ARTICLE ISSUED MAY 17, 2002

ENTERTAINMENT PROPERTIES CONTINUES BLOCKBUSTER RUN

Updated: Friday, May 17, 2002 01:26 PM ET

NEW YORK-(Dow Jones)-It's been a red carpet walk for the country's lone
publicly-traded movie theater REIT over the past year.

Entertainment Properties Trust (EPR, news, msgs) posted blockbuster returns of
88% in 2001 and show-stopping returns of 22% so far in 2002, according to the
National Association of Real Estate Investment Trusts.

And the run isn't over just yet: Critics continue to give the company a thumbs
up going forward.

Indeed, many of the troubles that caused investors to pan anything and
everything connected to the movie theater business 18 months ago have since
faded to black.

The problems for the movie theater industry began several years ago when
operators began borrowing buckets of cash to build new so-called megaplexes.
These theaters, which boast state-of-the-art digital sound systems,
stadium-style seating with plush rocking chairs and at least 14 screens, became
the theater-of-choice for movie-goers and theater operators. But the birth of
these glittering movie palaces took a toll on the older multiplex theaters.

The glut of new movie screens far outpaced demand, causing operators to take
big losses at older less-popular theaters. Jittery lenders began pulling the
plug on credit lines, causing operators to scramble for cash.

This caused a flurry of big-name operators, including Carmilke Cinemas Inc.,
United Artists Theatre Co., General Cinemas, Edwards Cinemas and Loews Cineplex
Entertainment Corp., to file for Chapter 11 bankruptcy protection.

The problems left investors wondering if operators would have the cash to make
lease payments to movie theater owners, such as Entertainment Properties. When
Entertainment Properties' biggest operator, AMC Entertainment Inc. (AEN, news,
msgs), started making noise about closing theaters and rumors swirled about
another possible bankruptcy, investors began dumping Entertainment Properties
shares.

However, much has changed over the past year. AMC weathered the turmoil. Other
movie theater operators have also rebounded: Bankrupt operators Regal Cinemas,
Edwards Theatres Inc., and United Artists banded together to form Regal
Entertainment Group Inc. (RGC, news, msgs), which went public on May 9.

Also, many of the underperforming multiplexes have gradually been closing,
which has helped get the supply-demand ratio back in balance. The number of
theater screens gracing the market was 36,764 at the end of 2001, down about 2%
from 37,396 in 2000, according the Motion Picture Association of America.

Box office sales have also soared. Box office sales revenue climbed almost 10%
in 2001 to $8.41 billion from $7.66 billion in 2000, the Motion Picture
Association said.

The biggest surge came in the fourth quarter, when sales jumped 29% to $2.44
billion from $1.90 billion during the same period a year earlier.

The trend has spilled over into 2002. In the first 132 days of 2002, box office
sales totaled $2.99 billion, up 19% from $2.52 billion a year ago, said Paul
Dergarabedian, president of box office tracker Exhibitor Relations Co.

"It's definitely been on a roll since Sept. 11," said Dergarabedian. He
attributes the surge to nesting trends in the wake of the terrorist attacks -
people are opting to stay closer to home - and to the economy, where people are
choosing cheaper forms of entertainment. He also cites blockbuster films such
as "Harry Potter and the Sorcerer's Stone" and "The Lord of the Rings: The
Fellowship of the Ring" in 2001 and "Spider-Man," "Ice Age" and "Panic Room"
this year as major draws.

"Things have definitely turned around," said Friedman Billings Ramsey analyst
Craig Kucera.

A Boon To Entertainment Properties

All of this bodes well for Entertainment Properties, which invests solely in
the popular state-of-the-art megaplexes.

Sam Lieber, chief executive of Alpine Management & Research LLC, has been
boosting his holdings in Entertainment Properties over the past six months. He
said the company had been badly beaten down and is in the process of regaining
market confidence. If the company continues its current growth trends, he
believes the company's stock could hit $25 to $26 a share within 12 months.
The company's shares recently traded at $22.48.

The company's 8.3% dividend yield is also attractive and above the REIT
average, noted Lieber.

However, the fund manager said the company is not without risk. As the movie
industry changes over to digital filming from analog, it's not clear who will
be stuck footing the bill for different projector equipment or satellite dishes
that may be required at movie theaters. Such an expense could cut into
potential profits.

"This is a long-term issue - three to five years" down the line, he said.

In the past, there have also been concerns about the REIT's ties to its largest
tenant - AMC - which accounts for about 75% of the company's rent revenue.
Some market experts felt the exposure was too high, although this worked in the
REIT's favor last year when AMC became one of the few operators to weather the
stormy period.

Some analysts have also raised questions about potential conflicts since
Entertainment Properties' chairman, Peter Brown, is also chairman of AMC, and
some wonder if the company's leasing terms and acquisition choices favor AMC.
Entertainment Properties Chief Executive David Brain said his company chooses
acquisitions based on quality, performance and location of properties and
isn't afraid to diversify away from AMC if the right opportunity presents
itself.

Friedman Billings Ramsey's Kucera has a 12-month price target on the stock of
$25.60. He said Entertainment Properties has been "writing better leases" and
making smart accretive acquisitions lately. He said it's been a buyer's market
for Entertainment Properties as cash-strapped movie operators sell off their
theaters to pull out cash for use in their operations. Entertainment
Properties then leases the theaters back to the operator on terms favorable
to the REIT.

CIBC World Markets analyst Anthony Paolone has a 12-month price target on the
stock of $24. He said the REIT has resolved the financing troubles it faced
back in early 2001, overcome a shareholder proxy battle, and weathered well
through last year's industry turmoil.

Indeed, Entertainment Properties faced a financing crunch in early 2001 when a
lender, spooked by the industry bankruptcies, decided not to renew a credit
line. The REIT wound up doing a bond offering that paid off the line when it
came due in March 2001. The company has also since lowered its debt to market
cap to about 48% from 56% a year ago, according to Entertainment Properties
Chief Executive David Brain.

Also, in February 2001, for the first time since July 1998, the REIT was able
to issue equity at $19.75 a share. The offering was oversubscribed and raised
$43 million, said Brain. The offering served as a sign that investors have
returned to the sector, he said.

Brain is bullish on the company's growth prospects going forward. He said he
expects to complete $200 million in acquisitions this year, up from $40 million
in 2001 and only $33 million in 2000.

Entertainment Properties' recently traded at $22.45, up 35 cents or 1.6%, on
volume of 10,200 shares compared with average daily volume of 53,300. By Janet
Morrissey, Dow Jones Newswires; 201-938-2118 (This story was originally
published by Dow Jones Newswires) Copyright (c) 2002 Dow Jones & Company,
Inc.

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