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 ~~September 30, 2022~~March 31, 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 ~~November 2, 2022,~~April 26, 2023, there were ~~75,021,051~~75,279,238 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;

•Uncertainties regarding the ultimate impact of a customer's pending bankruptcy proceeding on our existing leases with Regal theatre tenants;

•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;

•Risks of operating in the experiential real estate industry;

•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 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 ~~"2021~~"2022 Annual Report") filed with the Securities and Exchange Commission ("SEC") on February 23, ~~2022, as supplemented by Item 1A - "Risk Factors" in this Quarterly Report on Form 10-Q.~~2023.

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

3422

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

5036

Item 4.

Controls and Procedures

5238

PART II

5238

Item 1.

Legal Proceedings

5238

Item 1A.

Risk Factors

5238

Item 2.

Unregistered Sale of Equity Securities and Use of Proceeds

5439

Item 3.

Defaults Upon Senior Securities

5439

Item 4.

Mine Safety Disclosures

5439

Item 5.

Other Information

5439

Item 6.

Exhibits

5540

iii

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

EPR PROPERTIES

Consolidated Balance Sheets

(Dollars in thousands except share data)


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(unaudited)					(unaudited)
Assets	Assets					Assets
Real estate investments, net of accumulated depreciation of $1,278,427 and $1,167,734 at September 30, 2022 and December 31, 2021, respectively		$	4,769,717	$	4,713,091
Real estate investments, net of accumulated depreciation of $1,341,527 and $1,302,640 at March 31, 2023 and December 31, 2022, respectively						Real estate investments, net of accumulated depreciation of $1,341,527 and $1,302,640 at March 31, 2023 and December 31, 2022, respectively	$	4,708,342	$	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	56,347		42,362		Property under development	85,829		76,029
Operating lease right-of-use assets	Operating lease right-of-use assets	199,031		180,808		Operating lease right-of-use assets	197,357		200,985
Mortgage notes and related accrued interest receivable		399,485		370,159
Mortgage notes and related accrued interest receivable, net						Mortgage notes and related accrued interest receivable, net	461,263		457,268

Investment in joint ventures	Investment in joint ventures	50,124		36,670		Investment in joint ventures	50,978		52,964
Cash and cash equivalents	Cash and cash equivalents	160,838		288,822		Cash and cash equivalents	96,438		107,934
Restricted cash	Restricted cash	5,252		1,079		Restricted cash	2,599		2,577

Accounts receivable	Accounts receivable	53,375		78,073		Accounts receivable	50,591		53,587

Other assets	Other assets	78,422		69,918		Other assets	83,050		73,053
Total assets	Total assets	$	5,792,759	$	5,801,150	Total assets	$	5,756,615	$	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	$	83,384	$	73,462	Accounts payable and accrued liabilities	$	76,244	$	80,087
Operating lease liabilities	Operating lease liabilities	237,254		218,795		Operating lease liabilities	238,096		241,407
Common dividends payable	Common dividends payable	21,411		18,896		Common dividends payable	21,826		21,405
Preferred dividends payable	Preferred dividends payable	6,033		6,034		Preferred dividends payable	6,033		6,033
Unearned rents and interest	Unearned rents and interest	79,943		61,559		Unearned rents and interest	71,601		63,939
Debt	Debt	2,808,587		2,804,365		Debt	2,811,653		2,810,111
Total liabilities	Total liabilities	3,236,612		3,183,111		Total liabilities	3,225,453		3,222,982
Equity:	Equity:					Equity:
Common Shares, $0.01 par value; 100,000,000 shares authorized; and 82,538,739 and 82,225,061 shares issued at September 30, 2022 and December 31, 2021, respectively		825		822
Common Shares, $0.01 par value; 100,000,000 shares authorized; and 82,905,229 and 82,545,501 shares issued at March 31, 2023 and December 31, 2022, respectively						Common Shares, $0.01 par value; 100,000,000 shares authorized; and 82,905,229 and 82,545,501 shares issued at March 31, 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 September 30, 2022 and December 31, 2021; liquidation preference of $134,822,900		54		54
3,447,381 Series E convertible shares issued at September 30, 2022 and December 31, 2021; liquidation preference of $86,184,525		34		34
6,000,000 Series G shares issued at September 30, 2022 and December 31, 2021; liquidation preference of $150,000,000		60		60
5,392,916 Series C convertible shares issued at March 31, 2023 and December 31, 2022; liquidation preference of $134,822,900						5,392,916 Series C convertible shares issued at March 31, 2023 and December 31, 2022; liquidation preference of $134,822,900	54		54
3,446,070 and 3,447,381 Series E convertible shares issued at March 31, 2023 and December 31, 2022, respectively; liquidation preference of $86,151,750						3,446,070 and 3,447,381 Series E convertible shares issued at March 31, 2023 and December 31, 2022, respectively; liquidation preference of $86,151,750	34		34
6,000,000 Series G shares issued at March 31, 2023 and December 31, 2022; liquidation preference of $150,000,000						6,000,000 Series G shares issued at March 31, 2023 and December 31, 2022; liquidation preference of $150,000,000	60		60
Additional paid-in-capital	Additional paid-in-capital	3,895,354		3,876,817		Additional paid-in-capital	3,910,235		3,899,732
Treasury shares at cost: 7,520,030 and 7,416,746 common shares at September 30, 2022 and December 31, 2021, respectively		(269,744)		(264,817)
Treasury shares at cost: 7,628,551 and 7,520,227 common shares at March 31, 2023 and December 31, 2022, respectively						Treasury shares at cost: 7,628,551 and 7,520,227 common shares at March 31, 2023 and December 31, 2022, respectively	(273,904)		(269,751)
Accumulated other comprehensive income	Accumulated other comprehensive income	1,097		9,955		Accumulated other comprehensive income	1,823		1,897
Distributions in excess of net income	Distributions in excess of net income	(1,071,533)		(1,004,886)		Distributions in excess of net income	(1,107,969)		(1,097,132)

Total equity	Total equity	$	2,556,147	$	2,618,039	Total equity	$	2,531,162	$	2,535,719
Total liabilities and equity	Total liabilities and equity	$	5,792,759	$	5,801,150	Total liabilities and equity	$	5,756,615	$	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 September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Rental revenue	Rental revenue	$	140,471	$	123,040	$	422,949	$	341,537	Rental revenue	$	151,591	$	139,603
Other income	Other income	11,360		8,091		30,626		9,802		Other income	9,333		9,305
Mortgage and other financing income	Mortgage and other financing income	9,579		8,516		25,753		25,435		Mortgage and other financing income	10,472		8,564
Total revenue	Total revenue	161,410		139,647		479,328		376,774		Total revenue	171,396		157,472
Property operating expense	Property operating expense	14,707		13,815		42,238		43,806		Property operating expense	14,155		13,939
Other expense	Other expense	9,135		7,851		26,104		13,428		Other expense	8,950		8,097
General and administrative expense	General and administrative expense	12,582		11,154		38,497		33,866		General and administrative expense	13,965		13,224

Transaction costs	Transaction costs	148		2,132		3,540		3,342		Transaction costs	270		2,247
Credit loss expense (benefit)	Credit loss expense (benefit)	241		(14,096)		9,447		(19,677)		Credit loss expense (benefit)	587		(306)
Impairment charges	Impairment charges	—		2,711		4,351		2,711		Impairment charges	—		4,351
Depreciation and amortization	Depreciation and amortization	41,539		42,612		122,349		123,476		Depreciation and amortization	41,204		40,044
Total operating expenses	Total operating expenses	78,352		66,179		246,526		200,952		Total operating expenses	79,131		81,596
Gain on sale of real estate		304		787		304		1,499
Loss on sale of real estate										Loss on sale of real estate	(560)		—

Income from operations	Income from operations	83,362		74,255		233,106		177,321		Income from operations	91,705		75,876
Costs associated with loan refinancing or payoff		—		4,741		—		4,982

Interest expense, net	Interest expense, net	32,747		36,584		99,296		114,090		Interest expense, net	31,722		33,260
Equity in (income) loss from joint ventures		(572)		418		(1,887)		3,000
Impairment charges on joint ventures		—		—		647		—
Equity in loss from joint ventures										Equity in loss from joint ventures	1,985		106

Income before income taxes	Income before income taxes	51,187		32,512		135,050		55,249		Income before income taxes	57,998		42,510
Income tax expense	Income tax expense	388		395		1,150		1,200		Income tax expense	341		318

Net income	Net income	50,799		32,117		133,900		54,049		Net income	57,657		42,192
Preferred dividend requirements	Preferred dividend requirements	6,033		6,033		18,099		18,100		Preferred dividend requirements	6,033		6,033

Net income available to common shareholders of EPR Properties	Net income available to common shareholders of EPR Properties	$	44,766	$	26,084	$	115,801	$	35,949	Net income available to common shareholders of EPR Properties	$	51,624	$	36,159

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	$	0.60	$	0.35	$	1.55	$	0.48	Basic	$	0.69	$	0.48

Diluted	Diluted	$	0.60	$	0.35	$	1.54	$	0.48	Diluted	$	0.69	$	0.48
Shares used for computation (in thousands):	Shares used for computation (in thousands):									Shares used for computation (in thousands):
Basic	Basic	75,016		74,804		74,949		74,738		Basic	75,084		74,843
Diluted	Diluted	75,183		74,911		75,102		74,819		Diluted	75,283		75,047

Other comprehensive income:	Other comprehensive income:									Other comprehensive income:
Net income	Net income	$	50,799	$	32,117	$	133,900	$	54,049	Net income	$	57,657	$	42,192
Foreign currency translation adjustment	Foreign currency translation adjustment	(21,697)		(5,169)		(24,015)		(195)		Foreign currency translation adjustment	230		2,606
Change in net unrealized gain on derivatives		12,119		6,280		15,157		6,355
Change in net unrealized loss on derivatives										Change in net unrealized loss on derivatives	(304)		(2,090)
Comprehensive income attributable to EPR Properties	Comprehensive income attributable to EPR Properties	$	41,221	$	33,228	$	125,042	$	60,209	Comprehensive income attributable to EPR Properties	$	57,583	$	42,708

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
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
Balance at December 31, 2020 81,917,876 $ 819 14,841,431 $ 148 $ 3,857,632 $ (261,238) $ 216 $ (966,992) $ 2,630,585
Issuance of nonvested shares and performance shares, net of cancellations 246,562 2 — — 2,899 — — — 2,901
Purchase of common shares for vesting — — — — — (2,744) — — (2,744)
Share-based compensation expense — — — — 3,784 — — — 3,784
Foreign currency translation adjustment — — — — — — 2,300 — 2,300
Change in unrealized gain on derivatives — — — — — — 462 — 462
Net income — — — — — — — 3,380 3,380
Issuances of common shares 2,509 — — — 107 — — — 107
Dividend equivalents accrued on performance shares — — — — — — — (8) (8)
Dividends to Series C preferred shareholders ($0.359375 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) — — — — — — — (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
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.
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 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	243,286			3		—		—		4,496		(83)		—		—		4,416
Purchase of common shares for vesting	Purchase of common shares for vesting	—	—		—	—		—			(19)		—		—						(19)		Purchase of common shares for vesting	—			—		—		—		—		(4,250)		—		—		(4,250)
Share-based compensation expense	Share-based compensation expense	—	—		—	—		3,759			—		—		—						3,759		Share-based compensation expense	—			—		—		—		4,245		—		—		—		4,245

Foreign currency translation adjustment	Foreign currency translation adjustment	—	—		—	—		—			—		(5,169)		—						(5,169)		Foreign currency translation adjustment	—			—		—		—		—		—		2,606		—		2,606

Change in unrealized gain on derivatives		—	—		—	—		—			—		6,280		—						6,280
Loss reclassified from accumulated other comprehensive income into earnings from termination of interest rate swaps		—	—		—	—		—			—		3,249		—						3,249
Change in unrealized loss on derivatives																							Change in unrealized loss on derivatives	—			—		—		—		—		—		(2,090)		—		(2,090)

Net income	Net income	—	—		—	—		—			—		—		32,117						32,117		Net income	—			—		—		—		—		—		—		42,192		42,192
Issuances of common shares	Issuances of common shares	3,051	—		—	—		153			—		—		—						153		Issuances of common shares	4,730			—		—		—		228		—		—		—		228

Conversion of Series C Convertible Preferred shares to common shares		138	—		(334)	—		—			—		—		—						—

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	—	—		—	—		—			—		—		(47)						(47)		Dividend equivalents accrued on performance shares	—			—		—		—		—		—		—		(136)		(136)
Dividends to common shareholders ($0.75 per share)		—	—		—	—		—			—		—		(56,104)						(56,104)
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 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 September 30, 2021		82,219,663	$	822	14,840,297	$	148	$	3,872,777		$	(264,679)	$	9,625	$	(987,212)					$	2,631,481

Continued on next page.
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

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
Shares Par Shares Par
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
Restricted share units issued to Trustees 2,794 — — — — — — — —
Issuance of nonvested shares and performance shares, net of cancellations 243,286 3 — — 4,496 (83) — — 4,416
Purchase of common shares for vesting — — — — — (4,250) — — (4,250)
Share-based compensation expense — — — — 4,245 — — — 4,245
Foreign currency translation adjustment — — — — — — 2,606 — 2,606
Change in unrealized loss on derivatives — — — — — — (2,090) — (2,090)
Net income — — — — — — — 42,192 42,192
Issuances of common shares 4,730 — — — 228 — — — 228
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
Dividend equivalents accrued on performance shares — — — — — — — (188) (188)
Dividends to common shareholders ($0.825 per share) — — — — — — — (61,873) (61,873)
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, 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.


		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
		Shares	Par		Shares	Par				Total

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 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	1,449			—		—	—		—		—		—		—		—
Issuance of nonvested shares and performance shares, net of cancellations																					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	—			—		—	—		—		(3,565)		—		—		(3,565)
Share-based compensation expense	Share-based compensation expense	—	—		—	—		4,138			—		—		—				4,138		Share-based compensation expense	—			—		—	—		4,322		—		—		—		4,322

Foreign currency translation adjustment	Foreign currency translation adjustment	—	—		—	—		—			—		(21,697)		—				(21,697)		Foreign currency translation adjustment	—			—		—	—		—		—		230		—		230

Change in unrealized gain on derivatives		—	—		—	—		—			—		12,119		—				12,119
Change in unrealized loss on derivatives																					Change in unrealized loss on derivatives	—			—		—	—		—		—		(304)		—		(304)

Net income	Net income	—	—		—	—		—			—		—		50,799				50,799		Net income	—			—		—	—		—		—		—		57,657		57,657
Issuances of common shares	Issuances of common shares	6,117	—		—	—		296			—		—		—				296		Issuances of common shares	5,557			—		—	—		225		—		—		—		225

Issuances of captive REIT preferred shares		—	—		—	—		107			—		—		—				107

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

Stock option exercises, net		2,760	—		—	—		129			(136)		—		—				(7)
Dividend equivalents accrued on performance shares	Dividend equivalents accrued on performance shares	—	—		—	—		—			—		—		(263)				(263)		Dividend equivalents accrued on performance shares	—			—		—	—		—		—		—		(353)		(353)
Dividends to common shareholders ($0.825 per share)	Dividends to common shareholders ($0.825 per share)	—	—		—	—		—			—		—		(61,889)				(61,889)		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 September 30, 2022		82,538,739	$	825	14,840,297	$	148	$	3,895,354		$	(269,744)	$	1,097	$	(1,071,533)			$	2,556,147
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

See accompanying notes to consolidated financial statements.

EPR PROPERTIES

Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021			2023		2022
Operating activities:	Operating activities:					Operating activities:
Net income	Net income	$	133,900	$	54,049	Net income	$	57,657	$	42,192
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:

Impairment charges	Impairment charges	4,351		2,711		Impairment charges	—		4,351
Impairment charges on joint ventures		647		—

Gain on sale of real estate		(304)		(1,499)

Loss on sale of real estate						Loss on sale of real estate	560		—
Gain on insurance recovery	Gain on insurance recovery	(552)		(30)		Gain on insurance recovery	—		(552)
Deferred income tax benefit	Deferred income tax benefit	(37)		—		Deferred income tax benefit	(90)		—

Costs associated with loan refinancing or payoff		—		4,982
Equity in (income) loss from joint ventures		(1,887)		3,000
Distributions from joint ventures		780		90

Equity in loss from joint ventures						Equity in loss from joint ventures	1,985		106

Credit loss expense (benefit)	Credit loss expense (benefit)	9,447		(19,677)		Credit loss expense (benefit)	587		(306)
Depreciation and amortization	Depreciation and amortization	122,349		123,476		Depreciation and amortization	41,204		40,044
Amortization of deferred financing costs	Amortization of deferred financing costs	6,251		5,331		Amortization of deferred financing costs	2,129		2,071
Amortization of above/below market leases and tenant allowances, net	Amortization of above/below market leases and tenant allowances, net	(265)		(293)		Amortization of above/below market leases and tenant allowances, net	(89)		(87)
Share-based compensation expense to management and Trustees	Share-based compensation expense to management and Trustees	12,552		11,218		Share-based compensation expense to management and Trustees	4,322		4,245

Change in assets and liabilities:	Change in assets and liabilities:					Change in assets and liabilities:
Operating lease assets and liabilities	Operating lease assets and liabilities	237		(379)		Operating lease assets and liabilities	317		(49)
Mortgage notes accrued interest receivable	Mortgage notes accrued interest receivable	76		11		Mortgage notes accrued interest receivable	(296)		310
Accounts receivable	Accounts receivable	26,162		35,644		Accounts receivable	2,998		17,424

Other assets	Other assets	(1,090)		(1,924)		Other assets	(6,276)		(5,861)
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	23,762		5,511		Accounts payable and accrued liabilities	8,861		15,132
Unearned rents and interest	Unearned rents and interest	13,296		14,203		Unearned rents and interest	7,661		9,067

Net cash provided by operating activities	Net cash provided by operating activities	349,675		236,424		Net cash provided by operating activities	121,530		128,087
Investing activities:	Investing activities:					Investing activities:
Acquisition of and investments in real estate and other assets	Acquisition of and investments in real estate and other assets	(174,113)		(33,203)		Acquisition of and investments in real estate and other assets	(46,669)		(20,726)
Proceeds from sale of real estate	Proceeds from sale of real estate	9,995		30,821		Proceeds from sale of real estate	4,029		61
Investment in unconsolidated joint ventures		(19,690)		(13,611)
Distributions from joint venture related to refinancing		6,695		—
Settlement of derivative		(3,830)		—

Investment in mortgage notes receivable	Investment in mortgage notes receivable	(37,706)		(7,670)		Investment in mortgage notes receivable	(1,427)		—
Proceeds from mortgage notes receivable paydowns	Proceeds from mortgage notes receivable paydowns	1,621		8,106		Proceeds from mortgage notes receivable paydowns	132		151
Investment in notes receivable	Investment in notes receivable	—		(4,379)		Investment in notes receivable	(3,025)		—
Proceeds from note receivable paydowns	Proceeds from note receivable paydowns	582		7,124		Proceeds from note receivable paydowns	161		75

Proceeds from insurance recovery, net	Proceeds from insurance recovery, net	3,700		30		Proceeds from insurance recovery, net	—		609

Additions to properties under development	Additions to properties under development	(58,919)		(26,695)		Additions to properties under development	(14,711)		(5,205)

Net cash used by investing activities	Net cash used by investing activities	(271,665)		(39,477)		Net cash used by investing activities	(61,510)		(25,035)
Financing activities:	Financing activities:					Financing activities:

Principal payments on debt		—		(1,013,765)

Deferred financing fees paid	Deferred financing fees paid	(328)		(336)		Deferred financing fees paid	(74)		(48)
Costs associated with loan refinancing or payoff (cash portion)		—		(3,258)

Net proceeds from issuance of common shares	Net proceeds from issuance of common shares	576		308		Net proceeds from issuance of common shares	141		160

Impact of stock option exercises, net	Impact of stock option exercises, net	(11)		—		Impact of stock option exercises, net	—		(4)
Issuances of captive REIT preferred shares		107		—

Purchase of common shares for treasury for vesting	Purchase of common shares for treasury for vesting	(4,250)		(2,763)		Purchase of common shares for treasury for vesting	(3,565)		(4,250)

Dividends paid to shareholders	Dividends paid to shareholders	(197,809)		(55,459)		Dividends paid to shareholders	(67,988)		(62,151)

Net cash used by financing activities	Net cash used by financing activities	(201,715)		(1,075,273)		Net cash used by financing activities	(71,486)		(66,293)
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(106)		(109)		Effect of exchange rate changes on cash	(8)		57
Net change in cash and cash equivalents and restricted cash	Net change in cash and cash equivalents and restricted cash	(123,811)		(878,435)		Net change in cash and cash equivalents and restricted cash	(11,474)		36,816
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 and restricted cash at end of the period	Cash and cash equivalents and restricted cash at end of the period	$	166,090	$	149,575	Cash and cash equivalents and restricted cash at end of the period	$	99,037	$	326,717
Supplemental information continued on next page.	Supplemental information continued on next page.					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
		Nine Months Ended September 30,					Three Months Ended March 31,
		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	$	160,838	$	144,433	Cash and cash equivalents at end of the period	$	96,438	$	323,761
Restricted cash at end of the period	Restricted cash at end of the period	5,252		5,142		Restricted cash at end of the period	2,599		2,956
Cash and cash equivalents and restricted cash at end of the period	Cash and cash equivalents and restricted cash at end of the period	$	166,090	$	149,575	Cash and cash equivalents and restricted cash at end of the period	$	99,037	$	326,717

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	$	39,460	$	87,620	Transfer of property under development to real estate investments	$	134	$	35,255

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	$	21,698	$	19,791

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

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	$	80,948	$	107,456	Cash paid during the period for interest	$	17,913	$	17,298
Cash paid during the period for income taxes	Cash paid during the period for income taxes	$	1,011	$	1,193	Cash paid during the period for income taxes	$	253	$	—
Interest cost capitalized	Interest cost capitalized	$	606	$	1,341	Interest cost capitalized	$	783	$	200
Change in accrued capital expenditures	Change in accrued capital expenditures	$	(4,387)	$	2,172	Change in accrued capital expenditures	$	(7,510)	$	5,928

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 ~~nine~~three month period ended ~~September 30, 2022~~March 31, 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company does not have any investments in consolidated VIEs.

Risks and Uncertainties

The Company continues 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~~spending. The Company's non-theatre properties have ~~been lifted,~~demonstrated strong recovery from the ~~extent~~impacts of the ~~impact of~~pandemic. However, the Company's theatre customers were more severely impacted by the COVID-19 pandemic onand have seen a slower recovery than its non-theatre customers due primarily to changes in the ~~Company's business still remains highly uncertain~~timing of film releases, production delays and ~~difficult to predict.~~

experimentation with streaming. As of ~~September 30, 2022,~~a result, 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 a number of factors, including, but~~

not limited to, the scope, severity and duration of 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 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. The COVID-19 pandemic has negatively affected the Company's business and could continue to have material adverse effects 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 nine months ended September 30, 2022.

~~The~~ ~~following were impacts to the Company's financial statements and business during the~~ ~~nine months ended September 30, 2022 arising out of or relating to the COVID-19 pandemic~~:

•~~The Company continued~~continues to recognize revenue on a cash basis for certain tenants, including American-Multi Cinema, Inc. (AMC) and Regal Cinemas, ~~(Regal),~~ a subsidiary of Cineworld Group.

On September 7, 2022, Cineworld Group, plc, Regal Entertainment Group and the Company's other Regal theatre tenants (collectively, Regal) filed for protection under Chapter 11 ~~bankruptcy protection. The~~of the U.S. Bankruptcy Code (the Code). Regal leases 57 theatres from the Company ~~has~~pursuant to two master leases and 28 single property leases (the Regal Leases).

As a result of the filing, Regal did not ~~yet received contractual~~pay its rent or monthly deferral ~~payments from Regal~~payment for September 2022 but ~~received~~subsequently paid portions of this amount pursuant to an order of the bankruptcy court. Regal resumed payment of rent and deferral payments ~~from~~for all Regal ~~for~~Leases commencing in October 2022 and ~~November 2022.~~

•~~As of September 30, 2022, the Company~~ has ~~deferred amounts due from tenants of approximately $7.0 million~~continued making these payments through April 2023. However, there can be no assurance that are booked as receivables. Additionally, as of September 30, 2022, the Company has amounts due from customers that were not booked as receivables because the full amounts were not deemed probable of collection as a result of the COVID-19 pandemic. The amounts not booked as receivables remain obligations of the customers andsubsequent payments will be ~~recognized as revenue when received. During the nine months ended September 30, 2022, the Company collected $10.9 million~~made in ~~deferred rent~~a timely and $1.1 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 nine months ended September 30, 2022, the Company collected $19.2 million of 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.complete manner.

~~Reportable Segments~~

~~The Company~~In December of 2022, Regal filed a motion to reject leases for three of our properties, but thus far has ~~two reportable operating segments: Experiential~~not elected to proceed with these rejections. On April 2, 2023, Regal reported that it had entered into a restructuring support agreement with secured lenders holding most of Regal's outstanding secured indebtedness. On April 11, 2023, Regal filed a plan of reorganization and ~~Education. The Experiential segment includes~~an accompanying disclosure statement. Based on this progress, Regal has announced its expectation to emerge from the ~~following property types: theatres, eat & play (including seven theatres located~~bankruptcy case by mid-year. Given the complexity of this matter, there can be no assurance that Regal will not experience delays in ~~entertainment districts), attractions, ski, experiential lodging, fitness & wellness, gaming and cultural. The Education segment includes~~concluding 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 may 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.

bankruptcy case.

The Company ~~evaluates~~is currently in negotiations with Regal regarding the ~~held-for-sale classification~~properties Regal will continue to operate and the terms and conditions of ~~its real estate as~~leases for those properties. Regal is entitled to certain rights under the Code regarding the assumption or rejection of the ~~end of each quarter. Assets~~Regal Leases. There can be no assurance 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 is probable the assetsthese negotiations will be ~~sold within one year. On occasion,~~successful and which Regal Leases, if any, will be assumed under the Code. Additionally, Regal owes the Company ~~will receive unsolicited offers from third parties~~a significant amount of rent deferred during the COVID-19 pandemic pursuant to ~~buy individual Company properties. Under these circumstances, the Company will classify the properties as held for sale when~~ a ~~sales contract~~Promissory Note. This amount is ~~executed with no contingencies and the prospective buyer has funds at risk to ensure performance.~~

~~Real Estate Acquisitions~~

Upon acquisition of real estate properties, the Company evaluates the acquisition to determine if it is a business combination or an asset acquisition. If 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.

If the acquisition is determined to be a business combination, the Company records the fair value of acquired tangible assets and identified intangible assets and liabilities as well as any noncontrolling interest. Acquisition-related costs in connection with business combinations are expensed as incurred andnot included ~~in "Transaction costs"~~ in the accompanying consolidated ~~statements of income~~balance sheets and ~~comprehensive income.~~

~~For real estate acquisitions (asset acquisitions or business combinations), the fair value (or relative fair value in an asset acquisition)~~there can be no assurance how much of the ~~tangible assets is determined by valuing~~amount, if any, the ~~property using recent independent appraisals or methods similar to those used by independent appraisers. Land is valued using~~Company will recover under 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.Promissory Note.

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 ~~$32.6~~$29.6 million and ~~$36.9~~$31.1 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, are shown as a reduction of debt. The deferred financing costs ~~of $7.0 million and $8.7 million as of September 30, 2022 and December 31, 2021, respectively,~~ related to the unsecured revolving credit facility of $5.9 million and $6.4 million as of March 31, 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 the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, the Company recognized $2.1 million and $0.6 million, respectively, of straight-line ~~write-offs totaling $0.2 million. Straight-line~~ rental ~~revenue, net of write-offs, was~~ ~~$4.7 million~~revenue. There were no straight-line write offs for the ~~nine~~three months ended ~~September 30, 2022~~. For the nine months ended September 30, 2021, the Company recognized straight-line write-offs totaling $0.2 million. Straight-line rental revenue, net of write-offs, was $3.7 million for the nine months ended September 30, 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 842March 31, 2023 and ~~Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic. In reliance upon the~~

2022.

FASB Staff Q&A, 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 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 straight-line rent receivable will be amortized over the remaining term 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.

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 ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the Company recognized ~~$1.8~~$0.7 million and ~~$2.8~~$0.5 million, respectively, in tenant reimbursements related 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 ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the amounts due for non-lease components included in rental revenue totaled ~~$13.2~~$4.7 million and ~~$11.2~~$4.5 million, respectively.

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 ~~$5.4~~$1.8 million and ~~$7.2~~$3.4 million for the ~~nine~~three months ended ~~September 30,~~March 31, 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. During the nine months ended September 30, 2022, the Company wrote-off approximately $1.5 million of accrued interest and fees receivables against interest income related to one mortgage note receivable and two notes receivable. There were no accrued interest write-offs for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2023 and 2022. As of ~~September 30, 2022,~~March 31, 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 that the Company determines is collateral dependent, the Company measures expected credit losses based on the fair value of the collateral. As of ~~September 30, 2022,~~March 31, 2023, the Company does not have any mortgage notes or notes receivable with past due principal balances. See Note 65 for further discussion of mortgage notes and notes receivable for which the Company elected to apply the collateral dependent practical expedient.

~~Mortgage and Other Financing Income~~

Certain of the Company's borrowers are subject to additional interest based on certain thresholds defined in 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 nine months ended September 30, 2022 and 2021.~~

Concentrations of Risk

Regal, AMC and Topgolf USA (Topgolf) ~~and Regal~~ represented a significant portion of the Company's total revenue for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 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 due to the impact of the COVID-19 pandemic. The Company had higher revenue from Regal during the nine months ended 2022.~~September 30, 2022 due to the payment of rent as well as the repayment of deferred rent due, both of which were recognized as rental revenue when received.~~ As described above, on September 7, 2022, Cineworld Group, the parent entity of Regal, filed for Chapter 11 bankruptcy protection. The Company has not yet received contractual rent or deferral payments from Regal for September 2022, but received payment of contractual rent and deferral payments from Regal for October and November 2022. The following is a ~~summary~~summary of the Company's total revenue derived from rental or interest payments from AMC, Topgolf and Regal (dollars in thousands):

Nine Months Ended September 30,
2022 2021
Total Revenue % of Company's Total Revenue Total Revenue % of Company's Total Revenue
AMC $ 71,017 14.8 % $ 71,000 18.8 %
Topgolf 69,464 14.5 % 63,445 16.8 %
Regal 63,477 13.2 % 23,301 6.2 %

~~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 $5.9 million and $6.6 million~~ ~~for the nine months ended September 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 $5.0 million and $2.9 million for the~~ ~~nine months ended September 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 $11 thousand and $13 thousand for the nine months ended September 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 $1.7 million for~~ ~~both the nine months ended September 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.~~


	Three Months Ended March 31,
	2023				2022
	Total Revenue		% of Company's Total Revenue		Total Revenue		% of Company's Total Revenue
Regal	$	28,751	16.8	%	$	21,255	13.5	%
AMC	23,801		13.9	%	23,422		14.9	%
Topgolf	23,672		13.8	%	22,383		14.2	%

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 September 30, 2022, the Company had six 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (in thousands):


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Buildings and improvements	Buildings and improvements	$	4,664,228	$	4,523,052	Buildings and improvements	$	4,659,876	$	4,637,801
Furniture, fixtures & equipment	Furniture, fixtures & equipment	118,195		108,907		Furniture, fixtures & equipment	115,320		115,677
Land	Land	1,238,734		1,222,149		Land	1,247,733		1,236,358
Leasehold interests	Leasehold interests	26,987		26,717		Leasehold interests	26,940		26,940
		6,048,144		5,880,825			6,049,869		6,016,776
Accumulated depreciation	Accumulated depreciation	(1,278,427)		(1,167,734)		Accumulated depreciation	(1,341,527)		(1,302,640)
Total	Total	$	4,769,717	$	4,713,091	Total	$	4,708,342	$	4,714,136

Depreciation expense on real estate investments was ~~$118.7~~$40.0 million and ~~$119.2~~$38.8 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ 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 nine months ended September 30, 2022, the Company received an offer to sell a recently vacated property. As a result, the Company reassessed the expected holding period, and determined that the estimated cash flows were not sufficient to recover the carrying value of the property. The Company estimated the fair value of this property by taking into account the purchase offer. The Company reduced the carrying value of the real estate investment, net to $4.7 million. During the nine months ended September 30, 2022, the Company recognized an impairment charge of $4.4 million on the real estate investment, which is the amount that the carrying value of the asset exceeded the estimated fair value. This property was sold during the nine months ended September 30, 2022.

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

5. Investments and Dispositions

The Company's investment spending during the ~~nine~~three months ended ~~September 30, 2022 totaled $321.3~~March 31, 2023 totaled $66.5 million, and included the acquisition of ~~two~~a fitness and wellness ~~properties~~property for approximately ~~$63.5~~$46.7 million ~~the acquisition of two attraction properties located in Canada for approximately $142.8 million,~~and spending on build-to-suit experiential development and redevelopment ~~projects and the acquisition of interests in two joint ventures for approximately $50.6 million. See Note 9 for further details on these two joint ventures~~.projects.

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, the Company completed the sale of ~~two~~one vacant ~~theatre properties~~eat & play property and a land parcel for net proceeds of ~~$9.9~~$4.0 million and recognized a ~~combined gain~~net loss on sale of ~~$0.3~~$0.6 million.

6.5. 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 ~~September 30, 2022,~~March 31, 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.

~~Investment in~~Certain of the Company’s mortgage notes ~~including related accrued interest receivable, at September 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 September 30, 2022 December 31, 2021 September 30, 2022
Attraction property Powells Point, North Carolina 2019 7.75 % 6/30/2025 $ 29,206 $ 29,037 $ 28,243 $ —
Fitness & wellness property Omaha, Nebraska 2017 7.85 % 1/3/2027 10,905 10,937 10,940 —
Fitness & wellness property Merriam, Kansas 2019 7.55 % 7/31/2029 9,090 9,187 9,159 —
Ski property Girdwood, Alaska 2019 8.13 % 7/31/2032 72,000 71,563 45,877 10,000
Fitness & wellness property Omaha, Nebraska 2016 7.85 % 6/30/2030 10,539 10,563 10,615 379
Experiential lodging property Nashville, Tennessee 2019 6.99 % 9/30/2031 70,000 70,542 70,896 —
Eat & play property Austin, Texas 2012 11.31 % 6/1/2033 10,382 10,382 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 4,533 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 18,066 18,198 —
Fitness & wellness property Fort Collins, Colorado 2018 7.85 % 1/31/2038 10,292 10,069 10,277 —
Early childhood education center Lake Mary, Florida 2019 8.10 % 5/9/2039 4,200 4,353 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 4,013 4,034 —
$ 406,313 $ 399,485 $ 370,159 $ 10,379

~~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 ~~$3.5 million and $7.3 million at~~ ~~September 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 ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, the Company ~~recorded an allowance for credit loss of $6.8 million related to one 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 two 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 March 31, 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 ~~September 30, 2022,~~March 31, 2023, based on ~~delays in interest payments and~~ the ~~borrowers'~~borrower's declining financial condition, the Company determined that the ~~borrowers are experiencing~~borrower continues to experience financial difficulty. The repayments are expected to be provided substantially through the sale or operation of the collateral, therefore, the Company ~~in each case,~~ 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. 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 ~~borrower~~outstanding principal and ~~the notes receivable are secured by the equipment and personal property of the borrowers. The collateral was appraised during the nine months ended September 30, 2022, which resulted~~interest is no longer in credit loss expense of $6.8 million for the mortgage note, $1.2 million for one of the notes receivable and $1.9 million for the other note receivable, representing a full reserve for the $1.9 million note receivable.question. Income from ~~these borrowers~~this borrower is recognized on a cash basis. The Company received interest payments totaling $0.2 million and $0.3 million from this borrower for the three months ended March 31, 2023 and 2022, respectively. During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, the borrower made all contractual interest payments according to the terms of the modified agreement.

~~Company wrote-off $1.5 million~~Investment in notes receivable, including related accrued interest ~~receivables~~receivable, was $4.4 million and ~~fees to "Mortgage~~$2.9 million at March 31, 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~~At March 31, 2023, two of the ~~year ended December 31, 2020, the Company entered into an amended and restated loan and security agreement with one of its~~Company's notes receivable ~~borrowers in response to the impacts of the COVID-19 pandemic. 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 September 30, 2022, this note receivable was~~are considered 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 ~~September 30, 2022~~March 31, 2023 on these notes and the ~~note remains~~notes remain fully reserved with an allowance for credit loss totaling $8.4 million and $1.9 million, respectively, which represents the outstanding principal balance of the ~~note~~notes as of ~~September 30, 2022.~~March 31, 2023. Income ~~for this borrower~~from these borrowers is recognized on a cash basis. ~~During~~No interest payments were received during the ~~nine~~three months ended ~~September 30,~~March 31, 2023 or 2022 ~~the Company received principal payments totaling $0.3 million and $1.2 million in cash basis interest payments~~ on ~~this note receivable.~~these notes.

At ~~September 30, 2022,~~March 31, 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 $8.4 million, which is fully reserved in the allowance for credit losses at ~~September 30, 2022.~~March 31, 2023.

The following summarizes the activity within the allowance for credit losses related to mortgage notes, unfunded commitments and notes receivable for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 (in thousands):


		Mortgage notes receivable		Unfunded commitments - mortgage notes receivable		Notes receivable		Unfunded commitments - notes receivable		Total			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
Allowance for credit losses at December 31, 2022												Allowance for credit losses at December 31, 2022	$	8,999	$	751	$	11,952	$	—	$	21,702
Credit loss expense (benefit)	Credit loss expense (benefit)	6,682		(12)		2,777		—		9,447		Credit loss expense (benefit)	1,416		372		(1,201)		—		587
Charge-offs	Charge-offs	—		—		—		—		—		Charge-offs	(7,771)		—		—		—		(7,771)
Recoveries	Recoveries	—		—		—		—		—		Recoveries	—		—		—		—		—
Allowance for credit losses at September 30, 2022		$	8,806	$	64	$	11,463	$	—	$	20,333
Allowance for credit losses at March 31, 2023												Allowance for credit losses at March 31, 2023	$	2,644	$	1,123	$	10,751	$	—	$	14,518

6. Accounts Receivable

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


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Receivable from tenants	Receivable from tenants	$	8,491	$	37,417	Receivable from tenants	$	2,827	$	7,595
Receivable from non-tenants	Receivable from non-tenants	2,197		2,237		Receivable from non-tenants	751		1,006

Straight-line rent receivable	Straight-line rent receivable	42,687		38,419		Straight-line rent receivable	47,013		44,986

Total	Total	$	53,375	$	78,073	Total	$	50,591	$	53,587

As of ~~September 30, 2022,~~March 31, 2023, receivable from tenants includes payments of approximately ~~$7.0~~$1.5 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.

8.7. Capital Markets and Dividends

During the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023, the Company declared cash dividends totaling $0.825 ~~and $2.425~~ per common ~~share, respectively.~~share. Additionally, during the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, the Board declared cash dividends of $0.359375 ~~and $1.078125~~ 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 $1.6875~~ 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 6.11% at March 31, 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%.

9.8. Unconsolidated Real Estate Joint Ventures

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


						Investment as of				Income (Loss) for the Nine Months Ended									Investment as of				Income (Loss) for the Three Months Ended
Property Type	Property Type	Location	Ownership Interest			September 30, 2022		December 31, 2021		September 30, 2022		September 30, 2021		Property Type	Location	Ownership Interest			March 31, 2023		December 31, 2022		March 31, 2023		March 31, 2022
Experiential lodging	Experiential lodging	St. Pete Beach, FL	65	%	(1)	$	20,226	$	25,894	$	1,807	$	(2,837)	Experiential lodging	St. Pete Beach, FL	65	%	(1)	$	19,393	$	18,712	$	682	$	1,198
Experiential lodging	Experiential lodging	Warrens, WI	95	%	(2)	11,822		10,068		(92)		(170)		Experiential lodging	Warrens, WI	95	%	(2)	9,650		10,865		(1,215)		(1,294)
Experiential lodging	Experiential lodging	Breaux Bridge, LA	85	%	(3)	18,076		—		233		—		Experiential lodging	Breaux Bridge, LA	85	%	(3)	15,855		17,080		(1,225)		—
Experiential lodging														Experiential lodging	Harrisville, PA	62	%	(4)	6,080		6,307		(227)		—
Theatres	Theatres	China	various		(4)	—		708		(61)		7		Theatres	China	various			—		—		—		(10)
						$	50,124	$	36,670	$	1,887	$	(3,000)						$	50,978	$	52,964	$	(1,985)	$	(106)

(1) The Company has equity investments in two unconsolidated real estate ~~joint ventures related to two 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 two separate~~ joint ventures, one that holds the investment in the real estate of the experiential lodging properties and the other that holds 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 nine months ended September 30, 2022, the Company recagreement. ~~eived $6.7 million in distributions. In addition, the Company received $0.8 million in distributions from operations during the nine months ended September 30, 2022~~. No distributions were received during the nine months ended September 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 ~~September 30, 2022.~~March 31, 2023. The maturity date of this mortgage loan is May 18, 2025. The note can be extended for two additional 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 two 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 two 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 ~~$16.3~~$20.0 million at ~~September 30, 2022~~March 31, 2023 that provides for additional draws of approximately ~~$8.3~~$4.6 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 ~~$9.5~~$8.4 million remaining to fund at ~~September 30, 2022~~.March 31, 2023.

(3) The Company has equity investments in two 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 two 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 million at ~~September 30, 2022.~~March 31, 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 three 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 ~~nine months ended September 30, 2022,~~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 ~~recognized $0.6 million in other-than-temporary impairment charges related~~does not individually have the power 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~~direct the activities that are most important to the joint venture and, accordingly, this investment is not consolidated. Additionally, the Company's maximum exposure to loss at March 31, 2023, other than the guarantee described below, is its investment in ~~these~~the joint venture that holds the lodging operations of $0.5 million.

The Company's investments in the two unconsolidated real estate joint ventures (representing 92% of each joint venture's equity) have a 67% equity interest in two separate consolidated joint ventures, one that holds the 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 March 31, 2023 in order to fund renovations, with $0.5 million outstanding at March 31, 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 ~~nine months ended September 30, 2021. No distributions were received during~~Company has guaranteed the ~~nine months ended September 30, 2022.~~completion of the renovations in the amount of approximately $13.9 million, with $13.6 million remaining to fund at March 31, 2023.

~~10.~~9. 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 ~~$14.1~~$11.2 million and $11.4 million at ~~September 30, 2022 a~~March 31, 2023 and ~~nd no derivative assets at~~ December 31, ~~2021.~~2022, respectively. The Company had ~~derivative liabilities of $4.9 million at~~ ~~December 31, 2021 and~~ no

derivative liabilities at ~~September 30,~~March 31, 2023 and December 31, 2022. The Company has not posted or received collateral with its derivative counterparties as of ~~September 30, 2022~~March 31, 2023 or December 31, ~~2021.~~2022. See Note 1110 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 ~~September 30, 2022,~~March 31, 2023, the Company had one 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 ~~September 30, 2022~~March 31, 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 ~~September 30, 2022,~~March 31, 2023, the Company estimates that during the twelve months ending ~~September 30, 2023, $0.7~~March 31, 2024, $0.9 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 six 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 ~~September 30, 2022,~~March 31, 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 ~~September 30, 2022,~~March 31, 2023, the Company estimates that during the twelve months ending ~~September 30, 2023, $1.1~~March 31, 2024, $0.9 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 ~~September 30, 2022,~~March 31, 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 an 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, which continues to be reported in AOCI until the net investment is sold or liquidated.

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 nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~

2022.

Effect of Derivative Instruments on the Consolidated Statements of Changes in Equity and Comprehensive Income for the Three Ended March 31, 2023 and ~~Nine Months Ended September 30,~~ 2022 ~~and 2021~~ (Dollars in thousands)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
Description	Description	2022		2021		2022		2021		Description	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		$	527	$	(3,338)	$	1,577	$	(3,209)
Amount of (Loss) Gain Recognized in AOCI on Derivative										Amount of (Loss) Gain Recognized in AOCI on Derivative	$	(298)	$	825
Amount of Income (Expense) Reclassified from AOCI into Earnings (1)	Amount of Income (Expense) Reclassified from AOCI into Earnings (1)	55		(4,962)		(58)		(9,074)		Amount of Income (Expense) Reclassified from AOCI into Earnings (1)	126		(76)
Cross-Currency Swaps	Cross-Currency Swaps									Cross-Currency Swaps
Amount of Gain (Loss) Recognized in AOCI on Derivative	Amount of Gain (Loss) Recognized in AOCI on Derivative	2,072		143		2,245		(71)		Amount of Gain (Loss) Recognized in AOCI on Derivative	4		(26)
Amount of Income (Expense) Reclassified from AOCI into Earnings (2)	Amount of Income (Expense) Reclassified from AOCI into Earnings (2)	128		(57)		29		(205)		Amount of Income (Expense) Reclassified from AOCI into Earnings (2)	225		(54)
Net Investment Hedges	Net Investment Hedges									Net Investment Hedges
Cross-Currency Swaps	Cross-Currency Swaps									Cross-Currency Swaps
Amount of Gain Recognized in AOCI on Derivative		—		4,456		665		356
Amount of Loss Recognized in AOCI on Derivative										Amount of Loss Recognized in AOCI on Derivative	—		(3,019)
Amount of Income Recognized in Earnings (2) (3)	Amount of Income Recognized in Earnings (2) (3)	—		97		170		270		Amount of Income Recognized in Earnings (2) (3)	—		99
Currency Forward Agreements	Currency Forward Agreements									Currency Forward Agreements
Amount of Gain Recognized in AOCI on Derivative	Amount of Gain Recognized in AOCI on Derivative	9,703		—		10,641		—		Amount of Gain Recognized in AOCI on Derivative	341		—

Total	Total									Total
Amount of Gain (Loss) Recognized in AOCI on Derivatives	Amount of Gain (Loss) Recognized in AOCI on Derivatives	$	12,302	$	1,261	$	15,128	$	(2,924)	Amount of Gain (Loss) Recognized in AOCI on Derivatives	$	47	$	(2,220)
Amount of Income (Expense) Reclassified from AOCI into Earnings	Amount of Income (Expense) Reclassified from AOCI into Earnings	183		(5,019)		(29)		(9,279)		Amount of Income (Expense) Reclassified from AOCI into Earnings	351		(130)
Amount of Income Recognized in Earnings	Amount of Income Recognized in Earnings	—		97		170		270		Amount of Income Recognized in Earnings	—		99

Interest expense, net in accompanying consolidated statements of income and comprehensive income	Interest expense, net in accompanying consolidated statements of income and comprehensive income	$	32,747	$	36,584	$	99,296	$	114,090	Interest expense, net in accompanying consolidated statements of income and comprehensive income	$	31,722	$	33,260
Other income in accompanying consolidated statements of income and comprehensive income	Other income in accompanying consolidated statements of income and comprehensive income	$	11,360	$	8,091	$	30,626	$	9,802	Other income in accompanying consolidated statements of income and comprehensive income	$	9,333	$	9,305

(1) Included in "Interest expense, net" in the accompanying consolidated statements of income and comprehensive income for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

(2) Included in "Other income" in the accompanying consolidated statements of income and comprehensive income for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 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 agreements.

As of ~~September 30, 2022,~~March 31, 2023, the Company had no ~~derivatives~~derivatives in a liability position related to these derivative agreements. As of ~~September 30, 2022,~~March 31, 2023, the Company had not posted any collateral related to these agreements and was not in breach of any provisions in these agreements.

~~11.~~10. 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 ~~September 30, 2022,~~March 31, 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 ~~September 30, 2022~~March 31, 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

~~September 30, 2022~~March 31, 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
September 30, 2022
March 31, 2023										March 31, 2023

Cross-Currency Swaps (1)	Cross-Currency Swaps (1)	$	—	$	2,118	$	—	$	2,118	Cross-Currency Swaps (1)	$	—	$	1,303	$	—	$	1,303

Currency Forward Agreements (1)	Currency Forward Agreements (1)	—		10,641		—		10,641		Currency Forward Agreements (1)	—		9,027		—		9,027
Interest Rate Swap Agreements (1)	Interest Rate Swap Agreements (1)	—		1,374		—		1,374		Interest Rate Swap Agreements (1)	—		908		—		908
December 31, 2021
December 31, 2022										December 31, 2022
Cross-Currency Swaps (1)										Cross-Currency Swaps (1)	$	—	$	1,523	$	—	$	1,523

Cross-Currency Swaps (2)		$	—	$	(4,626)	$	—	$	(4,626)
Currency Forward Agreements (1)										Currency Forward Agreements (1)	—		8,686		—		8,686
Interest Rate Swap Agreements (1)										Interest Rate Swap Agreements (1)	—		1,240		—		1,240

Interest Rate Swap Agreements (2)		—		(262)		—		(262)

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

~~(2) Included in "Accounts payable and accrued liabilities" 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 ~~September 30,~~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 ~~September 30, 2022 and~~ December 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
September 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) — — — —


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





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)~~(2) Includes collateral dependent notes receivable, which are presented within "Other assets" in the accompanying consolidated balance sheets.

As further discussed in Note 4, during the nine months ended September 30, 2022, the Company recorded an impairment charge of $4.4 million related to real estate investments, net on one of its properties. Additionally, during the year ended December 31, 2021, the Company recorded impairment charge~~s of $2.7 million rel~~ated to real estate investments, net on two of its properties. Management estimated the fair values of these investments taking into account various factors including purchase offers, shortened hold periods and market conditions. The Company determined, based on the inputs, that the valuation of these properties with purchase offersThere were ~~classified within Level 2 of the fair value hierarchy and were~~no additional assets or liabilities measured at fair ~~value.~~

As further discussed in Note 6, during the nine months ended September 30, 2022, the Company recorded an allowance for credit losses of $6.8 million related to one mortgage note and $1.2 million related to one note receivable, asvalue on 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 $20 per square foot and a discount rate of 6.75%. These measurements were classified within Level 3 of the fair value hierarchy as many of the assumptions were not observable. Additionally, during the nine months ended September 30, 2022, the Company recorded an allowance for credit losses totaling $1.9 million related to one note receivable to fully reserve the outstanding principal balance of $1.9 million, as a result of recent changes 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 nine months ended September 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.non-recurring basis at March 31, 2023.

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 ~~September 30, 2022~~March 31, 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 ~~September 30, 2022,~~March 31, 2023, the Company had a carrying value of ~~$399.5~~$461.3 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 ~~8.96%~~9.01%. The fixed rate mortgage notes bear interest at rates of 6.99% to 12.14%. Discounting the future cash flows for 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 mortgage notes receivable to be approximately ~~$436.6~~$502.5 million with an estimated weighted average market rate of ~~7.79%~~7.77% at ~~September 30, 2022.~~March 31, 2023.

At December 31, ~~2021,~~2022, the Company had a carrying value of ~~$370.2~~$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 ~~9.04%~~8.92%. The fixed rate mortgage notes bear interest at rates of ~~7.01%~~6.99% to ~~11.96%~~12.14%. Discounting the future cash flows for fixed rate mortgage notes receivable using rates of ~~7.50%~~7.15% to ~~9.25%~~10.00%, management estimates the fair value of the fixed rate mortgage notes receivable to be ~~$400.1~~$500.0 million with an estimated weighted average market rate of ~~8.05%~~7.70% at December 31, ~~2021.~~2022.

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 ~~September 30, 2022,~~March 31, 2023, the Company had a carrying value of $25.0 million in variable rate debt outstanding with an average interest rate of approximately ~~3.27%~~4.94%. The carrying value of the variable rate debt outstanding approximated the fair value at ~~September 30, 2022.~~March 31, 2023.

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

At both ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the $25.0 million of variable rate debt outstanding, discussed above, had been effectively converted to a fixed rate by an interest rate swap ~~agreements.~~agreement. See Note 109 for additional information related to the Company's interest rate swap agreement.

At ~~September 30, 2022,~~March 31, 2023, the Company had a carrying value of $2.82 billion in fixed rate long-term debt outstanding with a weighted average interest rate of approximately 4.34%. Discounting the future cash flows for fixed rate debt using ~~September 30, 2022~~March 31, 2023 market rates of ~~7.29%~~6.46% to ~~8.14%~~9.35%, management estimates the fair value of the fixed rate debt to be approximately ~~$2.37~~$2.35 billion with an estimated weighted average market rate of ~~7.97%~~8.50% at ~~September 30, 2022.~~March 31, 2023.

At December 31, ~~2021,~~2022, the Company had a carrying value of $2.82 billion in fixed rate long-term debt outstanding with an average weighted interest rate of approximately 4.34%. Discounting the future cash flows for 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.~~11. Earnings Per Share

The following table summarizes the Company’s computation of basic and diluted earnings per share (EPS) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (amounts in thousands except per share information):


		Three Months Ended September 30, 2022					Nine Months Ended September 30, 2022						Three Months Ended March 31, 2023
		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	$	50,799				$	133,900				Net income	$	57,657
Less: preferred dividend requirements	Less: preferred dividend requirements	(6,033)					(18,099)					Less: preferred dividend requirements	(6,033)

Net income available to common shareholders	Net income available to common shareholders	$	44,766	75,016	$	0.60	$	115,801	74,949	$	1.55	Net income available to common shareholders	$	51,624	75,084	$	0.69
Diluted EPS:	Diluted EPS:											Diluted EPS:
Net income available to common shareholders	Net income available to common shareholders	$	44,766	75,016			$	115,801	74,949			Net income available to common shareholders	$	51,624	75,084
Effect of dilutive securities:	Effect of dilutive securities:											Effect of dilutive securities:
Share options and performance shares	Share options and performance shares	—		167			—		153			Share options and performance shares	—		199

Net income available to common shareholders	Net income available to common shareholders	$	44,766	75,183	$	0.60	$	115,801	75,102	$	1.54	Net income available to common shareholders	$	51,624	75,283	$	0.69

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021
Income
(numerator) Shares
(denominator) Per Share
Amount Income
(numerator) Shares
(denominator) Per Share
Amount
Basic EPS:
Net income $ 32,117 $ 54,049
Less: preferred dividend requirements (6,033) (18,100)
Net income available to common shareholders $ 26,084 74,804 $ 0.35 $ 35,949 74,738 $ 0.48
Diluted EPS:
Net income available to common shareholders $ 26,084 74,804 $ 35,949 74,738
Effect of dilutive securities:
Share options and performance shares — 107 — 81
Net income available to common shareholders $ 26,084 74,911 $ 0.35 $ 35,949 74,819 $ 0.48


	Three Months Ended March 31, 2022
	Income (numerator)		Shares (denominator)	Per Share Amount
Basic EPS:
Net income	$	42,192
Less: preferred dividend requirements	(6,033)



Net income available to common shareholders	$	36,159	74,843	$	0.48
Diluted EPS:
Net income available to common shareholders	$	36,159	74,843
Effect of dilutive securities:
Share options and performance shares	—		204


Net income available to common shareholders	$	36,159	75,047	$	0.48

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 nine~~ months ended ~~September 30,~~March 31, 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 nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

•Outstanding options to purchase 9583 thousand and 89 thousand common shares at per share prices ranging from $44.44 to $76.63 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, respectively.

•~~Outstanding options to purchase 89 thousand common shares at per share prices ranging from $44.44 to $76.63 for both the three and nine months ended September 30, 2021.~~

•The effect of 99 thousand contingently issuable performance shares granted during 2022 for ~~both~~ the three ~~and nine~~ months ended ~~September 30, 2022.~~March 31, 2023.

•The effect of 56112 thousand contingently issuable performance shares granted during ~~2020~~2023 for ~~both~~ the three ~~and nine~~ months ended ~~September 30, 2022 and 2021.~~March 31, 2023.

~~13.~~12. 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 ~~September 30, 2022,~~March 31, 2023, there were ~~1,983,595~~1,532,272 shares available for grant under the 2016 Equity Incentive Plan.

~~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 (12,559) 44.62 — 47.15 46.43
Outstanding at September 30, 2022 96,112 $ 44.44 — $ 76.63 $ 58.15

~~The weighted average fair value of options granted~~ ~~was $20.34~~ ~~during the nine months ended September 30, 2021. No~~ ~~options were granted during the nine months ended September 30, 2022. The intrinsic value of share options exercised was $62 thousand and $7 thousand for the nine months ended September 30, 2022 and 2021, respectively.~~

~~The following table summarizes outstanding and exercisable options at September 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 8,750 5.9 7,372 1.9
50.00 - 59.99 31,008 1.8 31,008 1.8
60.00 - 69.99 52,198 3.8 50,754 3.1
70.00 - 76.63 4,156 5.3 3,671 5.2
96,112 3.4 $ 58.15 $ — 92,805 2.6 $ 58.10 $ —

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	(215,727)	59.94			Vested	(220,437)	54.40
Forfeited	Forfeited	(2,176)	46.98			Forfeited	(13,809)	45.20
Outstanding at September 30, 2022		503,937	$	50.38	1.11
Outstanding at March 31, 2023						Outstanding at March 31, 2023	621,756	$	44.45	1.66

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~~$8.3 million and $~~6.6~~10.2 million for the ~~nine~~three months ended ~~September 30,~~March 31, 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 $1.9 million and $2.0 million for the three months ended March 31, 2023 and 2022, respectively. At ~~September 30, 2022,~~March 31, 2023, unamortized share-based compensation expense related to nonvested shares was ~~$11.4~~$16.6 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 ~~September 30, 2022~~March 31, 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 ~~nine~~three months ended ~~September 30,~~March 31, 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 $5.9 million and $6.0 million ~~and~~ ~~$6.6 million~~for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ 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 ~~nine~~three months ended ~~September 30, 2022:~~March 31, 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 ~~September 30, 2022,~~March 31, 2023, achievement of the performance condition was deemed probable for the performance shares granted during the ~~nine~~three months ended ~~September 30,~~March 31, 2023, 2022 and 2021 with an expected payout percentage of 75%, 200% and 200%, respectively, which resulted in a grant date fair value of approximately $0.9 million, $2.3 million for each period. Achievement of the minimum performance condition for the performance shares granted during the nine months ended September 30, 2020 was deemed not probable at September 30, 2022, resulting in no expected payout.and $2.3 million, respectively.

Expense recognized related to performance shares and included in "General and administrative expense" in the accompanying consolidated statements of income and comprehensive income was $2.0 million and $1.6 million for the three months ended March 31, 2023 and 2022, respectively. At ~~September 30, 2022,~~March 31, 2023, unamortized share-based compensation expense related to nonvested performance shares was ~~$10.2~~$13.3 million.

The performance shares accrue dividend equivalents which are paid only if common shares are issued upon settlement of the performance shares. During the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the Company accrued dividend equivalents expected to be paid on earned awards of ~~$587~~$353 thousand and ~~$65~~$136 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	1,449	41.63
Vested	Vested	(46,100)	49.00			Vested	—	—
Outstanding at September 30, 2022		38,605	$	50.77	0.67
Outstanding at March 31, 2023						Outstanding at March 31, 2023	40,054	$	50.44	0.20

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 $0.5 million and $0.6 million for the three months ended March 31, 2023 and 2022, respectively. At ~~September 30, 2022,~~March 31, 2023, unamortized share-based compensation expense related to restricted share units was ~~$1.3~~$0.4 million.

~~14.~~13. 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company was lessee in 52 ~~and 51~~ operating ground ~~leases, respectively.~~leases. 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 ~~September 30, 2022,~~March 31, 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 additio~~n,leases, however, two ofof 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 nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands):


			Three Months Ended September 30,				Nine Months Ended September 30,						Three Months Ended March 31,
		Classification	2022		2021		2022		2021			Classification	2023		2022
Operating leases	Operating leases	Rental revenue	$	134,316	$	117,408	$	405,062	$	325,429	Operating leases	Rental revenue	$	145,235	$	133,828
Sublease income - operating ground leases	Sublease income - operating ground leases	Rental revenue	6,155		5,632		$	17,887	$	16,108	Sublease income - operating ground leases	Rental revenue	6,356		5,775

Lease costs	Lease costs										Lease costs
Operating ground lease cost	Operating ground lease cost	Property operating expense	$	6,602	$	5,827	$	18,707	$	17,051	Operating ground lease cost	Property operating expense	$	6,600	$	5,969
Operating office lease cost	Operating office lease cost	General and administrative expense	226		226		678		678		Operating office lease cost	General and administrative expense	224		226

~~15.~~14. Segment Information

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

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

Balance Sheet Data:
As of September 30, 2022
Experiential Education Corporate/Unallocated Consolidated
Total Assets $ 5,122,466 $ 493,550 $ 176,743 $ 5,792,759
As of December 31, 2021
Experiential Education Corporate/Unallocated Consolidated
Total Assets $ 4,995,241 $ 505,086 $ 300,823 $ 5,801,150


Balance Sheet Data:
	As of March 31, 2023
	Experiential		Education		Corporate/Unallocated		Consolidated
Total Assets	$	5,173,349	$	470,135	$	113,131	$	5,756,615

	As of December 31, 2022
	Experiential		Education		Corporate/Unallocated		Consolidated
Total Assets	$	5,164,710	$	473,580	$	120,411	$	5,758,701

Operating Data:
Three Months Ended September 30, 2022
Experiential Education Corporate/Unallocated Consolidated
Rental revenue $ 130,588 $ 9,883 $ — $ 140,471
Other income 11,200 — 160 11,360
Mortgage and other financing income 9,353 226 — 9,579
Total revenue 151,141 10,109 160 161,410
Property operating expense 14,707 — — 14,707
Other expense 9,135 — — 9,135
Total investment expenses 23,842 — — 23,842
Net operating income - before unallocated items 127,299 10,109 160 137,568
Reconciliation to Consolidated Statements of Income and Comprehensive Income:
General and administrative expense (12,582)
Transaction costs (148)
Credit loss expense (241)
Depreciation and amortization (41,539)
Gain on sale of real estate 304
Interest expense, net (32,747)
Equity in income from joint ventures 572
Income tax expense (388)
Net income 50,799
Preferred dividend requirements (6,033)
Net income available to common shareholders of EPR Properties $ 44,766

Operating Data:
Three Months Ended September 30, 2021
Experiential Education Corporate/Unallocated Consolidated
Rental revenue $ 113,589 $ 9,451 $ — $ 123,040
Other income 8,052 — 39 8,091
Mortgage and other financing income 8,283 233 — 8,516
Total revenue 129,924 9,684 39 139,647
Property operating expense 13,572 16 227 13,815
Other expense 7,851 — — 7,851
Total investment expenses 21,423 16 227 21,666
Net operating income - before unallocated items 108,501 9,668 (188) 117,981
Reconciliation to Consolidated Statements of Income and Comprehensive Income:
General and administrative expense (11,154)
Transaction costs (2,132)
Credit loss benefit 14,096
Impairment charges (2,711)
Depreciation and amortization (42,612)
Gain on sale of real estate 787
Costs associated with loan refinancing or payoff (4,741)
Interest expense, net (36,584)
Equity in loss from joint ventures (418)
Income tax expense (395)
Net income 32,117
Preferred dividend requirements (6,033)
Net income available to common shareholders of EPR Properties $ 26,084

Operating Data:
Nine Months Ended September 30, 2022
Experiential Education Corporate/Unallocated Consolidated
Rental revenue $ 392,622 $ 30,327 $ — $ 422,949
Other income 28,095 — 2,531 30,626
Mortgage and other financing income 25,069 684 — 25,753
Total revenue 445,786 31,011 2,531 479,328
Property operating expense 41,758 (7) 487 42,238
Other expense 26,104 — — 26,104
Total investment expenses 67,862 (7) 487 68,342
Net operating income - before unallocated items 377,924 31,018 2,044 410,986
Reconciliation to Consolidated Statements of Income and Comprehensive Income:
General and administrative expense (38,497)
Transaction costs (3,540)
Credit loss expense (9,447)
Impairment charges (4,351)
Depreciation and amortization (122,349)
Gain on sale of real estate 304
Interest expense, net (99,296)
Equity in income from joint ventures 1,887
Impairment charges on joint ventures (647)
Income tax expense (1,150)
Net income 133,900
Preferred dividend requirements (18,099)
Net income available to common shareholders of EPR Properties $ 115,801
Operating Data:
Nine Months Ended September 30, 2021
Experiential Education Corporate/Unallocated Consolidated
Rental revenue $ 313,424 $ 28,113 $ — $ 341,537
Other income 9,442 — 360 9,802
Mortgage and other financing income 24,663 772 — 25,435
Total revenue 347,529 28,885 360 376,774
Property operating expense 42,985 113 708 43,806
Other expense 13,428 — — 13,428
Total investment expenses 56,413 113 708 57,234
Net operating income - before unallocated items 291,116 28,772 (348) 319,540
Reconciliation to Consolidated Statements of Income and Comprehensive Income:
General and administrative expense (33,866)
Transaction costs (3,342)
Credit loss benefit 19,677
Impairment charges (2,711)
Depreciation and amortization (123,476)
Gain on sale of real estate 1,499
Costs associated with loan refinancing or payoff (4,982)
Interest expense, net (114,090)
Equity in loss from joint ventures (3,000)
Income tax expense (1,200)
Net income 54,049
Preferred dividend requirements (18,100)
Net income available to common shareholders of EPR Properties $ 35,949

3320


Operating Data:
	Three Months Ended March 31, 2023
	Experiential		Education		Corporate/Unallocated		Consolidated
Rental revenue	$	141,700	$	9,891	$	—	$	151,591
Other income	9,108		1		224		9,333
Mortgage and other financing income	10,249		223		—		10,472
Total revenue	161,057		10,115		224		171,396

Property operating expense	14,177		—		(22)		14,155
Other expense	8,950		—		—		8,950
Total investment expenses	23,127		—		(22)		23,105
Net operating income - before unallocated items	137,930		10,115		246		148,291

Reconciliation to Consolidated Statements of Income and Comprehensive Income:
General and administrative expense							(13,965)




Transaction costs							(270)
Credit loss expense							(587)

Depreciation and amortization							(41,204)
Loss on sale of real estate							(560)
Interest expense, net							(31,722)
Equity in loss from joint ventures							(1,985)


Income tax expense							(341)




Net income							57,657

Preferred dividend requirements							(6,033)
Net income available to common shareholders of EPR Properties							$	51,624

~~16.~~


Operating Data:
	Three Months Ended March 31, 2022
	Experiential		Education		Corporate/Unallocated		Consolidated
Rental revenue	$	129,025	$	10,578	$	—	$	139,603
Other income	9,210		—		95		9,305
Mortgage and other financing income	8,334		230		—		8,564
Total revenue	146,569		10,808		95		157,472

Property operating expense	13,693		(7)		253		13,939
Other expense	8,097		—		—		8,097
Total investment expenses	21,790		(7)		253		22,036
Net operating income - before unallocated items	124,779		10,815		(158)		135,436

Reconciliation to Consolidated Statements of Income and Comprehensive Income:
General and administrative expense							(13,224)



Transaction costs							(2,247)
Credit loss benefit							306
Impairment charges							(4,351)
Depreciation and amortization							(40,044)


Interest expense, net							(33,260)
Equity in loss from joint ventures							(106)


Income tax expense							(318)



Net income							42,192
Preferred dividend requirements							(6,033)
Net income available to common shareholders of EPR Properties							$	36,159

15. Other Commitments and Contingencies

As of ~~September 30, 2022~~March 31, 2023, the Company had 1715 development projects with commitments to fund an aggregate of approximately ~~$161.6~~$200.5 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 ~~September 30, 2022,~~March 31, 2023, the Company had ~~two~~four mortgage notes with commitments totaling approximately ~~$10.4~~$84.0 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 ~~September 30, 2022,~~March 31, 2023, the Company had three surety bonds outstanding totaling ~~$3.3~~$2.7 million.

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 ~~2021~~2022 Annual ~~Report, as supplemented by Item 1A - "Risk Factors" in this Quarterly Report on Form 10-Q.~~Report.

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. InMore recently, and as further discussed below, the ~~near term, we intend to be more selective in making investments and acquisitions in light of the current uncertain~~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 ~~increasing costs of capital.~~near-term. Our business is subject to a number of risks and uncertainties, including those described in Item 1A - “Risk Factors” in our ~~2021~~2022 Annual ~~Report, as supplemented by Item 1A - "Risk Factors" in this Quarterly Report on Form 10-Q.~~Report.

As of ~~September 30, 2022,~~March 31, 2023, our total assets were approximately $5.8 billion (after accumulated depreciation of approximately $1.3 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 ~~September 30, 2022.~~March 31, 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. We group our investments into two reportable segments, Experiential and Education. As of ~~September 30, 2022,~~March 31, 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 ~~September 30, 2022,~~March 31, 2023, our Experiential segment ~~(excluding property under development and undeveloped land inventory)~~ consisted of the following property types (owned or financed):

•~~173~~172 theatre properties;

•5756 eat & play properties (including seven theatres located in entertainment districts);

•2223 attraction properties;

•11 ski properties;

•~~six~~seven experiential lodging properties;

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

•one gaming property; and

•three cultural properties.

As of ~~September 30, 2022,~~March 31, 2023, our owned Experiential real estate portfolio consisted of approximately ~~20.1~~20.0 million square feet, which was ~~97%~~98% leased and included ~~$56.3~~$85.8 million in property under development and $20.2 million in undeveloped land inventory.

As of ~~September 30, 2022,~~March 31, 2023, our Education segment consisted of the following property types (owned or financed):

•65 early childhood education center properties; and

•nine private school properties.

As of ~~September 30, 2022,~~March 31, 2023, our owned Education real estate portfolio consisted of approximately 1.4 million square feet, which was 100% leased.

The combined owned portfolio consisted of ~~21.5~~21.4 million square feet and was ~~97%~~98% 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 beginning in 2020. 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 September 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. The COVID-19 pandemic has negatively affected our business, and couldexperimentation 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 nine months ended September 30, 2022.

~~The following were impacts to our financial statements during the nine months ended September 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 American-Multi Cinema, Inc. ("AMC") and Regal Cinemas, ~~("Regal"),~~ a subsidiary of Cineworld Group. ~~As further described below, on September 7, 2022, Cineworld Group filed for Chapter 11 bankruptcy protection.~~Going forward, we intend to significantly reduce our exposure to theatres, thereby increasing the diversity of our experiential property types. We ~~have not yet received contractual rent or deferral payments from Regal for September 2022, but received payment~~expect that to occur as we strictly limit new investments in theatres, grow other target experiential property types and pursue opportunistic dispositions of ~~rent and deferral payments from Regal for October and November 2022.~~theatre property types.

•

As of ~~September 30, 2022,~~March 31, 2023, we have deferred amounts due from tenants of ~~approximately $7.0~~approximately $1.5 million that are booked as receivables. Additionally, as of ~~September 30, 2022,~~March 31, 2023, we have amounts due from customers that were not booked as

receivables totaling approximately ~~$123.0~~$110.1 million because the full amounts were not deemed probable of collection as a result of the COVID-19 pandemic. The amounts not booked as receivables remain obligations of the customers and will be recognized as revenue when any such amounts are received. During the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, we collected ~~$10.9~~$6.5 million and $1.6 million, respectively, in deferred rent ~~and $1.1 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 ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, we collected ~~$19.2~~$0.6 million and $10.2 million, respectively, of 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.

On September 7, 2022, Cineworld Group, plc, Regal Entertainment Group and the Company's other Regal theatre tenants (collectively, “Regal”) filed for protection under Chapter 11 of the U.S. Bankruptcy Code (the “Code”). Regal leases 57 theatres from the Company 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 monthly deferral payment for September 2022 but subsequently paid portions of this amount pursuant to an order of the bankruptcy court. Regal resumed payment of rent and deferral payments for all Regal Leases commencing in October 2022 and has continued making these payments through April 2023. However, there can be no assurance that subsequent payments will be made in a timely and complete manner.

In December of 2022, Regal filed a motion to reject leases for three of our properties, but thus far has not elected to proceed with these rejections. On April 2, 2023, Regal reported that it had entered into a restructuring support agreement with secured lenders holding most of Regal's outstanding secured indebtedness. On April 11, 2023, Regal filed a plan of reorganization and an accompanying disclosure statement. Based on this progress, Regal has announced its expectation to emerge from the bankruptcy case by mid-year. Given the complexity of this matter, there can be no assurance that Regal will not experience delays in concluding the bankruptcy case.

We are currently in negotiations with Regal regarding the properties Regal will continue to operate and the terms and conditions of leases for those properties. Regal is entitled to certain rights under the Code regarding the assumption or rejection of the Regal Leases. There can be no assurance that these negotiations will be successful and which Regal Leases, if any, will be assumed under the Code. Additionally at March 31, 2023, Regal owes us approximately $82.4 million of rent deferred during the COVID-19 pandemic pursuant to a Promissory Note and approximately $4.5 million for September 2022 rent, of which $1.1 million represents pre-petition rent and $3.4 million represents post-petition rent under the Code. Because revenue derived from Regal is recognized on a cash-basis, all receivables from Regal are not reflected as assets in our financial statements. Substantially all of our claims under the Promissory Note are unsecured and subject to the provisions of the Code, including those provisions regarding assumption and rejection of leases. Regal has substantial secured debt, which is senior to the Promissory Note, as well as other unsecured debt. As a result, there can be no assurance how much of the amount, if any, we will recover under the Promissory Note.

While deferments for this and future periods delay rent or mortgage 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 our financial statements as accounts receivable if collection is determined to be probable or will be recognized when received as variable lease 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 recognized on a cash basis, the contractual rent reflected in accounts receivable and the straight-line rent receivable 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 recognized in the period to which it relates, or we may provide rent concessions to tenants. In cases where we provide concessions to tenants to which they are not otherwise entitled, those amounts are recognized in the period in which the concession is granted unless the changes are accounted for as lease modifications.

~~Negative~~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 one of our major theatre tenants has recently filed for bankruptcy protection, as discussed ~~further below.~~above. Although we intend to continue making future investments, we expect that our levels of investment spending will be reduced in the near term due to elevated costs of capital, and that these investments will be funded primarily from cash from operations and borrowing availability under our unsecured revolving credit facility, subject to maintaining our leverage levels consistent with past practice. As a result, we intend to continue to be more selective in making future investments and acquisitions until such time as economic conditions improve and our cost of capital ~~returns to historical levels,~~improves, which may depend, in part, upon the ultimate outcome of our tenant's bankruptcy proceedings.

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 nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in millions, except per share information):


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2022		2021		Change		2022		2021		Change			2023		2022		Change
Total revenue	Total revenue	$	161.4	$	139.6	16	%	$	479.3	$	376.8	27	%	Total revenue	$	171.4	$	157.5	9	%
Net income available to common shareholders per diluted share	Net income available to common shareholders per diluted share	$	0.60	$	0.35	71	%	$	1.54	$	0.48	221	%	Net income available to common shareholders per diluted share	$	0.69	$	0.48	44	%
FFOAA per diluted share	FFOAA per diluted share	$	1.16	$	0.86	35	%	$	3.44	$	2.01	71	%	FFOAA per diluted share	$	1.26	$	1.10	15	%

The major factors impacting our results for the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, as compared to the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 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~~an increase in capitalized interest and interest income on short term ~~loan facility~~investments; and ~~revolving credit facility as well as exiting the covenant relief period in July of 2021 which had caused higher interest rates on certain debt;~~

•The decrease in impairment charges and transaction costs ~~associated with loan refinancing or payoff;~~

•~~Improved earnings from investments in joint ventures; and~~

•~~The~~offset by an increase in ~~general~~loss from joint ventures and ~~administrative expense and~~an increase in 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 ~~2021~~2022 Annual Report. For the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, there were no changes to critical accounting policies.

Recent Developments

Investment Spending

Our investment spending during the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ totaled ~~$321.3~~$66.5 million and ~~$107.9~~$24.4 million, respectively, and is detailed below (in thousands):


Nine Months Ended September 30, 2022
Three Months Ended March 31, 2023														Three Months Ended March 31, 2023
Operating Segment	Operating Segment	Total Investment Spending		New Development		Re-development		Asset Acquisition		Mortgage Notes or Notes Receivable		Investment in Joint Ventures		Operating Segment	Total Investment Spending		New Development		Re-development		Asset Acquisition		Mortgage Notes or Notes Receivable		Investment in Joint Ventures
Experiential:	Experiential:													Experiential:
Theatres		$	622	$	5	$	617	$	—	$	—	$	—

Eat & Play	Eat & Play	17,412		16,787		625		—		—		—		Eat & Play	11,432		11,201		231		—		—		—
Attractions	Attractions	144,324		—		1,559		142,765		—		—		Attractions	3,494		—		3,494		—		—		—
Ski	Ski	26,400		—		—		—		26,400		—		Ski	1,427		—		—		—		1,427		—
Experiential Lodging	Experiential Lodging	68,722		4,354		—		—		11,305		53,063		Experiential Lodging	2,658		—		—		—		—		2,658
Fitness & Wellness	Fitness & Wellness	63,760		43,557		345		19,858		—		—		Fitness & Wellness	47,369		473		101		43,770		3,025		—

Cultural	Cultural	23		—		23		—		—		—		Cultural	145		—		145		—		—		—
Total Experiential	Total Experiential	321,263		64,703		3,169		162,623		37,705		53,063		Total Experiential	66,525		11,674		3,971		43,770		4,452		2,658

Education:	Education:													Education:

Total Education	Total Education	—		—		—		—		—		—		Total Education	—		—		—		—		—		—

Total Investment Spending	Total Investment Spending	$	321,263	$	64,703	$	3,169	$	162,623	$	37,705	$	53,063	Total Investment Spending	$	66,525	$	11,674	$	3,971	$	43,770	$	4,452	$	2,658

Nine Months Ended September 30, 2021
Operating Segment Total Investment Spending New Development Re-development Asset Acquisition Mortgage Notes or Notes Receivable Investment in Joint Ventures
Experiential:
Theatres $ 4,190 $ 3,785 $ 405 $ — $ — $ —
Eat & Play 36,414 9,347 315 26,752 — —
Attractions 46 — 46 — — —
Ski 5,546 — — — 5,546 —
Experiential Lodging 55,193 16,300 11,070 — — 27,823
Fitness & Wellness 4,394 — 15 — 4,379 —
Cultural 2,124 — — — 2,124 —
Total Experiential 107,907 29,432 11,851 26,752 12,049 27,823
Education:
Total Education — — — — — —
Total Investment Spending $ 107,907 $ 29,432 $ 11,851 $ 26,752 $ 12,049 $ 27,823


Three Months Ended March 31, 2022
Operating Segment	Total Investment Spending		New Development		Re-development		Asset Acquisition		Mortgage Notes or Notes Receivable		Investment in Joint Ventures
Experiential:
Theatres	$	45	$	5	$	40	$	—	$	—	$	—
Eat & Play	2,899		2,793		106		—		—		—
Attractions	300		—		300		—		—		—

Experiential Lodging	1,256		309		299		—		—		648
Fitness & Wellness	19,858		—		—		19,858		—		—

Cultural	5		—		5		—		—		—
Total Experiential	24,363		3,107		750		19,858		—		648

Education:



Total Education	—		—		—		—		—		—

Total Investment Spending	$	24,363	$	3,107	$	750	$	19,858	$	—	$	648

The above amounts include ~~$0.6~~$0.8 million and ~~$1.3~~$0.2 million in capitalized interest for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, and ~~$0.3 million~~$59 thousand and $51 thousand in capitalized other general and administrative direct project costs for ~~both~~ the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021.~~respectively. Excluded from the table above is approximately ~~$1.8~~$2.1 million and ~~$2.8~~$1.4 million of maintenance capital expenditures and other spending for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

~~Impairment Charges~~

During the nine months ended September 30, 2022, we received an offer to purchase a recently vacated property. As a result, we reassessed the expected holding period of the property and determined that the estimated cash flows were not sufficient to recover the carrying value of the property. Accordingly, we recognized an impairment charge of $4.4 million on the real estate investment of this property. ~~This property was sold during the nine months ended September 30, 2022.~~

~~During the nine months ended September 30, 2022, we recognized other-than-temporary impairment charges of~~ ~~$0.6 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.~~

~~Dispositions~~

During the nine months ended September 30, 2022, we completed the sale of two vacant theatre properties and a land parcel for net proceeds totaling $9.9 million. In connection with these sales, we recognized a combined gain on sale of $0.3 million.

~~Mortgage Note and Notes Receivable Updates~~

During the nine months ended September 30, 2022, we recorded an allowance for credit loss of $6.8 million related to one of our mortgage notes receivable secured by an eat & play investment and $3.1 million related to two notes receivable. Although foreclosure was not deemed probable and the principal balance of the mortgage note and notes receivable were not past due at September 30, 2022, based on delays in interest payments and each borrower's declining financial condition, we determined the borrowers are experiencing financial difficulty. The repayments are 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 nine months ended September 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.~~

~~Regal Update~~

Cineworld Group, plc, Regal Entertainment Group and our other Regal theatre tenants (collectively, “Regal”) filed for protection under Chapter 11 of the U.S. Bankruptcy Code (the “Code”) on September 7, 2022. Regal leases 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 monthly deferral payment for September 2022. Regal resumed payment of rent and deferral payments for all Regal Leases in October and November 2022. However, there can be no assurance that subsequent payments will be made in a timely and complete manner. Regal is entitled to certain rights under the Code regarding the assumption or rejection of the Regal Leases and we are currently in negotiations with Regal regarding the properties Regal will continue to operate and the terms and conditions of leases for these properties. There can be no assurance that these negotiations will be successful and which Regal leases, if any, will be assumed under the Code.

At September 30, 2022, Regal owed us approximately $91.9 million pursuant to a Promissory Note for rent deferred during the COVID-19 pandemic and approximately $7.2 million for September 2022 rent, of which $1.4 million represents pre-petition rent and $5.8 million represents post-petition rent under the Code. Because revenue derived from Regal is recognized on a cash-basis, all receivables from Regal are not reflected as assets in our financial statements. Substantially all of our claims under the Promissory Note are unsecured and subject to the provisions of the Code, including those provisions regarding assumption and rejection of leases. Regal has substantial secured debt which is senior to the Promissory Note, as well as other unsecured debt. As a result, there is significant uncertainty regarding the collection of the amounts due under the Promissory Note.

3926

Results of Operations

Three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 compared to the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022

Analysis of Revenue

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


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2022		2021		Change		2022		2021		Change			2023		2022		Change
Minimum rent (1)	Minimum rent (1)	$	131,642	$	114,375	$	17,267	$	396,834	$	315,665	$	81,169	Minimum rent (1)	$	141,852	$	130,275	$	11,577
Percentage rent (2)	Percentage rent (2)	1,453		3,149		(1,696)		5,415		7,195		(1,780)		Percentage rent (2)	1,811		3,443		(1,632)
Straight-line rent (3)	Straight-line rent (3)	2,374		981		1,393		4,702		3,690		1,012		Straight-line rent (3)	2,105		595		1,510
Tenant reimbursements	Tenant reimbursements	4,652		4,187		465		15,001		14,009		992		Tenant reimbursements	5,435		5,001		434
Other rental revenue	Other rental revenue	350		348		2		997		978		19		Other rental revenue	388		289		99
Total Rental Revenue	Total Rental Revenue	$	140,471	$	123,040	$	17,431	$	422,949	$	341,537	$	81,412	Total Rental Revenue	$	151,591	$	139,603	$	11,988

Other income ~~(4)~~	Other income ~~(4)~~	11,360		8,091		3,269		30,626		9,802		20,824		Other income ~~(4)~~	9,333		9,305		28
Mortgage and other financing income ~~(5)~~(4)	Mortgage and other financing income ~~(5)~~(4)	9,579		8,516		1,063		25,753		25,435		318		Mortgage and other financing income ~~(5)~~(4)	10,472		8,564		1,908
Total revenue	Total revenue	$	161,410	$	139,647	$	21,763	$	479,328	$	376,774	$	102,554	Total revenue	$	171,396	$	157,472	$	13,924

(1) For the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~September 30, 2021,~~March 31, 2022, the increase in minimum rent resulted primarily from an increase of ~~$13.5~~$7.7 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 ~~$5.1~~$4.3 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 ~~$1.3 million from property dispositions.~~

For the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, the increase in minimum rent resulted primarily from an increase of $75.6 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 $9.8 million related to property acquisitions and developments completed in 2022 and 2021. This was partially offset by a decrease in rental revenue of $4.2$0.4 million from property dispositions.

During the three months ended ~~September 30, 2022, we renewed three~~March 31, 2023, there were no significant lease ~~agreements~~renewals on approximately 127 thousand square feet and funded or agreed to fund an average of $55.05 per square foot in tenant improvements. We experienced an increase of 7.5% in rental rates and paid no leasing commissions with respect to these lease renewals.

During the nine months ended September 30, 2022, we renewed four lease agreements on approximately 206 thousand square feet and funded or agreed to fund an average of $33.87 per square foot in tenant improvements. We experienced a decrease of 2.2% in rental rates and paid no leasing commissions with respect to these lease renewals.existing properties.

(2) The decrease in percentage rent ~~(amounts above base rent)~~ for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 compared to the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 was due primarily to ~~lower~~ percentage rent recognized from one early childhood education center tenant in 2022 due to the restructured lease having ~~higher~~lower base ~~rents in 2022. For~~rents. Adding to the ~~three months ended September 30, 2022, this~~ decrease was ~~partially offset by higher percentage rent recognized from our golf entertainment tenant. For the nine months ended September 30, 2022, this decrease was partially offset by higher~~lower percentage rent recognized from our gaming and golf entertainment ~~tenants and one ski property tenant.~~tenants.

(3) The increase in straight-line rent for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 compared to the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 was due ~~primarily~~ to property acquisitions and developments completed in 2023 and 2022 ~~and 2021.~~as well as previously agreed upon free rent periods for one tenant.

(4) The increase in other income for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021 related primarily to an increase 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, during the three and nine months ended September 30, 2022 the increase in other income was the result of increased operating income from two theatre properties.

~~(5)~~ The increase in mortgage and other financing income during the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~September 30, 2021~~March 31, 2022 related to ~~interest payments received from a cash basis borrower, as well as~~ income from additional investments ~~made~~ on an existing ~~mortgage. This was offset by less~~mortgage note receivable as well as interest ~~income from a borrower that was moved to cash basis during the nine months ended September 30,~~on new mortgage notes funded in 2022.

Analysis of Expenses and Other Line Items

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


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2022		2021		Change		2022		2021		Change			2023		2022		Change
Property operating expense	Property operating expense	$	14,707	$	13,815	$	892	$	42,238	$	43,806	$	(1,568)	Property operating expense	$	14,155	$	13,939	$	216
Other expense ~~(1)~~	Other expense ~~(1)~~	9,135		7,851		1,284		26,104		13,428		12,676		Other expense ~~(1)~~	8,950		8,097		853
General and administrative expense ~~(2)~~	General and administrative expense ~~(2)~~	12,582		11,154		1,428		38,497		33,866		4,631		General and administrative expense ~~(2)~~	13,965		13,224		741

Transaction costs ~~(3)~~(1)	Transaction costs ~~(3)~~(1)	148		2,132		(1,984)		3,540		3,342		198		Transaction costs ~~(3)~~(1)	270		2,247		(1,977)
Credit loss expense (benefit) ~~(4)~~	Credit loss expense (benefit) ~~(4)~~	241		(14,096)		14,337		9,447		(19,677)		29,124		Credit loss expense (benefit) ~~(4)~~	587		(306)		893
Impairment charges ~~(5)~~(2)	Impairment charges ~~(5)~~(2)	—		2,711		(2,711)		4,351		2,711		1,640		Impairment charges ~~(5)~~(2)	—		4,351		(4,351)
Depreciation and amortization	Depreciation and amortization	41,539		42,612		(1,073)		122,349		123,476		(1,127)		Depreciation and amortization	41,204		40,044		1,160
Gain on sale of real estate		304		787		(483)		304		1,499		(1,195)
Costs associated with loan refinancing or payoff (6)		—		4,741		(4,741)		—		4,982		(4,982)
Loss on sale of real estate														Loss on sale of real estate	(560)		—		(560)

Interest expense, net ~~(7)~~(3)	Interest expense, net ~~(7)~~(3)	32,747		36,584		(3,837)		99,296		114,090		(14,794)		Interest expense, net ~~(7)~~(3)	31,722		33,260		(1,538)
Equity in (income) loss from joint ventures (8)		(572)		418		(990)		(1,887)		3,000		(4,887)
Impairment charges on joint ventures		—		—		—		647		—		647
Equity in loss from joint ventures (4)														Equity in loss from joint ventures (4)	1,985		106		1,879

Income tax expense	Income tax expense	388		395		(7)		1,150		1,200		(50)		Income tax expense	341		318		23

Preferred dividend requirements	Preferred dividend requirements	6,033		6,033		—		18,099		18,100		(1)		Preferred dividend requirements	6,033		6,033		—

(1) The increase in other expense for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 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 nine months ended September 30, 2022 related primarily to an increase in payroll and benefit costs as well as an increase in travel expenses and professional fees.

~~(3)~~ The decrease in transaction costs during the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~September 30, 2021~~March 31, 2022 was due ~~primarily~~ to fewer terminated transactions.

(4) During the three and nine months ended September 30, 2021, credit loss benefit was primarily due to repayments of $6.8 million from a borrower on a previously fully-reserved note receivable and the release from an additional $8.5 million in funding commitments. During the nine months ended September 30, 2022, we recognized credit loss expense of $6.8 million related to one mortgage note receivable and $3.1 million related to two notes receivable. The remaining change in credit loss expense (benefit) for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021 was due to the results of the credit loss model that was impacted by the expected timing of the economic recovery from the impacts of the COVID-19 pandemic.

~~(5)~~(2) Impairment charges recognized during the ~~nine~~three months ended ~~September 30,~~March 31, 2022 related to a vacant property that we determined the cash flows were not sufficient to recover the carrying value. This property was sold during the ~~nine months~~year ended ~~September 30,~~December 31, 2022. Impairment charges recognized during the three and nine months ended September 30, 2021 related to two vacant properties that we determined the cash flows were not sufficient to recover the carrying value.

(6) Costs associated with loan refinancing or payoff for the three and nine months ended September 30, 2021 related to the pay-off of our unsecured term loan facility and the termination of related interest rate swaps.

~~(7)~~(3) The decrease in interest expense, net, for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 compared to the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, resulted primarily from ~~a decrease~~an increase in ~~average borrowings and a decrease~~interest income recognized on short term investments as well as an increase in ~~the weighted average interest rate on outstanding debt.~~capitalized interest.

~~(8)~~(4) The increase in equity in ~~(income)~~ loss from joint ventures for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 related primarily to ~~more income~~losses recognized at two experiential lodging properties that were acquired in 2022. In addition, income was higher for the three months ended March 31, 2022 due to government incentives received at our experiential lodging properties located in St. Petersburg, ~~Florida as well as income recognized at our experiential lodging property located in Breaux Bridge, Louisiana, which was acquired in May 2022.~~Florida.

Liquidity and Capital Resources

Cash and cash equivalents were ~~$160.8~~$96.4 million at ~~September 30, 2022.~~March 31, 2023. As of March 31, 2023, we had no uninsured deposits. In addition, we had restricted cash of ~~$5.3~~$2.6 million at ~~September 30, 2022. Of the restricted cash at September 30, 2022, $3.0 million~~March 31, 2023, which related ~~to cash held for our tenants' off-season rent reserves and $2.3 million 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 ~~September 30, 2022,~~March 31, 2023, we had total debt outstanding of $2.8 billion, of which 99% was unsecured.

At ~~September 30, 2022,~~March 31, 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 ~~September 30, 2022,~~March 31, 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 ~~4.34%~~6.11% at ~~September 30, 2022.~~March 31, 2023. Additionally, the facility fee on the revolving credit facility is 0.25%.

At ~~September 30, 2022,~~March 31, 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 ~~September 30, 2022,~~March 31, 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 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 ~~September 30, 2022.~~March 31, 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):


		Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021			2023		2022
Net cash provided by operating activities	Net cash provided by operating activities	$	349,675	$	236,424	Net cash provided by operating activities	$	121,530	$	128,087
Net cash used by investing activities	Net cash used by investing activities	(271,665)		(39,477)		Net cash used by investing activities	(61,510)		(25,035)
Net cash used by financing activities	Net cash used by financing activities	(201,715)		(1,075,273)		Net cash used by financing activities	(71,486)		(66,293)

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.

As described further above, we are ~~also~~ currently in negotiations with Regal regarding our theatre properties that Regal will continue to operate and the terms and conditions of leases for these properties in connection with Regal's pending bankruptcy proceedings, and there can be no assurance as to the ultimate outcome of these negotiations.

Commitments

As of ~~September 30, 2022,~~March 31, 2023, we had 1715 development projects with commitments to fund an aggregate of approximately ~~$161.6~~$200.5 million, of which approximately ~~$14.6~~$86.6 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 ~~September 30, 2022, w~~March 31, 2023e, we had ~~two~~four mortgage notes with commitments totaling approximately ~~$10.4~~$84.0 million, of which ~~$3.3~~$44.9 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 ~~September 30, 2022,~~March 31, 2023, we had three surety bonds outstanding totaling ~~$3.3~~$2.7 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 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 economic uncertainty caused by the COVID-19 pandemic and the~~ impact of ~~current~~the challenging economic environment and ~~other conditions~~our theatre tenant's bankruptcy proceedings on ~~financing costs.~~our 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. We are currently experiencing an elevated cost of capital due to current economic and other conditions. As a result, in the near term, we expect our investment spending will be reduced and funded primarily from cash from operations and borrowing availability under our unsecured revolving credit facility, subject to maintaining our leverage levels consistent with past practice. 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 our theatre tenant's 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, which may depend, in part, upon the ultimate outcome of our theatre tenant's bankruptcy proceedings.

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~~As of March 31, 2023, our debt to total assets ratio was 49%, our net debt to adjusted EBITDAre ratio was ~~5.2x~~5.0x and our net debt to gross assets ratio was 39% ~~as of September 30, 2022~~ ~~(see~~(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 transaction costs, credit loss expense (benefit), 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 expense (benefit) 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 nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ 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 September 30, Nine Months Ended September 30,
2022 2021 2022 2021
FFO:
Net income available to common shareholders of EPR Properties $ 44,766 $ 26,084 $ 115,801 $ 35,949
Gain on sale of real estate (304) (787) (304) (1,499)
Impairment of real estate investments, net — 2,711 4,351 2,711
Real estate depreciation and amortization 41,331 42,415 121,721 122,856
Allocated share of joint venture depreciation 2,093 966 5,576 1,779
Impairment charges on joint ventures — — 647 —
FFO available to common shareholders of EPR Properties $ 87,886 $ 71,389 $ 247,792 $ 161,796


	Three Months Ended March 31,
	2023		2022
FFO:
Net income available to common shareholders of EPR Properties	$	51,624	$	36,159
Loss on sale of real estate	560		—

Impairment of real estate investments, net	—		4,351

Real estate depreciation and amortization	41,000		39,827
Allocated share of joint venture depreciation	2,055		1,487

FFO available to common shareholders of EPR Properties	$	95,239	$	81,824

FFO available to common shareholders of EPR Properties	$	95,239	$	81,824
Add: Preferred dividends for Series C preferred shares	1,938		1,938
Add: Preferred dividends for Series E preferred shares	1,938		1,939
Diluted FFO available to common shareholders of EPR Properties	$	99,115	$	85,701

FFOAA:
FFO available to common shareholders of EPR Properties	$	95,239	$	81,824

Transaction costs	270		2,247





Credit loss expense (benefit)	587		(306)


Gain on insurance recovery (included in other income)	—		(552)
Deferred income tax benefit	(90)		—

FFOAA available to common shareholders of EPR Properties	$	96,006	$	83,213

FFOAA available to common shareholders of EPR Properties	$	96,006	$	83,213
Add: Preferred dividends for Series C preferred shares	1,938		1,938
Add: Preferred dividends for Series E preferred shares	1,938		1,939
Diluted FFOAA available to common shareholders of EPR Properties	$	99,882	$	87,090

AFFO:
FFOAA available to common shareholders of EPR Properties	$	96,006	$	83,213
Non-real estate depreciation and amortization	204		217
Deferred financing fees amortization	2,129		2,071
Share-based compensation expense to management and trustees	4,322		4,245
Amortization of above and below market leases, net and tenant allowances	(89)		(87)
Maintenance capital expenditures (1)	(2,176)		(1,351)
Straight-lined rental revenue	(2,105)		(595)
Straight-lined ground sublease expense	565		248
Non-cash portion of mortgage and other financing income	(122)		(116)
AFFO available to common shareholders of EPR Properties	$	98,734	$	87,845

AFFO available to common shareholders of EPR Properties	$	98,734	$	87,845
Add: Preferred dividends for Series C preferred shares	1,938		1,938
Add: Preferred dividends for Series E preferred shares	1,938		1,939
Diluted AFFO available to common shareholders of EPR Properties	$	102,610	$	91,722

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Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
FFO available to common shareholders of EPR Properties $ 87,886 $ 71,389 $ 247,792 $ 161,796
Add: Preferred dividends for Series C preferred shares 1,938 — 5,814 —
Add: Preferred dividends for Series E preferred shares 1,939 — 5,817 —
Diluted FFO available to common shareholders of EPR Properties $ 91,763 $ 71,389 $ 259,423 $ 161,796
FFOAA:
FFO available to common shareholders of EPR Properties $ 87,886 $ 71,389 $ 247,792 $ 161,796
Costs associated with loan refinancing or payoff — 4,741 — 4,982
Transaction costs 148 2,132 3,540 3,342
Credit loss expense (benefit) 241 (14,096) 9,447 (19,677)
Gain on insurance recovery (included in other income) — — (552) (30)
Deferred income tax benefit (37) — (37) —
FFOAA available to common shareholders of EPR Properties $ 88,238 $ 64,166 $ 260,190 $ 150,413
FFOAA available to common shareholders of EPR Properties $ 88,238 $ 64,166 $ 260,190 $ 150,413
Add: Preferred dividends for Series C preferred shares 1,938 — 5,814 —
Add: Preferred dividends for Series E preferred shares 1,939 — 5,817 —
Diluted FFOAA available to common shareholders of EPR Properties $ 92,115 $ 64,166 $ 271,821 $ 150,413
AFFO:
FFOAA available to common shareholders of EPR Properties $ 88,238 $ 64,166 $ 260,190 $ 150,413
Non-real estate depreciation and amortization 208 197 628 620
Deferred financing fees amortization 2,090 2,210 6,251 5,331
Share-based compensation expense to management and trustees 4,138 3,759 12,552 11,218
Amortization of above and below market leases, net and tenant allowances (89) (98) (265) (293)
Maintenance capital expenditures (1) (386) (690) (1,871) (2,913)
Straight-lined rental revenue (2,374) (981) (4,702) (3,690)
Straight-lined ground sublease expense 602 98 1,111 293
Non-cash portion of mortgage and other financing income (119) 55 (353) (332)
AFFO available to common shareholders of EPR Properties $ 92,308 $ 68,716 $ 273,541 $ 160,647
AFFO available to common shareholders of EPR Properties $ 92,308 $ 68,716 $ 273,541 $ 160,647
Add: Preferred dividends for Series C preferred shares 1,938 — 5,814 —
Add: Preferred dividends for Series E preferred shares 1,939 — 5,817
Diluted AFFO available to common shareholders of EPR Properties $ 96,185 $ 68,716 $ 285,172 $ 160,647


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
FFO per common share:	FFO per common share:									FFO per common share:
Basic	Basic	$	1.17	$	0.95	$	3.31	$	2.16	Basic	$	1.27	$	1.09
Diluted	Diluted	1.16		0.95		3.28		2.16		Diluted	1.25		1.09
FFOAA per common share:	FFOAA per common share:									FFOAA per common share:
Basic	Basic	$	1.18	$	0.86	$	3.47	$	2.01	Basic	$	1.28	$	1.11
Diluted	Diluted	1.16		0.86		3.44		2.01		Diluted	1.26		1.10
Shares used for computation (in thousands):	Shares used for computation (in thousands):									Shares used for computation (in thousands):
Basic	Basic	75,016		74,804		74,949		74,738		Basic	75,084		74,843
Diluted	Diluted	75,183		74,911		75,102		74,819		Diluted	75,283		75,047

Weighted average shares outstanding-diluted EPS	Weighted average shares outstanding-diluted EPS	75,183		74,911		75,102		74,819		Weighted average shares outstanding-diluted EPS	75,283		75,047
Effect of dilutive Series C preferred shares	Effect of dilutive Series C preferred shares	2,250		—		2,245		—		Effect of dilutive Series C preferred shares	2,272		2,241

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
Adjusted weighted average shares outstanding-diluted Series C and Series E	Adjusted weighted average shares outstanding-diluted Series C and Series E	79,097		74,911		79,011		74,819		Adjusted weighted average shares outstanding-diluted Series C and Series E	79,218		78,952

Other financial information:	Other financial information:									Other financial information:
Dividends per common share	Dividends per common share	$	0.8250	$	0.7500	$	2.4250	$	0.7500	Dividends per common share	$	0.825	$	0.775

(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 nine months ended September 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 nine~~ months ended ~~September 30,~~March 31, 2023 and March 31, 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, 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.

4834

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):


		September 30,							March 31,
		2022			2021				2023			2022
Net Debt:	Net Debt:							Net Debt:
Debt	Debt	$	2,808,587		$	2,684,063		Debt	$	2,811,653		$	2,805,853
Deferred financing costs, net	Deferred financing costs, net	32,642			32,166			Deferred financing costs, net	29,576			35,376
Cash and cash equivalents	Cash and cash equivalents	(160,838)			(144,433)			Cash and cash equivalents	(96,438)			(323,761)
Net Debt	Net Debt	$	2,680,391		$	2,571,796		Net Debt	$	2,744,791		$	2,517,468

Gross Assets:	Gross Assets:							Gross Assets:
Total Assets	Total Assets	$	5,792,759		$	5,721,157		Total Assets	$	5,756,615		$	5,818,070
Accumulated depreciation	Accumulated depreciation	1,278,427			1,142,513			Accumulated depreciation	1,341,527			1,206,317
Cash and cash equivalents	Cash and cash equivalents	(160,838)			(144,433)			Cash and cash equivalents	(96,438)			(323,761)
Gross Assets	Gross Assets	$	6,910,348		$	6,719,237		Gross Assets	$	7,001,704		$	6,700,626

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		%	38		%	Net Debt to Gross Assets Ratio	39		%	38		%

		Three Months Ended September 30,							Three Months Ended March 31,
		2022			2021				2023			2022
EBITDAre and Adjusted EBITDAre:	EBITDAre and Adjusted EBITDAre:							EBITDAre and Adjusted EBITDAre:
Net income	Net income	$	50,799		$	32,117		Net income	$	57,657		$	42,192
Interest expense, net	Interest expense, net	32,747			36,584			Interest expense, net	31,722			33,260
Income tax expense	Income tax expense	388			395			Income tax expense	341			318
Depreciation and amortization	Depreciation and amortization	41,539			42,612			Depreciation and amortization	41,204			40,044
Gain on sale of real estate		(304)			(787)
Loss on sale of real estate								Loss on sale of real estate	560			—

Impairment of real estate investments, net	Impairment of real estate investments, net	—			2,711			Impairment of real estate investments, net	—			4,351

Costs associated with loan refinancing or payoff		—			4,741

Allocated share of joint venture depreciation	Allocated share of joint venture depreciation	2,093			966			Allocated share of joint venture depreciation	2,055			1,487
Allocated share of joint venture interest expense	Allocated share of joint venture interest expense	1,822			981			Allocated share of joint venture interest expense	2,083			1,121

EBITDAre	EBITDAre	$	129,084		$	120,320		EBITDAre	$	135,622		$	122,773

Gain on insurance recovery (1)								Gain on insurance recovery (1)	—			(552)

Transaction costs	Transaction costs	148			2,132			Transaction costs	270			2,247

Credit loss expense (benefit)	Credit loss expense (benefit)	241			(14,096)			Credit loss expense (benefit)	587			(306)

Adjusted EBITDAre (for the quarter)	Adjusted EBITDAre (for the quarter)	$	129,473		$	108,356		Adjusted EBITDAre (for the quarter)	$	136,479		$	124,162

Adjusted EBITDAre (annualized) (1)		$	517,892		Footnote 2
Adjusted EBITDAre (annualized) (2)								Adjusted EBITDAre (annualized) (2)	$	545,916		$	496,648

Net Debt/Adjusted EBITDAre Ratio	Net Debt/Adjusted EBITDAre Ratio	5.2			Footnote 2			Net Debt/Adjusted EBITDAre Ratio	5.0			5.1

(1) Included in "Other income" in the consolidated statements of income and comprehensive income for the quarter. Other income includes the following:								(1) Included in "Other income" in the consolidated statements of income and comprehensive income for the quarter. Other income includes the following:
									Three Months Ended March 31,
									2023			2022
Income from settlement of foreign currency swap contracts								Income from settlement of foreign currency swap contracts	$	224		$	45
Gain on insurance recovery								Gain on insurance recovery	—			552
Operating income from operated properties								Operating income from operated properties	9,101			8,648
Miscellaneous income								Miscellaneous income	8			60
Other income								Other income	$	9,333		$	9,305

(2) Adjusted EBITDA for the quarter is multiplied by four to calculate an annual amount.								(2) 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.

4935

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):


							March 31, 2023		December 31, 2022

Total assets						Total assets	$	5,756,615	$	5,758,701
Operating lease right-of-use assets						Operating lease right-of-use assets	(197,357)		(200,985)
Cash and cash equivalents						Cash and cash equivalents	(96,438)		(107,934)
Restricted cash						Restricted cash	(2,599)		(2,577)
Accounts receivable						Accounts receivable	(50,591)		(53,587)
Add: accumulated depreciation on real estate investments						Add: accumulated depreciation on real estate investments	1,341,527		1,302,640
Add: accumulated amortization on intangible assets (1)						Add: accumulated amortization on intangible assets (1)	24,344		23,487
Prepaid expenses and other current assets (1)						Prepaid expenses and other current assets (1)	(38,791)		(33,559)
Total investments						Total investments	$	6,736,710	$	6,686,186
		September 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	$	4,769,717	$	4,713,091	Real estate investments, net of accumulated depreciation	$	4,708,342	$	4,714,136
Add back accumulated depreciation on real estate investments	Add back accumulated depreciation on real estate investments	1,278,427		1,167,734		Add back accumulated depreciation on real estate investments	1,341,527		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	56,347		42,362		Property under development	85,829		76,029
Mortgage notes and related accrued interest receivable		399,485		370,159
Mortgage notes and related accrued interest receivable, net						Mortgage notes and related accrued interest receivable, net	461,263		457,268

Investment in joint ventures	Investment in joint ventures	50,124		36,670		Investment in joint ventures	50,978		52,964
Intangible assets, gross (1)	Intangible assets, gross (1)	60,109		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)	3,495		7,254		Notes receivable and related accrued interest receivable, net (1)	4,447		2,872
Total investments	Total investments	$	6,637,872	$	6,415,400	Total investments	$	6,736,710	$	6,686,186

Total investments		$	6,637,872	$	6,415,400
Operating lease right-of-use assets		199,031		180,808
Cash and cash equivalents		160,838		288,822
Restricted cash		5,252		1,079
Accounts receivable		53,375		78,073
Less: accumulated depreciation on real estate investments		(1,278,427)		(1,167,734)
Less: accumulated amortization on intangible assets (1)		(22,650)		(20,163)
Prepaid expenses and other current assets (1)		37,468		24,865
Total assets		$	5,792,759	$	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:

		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Intangible assets, gross	Intangible assets, gross	$	60,109	$	57,962	Intangible assets, gross	$	64,156	$	60,109
Less: accumulated amortization on intangible assets	Less: accumulated amortization on intangible assets	(22,650)		(20,163)		Less: accumulated amortization on intangible assets	(24,344)		(23,487)
Notes receivable and related accrued interest receivable, net	Notes receivable and related accrued interest receivable, net	3,495		7,254		Notes receivable and related accrued interest receivable, net	4,447		2,872
Prepaid expenses and other current assets	Prepaid expenses and other current assets	37,468		24,865		Prepaid expenses and other current assets	38,791		33,559
Total other assets	Total other assets	$	78,422	$	69,918	Total other assets	$	83,050	$	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 ~~September 30, 2022,~~March 31, 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.

5036

As of ~~September 30, 2022,~~March 31, 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 ~~September 30, 2022,~~March 31, 2023, the joint ~~venture~~ventures had a secured mortgage loan with an 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 109 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.

5137

Item 4. Controls and Procedures

Evaluation of disclosures controls and procedures

As of ~~September 30, 2022,~~March 31, 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 ~~are many risks and uncertainties that can affect~~have been no material changes to the risk factors associated with 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 factors set forth underpreviously disclosed in Item 1A - "Risk Factors" in our 2021 Annual Report. This discussion includes a number of forward-looking statements. See "Cautionary Statement Concerning Forward-Looking Statements." The following risk factors replace and supersede the risk factors with the same titles set forth under Item 1A - "Risk Factors" in our 2021 Annual Report on Form ~~10-K.~~10-K for the fiscal year ended December 31, 2022 filed with the SEC on February 23, 2023.

5238

~~We depend on leasing space to tenants on economically favorable terms and collecting rent from our tenants, who may not be able to pay.~~

At any time, a tenant may experience a downturn in its business that may weaken its financial condition. Similarly, a general decline in the economy may result in a decline in demand for space at our commercial properties. Our financial results depend significantly on leasing space at our properties to tenants on economically favorable terms. In addition, because a majority of our income comes from leasing real property, our income, funds available to pay indebtedness and funds available for distribution to our shareholders or share repurchases will decrease if a significant number of our tenants cannot pay their rent or if we are not able to maintain our levels of occupancy on favorable terms. If our tenants cannot pay their rent or we are not able to maintain our levels of occupancy on favorable terms, there is also a risk that the fair value of the underlying property will be considered less than its carrying value and we may have to take a charge against earnings. In addition, if a tenant does not pay its rent, we might not be able to enforce our rights as landlord without significant delays and substantial legal costs.

If a tenant becomes bankrupt or insolvent, that could diminish or eliminate the income we expect from that tenant's leases. If a tenant becomes insolvent or bankrupt, we cannot be sure that we could recover the premises from the tenant promptly or from a trustee or debtor-in-possession in a bankruptcy proceeding relating to the tenant. On the other hand, a bankruptcy court might authorize the tenant to terminate its leases with us. If that happens, our claim against the bankrupt tenant for unpaid future rent would be subject to statutory limitations that might be substantially less than the remaining rent owed under the leases. In addition, any claim we have for unpaid past rent would likely not be paid in full and we would also have to take a charge against earnings for any accrued straight-line rent receivable related to the leases.

Specifically, Cineworld Group, plc, Regal Entertainment Group and our other Regal theatre tenants (collectively, “Regal”) filed for protection under Chapter 11 of the U.S. Bankruptcy Code (the “Code”) on September 7, 2022. Regal leases 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 monthly deferral payment for September 2022. Regal resumed payment of rent and deferral payments for all Regal Leases for October and November 2022. However, there can be no assurance that subsequent payments will be made in a timely and complete manner. Regal is entitled to certain rights under the Code regarding the assumption or rejection of the Regal Leases and we are currently in negotiations with Regal regarding the properties Regal will continue to operate and the terms and conditions of leases for those properties. There can be no assurance that these negotiations will be successful and which Regal Leases, if any, will be assumed under the Code. As described below, Regal owes us a significant amount for rent deferred during the COVID-19 pandemic pursuant to a Promissory Note, and there can be no assurance how much of the amount, if any, we will recover under the Promissory Note.

The reduced economic activity that initially resulted from the COVID-19 pandemic severely impacted our tenants' businesses, financial condition and liquidity and caused most of our tenants to be unable to meet their obligations to us in full, or at all, or to otherwise seek modifications of such obligations. The ultimate extent to which the COVID-19 pandemic, as well as generally weakening economic conditions, impacts the operations of our tenants will depend on future developments, which, as discussed above, are highly uncertain and cannot be predicted with confidence.

~~We could be adversely affected by a borrower's bankruptcy or default.~~

If a borrower becomes bankrupt or insolvent or defaults under its loan, that could force us to declare a default and foreclose on any available collateral. As a result, future interest income recognition related to the applicable note receivable could be significantly reduced or eliminated. There is also a risk that the fair value of the collateral, if any, will be less than the carrying value of the note and accrued interest receivable at the time of a foreclosure and we may have to take a charge against earnings. If a property serves as collateral for a note, we may experience costs and delays in recovering the property in foreclosure or finding a substitute operator for the property. If a mortgage we hold is subordinated to senior financing secured by the property, our recovery would be limited to any amount remaining after satisfaction of all amounts due to the holder of the senior financing. In addition, to protect our subordinated investment, we may desire to refinance any senior financing. However, there is no assurance that such refinancing would be available or, if it were to be available, that the terms would be attractive. We experienced borrower defaults resulting from the COVID-19 pandemic, and we may experience future defaults, the breadth of

~~which will depend upon the scope, severity and duration of the COVID-19 pandemic, as well as generally weakening economic conditions.~~

As discussed above, Regal filed for protection under Chapter 11 of the Code on September 7, 2022. At September 30, 2022, Regal owed us approximately $91.9 million pursuant to a Promissory Note for rent deferred during the COVID-19 pandemic. Because revenue derived from Regal is recognized on a cash-basis, this amount is not reflected as an asset in our financial statements. Substantially all of our claim under the Promissory Note is unsecured and subject to the provisions of the Code, including those provisions regarding assumption and rejection of leases. Regal has substantial secured debt which is senior to the Promissory Note, as well as other unsecured debt. As a result, there can be no assurance how much of the amount, if any, we will recover under the Promissory Note.

The ultimate extent to which the COVID-19 pandemic, as well as generally weakening economic conditions, impacts the operations of our borrowers will depend on future developments, which, as discussed above, are highly uncertain and cannot be predicted with confidence.

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
January 1 through January 31, 2023 common shares	94,515	(1)	$	37.72	—	$	—
February 1 through February 28, 2023 common shares	—		—		—	—
March 1 through March 31, 2023 common shares	—		—		—	—

Total	94,515		$	37.72	—	$	—

(1) The repurchases of equity securities during January 2023 were ~~no reportable events during~~completed in conjunction with the ~~quarter ended September 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 ~~September 30, 2022.~~March 31, 2023.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

There were no reportable events during the quarter ended ~~September 30, 2022.~~March 31, 2023.

5439

Item 6. Exhibits


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.

5540

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:

~~November 3, 2022~~April 27, 2023

/s/ Gregory K. Silvers

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

Dated:

~~November 3, 2022~~April 27, 2023

/s/ Tonya L. Mater

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

5641


					Outstanding principal amount of mortgage		Carrying amount as of				Unfunded commitments
Description	Year of Origination	Interest Rate		Maturity Date			September 30, 2022		December 31, 2021		September 30, 2022
Attraction property Powells Point, North Carolina	2019	7.75	%	6/30/2025	$	29,206	$	29,037	$	28,243	$	—
Fitness & wellness property Omaha, Nebraska	2017	7.85	%	1/3/2027	10,905		10,937		10,940		—
Fitness & wellness property Merriam, Kansas	2019	7.55	%	7/31/2029	9,090		9,187		9,159		—
Ski property Girdwood, Alaska	2019	8.13	%	7/31/2032	72,000		71,563		45,877		10,000
Fitness & wellness property Omaha, Nebraska	2016	7.85	%	6/30/2030	10,539		10,563		10,615		379
Experiential lodging property Nashville, Tennessee	2019	6.99	%	9/30/2031	70,000		70,542		70,896		—
Eat & play property Austin, Texas	2012	11.31	%	6/1/2033	10,382		10,382		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		4,533		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		18,066		18,198		—
Fitness & wellness property Fort Collins, Colorado	2018	7.85	%	1/31/2038	10,292		10,069		10,277		—
Early childhood education center Lake Mary, Florida	2019	8.10	%	5/9/2039	4,200		4,353		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		4,013		4,034		—
					$	406,313	$	399,485	$	370,159	$	10,379


	Three Months Ended September 30, 2021					Nine Months Ended September 30, 2021
	Income (numerator)		Shares (denominator)	Per Share Amount		Income (numerator)		Shares (denominator)	Per Share Amount
Basic EPS:
Net income	$	32,117				$	54,049
Less: preferred dividend requirements	(6,033)					(18,100)



Net income available to common shareholders	$	26,084	74,804	$	0.35	$	35,949	74,738	$	0.48
Diluted EPS:
Net income available to common shareholders	$	26,084	74,804			$	35,949	74,738
Effect of dilutive securities:
Share options and performance shares	—		107			—		81


Net income available to common shareholders	$	26,084	74,911	$	0.35	$	35,949	74,819	$	0.48


	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	(12,559)	44.62		—	47.15		46.43


Outstanding at September 30, 2022	96,112	$	44.44	—	$	76.63	$	58.15


	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	8,750	5.9					7,372	1.9
50.00 - 59.99	31,008	1.8					31,008	1.8
60.00 - 69.99	52,198	3.8					50,754	3.1
70.00 - 76.63	4,156	5.3					3,671	5.2
	96,112	3.4	$	58.15	$	—	92,805	2.6	$	58.10	$	—


Balance Sheet Data:
	As of September 30, 2022
	Experiential		Education		Corporate/Unallocated		Consolidated
Total Assets	$	5,122,466	$	493,550	$	176,743	$	5,792,759

	As of December 31, 2021
	Experiential		Education		Corporate/Unallocated		Consolidated
Total Assets	$	4,995,241	$	505,086	$	300,823	$	5,801,150