The ongoing saga of meme stock AMC Entertainment Holdings Inc (NYSE: AMC) has captivated traders for the past two years. But its fortunes are linked to those of other companies, such as little-known real estate investment trust EPR Properties (NYSE: EPR). 

AMC shares are down 82% in 2022. 

AMC has been losing money since 2019. Even before the pandemic, ticket sales had been declining attendance. Higher prices for tickets and concession items drove revenue and hid the fact that fewer people were in seats, munching on popcorn and watching the latest action flick.

Earlier this year, theater operator Cineworld Group PLC (OTCMKTS: CNNWF), which owns the Regal chain of movie theaters, filed for Chapter 11 bankruptcy in a Texas court. The filing, which allows a company to operate while restructuring its debt, was an attempt to slash its $5 billion debt burden. 

AMC is in a different position, but it still presents a risk to shareholders and business partners. 

However, because it became a meme stock, AMC could raise cash in the public markets. As a result, it’s been able to save off bankruptcy, but ultimately it's facing a familiar quandary: Expenses must be less than revenue to run a business efficiently. That's tough for companies operating capital-intensive brick-and-mortar locations in an industry on the decline.

Declining Revenue Growth

AMC's year-over revenue has been growing, albeit at decreasing rates, as you can see using MarketBeat earnings data for the company. The 2021 yearly revenue growth rates were easy comparisons over 2020, but that's no longer the case. Revenue grew 27% in the most recent quarter, down from triple- and quadruple-digit rates in the past five quarters.

Ticket sales fell sharply after Labor Day, but with the holiday moviegoing season upon us, it remains to be seen if AMC can post solid year-over-year gains. Unfortunately, there's potentially bad news with the much anticipated "Avatar: The Way of Water" underperforming expectations. 

Analyst data compiled by MarketBeat show a "hold" rating on the stock with a price target of $3.72, a downside of 26.19%. 

AMC announced Monday that it had raised $162 million by selling 125.9 million preferred shares. 

While the company is officially maintaining the outlook that 2023 business will outpace this year's, the company remains mired in debt, which is a warning signal for companies like EPR. 

EPR bills itself as an "experiential REIT" due to its focus on sports, entertainment and cultural properties, as opposed to typical office buildings and self-storage REITs. 

AMC Is Major Tenant

The REIT's most significant tenant is AMC, whose debt load and decreasing revenue are likely somewhat alarming to EPR's management team and significant shareholders. 

As it happens, Cineworld is also part of EPR's holdings. Theaters constitute 41% of EPR's holdings, meaning it's a business the REIT takes incredibly seriously. AMC is reportedly EPR's most significant tenant by revenue. 

When Cineworld announced its bankruptcy, bond rater Fitch addressed EPR's status. It said, "Fitch Ratings believes that EPR Properties (EPR) maintains ample cushion within our rating sensitivities to withstand potential implications from the recent declaration of Chapter 11 bankruptcy by Cineworld (not rated), parent of EPR's third largest tenant, Regal Entertainment Group (Regal; not rated), which represented 13.5% of rental revenue at June 30, 2022." 

Fitch said it didn't believe theater attendance would regain pre-pandemic levels but expressed confidence that "theatres will remain an important part of movie release schedules." 

Fitch maintained EPR's rating of BBB-, which places it at the lower end of investment grade. 

EPR's share price has held relatively well this year, down just 10.54% year-to-date. As a REIT, it has the added attraction of pass-through income to investors, a benefit in a down market.

For EPR, a way out of a potential decline in movie theater rental revenue would involve greater reliance on other forms of real estate. The company is already headed in that direction. Its second-largest tenant is Topgolf, and in its third-quarter conference call, EPR said it had recently closed on a property in California that it intends to develop as a resort and on property in Colorado to expand an existing alternative.