthly dividend payments sooner than expected, and the company is now prepared to start aggressively growing its portfolio once again. With more than $1.1 billion in cash and available borrowing capacity, and an estimated $100 billion in real estate in its investable universe, the next few years could be very strong for EPR.
The outlet industry showed its resilience over the past year
Tanger Factory Outlet Centers owns 36 outlet mall properties, mostly along the east coast and in Texas. And to be fair, Tanger has had a rough few years. Even before the COVID-19 pandemic, some of Tanger's key tenants were struggling to compete with e-commerce. Then, when the pandemic hit, it sent some of the company's biggest retailers into bankruptcy.
However, there are some reasons to think the worst is over. For one thing, Tanger has about 7% of its space vacant and is doing a great job of filling it with retailers and other businesses that aren't quite as susceptible to e-commerce headwinds.
For example, a microbrewery recently opened at a Tanger property, as did the first Dick's Sporting Goods outlet. What's more, not only has Tanger's customer traffic rebounded to pre-pandemic levels, but Tanger's tenants have also reported that over the past year, average sales per square foot have been 7.3% greater than comparable 2019 figures.
As far as income goes, Tanger did suspend its dividend payments at the start of the pandemic but has since resumed them. In fact, Tanger just announced a nearly 3% increase in its dividend rate starting in November, and I wouldn't be surprised to see the dividend grow significantly in the years ahead.
This company is doing a great job of adapting to changing times
Iron Mountain is in a class by itself regarding its core business of records storage. The company operates 1,450 storage facilities with about 730 million cubic feet of storage volume located in 58 countries around the world. Of Fortune 1,000 companies, 95% are among the 225,000 customers who trust Iron Mountain's facilities to store sensitive records.
The problem is that this business is declining and will continue to do so. Simply put, the need to store paper records is gradually going away in favor of digital records. It will take some time for this to play out -- as the average box of records has been in an Iron Mountain facility for 15 years -- but records management makes up well over half of Iron Mountain's revenue, so this is a big concern.
However, the good news is that Iron Mountain is pivoting to digital records storage, attempting to leverage its brand name and customer relationships to build a portfolio of data centers. Currently, this is a relatively small part of the business (about 10% of revenue) but could grow into the dominant portion over time, producing a massive stream of recurring revenue optimized for the 21stt century.
The Millionacres bottom line
These could be great total return investments. While REITs like these are often thought of as income plays, it's important for investors to think of them from a total return perspective. All three of these companies have excellent growth opportunities that could create tremendous shareholder value over the long run and produce a combination of stock price gains and dividend income that handily beats the market over time if things go well.