UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2022~~2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-13561

EPR PROPERTIES

(Exact name of registrant as specified in its charter)


Maryland		43-1790877
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

909 Walnut Street,	Suite 200
Kansas City,	Missouri	64106
(Address of principal executive offices)		(Zip Code)


Registrant’s telephone number, including area code:			(816)			472-1700

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common shares, par value $0.01 per share

EPR

New York Stock Exchange

5.75% Series C cumulative convertible preferred shares, par value $0.01 per share

EPR PrC

New York Stock Exchange

9.00% Series E cumulative convertible preferred shares, par value $0.01 per share

EPR PrE

New York Stock Exchange

5.75% Series G cumulative redeemable preferred shares, par value $0.01 per share

EPR PrG

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

At August ~~1, 2022,~~2, 2023, there were ~~75,014,656~~75,324,367 common shares outstanding.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

With the exception of historical information, certain statements contained or incorporated by reference herein may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), such as those pertaining to the uncertain financial impact of the COVID-19 pandemic, our capital resources and liquidity, our expected pursuit of growth opportunities, our expected cash flows, the performance of our customers, our expected cash collections and our results of operations and financial condition. Forward-looking statements involve numerous risks and uncertainties, and you should not rely on them as predictions of actual events. There is no assurance that the events or circumstances reflected in the forward-looking statements will occur. You can identify forward-looking statements by use of words such as “will be,” “intend,” “continue,” “believe,” “may,” “expect,” “hope,” “anticipate,” “goal,” “forecast,” “pipeline,” “estimates,” “offers,” “plans,” “would” or other similar expressions or other comparable terms or discussions of strategy, plans or intentions in this Quarterly Report on Form 10-Q. In addition, references to our budgeted amounts and guidance are forward-looking statements.

Factors that could materially and adversely affect us include, but are not limited to, the factors listed below:

•Risks associated with the effects of the COVID-19 pandemic, or the future outbreak of any additional variants of COVID-19 or other highly infectious or contagious diseases;

•Global economic uncertainty, ~~and~~ disruptions in financial ~~markets;~~markets, and generally weakening economic conditions;

•The impact of inflation on our customers and our results of operations;

•Reduction in discretionary spending by consumers;

•Covenants in our debt instruments that limit our ability to take certain actions;

•Adverse changes in our credit ratings;

•~~Fluctuations in~~Rising interest rates;

•Defaults in the performance of lease terms by our tenants;

•Defaults by our customers and counterparties on their obligations owed to us;

•A borrower's bankruptcy or default;

•Our ability to renew maturing leases on terms comparable to prior leases and/or our ability to locate substitute lessees for these properties on economically favorable ~~terms;~~terms or at all;

•Risks of operating in the experiential real estate ~~industry;~~industry (including the impact of labor strikes on the production or supply of motion pictures to our theatre tenants);

•Our ability to compete effectively;

•Risks associated with three tenants representing a substantial portion of our lease revenues;

•The ability of our build-to-suit tenants to achieve sufficient operating results within expected time-frames and therefore have capacity to pay their ~~agreed upon~~agreed-upon rent;

•Risks associated with our dependence on third-party managers to operate certain of our properties;

•Risks associated with our level of indebtedness;

•Risks associated with use of leverage to acquire properties;

•Financing arrangements that require lump-sum payments;

•Our ability to raise capital;

•The concentration of our investment portfolio;

•Our continued qualification as a real estate investment trust for U.S. federal income tax purposes and related tax matters;

•The ability of our subsidiaries to satisfy their obligations;

•Financing arrangements that expose us to funding and completion risks;

•Our reliance on a limited number of employees, the loss of which could harm operations;

•Risks associated with the employment of personnel by managers of certain of our properties;

•Risks associated with the gaming industry;

•Risks associated with gaming and other regulatory authorities;

•Delays or prohibitions of transfers of gaming properties due to required regulatory approvals;

•Risks associated with security breaches and other disruptions;

•Changes in accounting standards that may adversely affect our financial statements;

•Fluctuations in the value of real estate income and investments;

•Risks relating to real estate ownership, leasing and development, including local conditions such as an

oversupply of space or a reduction in demand for real estate in the area, competition from other available space, whether tenants and users such as customers of our tenants consider a property attractive, changes in real estate taxes and other expenses, changes in market rental rates, the timing and costs associated with property improvements and rentals, changes in taxation or zoning laws or other governmental regulation, whether we are able to pass some or all of any increased operating costs through to tenants or other customers, and how well we manage our properties;

•Our ability to secure adequate insurance and risk of potential uninsured losses, including from natural disasters;

•Risks involved in joint ventures;

•Risks in leasing multi-tenant properties;

•A failure to comply with the Americans with Disabilities Act or other laws;

•Risks of environmental liability;

•Risks associated with the relatively illiquid nature of our real estate investments;

•Risks with owning assets in foreign countries;

•Risks associated with owning, operating or financing properties for which the tenants', mortgagors' or our operations may be impacted by weather conditions, climate change and natural disasters;

•Risks associated with the development, redevelopment and expansion of properties and the acquisition of other real estate related companies;

•Our ability to pay dividends in cash or at current rates;

•Risks associated with the impact of inflation or market interest rates on the value of our shares;

•Fluctuations in the market prices for our shares;

•Certain limits on changes in control imposed under law and by our Declaration of Trust and Bylaws;

•Policy changes obtained without the approval of our shareholders;

•Equity issuances that could dilute the value of our shares;

•Future offerings of debt or equity securities, which may rank senior to our common shares;

•Risks associated with changes in foreign exchange rates; and

•Changes in laws and regulations, including tax laws and regulations.

Our forward-looking statements represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Many of the factors that will determine these items are beyond our ability to control or predict. For further discussion of these factors, see Item 1A - "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (the "2022 Annual Report") filed with the Securities and Exchange Commission ("SEC") on February 23, ~~2022.~~2023, as supplemented by Item 1A - "Risk Factors" in this Quarterly Report on Form 10-Q.

For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q or the date of any document incorporated by reference herein. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except as required by law, we do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.

TABLE OF CONTENTS

Page

PART I

Item 1.

Financial Statements

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

3227

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

4642

Item 4.

Controls and Procedures

4844

PART II

4844

Item 1.

Legal Proceedings

4844

Item 1A.

Risk Factors

4844

Item 2.

Unregistered Sale of Equity Securities and Use of Proceeds

4846

Item 3.

Defaults Upon Senior Securities

4946

Item 4.

Mine Safety Disclosures

4946

Item 5.

Other Information

4946

Item 6.

Exhibits

5047

iii

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

EPR PROPERTIES

Consolidated Balance Sheets

(Dollars in thousands except share data)


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
		(unaudited)					(unaudited)
Assets	Assets					Assets
Real estate investments, net of accumulated depreciation of $1,243,240 and $1,167,734 at June 30, 2022 and December 31, 2021, respectively		$	4,838,701	$	4,713,091
Real estate investments, net of accumulated depreciation of $1,369,790 and $1,302,640 at June 30, 2023 and December 31, 2022, respectively						Real estate investments, net of accumulated depreciation of $1,369,790 and $1,302,640 at June 30, 2023 and December 31, 2022, respectively	$	4,659,678	$	4,714,136
Land held for development	Land held for development	20,168		20,168		Land held for development	20,168		20,168
Property under development	Property under development	8,241		42,362		Property under development	80,650		76,029
Operating lease right-of-use assets	Operating lease right-of-use assets	202,708		180,808		Operating lease right-of-use assets	192,325		200,985
Mortgage notes and related accrued interest receivable		374,617		370,159
Mortgage notes and related accrued interest receivable, net						Mortgage notes and related accrued interest receivable, net	466,459		457,268

Investment in joint ventures	Investment in joint ventures	47,705		36,670		Investment in joint ventures	53,763		52,964
Cash and cash equivalents	Cash and cash equivalents	168,266		288,822		Cash and cash equivalents	99,711		107,934
Restricted cash	Restricted cash	1,277		1,079		Restricted cash	2,623		2,577

Accounts receivable	Accounts receivable	60,176		78,073		Accounts receivable	53,305		53,587

Other assets	Other assets	71,583		69,918		Other assets	74,882		73,053
Total assets	Total assets	$	5,793,442	$	5,801,150	Total assets	$	5,703,564	$	5,758,701
Liabilities and Equity	Liabilities and Equity					Liabilities and Equity
Liabilities:	Liabilities:					Liabilities:
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	$	67,178	$	73,462	Accounts payable and accrued liabilities	$	74,493	$	80,087
Operating lease liabilities	Operating lease liabilities	240,595		218,795		Operating lease liabilities	233,126		241,407
Common dividends payable	Common dividends payable	21,146		18,896		Common dividends payable	22,289		21,405
Preferred dividends payable	Preferred dividends payable	6,033		6,034		Preferred dividends payable	6,032		6,033
Unearned rents and interest	Unearned rents and interest	72,833		61,559		Unearned rents and interest	71,746		63,939
Debt	Debt	2,807,080		2,804,365		Debt	2,813,007		2,810,111
Total liabilities	Total liabilities	3,214,865		3,183,111		Total liabilities	3,220,693		3,222,982
Equity:	Equity:					Equity:
Common Shares, $0.01 par value; 100,000,000 shares authorized; and 82,529,862 and 82,225,061 shares issued at June 30, 2022 and December 31, 2021, respectively		825		822
Common Shares, $0.01 par value; 125,000,000 and 100,000,000 shares authorized at June 30, 2023 and December 31, 2022, respectively; and 82,953,453 and 82,545,501 shares issued at June 30, 2023 and December 31, 2022, respectively						Common Shares, $0.01 par value; 125,000,000 and 100,000,000 shares authorized at June 30, 2023 and December 31, 2022, respectively; and 82,953,453 and 82,545,501 shares issued at June 30, 2023 and December 31, 2022, respectively	829		825
Preferred Shares, $0.01 par value; 25,000,000 shares authorized:	Preferred Shares, $0.01 par value; 25,000,000 shares authorized:					Preferred Shares, $0.01 par value; 25,000,000 shares authorized:
5,392,916 Series C convertible shares issued at June 30, 2022 and December 31, 2021; liquidation preference of $134,822,900		54		54
3,447,381 Series E convertible shares issued at June 30, 2022 and December 31, 2021; liquidation preference of $86,184,525		34		34
6,000,000 Series G shares issued at June 30, 2022 and December 31, 2021; liquidation preference of $150,000,000		60		60
5,392,916 Series C convertible shares issued at June 30, 2023 and December 31, 2022; liquidation preference of $134,822,900						5,392,916 Series C convertible shares issued at June 30, 2023 and December 31, 2022; liquidation preference of $134,822,900	54		54
3,445,980 and 3,447,381 Series E convertible shares issued at June 30, 2023 and December 31, 2022, respectively; liquidation preference of $86,149,500						3,445,980 and 3,447,381 Series E convertible shares issued at June 30, 2023 and December 31, 2022, respectively; liquidation preference of $86,149,500	34		34
6,000,000 Series G shares issued at June 30, 2023 and December 31, 2022; liquidation preference of $150,000,000						6,000,000 Series G shares issued at June 30, 2023 and December 31, 2022; liquidation preference of $150,000,000	60		60
Additional paid-in-capital	Additional paid-in-capital	3,890,684		3,876,817		Additional paid-in-capital	3,915,273		3,899,732
Treasury shares at cost: 7,517,572 and 7,416,746 common shares at June 30, 2022 and December 31, 2021, respectively		(269,608)		(264,817)
Treasury shares at cost: 7,630,877 and 7,520,227 common shares at June 30, 2023 and December 31, 2022, respectively						Treasury shares at cost: 7,630,877 and 7,520,227 common shares at June 30, 2023 and December 31, 2022, respectively	(274,001)		(269,751)
Accumulated other comprehensive income	Accumulated other comprehensive income	10,675		9,955		Accumulated other comprehensive income	3,610		1,897
Distributions in excess of net income	Distributions in excess of net income	(1,054,147)		(1,004,886)		Distributions in excess of net income	(1,162,988)		(1,097,132)

Total equity	Total equity	$	2,578,577	$	2,618,039	Total equity	$	2,482,871	$	2,535,719
Total liabilities and equity	Total liabilities and equity	$	5,793,442	$	5,801,150	Total liabilities and equity	$	5,703,564	$	5,758,701

See accompanying notes to consolidated financial statements.

EPR PROPERTIES

Consolidated Statements of Income and Comprehensive Income

(Unaudited)

(Dollars in thousands except per share data)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Rental revenue	Rental revenue	$	142,875	$	115,883	$	282,478	$	218,497	Rental revenue	$	151,870	$	142,875	$	303,461	$	282,478
Other income	Other income	9,961		1,033		19,266		1,711		Other income	10,124		9,961		19,457		19,266
Mortgage and other financing income	Mortgage and other financing income	7,610		8,446		16,174		16,919		Mortgage and other financing income	10,913		7,610		21,385		16,174
Total revenue	Total revenue	160,446		125,362		317,918		237,127		Total revenue	172,907		160,446		344,303		317,918
Property operating expense	Property operating expense	13,592		14,678		27,531		29,991		Property operating expense	13,972		13,592		28,127		27,531
Other expense	Other expense	8,872		3,025		16,969		5,577		Other expense	9,161		8,872		18,111		16,969
General and administrative expense	General and administrative expense	12,691		11,376		25,915		22,712		General and administrative expense	15,248		12,691		29,213		25,915

Severance expense										Severance expense	547		—		547		—

Transaction costs	Transaction costs	1,145		662		3,392		1,210		Transaction costs	36		1,145		306		3,392
Credit loss expense (benefit)		9,512		(2,819)		9,206		(5,581)
Credit loss (benefit) expense										Credit loss (benefit) expense	(275)		9,512		312		9,206
Impairment charges	Impairment charges	—		—		4,351		—		Impairment charges	43,785		—		43,785		4,351
Depreciation and amortization	Depreciation and amortization	40,766		40,538		80,810		80,864		Depreciation and amortization	43,705		40,766		84,909		80,810
Total operating expenses	Total operating expenses	86,578		67,460		168,174		134,773		Total operating expenses	126,179		86,578		205,310		168,174
Gain on sale of real estate		—		511		—		712
Loss on sale of real estate										Loss on sale of real estate	(575)		—		(1,135)		—

Income from operations	Income from operations	73,868		58,413		149,744		103,066		Income from operations	46,153		73,868		137,858		149,744
Costs associated with loan refinancing or payoff		—		—		—		241

Interest expense, net	Interest expense, net	33,289		38,312		66,549		77,506		Interest expense, net	31,591		33,289		63,313		66,549
Equity in (income) loss from joint ventures		(1,421)		1,151		(1,315)		2,582
Equity in loss (income) from joint ventures										Equity in loss (income) from joint ventures	615		(1,421)		2,600		(1,315)
Impairment charges on joint ventures	Impairment charges on joint ventures	647		—		647		—		Impairment charges on joint ventures	—		647		—		647
Income before income taxes	Income before income taxes	41,353		18,950		83,863		22,737		Income before income taxes	13,947		41,353		71,945		83,863
Income tax expense	Income tax expense	444		398		762		805		Income tax expense	347		444		688		762

Net income	Net income	40,909		18,552		83,101		21,932		Net income	13,600		40,909		71,257		83,101
Preferred dividend requirements	Preferred dividend requirements	6,033		6,033		12,066		12,067		Preferred dividend requirements	6,040		6,033		12,073		12,066

Net income available to common shareholders of EPR Properties	Net income available to common shareholders of EPR Properties	$	34,876	$	12,519	$	71,035	$	9,865	Net income available to common shareholders of EPR Properties	$	7,560	$	34,876	$	59,184	$	71,035

Net income available to common shareholders of EPR Properties per share:	Net income available to common shareholders of EPR Properties per share:									Net income available to common shareholders of EPR Properties per share:

Basic	Basic	$	0.47	$	0.17	$	0.95	$	0.13	Basic	$	0.10	$	0.47	$	0.79	$	0.95

Diluted	Diluted	$	0.46	$	0.17	$	0.95	$	0.13	Diluted	$	0.10	$	0.46	$	0.78	$	0.95
Shares used for computation (in thousands):	Shares used for computation (in thousands):									Shares used for computation (in thousands):
Basic	Basic	74,986		74,781		74,915		74,704		Basic	75,297		74,986		75,191		74,915
Diluted	Diluted	75,234		74,870		75,142		74,772		Diluted	75,715		75,234		75,571		75,142

Other comprehensive income:	Other comprehensive income:									Other comprehensive income:
Net income	Net income	$	40,909	$	18,552	$	83,101	$	21,932	Net income	$	13,600	$	40,909	$	71,257	$	83,101
Foreign currency translation adjustment	Foreign currency translation adjustment	(4,924)		2,674		(2,318)		4,974		Foreign currency translation adjustment	6,393		(4,924)		6,623		(2,318)
Change in net unrealized gain (loss) on derivatives		5,128		(387)		3,038		75
Unrealized (loss) gain on derivatives, net										Unrealized (loss) gain on derivatives, net	(4,606)		5,128		(4,910)		3,038
Comprehensive income attributable to EPR Properties	Comprehensive income attributable to EPR Properties	$	41,113	$	20,839	$	83,821	$	26,981	Comprehensive income attributable to EPR Properties	$	15,387	$	41,113	$	72,970	$	83,821

See accompanying notes to consolidated financial statements.

EPR PROPERTIES

Consolidated Statements of Changes in Equity

(Unaudited)

(Dollars in thousands except per share data)


		EPR Properties Shareholders’ Equity																						EPR Properties Shareholders’ Equity
		Common Stock			Preferred Stock			Additional paid-in capital			Treasury shares		Accumulated other comprehensive income		Distributions in excess of net income						Total			Common Stock				Preferred Stock				Additional paid-in capital		Treasury shares		Accumulated other comprehensive income		Distributions in excess of net income		Total
		Shares	Par		Shares	Par				Total									Shares	Par					Shares		Par		Additional paid-in capital
Balance at December 31, 2020		81,917,876	$	819	14,841,431	$	148				$	3,857,632	$	(261,238)	$	216	$	(966,992)						$	2,630,585

Balance at December 31, 2021																							Balance at December 31, 2021	82,225,061		$	822	14,840,297		$	148	$	3,876,817	$	(264,817)	$	9,955	$	(1,004,886)	$	2,618,039
Restricted share units issued to Trustees																							Restricted share units issued to Trustees	2,794		—		—		—		—		—		—		—		—
Issuance of nonvested shares and performance shares, net of cancellations	Issuance of nonvested shares and performance shares, net of cancellations	246,562	2		—	—		2,899			—		—		—						2,901		Issuance of nonvested shares and performance shares, net of cancellations	243,286		3		—		—		4,496		(83)		—		—		4,416
Purchase of common shares for vesting	Purchase of common shares for vesting	—	—		—	—		—			(2,744)		—		—						(2,744)		Purchase of common shares for vesting	—		—		—		—		—		(4,250)		—		—		(4,250)
Share-based compensation expense	Share-based compensation expense	—	—		—	—		3,784			—		—		—						3,784		Share-based compensation expense	—		—		—		—		4,245		—		—		—		4,245

Foreign currency translation adjustment	Foreign currency translation adjustment	—	—		—	—		—			—		2,300		—						2,300		Foreign currency translation adjustment	—		—		—		—		—		—		2,606		—		2,606

Change in unrealized gain on derivatives		—	—		—	—		—			—		462		—						462
Change in unrealized loss on derivatives, net																							Change in unrealized loss on derivatives, net	—		—		—		—		—		—		(2,090)		—		(2,090)

Net income																							Net income	—		—		—		—		—		—		—		42,192		42,192
Issuances of common shares																							Issuances of common shares	4,730		—		—		—		228		—		—		—		228

Stock option exercises, net																							Stock option exercises, net	9,799		—		—		—		454		(458)		—		—		(4)
Dividend equivalents accrued on performance shares																							Dividend equivalents accrued on performance shares	—		—		—		—		—		—		—		(136)		(136)
Dividends to common shareholders ($0.7750 per share)																							Dividends to common shareholders ($0.7750 per share)	—		—		—		—		—		—		—		(58,099)		(58,099)
Dividends to Series C preferred shareholders ($0.359375 per share)																							Dividends to Series C preferred shareholders ($0.359375 per share)	—		—		—		—		—		—		—		(1,938)		(1,938)
Dividends to Series E preferred shareholders ($0.5625 per share)																							Dividends to Series E preferred shareholders ($0.5625 per share)	—		—		—		—		—		—		—		(1,939)		(1,939)
Dividends to Series G preferred shareholders ($0.359375 per share)																							Dividends to Series G preferred shareholders ($0.359375 per share)	—		—		—		—		—		—		—		(2,156)		(2,156)

Balance at March 31, 2022																							Balance at March 31, 2022	82,485,670		$	825	14,840,297		$	148	$	3,886,240	$	(269,608)	$	10,471	$	(1,026,962)	$	2,601,114

Restricted share units issued to Trustees																							Restricted share units issued to Trustees	38,605		—		—		—		—		—		—		—		—

Share-based compensation expense																							Share-based compensation expense	—		—		—		—		4,169		—		—		—		4,169

Foreign currency translation adjustment																							Foreign currency translation adjustment	—		—		—		—		—		—		(4,924)		—		(4,924)

Change in unrealized gain on derivatives, net																							Change in unrealized gain on derivatives, net	—		—		—		—		—		—		5,128		—		5,128

Net income	Net income	—	—		—	—		—			—		—		3,380						3,380		Net income	—		—		—		—		—		—		—		40,909		40,909
Issuances of common shares	Issuances of common shares	2,509	—		—	—		107			—		—		—						107		Issuances of common shares	5,587		—		—		—		275		—		—		—		275

Dividend equivalents accrued on performance shares	Dividend equivalents accrued on performance shares	—	—		—	—		—			—		—		(8)						(8)		Dividend equivalents accrued on performance shares	—		—		—		—		—		—		—		(188)		(188)

Dividends to common shareholders ($0.825 per share)																							Dividends to common shareholders ($0.825 per share)	—		—		—		—		—		—		—		(61,873)		(61,873)
Dividends to Series C preferred shareholders ($0.359375 per share)	Dividends to Series C preferred shareholders ($0.359375 per share)	—	—		—	—		—			—		—		(1,939)						(1,939)		Dividends to Series C preferred shareholders ($0.359375 per share)	—		—		—		—		—		—		—		(1,938)		(1,938)
Dividends to Series E preferred shareholders ($0.5625 per share)	Dividends to Series E preferred shareholders ($0.5625 per share)	—	—		—	—		—			—		—		(1,939)						(1,939)		Dividends to Series E preferred shareholders ($0.5625 per share)	—		—		—		—		—		—		—		(1,939)		(1,939)
Dividends to Series G preferred shareholders ($0.359375 per share)	Dividends to Series G preferred shareholders ($0.359375 per share)	—	—		—	—		—			—		—		(2,156)						(2,156)		Dividends to Series G preferred shareholders ($0.359375 per share)	—		—		—		—		—		—		—		(2,156)		(2,156)

Balance at March 31, 2021		82,166,947	$	821	14,841,431	$	148	$	3,864,422		$	(263,982)	$	2,978	$	(969,654)					$	2,634,733

Restricted share units issued to Trustees		43,306	1		—	—		—			—		—		—						1
Cancellations of nonvested shares		—	—		—	—		484			(484)		—		—						—

Share-based compensation expense		—	—		—	—		3,675			—		—		—						3,675

Foreign currency translation adjustment		—	—		—	—		—			—		2,674		—						2,674

Change in unrealized loss on derivatives		—	—		—	—		—			—		(387)		—						(387)

Net income		—	—		—	—		—			—		—		18,552						18,552
Issuances of common shares		1,826	—		—	—		90			—		—		—						90

Conversion of Series C Convertible Preferred shares to common shares		330	—		(800)	—		—			—		—		—						—

Stock option exercises, net		4,065	—		—	—		194			(194)		—		—						—
Dividend equivalents accrued on performance shares		—	—		—	—		—			—		—		(10)						(10)

Dividends to Series C preferred shareholders ($0.359375 per share)		—	—		—	—		—			—		—		(1,938)						(1,938)
Dividends to Series E preferred shareholders ($0.5625 per share)		—	—		—	—		—			—		—		(1,939)						(1,939)
Dividends to Series G preferred shareholders ($0.359375 per share)		—	—		—	—		—			—		—		(2,156)						(2,156)

Balance at June 30, 2021		82,216,474	$	822	14,840,631	$	148	$	3,868,865		$	(264,660)	$	5,265	$	(957,145)					$	2,653,295
Balance at June 30, 2022																							Balance at June 30, 2022	82,529,862		$	825	14,840,297		$	148	$	3,890,684	$	(269,608)	$	10,675	$	(1,054,147)	$	2,578,577

Continued on next page.	Continued on next page.																						Continued on next page.


		EPR Properties Shareholders’ Equity																				EPR Properties Shareholders’ Equity
		Common Stock			Preferred Stock			Additional paid-in capital			Treasury shares		Accumulated other comprehensive income		Distributions in excess of net income				Total			Common Stock					Preferred Stock				Additional paid-in capital		Treasury shares		Accumulated other comprehensive income		Distributions in excess of net income		Total
		Shares	Par		Shares	Par				Total							Shares	Par					Shares			Par		Additional paid-in capital
Continued from previous page.	Continued from previous page.																							Continued from previous page.
Balance at December 31, 2021		82,225,061	$	822	14,840,297	$	148	$	3,876,817		$	(264,817)	$	9,955	$	(1,004,886)			$	2,618,039
Balance at December 31, 2022																					Balance at December 31, 2022	82,545,501			$	825	14,840,297		$	148	$	3,899,732	$	(269,751)	$	1,897	$	(1,097,132)	$	2,535,719
Restricted share units issued to Trustees	Restricted share units issued to Trustees	2,794	—		—	—		—			—		—		—				—		Restricted share units issued to Trustees	1,449			—		—		—		—		—		—		—		—
Issuance of nonvested shares and performance shares, net of cancellations	Issuance of nonvested shares and performance shares, net of cancellations	243,286	3		—	—		4,496			(83)		—		—				4,416		Issuance of nonvested shares and performance shares, net of cancellations	352,090			4		—		—		5,956		(588)		—		—		5,372
Purchase of common shares for vesting	Purchase of common shares for vesting	—	—		—	—		—			(4,250)		—		—				(4,250)		Purchase of common shares for vesting	—			—		—		—		—		(3,565)		—		—		(3,565)
Share-based compensation expense	Share-based compensation expense	—	—		—	—		4,245			—		—		—				4,245		Share-based compensation expense	—			—		—		—		4,322		—		—		—		4,322

Foreign currency translation adjustment	Foreign currency translation adjustment	—	—		—	—		—			—		2,606		—				2,606		Foreign currency translation adjustment	—			—		—		—		—		—		230		—		230

Change in unrealized loss on derivatives		—	—		—	—		—			—		(2,090)		—				(2,090)
Change in unrealized loss on derivatives, net																					Change in unrealized loss on derivatives, net	—			—		—		—		—		—		(304)		—		(304)

Net income	Net income	—	—		—	—		—			—		—		42,192				42,192		Net income	—			—		—		—		—		—		—		57,657		57,657
Issuances of common shares	Issuances of common shares	4,730	—		—	—		228			—		—		—				228		Issuances of common shares	5,557			—		—		—		225		—		—		—		225

Stock option exercises, net		9,799	—		—	—		454			(458)		—		—				(4)
Dividend equivalents accrued on performance shares		—	—		—	—		—			—		—		(136)				(136)
Dividends to common shareholders ($0.775 per share)		—	—		—	—		—			—		—		(58,099)				(58,099)
Dividends to Series C preferred shareholders ($0.359375 per share)		—	—		—	—		—			—		—		(1,938)				(1,938)
Dividends to Series E preferred shareholders ($0.5625 per share)		—	—		—	—		—			—		—		(1,939)				(1,939)
Dividends to Series G preferred shareholders ($0.359375 per share)		—	—		—	—		—			—		—		(2,156)				(2,156)
Balance at March 31, 2022		82,485,670	$	825	14,840,297	$	148	$	3,886,240		$	(269,608)	$	10,471	$	(1,026,962)			$	2,601,114

Restricted share units issued to Trustees		38,605	—		—	—		—			—		—		—				—

Share-based compensation expense		—	—		—	—		4,169			—		—		—				4,169

Foreign currency translation adjustment		—	—		—	—		—			—		(4,924)		—				(4,924)

Change in unrealized gain on derivatives		—	—		—	—		—			—		5,128		—				5,128

Net income		—	—		—	—		—			—		—		40,909				40,909
Issuances of common shares		5,587	—		—	—		275			—		—		—				275

Conversion of Series E Convertible Preferred shares to common shares																					Conversion of Series E Convertible Preferred shares to common shares	632			—		(1,311)		—		—		—		—		—		—

Dividend equivalents accrued on performance shares	Dividend equivalents accrued on performance shares	—	—		—	—		—			—		—		(188)				(188)		Dividend equivalents accrued on performance shares	—			—		—		—		—		—		—		(353)		(353)
Dividends to common shareholders ($0.825 per share)	Dividends to common shareholders ($0.825 per share)	—	—		—	—		—			—		—		(61,873)				(61,873)		Dividends to common shareholders ($0.825 per share)	—			—		—		—		—		—		—		(62,109)		(62,109)
Dividends to Series C preferred shareholders ($0.359375 per share)	Dividends to Series C preferred shareholders ($0.359375 per share)	—	—		—	—		—			—		—		(1,938)				(1,938)		Dividends to Series C preferred shareholders ($0.359375 per share)	—			—		—		—		—		—		—		(1,938)		(1,938)
Dividends to Series E preferred shareholders ($0.5625 per share)	Dividends to Series E preferred shareholders ($0.5625 per share)	—	—		—	—		—			—		—		(1,939)				(1,939)		Dividends to Series E preferred shareholders ($0.5625 per share)	—			—		—		—		—		—		—		(1,938)		(1,938)
Dividends to Series G preferred shareholders ($0.359375 per share)	Dividends to Series G preferred shareholders ($0.359375 per share)	—	—		—	—		—			—		—		(2,156)				(2,156)		Dividends to Series G preferred shareholders ($0.359375 per share)	—			—		—		—		—		—		—		(2,156)		(2,156)
Balance at June 30, 2022		82,529,862	$	825	14,840,297	$	148	$	3,890,684		$	(269,608)	$	10,675	$	(1,054,147)			$	2,578,577
Balance at March 31, 2023																					Balance at March 31, 2023	82,905,229			$	829	14,838,986		$	148	$	3,910,235	$	(273,904)	$	1,823	$	(1,107,969)	$	2,531,162

Restricted share units issued to Trustees																					Restricted share units issued to Trustees	42,048			—		—		—		—		—		—		—		—

Purchase of common shares for vesting																					Purchase of common shares for vesting	—			—		—		—		—		(97)		—		—		(97)
Share-based compensation expense																					Share-based compensation expense	—			—		—		—		4,477		—		—		—		4,477
Share-based compensation included in severance expense																					Share-based compensation included in severance expense	—			—		—		—		304		—		—		—		304
Foreign currency translation adjustment																					Foreign currency translation adjustment	—			—		—		—		—		—		6,393		—		6,393

Change in unrealized gain on derivatives, net																					Change in unrealized gain on derivatives, net				—		—		—		—		—		(4,606)		—		(4,606)

Net income																					Net income	—			—		—		—		—		—		—		13,600		13,600
Issuances of common shares																					Issuances of common shares	6,134			—		—		—		257		—		—		—		257

Conversion of Series E Convertible Preferred shares to common shares																					Conversion of Series E Convertible Preferred shares to common shares	42			—		(90)		—		—		—		—		—		—

Dividend equivalents accrued on performance shares																					Dividend equivalents accrued on performance shares	—			—		—		—		—		—		—		(450)		(450)
Dividend to captive REIT preferred shareholders																					Dividend to captive REIT preferred shareholders	—			—		—		—		—		—		—		(8)		(8)
Dividends to common shareholders ($0.825 per share)																					Dividends to common shareholders ($0.825 per share)	—			—		—		—		—		—		—		(62,129)		(62,129)
Dividends to Series C preferred shareholders ($0.359375 per share)																					Dividends to Series C preferred shareholders ($0.359375 per share)	—			—		—		—		—		—		—		(1,938)		(1,938)
Dividends to Series E preferred shareholders ($0.5625 per share)																					Dividends to Series E preferred shareholders ($0.5625 per share)	—			—		—		—		—		—		—		(1,938)		(1,938)
Dividends to Series G preferred shareholders ($0.359375 per share)																					Dividends to Series G preferred shareholders ($0.359375 per share)	—			—		—		—		—		—		—		(2,156)		(2,156)
Balance at June 30, 2023																					Balance at June 30, 2023	82,953,453			$	829	14,838,896		$	148	$	3,915,273	$	(274,001)	$	3,610	$	(1,162,988)	$	2,482,871

See accompanying notes to consolidated financial statements.

EPR PROPERTIES

Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)

Six Months Ended June 30,
2022 2021
Operating activities:
Net income $ 83,101 $ 21,932
Adjustments to reconcile net income to net cash provided by operating activities:
Impairment charges 4,351 —
Impairment charges on joint ventures 647 —
Gain on sale of real estate — (712)
Gain on insurance recovery (552) (30)
Costs associated with loan refinancing or payoff — 241
Equity in (income) loss from joint ventures (1,315) 2,582
Distributions from joint ventures 780 90
Credit loss expense (benefit) 9,206 (5,581)
Depreciation and amortization 80,810 80,864
Amortization of deferred financing costs 4,161 3,121
Amortization of above/below market leases and tenant allowances, net (176) (195)
Share-based compensation expense to management and Trustees 8,414 7,459
Change in assets and liabilities:
Operating lease assets and liabilities (100) (233)
Mortgage notes accrued interest receivable 350 (143)
Accounts receivable 22,168 24,952
Other assets (3,902) (6,320)
Accounts payable and accrued liabilities 2,955 (1,719)
Unearned rents and interest 6,152 14,492
Net cash provided by operating activities 217,050 140,800
Investing activities:
Acquisition of and investments in real estate and other assets (169,656) (29,702)
Proceeds from sale of real estate 80 28,635
Investment in unconsolidated joint ventures (17,843) (1,940)
Distributions from joint venture related to refinancing 6,695 —
Settlement of derivative (3,830) —
Investment in mortgage notes receivable (11,305) (4,588)
Proceeds from mortgage notes receivable paydowns 272 7,982
Investment in notes receivable — (4,379)
Proceeds from note receivable paydowns 189 1,708
Proceeds from insurance recovery, net 1,071 30
Additions to properties under development (9,393) (24,512)
Net cash used by investing activities (203,720) (26,766)
Financing activities:
Principal payments on debt — (613,765)
Deferred financing fees paid (328) (251)
Net proceeds from issuance of common shares 359 198
Impact of stock option exercises, net (4) —
Purchase of common shares for treasury for vesting (4,250) (2,744)
Dividends paid to shareholders (129,968) (12,068)
Net cash used by financing activities (134,191) (628,630)
Effect of exchange rate changes on cash 503 (8)
Net change in cash and cash equivalents and restricted cash (120,358) (514,604)
Cash and cash equivalents and restricted cash at beginning of the period 289,901 1,028,010
Cash and cash equivalents and restricted cash at end of the period $ 169,543 $ 513,406
Supplemental information continued on next page.


	Six Months Ended June 30,
	2023		2022
Operating activities:
Net income	$	71,257	$	83,101
Adjustments to reconcile net income to net cash provided by operating activities:

Impairment charges	43,785		4,351
Impairment charges on joint ventures	—		647


Loss on sale of real estate	1,135		—
Gain on insurance recovery	—		(552)
Deferred income tax benefit	(182)		—


Equity in loss (income) from joint ventures	2,600		(1,315)
Distributions from joint ventures	—		780
Credit loss expense	312		9,206
Depreciation and amortization	84,909		80,810
Amortization of deferred financing costs	4,279		4,161
Amortization of above/below market leases and tenant allowances, net	(274)		(176)
Share-based compensation expense to management and Trustees	8,799		8,414
Share-based compensation expense included in severance expense	304		—
Change in assets and liabilities:
Operating lease assets and liabilities	460		(100)
Mortgage notes accrued interest receivable	(917)		350
Accounts receivable	249		22,168

Other assets	(6,181)		(3,902)
Accounts payable and accrued liabilities	5,466		2,955
Unearned rents and interest	4,887		6,152


Net cash provided by operating activities	220,888		217,050
Investing activities:
Acquisition of and investments in real estate and other assets	(47,115)		(169,656)
Proceeds from sale of real estate	8,373		80
Investment in unconsolidated joint ventures	(3,399)		(17,843)
Distributions from joint venture related to refinancing	—		6,695
Settlement of derivative	—		(3,830)
Investment in mortgage notes receivable	(6,040)		(11,305)
Proceeds from mortgage notes receivable paydowns	268		272
Investment in notes receivable	(3,025)		—
Proceeds from note receivable paydowns	353		189

Proceeds from insurance recovery, net	—		1,071


Additions to properties under development	(38,886)		(9,393)



Net cash used by investing activities	(89,471)		(203,720)
Financing activities:


Deferred financing fees paid	(279)		(328)

Net proceeds from issuance of common shares	311		359

Impact of stock option exercises, net	—		(4)

Purchase of common shares for treasury for vesting	(3,662)		(4,250)


Dividends paid to shareholders	(136,057)		(129,968)


Net cash used by financing activities	(139,687)		(134,191)
Effect of exchange rate changes on cash	93		503
Net change in cash and cash equivalents and restricted cash	(8,177)		(120,358)
Cash and cash equivalents and restricted cash at beginning of the period	110,511		289,901
Cash and cash equivalents and restricted cash at end of the period	$	102,334	$	169,543
Supplemental information continued on next page.

EPR PROPERTIES

Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)


Continued from previous page	Continued from previous page					Continued from previous page
		Six Months Ended June 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Reconciliation of cash and cash equivalents and restricted cash:	Reconciliation of cash and cash equivalents and restricted cash:					Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents at beginning of the period	Cash and cash equivalents at beginning of the period	$	288,822	$	1,025,577	Cash and cash equivalents at beginning of the period	$	107,934	$	288,822
Restricted cash at beginning of the period	Restricted cash at beginning of the period	1,079		2,433		Restricted cash at beginning of the period	2,577		1,079
Cash and cash equivalents and restricted cash at beginning of the period	Cash and cash equivalents and restricted cash at beginning of the period	$	289,901	$	1,028,010	Cash and cash equivalents and restricted cash at beginning of the period	$	110,511	$	289,901

Cash and cash equivalents at end of the period	Cash and cash equivalents at end of the period	$	168,266	$	509,836	Cash and cash equivalents at end of the period	$	99,711	$	168,266
Restricted cash at end of the period	Restricted cash at end of the period	1,277		3,570		Restricted cash at end of the period	2,623		1,277
Cash and cash equivalents and restricted cash at end of the period	Cash and cash equivalents and restricted cash at end of the period	$	169,543	$	513,406	Cash and cash equivalents and restricted cash at end of the period	$	102,334	$	169,543

Supplemental schedule of non-cash activity:	Supplemental schedule of non-cash activity:					Supplemental schedule of non-cash activity:
Transfer of property under development to real estate investments	Transfer of property under development to real estate investments	$	38,119	$	70,784	Transfer of property under development to real estate investments	$	29,366	$	38,119

Transfer of real estate investments to mortgage note						Transfer of real estate investments to mortgage note	$	1,321	$	—

Issuance of nonvested shares and restricted share units at fair value, including nonvested shares issued for payment of bonuses	Issuance of nonvested shares and restricted share units at fair value, including nonvested shares issued for payment of bonuses	$	21,751	$	21,921	Issuance of nonvested shares and restricted share units at fair value, including nonvested shares issued for payment of bonuses	$	25,805	$	21,751

Operating lease right-of-use asset and related operating lease liability recorded for new ground lease	Operating lease right-of-use asset and related operating lease liability recorded for new ground lease	$	29,022	$	22,126	Operating lease right-of-use asset and related operating lease liability recorded for new ground lease	$	—	$	29,022

Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Cash paid during the period for interest	Cash paid during the period for interest	$	63,551	$	77,012	Cash paid during the period for interest	$	63,417	$	63,551
Cash paid during the period for income taxes	Cash paid during the period for income taxes	$	657	$	921	Cash paid during the period for income taxes	$	964	$	657
Interest cost capitalized	Interest cost capitalized	$	271	$	1,109	Interest cost capitalized	$	1,629	$	271
Change in accrued capital expenditures	Change in accrued capital expenditures	$	(217)	$	8,017	Change in accrued capital expenditures	$	(5,639)	$	(217)

See accompanying notes to consolidated financial statements.

EPR PROPERTIES

Notes to Consolidated Financial Statements (Unaudited)

1. Organization

Description of Business

EPR Properties (the Company) was formed on August 22, 1997 as a Maryland real estate investment trust (REIT), and an initial public offering of the Company's common shares of beneficial interest (common shares) was completed on November 18, 1997. Since that time, the Company has been a leading diversified Experiential net lease REIT specializing in select enduring experiential properties. The Company's underwriting is centered on key industry and property cash flow criteria, as well as the credit metrics of the Company's tenants and customers. The Company’s properties are located in the United States (U.S.) and Canada.

2. Summary of Significant Accounting Policies and Recently Issued Accounting Standards

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. In addition, operating results for the six month period ended June 30, ~~2022~~2023 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2022.~~2023. Amounts as of December 31, ~~2021~~2022 have been derived from the audited Consolidated Financial Statements as of that date and should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 filed with the Securities and Exchange Commission (SEC) on February 23, ~~2022.~~2023.

The Company consolidates certain entities when it is deemed to be the primary beneficiary in a variable interest entity (VIE) in which it has a controlling financial interest in accordance with the consolidation guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC). The equity method of accounting is applied to entities in which the Company is not the primary beneficiary as defined in the FASB ASC Topic on Consolidation (Topic 810) but can exercise influence over the entity with respect to its operations and major decisions.

The Company examines specific criteria and uses its judgment when determining if the Company is the primary beneficiary of a VIE. The primary beneficiary generally is defined as the party with the controlling financial interest. Consideration of various factors include, but are not limited to, the Company’s ability to direct the activities that most significantly impact the entity’s economic performance and its obligation to absorb losses from or right to receive benefits of the VIE that could potentially be significant to the VIE. As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company does not have any investments in consolidated VIEs.

~~Risks~~Regal Update

On September 7, 2022, Cineworld Group, plc, Regal Entertainment Group and ~~Uncertainties~~

~~The Company continues~~the Company's other Regal theatre tenants (collectively, Regal) filed for protection under Chapter 11 of the U.S. Bankruptcy Code (the Code). Prior to ~~be subject to risks~~such filing date and ~~uncertainties resulting~~continuing throughout the Chapter 11 bankruptcy cases, Regal leased 57 theatres from the ~~COVID-19 pandemic. The COVID-19 pandemic severely impacted global economic activity~~Company pursuant to two master leases and caused significant volatility and negative pressure in financial markets. In response to the COVID-19 pandemic, many jurisdictions within the United States and abroad instituted health and safety measures, including quarantines, mandated business and school closures and travel restrictions.28 single property leases (the Regal Leases). As a result ~~the COVID-19 pandemic severely impacted experiential real estate properties, given that such properties involve congregate social activity and discretionary consumer spending. Although many of these health and safety measures have been lifted, the extent~~ of the ~~impact~~filing, Regal did not pay its rent or monthly deferral payment for September 2022 but subsequently paid portions of this amount, totaling approximately $4.0 million, pursuant to an order of the ~~COVID-19 pandemic on~~bankruptcy court issued during the ~~Company's business still remains highly uncertain~~Chapter 11 bankruptcy cases. Regal resumed monthly rent and ~~difficult to predict.~~deferral payments for all Regal Leases commencing in October 2022 and has continued making these payments through July 2023.

~~As of~~ On June ~~30, 2022,~~27, 2023, the Company ~~had no properties closed due to COVID-19 restrictions~~. ~~The continuing impact of the COVID-19 pandemic on the Company’s business will depend on~~entered into a ~~number of factors, including, but not limited~~comprehensive restructuring agreement with Regal, evidenced by an Omnibus Lease Amendment Agreement (Omnibus Agreement), anchored by a new master lease (Master Lease) for

41 of the 57 properties previously leased to Regal (Master Lease Properties). On June 28, 2023, Regal’s Plan of Reorganization (the Plan) was confirmed by the bankruptcy court. The Plan became effective on July 31, 2023 (the Effective Date) and Regal emerged from the Chapter 11 bankruptcy cases.

Pursuant to the ~~scope, severity~~Omnibus Agreement, the Master Lease and ~~duration of any resurgence~~certain related agreements became effective upon the Effective Date. Material terms of the ~~pandemic (including COVID-19 variants),~~Omnibus Agreement, the ~~actions taken~~Master Lease and related agreements include:

•Beginning on August 1, 2023, the total annual fixed rent for the Master Lease Properties (Annual Base Rent) will be $65.0 million, escalating by 10% every five years. The Master Lease is a triple-net lease, and therefore, Annual Base Rent does not include taxes, insurance, utilities, common area maintenance and ground lease rent, for which Regal will be responsible for paying separately. Due to ~~contain~~Regal's expected significantly improved credit profile, continuing box office recovery and Regal's payment history, among other factors, the ~~outbreak or any resurgence or mitigate their impacts,~~Company will recognize revenue related to the distribution and efficacy of vaccines and therapeutics, the public’s confidence in the health and safety measures implemented by the Company's tenants and borrowers, the continuing direct and indirect economic effects of the outbreak and containment measures, and the ability of the Company's tenants and borrowers to recover from the negative economic impacts of the pandemic as it subsides, and in many cases, service elevated levels of debt resulting from the pandemic, all of which are uncertain and cannot be predicted. During 2020 and 2021, the COVID-19 pandemic negatively affected the Company's business and could continue to have material adverse effectsMaster Lease on an accrual basis beginning on the ~~Company's financial condition, results of operations and cash flows. The~~ Company considered the impact of, and recovery from, the COVID-19 pandemic on the assumptions and estimates used in determining the Company’s financial condition and results of operations for the six months ended June 30, 2022.Effective Date.

~~The~~ •~~following were impacts~~Pursuant to the ~~Company's financial statements~~Master Lease, Regal will also pay annual percentage rent (Annual Percentage Rent) of 15% of annual gross sales exceeding $220.0 million and ~~business during~~up to $270.0 million, and 12.5% of annual gross sales exceeding $270.0 million. These threshold amounts will increase every five years commensurate with escalations in Annual Base Rent.

•The Master Lease Properties have been divided into three tranches within the Master Lease, with the initial term of each tranche expiring annually on the 11th, 13th and 15th anniversaries from the Effective Date. Each tranche has three five-year renewal options. The average lease term for the Master Lease Properties as of th~~six months ended June 30, 2022 arising out of or relating~~e Effective Date will be increased by four years to ~~the COVID-19 pandemic~~: 13 years.

•The Company ~~continued~~has agreed to ~~recognize revenue~~reimburse Regal for 50% of certain revenue-enhancing premises renovations to the Master Lease Properties, up to a maximum reimbursement of $32.5 million, provided that (a) Regal is not in default, (b) the maximum amount the Company will be required to reimburse in any calendar year will not exceed $10.0 million, and (c) reimbursable expenses have prior approval of the Company and relate to a project mobilized and physically commenced during the first five years of the Master Lease term.

•On the Effective Date, Regal surrendered to the Company the remaining 16 properties not included in the Master Lease (Surrendered Properties), together with all furniture, fixtures and equipment located at the Surrendered Properties. The Company has entered into management agreements whereby Cinemark will manage four of the Surrendered Properties and Phoenix Theatres will manage one of the Surrendered Properties. The Company plans to sell the remaining 11 Surrendered Properties and deploy the proceeds to acquire non-theatre experiential properties. In conjunction with taking back the Surrendered Properties, the Company recorded a non-cash impairment charge on ~~a cash basis for certain tenants including American-Multi Cinema, Inc. (AMC) and Regal Cinemas (Regal), a subsidiary~~eight of ~~Cineworld Group.~~these properties during the three months ended June 30, 2023 of $42.4 million based on recently appraised values.

•As of July 31, 2023, Regal owed approximately $76.3 million of u~~June 30, 2022, t~~ndiscounted deferred rent (the Deferred Rent Balance), of which the Deferred Rent Balance related to the Master Lease Properties was approximatel~~he Company has deferred amounts due from tenants of approximately $12.1~~y $56.8 million ~~that are booked as receivables. Additionally,~~(Master Lease Deferred Rent Balance) and the ~~Company has amounts due from customers that were not booked as receivables because~~Deferred Rent Balance related to the ~~full amounts were not deemed probable of collection as a result of~~Surrendered Properties was approximately $19.5 million (Surrendered Property Deferred Rent Balance). Of the ~~COVID-19 pandemic. The amounts not booked as receivables remain obligations of the customers~~Master Lease Deferred Rent Balance, approximately $50.1 million will be held in abeyance and will be ~~recognized~~forgiven in its entirety if Regal has no uncured events of default prior to the 15th anniversary of the Effective Date, and the remaining portion of the Master Lease Deferred Rent Balance will be waived and forgiven. If Regal has an uncured event of default at any time prior to the 15th anniversary of the Effective Date, the Master Lease Deferred Rent Balance held in abeyance will become due. The Surrendered Property Deferred Rent Balance will be included in the Company’s claims for rejection damages in the Chapter 11 bankruptcy cases, which will be treated as ~~revenue when received. During the~~ ~~six months ended June 30, 2022, the Company collected~~ ~~$6.3 million~~ ingeneral unsecured claims for which no material recovery is expected. The deferred rent ~~and $0.3 million of deferred interest from cash basis customers and from customers for which the deferred payments were~~was not previously recognized as ~~revenue. In addition, during the six months ended June 30, 2022,~~accounts receivable by the Company ~~collected~~ ~~$14.7 million~~because payments from Regal were recognized on a cash-basis prior to the Effective Date of the Master Lease. The deferred rent ~~and $0.4 million of deferred interest from accrual basis customers that reduced related accounts and interest receivable.~~ ~~The repayment terms for all of these deferments vary by customer.~~

~~Reportable Segments~~

The Company has 2 reportable operating segments: Experiential and Education. The Experiential segment includes the following property types: theatres, eat & play (including 7 theatres located in entertainment districts), attractions, ski, experiential lodging, fitness & wellness, gaming and cultural. The Education segment includes the following property types: early childhood education centers and private schools. See Note 15 for financial information related to ~~these reportable segments.~~

~~Real Estate Investments~~

~~Real estate investments are carried at initial recorded value less accumulated depreciation. Costs incurred for~~ the acquisition and development of the properties are capitalized. In addition, the Company capitalizes certain costs that relate to property under development including interest and a portion of internal legal personnel costs. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which generally are estimated to be 30 years to 40 years for buildings, three years to 25 years for furniture, fixtures and equipment and 10 years to 20 years for site improvements. Tenant improvements, including allowances, are depreciated over the shorter of the lease term or the estimated useful life and leasehold interests are depreciated over the useful life of the underlying ground lease.

Management reviews the Company's real estate investments, including operating lease right-of-use assets, for impairment whenever events or changes in circumstances indicate that the carrying value of a property mayMaster Lease Properties will not be recoverable, which is based on an estimate of undiscounted future cash flows expected to result from its use and eventual disposition. If impairment exists due to the inability to recover the carrying value of the property, an impairment loss is recorded to the extent that the carrying value of the property exceeds its estimated fair value.

The Company evaluates the held-for-sale classification of its real estate as of the end of each quarter. Assets that are classified as held for sale are recorded at the lower of their carrying amount or fair value less costs to sell and are generally classified as held for sale once management has initiated an active program to market them for sale and it

recognized on the balance sheet because it is ~~probable~~a contingent receivable only due in the assets will be sold within one year. On occasion, the Company will receive unsolicited offers from third parties to buy individual Company properties. Under these circumstances, the Company will classify the properties as held for sale whenevent of a ~~sales contract~~default and payment is ~~executed with no contingencies and the prospective buyer has funds at risk to ensure performance.~~not deemed probable.

~~Real Estate Acquisitions~~

~~Upon acquisition of real estate properties,~~•Regal has provided the Company ~~evaluates~~with a first lien security interest in all furniture, fixtures and equipment located at the ~~acquisition to determine if it is~~Master Lease Properties. A parent entity of Regal has provided a ~~business combination or an asset acquisition. If~~guaranty of Regal’s obligations under the acquisition is determined to be an asset acquisition, the Company records the purchase price and other related costs incurred to the acquired tangible assets and identified intangible assets and liabilities on a relative fair value basis. In addition, costs incurred for asset acquisitions, including transaction costs, are capitalized.Master Lease.

If•On or about the ~~acquisition is determined to be a business combination,~~Effective Date, Regal paid the Company ~~records~~approximately $3.0 million representing the ~~fair value~~unpaid portion of ~~acquired tangible assets~~post-petition September stub rent for all properties, and identified intangible assets and liabilities as well as any noncontrolling interest. Acquisition-related costs in connection with business combinations are expensed as incurred and included in "Transaction costs" inapproximately $1.3 million representing the ~~accompanying consolidated statements of income and comprehensive income.~~

~~For real estate acquisitions (asset acquisitions or business combinations),~~ unpaid pre-petition September rent for the fair value (or relative fair value in an asset acquisition) of the tangible assets is determined by valuing the property using recent independent appraisals or methods similar to those used by independent appraisers. Land is valued using the sales comparison approach which uses available market data from recent comparable land sales as an input to estimate the fair value. Site improvements and tenant improvements are valued using the cost approach which uses replacement cost data obtained from industry recognized guides less depreciation as an input to estimate the fair value. The building is valued either using the cost approach described above or a combination of the cost and the income approach. The income approach uses market leasing assumptions to estimate the fair value of the property as if vacant. The cost and income approaches are reconciled to arrive at an estimated building fair value.Master Lease Properties.

Deferred Financing Costs

Deferred financing costs are amortized over the terms of the related debt obligations, ~~or mortgage note receivable~~ as applicable. Deferred financing costs of ~~$34.1~~$28.2 million and ~~$36.9~~$31.1 million as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, are shown as a reduction of debt. The deferred financing costs ~~of $7.6 million and $8.7 million as of June 30, 2022 and December 31, 2021, respectively,~~ related to the unsecured revolving credit facility of $5.3 million and $6.4 million as of June 30, 2023 and December 31, 2022, respectively, are included in "Other assets" in the accompanying consolidated balance sheets.

Rental Revenue

The Company leases real estate to its tenants under leases classified as operating leases. The Company's leases generally provide for rent escalations throughout the lease terms. Rents that are fixed are recognized on a straight-line basis over the lease term. Base rent escalations that include a variable component are recognized upon the occurrence of the specified event as defined in the Company's lease agreements. Many of the Company's leasing arrangements include options to ~~extend~~extend the lease, which are not included in the minimum lease terms unless itthe option is reasonably certain to be exercised. Straight-line rental revenue is subject to an evaluation for collectibility, and the Company records a direct write-off against rental revenue if collectibility of these future rents is not probable. ~~For~~During the six months ended June 30, ~~2022 and 2021,~~ 2023, the Company recognized ~~$2.3 million and $2.7 million, respectively, of~~ straight-line ~~rental revenue.~~write-offs totaling $0.6 million. There were no straight-line write-offs for the six months ended June 30, ~~2022~~2022. For the six months ended June 30, 2023 and ~~2021~~.

The Company has agreed to defer rent for a substantial portion of its customers in response to the impact of the COVID-19 pandemic on their operations. On April 10, 2020, the FASB issued a Staff Q&A on Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic. In reliance upon the FASB Staff Q&A,2022, the Company ~~has not treated qualifying deferrals or rent concessions during the period affected by the COVID-19 pandemic as lease modifications. While deferments for this~~recognized $3.3 million and future periods delay rent payments, these deferments generally do not release customers from the obligation to pay the deferred amounts in the future. Deferred rent amounts are reflected in the Company's financial statements as accounts receivable if collection is determined to be probable or recognized when received as variable lease payments if collection is

determined to not be probable. Certain agreements with tenants where remaining lease terms are extended, or other changes are made that do not qualify for the treatment in the FASB Staff Q&A, are treated as lease modifications. In these circumstances, upon an executed lease modification, if the tenant is not being recognized on a cash basis, the contractual rent reflected in accounts receivable and$2.3 million, respectively, of straight-line ~~rent receivable will be amortized over the remaining term~~rental revenue, net of the lease against rental revenue. In limited cases, customers may be entitled to the abatement of rent during governmentally imposed prohibitions on business operations which is recognized in the period to which the abatement relates, or the Company may provide rent concessions to tenants. In cases where the Company provides concessions to tenants to which they are not otherwise entitled, those amounts will be recognized in the period in which the concession is granted unless the changes are accounted for as lease modifications.write-offs.

Most of the Company’s lease contracts are triple-net leases, which require the tenants to make payments to third parties for lessor costs (such as property taxes and insurance) associated with the properties. In accordance with Topic 842, the Company does not include these lessee payments to third parties in rental revenue or property operating expenses. In certain situations, the Company pays these lessor costs directly to third parties and the tenants reimburse the Company. In accordance with Topic 842, these payments are presented on a gross basis in rental revenue and property operating expense. During the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, the Company recognized $1.1 million ~~and $1.9 million, respectively,~~ in tenant reimbursements for both periodsrelated to the ~~gross up~~gross-up of these reimbursed expenses which are included in rental revenue.

Certain of the Company's leases, particularly at its entertainment districts, require the tenants to make payments to the Company for property-related expenses such as common area maintenance. The Company has elected to combine these non-lease components with the lease components in rental revenue. For the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, the amounts due for non-lease components included in rental revenue totaled ~~$9.2~~$9.2 million ~~and~~ ~~$7.9 million, respectively.~~for both periods.

In addition, most of the Company's tenants are subject to additional rents (above base rents) if gross revenues of the properties exceed certain thresholds defined in the lease agreements (percentage rents). Percentage rents are recognized at the time when specific triggering events occur as provided by the lease agreement. Rental revenue included percentage rents of $3.9 million and $4.0 million fo~~r both~~for the six months ended June 30, 2023 and 2022, ~~and 2021.~~respectively.

The Company regularly evaluates the collectibility of its receivables on a lease-by-lease basis. The evaluation primarily consists of reviewing past due account balances and considering such factors as the credit quality of the

Company's tenants, historical trends of the tenant, current economic conditions and changes in customer payment terms. When the collectibility of lease receivables or future lease payments are no longer probable, the Company records a direct write-off of the receivable to rental revenue and recognizes future rental revenue on a cash basis.

~~Property Sales~~

Sales of real estate properties are recognized when a contract exists and the purchaser has obtained control of the property. Gains on sales of properties are recognized in full in a partial sale of nonfinancial assets, to the extent control is not retained. Any noncontrolling interest retained by the seller would, accordingly, be measured at fair value.

The Company evaluates each sale or disposal transaction to determine if it meets the criteria to qualify as discontinued operations. A discontinued operation is a component of an entity or group of components that have been disposed of or are classified as held for sale and represent a strategic shift that has or will have a major effect on the Company's operations and financial results. If the sale or disposal transaction does not meet the criteria, the operations and related gain or loss on sale is included in income from continuing operations.

Mortgage Notes and Other Notes Receivable

Mortgage notes and other notes receivable, including related accrued interest receivable, consist of loans originated by the Company and the related accrued and unpaid interest income as of the balance sheet date. Mortgage notes and other notes receivable are initially recorded at the amount advanced to the borrower less allowance for credit loss. Interest income is recognized using the effective interest method over the estimated life of the note. Interest income includes both the stated interest and the amortization or accretion of premiums or discounts (if any).

~~In accordance with ASC Topic 326,~~ ~~Measurement of Credit Losses on Financial Instruments,~~ the Company records allowance for credit loss to reflect that all mortgage notes and notes receivable have some inherent risk of loss regardless of credit quality, collateral, or other mitigating factors. While Topic 326 does not require any particular method for determining the reserves, it does specify that it should be based on relevant information about past events, including historical loss experience, current portfolio and market conditions, as well as reasonable and supportable forecasts for the term of each mortgage note or note receivable. The Company uses a forward looking commercial real estate forecasting tool to estimate its current expected credit losses (CECL) for each of its mortgage notes and notes receivable on a loan by loan basis. The CECL allowance required by Topic 326 is a valuation account that is deducted from the related mortgage note or note receivable.

Certain of the Company’s mortgage notes and notes receivable include commitments to fund incremental amounts to its borrowers. These future funding commitments are also subject to the CECL model. The allowance related to future funding is recorded as a liability and is included in "Accounts payable and accrued liabilities" in the accompanying consolidated balance sheet.

~~As permitted under Topic 326, the~~ Company made an accounting policy election to not measure an allowance for credit losses for accrued interest receivables related to its mortgage notes and notes receivable. Accordingly, if accrued interest receivable is deemed to be uncollectible, the Company will record any necessary write-offs as a reversal of interest income. There were no accrued interest write-offs for the six months ended June 30, 2023. During the six months ended June 30, 2022, the Company ~~wrote-off~~wrote off approximately $1.5 million of accrued interest and fees receivables against interest income related to 1one mortgage note receivable and 2two notes receivable.~~There were no accrued interest write-offs for the six months ended June 30, 2021.~~ As of June 30, ~~2022,~~2023, the Company believes that all outstanding accrued interest is collectible.

In the event the Company has a past due mortgage note or note receivable ~~and~~that the Company determines it is ~~collateral dependent,~~collateral-dependent, the Company measures expected credit losses based on the fair value of the collateral. As of June 30, ~~2022,~~2023, the Company does not have any mortgage notes or notes receivable with past due principal balances.

See Note
6

~~Mortgage~~ for further discussion of mortgage notes and ~~Other Financing Income~~

~~Certain of~~notes receivable for which the ~~Company's borrowers are subject~~Company elected to ~~additional interest based on certain thresholds defined in~~apply the ~~mortgage agreements (participating interest). Participating interest income is recognized at the time when specific parameters have been met as provided by the mortgage agreement.~~ ~~There was no participating~~ ~~interest income for the six months ended June 30, 2022 and 2021.~~collateral-dependent practical expedient.

Concentrations of Risk

~~AMC,~~ Regal, American-Multi Cinema, Inc. (AMC) and Topgolf USA (Topgolf) represented a significant portion of the Company's total revenue for the six months ended June 30, ~~2022~~2023 and 2021. The Company began recognizing revenue on a cash basis for AMC at the end of the first quarter of 2020 and for Regal at the end of the third quarter of 2020 and cash payments were reduced due to the impact of the COVID-19 pandemic. Additionally, Regal had higher revenues during the six months ended ~~June 30, 2022 due to the repayment of deferred rent that was recognized as rental revenue when received.~~2022. The following is a ~~summary~~summary of the Company's total revenue derived from rental or interest payments from AMC, ~~Regal~~Topgolf and ~~Topgolf~~Regal (dollars in thousands):

Six Months Ended June 30,
2022 2021
Total Revenue % of Company's Total Revenue Total Revenue % of Company's Total Revenue
AMC $ 47,588 15.0 % $ 47,625 20.1 %
Regal 45,919 14.4 % 11,762 5.0 %
Topgolf 45,423 14.3 % 41,896 17.7 %

~~Share-Based Compensation~~

Share-based compensation to employees of the Company is granted pursuant to the Company's Annual Incentive Program and Long-Term Incentive Plan and share-based compensation to non-employee Trustees of the Company is granted pursuant to the Company's Trustee compensation program.

Share-based compensation expense consists of amortization of non-vested share grants and share options issued to employees, and amortization of share units issued to non-employee Trustees for payment of their annual retainers. Share-based compensation is included in "General and administrative expense" in the accompanying consolidated statements of income and comprehensive income.

~~Nonvested Shares Issued to Employees~~

The Company grants nonvested shares to employees pursuant to both the Annual Incentive Program and the Long-Term Incentive Plan. The Company amortizes the expense related to the nonvested shares awarded to employees under the Long-Term Incentive Plan and the premium awarded under the nonvested share alternative of the Annual Incentive Program on a straight-line basis over the future vesting period (three years or four years). Expense recognized related to nonvested shares and included in "General and administrative expense" in the accompanying consolidated statements of income and comprehensive income ~~was $3.9 million and $4.4 million~~ ~~for the six months ended June 30, 2022 and 2021, respectively.~~

~~Nonvested Performance Shares Issued to Employees~~

The Company awards performance shares to the Company's executive officers pursuant to the Long-Term Incentive Plan. The performance shares contain both a market condition and a performance condition. The Company amortizes the expense related to the performance shares over the future performance period of three years. Expense recognized related to performance shares and included in "General and administrative expense" in the accompanying consolidated statements of income and comprehensive income ~~was $3.3 million and $1.9 million for the~~ ~~six months ended June 30, 2022 and 2021, respectively.~~

~~Share Options~~

Share options were granted to employees pursuant to the Long-Term Incentive Plan prior to 2022. The fair value of share options granted was estimated at the date of grant using the Black-Scholes option pricing model. Share options granted to employees vest over a period of four years and share option expense for these options is recognized on a straight-line basis over the vesting period. Expense recognized related to share options and included in "General and administrative expense" in the accompanying consolidated statements of income and comprehensive income ~~was $7 thousand and $9 thousand for the six months ended June 30, 2022 and 2021, respectively.~~

~~Restricted Share Units Issued to Non-Employee Trustees~~

The Company issues restricted share units to non-employee Trustees for payment of their annual retainers under the Company's Trustee compensation program. The fair value of the share units granted was based on the share price at the date of grant. The share units vest upon the earlier of the day preceding the next annual meeting of shareholders or a change of control. The settlement date for the shares is selected by the non-employee Trustee, and ranges from one year from the grant date to upon termination of service. This expense is amortized by the Company on a straight-line basis over the year of service by the non-employee Trustees. Total expense recognized related to shares issued to non-employee Trustees and included in "General and ~~administrative expense" in the accompanying consolidated~~ ~~statements of income and comprehensive income~~ ~~was~~ ~~$1.2 million for both the six months ended June 30, 2022 and 2021.~~

~~Derivative Instruments~~

~~The Company uses derivative instruments to reduce exposure to fluctuations in foreign currency exchange rates and variable interest rates.~~

The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to

changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as foreign currency risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. If hedge accounting is not applied, realized and unrealized gains or losses are reported in earnings.

~~The Company's policy is to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.~~


	Six Months Ended June 30,
	2023				2022
	Total Revenue		% of Company's Total Revenue		Total Revenue		% of Company's Total Revenue
Regal	$	56,101	16.3	%	$	45,919	14.4	%
AMC	47,590		13.8	%	47,588		15.0	%
Topgolf	47,353		13.8	%	45,423		14.3	%

Impact of Recently Issued Accounting Standards

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848). The ASU contains practical expedients for reference rate reform - related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the year ended December 31, 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. On March 5, 2021, the Financial Conduct Authority (FCA) announced that the USD LIBOR will no longer be published after June 30, 2023. At June 30, 2022, the Company had 7 agreements (including debt, interest rate swap, mortgage note and lease agreements) that are indexed to LIBOR. The Company has transitioned several existing contracts to a replacement index and continues to make progress transitioning the remaining contracts.

In ~~March~~December 2022, the FASB issued ASU No. ~~2022-02,~~2022-06, ~~Financial Instruments - Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures.~~Deferral of the Sunset Date of Topic 848. The guidance in ASU ~~eliminates~~2022-06 deferred the accounting guidance for troubled debt restructurings (TDR) by creditors that have adopted the CECL model and enhances disclosure requirements for loan modifications made with borrowers experiencing financial difficulty. In addition, the amendments require disclosure of current period gross write-offs by year of origination for financing receivables. ASU 2022-02 is effective for fiscal years (and interim periods within those years), beginning aftersunset date to December ~~15, 2022.~~31, 2024. The Company ~~expects~~has transitioned existing contracts to ~~adopt~~a replacement index. These ASUs are not anticipated to have any significant impact on the ~~guidance beginning January 1, 2023 and is currently evaluating the impact that ASU 2022-02 will have on its disclosures.~~Company's consolidated financial statements.

3. Real Estate Investments

The following table summarizes the carrying amounts of real estate investments as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Buildings and improvements	Buildings and improvements	$	4,687,295	$	4,523,052	Buildings and improvements	$	4,645,441	$	4,637,801
Furniture, fixtures & equipment	Furniture, fixtures & equipment	118,921		108,907		Furniture, fixtures & equipment	115,452		115,677
Land	Land	1,248,738		1,222,149		Land	1,240,122		1,236,358
Leasehold interests	Leasehold interests	26,987		26,717		Leasehold interests	28,453		26,940
		6,081,941		5,880,825			6,029,468		6,016,776
Accumulated depreciation	Accumulated depreciation	(1,243,240)		(1,167,734)		Accumulated depreciation	(1,369,790)		(1,302,640)
Total	Total	$	4,838,701	$	4,713,091	Total	$	4,659,678	$	4,714,136

Depreciation expense on real estate investments was ~~$78.4~~$80.5 million and ~~$78.0~~$78.4 million for the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

4. Impairment Charges

The Company reviews its properties for changes in circumstances that indicate that the carrying value of a property may not be recoverable based on an estimate of undiscounted future cash flows. During the six months ended June

30, ~~2022, the Company received an offer to sell a recently vacated property. As a result,~~2023, the Company reassessed the ~~expected~~ holding period of the Regal Surrendered Properties not included in the Master Lease and one early childhood education center property subject to a lease termination triggered by a casualty event. The Company determined that the estimated cash flows for eight Regal Surrendered Properties and the early childhood education center property were not sufficient to recover the carrying ~~value of the property. The Company~~values and estimated the fair value of ~~this property by taking into account~~ the ~~purchase offer. The~~real estate investments of these properties using independent appraisals. During the six months ended June 30, 2023, the Company reduced the carrying value of the real estate ~~investment,~~investments, net to ~~$4.7 million. During the six months ended June 30, 2022, the Company~~$27.2 million and recognized an impairment ~~charge~~charges of ~~$4.4~~$43.8 million on ~~the~~ real estate ~~investment,~~investments, which is the amount that the carrying ~~value~~values of the ~~asset~~assets exceeded the estimated fair ~~value.~~

During the six months ended June 30, 2022, the Company also recognized $0.6 million in other-than-temporary impairments related to its equity investments in joint ventures in 2 theatre projects located in China. See Note 9 for further details on these impairments.values.

5. Investments and Dispositions

The Company's investment spending during the six months ended June 30, ~~2022~~2023 totaled ~~$239.2~~$98.7 million, and included the acquisition of 1a fitness and wellness property for approximately ~~$19.9~~$46.7 million ~~the acquisition of 2 attraction properties located in Canada for approximately $142.8 million,~~and spending on build-to-suit experiential development and redevelopment ~~projects~~projects.

During the six months ended June 30, 2023, the Company completed the sales of one vacant eat & play property, one early childhood education center and a land parcel for net proceeds of $8.4 million and recognized a net loss on sale totaling $1.1 million. Additionally, during the ~~acquisition of interests in 2 joint ventures for approximately $50.6 million. See Note~~ ~~9 for further details on these~~ 2 ~~joint ventures~~.six months ended June 30, 2023, the Company, as lessee, terminated one ground lease that held one theatre property.

6. Investment in Mortgage Notes and Notes Receivable

The Company measures expected credit losses on its mortgage notes and notes receivable on an individual basis ~~over the related contractual term as~~because its financial instruments do not have similar risk characteristics. The Company uses a forward-looking commercial real estate loss forecasting tool to estimate its current expected credit ~~losses. The loss forecasting tool is comprised~~losses (CECL) for each of ~~a probability of default model~~its mortgage notes and a loss given default model that utilizes the Company’s loan specific inputs as well as selected forward-looking macroeconomic variables and mean loss rates. Based on certain inputs, such as origination year, balance, interest rate as well as collateral value and borrower operating income, the model produces life of loan expected lossesnotes receivable on a ~~loan by loan~~loan-by-loan basis. As of June 30, ~~2022,~~2023, the Company did not anticipate any prepayments; therefore, the contractual ~~term~~terms of its mortgage notes ~~was~~and notes receivable were used for the calculation of the expected credit losses. The Company updates the model inputs at each reporting period to reflect, if applicable, any newly originated loans, changes to loan specific information on existing loans and current macroeconomic conditions. The CECL allowance is a valuation account that is deducted from the related mortgage note or note receivable. Effective January 1, 2023, the Company adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures.

1411

~~Investment in~~Certain of the Company’s mortgage notes ~~including related accrued interest receivable, at June 30, 2022~~ and ~~December 31, 2021 consists of the following (in thousands):~~

Outstanding principal amount of mortgage Carrying amount as of Unfunded commitments
Description Year of Origination Interest Rate Maturity Date June 30, 2022 December 31, 2021 June 30, 2022
Attraction property Powells Point, North Carolina 2019 7.75 % 6/30/2025 $ 29,035 $ 28,879�� $ 28,243 $ —
Fitness & wellness property Omaha, Nebraska 2017 7.85 % 1/3/2027 10,905 10,953 10,940 —
Fitness & wellness property Merriam, Kansas 2019 7.55 % 7/31/2029 9,090 9,180 9,159 —
Ski property Girdwood, Alaska 2019 8.20 % 12/31/2029 45,599 45,587 45,877 11,401
Fitness & wellness property Omaha, Nebraska 2016 7.85 % 6/30/2030 10,539 10,584 10,615 379
Experiential lodging property Nashville, Tennessee 2019 7.01 % 9/30/2031 71,223 71,656 70,896 —
Eat & play property Austin, Texas 2012 11.31 % 6/1/2033 10,507 10,507 10,874 —
Experiential lodging property Breaux Bridge, LA 2022 7.25 % 3/8/2034 11,305 11,373 — —
Ski property West Dover and Wilmington, Vermont 2007 12.14 % 12/1/2034 51,050 51,049 51,047 —
Four ski properties Ohio and Pennsylvania 2007 11.07 % 12/1/2034 37,562 37,533 37,519 —
Ski property Chesterland, Ohio 2012 11.55 % 12/1/2034 4,550 4,532 4,516 —
Ski property Hunter, New York 2016 8.88 % 1/5/2036 21,000 21,000 21,000 —
Eat & play property Midvale, Utah 2015 10.25 % 5/31/2036 17,505 17,505 17,639 —
Eat & play property West Chester, Ohio 2015 9.75 % 8/1/2036 18,068 18,067 18,198 —
Fitness & wellness property Fort Collins, Colorado 2018 7.85 % 1/31/2038 10,292 10,081 10,277 —
Early childhood education center Lake Mary, Florida 2019 8.10 % 5/9/2039 4,200 4,345 4,329 —
Eat & play property Eugene, Oregon 2019 8.13 % 6/17/2039 14,700 7,780 14,996 —
Early childhood education center Lithia, Florida 2017 8.58 % 10/31/2039 3,959 4,006 4,034 —
$ 381,089 $ 374,617 $ 370,159 $ 11,780

~~Investment in~~ notes receivable ~~including~~include commitments to fund future incremental amounts to its borrowers. These future funding commitments are also subject to the CECL model. The allowance related ~~accrued interest receivable, w~~to future funding is recorded as ~~$3.6 million and $7.3 million at~~ ~~June 30, 2022 and December 31, 2021, respectively,~~a liability and is included in ~~"Other assets"~~"Accounts payable and accrued liabilities" in the accompanying consolidated balance sheets.

During the six months ended June 30, ~~2022,~~2023, the Company ~~recorded an allowance for credit loss of $6.8 million related to 1 of its~~amended a mortgage ~~notes~~note receivable and note receivable secured by an eat & play investment with one borrower. The modified loan agreement consolidated all of the borrower's obligations into one mortgage note agreement, including with respect to land which was previously ground leased to the borrower. The maturity date of this mortgage note receivable was modified to be August 31, 2024 and ~~$3.1~~was previously June 17, 2039. In connection with the modification, the Company forgave approximately $7.8 million ~~related to 2 notes receivable.~~ of principal, which was fully reserved at December 31, 2022, and reduced the allowance for credit loss at March 31, 2023. The balance of this mortgage note receivable at June 30, 2023 was $10.8 million.

Although foreclosure was not deemed probable and the principal balance of the mortgage note ~~and notes~~ receivable ~~were~~was not past due at June 30, ~~2022,~~2023, based on ~~delays in interest payments and~~ the ~~borrowers'~~borrower's declining financial condition, the Company determined that the borrower ~~is experiencing~~continues to experience financial difficulty. The ~~repayment is~~repayments are expected to be provided substantially through the sale or operation of the collateral, therefore, the Company elected to apply the ~~collateral dependent~~collateral-dependent practical expedient. Expected credit losses are based on the fair value of the underlying collateral at the reporting date. The ~~mortgage note~~Company will continue to monitor and re-assess the borrower’s financial status at each reporting period and will continue to apply the practical expedient until the borrower is ~~secured by~~no longer experiencing financial difficulties or the ~~real estate assets~~repayment of the outstanding principal and interest is no longer in question. Income from this borrower ~~and the notes receivable are secured by the equipment and personal property of the borrowers.~~is recognized on a cash basis. The ~~collateral was appraised during~~Company received interest payments totaling $0.4 million from this borrower for both the six months ended June 30, ~~2022, which resulted in credit loss expense of $6.8 million for the mortgage note~~2023 and $1.2 million for 1 of the notes receivable. The principal balance for the other note receivable was fully reserved with credit loss expense of $1.9 million. Although foreclosure was not deemed probable and the principal balance of the note receivable were not past due at June 30, 2022, based on delays in interest payments and the borrowers' declining financial condition, the Company determined the borrower is experiencing financial difficulty. The repayment is expected to be provided substantially through the sale or operation of the collateral, therefore, the Company elected to apply the collateral dependent practical expedient.

~~Income from these borrowers is recognized on a cash basis.~~2022. During the six months ended June 30, ~~2022,~~2023, the ~~Company wrote-off $1.5 million~~borrower made all contractual interest payments according to the terms of the modified agreement.

Investment in notes receivable, including related accrued interest ~~receivables~~receivable, was $4.3 million and ~~fees to "Mortgage~~$2.9 million at June 30, 2023 and ~~other financing income"~~ December 31, 2022, respectively, and is included in "Other assets" in the accompanying consolidated ~~statements of income related~~ ~~to the mortgage note and notes receivables.~~balance sheets.

During the year ended December 31, 2020, the Company entered into an amended and restated loan and security agreement with 1 of its notes receivable borrowers in response to the impacts of the COVID-19 pan~~demic. Although the borrower was not in default, nor had the borrower declared bankruptcy, the Company determined that these modifications resulted in a troubled debt restructuring~~. At June 30, ~~2022, this note~~2023, two of the Company's notes receivable ~~was~~are considered ~~collateral dependent~~collateral-dependent and expected credit losses are based on the fair value of the underlying collateral at the reporting date. The ~~note is secured by the working capital and non-real estate assets of the borrower. The~~ Company assessed the fair value of the collateral as of June 30, ~~2022~~2023 on these notes and the ~~note remains~~notes remain fully reserved with an allowance for credit loss totaling ~~$8.6~~$8.4 million and $1.9 million, respectively, which represents the outstanding principal balance of the ~~note~~notes as of June 30, ~~2022.~~2023. Income ~~for this borrower~~from these borrowers is recognized on a cash basis. The Company received interest payments totaling $0.4 million from one of these borrowers for both the six months ended June 30, 2023 and 2022.

At June 30, ~~2022,~~2023, the Company's investment in ~~this note~~one of the notes receivable was a variable interest investment and the underlying entity is a VIE. The Company is not the primary beneficiary of this VIE because the Company does not individually have the power to direct the activities that are most significant to the entity and, accordingly, this investment is not consolidated. The Company's maximum exposure to loss associated with this VIE is limited to the Company's outstanding note receivable in the amount of ~~$8.6~~$8.4 million, which is fully reserved in the allowance for credit losses at June 30, ~~2022.~~2023.

The following summarizes the activity within the allowance for credit losses related to mortgage notes, unfunded commitments and ~~notes~~notes receivable for the six months ended June 30, ~~2022~~2023 (in thousands):

Mortgage notes receivable Unfunded commitments - mortgage notes receivable Notes receivable Unfunded commitments - notes receivable Total
Allowance for credit losses at December 31, 2021 $ 2,124 $ 76 $ 8,686 $ — $ 10,886
Credit loss (benefit) expense 6,223 (70) 3,053 — 9,206
Charge-offs — — — — —
Recoveries — — — — —
Allowance for credit losses at June 30, 2022 $ 8,347 $ 6 $ 11,739 $ — $ 20,092


	Mortgage notes receivable		Unfunded commitments - mortgage notes receivable		Notes receivable		Unfunded commitments - notes receivable		Total
Allowance for credit losses at December 31, 2022	$	8,999	$	751	$	11,952	$	—	$	21,702
Credit loss expense (benefit)	1,319		253		(1,260)		—		312
Charge-offs	(7,771)		—		(394)		—		(8,165)
Recoveries	—		—		—		—		—
Allowance for credit losses at June 30, 2023	$	2,547	$	1,004	$	10,298	$	—	$	13,849

7. Accounts Receivable

The following table summarizes the carrying amounts of accounts receivable as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Receivable from tenants	Receivable from tenants	$	14,899	$	37,417	Receivable from tenants	$	4,554	$	7,595
Receivable from non-tenants	Receivable from non-tenants	4,794		2,237		Receivable from non-tenants	707		1,006

Straight-line rent receivable	Straight-line rent receivable	40,483		38,419		Straight-line rent receivable	48,044		44,986

Total	Total	$	60,176	$	78,073	Total	$	53,305	$	53,587

The COVID-19 pandemic severely impacted experiential real estate properties because such properties involve congregate social activity and discretionary spending. As a result, the Company continued to recognize revenue on a cash basis for certain tenants, including AMC and Regal, during the six months ended June 30, 2023.

As of June 30, ~~2022,~~2023, receivable from tenants includes payments of approximately ~~$12.1~~$1.0 million that were deferred due to the COVID-19 pandemic and determined to be collectible. Additionally, the Company has amounts due from tenants that were not booked as receivables because the full amounts were not deemed probable of collection as a result of the COVID-19 pandemic. While deferments for this and future periods delay rent payments, these deferments do not release tenants from the obligation to pay the deferred amounts in the future.

8. Capital Markets and Dividends

During the three and six months ended June 30, ~~2022~~2023, the Company declared cash dividends totaling $0.825 and ~~$1.60~~$1.65 per common share, respectively. Additionally, during the three and six months ended June 30, ~~2022,~~2023, the Board declared cash dividends of $0.359375 and $0.71875 per share ~~respectively,~~ on each of the Company's 5.75% Series C cumulative convertible preferred shares and the Company's 5.75% Series G cumulative redeemable preferred shares, and cash dividends of $0.5625 and $1.125 per share ~~respectively,~~ on the Company's 9.00% Series E cumulative convertible preferred shares.

On ~~January 14, 2022,~~February 17, 2023, the Company amended ~~the note purchase agreement governing~~ its private placement notes (Note Purchase Agreement) to, among other things: (i) amend certain financial and other covenants and provisions in the existing Note Purchase Agreement to conform generally to the changes beneficial to the Company in the corresponding covenants and provisions contained in the Company's Third ~~Amended, Restated and~~ Consolidated Credit Agreement, ~~dated October 6, 2021,~~which governs its unsecured revolving credit facility, to modify the interest rate from LIBOR to SOFR. The facility bears interest at a floating rate of SOFR plus 1.30% (with a SOFR floor of zero), which was 6.40% at June 30, 2023, and ~~(ii) amend certain financial and other covenants and provisions in the existing Note Purchase Agreement to reflect the prior termination~~has a facility fee of ~~the Covenant Relief Period (as defined in the existing Note Purchase Agreement) and removal of related provisions.~~0.25%.

9. Unconsolidated Real Estate Joint Ventures

The following table summarizes ~~our investment~~the Company's investments in unconsolidated joint ventures as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


						Investment as of				Income (Loss) for the Six Months Ended									Investment as of				Income (Loss) for the Six Months Ended
Property Type	Property Type	Location	Ownership Interest			June 30, 2022		December 31, 2021		June 30, 2022		June 30, 2021		Property Type	Location	Ownership Interest			June 30, 2023		December 31, 2022		June 30, 2023		June 30, 2022
Experiential lodging	Experiential lodging	St. Pete Beach, FL	65	%	(1)	$	21,256	$	25,894	$	2,837	$	(2,592)	Experiential lodging	St. Pete Beach, FL	65	%	(1)	$	19,517	$	18,712	$	806	$	2,837
Experiential lodging	Experiential lodging	Warrens, WI	95	%	(2)	8,413		10,068		(1,654)		—		Experiential lodging	Warrens, WI	95	%	(2)	9,076		10,865		(1,789)		(1,654)
Experiential lodging	Experiential lodging	Breaux Bridge, LA	85	%	(3)	18,036		—		193		—		Experiential lodging	Breaux Bridge, LA	85	%	(3)	19,138		17,080		(1,342)		193
Experiential lodging														Experiential lodging	Harrisville, PA	62	%	(4)	6,032		6,307		(275)		—
Theatres	Theatres	China	various		(4)	—		708		(61)		10		Theatres	China	various			—		—		—		(61)
						$	47,705	$	36,670	$	1,315	$	(2,582)						$	53,763	$	52,964	$	(2,600)	$	1,315

(1) The Company has equity investments in 2two unconsolidated real estate ~~joint ventures related to 2 experiential lodging properties located in St. Petersburg Beach, Florida.~~ T~~he Company's investments in these joint ventures were considered to be variable interest investments, however, the underlying entities are not VIEs. There are 2 separate~~ joint ventures, one that holds the investment in the real estate of the experiential lodging properties and the other that holds the lodging operations, which are facilitated by a management agreement with an eligible independent contractor. The Company's investment in the operating entity is held in a taxable REIT subsidiary (TRS). The Company accounts for its investment in these joint ventures under the equity method of accounting because control over major decisions is shared. On May 18, 2022, the joint venture that holds the real estate refinanced its secured mortgage loan, the new terms of which are described below. In connection with this refinancing, during the six months ended June 30, 2022, the Company received $6.7 million in distributions. In addition, the Company received $0.8 million in distributions from operations during the six months ended June 30, 2022agreement. . No distributions were received during the six months ended June 30, 2021. The Company's accounting policy is to classify the distribution on its consolidated statement of cash flows using the nature of the distribution approach based on facts and circumstances surrounding the distribution.

The joint venture that holds the real property has a secured mortgage loan of $105.0 million at June 30, ~~2022.~~2023. The maturity date of this mortgage loan is May 18, 2025. The note can be extended for 2two additional ~~1-year~~one-year periods from the original maturity date upon the satisfaction of certain conditions. The mortgage loan bears interest at SOFR

plus 3.65%, with monthly interest payments required. The joint venture has an interest rate cap agreement to limit the variable portion of the interest rate (SOFR) on this note to 3.5% from May 19, 2022 to June 1, 2024.

(2) The Company has equity investments in 2two unconsolidated real estate ~~joint ventures related to an experiential lodging property located in Warrens, Wisconsin. The Company's investments in these joint ventures were considered to be variable interest investments, however, the underlying entities are not VIEs.~~ ~~There are 2 separate~~ joint ventures, one that holds the investment in the real estate of the experiential lodging property and the other that holds the lodging operations, which are facilitated by a management agreement. The Company's investment in the operating entity is held in a TRS. The Company accounts for its investment in these joint ventures under the equity method of accounting because control over major decisions is shared.

The joint venture that holds the real property has a secured mortgage loan of ~~$15.0~~$22.9 million at June 30, ~~2022~~2023 that provides for additional draws of approximately ~~$9.6~~$1.6 million to fund renovations. The maturity date of this mortgage loan is September 15, 2031. The loan bears interest at an annual fixed rate of 4.00% with monthly interest payments required. Additionally, the Company has guaranteed the completion of the renovations in the amount of approximately $14.2 million, with ~~$11.2~~$3.1 million remaining to fund at June 30, ~~2022~~.2023.

(3) The Company has equity investments in 2two unconsolidated real estate ~~joint ventures related to an experiential lodging property located in Breaux Bridge, Louisiana. The Company's investments in these joint ventures were considered to be variable interest investments, however, the underlying entities are not VIEs.~~ ~~There are 2 separate~~ joint ventures, one that holds the investment in the real estate of the experiential lodging property and the other that holds the lodging operations, which are facilitated by a management agreement. The Company's investment in the operating entity is held in a TRS. The Company accounts for its investment in these joint ventures under the equity method of accounting because control over major decisions is shared.

The joint venture that holds the real estate property has a secured senior mortgage loan of ~~$38.5~~$38.5 million at June 30, ~~2022.~~2023. The maturity date of this mortgage loan is March 8, 2034. The mortgage loan bears interest at an annual fixed rate of 3.85% through April 7, 2025 and increases to 4.25% from April 8, 2025 through maturity. Monthly interest payments are required. Additionally, the Company provided a subordinated loan to the joint venture for $11.3 million with a maturity date of March 8, 2034. The mortgage loan bears interest at an annual fixed rate of 7.25% through the sixth anniversary and increases to SOFR plus 7.20% with a cap of 8.00%, through maturity.

(4) The Company has a 92% equity ~~investments~~investment in two separate unconsolidated real estate joint ventures, ~~for 3 theatre projects located~~that through subsequent joint ventures (described below), hold the investments in ~~China, with ownership interests ranging from 30%~~the real estate of the experiential lodging property and the lodging operations, which are facilitated by a management agreement. The Company's investments in these two unconsolidated real estate joint ventures were considered to ~~49%. During~~be variable interest investments and the Company's investment in the joint venture that holds the lodging operations is a VIE. The Company is not the primary beneficiary of the VIE because the Company does not individually have the power to direct the activities that are most important to the joint venture and, accordingly, this investment is not consolidated. Additionally, the

~~six months ended~~

Company's maximum exposure to loss at June 30, ~~2022,~~2023, other than the Company recognized $0.6 million in other-than-temporary impairment charges related to these equity investments. The Company determined these investments had no fair value based primarily on discounted cash flow projections. ~~The Company received distributions of $90 thousand from~~guarantee described below, is its investment in ~~these~~the joint venture that holds the lodging operations of $0.7 million.

The Company's investments in the two unconsolidated real estate joint ventures ~~for~~(representing 92% of each joint venture's equity) have a 67% equity interest in two separate consolidated joint ventures, one that holds the ~~six months ended~~investments in the real estate of the experiential lodging property and the other that holds the lodging operations, which are facilitated by a management agreement. The consolidated joint venture that holds the real estate property has a secured senior mortgage loan commitment of up to $22.5 million at June 30, ~~2021. No distributions were received during the six months ended~~2023 in order to fund renovations, with $3.2 million outstanding at June 30, ~~2022.~~2023. The maturity date of this mortgage loan is November 1, 2029. The mortgage loan bears interest at an annual fixed rate of 6.38% with monthly interest payments required. The Company has guaranteed $10.0 million in principal on the secured mortgage loan, and, upon completion of construction and achieving a specified debt service coverage ratio, the principal guarantee will be reduced to $5.0 million. The guarantee will be removed completely upon achievement of specified debt service coverage for three consecutive calculation periods. Additionally, the Company has guaranteed the completion of the renovations in the amount of approximately $13.9 million, with $11.9 million remaining to fund at June 30, 2023.

10. Derivative Instruments

All derivatives are recognized at fair value in the consolidated balance sheets within the line items "Other assets" and "Accounts payable and accrued liabilities" as applicable. The Company has elected not to offset its derivative position for purposes of balance sheet presentation and disclosure. The Company had derivative assets of ~~$2.3~~$6.7 million and $11.4 million at June 30, 2023 and December 31, 2022, arespectively. The Company hadnd no derivative ~~assets at December 31, 2021. The Company had derivative~~ liabilities ~~of $0.3 million and $4.9 million~~ at June 30, ~~2022~~2023 and December 31, ~~2021, respectively.~~2022. The Company has not posted or received collateral with its derivative counterparties as of June 30, ~~2022~~2023 or December 31, ~~2021.~~2022. See Note 11 for disclosures relating to the fair value of the derivative instruments.

Risk Management Objective of Using Derivatives

The Company is exposed to certain risk arising from both its business operations and economic conditions, including the effect of changes in foreign currency exchange rates on foreign currency transactions and interest rates on its ~~LIBOR-based~~SOFR-based borrowings. The Company manages this risk by following established risk management policies and procedures including the use of derivatives. The Company’s objective in using derivatives is to add stability to reported earnings and to manage its exposure to foreign exchange and interest rate movements or other identified risks. To accomplish this objective, the Company primarily uses interest rate swaps, cross-currency swaps and foreign currency forwards.

Cash Flow Hedges of Interest Rate Risk

The Company uses interest rate swaps as its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt or payment of variable-rate amounts from a counterparty, which results in the Company recording net interest expense that is fixed over the life of the agreements without exchange of the underlying notional amount.

At June 30, ~~2022,~~2023, the Company had 1one interest rate swap agreement designated as a cash flow hedge of interest rate ~~risk related to its variable rate secured bonds totaling $25.0 million.~~risk. The interest rate swap agreement outstanding as of June 30, ~~2022~~2023 is summarized below:

Fixed rate Notional Amount (in millions) Index Maturity
1.3925% $ 25.0 USD LIBOR September 30, 2024

Fixed rate

Notional Amount (in millions)

Index

Maturity

2.5325%

25.0

USD SOFR

September 30, 2026

The change in the fair value of interest rate derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (AOCI) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings within the same income statement line item as the earnings effect of the hedged transaction.

Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. As of June 30, ~~2022,~~2023, the Company estimates that during the twelve months ending June 30, ~~2023, $0.4~~2024, $1.1 million of gains will be reclassified from AOCI to interest expense.

Cash Flow Hedges of Foreign Exchange Risk

The Company is exposed to foreign currency exchange risk against its functional currency, USD, on CAD denominated cash flow from its 6six Canadian properties. The Company uses cross-currency swaps to mitigate its exposure to fluctuations in the USD-CAD exchange rate on cash inflows associated with these properties which should hedge a significant portion of the Company's expected CAD denominated cash flows. As of June 30, ~~2022,~~2023, the Company had the following cross-currency swaps:


Fixed rate	Notional Amount (in millions, CAD)		Annual Cash Flow (in millions, CAD)		Maturity
$1.26 CAD per USD	$	150.0	$	10.8	October 1, 2024
$1.28 CAD per USD	200.0		4.5		October 1, 2024
$1.30 CAD per USD	90.0		8.1		December 1, 2024
	$	440.0	$	23.4

The change in the fair value of foreign currency derivatives designated and that qualify as cash flow hedges of foreign exchange risk is recorded in AOCI and reclassified into earnings in the period that the hedged forecasted transaction affects earnings within the same income statement line item as the earnings effect of the hedged transaction. As of June 30, ~~2022,~~2023, the Company estimates that during the twelve months ending June 30, ~~2023, $0.1~~2024, $0.5 million of gains will be reclassified from AOCI to other income.

Net Investment Hedges

The Company is exposed to fluctuations in the USD-CAD exchange rate on its net investments in Canada. As such, the Company uses currency forward agreements to manage its exposure to changes in foreign exchange rates on certain of its foreign net investments. As of June 30, ~~2022,~~2023, the Company had the following foreign currency forwards designated as net investment hedges:

Fixed rate

Notional Amount (in millions, CAD)

Maturity

$1.28 CAD per USD

200.0

October 1, 2024

$1.30 CAD per USD

90.0

December 2, 2024

Total

290.0

The Company previously also used CAD to USD cross-currency swaps that were designated as net investment hedges. The cross-currency swaps included a monthly settlement feature to lock in on exchange rate of CAD to USD. On April 29, 2022, the Company terminated its CAD to USD cross-currency swaps in conjunction with entering into new agreements. The Company paid $3.8 million in connection with the settlement of the CAD to USD cross-currency swap agreements.

For qualifying foreign currency derivatives designated as net investment hedges, the change in the fair value of the derivatives are reported in AOCI as part of the cumulative translation adjustment. Amounts are reclassified out of AOCI into earnings when the hedged net investment is either sold or substantially liquidated. Gains and losses on the derivative representing hedge components excluded from the assessment of effectiveness are recognized over the life of the hedge on a systematic and rational basis, as documented at hedge inception in accordance with the Company's accounting policy election. The earnings recognition of excluded components are presented in other income.

Below is a summary of the effect of derivative instruments on the consolidated statements of changes in equity and income for the three and six months ended June 30, ~~2022~~2023 and ~~2021.~~2022.

Effect of Derivative Instruments on the Consolidated Statements of Changes in Equity and Comprehensive Income for the Three and Six ~~Months~~ Ended June 30, ~~2022~~2023 and ~~2021~~2022 (Dollars in thousands)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
Description	Description	2022		2021		2022		2021		Description	2023		2022		2023		2022
Cash Flow Hedges	Cash Flow Hedges									Cash Flow Hedges
Interest Rate Swaps	Interest Rate Swaps									Interest Rate Swaps
Amount of Gain (Loss) Recognized in AOCI on Derivative		$	225	$	(130)	$	1,050	$	129
Amount of Expense Reclassified from AOCI into Earnings (1)		(37)		(2,079)		(113)		(4,112)
Amount of Gain Recognized in AOCI on Derivative										Amount of Gain Recognized in AOCI on Derivative	$	516	$	225	$	218	$	1,050
Amount of Income (Expense) Reclassified from AOCI into Earnings (1)										Amount of Income (Expense) Reclassified from AOCI into Earnings (1)	159		(37)		285		(113)
Cross-Currency Swaps	Cross-Currency Swaps									Cross-Currency Swaps
Amount of Gain (Loss) Recognized in AOCI on Derivative		199		(121)		173		(214)
Amount of Expense Reclassified from AOCI into Earnings (2)		(45)		(99)		(99)		(148)
Amount of (Loss) Gain Recognized in AOCI on Derivative										Amount of (Loss) Gain Recognized in AOCI on Derivative	(460)		199		(456)		173
Amount of Income (Expense) Reclassified from AOCI into Earnings (2)										Amount of Income (Expense) Reclassified from AOCI into Earnings (2)	216		(45)		441		(99)
Net Investment Hedges	Net Investment Hedges									Net Investment Hedges
Cross-Currency Swaps	Cross-Currency Swaps									Cross-Currency Swaps
Amount of Gain (Loss) Recognized in AOCI on Derivative		3,684		(2,314)		665		(4,100)
Amount of Gain Recognized in AOCI on Derivative										Amount of Gain Recognized in AOCI on Derivative	—		3,684		—		665
Amount of Income Recognized in Earnings (2) (3)	Amount of Income Recognized in Earnings (2) (3)	71		71		170		173		Amount of Income Recognized in Earnings (2) (3)	—		71		—		170
Currency Forward Agreements	Currency Forward Agreements									Currency Forward Agreements
Amount of Gain Recognized in AOCI on Derivative		938		—		938		—
Amount of (Loss) Gain Recognized in AOCI on Derivative										Amount of (Loss) Gain Recognized in AOCI on Derivative	(4,287)		938		(3,946)		938

Total	Total									Total
Amount of Gain (Loss) Recognized in AOCI on Derivatives		$	5,046	$	(2,565)	$	2,826	$	(4,185)
Amount of Expense Reclassified from AOCI into Earnings		(82)		(2,178)		(212)		(4,260)
Amount of (Loss) Gain Recognized in AOCI on Derivatives										Amount of (Loss) Gain Recognized in AOCI on Derivatives	$	(4,231)	$	5,046	$	(4,184)	$	2,826
Amount of Income (Expense) Reclassified from AOCI into Earnings										Amount of Income (Expense) Reclassified from AOCI into Earnings	375		(82)		726		(212)
Amount of Income Recognized in Earnings	Amount of Income Recognized in Earnings	71		71		170		173		Amount of Income Recognized in Earnings	—		71		—		170

Interest expense, net in accompanying consolidated statements of income and comprehensive income	Interest expense, net in accompanying consolidated statements of income and comprehensive income	$	33,289	$	38,312	$	66,549	$	77,506	Interest expense, net in accompanying consolidated statements of income and comprehensive income	$	31,591	$	33,289	$	63,313	$	66,549
Other income in accompanying consolidated statements of income and comprehensive income	Other income in accompanying consolidated statements of income and comprehensive income	$	9,961	$	1,033	$	19,266	$	1,711	Other income in accompanying consolidated statements of income and comprehensive income	$	10,124	$	9,961	$	19,457	$	19,266

(1) Included in "Interest expense, net" in the accompanying consolidated statements of income and comprehensive income for the three and six months ended June 30, ~~2022~~2023 and ~~2021.~~2022.

(2) Included in "Other income" in the accompanying consolidated statements of income and comprehensive income for the three and six months ended June 30, ~~2022~~2023 and ~~2021.~~2022.

(3) Amounts represent derivative gains excluded from the effectiveness testing.

Credit-risk-related Contingent Features

The Company has an agreement with its interest rate derivative counterparty that contains a provision where if the Company defaults on any of its obligations for borrowed money or credit in an amount exceeding $50.0 million and such default is not waived or cured within a specified period of time, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its interest rate derivative ~~obligations.~~agreements.

As of June 30, ~~2022,~~2023, the ~~fair value of the Company's derivatives~~Company had no derivatives in a liability position related to these derivative agreements w~~as $0.3 million. If the Company breached any of the contractual provisions of these derivative contracts, it would be required to settle its obligations under the agreements for~~ ~~$44 thousand, which is the agreements' termination value after considering the right of offset.~~. As of June 30, ~~2022,~~2023, the Company had not posted any collateral related to these agreements and was not in breach of any provisions in these agreements.

11. Fair Value Disclosures

The Company has certain financial instruments that are required to be measured under the FASB’s Fair Value Measurement guidance. The Company currently does not have any non-financial assets and non-financial liabilities that are required to be measured at fair value on a recurring basis.

As a basis for considering market participant assumptions in fair value measurements, the FASB’s Fair Value Measurement guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). Level 1 inputs use quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Derivative Financial Instruments

The Company uses interest rate swaps, foreign currency forwards and cross currency swaps to manage its interest rate and foreign currency risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, foreign exchange rates, and implied volatilities. The fair value of interest rate swaps is determined using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The variable cash payments are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. In conjunction with the FASB's fair value measurement guidance, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

~~Although the~~ Company determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives also use Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by itself and its counterparties. As of June 30, ~~2022,~~2023, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives and therefore, classified its derivatives as Level 2 within the fair value reporting hierarchy.

The table below presents the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 aggregated by the level in the fair value hierarchy within which those measurements are classified and by derivative type.

Assets and Liabilities Measured at Fair Value on a Recurring Basis at

June 30, ~~2022~~2023 and December 31, ~~2021~~2022

(Dollars in thousands)


Description	Description	Quoted Prices in Active Markets for Identical Assets (Level I)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at end of period		Description	Quoted Prices in Active Markets for Identical Assets (Level I)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at end of period
June 30, 2022
Cross-Currency Swaps (1)		$	—	$	(105)	$	—	$	(105)
Cross-Currency Swaps (2)		—		279		—		279
Currency Forward Agreements (1)		—		(226)		—		(226)
Currency Forward Agreements (2)		—		1,164		—		1,164
Interest Rate Swap Agreements (2)		—		901		—		901
December 31, 2021
June 30, 2023										June 30, 2023

Cross-Currency Swaps (1)	Cross-Currency Swaps (1)	$	—	$	(4,626)	$	—	$	(4,626)	Cross-Currency Swaps (1)	$	—	$	626	$	—	$	626

Currency Forward Agreements (1)										Currency Forward Agreements (1)	—		4,741		—		4,741
Interest Rate Swap Agreements (1)										Interest Rate Swap Agreements (1)	—		1,359		—		1,359
December 31, 2022										December 31, 2022
Cross-Currency Swaps (1)										Cross-Currency Swaps (1)	$	—	$	1,523	$	—	$	1,523

Currency Forward Agreements (1)										Currency Forward Agreements (1)	—		8,686		—		8,686
Interest Rate Swap Agreements (1)	Interest Rate Swap Agreements (1)	—		(262)		—		(262)		Interest Rate Swap Agreements (1)	—		1,240		—		1,240

(1) ~~Included in "Accounts payable and accrued liabilities" in the accompanying consolidated balance sheets.~~

~~(2)~~ Included in "Other assets" in the accompanying consolidated balance sheets.

Non-recurring fair value measurements

The table below presents the Company's assets measured at fair value on a non-recurring basis as of June 30, 2023 and December 31, 2022, aggregated by the level in the fair value hierarchy within which those measurements are classified.

Assets Measured at Fair Value on a Non-Recurring Basis at June 30, ~~2022~~2023 andDecember 31, ~~2021~~2022

(Dollars in thousands)
Description Quoted Prices in
Active Markets
for Identical
Assets (Level I) Significant
Other
Observable
Inputs (Level 2) Significant
Unobservable
Inputs (Level 3) Balance at
end of period
June 30, 2022
Real estate investments, net $ — $ 4,700 $ — $ 4,700
Mortgage notes and related accrued interest receivable — — 7,780 7,780
Investment in joint ventures — — — —
Other assets (1) — — 1,316 1,316
December 31, 2021
Real estate investments, net $ — $ 6,956 $ — $ 6,956
Other assets (1) — — — —

~~(1) Includes collateral dependent notes receivable, which are presented within "Other assets" in the accompanying consolidated balance sheets.~~


Description	Quoted Prices in Active Markets for Identical Assets (Level I)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at end of period
June 30, 2023
Real estate investments, net (1)	$	—	$	—	$	27,190	$	27,190



December 31, 2022
Real estate investments, net	$	—	$	4,700	$	33,670	$	38,370
Operating lease right-of-use asset	—		—		7,006		7,006
Mortgage notes and related accrued interest receivable, net	—		—		7,780		7,780
Investment in joint ventures	—		—		—		—
Other assets (2)	—		—		1,316		1,316

(1) As further discussed in Note 4, during the six months ended June 30, ~~2022,~~2023, the Company recorded an impairment charge of ~~$4.4~~$43.8 million related to real estate investments, net, on ~~1 of its properties. Additionally, during the year ended December 31, 2021, the Company recorded impairment charges of $2.7 million related to real estate investments, net on 2 of its~~nine properties. Management estimated the fair values of these investments taking into account various factors including ~~purchase offers,~~independent appraisals, shortened hold periods and market conditions. ~~The Company determined, based on the inputs, that the valuation of these properties with purchase offers were classified within Level 2 of the fair value hierarchy and were measured at fair value.~~

As further discussed in Note 6, during the six months ended June 30, 2022, the Company recorded an allowance for credit losses of $6.8 million related to 1 mortgage note and $1.2 million related to 1 note receivable, as a result

of recent changes in the borrower's financial status. Management valued the mortgage note and note receivable based on the fair value of the underlying collateral determined using independent appraisals which used discounted cash flow models. The significant inputs and assumptions used in the real estate appraisals included market rents ~~of approximately~~ranging from $4.50 per square foot to $20 per square foot, discount rates ranging from 9.50% to 11.50% and ~~a discount rate of 6.75%~~terminal capitalization rates ranging from 8.50% to 10.25%. These measurements were classified within Level 3 of the fair value hierarchy asbecause many of the assumptions were not observable. ~~Additionally, during the six months ended June 30, 2022, the Company recorded an allowance for credit losses totaling $1.9 million related to 1 note~~

(2) Includes collateral-dependent notes receivable, ~~to fully reserve the outstanding principal balance of $1.9 million, as a result of recent changes~~which are presented within "Other assets" in the borrower's financial status. Management valued the note receivable based on the fair value of the underlying collateral which was determined taking into account various factors including implied asset value changes based on current market conditions and review of the financial statements of the borrower, and was classified within Level 3 of the fair value hierarchy.

~~Additionally, as further discussed in Note~~9, during the six months ended June 30, 2022, the Company recorded impairment charges of $0.6 million related to its investment in joint ventures. Management estimated the fair value of these investments, taking into account various factors including implied asset value changes based on discounted cash flow projections and current market conditions. The Company determined, based on the inputs, that its valuation of investment in joint ventures was classified within Level 3 of the fair value hierarchy as many of the assumptions were not observable.accompanying consolidated balance sheets.

Fair Value of Financial Instruments

The following methods and assumptions were used by the Company to estimate the fair value of each class of financial instruments at June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:

Mortgage notes receivable and related accrued interest ~~receivable:~~receivable, net:

The fair value of the Company’s mortgage notes and related accrued interest receivable, net, is estimated by discounting the future cash flows of each instrument using current market rates. At June 30, ~~2022,~~2023, the Company had a carrying value of ~~$374.6~~$466.5 million in ~~fixed rate~~fixed-rate mortgage notes receivable outstanding, including related accrued interest and allowance for credit losses, with a weighted average interest rate of approximately ~~9.03%~~8.91%. The ~~fixed rate~~fixed-rate mortgage notes bear interest at rates of ~~7.01%~~6.99% to 12.32%. Discounting the future cash flows for fixed-rate mortgage notes receivable using rates of 7.00% to 10.00%, management estimates the fair value of the fixed-rate mortgage notes receivable to be approximately $510.5 million with an estimated weighted average market rate of 7.66% at June 30, 2023.

At December 31, 2022, the Company had a carrying value of $457.3 million in fixed-rate mortgage notes receivable outstanding, including related accrued interest and allowance for credit losses, with a weighted average interest rate of approximately 8.92%. The fixed-rate mortgage notes bear interest at rates of 6.99% to 12.14%. Discounting the future cash flows for ~~fixed rate~~fixed-rate mortgage notes receivable using rates of ~~7.25%~~7.15% to ~~9.25%~~10.00%, management estimates the fair value of the ~~fixed rate~~fixed-rate mortgage notes receivable to be ~~approximately $407.4~~$500.0 million with an estimated weighted average market rate of ~~7.95%~~7.70% at ~~June 30,~~December 31, 2022.

At December 31, 2021, the Company had a carrying value of $370.2 million in fixed rate mortgage notes receivable outstanding, including related accrued interest, with a weighted average interest rate of approximately 9.04%. The fixed rate mortgage notes bear interest at rates of 7.01% to 11.96%. Discounting the future cash flows for fixed rate mortgage notes receivable using rates of 7.50% to 9.25%, management estimates the fair value of the fixed rate mortgage notes receivable to be $400.1 million with an estimated weighted average market rate of 8.05% at December 31, 2021.

Derivative instruments:

Derivative instruments are carried at their fair value.

Debt instruments:

The fair value of the Company's debt is estimated by discounting the future cash flows of each instrument using current market rates. At June 30, ~~2022,~~2023, the Company had a carrying value of $25.0 million in ~~variable rate~~variable-rate debt outstanding with an average interest rate of approximately ~~1.71%~~5.23%. The carrying value of the ~~variable rate~~variable-rate debt outstanding approximated the fair value at June 30, ~~2022.~~2023.

At December 31, ~~2021,~~2022, the Company had a carrying value of $25.0 million in ~~variable rate~~variable-rate debt outstanding with a weighted average interest rate of approximately ~~0.15%~~4.43%. The carrying value of the ~~variable rate~~variable-rate debt outstanding approximated the fair value at December 31, ~~2021.~~2022.

At both June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the $25.0 million of ~~variable rate~~variable-rate debt outstanding, discussed above, had been effectively converted to a fixed rate by an interest rate swap ~~agreements.~~agreement. See Note 10 for additional information related to the Company's interest rate swap agreement.

At June 30, ~~2022,~~2023, the Company had a carrying value of $2.82 billion in ~~fixed rate~~fixed-rate long-term debt outstanding with a weighted average interest rate of approximately 4.34%. Discounting the future cash flows for ~~fixed rate~~fixed-rate debt using June 30, ~~2022~~2023 market rates of ~~4.35%~~7.24% to ~~6.81%~~8.28%, management estimates the fair value of the fixed rate debt to be approximately ~~$2.54~~$2.45 billion with an estimated weighted average market rate of ~~6.23%~~7.77% at June 30, ~~2022.~~2023.

At December 31, ~~2021,~~2022, the Company had a carrying value of $2.82 billion in ~~fixed rate~~fixed-rate long-term debt outstanding with an average weighted interest rate of approximately 4.34%. Discounting the future cash flows for ~~fixed rate~~fixed-rate debt using December 31, ~~2021~~2022 market rates of ~~2.25%~~7.42% to ~~4.56%~~8.35%, management estimates the fair value of the fixed rate debt to be approximately ~~$2.93~~$2.39 billion with an estimated weighted average market rate of ~~3.43%~~7.94% at December 31, ~~2021.~~2022.

12. Earnings Per Share

The following table summarizes the Company’s computation of basic and diluted earnings per share (EPS) for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 (amounts in thousands except per share information):


		Three Months Ended June 30, 2022					Six Months Ended June 30, 2022						Three Months Ended June 30, 2023					Six Months Ended June 30, 2023
		Income (numerator)		Shares (denominator)	Per Share Amount		Income (numerator)		Shares (denominator)	Per Share Amount			Income (numerator)		Shares (denominator)	Per Share Amount		Income (numerator)		Shares (denominator)	Per Share Amount
Basic EPS:	Basic EPS:											Basic EPS:
Net income	Net income	$	40,909				$	83,101				Net income	$	13,600				$	71,257
Less: preferred dividend requirements	Less: preferred dividend requirements	(6,033)					(12,066)					Less: preferred dividend requirements	(6,040)					(12,073)

Net income available to common shareholders	Net income available to common shareholders	$	34,876	74,986	$	0.47	$	71,035	74,915	$	0.95	Net income available to common shareholders	$	7,560	75,297	$	0.10	$	59,184	75,191	$	0.79
Diluted EPS:	Diluted EPS:											Diluted EPS:
Net income available to common shareholders	Net income available to common shareholders	$	34,876	74,986			$	71,035	74,915			Net income available to common shareholders	$	7,560	75,297			$	59,184	75,191
Effect of dilutive securities:	Effect of dilutive securities:											Effect of dilutive securities:
Share options and performance shares		—		248			—		227
Performance shares												Performance shares	—		418			—		380

Net income available to common shareholders	Net income available to common shareholders	$	34,876	75,234	$	0.46	$	71,035	75,142	$	0.95	Net income available to common shareholders	$	7,560	75,715	$	0.10	$	59,184	75,571	$	0.78

2520


		Three Months Ended June 30, 2021					Six Months Ended June 30, 2021						Three Months Ended June 30, 2022					Six Months Ended June 30, 2022
		Income (numerator)		Shares (denominator)	Per Share Amount		Income (numerator)		Shares (denominator)	Per Share Amount			Income (numerator)		Shares (denominator)	Per Share Amount		Income (numerator)		Shares (denominator)	Per Share Amount
Basic EPS:	Basic EPS:											Basic EPS:
Net income	Net income	$	18,552				$	21,932				Net income	$	40,909				$	83,101
Less: preferred dividend requirements	Less: preferred dividend requirements	(6,033)					(12,067)					Less: preferred dividend requirements	(6,033)					(12,066)

Net income available to common shareholders	Net income available to common shareholders	$	12,519	74,781	$	0.17	$	9,865	74,704	$	0.13	Net income available to common shareholders	$	34,876	74,986	$	0.47	$	71,035	74,915	$	0.95
Diluted EPS:	Diluted EPS:											Diluted EPS:
Net income available to common shareholders	Net income available to common shareholders	$	12,519	74,781			$	9,865	74,704			Net income available to common shareholders	$	34,876	74,986			$	71,035	74,915
Effect of dilutive securities:	Effect of dilutive securities:											Effect of dilutive securities:
Share options and performance shares	Share options and performance shares	—		89			—		68			Share options and performance shares	—		248			—		227

Net income available to common shareholders	Net income available to common shareholders	$	12,519	74,870	$	0.17	$	9,865	74,772	$	0.13	Net income available to common shareholders	$	34,876	75,234	$	0.46	$	71,035	75,142	$	0.95

The effect of the potential common shares from the conversion of the Company’s convertible preferred shares and from the exercise of share options are included in diluted earnings per share if the effect is dilutive. Potential common shares from the performance shares are included in diluted earnings per share upon the satisfaction of certain performance and market conditions. These conditions are evaluated at each reporting period and if the conditions have been satisfied during the reporting period, the number of contingently issuable shares are included in the computation of diluted earnings per share.

The following shares have been excluded from the calculation of diluted earnings per share, either because they are anti-dilutive or, in the case of contingently issuable performance shares, are not ~~probable:~~probable of issuance:

•The additional 2.3 million and 2.2 million common shares that would result from the conversion of the Company’s 5.75% Series C cumulative convertible preferred shares and the corresponding add-back of the preferred dividends declared on those shares for ~~both~~ the three and six months ended June 30, 2023 and 2022, ~~and 2021.~~respectively.

•The additional 1.7 million common shares that would result from the conversion of the Company’s 9.0% Series E cumulative convertible preferred shares and the corresponding add-back of the preferred dividends declared on those shares for both the three and six months ended June 30, ~~2022~~2023 and ~~2021.~~2022.

•Outstanding options to purchase 83 thousand and 89 thousand common shares at per share prices ranging from $44.44 to $76.63 for the three and six months ended June 30, ~~2022.~~

•~~Outstanding options to purchase 90 thousand~~2023 and ~~106 thousand common shares at per share prices ranging from $44.44 to $76.63 for the three and six months ended June 30, 2021,~~2022, respectively.

•~~The effect of 102 thousand contingently issuable performance shares granted during 2021 for both the~~ ~~three and six months ended June 30, 2021.~~

•The effect of 56 thousand contingently issuable performance shares granted during 2020 for ~~both~~ the three and six months ended June 30, ~~2022 and 2021.~~2022.

13. Equity Incentive Plans

All grants of common shares and options to purchase common shares were issued under the Company's 2007 Equity Incentive Plan prior to May 12, 2016 and under the 2016 Equity Incentive Plan on and after May 12, 2016. Under the 2016 Equity Incentive Plan, an aggregate of 3,950,000 common shares, options to purchase common shares and restricted share units, subject to adjustment in the event of certain capital events, may be granted. Additionally, the 2020 Long Term Incentive Plan (2020 LTIP) is a sub-plan under the Company's 2016 Equity Incentive Plan. Under the 2020 LTIP, the Company awards performance shares and restricted shares to the Company's executive officers. At June 30, ~~2022,~~2023, there were ~~1,983,595~~1,490,224 shares available for grant under the 2016 Equity Incentive Plan.

2621

~~Share Options~~

Share options have exercise prices equal to the fair market value of a common share at the date of grant. The options may be granted for any reasonable term, not to exceed 10 years. The Company generally issues new common shares upon option exercise. A summary of the Company’s share option activity and related information is as follows:

Number of options Option price per share Weighted avg. exercise price
Outstanding at December 31, 2021 108,671 $ 44.44 — $ 76.63 $ 56.79
Exercised (9,799) 44.62 — 47.15 46.30
Outstanding at June 30, 2022 98,872 $ 44.44 — $ 76.63 $ 57.83

~~The weighted average fair value of options granted~~ ~~was $20.34~~ ~~during the six months ended June 30, 2021. No~~ ~~options were granted during the six months ended June 30, 2022. The intrinsic value of share options exercised was $38 thousand and $7 thousand for the six months ended June 30, 2022 and 2021, respectively.~~

~~The following table summarizes outstanding and exercisable options at June 30, 2022:~~

Options outstanding Options exercisable
Exercise price range Options outstanding Weighted avg. life remaining Weighted avg. exercise price Aggregate intrinsic value (in thousands) Options exercisable Weighted avg. life remaining Weighted avg. exercise price Aggregate intrinsic value (in thousands)
$44.44 - 49.99 11,510 4.8 10,132 1.7
50.00 - 59.99 31,008 2.0 31,008 2.0
60.00 - 69.99 52,198 4.0 50,754 3.4
70.00 - 76.63 4,156 5.6 3,671 5.4
98,872 3.5 $ 57.83 $ 5 95,565 2.8 $ 57.77 $ 1

Nonvested Shares

A summary of the Company’s nonvested share activity and related information is as follows:


		Number of shares	Weighted avg. grant date fair value		Weighted avg. life remaining		Number of shares	Weighted avg. grant date fair value		Weighted avg. life remaining
Outstanding at December 31, 2021		478,554	$	56.57
Outstanding at December 31, 2022						Outstanding at December 31, 2022	503,912	$	50.38
Granted	Granted	243,286	46.65			Granted	352,090	42.23
Vested	Vested	(215,096)	59.97			Vested	(228,102)	54.10
Forfeited	Forfeited	(2,176)	46.98			Forfeited	(13,809)	45.20
Outstanding at June 30, 2022		504,568	$	50.38	1.36
Outstanding at June 30, 2023						Outstanding at June 30, 2023	614,091	$	44.44	1.40

The holders of nonvested shares have voting rights and receive dividends from the date of grant. The fair value of the nonvested shares that vested was ~~$10.2~~$8.6 million and $~~6.5~~10.2 million for the six months ended June 30, 2023 and 2022, respectively. Expense recognized related to nonvested shares and ~~2021,~~included in "General and administrative expense" in the accompanying consolidated statements of income and comprehensive income was $3.8 million and $3.9 million for the six months ended June 30, 2023 and 2022, respectively. Expense related to nonvested shares and included in severance expense in the accompanying consolidated statements of income and comprehensive income was $0.3 million for the six months ended June 30, 2023. There was no expense related to nonvested shares included in severance expense for the six months ended June 30, 2022. At June 30, ~~2022,~~2023, unamortized share-based compensation expense related to nonvested shares was ~~$13.4~~$14.3 million.

Nonvested Performance Shares

A summary of the Company's nonvested performance share activity and related information is as follows:


			Target Number of Performance Shares
Outstanding at December 31, ~~2021~~2022			~~158,776~~257,386
Granted			~~98,610~~111,593
Vested (1)			(56,338)
Forfeited			—
Outstanding at June 30, ~~2022~~2023			~~257,386~~312,641

(1) The performance conditions for the performance shares granted during the year ended December 31, 2020 were not achieved resulting in no pay-out.

The number of common shares issuable upon settlement of the performance shares granted during the six months ended June 30, 2023, 2022 ~~2021~~ and ~~2020~~2021 will be based upon the Company's achievement level relative to the following performance measures at December 31, 2025, 2024 ~~2023~~ and ~~2022,~~2023, respectively: 50% based upon the Company's Total Shareholder Return (TSR) relative to the TSRs of the Company's peer group companies, 25% based upon the

Company's TSR relative to the TSRs of companies in the MSCI US REIT Index and 25% based upon the Company's Compounded Annual Growth Rate (CAGR) in AFFO per share over the three-year performance period. The Company's achievement level relative to the performance measures is assigned a specific payout percentage which is multiplied by a target number of performance shares.

The performance shares based on relative TSR performance have market conditions and are valued using a Monte Carlo simulation model on the grant date, which resulted in a grant date fair value of approximately ~~$6.0~~$5.9 million and ~~$6.6~~$6.0 million for the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The estimated fair value is amortized to expense over the three-year performance periods, which end on December 31, 2025, 2024 ~~2023~~ and ~~2022~~2023 for performance shares granted in 2023, 2022 ~~2021~~ and ~~2020,~~2021, respectively. The following assumptions were used in the Monte Carlo simulation for computing the grant date fair value of the performance shares with a market condition for the six months ended June 30, ~~2022:~~2023: risk-free ~~interest~~interest rate of ~~1.7%~~4.4%, volatility factors in the expected market price of the Company's common shares of ~~71%~~52% and an expected life of approximately three years.

The performance shares based on growth in AFFO per share have a performance condition. The probability of achieving the performance condition is assessed at each reporting period. If it is deemed probable that the performance condition will be met, compensation cost will be recognized based on the closing price per share of the Company's common stock on the date of the grant multiplied by the number of awards expected to be earned. If it is deemed that it is not probable that the performance condition will be met, the Company will discontinue the recognition of compensation cost ~~and~~and any compensation cost previously ~~recorded~~recorded will be reversed. At June 30, ~~2022,~~2023, achievement of the performance condition was deemed probable for the performance shares granted during the six months ended June 30, 2023, 2022 and 2021 with an expected payout percentage of 100%, 200% and 200%, respectively, which resulted in a grant date fair value of approximately $1.2 million, $2.3 million ~~for each period. Achievement~~and $2.3 million, respectively.

Expense recognized related to performance shares and included in "General and administrative expense" in the accompanying consolidated statements of ~~the minimum performance condition~~income and comprehensive income was $4.0 million and $3.3 million for the ~~performance shares granted during the~~ six months ended June 30, ~~2020 was deemed not probable at June 30,~~2023 and 2022 ~~resulting in no expected payout.~~

, respectively. At June 30, ~~2022,~~2023, unamortized share-based compensation expense related to nonvested performance shares was ~~$11.8~~$11.5 million.

The performance shares accrue dividend equivalents which are paid only if common shares are issued upon settlement of the performance shares. During the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, the Company accrued dividend equivalents expected to be paid on earned awards of ~~$324~~$803 thousand and ~~$18~~$324 thousand, respectively.

Restricted Share Units

A summary of the Company’s restricted share unit activity and related information is as follows:


		Number of shares	Weighted avg. grant date fair value		Weighted avg. life remaining		Number of shares	Weighted avg. grant date fair value		Weighted avg. life remaining
Outstanding at December 31, 2021		43,306	$	49.15
Outstanding at December 31, 2022						Outstanding at December 31, 2022	38,605	$	50.77
Granted	Granted	41,399	50.49			Granted	43,497	41.67
Vested	Vested	(46,100)	49.00			Vested	(40,054)	50.44
Outstanding at June 30, 2022		38,605	$	50.77	0.92
Outstanding at June 30, 2023						Outstanding at June 30, 2023	42,048	$	41.67	0.92

The holders of restricted share units receive dividend equivalents from the date of grant. Total expense recognized related to shares issued to non-employee Trustees and included in "General and administrative expense" in the accompanying consolidated statements of income and comprehensive income was $1.0 million and $1.2 million for the six months ended June 30, 2023 and 2022, respectively. At June 30, ~~2022,~~2023, unamortized share-based compensation expense related to restricted share units was ~~$1.8~~$1.6 million.

14. Operating Leases

The Company’s real estate investments are leased under operating leases. In addition to its lessor arrangements on its real estate investments, as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company was lessee in 5251 and 5152 operating ground leases, respectively. The Company's tenants, who are generally sub-tenants under these ground leases, are responsible for paying the rent under these ground leases. As of June 30, ~~2022,~~2023, rental revenue from several of the Company's tenants, who are also sub-tenants under the ground leases, is being recognized on a cash basis. In most cases, the ground lease sub-tenants have continued to pay the rent under these ground ~~leases. In~~

~~addition, 2 o~~fleases, however, two of these properties do not currently have sub-tenants. In the event the tenant fails to pay the ground lease rent or if the property does not have sub-tenants, the Company is primarily responsible for the payment, assuming the Company does not sell or re-tenant the property. The Company is also the lessee in an operating lease of its executive office.

The following table summarizes rental revenue, including sublease arrangements and lease costs, for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):


			Three Months Ended June 30,				Six Months Ended June 30,						Three Months Ended June 30,				Six Months Ended June 30,
		Classification	2022		2021		2022		2021			Classification	2023		2022		2023		2022
Operating leases	Operating leases	Rental revenue	$	136,918	$	110,349	$	270,746	$	208,021	Operating leases	Rental revenue	$	145,531	$	136,918	$	290,766	$	270,746
Sublease income - operating ground leases	Sublease income - operating ground leases	Rental revenue	5,957		5,534		$	11,732	$	10,476	Sublease income - operating ground leases	Rental revenue	6,339		5,957		12,695		11,732

Lease costs	Lease costs										Lease costs
Operating ground lease cost	Operating ground lease cost	Property operating expense	$	6,136	$	5,811	$	12,105	$	11,224	Operating ground lease cost	Property operating expense	$	6,563	$	6,136	$	13,163	$	12,105
Operating office lease cost	Operating office lease cost	General and administrative expense	226		226		452		452		Operating office lease cost	General and administrative expense	224		226		448		452

15. Segment Information

The Company groups its investments into 2two reportable operating segments: Experiential and Education.

The financial information summarized below is presented by reportable operating segment (in thousands):


Balance Sheet Data:	Balance Sheet Data:									Balance Sheet Data:
		As of June 30, 2022									As of June 30, 2023
		Experiential		Education		Corporate/Unallocated		Consolidated			Experiential		Education		Corporate/Unallocated		Consolidated
Total Assets	Total Assets	$	5,123,623	$	497,006	$	172,813	$	5,793,442	Total Assets	$	5,140,804	$	460,126	$	102,634	$	5,703,564

		As of December 31, 2021									As of December 31, 2022
		Experiential		Education		Corporate/Unallocated		Consolidated			Experiential		Education		Corporate/Unallocated		Consolidated
Total Assets	Total Assets	$	4,995,241	$	505,086	$	300,823	$	5,801,150	Total Assets	$	5,164,710	$	473,580	$	120,411	$	5,758,701

2924


Operating Data:
	Three Months Ended June 30, 2023
	Experiential		Education		Corporate/Unallocated		Consolidated
Rental revenue	$	142,421	$	9,449	$	—	$	151,870
Other income	9,825		—		299		10,124
Mortgage and other financing income	10,694		219		—		10,913
Total revenue	162,940		9,668		299		172,907

Property operating expense	13,744		—		228		13,972
Other expense	9,161		—		—		9,161
Total investment expenses	22,905		—		228		23,133
Net operating income - before unallocated items	140,035		9,668		71		149,774

Reconciliation to Consolidated Statements of Income and Comprehensive Income:
General and administrative expense							(15,248)
Severance expense							(547)



Transaction costs							(36)
Credit loss benefit							275
Impairment charges							(43,785)
Depreciation and amortization							(43,705)
Loss on sale of real estate							(575)
Interest expense, net							(31,591)
Equity in loss from joint ventures							(615)


Income tax expense							(347)




Net income							13,600

Preferred dividend requirements							(6,040)
Net income available to common shareholders of EPR Properties							$	7,560


Operating Data:
	Three Months Ended June 30, 2022
	Experiential		Education		Corporate/Unallocated		Consolidated
Rental revenue	$	133,009	$	9,866	$	—	$	142,875
Other income	7,685		—		2,276		9,961
Mortgage and other financing income	7,382		228		—		7,610
Total revenue	148,076		10,094		2,276		160,446

Property operating expense	13,358		—		234		13,592
Other expense	8,872		—		—		8,872
Total investment expenses	22,230		—		234		22,464
Net operating income - before unallocated items	125,846		10,094		2,042		137,982

Reconciliation to Consolidated Statements of Income and Comprehensive Income:
General and administrative expense							(12,691)



Transaction costs							(1,145)
Credit loss expense							(9,512)

Depreciation and amortization							(40,766)


Interest expense, net							(33,289)
Equity in income from joint ventures							1,421
Impairment charges on joint ventures							(647)

Income tax expense							(444)



Net income							40,909
Preferred dividend requirements							(6,033)
Net income available to common shareholders of EPR Properties							$	34,876

Operating Data:
Three Months Ended June 30, 2021
Experiential Education Corporate/Unallocated Consolidated
Rental revenue $ 106,559 $ 9,324 $ — $ 115,883
Other income 1,061 — (28) 1,033
Mortgage and other financing income 8,239 207 — 8,446
Total revenue 115,859 9,531 (28) 125,362
Property operating expense 14,421 15 242 14,678
Other expense 3,025 — — 3,025
Total investment expenses 17,446 15 242 17,703
Net operating income - before unallocated items 98,413 9,516 (270) 107,659
Reconciliation to Consolidated Statements of Income and Comprehensive Income:
General and administrative expense (11,376)
Transaction costs (662)
Credit loss benefit 2,819
Depreciation and amortization (40,538)
Gain on sale of real estate 511
Interest expense, net (38,312)
Equity in loss from joint ventures (1,151)
Income tax expense (398)
Net income 18,552
Preferred dividend requirements (6,033)
Net income available to common shareholders of EPR Properties $ 12,519

3025


Operating Data:
	Six Months Ended June 30, 2023
	Experiential		Education		Corporate/Unallocated		Consolidated
Rental revenue	$	284,121	$	19,340	$	—	$	303,461
Other income	18,933		1		523		19,457
Mortgage and other financing income	20,943		442		—		21,385
Total revenue	323,997		19,783		523		344,303

Property operating expense	27,921		—		206		28,127
Other expense	18,111		—		—		18,111
Total investment expenses	46,032		—		206		46,238
Net operating income - before unallocated items	277,965		19,783		317		298,065

Reconciliation to Consolidated Statements of Income and Comprehensive Income:
General and administrative expense							(29,213)
Severance expense							(547)


Transaction costs							(306)
Credit loss expense							(312)
Impairment charges							(43,785)
Depreciation and amortization							(84,909)
Loss on sale of real estate							(1,135)

Interest expense, net							(63,313)
Equity in loss from joint ventures							(2,600)


Income tax expense							(688)



Net income							71,257
Preferred dividend requirements							(12,073)
Net income available to common shareholders of EPR Properties							$	59,184


Operating Data:
	Six Months Ended June 30, 2022
	Experiential		Education		Corporate/Unallocated		Consolidated
Rental revenue	$	262,034	$	20,444	$	—	$	282,478
Other income	16,895		—		2,371		19,266
Mortgage and other financing income	15,716		458		—		16,174
Total revenue	294,645		20,902		2,371		317,918

Property operating expense	27,051		(7)		487		27,531
Other expense	16,969		—		—		16,969
Total investment expenses	44,020		(7)		487		44,500
Net operating income - before unallocated items	250,625		20,909		1,884		273,418

Reconciliation to Consolidated Statements of Income and Comprehensive Income:
General and administrative expense							(25,915)



Transaction costs							(3,392)
Credit loss expense							(9,206)
Impairment charges							(4,351)
Depreciation and amortization							(80,810)


Interest expense, net							(66,549)
Equity in income from joint ventures							1,315
Impairment charges on joint ventures							(647)

Income tax expense							(762)



Net income							83,101
Preferred dividend requirements							(12,066)
Net income available to common shareholders of EPR Properties							$	71,035

Operating Data:
Six Months Ended June 30, 2021
Experiential Education Corporate/Unallocated Consolidated
Rental revenue $ 199,835 $ 18,662 $ — $ 218,497
Other income 1,390 — 321 1,711
Mortgage and other financing income 16,380 539 — 16,919
Total revenue 217,605 19,201 321 237,127
Property operating expense 29,413 97 481 29,991
Other expense 5,577 — — 5,577
Total investment expenses 34,990 97 481 35,568
Net operating income - before unallocated items 182,615 19,104 (160) 201,559
Reconciliation to Consolidated Statements of Income and Comprehensive Income:
General and administrative expense (22,712)
Transaction costs (1,210)
Credit loss benefit 5,581
Depreciation and amortization (80,864)
Gain on sale of real estate 712
Costs associated with loan refinancing or payoff (241)
Interest expense, net (77,506)
Equity in loss from joint ventures (2,582)
Income tax expense (805)
Net income 21,932
Preferred dividend requirements (12,067)
Net income available to common shareholders of EPR Properties $ 9,865

3126

16. Other Commitments and Contingencies

As of June 30, ~~2022~~2023, the Company had 16 development projects with commitments to fund an aggregate of approximately ~~$110.7~~$178.3 million. Development costs are advanced by the Company in periodic draws. If the Company determines that construction is not being completed in accordance with the terms of the development agreement, it can discontinue funding construction draws. The Company has agreed to lease the properties to the operators at pre-determined rates upon completion of construction.

The Company has certain commitments related to its mortgage notes ~~and notes receivable~~ investments that it may be required to fund in the future. The Company is generally obligated to fund these commitments at the request of the borrower or upon the occurrence of events outside of its direct control. As of June 30, ~~2022,~~2023, the Company had 2four mortgage notes with commitments totaling approximately ~~$11.8~~$85.0 million. If commitments are funded in the future, interest will be charged at rates consistent with the existing investments.

In connection with construction of the Company's development projects and related infrastructure, certain public agencies require posting of surety bonds to guarantee that the Company's obligations are satisfied. These bonds expire upon the completion of the improvements or infrastructure. As of June 30, ~~2022,~~2023, the Company had 4two surety bonds outstanding totaling ~~$33.3~~$2.6 million.

17. Subsequent Events

On July 17, 2023, Santikos Theaters, LLC (Santikos) announced its acquisition of VSS-Southern Theatres (Southern). The Company currently has investments at 10 Southern properties located in six states and expects to continue to hold these investments with no structural changes to existing lease terms. If the transaction had been consummated at June 30, 2023, Santikos would have been one of the Company's top 10 customers by revenue during the second quarter of 2023. Due to the sale, Southern paid their deferred rent receivable of $11.6 million in full, which was not previously recognized by the Company. This amount will be recognized as rental revenue in the third quarter of 2023.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q of EPR Properties (the “Company”, “EPR”, “we” or “us”). The forward-looking statements included in this discussion and elsewhere in this Quarterly Report on Form 10-Q involve risks and uncertainties, including anticipated financial performance, anticipated liquidity and capital resources, business prospects, industry trends, shareholder returns, performance of leases by tenants, performance on loans to customers and other matters, which reflect management's best judgment based on factors currently known. See “Cautionary Statement Concerning Forward-Looking Statements” which is incorporated herein by reference. Actual results and experience could differ materially from the anticipated results and other expectations expressed in our forward-looking statements as a result of a number of factors, including but not limited to those discussed in Item 1A - "Risk Factors" in our 2022 Annual Report, as supplemented by Item 1A - "Risk Factors" in this Quarterly Report on Form ~~10-K for the year ended December 31, 2021 filed with the SEC on February 23, 2022.~~10-Q.

Overview

Business

Our principal business objective is to enhance shareholder value by achieving predictable and increasing Funds From Operations As Adjusted ("FFOAA") and dividends per share. Our strategy is to focus on long-term investments in the Experiential sector which benefit from our depth of knowledge and relationships, and which we believe offer sustained performance throughout most economic cycles.

Our investment portfolio includes ownership of and long-term mortgages on Experiential and Education properties. Substantially all of our owned single-tenant properties are leased pursuant to long-term, triple-net leases, under which the tenants typically pay all operating expenses of the property. Tenants at our owned multi-tenant properties

are typically required to pay common area maintenance charges to reimburse us for their pro-rata portion of these costs. We also own certain experiential lodging assets structured using traditional REIT lodging structures.

It has been our strategy to structure leases and financings to ensure a positive spread between our cost of capital and the rentals or interest paid by our tenants. We have primarily acquired or developed new properties that are pre-leased to a single tenant or multi-tenant properties that have a high occupancy rate. We have also entered into certain joint ventures and we have provided mortgage note financing. We intend to continue entering into some or all of these types of arrangements in the foreseeable future.

Historically, our primary challenges ~~have~~had been locating suitable properties, negotiating favorable lease or financing terms (on new or existing properties), and managing our portfolio as we ~~have~~ continued to grow. We believe our management’s knowledge and industry relationships have facilitated opportunities for us to acquire, finance and lease properties. More recently, and as further discussed below, the challenging economic environment and a theatre tenant's bankruptcy have increased our cost of capital, which has negatively impacted our ability to make investments in the near-term. Our business is subject to a number of risks and uncertainties, including those described in Item 1A - “Risk Factors” in our 2022 Annual Report, as supplemented by Item 1A - "Risk Factors" in this Quarterly Report on Form ~~10-K for the year ended December 31, 2021 filed with the SEC on February 23, 2022.~~10-Q.

As of June 30, ~~2022,~~2023, our total assets were ~~approximately $5.8~~approximately $5.7 billion (after accumulated depreciation of approximately ~~$1.2~~$1.4 billion) with properties located in 44 states, Ontario and Quebec, Canada. Our total investments (a non-GAAP financial measure) were approximately ~~$6.6~~$6.7 billion at June 30, ~~2022.~~2023. See "Non-GAAP Financial Measures" for the ~~calculation of total investments and~~ reconciliation of ~~total investments to~~ "Total assets" in the consolidated balance sheet to total investments at June 30, ~~2022~~2023 and December 31, ~~2021.~~2022. We group our investments into two reportable segments, Experiential and Education. As of June 30, ~~2022,~~2023, our Experiential investments comprised ~~$6.0~~$6.2 billion, or ~~91%~~92%, and our Education investments comprised ~~$0.6~~$0.5 billion, or 9%8%, of our total investments.

As of June 30, ~~2022,~~2023, our Experiential segment ~~(excluding property under development and undeveloped land inventory)~~ consisted of the following property types (owned or financed):

•~~175~~171 theatre properties;

•57 eat & play properties (including seven theatres located in entertainment districts);

•2224 attraction properties;

•11 ski properties;

•~~six~~seven experiential lodging properties;

•~~nine~~16 fitness & wellness properties;

•one gaming property; and

•three cultural properties.

As of June 30, ~~2022,~~2023, our owned ~~Experienti~~alExperiential real estate portfolio consisted of approximately ~~20.0~~20.1 million square feet, which was ~~96%~~98% leased and included ~~$8.2~~$80.7 million in property under development and $20.2 million in undeveloped land inventory.

As of June 30, ~~2022,~~2023, our Education segment consisted of the following property types (owned or financed):

•6564 early childhood education center properties; and

•nine private school properties.

As of June 30, ~~2022,~~2023, our owned Education real estate portfolio consisted of approximately 1.4 million square feet, which was ~~100%~~93% leased.

The combined owned portfolio consisted of ~~21.4~~21.5 million square feet and was 97% leased.

Update on Impact of COVID-19 ~~Update~~Pandemic

~~We continue to be subject to risks and uncertainties resulting from the COVID-19 pandemic.~~ The COVID-19 pandemic severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. In response to the COVID-19 pandemic, many jurisdictions within the United States and abroad instituted health and safety measures, including quarantines, mandated business and school closures and travel restrictions. As a result, the COVID-19 pandemic severely impacted experiential real estate properties ~~given that~~because such properties involve congregate social activity and discretionary ~~consumer~~ spending. ~~Although many of these health and safety measures~~Our non-theatre properties have ~~been lifted,~~demonstrated strong recovery from the ~~extent~~impacts of the ~~impact of~~pandemic. However, our theatre customers were more severely impacted by the COVID-19 pandemic onand have seen a slower recovery than our ~~business still remains highly uncertain and difficult~~non-theatre customers due primarily to ~~predict.~~

As of June 30, 2022, we had no properties closed due to COVID-19 restrictions. The continuing impact of the COVID-19 pandemic on our business will depend on several factors, including, but not limited to, the scope,

severity and duration or any resurgence of the pandemic (including COVID-19 variants), the actions taken to contain the outbreak or any resurgence or mitigate their impacts, the distribution and efficacy of vaccines and therapeutics, the public’s confidencechanges in the ~~health~~timing of film releases, production delays and safety measures implemented by our tenants and borrowers, the continuing direct and indirect economic effects of the outbreak and containment measures, and the ability of our tenants and borrowers to recover from the negative economic impacts of the pandemic as it subsides and, in many cases, service elevated levels of debt resulting from the pandemic, all of which are uncertain and cannot be predicted. Dur~~ing 2020 and 2021, the COVID-19 pandemic negatively affected our business, and could~~experimentation with streaming. As a result, we continue ~~to have material adverse effects on our financial condition, results of operations and cash flows.~~

Our consolidated financial statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting periods presented. We considered the impact of, and recovery from, the COVID-19 pandemic on the assumptions and estimates used in determining our financial condition and results of operations for the six months ended June 30, 2022.

~~The following were impacts to our financial statements during the six months ended June 30, 2022 arising out of or relating to the COVID-19 pandemic:~~

•~~We continued~~ to recognize revenue on a cash basis for certain ~~tenants including~~tenants. We began recognizing revenue on a cash basis for American-Multi Cinema, Inc. ("~~AMC"~~AMC") at the end of the first quarter of 2020 and for our Regal Cinemas ~~("Regal"), a subsidiary~~tenants, subsidiaries of Cineworld ~~Group.~~Group, plc, at the end of the third quarter of 2020. With the emergence of Regal Cinemas from bankruptcy (discussed below), we began recognizing revenue on an accrual basis for the Regal Cinemas tenants. Although the box office continues to recover post-pandemic, the recent writers and actors strikes, if prolonged, could delay the production and supply of motion pictures thereby negatively affecting this recovery in future periods. Going forward, we intend to increase the diversity of our experiential property types, thereby significantly reducing our exposure to theatres. We expect that to occur as we strictly limit new investments in theatres, grow other target experiential property types and pursue opportunistic dispositions of theatre property types.

•

As of June 30, ~~2022,~~2023, we ~~have~~had deferred amounts due from tenants of approximately ~~$12.1~~$1.0 million t~~hat are~~ that were booked as receivables. Additionally, as of June 30, 2023, we ~~have~~had amounts due from customers that were not booked as receivables totaling approximately $102.8 million because the full amounts were not deemed probable of collection as a result of the COVID-19 pandemic. ~~The~~The amounts not booked as receivables remain obligations of the customers and will be recognized as revenue when any such amounts are received. See discussion below regarding expected changes to Regal Cinema's deferred amounts not booked as a receivable based on our comprehensive restructuring agreement with them which became effective upon their emergence from bankruptcy. During the three and six months ended June 30, 2023 and 2022, we collected ~~$6.3~~$7.3 million, $13.8 million, $4.7 million and $6.3 million, respectively, in ~~deferr~~eddeferred rent ~~and $0.3 million of deferred interest~~ from cash basis customers and from customers for which the deferred payments were not previously recognized as revenue. In addition, during the three and six months ended June 30, 2023 and 2022, we collected ~~$14.7~~$0.5 million, $1.1 million, $4.9 million and $15.2 million, respectively, of deferred rent a~~nd $0.4 million of deferred interest~~ from accrual basis customers that reduced related accounts and interest receivable. The repayment terms for all of these deferments vary by customer.

~~While deferments~~Regal Update

On September 7, 2022, Cineworld Group, plc, Regal Entertainment Group and the Company's other Regal theatre tenants (collectively, “Regal”) filed for ~~this~~protection under Chapter 11 of the U.S. Bankruptcy Code (the “Code”). Prior to such filing date and ~~future periods delay~~continuing throughout the Chapter 11 bankruptcy cases, Regal leased 57 theatres from us pursuant to two master leases and 28 single property leases (the “Regal Leases”). As a result of the filing, Regal did not pay its rent or ~~mortgage~~monthly deferral payment for September 2022 but subsequently paid portions of this amount pursuant to an order of the bankruptcy court. Regal resumed monthly rent and deferral payments for all Regal Leases commencing in October 2022 and has continued making these ~~deferments generally do not release customers~~payments through July 2023.

On June 27, 2023, we entered into a comprehensive restructuring agreement with Regal, evidenced by an Omnibus Lease Amendment Agreement (“Omnibus Agreement”), anchored by a new master lease (“Master Lease”) for 41 of the 57 properties previously leased to Regal (“Master Lease Properties”). On June 28, 2023, Regal’s Plan of Reorganization (the “Plan”) was confirmed by the bankruptcy court. The Plan became effective on July 31, 2023 (the "Effective Date") and Regal emerged from the ~~obligation~~Chapter 11 bankruptcy cases.

Pursuant to the Omnibus Agreement, the Master Lease and certain related agreements became effective upon the Effective Date. Material terms of the Omnibus Agreement, the Master Lease and related agreements include:

•Beginning on August 1, 2023, the total annual fixed rent for the Master Lease Properties (“Annual Base Rent”) will be $65.0 million, escalating by 10% every five years. The Master Lease is a triple-net lease, and therefore, Annual Base Rent does not include taxes, insurance, utilities, common area maintenance and ground lease rent, for which Regal will be responsible for paying separately. Due to Regal's expected significantly improved credit profile, continuing box office recovery and Regal's payment history, among

other factors, we will recognize revenue related to the Master Lease on an accrual basis beginning on the Effective Date.

•Pursuant to the Master Lease, Regal will also pay annual percentage rent (“Annual Percentage Rent”) of 15% of annual gross sales exceeding $220.0 million and up to $270.0 million, and 12.5% of annual gross sales exceeding $270.0 million. These threshold amounts will increase every five years commensurate with escalations in Annual Base Rent.

•The Master Lease Properties have been divided into three tranches within the ~~deferred amounts~~Master Lease, with the initial term of each tranche expiring annually on the 11th, 13th and 15th anniversaries from the Effective Date. Each tranche has three five-year renewal options. The average lease term for the Master Lease Properties as of the Effective Date will be increased by four years to 13 years.

•We have agreed to reimburse Regal for 50% of certain revenue-enhancing premises renovations to the Master Lease Properties, up to a maximum reimbursement of $32.5 million, provided that (a) Regal is not in default, (b) the maximum amount we will be required to reimburse in any calendar year will not exceed $10.0 million, and (c) reimbursable expenses must receive our prior approval and relate to a project mobilized and physically commenced during the first five years of the Master Lease term.

•Regal surrendered to the Company the remaining 16 properties not included in the ~~future.~~Master Lease (“Surrendered Properties”), together with all furniture, fixtures and equipment located at the Surrendered Properties. We have entered into management agreements whereby Cinemark will manage four of the Surrendered Properties and Phoenix Theatres will manage one of the Surrendered Properties. We plan to sell the remaining 11 Surrendered Properties and deploy the proceeds to acquire non-theatre experiential properties. In conjunction with taking back the Surrendered Properties, we recorded a non-cash impairment charge during the three months ended June 30, 2023 of $42.4 million based on recently appraised values.

•As of July 31, 2023, Regal owed approximately $76.3 million of undiscounted deferred rent (the “Deferred Rent Balance”), of which the Deferred ~~rent amounts are reflected~~Rent Balance related to the Master Lease Properties was approximately $56.8 million (“Master Lease Deferred Rent Balance”) and the Deferred Rent Balance related to the Surrendered Properties was approximately $19.5 million (“Surrendered Property Deferred Rent Balance”). Of the Master Lease Deferred Rent Balance, approximately $50.1 million will be held in abeyance and will be forgiven in its entirety if Regal has no uncured events of default prior to the 15th anniversary of the Effective Date, and the remaining portion of the Master Lease Deferred Rent Balance will be waived and forgiven. If at any time prior to that date Regal has an uncured event of default, the Master Lease Deferred Rent Balance held in abeyance will become due. The Surrendered Property Deferred Rent Balance will be included in our ~~financial statements~~claims for rejection damages in the Chapter 11 bankruptcy cases, which will be treated as general unsecured claims for which no material recovery is expected. The deferred rent was not previously recognized as accounts receivable ~~if collection is determined to be probable or will be recognized when received as variable lease~~because payments if collection is determined to not be probable, while deferred mortgage payments are reflected as mortgage notes and related accrued interest receivable, less any allowance for credit loss. Certain agreements with tenants where remaining lease terms are extended, or other changes are made that do not qualify for the treatment in the Financial Accounting Standards Board ("FASB") Staff Q&A on Topic 842 and Topic 840: ~~Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic, are treated as lease modifications. In these circumstances upon an executed lease modification, if the tenant is not being~~from Regal were recognized on a ~~cash basis,~~cash-basis prior to the ~~contractual~~Effective Date of the Master Lease. The deferred rent ~~reflected~~related to the Master Lease Properties will not be recognized on the balance sheet because it is a contingent receivable only due in ~~accounts receivable~~the event of a default and payment is not deemed probable.

•Regal has provided us with a first lien security interest in all furniture, fixtures and equipment located at the ~~straight-line~~Master Lease Properties. A parent entity of Regal has provided a guaranty of Regal’s obligations under the Master Lease.

•On or about the Effective Date, Regal paid us approximately $3.0 million representing the unpaid portion of post-petition September stub rent ~~receivable~~for all properties, and approximately $1.3 million representing the unpaid pre-petition September rent for the Master Lease Properties.

Challenging Economic Environment

REITS are generally experiencing heightened risks and uncertainties resulting from current challenging economic conditions, including significant volatility and negative pressure in financial and capital markets, increasing cost of

capital, high inflation and other risks and uncertainties associated with a recessionary environment. Our business has been more acutely affected by these risks and uncertainties because of Regal's bankruptcy, as discussed above. Although we intend to continue making future investments, we expect that our levels of investment spending will be amortized over the remaining term of the lease against rental revenue. In limited cases, tenants may be entitled to the abatement of rent during governmentally imposed prohibitions on business operations which is recognizedreduced in the ~~period~~near term due to ~~which it relates, or~~elevated costs of capital, and that these investments will be funded primarily from cash on hand, cash from operations, disposition proceeds and borrowing availability under our unsecured revolving credit facility, subject to maintaining our leverage levels consistent with past practice. As a result, we ~~may provide rent concessions~~intend to ~~tenants. In cases where we provide concessions~~continue to ~~tenants to which they are not otherwise entitled, those amounts are recognized~~be more selective in ~~the period in which the concession is granted unless the changes are accounted for~~making future investments and acquisitions until such time as ~~lease modifications.~~economic conditions improve and our cost of capital improves.

Operating Results

Our total revenue, net income available to common shareholders per diluted share and Funds From Operations As Adjusted ("FFOAA") per diluted share (a non-GAAP financial measure) are detailed below for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 (in millions, except per share information):


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,						Six Months Ended June 30,
		2022		2021		Change		2022		2021		Change			2023		2022		Change		2023		2022		Change
Total revenue	Total revenue	$	160.4	$	125.4	28	%	$	317.9	$	237.1	34	%	Total revenue	$	172.9	$	160.4	8	%	$	344.3	$	317.9	8	%
Net income available to common shareholders per diluted share	Net income available to common shareholders per diluted share	$	0.46	$	0.17	171	%	$	0.95	$	0.13	631	%	Net income available to common shareholders per diluted share	$	0.10	$	0.46	(78)	%	$	0.78	$	0.95	(18)	%
FFOAA per diluted share	FFOAA per diluted share	$	1.17	$	0.68	72	%	$	2.27	$	1.15	97	%	FFOAA per diluted share	$	1.28	$	1.17	9	%	$	2.53	$	2.27	11	%

The major factors impacting our results for the three and six months ended June 30, ~~2022,~~2023, as compared to the three and six months ended June 30, ~~2021~~2022 were as follows:

•The increase in rental revenue due to an increase in contractual rental payments from cash basis ~~tenants and from tenants which were previously receiving abatements;~~tenants;

•The effect of property acquisitions as well as dispositions that occurred in ~~2022~~2023 and ~~2021;~~

•The change in other income and other expenses primarily due to the government-required closure of the Kartrite Resort and Indoor Waterpark in Sullivan County, New York due to the COVID-19 pandemic in mid-March of 2020 and the re-opening of this property in July of 2021;2022;

•The decrease in interest expense due to ~~the repayment of our unsecured term loan facility~~an increase in capitalized interest and ~~revolving credit facility as well as exiting the covenant relief period in July of 2021 which caused higher~~ interest ~~rates~~income on ~~certain debt;~~

•~~Improved earnings from investments in joint ventures;~~short-term investments; and

•The increase in impairment charges, general and administrative expense, loss on sales of real estate and loss from joint ventures offset by a decrease in transaction costs and credit loss expense.

For further detail on items impacting our operating results, see ~~the~~ section below titled "Results of Operations". FFOAA is a non-GAAP financial measure. For the definitions and further details on the calculations of FFOAA and certain other non-GAAP financial measures, see the section below titled "Non-GAAP Financial Measures."

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related notes. In preparing these financial statements, management has made its best estimates and assumptions that affect the reported assets and liabilities and the reported amounts of revenues and expenses during the reporting period. The most significant assumptions and estimates relate to the valuation of real estate, accounting for real estate acquisitions, assessing the collectibility of receivables and the credit loss related to mortgage and other notes receivable. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates. A summary of critical accounting policies and estimates is included in our 2022 Annual ~~Report on Form 10-K for the year ended December 31, 2021.~~Report. For the six months ended June 30, ~~2022,~~2023, there were no changes to critical accounting policies.

Recent Developments

Investment Spending

Our investment spending during the six months ended June 30, ~~2022~~2023 and ~~2021~~2022 totaled$98.7 million and $239.2 ~~million and $68.7~~ million, respectively, and is detailed below (in thousands):


Six Months Ended June 30, 2023
Operating Segment	Total Investment Spending		New Development		Re-development		Asset Acquisition		Mortgage Notes or Notes Receivable		Investment in Joint Ventures
Experiential:

Eat & Play	$	19,134	$	18,607	$	527	$	—	$	—	$	—
Attractions	6,570		—		3,552		—		3,018		—
Ski	3,022		—		—		—		3,022		—
Experiential Lodging	8,936		—		—		—		—		8,936
Fitness & Wellness	58,060		11,055		210		43,770		3,025		—

Cultural	2,962		—		2,962		—		—		—
Total Experiential	98,684		29,662		7,251		43,770		9,065		8,936

Education:


Total Education	—		—		—		—		—		—

Total Investment Spending	$	98,684	$	29,662	$	7,251	$	43,770	$	9,065	$	8,936


Six Months Ended June 30, 2022
Operating Segment	Total Investment Spending		New Development		Re-development		Asset Acquisition		Mortgage Notes or Notes Receivable		Investment in Joint Ventures
Experiential:
Theatres	$	218	$	5	$	213	$	—	$	—	$	—
Eat & Play	8,626		8,494		132		—		—		—
Attractions	144,311		—		1,546		142,765		—		—

Experiential Lodging	65,880		3,359		—		—		11,305		51,216
Fitness & Wellness	20,181		—		323		19,858		—		—

Cultural	19		—		19		—		—		—
Total Experiential	239,235		11,858		2,233		162,623		11,305		51,216

Education:



Total Education	—		—		—		—		—		—

Total Investment Spending	$	239,235	$	11,858	$	2,233	$	162,623	$	11,305	$	51,216

Six Months Ended June 30, 2021
Operating Segment Total Investment Spending New Development Re-development Asset Acquisition Mortgage Notes or Notes Receivable Investment in Joint Ventures
Experiential:
Theatres $ 3,049 $ 2,940 $ 109 $ — $ — $ —
Eat & Play 34,918 7,855 311 26,752 — —
Attractions 29 — 29 — — —
Ski 2,793 — — — 2,793 —
Experiential Lodging 21,684 13,922 5,822 — — 1,940
Fitness & Wellness 1,795 — — — 1,795 —
Cultural 4,389 — 10 — 4,379 —
Total Experiential 68,657 24,717 6,281 26,752 8,967 1,940
Education:
Total Education — — — — — —
Total Investment Spending $ 68,657 $ 24,717 $ 6,281 $ 26,752 $ 8,967 $ 1,940

The above amounts include ~~$0.3~~$1.6 million and ~~$1.1~~$0.3 million in capitalized interest for the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and $0.1 ~~million and $0.2~~ million in capitalized other general and administrative direct project costs for both the six months ended June 30, ~~2022~~2023 and ~~2021, respectively.~~2022. Excluded from the table above is approximately ~~$1.5~~$5.5 million and ~~$2.2~~$1.5 million of maintenance capital expenditures and other spending for the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

~~Impairment Charges~~Dispositions

During the six months ended June 30, ~~2022,~~2023, we ~~received an offer to purchase~~completed the sales of one vacant eat & play property, one early childhood education center and a ~~recently vacated property. As a result, we reassessed the expected holding period~~land parcel for net proceeds of ~~the property and determined that the estimated cash flows were not sufficient to recover the carrying value of the property. Accordingly,~~$8.4 million. In connection with these sales, we recognized ~~an impairment charge~~a net loss on sale of ~~$4.4 million on~~$1.1 million. Additionally, during the ~~real estate investment of this~~six months ended June 30, 2023, we, as lessee, terminated one ground lease that held one theatre property.

Impairment Charges

During the six months ended June 30, ~~2022,~~2023, we reassessed the holding period of the Regal Surrendered Properties not included in the Master Lease and one early childhood education center property subject to a lease termination triggered by a casualty event. We determined that the estimated cash flows for eight Regal Surrendered Properties and the early childhood education center property were not sufficient to recover the carrying values and estimated the fair value of the real estate investments of these properties using independent appraisals. Accordingly, we recognized ~~other-than-temporary~~ impairment charges of ~~$0.6~~totaling $43.8 million ~~on our equity investments in two theatre projects located in China. See Note9 to the consolidated financial statements in this Quarterly Report on Form 10-Q~~ for ~~additional information related to these impairments.~~

~~Mortgage Note and Notes Receivable Updates~~

~~During~~ the six months ended June 30, ~~2022, we recorded an allowance for credit loss~~2023.

Theatre Tenant Update

On July 17, 2023, Santikos Theaters, LLC ("Santikos") announced its acquisition of ~~$6.8 million related~~VSS-Southern Theatres ("Southern"). We currently have investments at 10 Southern properties located in six states. We expect to continue to hold these investments with no structural changes to existing lease terms. If the transaction had been consummated at June 30, 2023, Santikos would have been one of our ~~mortgage notes~~top 10 customers by revenue during the second quarter of 2023. Due to the sale, Southern paid their deferred rent receivable ~~secured by an eat & play investment and $3.1~~of $11.6 million ~~related to two notes receivable. Although foreclosure~~in full, which was not ~~deemed probable and~~previously recognized. This amount will be recognized as rental revenue in the ~~principal balance~~third quarter of the mortgage note and notes receivable were not past due at June 30, 2022, based on delays in interest payments and each borrower's declining financial condition, we determined the borrowers are experiencing financial difficulty. The repayment is expected to be provided substantially through the sale or operation of the collateral, therefore, we elected to apply the collateral dependent practical expedient. Expected credit losses are based on the fair value of the underlying collateral at the reporting date. During the six months ended June 30, 2022, we wrote-off $1.5 million in accrued interest receivables and fees to mortgage and ~~other financing income related~~ ~~to the mortgage note and notes receivables. See Note~~ ~~6 to the consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.~~2023.

Results of Operations

Three and six months ended June 30, ~~2022~~2023 compared to the three and six months ended June 30, ~~2021~~2022

Analysis of Revenue

The following table summarizes our total revenue (dollars in thousands):


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,						Six Months Ended June 30,
		2022		2021		Change		2022		2021		Change			2023		2022		Change		2023		2022		Change
Minimum rent (1)	Minimum rent (1)	$	134,917	$	107,100	$	27,817	$	265,192	$	201,290	$	63,902	Minimum rent (1)	$	143,352	$	134,917	$	8,435	$	285,204	$	265,192	$	20,012
Percentage rent (2)	Percentage rent (2)	519		2,016		(1,497)		3,962		4,046		(84)		Percentage rent (2)	2,125		519		1,606		3,936		3,962		(26)
Straight-line rent	Straight-line rent	1,733		1,420		313		2,328		2,709		(381)		Straight-line rent	1,149		1,733		(584)		3,254		2,328		926
Tenant reimbursements	Tenant reimbursements	5,348		5,000		348		10,349		9,822		527		Tenant reimbursements	4,815		5,348		(533)		10,250		10,349		(99)
Other rental revenue	Other rental revenue	358		347		11		647		630		17		Other rental revenue	429		358		71		817		647		170
Total Rental Revenue	Total Rental Revenue	$	142,875	$	115,883	$	26,992	$	282,478	$	218,497	$	63,981	Total Rental Revenue	$	151,870	$	142,875	$	8,995	$	303,461	$	282,478	$	20,983

Other income ~~(3)~~	Other income ~~(3)~~	9,961		1,033		8,928		19,266		1,711		17,555		Other income ~~(3)~~	10,124		9,961		163		19,457		19,266		191
Mortgage and other financing income(3)	Mortgage and other financing income(3)	7,610		8,446		(836)		16,174		16,919		(745)		Mortgage and other financing income(3)	10,913		7,610		3,303		21,385		16,174		5,211
Total revenue	Total revenue	$	160,446	$	125,362	$	35,084	$	317,918	$	237,127	$	80,791	Total revenue	$	172,907	$	160,446	$	12,461	$	344,303	$	317,918	$	26,385

(1) For the three months ended June 30, ~~2022~~2023 compared to the three months ended June 30, ~~2021,~~2022, the increase in minimum rent resulted primarily from an increase of ~~$27.0~~$4.2 million related to rental revenue on existing properties, including improved collections of rent being recognized on a cash basis. In addition, there was an increase in minimum rent of ~~$2.1~~$4.2 million related to property acquisitions and developments completed in ~~2022~~2023 and ~~2021. This was partially offset by a decrease in rental revenue of $1.3 million from property dispositions.~~2022.

For the six months ended June 30, ~~2022~~2023 compared to the six months ended June 30, ~~2021,~~2022, the increase in minimum rent resulted primarily from an increase of ~~$62.1~~$11.9 million related to rental revenue on existing properties, including improved collections of rent being recognized on a cash basis. In addition, there was an increase in minimum rent of ~~$4.7~~$8.5 million related to property acquisitions and developments completed in ~~2022~~2023 and ~~2021.~~2022. This was partially offset by a decrease in rental revenue of ~~$2.9~~$0.4 million from property dispositions.

During the three and six months ended June 30, ~~2022, we renewed one~~2023, there were no significant lease ~~agreement~~renewals on ~~approximately 79 thousand square feet. We experienced a decrease of 17.6% in rental rates and paid no leasing commissions with respect to this lease renewal.~~existing properties.

(2) The ~~decrease~~increase in percentage rent ~~(amounts above base rent)~~ for the three months ended June 30, ~~2022~~2023 compared to the three months ended June 30, ~~2021~~2022 was due primarily to ~~lower~~higher percentage rent recognized from one ~~early childhood education center tenant due to the restructured lease having higher base rents~~ski property in ~~2022. This decrease was partially offset by higher percentage rent recognized for one ski property.~~2023.

3733

(3) The increase in mortgage and other financing income ~~for~~during the three and six months ended June 30, ~~2022~~2023 compared to the three and six months ended June 30, ~~2021~~2022 related ~~primarily~~ to income from additional investments on an ~~increase~~existing mortgage note receivable, as well as interest on new mortgage notes funded in ~~operating income as a result of the re-opening of the Kartrite Resort, which was previously closed due to the COVID-19 pandemic. Additionally,~~2023 and 2022. In addition, during the three and six months ended June 30, 2022, ~~the increase in other~~$1.5 million of accrued interest and fees receivable was written off against interest income ~~was the result of increased operating income from~~related to one mortgage note receivable and two ~~theatre properties.~~notes receivable.

Analysis of Expenses and Other Line Items

The following table summarizes our expenses and other line items (dollars in thousands):


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,						Six Months Ended June 30,
		2022		2021		Change		2022		2021		Change			2023		2022		Change		2023		2022		Change
Property operating expense	Property operating expense	$	13,592	$	14,678	$	(1,086)	$	27,531	$	29,991	$	(2,460)	Property operating expense	$	13,972	$	13,592	$	380	$	28,127	$	27,531	$	596
Other expense ~~(1)~~	Other expense ~~(1)~~	8,872		3,025		5,847		16,969		5,577		11,392		Other expense ~~(1)~~	9,161		8,872		289		18,111		16,969		1,142
General and administrative expense ~~(2)~~(1)	General and administrative expense ~~(2)~~(1)	12,691		11,376		1,315		25,915		22,712		3,203		General and administrative expense ~~(2)~~(1)	15,248		12,691		2,557		29,213		25,915		3,298

Severance expense														Severance expense	547		—		547		547		—		547

Transaction costs ~~(3)~~(2)	Transaction costs ~~(3)~~(2)	1,145		662		483		3,392		1,210		2,182		Transaction costs ~~(3)~~(2)	36		1,145		(1,109)		306		3,392		(3,086)
Credit loss expense (benefit) (4)		9,512		(2,819)		12,331		9,206		(5,581)		14,787
Credit loss (benefit) expense (3)														Credit loss (benefit) expense (3)	(275)		9,512		(9,787)		312		9,206		(8,894)
Impairment charges ~~(5)~~(4)	Impairment charges ~~(5)~~(4)	—		—		—		4,351		—		4,351		Impairment charges ~~(5)~~(4)	43,785		—		43,785		43,785		4,351		39,434
Depreciation and amortization(5)	Depreciation and amortization(5)	40,766		40,538		228		80,810		80,864		(54)		Depreciation and amortization(5)	43,705		40,766		2,939		84,909		80,810		4,099
Gain on sale of real estate		—		511		(511)		—		712		(712)
Costs associated with loan refinancing or payoff		—		—		—		—		241		(241)
Loss on sale of real estate														Loss on sale of real estate	(575)		—		(575)		(1,135)		—		(1,135)

Interest expense, net (6)	Interest expense, net (6)	33,289		38,312		(5,023)		66,549		77,506		(10,957)		Interest expense, net (6)	31,591		33,289		(1,698)		63,313		66,549		(3,236)
Equity in (income) loss from joint ventures (7)		(1,421)		1,151		(2,572)		(1,315)		2,582		(3,897)
Equity in loss (income) from joint ventures (7)														Equity in loss (income) from joint ventures (7)	615		(1,421)		2,036		2,600		(1,315)		3,915
Impairment charges on joint ventures	Impairment charges on joint ventures	647		—		647		647		—		647		Impairment charges on joint ventures	—		647		(647)		—		647		(647)
Income tax expense	Income tax expense	444		398		46		762		805		(43)		Income tax expense	347		444		(97)		688		762		(74)

Preferred dividend requirements	Preferred dividend requirements	6,033		6,033		—		12,066		12,067		(1)		Preferred dividend requirements	6,040		6,033		7		12,073		12,066		7

(1) The increase in ~~other~~general and administrative expense for the three and six months ended June 30, ~~2022~~2023 compared to the three and six months ended June 30, 2021 related primarily to an increase in operating expenses as a result of the re-opening of the Kartrite Resort, which was previously closed due to the COVID-19 pandemic as well as increases in operating expenses from two theatre properties.

~~(2) The increase in general and administrative expense for~~ the three and six months ended June 30, 2022 related primarily to an increase in payroll and benefit costs, as well as an increase in ~~travel expenses and~~ professional ~~fees.~~fees, including those related to the comprehensive restructuring agreement with Regal.

~~(3)~~

(2) The ~~increase~~decrease in transaction costs ~~for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was due to an increase in costs related to equity method investments as well as to terminated transactions.~~

~~(4) The change in credit loss expense (benefit) for~~during the three and six months ended June 30, ~~2022~~2023 compared to the three and six months ended June 30, ~~2021~~2022 was due to a decrease in costs related to equity method investments and fewer terminated transactions.

(3) The change in credit loss (benefit) expense for the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022 was due primarily to a credit loss expense of $6.8 million related to one mortgage note receivable and $3.1 million related to two notes receivable recorded during the three months ended June 30, 2022. ~~In addition, the change was impacted by the results of the credit loss model related to the expected timing of the economic recovery from the impacts of the COVID-19 pandemic.~~

~~(5)~~(4) Impairment charges recognized during the three and six months ended June 30, 2023 primarily related to eight Regal Surrendered Properties not included in the Master Lease that we determined did not have sufficient cash flows to recover the carrying values. Impairment charges recognized during the six months ended June 30, 2022 related to ~~one recently vacated~~a vacant property that we ~~intend to sell and we~~ determined ~~that the~~did not have sufficient cash flows ~~were not sufficient~~ to recover the carrying value. This property was sold during the year ended December 31, 2022.

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(5) The increase in depreciation and amortization expense for the three and six months ended June 30, 2023 compared to the three and three and six months ended June 30, 2022 resulted primarily from acquisitions and developments completed in 2023 and 2022. This was partially offset by property dispositions that occurred during 2023 and 2022.

(6) The decrease in interest expense, net, for the three and six months ended June 30, ~~2022~~2023 compared to the three and six months ended June 30, ~~2021,~~2022, resulted primarily from ~~a decrease~~an increase in ~~average borrowings~~interest income recognized on short term investments and ~~a decrease~~an increase in ~~the weighted average interest rate on outstanding debt.~~capitalized interest.

(7) The increase in equity in ~~(income)~~ loss from joint ventures for the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022 related primarily to ~~more income recognized~~government incentives received at ~~two~~our experiential lodging properties located in St. Petersburg, ~~Florida. This was partially offset by losses recognized~~Florida during the three and six months ended June 30, 2022, as well as higher interest expense at ~~our experiential lodging property located in Warrens, Wisconsin which was acquired in August of 2021.~~these joint ventures for the three and six months ended June 30, 2023.

Liquidity and Capital Resources

Cash and cash ~~equivalent~~sequivalents were ~~$168.3~~$99.7 million at June 30, ~~2022.~~2023. As of June 30, 2023, we had no uninsured deposits. In addition, we had restricted cash of ~~$1.3~~$2.6 million at June 30, ~~2022,~~2023, which related primarily to escrow deposits required for property management and debt agreements or held for potential acquisitions and redevelopments.

Mortgage Debt, Senior Notes and Unsecured Revolving Credit Facility

At June 30, ~~2022,~~2023, we had total debt outstanding of $2.8 billion, of which 99% was un~~secured.~~unsecured.

At June 30, ~~2022,~~2023, we had outstanding $2.5 billion in aggregate principal amount of unsecured senior notes (excluding the private placement notes discussed below) ranging in interest rates from 3.60% to 4.95%. The notes contain various covenants, including: (i) a limitation on incurrence of any debt that would cause the ratio of our debt to adjusted total assets to exceed 60%; (ii) a limitation on incurrence of any secured debt that would cause the ratio of secured debt to adjusted total assets to exceed 40%; (iii) a limitation on incurrence of any debt that would cause our debt service coverage ratio to be less than 1.5 times; and (iv) the maintenance at all times of our total unencumbered assets such that they are not less than 150% of our outstanding unsecured debt. Interest payments on our unsecured senior notes are due semiannually.

At June 30, ~~2022,~~2023, we had no outstanding balance under our $1.0 billion unsecured revolving credit facility. Our unsecured revolving credit facility is governed by the terms of a Third Amended, Restated and Consolidated Credit Agreement, dated as of October 6, 2021 (the "Third Consolidated Credit Agreement"). The facility will mature on October 6, 2025. We have two options to extend the maturity date of the facility by an additional six months each (for a total of 12 months), subject to paying additional fees and the absence of any default. The facility provides for an initial maximum principal amount of borrowing availability of $1.0 billion with an "accordion" feature under which we may increase the total maximum principal amount available by $1.0 billion, to a total of $2.0 billion, subject to lender consent. The unsecured revolving credit facility bears interest at a floating rate of ~~LIBOR~~SOFR plus ~~1.20%~~1.30% (based on our unsecured debt ratings and with a ~~LIBOR~~SOFR floor of zero), which was ~~2.99%~~6.40% at June 30, ~~2022.~~2023. Additionally, the facility fee on the revolving credit facility is 0.25%.

At June 30, ~~2022,~~2023, we had outstanding $316.2 million of senior unsecured notes that were issued in a private placement transaction. The private placement notes were issued in two tranches with $148.0 million due August 22, 2024, and $192.0 million due August 22, 2026. At June 30, ~~2022,~~2023, the interest rates for the private placement notes were 4.35% and 4.56% for the Series A notes due 2024 and the Series B notes due 2026, respectively.

On January 14, 2022, we amended the note purchase agreement governing our private placement notes (the "Note Purchase Agreement") to, among other things: (i) amend certain financial and other covenants and provisions in the Note Purchase Agreement to conform generally to the changes beneficial to us in the corresponding covenants and provisions contained in the Third Consolidated Credit Agreement, and (ii) amend certain financial and other covenants and provisions in the existing Note Purchase Agreement to reflect the prior termination of the Covenant Relief Period (as defined in the existing Note Purchase Agreement) and removal of related provisions.

Our unsecured revolving credit facility and the private placement notes contain financial covenants or restrictions that limit our levels of consolidated debt, secured debt, investments outside certain categories, stock repurchases and dividend distributions and require us to maintain a minimum consolidated tangible net worth and meet certain coverage levels for fixed charges and debt service. Additionally, these debt instruments contain cross-default provisions if we default under other indebtedness exceeding certain amounts. Those cross-default thresholds vary

3935

from $50.0 million to $75.0 million, depending upon the debt instrument. We were in compliance with all financial and other covenants under our debt instruments at June 30, ~~2022.~~2023.

Our principal investing activities are acquiring, developing and financing Experiential properties. These investing activities have generally been financed with senior unsecured notes, as well as the proceeds from equity offerings. Our unsecured revolving credit facility isand cash from operations are also used to finance the acquisition or development of properties, and to provide mortgage financing. We have and expect to continue to issue debt securities in public or private offerings. We have and may in the future assume mortgage debt in connection with property acquisitions or incur new mortgage debt on existing properties. We may also issue equity securities in connection with acquisitions. Continued growth of our real estate investments and mortgage financing portfolios will depend in part on our continued ability to access funds through additional borrowings and securities offerings and, to a lesser extent, our ability to assume debt in connection with property acquisitions. We may also fund investments with the proceeds from asset dispositions. As discussed above, we intend to fund our investments in the near term primarily from cash from operations and borrowing availability under our unsecured revolving credit facility, subject to maintaining our leverage levels consistent with past practice, due to our current elevated cost of capital.

Liquidity Requirements

Short-term liquidity requirements consist primarily of normal recurring corporate operating expenses, debt service requirements and distributions to shareholders. We have historically met these requirements primarily through cash provided by operating ~~activities.~~activities. The table below summarizes our cash flows (dollars in thousands):


		Six Months Ended June 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Net cash provided by operating activities	Net cash provided by operating activities	$	217,050	$	140,800	Net cash provided by operating activities	$	220,888	$	217,050
Net cash used by investing activities	Net cash used by investing activities	(203,720)		(26,766)		Net cash used by investing activities	(89,471)		(203,720)
Net cash used by financing activities	Net cash used by financing activities	(134,191)		(628,630)		Net cash used by financing activities	(139,687)		(134,191)

As previously disclosed, we have agreed to rent and mortgage payment deferral arrangements with most of our customers as a result of the COVID-19 pandemic. Under these deferral arrangements, our customers are required to resume rent and mortgage payments at negotiated times, and begin repaying deferred amount under negotiated schedules. In addition, the continuing impact of the COVID-19 pandemic may result in further extensions or adjustments for our customers, which we cannot predict at this time.

Commitments

As of June 30, ~~2022,~~2023, we had 16 development projects with commitments to fund an aggregate of approximately ~~$110.7~~$178.3 million, of which approximately ~~$32.9~~$70.7 million is expected to be funded in ~~2022.~~2023. Development costs are advanced by us in periodic draws. If we determine that construction is not being completed in accordance with the terms of the development agreement, we can discontinue funding construction draws. We have agreed to lease the properties to the operators at pre-determined rates upon completion of construction.

We have certain commitments related to our mortgage notes ~~and notes receivable~~ investments that we may be required to fund in the future. We are generally obligated to fund these commitments at the request of the borrower or upon the occurrence of events outside of our direct control. As of June 30, ~~2022, w~~2023e, we had ~~two~~four mortgage notes with commitments totaling approximately ~~$11.8~~$85.0 million, ~~all~~ of which $34.3 million is expected to be funded in ~~2022.~~2023. If commitments are funded in the future, interest will be charged at rates consistent with the existing investments.

In connection with construction of our development projects and related infrastructure, certain public agencies require posting of surety bonds to guarantee that our obligations are satisfied. These bonds expire upon the completion of the improvements or infrastructure. As of June 30, ~~2022,~~2023, we had ~~four~~two surety bonds outstanding totaling ~~$33.3~~$2.6 million.

Liquidity Analysis

We currently anticipate that our cash on hand, cash from operations, funds available under our unsecured revolving credit facility and proceeds from asset dispositions will provide adequate liquidity to meet our financial commitments, including the amounts needed to fund our operations, make recurring debt service payments, and allow distributions to our

shareholders and avoid corporate level federal income or excise tax in accordance with REIT Internal Revenue Code requirements.

Long-term liquidity requirements consist primarily of debt maturities. We have no scheduled debt payments due ~~until~~in 2023 and $136.6 million due in 2024. We currently believe that we will be able to repay, extend, refinance or otherwise settle our debt maturities as the debt comes due and that we will be able to fund our remaining commitments, as necessary. However, there can be no assurance that additional financing or capital will be available, or that terms will be acceptable or advantageous to us, particularly in light of the ~~continuing~~impact of the challenging economic ~~uncertainty caused by the COVID-19 pandemic.~~environment and our elevated cost of capital.

Our primary use of cash after paying operating expenses, debt service, distributions to shareholders and funding existing commitments is in growing our investment portfolio through the acquisition, development and financing of additional properties. We expect to finance these investments with borrowings under our unsecured revolving credit facility as well as debt and equity financing alternatives or proceeds from asset dispositions. ~~The availability and terms of any such financing or sales will depend upon market and other conditions.~~ If we borrow the maximum amount available under our unsecured revolving credit facility, there can be no assurance that we will be able to obtain additional or substitute investment financing. We may also assume mortgage debt in connection with property acquisitions. The availability and terms of any such financing or sales will depend upon market and other conditions.

The challenging economic environment and Regal's prior bankruptcy have increased our cost of capital, which has negatively impacted our ability to make investments in the near-term. As a result, we intend to continue to be more selective in making investments and acquisitions, utilizing excess cash flow and borrowings under our line of credit until such time as economic conditions improve and our cost of capital returns to acceptable levels.

Capital Structure

We believe that our shareholders are best served by a conservative capital structure. Therefore, we seek to maintain a conservative debt level on our balance sheet as measured primarily by our net debt to adjusted EBITDAre ratio (see "Non-GAAP Financial Measures" for definitions). We also seek to maintain conservative interest, fixed charge, debt service coverage and net debt to gross asset ~~ratios. Our~~ratios. As of June 30, 2023, our debt to total assets ratio was 49%, our net debt to adjusted EBITDAre ratio wa~~s 5.1x~~was 5.0x and ourour net debt to gross assets ratio was 39% ~~as of June 30, 2022~~ (see "Non-GAAP Financial Measures" for calculation).

Non-GAAP Financial Measures

Funds From Operations (FFO), Funds From Operations As Adjusted (FFOAA) and Adjusted Funds From Operations (AFFO)

The National Association of Real Estate Investment Trusts (“NAREIT”) developed FFO as a relative non-GAAP financial measure of performance of an equity REIT in order to recognize that income-producing real estate historically has not depreciated on the basis determined under GAAP. Pursuant to the definition of FFO by the Board of Governors of NAREIT, we calculate FFO as net income available to common shareholders, computed in accordance with GAAP, excluding gains and losses from disposition of real estate and impairment losses on real estate, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships, joint ventures and other affiliates. Adjustments for unconsolidated partnerships, joint ventures and other affiliates are calculated to reflect FFO on the same basis. We have calculated FFO for all periods presented in accordance with this definition.

In addition to FFO, we present FFOAA and AFFO. FFOAA is presented by adding to FFO severance expense, transaction costs, credit loss (benefit) expense, costs associated with loan refinancing or payoff, ~~transaction costs, severance expense,~~ preferred share redemption costs and impairment of operating lease right-of-use assets and ~~credit loss (benefit) expense and~~ subtracting sale participation income, gain on insurance recovery and deferred income tax (benefit) expense. AFFO is presented by adding to FFOAA non-real estate depreciation and amortization, deferred financing fees amortization, share-based compensation expense to management and Trustees and amortization of above and below market leases, net and tenant allowances; and subtracting maintenance capital expenditures (including second generation tenant improvements and leasing commissions), straight-lined rental revenue (removing the impact of straight-line ground sublease expense), and the non-cash portion of mortgage and other financing income.

FFO, FFOAA and AFFO are widely used measures of the operating performance of real estate companies and are provided here as supplemental measures to GAAP net income available to common shareholders and earnings per share, and management provides FFO, FFOAA and AFFO herein because it believes this information is useful to

investors in this regard. FFO, FFOAA and AFFO are non-GAAP financial measures. FFO, FFOAA and AFFO do not represent cash flows from operations as defined by GAAP and are not indicative that cash flows are adequate to fund all cash needs and are not to be considered alternatives to net income or any other GAAP measure as a measurement of the results of our operations or our cash flows or liquidity as defined by GAAP. It should also be noted that not all REITs calculate FFO, FFOAA and AFFO the same way so comparisons with other REITs may not be meaningful.

The following table summarizes our FFO, FFOAA and AFFO including per share amounts for FFO and FFOAA, for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 and reconciles such measures to net income available to common shareholders, the most directly comparable GAAP measure (unaudited, in thousands, except per share information):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
FFO:	FFO:									FFO:
Net income available to common shareholders of EPR Properties	Net income available to common shareholders of EPR Properties	$	34,876	$	12,519	$	71,035	$	9,865	Net income available to common shareholders of EPR Properties	$	7,560	$	34,876	$	59,184	$	71,035
Gain on sale of real estate		—		(511)		—		(712)
Loss on sale of real estate										Loss on sale of real estate	575		—		1,135		—

Impairment of real estate investments, net	Impairment of real estate investments, net	—		—		4,351		—		Impairment of real estate investments, net	43,785		—		43,785		4,351

Real estate depreciation and amortization	Real estate depreciation and amortization	40,563		40,332		80,390		80,441		Real estate depreciation and amortization	43,494		40,563		84,494		80,390
Allocated share of joint venture depreciation	Allocated share of joint venture depreciation	1,996		459		3,483		813		Allocated share of joint venture depreciation	2,162		1,996		4,217		3,483
Impairment charges on joint ventures	Impairment charges on joint ventures	647		—		647		—		Impairment charges on joint ventures	—		647		—		647
FFO available to common shareholders of EPR Properties	FFO available to common shareholders of EPR Properties	$	78,082	$	52,799	$	159,906	$	90,407	FFO available to common shareholders of EPR Properties	$	97,576	$	78,082	$	192,815	$	159,906

FFO available to common shareholders of EPR Properties	FFO available to common shareholders of EPR Properties	$	78,082	$	52,799	$	159,906	$	90,407	FFO available to common shareholders of EPR Properties	$	97,576	$	78,082	$	192,815	$	159,906
Add: Preferred dividends for Series C preferred shares	Add: Preferred dividends for Series C preferred shares	1,938		—		3,876		—		Add: Preferred dividends for Series C preferred shares	1,938		1,938		3,876		3,876
Add: Preferred dividends for Series E preferred shares	Add: Preferred dividends for Series E preferred shares	1,939		—		3,878		—		Add: Preferred dividends for Series E preferred shares	1,938		1,939		3,876		3,878
Diluted FFO available to common shareholders of EPR Properties	Diluted FFO available to common shareholders of EPR Properties	$	81,959	$	52,799	$	167,660	$	90,407	Diluted FFO available to common shareholders of EPR Properties	$	101,452	$	81,959	$	200,567	$	167,660

FFOAA:	FFOAA:									FFOAA:
FFO available to common shareholders of EPR Properties	FFO available to common shareholders of EPR Properties	$	78,082	$	52,799	$	159,906	$	90,407	FFO available to common shareholders of EPR Properties	$	97,576	$	78,082	$	192,815	$	159,906
Costs associated with loan refinancing or payoff		—		—		—		241

Severance expense										Severance expense	547		—		547		—
Transaction costs	Transaction costs	1,145		662		3,392		1,210		Transaction costs	36		1,145		306		3,392

Credit loss expense (benefit)		9,512		(2,819)		9,206		(5,581)
Credit loss (benefit) expense										Credit loss (benefit) expense	(275)		9,512		312		9,206

Gain on insurance recovery (included in other income)	Gain on insurance recovery (included in other income)	—		—		(552)		(30)		Gain on insurance recovery (included in other income)	—		—		—		(552)

Deferred income tax benefit										Deferred income tax benefit	(92)		—		(182)		—

FFOAA available to common shareholders of EPR Properties	FFOAA available to common shareholders of EPR Properties	$	88,739	$	50,642	$	171,952	$	86,247	FFOAA available to common shareholders of EPR Properties	$	97,792	$	88,739	$	193,798	$	171,952

FFOAA available to common shareholders of EPR Properties	FFOAA available to common shareholders of EPR Properties	$	88,739	$	50,642	$	171,952	$	86,247	FFOAA available to common shareholders of EPR Properties	$	97,792	$	88,739	$	193,798	$	171,952
Add: Preferred dividends for Series C preferred shares	Add: Preferred dividends for Series C preferred shares	1,938		—		3,876		—		Add: Preferred dividends for Series C preferred shares	1,938		1,938		3,876		3,876
Add: Preferred dividends for Series E preferred shares	Add: Preferred dividends for Series E preferred shares	1,939		—		3,878		—		Add: Preferred dividends for Series E preferred shares	1,938		1,939		3,876		3,878
Diluted FFOAA available to common shareholders of EPR Properties	Diluted FFOAA available to common shareholders of EPR Properties	$	92,616	$	50,642	$	179,706	$	86,247	Diluted FFOAA available to common shareholders of EPR Properties	$	101,668	$	92,616	$	201,550	$	179,706

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		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
AFFO:	AFFO:									AFFO:
FFOAA available to common shareholders of EPR Properties	FFOAA available to common shareholders of EPR Properties	$	88,739	$	50,642	$	171,952	$	86,247	FFOAA available to common shareholders of EPR Properties	$	97,792	$	88,739	$	193,798	$	171,952
Non-real estate depreciation and amortization	Non-real estate depreciation and amortization	203		206		420		423		Non-real estate depreciation and amortization	211		203		415		420
Deferred financing fees amortization	Deferred financing fees amortization	2,090		1,574		4,161		3,121		Deferred financing fees amortization	2,150		2,090		4,279		4,161
Share-based compensation expense to management and trustees	Share-based compensation expense to management and trustees	4,169		3,675		8,414		7,459		Share-based compensation expense to management and trustees	4,477		4,169		8,799		8,414
Amortization of above and below market leases, net and tenant allowances	Amortization of above and below market leases, net and tenant allowances	(89)		(99)		(176)		(195)		Amortization of above and below market leases, net and tenant allowances	(185)		(89)		(274)		(176)
Maintenance capital expenditures (1)	Maintenance capital expenditures (1)	(134)		(1,467)		(1,485)		(2,223)		Maintenance capital expenditures (1)	(3,455)		(134)		(5,631)		(1,485)
Straight-lined rental revenue	Straight-lined rental revenue	(1,733)		(1,420)		(2,328)		(2,708)		Straight-lined rental revenue	(1,149)		(1,733)		(3,254)		(2,328)
Straight-lined ground sublease expense	Straight-lined ground sublease expense	261		111		509		195		Straight-lined ground sublease expense	401		261		966		509
Non-cash portion of mortgage and other financing income	Non-cash portion of mortgage and other financing income	(118)		(216)		(234)		(387)		Non-cash portion of mortgage and other financing income	(141)		(118)		(263)		(234)
AFFO available to common shareholders of EPR Properties	AFFO available to common shareholders of EPR Properties	$	93,388	$	53,006	$	181,233	$	91,932	AFFO available to common shareholders of EPR Properties	$	100,101	$	93,388	$	198,835	$	181,233

AFFO available to common shareholders of EPR Properties	AFFO available to common shareholders of EPR Properties	$	93,388	$	53,006	$	181,233	$	91,932	AFFO available to common shareholders of EPR Properties	$	100,101	$	93,388	$	198,835	$	181,233
Add: Preferred dividends for Series C preferred shares	Add: Preferred dividends for Series C preferred shares	1,938		—		3,876		—		Add: Preferred dividends for Series C preferred shares	1,938		1,938		3,876		3,876
Add: Preferred dividends for Series E preferred shares	Add: Preferred dividends for Series E preferred shares	1,939		—		3,878				Add: Preferred dividends for Series E preferred shares	1,938		1,939		3,876		3,878
Diluted AFFO available to common shareholders of EPR Properties	Diluted AFFO available to common shareholders of EPR Properties	$	97,265	$	53,006	$	188,987	$	91,932	Diluted AFFO available to common shareholders of EPR Properties	$	103,977	$	97,265	$	206,587	$	188,987

FFO per common share:	FFO per common share:									FFO per common share:
Basic	Basic	$	1.04	$	0.71	$	2.13	$	1.21	Basic	$	1.30	$	1.04	$	2.56	$	2.13
Diluted	Diluted	1.04		0.71		2.12		1.21		Diluted	1.27		1.04		2.52		2.12
FFOAA per common share:	FFOAA per common share:									FFOAA per common share:
Basic	Basic	$	1.18	$	0.68	$	2.30	$	1.15	Basic	$	1.30	$	1.18	$	2.58	$	2.30
Diluted	Diluted	1.17		0.68		2.27		1.15		Diluted	1.28		1.17		2.53		2.27
Shares used for computation (in thousands):	Shares used for computation (in thousands):									Shares used for computation (in thousands):
Basic	Basic	74,986		74,781		74,915		74,704		Basic	75,297		74,986		75,191		74,915
Diluted	Diluted	75,234		74,870		75,142		74,772		Diluted	75,715		75,234		75,571		75,142

Weighted average shares outstanding-diluted EPS	Weighted average shares outstanding-diluted EPS	75,234		74,870		75,142		74,772		Weighted average shares outstanding-diluted EPS	75,715		75,234		75,571		75,142
Effect of dilutive Series C preferred shares	Effect of dilutive Series C preferred shares	2,245		—		2,243		—		Effect of dilutive Series C preferred shares	2,279		2,245		2,276		2,243

Effect of dilutive Series E preferred shares	Effect of dilutive Series E preferred shares	1,664		—		1,664		—		Effect of dilutive Series E preferred shares	1,663		1,664		1,663		1,664
Adjusted weighted average shares outstanding-diluted Series C and Series E	Adjusted weighted average shares outstanding-diluted Series C and Series E	79,143		74,870		79,049		74,772		Adjusted weighted average shares outstanding-diluted Series C and Series E	79,657		79,143		79,510		79,049

Other financial information:	Other financial information:									Other financial information:
Dividends per common share	Dividends per common share	$	0.8250	$	—	$	1.6000	$	—	Dividends per common share	$	0.825	$	0.825	$	1.650	$	1.600

(1) Includes maintenance capital expenditures and certain second-generation tenant improvements and leasing commissions.

The effect of the conversion of our convertible preferred shares is calculated using the if-converted method and the conversion which results in the most dilution is included in the computation of per share amounts. The additional common shares that would result from the conversion of the 5.75% Series C cumulative convertible preferred shares and the 9.00% Series E cumulative convertible preferred shares for the three and six months ended June 30, 2021, and the corresponding add-back of the preferred dividends declared on those shares are not included in the calculation of diluted FFO, FFOAA and AFFO per share because the effect is anti-dilutive. The conversion of the 5.75% Series C cumulative convertible preferred shares and the 9.00% Series E cumulative convertible preferred shares would be dilutive to FFO, FFOAA and AFFO per share for the three and six months ended June 30, 2023 and June 30, 2022. Therefore, the additional common shares that would result from the conversion and the corresponding add-back of

the preferred dividends declared on those shares are included in the calculation of diluted FFO, FFOAA and AFFO per share.

Net Debt

Net Debt represents debt (reported in accordance with GAAP) adjusted to exclude deferred financing costs, net and reduced for cash and cash equivalents. By excluding deferred financing costs, net, and reducing debt for cash and cash equivalents on hand, the result provides an estimate of the contractual amount of borrowed capital to be repaid, net of cash available to repay it. We believe this calculation constitutes a beneficial supplemental non-GAAP financial disclosure to investors in understanding our financial condition. Our method of calculating Net Debt may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

Gross Assets

Gross Assets represents total assets (reported in accordance with GAAP) adjusted to exclude accumulated depreciation and reduced for cash and cash equivalents. By excluding accumulated depreciation and reducing cash and cash equivalents, the result provides an estimate of the investment made by us. We believe that investors commonly use versions of this calculation in a similar manner. Our method of calculating Gross Assets may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

Net Debt to Gross Assets Ratio

Net Debt to Gross Assets Ratio is a supplemental measure derived from non-GAAP financial measures that we use to evaluate capital structure and the magnitude of debt to gross assets. We believe that investors commonly use versions of this ratio in a similar manner. Our method of calculating the Net Debt to Gross Assets Ratio may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

EBITDAre

NAREIT developed EBITDAre as a relative non-GAAP financial measure of REITs, independent of a company's capital structure, to provide a uniform basis to measure the enterprise value of a company. Pursuant to the definition of EBITDAre by the Board of Governors of NAREIT, we calculate EBITDAre as net income, computed in accordance with GAAP, excluding interest expense (net), income tax (benefit) expense, depreciation and amortization, gains and losses from disposition of real estate, impairment losses on real estate, costs associated with loan refinancing or payoff and adjustments for unconsolidated partnerships, joint ventures and other affiliates.

Management provides EBITDAre herein because it believes this information is useful to investors as a supplemental performance measure asbecause it can help facilitate comparisons of operating performance between periods and with other REITs. Our method of calculating EBITDAre may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. EBITDAre is not a measure of performance under GAAP, does not represent cash generated from operations as defined by GAAP and is not indicative of cash available to fund all cash needs, including distributions. This measure should not be considered an alternative to net income or any other GAAP measure as a measurement of the results of our operations or cash flows or liquidity as defined by GAAP.

Adjusted EBITDAre

Management uses Adjusted EBITDAre in its analysis of the performance of the business and operations of the Company. Management believes Adjusted EBITDAre is useful to investors because it excludes various items that management believes are not indicative of operating performance, and ~~that~~because it is an informative measure to use in computing various financial ratios to evaluate the Company. We define Adjusted EBITDAre as EBITDAre (defined above) for the quarter excluding sale participation income, gain on insurance recovery, severance expense, transaction costs, credit loss (benefit) expense, ~~transaction costs,~~ impairment losses on operating lease right-of-use assets and prepayment ~~fee~~s.fees.

Our method of calculating Adjusted EBITDAre may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. Adjusted EBITDAre is not a measure of performance under GAAP, does not represent cash generated from operations as defined by GAAP and is not indicative of cash available to fund all cash needs, including distributions. This measure should not be considered as an alternative to net income or any other GAAP measure as a measurement of the results of our operations or cash flows or liquidity as defined by GAAP.

Net Debt to Adjusted EBITDAre Ratio

Net Debt to Adjusted EBITDAre Ratio is a supplemental measure derived from non-GAAP financial measures that we use to evaluate our capital structure and the magnitude of our debt against our operating performance. We believe that investors commonly use versions of this ratio in a similar manner. In addition, financial institutions use versions of this ratio in connection with debt agreements to set pricing and covenant limitations. Our method of calculating the Net Debt to Adjusted EBITDAre Ratio may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

Reconciliations of debt, total assets and net income (all reported in accordance with GAAP) to Net Debt, Gross Assets Ratio, Net Debt to Gross Assets Ratio, EBITDAre, Adjusted EBITDAre and Net Debt to Adjusted EBITDAre Ratio (each of which is a non-GAAP financial measure), as applicable, are included in the following tables (unaudited, in thousands):


		June 30,							June 30,
		2022			2021				2023			2022
Net Debt:	Net Debt:							Net Debt:
Debt	Debt	$	2,807,080		$	3,081,485		Debt	$	2,813,007		$	2,807,080
Deferred financing costs, net	Deferred financing costs, net	34,149			34,744			Deferred financing costs, net	28,222			34,149
Cash and cash equivalents	Cash and cash equivalents	(168,266)			(509,836)			Cash and cash equivalents	(99,711)			(168,266)
Net Debt	Net Debt	$	2,672,963		$	2,606,393		Net Debt	$	2,741,518		$	2,672,963

Gross Assets:	Gross Assets:							Gross Assets:
Total Assets	Total Assets	$	5,793,442		$	6,142,212		Total Assets	$	5,703,564		$	5,793,442
Accumulated depreciation	Accumulated depreciation	1,243,240			1,130,409			Accumulated depreciation	1,369,790			1,243,240
Cash and cash equivalents	Cash and cash equivalents	(168,266)			(509,836)			Cash and cash equivalents	(99,711)			(168,266)
Gross Assets	Gross Assets	$	6,868,416		$	6,762,785		Gross Assets	$	6,973,643		$	6,868,416

Debt to Total Assets Ratio								Debt to Total Assets Ratio	49		%	48		%
Net Debt to Gross Assets Ratio	Net Debt to Gross Assets Ratio	39		%	39		%	Net Debt to Gross Assets Ratio	39		%	39		%

		Three Months Ended June 30,							Three Months Ended June 30,
		2022			2021				2023			2022
EBITDAre and Adjusted EBITDAre:	EBITDAre and Adjusted EBITDAre:							EBITDAre and Adjusted EBITDAre:
Net income	Net income	$	40,909		$	18,552		Net income	$	13,600		$	40,909
Interest expense, net	Interest expense, net	33,289			38,312			Interest expense, net	31,591			33,289
Income tax expense	Income tax expense	444			398			Income tax expense	347			444
Depreciation and amortization	Depreciation and amortization	40,766			40,538			Depreciation and amortization	43,705			40,766
Gain on sale of real estate		—			(511)
Loss on sale of real estate								Loss on sale of real estate	575			—

Impairment of real estate investments, net								Impairment of real estate investments, net	43,785			—

Impairment charges on joint ventures	Impairment charges on joint ventures	647			—			Impairment charges on joint ventures	—			647

Allocated share of joint venture depreciation	Allocated share of joint venture depreciation	1,996			459			Allocated share of joint venture depreciation	2,162			1,996
Allocated share of joint venture interest expense	Allocated share of joint venture interest expense	1,276			846			Allocated share of joint venture interest expense	2,172			1,276

EBITDAre	EBITDAre	$	119,327		$	98,594		EBITDAre	$	137,937		$	119,327

Severance expense								Severance expense	547			—
Transaction costs	Transaction costs	1,145			662			Transaction costs	36			1,145

Credit loss expense (benefit)		9,512			(2,819)
Credit loss (benefit) expense								Credit loss (benefit) expense	(275)			9,512

Adjusted EBITDAre (for the quarter)	Adjusted EBITDAre (for the quarter)	$	129,984		$	96,437		Adjusted EBITDAre (for the quarter)	$	138,245		$	129,984

Adjusted EBITDAre (annualized) (1)	Adjusted EBITDAre (annualized) (1)	$	519,936		Footnote 2			Adjusted EBITDAre (annualized) (1)	$	552,980		$	519,936

Net Debt/Adjusted EBITDAre Ratio	Net Debt/Adjusted EBITDAre Ratio	5.1			Footnote 2			Net Debt/Adjusted EBITDAre Ratio	5.0			5.1

(1) Adjusted EBITDA for the quarter is multiplied by four to calculate an annual amount.	(1) Adjusted EBITDA for the quarter is multiplied by four to calculate an annual amount.							(1) Adjusted EBITDA for the quarter is multiplied by four to calculate an annual amount.
(2) Not presented as ratio is not meaningful given the disruption caused by COVID-19 and the associated accounting for tenant rent deferrals and other lease modifications.

4541

Total Investments

Total investments is a non-GAAP financial measure defined as the sum of the carrying values of real estate investments (before accumulated depreciation), land held for development, property under development, mortgage notes receivable ~~(including~~and related ~~accru~~edaccrued interest ~~receivable),~~receivable, net, investment in joint ventures, intangible assets, gross (before accumulated amortization and included in other assets) and notes receivable and related accrued interest receivable, net (included in other assets). Total investments is a useful measure for management and investors as it illustrates across which asset categories the Company's funds have been invested. Our method of calculating total investments may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. A reconciliation of total ~~investments to total~~ assets (computed in accordance with GAAP) to total investments is included in the following table (unaudited, in thousands):


							June 30, 2023		December 31, 2022

Total assets						Total assets	$	5,703,564	$	5,758,701
Operating lease right-of-use assets						Operating lease right-of-use assets	(192,325)		(200,985)
Cash and cash equivalents						Cash and cash equivalents	(99,711)		(107,934)
Restricted cash						Restricted cash	(2,623)		(2,577)
Accounts receivable						Accounts receivable	(53,305)		(53,587)
Add: accumulated depreciation on real estate investments						Add: accumulated depreciation on real estate investments	1,369,790		1,302,640
Add: accumulated amortization on intangible assets (1)						Add: accumulated amortization on intangible assets (1)	27,173		23,487
Prepaid expenses and other current assets (1)						Prepaid expenses and other current assets (1)	(33,625)		(33,559)
Total investments						Total investments	$	6,718,938	$	6,686,186
		June 30, 2022		December 31, 2021
Total Investments:	Total Investments:					Total Investments:
Real estate investments, net of accumulated depreciation	Real estate investments, net of accumulated depreciation	$	4,838,701	$	4,713,091	Real estate investments, net of accumulated depreciation	$	4,659,678	$	4,714,136
Add back accumulated depreciation on real estate investments	Add back accumulated depreciation on real estate investments	1,243,240		1,167,734		Add back accumulated depreciation on real estate investments	1,369,790		1,302,640
Land held for development	Land held for development	20,168		20,168		Land held for development	20,168		20,168
Property under development	Property under development	8,241		42,362		Property under development	80,650		76,029
Mortgage notes and related accrued interest receivable		374,617		370,159
Mortgage notes and related accrued interest receivable, net						Mortgage notes and related accrued interest receivable, net	466,459		457,268

Investment in joint ventures	Investment in joint ventures	47,705		36,670		Investment in joint ventures	53,763		52,964
Intangible assets, gross (1)	Intangible assets, gross (1)	60,108		57,962		Intangible assets, gross (1)	64,156		60,109
Notes receivable and related accrued interest receivable, net (1)	Notes receivable and related accrued interest receivable, net (1)	3,596		7,254		Notes receivable and related accrued interest receivable, net (1)	4,274		2,872
Total investments	Total investments	$	6,596,376	$	6,415,400	Total investments	$	6,718,938	$	6,686,186

Total investments		$	6,596,376	$	6,415,400
Operating lease right-of-use assets		202,708		180,808
Cash and cash equivalents		168,266		288,822
Restricted cash		1,277		1,079
Accounts receivable		60,176		78,073
Less: accumulated depreciation on real estate investments		(1,243,240)		(1,167,734)
Less: accumulated amortization on intangible assets (1)		(21,812)		(20,163)
Prepaid expenses and other current assets (1)		29,691		24,865
Total assets		$	5,793,442	$	5,801,150

(1) Included in "Other assets" in the accompanying consolidated balance sheet. Other assets include the following:	(1) Included in "Other assets" in the accompanying consolidated balance sheet. Other assets include the following:					(1) Included in "Other assets" in the accompanying consolidated balance sheet. Other assets include the following:

		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Intangible assets, gross	Intangible assets, gross	$	60,108	$	57,962	Intangible assets, gross	$	64,156	$	60,109
Less: accumulated amortization on intangible assets	Less: accumulated amortization on intangible assets	(21,812)		(20,163)		Less: accumulated amortization on intangible assets	(27,173)		(23,487)
Notes receivable and related accrued interest receivable, net	Notes receivable and related accrued interest receivable, net	3,596		7,254		Notes receivable and related accrued interest receivable, net	4,274		2,872
Prepaid expenses and other current assets	Prepaid expenses and other current assets	29,691		24,865		Prepaid expenses and other current assets	33,625		33,559
Total other assets	Total other assets	$	71,583	$	69,918	Total other assets	$	74,882	$	73,053

Impact of Recently Issued Accounting Standards

See Note 2 to the consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information on the impact of recently issued accounting standards on our business.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks, primarily relating to potential losses due to changes in interest rates and foreign currency exchange rates. We seek to mitigate the effects of fluctuations in interest rates by matching the term of new investments with new long-term fixed rate borrowings whenever possible. As of June 30, ~~2022,~~2023, we had a $1.0 billion unsecured revolving credit facility with no outstanding balance. We also had a $25.0 million bond that bears interest at a floating rate but has been fixed through an interest rate swap agreement.

4642

As of June 30, ~~2022,~~2023, we had a 65% investment interest in two unconsolidated real estate joint ventures related to two experiential lodging properties located in St. Petersburg Beach, Florida. At June 30, ~~2022,~~2023, the joint ~~venture~~ventures had a secured mortgage loan with an ~~outstanding~~outstanding balance of $105.0 million. The mortgage loan bears interest at SOFR plus 3.65%, with monthly interest payments required. The joint venture has an interest rate cap agreement to limit the variable portion of the interest rate (SOFR) on this note to 3.5% from May 19, 2022 to June 1, 2024.

We are subject to risks associated with debt financing, including the risk that existing indebtedness may not be refinanced or that the terms of such refinancing may not be as favorable as the terms of current indebtedness. The majority of our borrowings are subject to contractual agreements or mortgages which limit the amount of indebtedness we may incur. Accordingly, if we are unable to raise additional equity or borrow money due to these limitations, our ability to make additional real estate investments may be limited.

We are exposed to foreign currency risk against our functional currency, the U.S. dollar, on our six Canadian properties and the rents received from tenants of the properties are payable in CAD. In order to hedge our CAD denominated cash ~~flow~~flows and our net investment in our six Canadian properties, we entered into cross-currency swaps designated as cash flow hedges and foreign currency forwards designated as net investment hedges as further described below.

Cash Flow Hedges of Interest Rate Risk

In order to hedge our interest rate risk, we entered into an interest rate swap agreement on our variable rate secured bonds with a notional amount of $25.0 million. The interest rate cap agreement limits the variable portion of the interest rate (SOFR) on this bond to 2.5325% until September 30, 2026.

Cash Flow Hedges of Foreign Exchange Risk-Cross Currency Swaps

~~On April 12, 2022, we~~We entered into three USD-CAD cross-currency swaps that became effective July 1, 2022, ~~with~~mature on October 1, 2024, and have a total fixed original notional value of $150.0 million CAD and $118.7 million USD. The net effect of these swaps is to lock in an exchange rate of $1.26 CAD per USD on approximately $10.8 million annual CAD denominated cash ~~flows through October 1, 2024.~~flows.

~~On April 29, 2022, we~~We entered into two USD-CAD cross-currency swaps that became effective May 1, 2022, ~~with~~mature on October 1, 2024 and have a total fixed notional value of $200.0 million CAD and $156.0 million USD. The net effect of these swaps is to lock in an exchange rate of $1.28 CAD per USD on approximately $4.5 million of annual CAD denominated cash ~~flows through October 1, 2024.~~flows.

~~On June 14, 2022, we~~We entered into three USD-CAD cross-currency swaps ~~with~~that became effective June 1, 2022, mature on December 1, 2024 and have a total fixed notional value of $90.0 million CAD and $69.5 million USD. The net effect of these swaps is to lock in an exchange rate of $1.30 CAD per USD on approximately $8.1 million of annual CAD denominated cash ~~flows through December 1, 2024.~~flows.

Net Investment Hedges - Foreign Currency Forwards

~~On April 29, 2022, we~~We entered into two forward contracts that became effective April 29, 2022 with a fixed notional value of $200.0 million CAD and $155.9 million USD with a settlement date of October 1, 2024. The exchange rate of these forward contracts is approximately $1.28 CAD per USD.

~~On June 14, 2022, we~~We entered into a forward contract that became effective June 14, 2022 with a fixed notional value of $90.0 million CAD and $69.2 million USD with a settlement date of December 2, 2024. The exchange rate of this forward contract is approximately $1.30 CAD per USD.

On April 29, 2022, we terminated two cross-currency swaps with a fixed notional value of $200.0 million CAD. These contracts were previously designated as net investment hedges. We paid $3.8 million in connection with the settlement of these CAD to USD cross-currency swap agreements.

For foreign currency derivatives designated as net investment hedges, the change in the fair value of the derivatives are reported in AOCI as part of the cumulative translation adjustment. Amounts are reclassified out of AOCI into earnings when the hedged net investment is either sold or substantially liquidated.

See Note 10 to the consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information on our derivative financial instruments and hedging activities.

4743

Item 4. Controls and Procedures

Evaluation of disclosures controls and procedures

As of June 30, ~~2022,~~2023, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based upon and as of the date of that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Limitations on the effectiveness of controls

Our disclosure controls were designed to provide reasonable assurance that the controls and procedures would meet their objectives. Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable assurance of achieving the designed control objectives and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusions of two or more people, or by management override of the control. Because of the inherent limitations in a cost-effective, maturing control system, misstatements due to error or fraud may occur and not be detected.

Change in internal controls

There have not been any changes in the Company's internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter of the fiscal year to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are subject to certain claims and lawsuits in the ordinary course of business, the outcome of which cannot be determined at this time. In the opinion of management, any liability we might incur upon the resolution of these claims and lawsuits will not, in the aggregate, have a material adverse effect on our consolidated financial position or results of operations.

Item 1A. Risk Factors

There ~~have been no material changes to~~are many risks and uncertainties that can affect our current or future business, operating results, financial performance or share price. The following discussion describes certain important factors that could adversely affect our current or future business, operating results, financial condition or share price, and supplements the ~~risk~~ factors ~~associated with our business previously disclosed in~~set forth under Item 1A - "Risk Factors" in our 2022 Annual ~~Report on Form 10-K for~~Report. This discussion includes a number of forward-looking statements. See "Cautionary Statement Concerning Forward-Looking Statements." The following risk factor replaces and supersedes the ~~fiscal year ended December 31, 2021 filed~~risk factor with the ~~SEC on February 23, 2022.~~same title set forth under Item 1A - "Risk Factors" in our 2022 Annual Report.

Operating risks in the experiential real estate industry may affect the ability of our customers to perform under their leases or mortgages.

The ability of our customers to operate successfully in the experiential real estate industry and remain current on their obligations depends on a number of factors, including, with respect to theatres, the availability and popularity of motion pictures, the performance of those pictures in tenants' markets, the allocation of popular pictures to tenants, the release window (the time that elapses from the date of a motion picture's theatrical release to the date it is available on other mediums) and the terms on which the motion pictures are licensed. In addition, motion picture production is highly dependent on labor that is subject to various collective bargaining agreements. The Writers Guild of America strike that began on May 2, 2023 has halted motion picture production and may delay or otherwise affect the supply of certain motion pictures. The Screen Actors Guild – American Federation of Television and Radio Artists strike that began on July 14, 2023 has also had a similar effect on the production and supply of motion pictures.Studios are party to collective bargaining agreements with a number of other labor unions, and failure to reach timely agreements or renewals of existing agreements may further affect the production and supply of motion pictures. Neither we nor our customers control the operations of studios or motion picture distributors. During the COVID-19 pandemic, motion picture distributors increasingly relied upon content streaming as a method of delivering products and continue to do so for certain film releases. There can be no assurances that motion picture distributors will continue to rely on theatres as the primary means of distributing first-run films and motion picture distributors have, and may in the future, consider alternative film delivery methods. In addition, in August 2020, a U.S. District Court granted the U.S. Department of Justice's request to terminate the Paramount Consent Decrees, which prohibit movie studios from owning theatres or utilizing "block booking," a practice whereby movie studios sell multiple films as a package to theatres, in addition to other restrictions. There can be no assurances as to the effects of this regulatory action or whether this regulatory action will materially adversely affect our theatre customers' operations and, in turn, their ability to perform under their leases.

Our other experiential customers are exposed to the risk of adverse economic conditions that can affect experiential activities. Eat & play, ski, attraction, experiential lodging, gaming, fitness & wellness and cultural properties are discretionary activities that can entail a relatively high cost of participation and may be adversely affected by an economic slowdown or recession. Economic conditions, including increasing interest rates and inflation, high unemployment and erosion of consumer confidence, may potentially have negative effects on our customers and on their results of operations. The reduced economic activity resulting from the COVID-19 pandemic severely impacted our customers' businesses, financial condition and liquidity. The ultimate extent to which the COVID-19 pandemic, as well as generally weakening economic conditions, impacts the operations of our customers will depend on future developments, which, as discussed above, are highly uncertain and cannot be predicted with confidence. We cannot predict what impact these uncertainties may have on overall guest visitation, guest spending or other related trends and the ultimate impact it will have on our customers’ operations and, in turn, their ability to perform under their respective leases or mortgages.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~There~~Issuer Purchases of Equity Securities


Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
April 1 through April 30, 2023 common shares	—		$	—	—	$	—
May 1 through May 31, 2023 common shares	2,326	(1)	41.97		—	—
June 1 through June 30, 2023 common shares	—		—		—	—

Total	2,326		$	41.97	—	$	—

(1) The repurchases of equity securities during May 2023 were ~~no reportable events during~~completed in conjunction with the ~~quarter ended June 30, 2022.~~vesting of employee nonvested shares. These repurchases were not made pursuant to a publicly announced plan or program.

Item 3. Defaults Upon Senior Securities

There were no reportable events during the quarter ended June 30, ~~2022.~~2023.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the three months ended June 30, 2023, no trustee or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K. There were no reportable events during the quarter ended June 30, ~~2022.~~2023 otherwise reportable under this Item 5.

4946

Item 6. Exhibits


3.1*			Composite of Amended and Restated Declaration of Trust of the Company (inclusive of all amendments through May 26, 2023), is attached hereto as Exhibit 3.1.
31.1*			Certification of Gregory K. Silvers pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, is attached hereto as Exhibit 31.1.
31.2*			Certification of Mark A. Peterson pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, is attached hereto as Exhibit 31.2.
32.1**			Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is attached hereto as Exhibit 32.1.
32.2**			Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is attached hereto as Exhibit 32.2.
101.INS*			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*			Inline XBRL Taxonomy Extension Schema
101.CAL*			Inline XBRL Extension Calculation Linkbase
101.DEF*			Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB*			Inline XBRL Taxonomy Extension Label Linkbase
101.PRE*			Inline XBRL Taxonomy Extension Presentation Linkbase
104*			Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

* Filed herewith.

** Furnished herewith.

5047

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

EPR Properties

Dated:

August ~~2, 2022~~3, 2023

/s/ Gregory K. Silvers

Gregory K. Silvers, Chairman, President and Chief Executive Officer (Principal Executive Officer)

Dated:

August ~~2, 2022~~3, 2023

/s/ Tonya L. Mater

Tonya L. Mater, Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)

5148


					Outstanding principal amount of mortgage		Carrying amount as of				Unfunded commitments
Description	Year of Origination	Interest Rate		Maturity Date			June 30, 2022		December 31, 2021		June 30, 2022
Attraction property Powells Point, North Carolina	2019	7.75	%	6/30/2025	$	29,035	$	28,879��	$	28,243	$	—
Fitness & wellness property Omaha, Nebraska	2017	7.85	%	1/3/2027	10,905		10,953		10,940		—
Fitness & wellness property Merriam, Kansas	2019	7.55	%	7/31/2029	9,090		9,180		9,159		—
Ski property Girdwood, Alaska	2019	8.20	%	12/31/2029	45,599		45,587		45,877		11,401
Fitness & wellness property Omaha, Nebraska	2016	7.85	%	6/30/2030	10,539		10,584		10,615		379
Experiential lodging property Nashville, Tennessee	2019	7.01	%	9/30/2031	71,223		71,656		70,896		—
Eat & play property Austin, Texas	2012	11.31	%	6/1/2033	10,507		10,507		10,874		—
Experiential lodging property Breaux Bridge, LA	2022	7.25	%	3/8/2034	11,305		11,373		—		—
Ski property West Dover and Wilmington, Vermont	2007	12.14	%	12/1/2034	51,050		51,049		51,047		—
Four ski properties Ohio and Pennsylvania	2007	11.07	%	12/1/2034	37,562		37,533		37,519		—
Ski property Chesterland, Ohio	2012	11.55	%	12/1/2034	4,550		4,532		4,516		—
Ski property Hunter, New York	2016	8.88	%	1/5/2036	21,000		21,000		21,000		—
Eat & play property Midvale, Utah	2015	10.25	%	5/31/2036	17,505		17,505		17,639		—
Eat & play property West Chester, Ohio	2015	9.75	%	8/1/2036	18,068		18,067		18,198		—
Fitness & wellness property Fort Collins, Colorado	2018	7.85	%	1/31/2038	10,292		10,081		10,277		—
Early childhood education center Lake Mary, Florida	2019	8.10	%	5/9/2039	4,200		4,345		4,329		—
Eat & play property Eugene, Oregon	2019	8.13	%	6/17/2039	14,700		7,780		14,996		—
Early childhood education center Lithia, Florida	2017	8.58	%	10/31/2039	3,959		4,006		4,034		—
					$	381,089	$	374,617	$	370,159	$	11,780


	Number of options	Option price per share					Weighted avg. exercise price
Outstanding at December 31, 2021	108,671	$	44.44	—	$	76.63	$	56.79
Exercised	(9,799)	44.62		—	47.15		46.30


Outstanding at June 30, 2022	98,872	$	44.44	—	$	76.63	$	57.83


	Options outstanding						Options exercisable
Exercise price range	Options outstanding	Weighted avg. life remaining	Weighted avg. exercise price		Aggregate intrinsic value (in thousands)		Options exercisable	Weighted avg. life remaining	Weighted avg. exercise price		Aggregate intrinsic value (in thousands)



$44.44 - 49.99	11,510	4.8					10,132	1.7
50.00 - 59.99	31,008	2.0					31,008	2.0
60.00 - 69.99	52,198	4.0					50,754	3.4
70.00 - 76.63	4,156	5.6					3,671	5.4
	98,872	3.5	$	57.83	$	5	95,565	2.8	$	57.77	$	1