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EPR EPR Properties

Filed: 25 Feb 21, 1:44pm
0001045450epr:McHenryMDSkiAreaMember2020-12-31

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
or
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 classTrading symbol(s)Name of each exchange on which registered
Common shares, par value $0.01 per shareEPRNew York Stock Exchange
5.75% Series C cumulative convertible preferred shares, par value $0.01 per shareEPR PrCNew York Stock Exchange
9.00% Series E cumulative convertible preferred shares, par value $0.01 per shareEPR PrENew York Stock Exchange
5.75% Series G cumulative redeemable preferred shares, par value $0.01 per shareEPR PrGNew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.      Yes      No  
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.     Yes       No  
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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes      No  
The aggregate market value of the common shares of beneficial interest (“common shares”) of the registrant held by non-affiliates, based on the closing price on the last business day of the registrant’s most recently completed second fiscal quarter, as reported on the New York Stock Exchange, was $2,477,018,949.
At February 24, 2021, there were 74,766,645 common shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for the 2021 Annual Meeting of Shareholders to be filed with the Commission pursuant to Regulation 14A are incorporated by reference in Part III of this Annual Report on Form 10-K.



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 cash flows and liquidity, continuing waivers of financial covenants related to our bank credit facilities and private placement notes, the performance of our customers, including AMC and Regal, our expected cash collections, expected use of proceeds from dispositions and our results of operations and financial condition. The estimates presented herein are based on the Company's current expectations and, given the current economic uncertainty, there can be no assurances that the Company will be able to continue to comply with other applicable covenants under its debt agreements, which could materially impact actual performance. Forward-looking statements involve numerous risks and uncertainties, and you should not rely on them as predictions of actual events. There is no assurance 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 Annual Report on Form 10-K.

Forward-looking statements necessarily are dependent on assumptions, data or methods that may be incorrect or imprecise. These 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 "Summary Risk Factors" below and Item 1A - "Risk Factors" in this Annual Report on Form 10-K.

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 Annual Report on Form 10-K 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 Annual Report on Form 10-K.

SUMMARY RISK FACTORS

Our business is subject to varying degrees of risk and uncertainty. You should carefully review and consider the full discussion of our risk factors in Item 1A - “Risk Factors” in this Annual Report on Form 10-K. If any of these risks occur, our business, financial condition or results of operations could be materially and adversely affected. Set forth below is a summary list of the principal risk factors relating to our business:

Risks associated with the current outbreak of the novel coronavirus, or COVID-19, or the future outbreak of any other highly infectious or contagious diseases;
Global economic uncertainty and disruptions in financial markets;
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 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;
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Our ability to compete effectively;
Risks associated with four 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 and lack of diversification 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;
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.

Market and Industry Data
This Annual Report on Form 10-K contains market and industry data and forecasts that have been obtained from publicly available information, various industry publications, and other published industry sources. We have not
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independently verified the information from third party sources and cannot make any representation as to the accuracy or completeness of such information. None of the reports and other materials of third party sources referred to in this Annual Report on Form 10-K were prepared for use in, or in connection with, this Annual Report on Form 10-K.
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TABLE OF CONTENTS
 
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PART I

Item 1. Business

General

EPR Properties (“we,” “us,” “our,” “EPR” or the “Company”) was formed on August 22, 1997 as a Maryland real estate investment trust (“REIT”), and an initial public offering of our common shares of beneficial interest (“common shares”) was completed on November 18, 1997. Since that time, we have been a leading net lease investor in experiential real estate, venues which create value by facilitating out of home leisure and recreation experiences where consumers choose to spend their discretionary time and money. We focus our underwriting of experiential property investments on key industry and property cash flow criteria, as well as the credit metrics of our tenants and customers.

In 2019, we began the implementation of a strategy focused solely on future growth in experiential properties. We believe experiential is an enduring sector of the real estate industry and that our focus on properties in this sector, industry relationships and the knowledge of our management, provide us with a competitive advantage in providing capital to operators of these types of properties. We believe this focused niche approach aligns with long-term trends in consumer demand and offers the potential for higher growth and better yields. In pursuit of this strategy, we sold our remaining charter school portfolio in the fourth quarter of 2019, as well as a portion of our private school and early education portfolios in the fourth quarter of 2020. Our remaining Education portfolio, consisting of early childhood education centers and private schools, continues as a legacy investment and provides additional geographic and property diversity.

The outbreak of the COVID-19 pandemic severely impacted global economic activity during 2020 and caused significant volatility and negative pressure in financial markets, which is expected to continue into 2021. The global impact of the outbreak rapidly evolved and many jurisdictions within the United States and abroad reacted by instituting quarantines, mandating business and school closures and restricting travel. As a result, the COVID-19 pandemic severely impacted experiential real estate properties, given that such properties involve congregate social activity and discretionary consumer spending. During 2020, the COVID-19 pandemic negatively affected our business, and could continue to have a material adverse effect on our financial condition, results of operations and cash flows. 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 of the pandemic, the actions taken to contain the outbreak or mitigate its impact, the development and distribution of vaccines and the efficacy of those vaccines, the public’s confidence in the health and safety measures implemented by our tenants and borrowers, and the direct and indirect economic effects of the outbreak and containment measures, all of which are uncertain and cannot be predicted.

While the pandemic has created a very challenging environment, consumers have historically demonstrated an enduring desire for out-of-home congregate experiences. We expect that as COVID-19 vaccinations reach critical mass, business and school closures will be lifted and consumers will return to the leisure and recreation activities our properties offer. We believe that this is further supported by the fact that our customers offer popular and affordable entertainment and social outlet options, particularly through our theatres, eat & play and cultural venues. Additionally, we offer regional destinations (experiential lodging, ski, attractions and gaming properties) which are drive-to locations that do not require air travel.

We are a self-administered REIT. As of December 31, 2020, our total assets were approximately $6.7 billion (after accumulated depreciation of approximately $1.1 billion). Our investments are generally structured as long-term triple-net leases that require tenants to pay substantially all expenses associated with the operation and maintenance of the property, or as long-term mortgages with economics similar to our triple-net lease structure.

Our total investments (a non-GAAP financial measure) were approximately $6.5 billion at December 31, 2020. See Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Financial Measures" for the calculation of total investments and reconciliation of total investments to "Total assets"
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in the consolidated balance sheet at December 31, 2020 and 2019. We currently group our investments into two reportable segments: Experiential and Education. As of December 31, 2020, our Experiential investments comprised $5.9 billion, or 91%, and our Education investments comprised $0.6 billion, or 9%, of our total investments. A more detailed description of the property types included within these segments is provided below.

We believe our management’s knowledge and industry relationships have facilitated favorable opportunities for us to acquire, finance and lease properties. Prior to the pandemic, our primary challenges were locating suitable properties, negotiating favorable lease or financing terms, and managing our real estate portfolio as we have continued to grow. During the pandemic, our focus has been addressing all challenges brought on by the pandemic including monitoring customer status and working with customers to help ensure long-term stability and assisting them in establishing re-opening plans.

Going forward, we are particularly focused on property categories which allow us to use our experience to mitigate some of the risks inherent in a changing economic environment. We cannot provide any assurance that any such potential investment or acquisition opportunities will arise in the near future, or that we will actively pursue any such opportunities.

Although we are primarily a long-term investor, we may also sell assets if we believe that it is in the best interest of our shareholders or pursuant to contractual rights of our tenants or our customers.

Experiential

As of December 31, 2020, our Experiential segment included total investments of approximately $5.9 billion in the following property types (owned or financed):
178 theatre properties;
55 eat & play properties (including seven theatres located in entertainment districts);
18 attraction properties;
13 ski properties;
six experiential lodging properties;
one gaming property;
three cultural properties; and
seven fitness & wellness properties.

As of December 31, 2020, our owned Experiential real estate portfolio of approximately 19.3 million square feet was 93.8% leased and included $57.6 million in property under development and $20.2 million in undeveloped land inventory.

Theatres
A significant portion of our Experiential portfolio consists of modern megaplex theatres. The COVID-19 pandemic has had a severe impact on the theatre industry. Many theatre locations remain closed due to local restrictions or operator decision to close as a result of the impact of the COVID-19 pandemic, specifically the decision by many major studios to delay the release of blockbuster movies in hopes that larger audiences will be available as additional markets open. Due to these closures and the lack of content to exhibit, our tenants have required significant rent deferrals and, in some circumstances, restructured lease agreements. While studios pushed the majority of movie content to 2021, certain studios chose hybrid content release strategies in support of their direct-to-consumer streaming services. In these cases, the standard movie release strategy referred to as “release windows” was set aside as movies were either simultaneously released in theatres and through streaming services, or simply released directly through streaming services. While these decisions were made as a result of the pandemic, it is yet to be determined how the industry will again coalesce around a standard release strategy in a post-pandemic environment.

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Several theatre tenants have been placed on a cash-basis for revenue recognition purposes due to the ongoing uncertainty. During 2020, we experienced vacancies at certain theatre properties and have determined to either sell these properties or manage them through a third-party manager. As theatres continue to be impacted by the pandemic, we will evaluate the best strategy for any future vacancies on a property-by-property basis.

The modern megaplex theatre provides a greatly enhanced audio and visual experience for patrons. Prior to the pandemic, there was a trend among national and local exhibitors to further enhance the customer experience. These enhancements include reserved, luxury seating and expanded food and beverage offerings, including the addition of alcohol and more efficient point of sale systems. The evolution of the theatre industry over the last 20 years from the sloped floor theatre to the megaplex stadium theatre to the expanded amenity theatre has demonstrated that exhibitors and their landlords are willing to make investments in their theatres to take the customer experience to the next level.

Moviegoing has been a dominant out-of-home entertainment option for decades, with over 1.2 billion tickets sold in North America during 2019 according to the Motion Picture Association (MPA) 2019 Theme Report. We believe that the evolution in theatres and enhanced customer experience will bring customers back to enjoy film exhibition in a post-pandemic environment. While consumers have the option of watching streaming content at home, data has shown that theatre exhibition and streaming options have successfully coexisted. In fact, a survey published by EY (The Relationship Between Movie Theater Attendance and Streaming Behavior - February, 2020) illustrated that the most frequent moviegoers also spend the most time streaming. This is in part likely due to the fact that the majority of content streamed in-home is series-based content. Additionally, theatre exhibition remains a critical initial distribution platform for studios to fully monetize titles.

Ultimately, the pace of recovery and stabilization of theatre exhibition will be dependent upon several factors including the success of the deployment of vaccines, consumer confidence in attending theatres and studios' willingness to broadly release content to theatres.

While theatres are the largest property type in our Experiential segment currently, it is expected that over time it will become a smaller percent of the portfolio. We expect this to occur as we grow in other target experiential property types and possibly through dispositions of theatre properties.

As of December 31, 2020, our owned theatre properties were leased to 17 different leading theatre operators. A significant portion of our total revenue was from Cinemark USA, Inc. ("Cinemark"), American Multi-Cinema, Inc. ("AMC") and Regal Entertainment Group ("Regal"). For the year ended December 31, 2020, approximately $42.1 million or 10.1%, $30.0 million or 7.2% and $13.1 million or 3.1% of the Company's total revenue was from Cinemark, AMC and Regal, respectively.

Eat & Play
The emergence of the "eatertainment" category has inspired an increasing number of successful concepts that appeal to consumers by providing good food and high-quality entertainment options all at one location. Our eat & play portfolio includes golf entertainment complexes, entertainment districts and family entertainment centers.

Our golf entertainment complexes combine golf with entertainment, competition and food and beverage service, and are leased to, or we have mortgage receivables from, Topgolf USA ("Topgolf"). By combining interactive entertainment with quality food and beverage and a long-lived recreational activity, Topgolf provides an innovative, enjoyable and repeatable customer experience. Due to the pandemic, our TopGolf locations were closed for a portion of 2020 based on local restrictions. However, these locations have reopened and are recovering quickly as customers return to experience this interactive activity. We expect to continue to pursue select opportunities related to golf entertainment complexes. A significant portion of our total revenue was from Topgolf, which totaled approximately $80.7 million, or 19.5%, of the Company's total revenue for the year ended December 31, 2020.

We also continue to seek opportunities for the acquisition, financing or development of entertainment districts. Entertainment districts are restaurant, retail and other entertainment venues typically anchored by a megaplex theatre. The opportunity to capitalize on the traffic generation of our existing market-dominant theatres to create
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entertainment districts not only strengthens the execution of the megaplex theatre but adds diversity to our tenant and asset base. We have and will continue to evaluate our existing portfolio for additional development of entertainment, retail and restaurant density, and we will also continue to evaluate the purchase or financing of existing entertainment districts that have demonstrated strong financial performance and meet our quality standards. The leasing and property management requirements of our entertainment districts are generally met using third-party professional service providers.

Our family entertainment center operators offer a variety of entertainment options including bowling, bocce ball and karting. We will continue to seek opportunities for the acquisition, financing or development of such properties that leverage our expertise in this area.

Attractions
Our attractions portfolio consists primarily of waterparks and amusement parks, each of which draw a diverse segment of customers. Prior to the pandemic, outdoor waterparks had historically experienced attendance growth since their inception in 1977. Consumer demand for indoor waterparks was also increasing pre-pandemic, making a trip to the waterpark accessible in all four seasons. Today’s amusement parks offer themed experiences designed to appeal to all ages.

Our attraction operators continue to deliver innovative and compelling attractions along with high standards of service, making our attractions a day of fun that is accessible for families, teens, locals and tourists. These attractions offer experiences designed to appeal to all ages while remaining accessible in both cost and proximity. As the attractions industry continues to evolve, innovative technologies and concepts are redefining the attractions experience.

Due to the pandemic, our attraction properties were closed for all or a portion of 2020 based on local restrictions with certain properties still required to be closed. We believe that demand for attractions will normalize in a post-pandemic environment. Our attraction properties are leased to, or we have mortgage notes receivable from, five different operators. We expect to continue to pursue opportunities in this area.

Ski
Our ski portfolio provides a sustainable advantage for the experience-oriented consumer, providing outdoor entertainment in the winter and, in some cases, year-round. All the ski properties that serve as collateral for our mortgage notes in this area, as well as our five owned properties, offer snowmaking capabilities and provide a variety of terrains and vertical drop options. We believe that the primary appeal of our ski properties lies in the convenient and reliable experience consumers can expect. Given that all our ski properties are located near major metropolitan areas, they offer skiing, snowboarding and other activities without the expense, travel, or lengthy preparations of remote ski resorts. Furthermore, advanced snowmaking capabilities increase the reliability of the experience during the winter versus other ski properties that do not have such capabilities. Our ski properties were minimally impacted by the pandemic in 2020 because the ski season was substantially over when pandemic restrictions began. Additionally, in 2021, due to the outdoor nature of the activity and the convenient location of our properties, we believe that our ski portfolio will perform well through the pandemic. Our ski properties are leased to, or we have mortgage notes receivable from, five different operators. We expect to continue to pursue opportunities in this area.

Experiential Lodging
Experiential lodging meets the needs of consumers by providing a convenient, central location that combines high-quality lodging amenities with entertainment, recreation and leisure activities. The appeal of these properties attracts multiple generations at once. Due to the pandemic, our experiential lodging property in Sullivan County, New York has been closed by state mandate since March of 2020 and our two locations in Florida were required to be closed for a portion of the second quarter of 2020. Additionally, travel restrictions negatively impacted our locations in Florida when they were able to reopen. We believe that demand for experiential lodging will return in a post-pandemic environment. Our investments in experiential lodging have been typically structured using triple-net leases, however, we currently operate these three properties (two of which are included in an unconsolidated joint venture) through a traditional REIT lodging structure. In the traditional REIT lodging structure, we hold qualified
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lodging facilities under the REIT and we separately hold the operations of the facilities in taxable REIT subsidiaries ("TRSs") which are facilitated by management agreements with eligible independent contractors. We expect to continue to pursue opportunities for investments in experiential lodging.

Gaming
Our strategic focus in our gaming portfolio is on casino resorts and hotels leased to leading operators with a strong regulatory track record that seek to drive consumer loyalty and value through quality customer experiences, superior service, world-class affinity programs and continuous innovation on and off the gaming floor. Additionally, we focus on casino resorts and hotels that provide a wide array of experiential offerings outside of lodging and state-of-the-art gaming. Through live entertainment, various recreational opportunities, dining options and night clubs, the combination of amenities appeals to a broader demographic. In 2020, regional gaming properties demonstrated stronger resilience versus Las Vegas strip casinos, as they are not dependent on air travel and conventions, both of which saw significant declines during the year.

As of December 31, 2020, our investments in gaming consisted of land under ground lease related to the Resorts World Catskills casino and resort project in Sullivan County, New York. Our ground lease tenant has invested in excess of $930.0 million in the construction of the casino and resort project, and the casino first opened for business in February 2018. We will continue to pursue opportunities for investment in gaming under triple net lease structures or mortgages.

Cultural
Our cultural investments seek to engage consumers and create memorable experiences and are evolving to offer immersive and interactive exhibits that encourage repeat visits. Combining an opportunity to experience animals, art or history with a congregate social experience, cultural venues, such as zoos, aquariums and museums, are reemerging as an entertainment option. As appreciation for the importance of leisure time is growing, cultural venues are broadening their appeal to reach a variety of customers.

Desiring to be a preeminent choice in what is now known as location-based experiences, several trends have developed among cultural venues. Many are utilizing new technology, personalizing the guest experience and implementing an element of play that was previously absent. In making new investments in this property type, we will continue to identify the locations and tenants that execute well on these trends and have a history of strong attendance. City Museum in St. Louis is one of our properties and is a great example of an emerging category called “artainment” which is an art display that invites guests to interact and explore.

Due to the pandemic, our cultural investments were closed for a portion of 2020 based on local restrictions but all locations have reopened. Although City Museum is experiencing a slower recovery, our two other cultural investments are recovering quickly. We believe that demand for cultural activities will return in a post-pandemic environment and we expect to continue to pursue opportunities in this area.

Fitness & Wellness
In recent years, consumers have begun to spend more time and money on their well-being. The diverse offerings of boutique and larger fitness centers have caught the interest of many consumers, driving an expansion of both fitness and more broadly, the wellness industry. By allowing fitness club members to focus on their individual interests and goals in a community setting, operators gain loyalty and retention which are essential elements in the ongoing success of a facility. Commercial fitness centers have stayed at the forefront of the industry by offering personalization within congregate settings. Our tenants make it their goal to motivate, educate, and to help consumers look and feel better.

We will continue to seek opportunities for the acquisition, financing or development of other experiential properties that leverage our expertise in this area.

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Education

As of December 31, 2020, our Education segment included total investments of approximately $0.6 billion in the following property types (owned or financed):
65 early childhood education center properties; and
10 private school properties.

As of December 31, 2020, our owned Education real estate portfolio of approximately 1.4 million square feet was 100% leased and included $3.0 million in undeveloped land inventory.

Private schools were minimally impacted by the pandemic as students were still learning in a remote environment in areas where closures were required. Most of our early education centers have experienced mandated closures and a drop in revenue that we believe is temporary and will continue to recover as people return to work. As discussed above, our growth going forward will be focused on Experiential properties and therefore we do not expect to seek additional opportunities for Education properties.

Business Objectives and Strategies

Our vision is to continue to build the premier experiential REIT. We focus on real estate venues which create value by facilitating out of home leisure and recreation experiences where consumers choose to spend their discretionary time and money. These are properties which make up the social infrastructure of society.

Our long-term primary business objective is to enhance shareholder value by achieving predictable and increasing Funds From Operations As Adjusted ("FFOAA") and dividends per share (See Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Financial Measures - Funds From Operations (FFO), Funds From Operations As Adjusted (FFOAA) and Adjusted Funds From Operations (AFFO)” for a discussion of FFOAA, which is a non-GAAP financial measure). Our growth strategy focuses on acquiring or developing experiential properties in which we maintain a depth of knowledge and relationships, and which we believe offer sustained performance throughout most economic cycles. We intend to achieve this objective by continuing to execute the Growth Strategies, Operating Strategies and Capitalization Strategies described below.

Growth Strategies

Our strategic growth is focused on acquiring or developing experiential real estate venues which create value by facilitating out of home leisure and recreation experiences where consumers choose to spend their discretionary time and money. We may also pursue opportunities to provide mortgage financing for these investments in certain situations where this structure is more advantageous than owning the underlying real estate.

Our focus on Experiential properties is consistent with our strategic organizational design which is structured around building a center of knowledge and strong operating competencies in the experiential real estate market. Retention and building of this knowledge depth creates a competitive advantage allowing us to more quickly identify key market trends.

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To this end, we will deliberately apply information and our ingenuity to identify properties which represent potential logical extensions within each of our existing experiential property types, or potential future additional experiential property types. As part of our strategic planning and portfolio management process, we assess new opportunities against the following underwriting principles:

    Industry
Experiential Alignment
Proven Business Model
Enduring Value
Addressable Opportunity
    Property
Location Quality
Competitive Position
Location Rent Coverage
Cash Flow Durability
    Tenant
Demonstrated Success
Commitment
Reputable Management
Solid Credit Quality

We believe that our over 20 years of experience and knowledge in the experiential real estate market gives us the opportunity to be the dominant player in this area. Additionally, we have tenant and borrower relationships that provide us with access to investment opportunities.

The pandemic has impeded our growth in the near term while our focus has been addressing challenges brought on by the pandemic including monitoring customer status and working with customers to help ensure long-term stability and assisting them in establishing re-opening plans. We expect to return to growth as our customers' businesses continue to recover and, in turn, our cash flows stabilize.

Operating Strategies

Lease Risk Minimization
To avoid initial lease-up risks and produce a predictable income stream, we typically acquire or develop single-tenant properties that are leased under long-term leases. We believe our willingness to make long-term investments in properties offers our tenants financial flexibility and allows tenants to allocate capital to their core businesses. Although we will continue to emphasize single-tenant properties, we have acquired or developed, and may continue to acquire or develop, multi-tenant properties we believe add shareholder value.

Lease Structure
We have structured our leasing arrangements to achieve a positive spread between our cost of capital and the rents paid by our tenants. We typically structure leases on a triple-net basis under which the tenants bear the principal portion of the financial and operational responsibility for the properties. During each lease term and any renewal periods, the leases typically provide for periodic increases in rent and/or percentage rent based upon a percentage of the tenant’s gross sales over a pre-determined level. In our multi-tenant property leases and some of our theatre leases, we generally require the tenant to pay a common area maintenance (“CAM”) charge to defray its pro rata share of insurance, taxes and maintenance costs.

Mortgage Structure
We have structured our mortgages to achieve economics similar to our triple-net lease structure with a positive spread between our cost of capital and the interest paid by our tenants. During each mortgage term and any renewal
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periods, the notes typically provide for periodic increases in interest and/or participating features based upon a percentage of the tenant’s gross sales over a pre-determined level.

Traditional REIT Lodging Structure
In certain limited instances, we have utilized traditional REIT lodging structures, where we hold qualified lodging facilities under the REIT and we separately hold the operations of the facilities in TRSs which are facilitated by management agreements with eligible independent contractors. However, we currently anticipate migrating over time what we hold in such structures to more traditional net lease or mortgage arrangements.

Development and Redevelopment
We intend to continue developing properties and redeveloping existing properties that are consistent with our growth strategies. We generally do not begin development of a single-tenant property without a signed lease providing for rental payments that are commensurate with our level of capital investment. In the case of a multi-tenant development, we generally require a significant amount of the development to be pre-leased prior to construction to minimize lease-up risks. In addition, to minimize overhead costs and to provide the greatest amount of flexibility, we generally outsource construction management to third-party firms.

We believe our build-to-suit development program is a competitive advantage. First, we believe our strong relationships with our tenants and developers drive new investment opportunities that are often exclusive to us, rather than bid broadly, and with our deep knowledge of their businesses, we believe we are a value-added partner in the underwriting of each new investment. Second, we offer financing from start to finish for a build-to-suit project such that there is no need for a tenant to seek separate construction and permanent financing, which we believe makes us a more attractive partner. Third, we are actively developing strong relationships with tenants in the experiential sector leading to multiple investments without strict investment portfolio allocations. Finally, multiple investments with the same tenant allows us in most cases to include cross-default provisions in our lease or financing contracts, meaning a default in an obligation to us at one location is a default under all obligations with that tenant.
We will also investigate opportunities to redevelop certain of our existing properties. We may redevelop properties in conjunction with a lease renewal or new tenant, or we may redevelop properties that have more earnings potential due to the redevelopment. Additionally, certain of our properties have excess land where we will pro-actively seek opportunities to further develop.
Tenant and Customer Relationships
We intend to continue developing and maintaining long-term working relationships with experiential operators and developers by providing capital for multiple properties on a regional, national and international basis, thereby creating efficiency and value for both the operators and the Company.

Portfolio Diversification
We will endeavor to further diversify our asset base by property type, geographic location and tenant or customer. In pursuing this diversification strategy, we will target experiential business operators that we view as leaders in their property types and have the ability to compete effectively and perform under their agreements with the Company.

Dispositions
We will consider discretionary property dispositions for reasons such as creating price awareness of a certain property type, opportunistically taking advantage of an above-market offer or reducing exposure related to a certain tenant, property type or geographic area.

Capitalization Strategies

Debt and Equity Financing
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, a non-GAAP measure (see Item 7 – “Management’s Discussion and Analysis of Financial Condition - Non-GAAP
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Financial Measures" for definitions and reconciliations). We also seek to maintain conservative interest, fixed charge, debt service coverage and net debt to gross asset ratios.

We rely primarily on an unsecured debt structure. In the future, while we may obtain secured debt from time to time or assume secured debt financing obligations in acquisitions, we intend to issue primarily unsecured debt securities to satisfy our debt financing needs. We believe this strategy increases our access to capital and permits us to more efficiently match available debt and equity financing to our ongoing capital requirements.

During the year ended December 31, 2020, we amended our Consolidated Credit Agreement, which governs our unsecured revolving credit facility and our unsecured term loan facility, and our Note Purchase Agreement, which governs our private placement notes. The amendments modified certain provisions and waived our obligation to comply with certain covenants under these debt agreements during the Covenant Relief Period, subject to certain conditions. These waivers to comply with certain covenants were obtained in light of the uncertainty related to impacts of the COVID-19 pandemic on us and our tenants and borrowers. The amendments also imposed additional restrictions on us during the Covenant Relief Period, including limitations on making investments, incurring indebtedness, making capital expenditures, paying dividends and making other distributions, repurchasing our shares, voluntarily prepaying certain indebtedness, encumbering certain assets and maintaining a minimum liquidity amount, in each case subject to certain exceptions. The term "Covenant Relief Period," as used in this Annual Report on Form 10-K, generally means the period of time beginning on June 29, 2020 and ending on (i) December 31, 2021, in the case of our Consolidated Credit Agreement, or (ii) October 1, 2021 (subject to extension to January 1, 2022 at our election, subject to certain conditions), in the case of our Note Purchase Agreement governing our private placement notes. We have the right under certain circumstances to terminate the Covenant Relief Period earlier.

Our sources of equity financing consist of the issuance of common shares as well as the issuance of preferred shares (including convertible preferred shares). In addition to larger underwritten registered public offerings of both common and preferred shares, we have also offered shares pursuant to registered public offerings through the direct share purchase component of our Dividend Reinvestment and Direct Share Purchase Plan (“DSP Plan”). While such offerings are generally smaller than a typical underwritten public offering, issuing common shares under the direct share purchase component of our DSP Plan allows us to access capital on a more frequent basis in a cost-effective manner. We expect to opportunistically access the equity markets in the future and, depending primarily on the size and timing of our equity capital needs, may continue to issue shares under the direct share purchase component of our DSP Plan. Furthermore, we may issue shares in connection with acquisitions in the future.

Joint Ventures
We will examine and may pursue potential additional joint venture opportunities with institutional investors or developers if the investments to which they relate meet our guiding principles discussed above. We may employ higher leverage in joint ventures and be more inclined to use secured financing at the property level.

Payment of Regular Dividends
We pay dividend distributions to our common shareholders on a monthly basis (as opposed to a quarterly basis). We temporarily suspended our monthly cash dividend to common shareholders after the common share dividend payable May 15, 2020. Our plan is to reinstitute such dividends to common shareholders, when conditions allow, however, there can be no assurances as to our ability to do so or the timing thereof. Our Series C cumulative convertible preferred shares (“Series C preferred shares”) have a dividend rate of 5.75%, our Series E cumulative convertible preferred shares (“Series E preferred shares”) have a dividend rate of 9.00% and our Series G cumulative redeemable preferred shares ("Series G preferred shares") have a dividend rate of 5.75%. Among the factors the Company’s board of trustees (“Board of Trustees”) considers in setting the common share dividend rate are the applicable REIT tax rules and regulations that apply to dividends, the Company’s results of operations, including FFO and FFOAA per share, and the Company’s Cash Available for Distribution (defined as net cash flow available for distribution after payment of operating expenses, debt service, preferred dividends and other obligations).
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Competition

We compete for real estate financing opportunities with other companies that invest in real estate, as well as traditional financial sources such as banks and insurance companies. REITs have financed, and may continue to seek to finance, experiential and other specialty properties as new properties are developed or become available for acquisition.

Human Capital

Our strategy is specializing in investments in select enduring experiential properties in the real estate industry, and our people are vital to our success in executing on this strategy. As a human-capital intensive business, the long-term success of our firm depends on our people. Our Vice President, Human Resources and Administration works in conjunction with our Executive Vice President and General Counsel, who reports directly to our Chief Executive Officer, to develop and oversee our human capital management objectives, programs and initiatives. In addition, our Board of Trustees is actively involved in our human capital management in its oversight of our long-term strategy and through its Compensation and Human Capital Committee and engagement with management. Our management regularly reports to the Compensation and Human Capital Committee regarding management's human capital objectives, programs and initiatives.

Our key human capital objectives are to attract, retain and develop the highest quality talent to ensure that we have the right talent, in the right place, at the right time. To achieve these objectives, our human capital programs are designed to develop talent to prepare them for critical roles and leadership positions for the future; reward and support employees through competitive pay, benefit, and perquisite programs; enhance our culture through efforts aimed at making the workplace more engaging and inclusive; acquire talent and facilitate internal talent mobility to create a high-performing, diverse workforce; and evolve and invest in technology, tools, and resources to enable employees at work. As of December 31, 2020, we had 53 full-time employees.

Examples of key programs and initiatives that are focused to attract, develop and retain our diverse workforce include:

Development. We provide opportunities for our associates to learn and thrive as professionals, including educational reimbursement, mentorship, executive coaching and ongoing professional development. Annually, EPR hosts leadership development sessions for all levels of our organization. In 2020, we hosted and facilitated virtual sessions with an external professional, focused on building our “Feedback Rich Culture.”

Diversity, equity and inclusion (DE&I). Our DE&I objectives are to ensure our culture is evolving and inclusive, and build teams that reflect the life experiences of our customers and the ultimate consumers of our customers’ services. Specific steps we have taken to address our commitment to DE&I include:
Hosting in 2020 multiple culture-changing and learning opportunities regarding DE&I with external experts and the response was overwhelmingly positive;
Adopting in 2020 the “Rooney” rule with respect to our recruiting processes to ensure an active approach to diversification at all areas of our organization;
Establishing a partnership with a local charter school to provide internship opportunities to diverse alumni as a means to invest in a future and local diverse talent pipeline; and
Sponsoring since 2015, the EPR Women’s Initiative Network, or EWIN, that represents and supports our diverse communities within our workforce. EWIN facilitates networking and connections with peers, outreach and mentoring, leadership and skill development. Most of our employees regularly participate in EWIN programs.

Compensation and Benefits. Our benefits include competitive base pay, performance-based restricted stock awards and a 401(k) with a robust company match. We support our employees’ physical and mental health through paid parental leave, industry-leading health care benefits, unlimited sick leave, flexible paid time
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off and employee assistance programs. In addition, we offer yearly wellness reimbursements, an on-site fitness center and fully stocked kitchens.

Community & Social Impact. Giving back is one of our core values. We demonstrate this through our charitable giving program, EPR Impact, a key cornerstone of our social responsibility. Through a number of employees actively engaged in nonprofits and our commitment to donating to and sponsoring charitable causes and events, we are fortunate to partner with amazing organizations both locally and nationally. As a benefit to employees, EPR Impact’s annual budget includes a pool of funds to support employee-directed contributions to nonprofit organizations where an employee is personally involved. Additionally, EPR will match employee contributions annually up to a given amount for contributions from their personal funds to nonprofit organizations that meet the criteria of the program. In response to the COVID-19 pandemic, “EPRcares” was formed as a way to raise employee funds to provide relief to local front-line workers. This initiative raised over $47,000 and aided 51 organizations in 2020. Additionally, EPR Impact launched a giving initiative, “The Amazing Giving Race,” to support local companies.

Regulation

To maintain our status as a REIT for federal income tax purposes, we must distribute to our shareholders at least 90% of our taxable income for a calendar year, as well as satisfy certain assets, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. In addition, we are subject to numerous federal, state and local laws and regulations applicable to owners of real property. For instance, under federal, state and local environmental laws, we may be liable for the costs of removal or remediation of certain hazardous or toxic substances at, on, in or under our properties, as well as certain other potential costs relating to hazardous or toxic substances (including government fines and penalties and damages for injuries to persons and adjacent property). These laws may impose liability without regard to whether we knew of, or were responsible for, the presence or disposal of those substances. In addition, most of our properties must comply with the Americans with Disabilities Act ("ADA"). The ADA requires that public accommodations reasonably accommodate individuals with disabilities and that new construction or alterations be made to commercial facilities to conform to accessibility guidelines. The ownership, operation, and management of our gaming facilities are also subject to pervasive regulation. These gaming regulations impact our gaming tenants and persons associated with our gaming facilities, which in many jurisdictions include us as the landlord and owner of the real estate.

Our properties are also subject to various other federal, state and local regulatory requirements. We do not know whether existing requirements will change or whether compliance with future requirements will involve significant unanticipated expenditures. Although these expenditures would be the responsibility of our tenants in most cases and for our managers to oversee at our properties, if these tenants or managers fail to perform these obligations, we may be required to do so. For additional information regarding regulations applicable to our business, and risks associated with our failure to comply with such regulations, see Item 1A – "Risk Factors" in this Annual Report on Form 10-K.

Principal Executive Offices

The Company’s principal executive offices are located at 909 Walnut Street, Suite 200, Kansas City, Missouri 64106; telephone (816) 472-1700.

Materials Available on Our Website

Our internet website address is www.eprkc.com. We make available, free of charge, through our website copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “Commission” or “SEC”). You may also view our Code of Business Conduct and Ethics, Company Governance Guidelines, Independence Standards for Trustees and the charters of our Audit, Nominating/Company Governance, Finance and Compensation and Human Capital Committees on our website. Copies of these documents are also
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available in print to any person who requests them. We do not intend for information contained in our website to be part of this Annual Report on Form 10-K.

Item 1A. Risk Factors
There are many risks and uncertainties that can affect our current or future business, operating results, financial condition or share price. The following discussion describes important factors which could adversely affect our current or future business, operating results, financial condition or share price. This discussion includes a number of forward-looking statements. See "Cautionary Statement Concerning Forward-Looking Statements."

Risks That May Impact Our Financial Condition or Performance

The current outbreak of the novel coronavirus, or COVID-19, has negatively impacted and caused disruption to, and the continued COVID-19 outbreak or the future outbreak of any other highly infectious or contagious diseases could materially and adversely impact or cause disruption to, our performance, financial condition, results of operations and cash flows.
The outbreak of COVID-19 has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. In the United States, governmental authorities have instituted quarantines, mandated business and school closures and restricted travel. As a result, the COVID-19 pandemic continues to severely impact experiential real estate properties given that such properties rely on social interaction and discretionary consumer spending. Most of our tenants and borrowers announced temporary closures of their operations during this pandemic. Many experts predict that the outbreak will trigger a period of global economic slowdown or a global recession. The COVID-19 pandemic has negatively affected, and the COVID-19 pandemic (or a future pandemic) could have material and adverse effects on, our ability, and the ability of our customers, to successfully operate and on our financial condition, results of operations and cash flows due to, among other factors:

complete or partial closures of, or other operational issues at, our properties resulting from government, tenant or borrower action;
the reduced economic activity has severely impacted our tenants' and borrowers’ businesses, financial condition and liquidity and caused most of our tenants and borrowers to obtain modifications of their obligations to us;
most of our tenants obtained varying levels of deferral of rent since the outbreak of COVID-19 and may have difficulty repaying those deferrals as they become due;
the reduced economic activity could result in a recession, which could negatively impact consumer discretionary spending;
difficulty accessing debt and equity capital on attractive terms, or at all, and a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our access to capital necessary to fund business operations or address maturing liabilities on a timely basis and our tenants' and borrowers’ ability to fund their business operations and meet their obligations to us;
a general decline in business activity and demand for real estate transactions would adversely affect our ability or desire to grow our portfolio of experiential real estate properties;
a deterioration in our and our tenants' and borrowers’ ability to operate in affected areas or delays in the supply of products or services to us and our tenants and borrowers from vendors that are needed for our and our tenants' and borrowers’ efficient operations has adversely affected our operations and those of our tenants and borrowers; and
the potential negative impact on the health of our personnel, particularly if a significant number of them are impacted, would result in a deterioration in our ability to ensure business continuity during a disruption.

The ultimate extent to which the COVID-19 pandemic impacts our operations and those of our tenants and borrowers will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the outbreak, the actions taken to contain the outbreak or mitigate its impact, the development and distribution of vaccines and the efficacy of those vaccines, the public’s confidence in the health and safety measures implemented by our tenants and borrowers, and the direct and indirect economic effects of the outbreak and containment measures, among others. The financial impact of the COVID-19 pandemic
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could negatively impact our future compliance with financial covenants of our credit facility and other debt agreements and result in a default and potentially an acceleration of indebtedness. Such non-compliance could negatively impact our ability to make additional borrowings under our revolving credit facility, pay dividends and repurchase common shares under our share repurchase program. As discussed below under "Management's Discussion and Analysis of Financial Condition and Results of Operations," we entered into amendments to our bank credit facilities and agreements regarding certain private placement notes that provide a temporary suspension or modification of certain of our financial covenants during the Covenant Relief Period. The Covenant Relief Period may be terminated earlier at our election at the end of a fiscal quarter if we would have been in compliance with financial covenants at the end of the quarter if the Covenant Relief Period had not been in effect. In connection with obtaining these covenant modifications, we temporarily suspended our monthly cash dividend to common shareholders and our share repurchase program. There can be no assurances as to our ability to reinstitute cash dividend payments to common shareholders or share repurchases or the timing thereof. The rapid development and fluidity of the COVID-19 pandemic precludes any prediction as to the ultimate adverse impact of the pandemic. Nevertheless, the COVID-19 pandemic has negatively affected, and presents additional material uncertainty and risk with respect to, our performance, financial condition, results of operations and cash flows.

Global economic uncertainty and disruptions in the financial markets may impair our ability to refinance existing obligations or obtain new financing for acquisition or development of properties.
There exists a high level of global economic uncertainty, including uncertainty regarding the impact of the COVID-19 pandemic after its subsidence. Regarding experiential industries, it is unclear whether the COVID-19 pandemic will negatively impact future consumer preferences regarding congregate activities, such as those offered by theatres, casinos, restaurants, attractions and other industries in which we invest. Political decisions and uncertainty in the U.S. and abroad, such as the direction and levels of stimulus spending in response to the impact of the COVID-19 pandemic, have contributed to volatility in the global financial markets. Many economists believe that the aftermath of the COVID-19 pandemic will present a significant risk of a recession to the U.S. economy. We rely in part on debt financing to finance our investments and development. To the extent that turmoil in the financial markets continues or intensifies, it has the potential to adversely affect our ability to refinance our existing obligations as they mature or obtain new financing for acquisition or development of properties and adversely affect the value of our investments. If we are unable to refinance existing indebtedness on attractive terms at its maturity, we may be forced to dispose of some of our assets. Uncertain economic conditions and disruptions in the financial markets could also result in a substantial decrease in the value of our investments, which could also make it more difficult to refinance existing obligations or obtain new financing. In addition, these factors may make it more difficult for us to sell properties or may adversely affect the price we receive for properties that we do sell, as prospective buyers may experience increased costs of capital or difficulties in obtaining capital. These events in the credit markets may have an adverse effect on other financial markets in the U.S., which may make it more difficult or costly for us to raise capital through the issuance of our common shares or preferred shares. In addition, disruptions in global financial markets may have other adverse effects on us, our tenants, our borrowers or the economy in general.

Most of our customers, consisting primarily of tenants and borrowers, operate properties in market segments that depend upon discretionary spending by consumers. Any continued reduction in discretionary spending by consumers within the market segments in which our customers or potential customers operate could adversely affect such customers' operations and, in turn, reduce the demand for our properties or financing solutions.
Most of our portfolio is leased to or financed with customers operating service or retail businesses on our property locations. Many of these customers operate services or businesses that are dependent upon consumer experiences. Theatre, eat & play, attraction, ski, experiential lodging, gaming, private school and early childhood education center properties, represent some of the largest market investments in our portfolio; and AMC, Topgolf, Regal Cinemas, Inc. and Cinemark USA, Inc. represented our largest customers for the fiscal year ended December 31, 2020. The success of most of these businesses depends on the willingness or ability of consumers to use their discretionary income to purchase our customers' products or services. In addition, the lodging and gaming industries are also highly sensitive to consumer discretionary spending. A downturn in the economy, or a trend to not want to go "out of home" could cause consumers in each of our property types to reduce their discretionary spending within the market segments in which our customers or potential customers operate, which could adversely affect such customers' operations and, in turn, reduce the demand for our properties or financing solutions. The current
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COVID-19 pandemic has significantly reduced consumer discretionary spending, which is severely impacting experiential real estate properties, including those of our customers, and it is unclear whether the COVID-19 pandemic will negatively impact future consumer preferences regarding congregate activities.

Covenants in our debt instruments could adversely affect our financial condition and our acquisitions and development activities.
Our unsecured revolving credit facility, term loan facility, senior notes and other loans that we may obtain in the future contain certain cross-default provisions as well as customary restrictions, requirements and other limitations on our ability to incur indebtedness, including covenants involving our maximum total debt to total asset value; maximum permitted investments; minimum tangible net worth; maximum secured debt to total asset value; maximum unsecured debt to eligible unencumbered properties; minimum unsecured interest coverage; and minimum fixed charge coverage. Our ability to borrow under our unsecured revolving credit facility and our term loan facility is also subject to compliance with certain other covenants. We also have senior notes issued in a private placement transaction that are subject to certain covenants. In addition, some of our properties are subject to mortgages that contain customary covenants such as those that limit our ability, without the prior consent of the lender, to further mortgage the applicable property or to discontinue insurance coverage.

As discussed below under "Management's Discussion and Analysis of Financial Condition and Results of Operations", we entered into amendments to our bank credit facilities and agreements regarding certain private placement notes that provide a temporary suspension or modification of our financial covenants during the Covenant Relief Period. During the Covenant Relief Period, we are subject to certain restrictions, including limitations on certain investments, incurrences of indebtedness, capital expenditures, payment of dividends or other distributions and stock repurchases, and maintenance of a minimum liquidity amount, in each case subject to certain exceptions. There can be no assurance as to the timing of the termination of the Covenant Relief Period. In addition, upon termination of the Covenant Relief Period, failure to comply with our covenants or obtain modifications of such covenants could cause a default under the applicable debt instrument, and we may then be required to repay such debt with capital from other sources. The ongoing financial impact of the COVID-19 pandemic could negatively impact our future compliance with financial covenants of our credit facility and other debt agreements and result in a default and potentially an acceleration of indebtedness. Under those circumstances, other sources of capital may not be available to us, or be available only on unattractive terms. Additionally, our ability to satisfy current or prospective lenders' insurance requirements may be adversely affected if lenders generally insist upon greater insurance coverage against acts of terrorism than is available to us in the marketplace or on commercially reasonable terms.

We rely on debt financing, including borrowings under our unsecured revolving credit facility, term loan facility, issuances of debt securities and debt secured by individual properties, to finance our acquisition and development activities and for working capital. If we are unable to obtain financing from these or other sources, or to refinance existing indebtedness upon maturity, our financial condition and results of operations would likely be adversely affected. The ultimate extent to which the COVID-19 pandemic impacts our ability to comply with existing or modified financial covenants and obtain financing will depend on future developments, which, as discussed above, are highly uncertain and cannot be predicted with confidence.

Adverse changes in our credit ratings could impair our ability to obtain additional debt and equity financing on favorable terms, if at all, and negatively impact the market price of our securities, including our common shares.
The credit ratings of our senior unsecured debt and preferred equity securities are based on our operating performance, liquidity and leverage ratios, overall financial position and other factors employed by the credit rating agencies in their rating analysis of us. Our credit ratings can affect the amount and type of capital we can access, as well as the terms of any financings we may obtain, and downward changes in our credit ratings and outlook were recently made by certain credit rating agencies. There can be no assurance that we will be able to maintain our current credit ratings, particularly in light of the effects of the ongoing COVID-19 pandemic, and in the event that our current credit ratings further deteriorate, we would likely incur a higher cost of capital and it may be more difficult or expensive to obtain additional financing or refinance existing obligations and commitments. Also, further downgrades in our credit ratings would trigger additional costs or other potentially negative consequences under our current and future credit facilities and future debt instruments.
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An increase in interest rates could increase interest cost on new debt and could materially adversely impact our ability to refinance existing debt, sell assets and limit our acquisition and development activities.
Although the U.S. Federal Reserve decreased its benchmark interest rate multiple times in 2019 and 2020, there can be no assurances that the rate will not increase in the future. If interest rates increase, so could our interest costs for any new debt. This increased cost could make the financing of any acquisition and development activity more costly. Rising interest rates could limit our ability to refinance existing debt when it matures or cause us to pay higher interest rates upon refinancing and increase interest expense on refinanced indebtedness. In addition, an increase in interest rates could decrease the amount third parties are willing to pay for our assets, thereby limiting our ability to reposition our portfolio promptly in response to changes in economic or other conditions.

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.

The reduced economic activity resulting from the COVID-19 pandemic is severely impacting our tenants' businesses, financial condition and liquidity and has 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. We also anticipate that one or more of our tenants may become bankrupt or insolvent as a result of this reduced economic activity. The ultimate extent to which the COVID-19 pandemic 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 are exposed to the credit risk of our customers and counterparties and their failure to meet their financial obligations could adversely affect our business.
Our business is subject to credit risk. There is a risk that a customer or counterparty will fail to meet its obligations when due. Customers and counterparties that owe us money may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure or other reasons. Although we have procedures for reviewing credit exposures to specific customers and counterparties to address present credit concerns, default risk may arise from events or circumstances that are difficult to detect or foresee. Some of our risk management methods depend upon the evaluation of information regarding markets, clients or other matters that are publicly available or otherwise accessible by us. That information may not, in all cases, be accurate, complete, up-to-date or properly evaluated. In addition, concerns about, or a default by, one customer or counterparty could lead to significant liquidity problems, losses or defaults by other customers or counterparties, which in turn could adversely affect us. We have experienced customer defaults resulting from the COVID-19 pandemic, and we expect to experience future defaults, the breadth of which will depend upon the scope, severity and duration of the COVID-19 pandemic. We may be materially and adversely affected in the event of a significant default by our customers and counterparties.
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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. One or more of our borrowers may become bankrupt or insolvent as a result of this reduced economic activity. The ultimate extent to which the COVID-19 pandemic impacts the operations of our borrowers will depend on future developments, which, as discussed above, are highly uncertain and cannot be predicted with confidence.

From time to time, the base terms of some of our leases will expire and there is no assurance that such leases will be renewed at existing lease terms, at otherwise economically favorable terms or at all.
From time to time, the base terms of some of our leases with our tenants will expire. These tenants have and may continue to seek rent or other concessions from us, including requiring us to modify the properties in order to renew their leases. There is no guarantee that we will be able to renew these leases at existing lease terms, at otherwise economically favorable terms or at all. In addition, if we fail to renew these leases, there can be no assurances that we will be able to locate substitute tenants for such properties or enter into leases with these substitute tenants on economically favorable terms.

Operating risks in the experiential real estate industry may affect the ability of our tenants to perform under their leases.
The ability of our tenants to operate successfully in the experiential real estate industry and remain current on their lease obligations depends on a number of factors, including, with respect to theatres, the availability and popularity of motion pictures, the performance of those pictures in tenants' markets, the allocation of popular pictures to tenants, the release window (represents the time that elapses from the date of a picture's theatrical release to the date it is available on other mediums) and the terms on which the pictures are licensed. Neither we nor our tenants control the operations of motion picture distributors. During the COVID-19 pandemic, motion picture distributors have increasingly relied upon streaming as a method of delivering product, including Warner Bros. announced simultaneous release of “Wonder Woman 1984” to theatres and streaming on HBO Max. There can be no assurances that motion picture distributors will continue to rely on theatres as the primary means of distributing first-run films, and motion picture distributors have and may in the future consider alternative film delivery methods. In addition, in August 2020, a U.S. District Court granted the U.S. Department of Justice's request to terminate the Paramount Consent Decrees, which prohibit movie studios from owning theatres or utilizing "block booking," a practice whereby movie studios sell multiple films as a package to theatres, in addition to other restrictions. The termination was effective immediately for certain restrictions, while other restrictions are subject to a two-year sunset period. There can be no assurances as to the effects of this regulatory action or whether this regulatory action will materially adversely affect our theatre tenants' operations and, in turn, their ability to perform under their leases.

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

Real estate is a competitive business.
Our business operates in highly competitive environments. We compete with a large number of real estate property investors and developers including traded and non-traded public REITS, private equity investors and institutional investment funds. Some of these investors may be willing to accept lower returns on their investments, or have greater financial resources than we do, a greater ability to borrow funds to acquire properties and the ability to accept more risk than we prudently manage. This competition may increase the demand for the types of properties in which we typically invest and, therefore, reduce the number of suitable acquisition opportunities available to us and increase the prices paid for such acquisition properties. This competition will increase if investments in real estate become more attractive relative to other types of investment. Accordingly, competition for the acquisition of real property could materially and adversely affect us.

Principal factors of competition are rent or interest charged, attractiveness of location, the quality of the property and breadth and quality of services provided. If our competitors offer space at rental rates below the rental rates we are currently charging our tenants, we may lose potential tenants, and we may be pressured to reduce our rental rates below those we currently charge in order to retain tenants when our tenants' leases expire. Our success depends upon, among other factors, trends of the national and local economies, financial condition and operating results of current and prospective tenants and customers, availability and cost of capital, construction and renovation costs, taxes, governmental regulations, legislation and population trends.

Four tenants represent a significant portion of our lease revenues.
AMC, Topgolf, Regal Cinemas Inc. and Cinemark USA, Inc., represent a significant portion of our total revenue. For the year ended December 31, 2020, total revenues of approximately $30.0 million or 7.2% were from AMC, approximately $80.7 million or 19.5% were from TopGolf, approximately $13.1 million or 3.1% were from Regal and approximately $42.1 million or 10.1% were from Cinemark. The COVID-19 pandemic is severely impacting these tenants', as well as our other tenants' businesses, financial condition and liquidity.

We have diversified and expect to continue to diversify our real estate portfolio by entering into lease transactions or financing arrangements with a number of other tenants or borrowers. If for any reason AMC, TopGolf, Regal and/or Cinemark failed to perform under their lease obligations for a significant period of time, or under any modified lease obligations, we could be required to reduce or suspend our shareholder dividends or share repurchases and may not have sufficient funds to support operations or service our debt until substitute tenants are obtained. If that happened, we cannot predict when or whether we could obtain substitute quality tenants on acceptable terms.

Properties we develop may not achieve sufficient operating results within expected timeframes and therefore the tenant or borrowers may not be able to pay their agreed upon rent or interest, and managed properties may not be able to operate profitably, which could adversely affect our financial results.
A significant portion of our investments include investments in build-to-suit projects. When construction is completed, these projects may require some period of time to achieve targeted operating results. For properties leased or financed, we may provide our tenants or borrowers with lease or financing terms that are more favorable to them during this timeframe. Tenants and borrowers that fail to achieve targeted operating results within expected timeframes may be unable to pay their obligations pursuant to the agreed upon lease or financing terms or at all. If we are required to restructure lease or financing terms or take other action with respect to the applicable property, our financial results may be impacted by lower revenues, recording an impairment or provision for loan loss, writing off rental or interest amounts or otherwise. Additionally, if we have entered into a management agreement to operate a property we have developed, the project may not be able to achieve targeted operating results which may impact our financial results by lowering income or recording an impairment loss.

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We have entered into management agreements to operate certain of our properties and we could be adversely affected if such managers do not manage these properties successfully.
To maintain our status as a REIT, we are generally not permitted to directly operate our properties. As a result, from time to time, we enter into management agreements with third-party managers to operate certain properties. In the past, this practice has been most frequent with our experiential lodging properties. However, as a result of the impact of the COVID-19 pandemic, we have also begun managing a small number of theatres formerly operated by our tenants and may manage a greater number in the future if defaults result in our taking back additional theatre locations. For managed properties, our ability to direct and control how our properties are operated is less than if we were able to manage these properties directly. Under the terms of our management agreements, our participation in operating decisions relating to these properties is generally limited to certain matters. We do not supervise any of these managers or their personnel on a day-to-day basis. We cannot provide any assurances that the managers will manage our properties in a manner that is consistent with their respective obligations under the applicable management agreement or our obligations under any franchise agreements. We could be materially and adversely affected if any of our managers fail to effectively manage revenues and expenses, provide quality services and amenities, or otherwise fail to manage our properties in our best interests, and we may be financially responsible for the actions and inactions of the managers. In certain situations, we may terminate the management agreement. However, we can provide no assurances that we could identify a replacement manager, or that the replacement manager will manage our property successfully. A failure by our third-party managers to successfully manage our properties could lead to an increase in our operating expenses or decrease in our revenue, or both.

Our indebtedness may affect our ability to operate our business and may have a material adverse effect on our financial condition and results of operations.
We have a significant amount of indebtedness. As of December 31, 2020, we had total debt outstanding of approximately $3.7 billion, including $590.0 million outstanding under our revolving credit facility, drawn as a precautionary measure to increase our cash position and preserve financial flexibility that was subsequently paid down to $90.0 million in January 2021. Our indebtedness could have important consequences, such as:

limiting our ability to obtain additional financing to fund our working capital needs, acquisitions, capital expenditures or other debt service requirements or for other purposes;
limiting our ability to use operating cash flow in other areas of our business because we must dedicate a substantial portion of these funds to service debt;
limiting our ability to compete with other companies who are not as highly leveraged, as we may be less capable of responding to adverse economic and industry conditions;
restricting us from making strategic acquisitions, developing properties or pursuing business opportunities;
restricting the way in which we conduct our business because of financial and operating covenants in the agreements governing our existing and future indebtedness;
exposing us to potential events of default (if not cured or waived) under financial and operating covenants contained in our debt instruments that could have a material adverse effect on our business, financial condition and operating results;
increasing our vulnerability to a downturn in general economic conditions or in pricing of our investments;
negatively impacting our credit ratings; and
limiting our ability to react to changing market conditions in our industry and in our customers’ industries.

In addition to our debt service obligations, our operations require substantial investments on a continuing basis. Our ability to make scheduled debt payments, to refinance our obligations with respect to our indebtedness and to fund capital and non-capital expenditures necessary to meet our remaining commitments on existing projects and maintain the condition of our assets, as well as to provide capacity for the growth of our business, depends on our financial and operating performance, which, in turn, is subject to prevailing economic conditions and financial, business, competitive, legal and other factors.

Subject to the restrictions in our unsecured revolving credit facility, our unsecured term loan facility and the debt instruments governing our existing senior notes, we may incur significant additional indebtedness, including additional secured indebtedness. Although the terms of our unsecured revolving credit facility, our unsecured term loan facility and the debt instruments governing our existing senior notes contain restrictions on the incurrence of
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additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and additional indebtedness incurred in compliance with these restrictions could be significant. If new debt is added to our current debt levels, the risks described above could increase.

The financial impact of the COVID-19 pandemic has negatively impacted our compliance with financial covenants of our credit facility and other debt agreements. As discussed below under "Management's Discussion and Analysis of Financial Condition and Results of Operations", during 2020, we entered into amendments to our unsecured revolving credit facility, our unsecured term loan facility and the debt instruments governing our certain private placement notes to provide for a Covenant Relief Period. Upon expiration of the Covenant Relief Period, those financial covenants will apply and our failure to comply with the financial covenants of our credit facility and other debt agreements could result in a default and potentially an acceleration of indebtedness. Such non-compliance could negatively impact our ability to make additional borrowings under our revolving credit facility, pay dividends and repurchase common shares under our share repurchase program. There can be no assurances that we will be able to comply with financial covenants in future periods. The ultimate extent to which the COVID-19 pandemic impacts our operations will depend on future developments, which, as discussed above, are highly uncertain and cannot be predicted with confidence.

There are risks inherent in having indebtedness and using such indebtedness to fund acquisitions.
We currently use debt to fund portions of our operations and acquisitions. In a rising interest rate environment, the cost of our existing variable rate debt and any new debt will increase. We have used leverage to acquire properties and expect to continue to do so in the future. Although the use of leverage is common in the real estate industry, our use of debt exposes us to some risks. If a significant number of our tenants fail to make their lease payments for a significant period of time, the risk of which has been heightened as a result of the COVID-19 pandemic, and we do not have sufficient cash to pay principal and interest on the debt, we could default on our debt obligations. A small amount of our debt financing is secured by mortgages on our properties and we may enter into additional secured mortgage financing in the future. If we fail to meet our mortgage payments, the lenders could declare a default and foreclose on those properties.

Most of our debt instruments contain balloon payments which may adversely impact our financial performance and our ability to pay dividends.
Most of our financing arrangements require us to make a lump-sum or "balloon" payment at maturity. There can be no assurance that we will be able to refinance such debt on favorable terms or at all. To the extent we cannot refinance such debt on favorable terms or at all, we may be forced to dispose of properties on disadvantageous terms or pay higher interest rates, either of which would have an adverse impact on our financial performance and ability to pay dividends to our shareholders.

We must obtain new financing in order to grow.
As a REIT, we are required to distribute at least 90% of our taxable net income to shareholders in the form of dividends. Other than deciding to make these dividends in our common shares, we are limited in our ability to use internal capital to acquire properties and must continually raise new capital in order to continue to grow and diversify our investment portfolio. Our ability to raise new capital depends in part on factors beyond our control, including conditions in equity and credit markets, conditions in the industries in which our tenants are engaged and the performance of real estate investment trusts generally, all of which have been negatively impacted by the COVID-19 pandemic. We continually consider and evaluate a variety of potential transactions to raise additional capital, but we cannot assure that attractive alternatives will always be available to us, nor that our share price will increase or remain at a level that will permit us to continue to raise equity capital publicly or privately, particularly in light of the effects of the ongoing COVID-19 pandemic.

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Our real estate investments are concentrated in experiential real estate properties and a significant portion of those investments are in megaplex theatre properties, making us more vulnerable economically than if our investments were more diversified.
We acquire, develop or finance experiential real estate properties. A significant portion of our investments are in megaplex theatre properties. Although we are subject to the general risks inherent in concentrating investments in real estate, the risks resulting from a lack of diversification become even greater as a result of investing primarily in experiential real estate properties. These risks are further heightened by the fact that a significant portion of our investments are in megaplex theatre properties. Although a downturn in the real estate industry could significantly adversely affect the value of our properties, a downturn in the experiential real estate industry could compound this adverse effect. These adverse effects could be more pronounced than if we diversified our investments to a greater degree outside of experiential real estate properties or, more particularly, outside of megaplex theatre properties. In addition, the COVID-19 pandemic is severely impacting experiential real estate properties, particularly theatre operations, given that such properties rely on social interaction and discretionary consumer spending and have been subject to state and local governmental restrictions.

If we fail to qualify as a REIT, we would be taxed as a corporation, which would substantially reduce funds available for payment of dividends to our shareholders.
If we fail to qualify as a REIT for U.S. federal income tax purposes, we will be taxed as a corporation. We are organized to and believe we qualify as a REIT, and intend to operate in a manner that will allow us to continue to qualify as a REIT. However, we cannot provide any assurance that we have always qualified and will remain qualified in the future. This is because qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), on which there are only limited judicial and administrative interpretations, and depends on facts and circumstances not entirely within our control, including requirements relating to the sources of our gross income. Rents received or accrued by us from our tenants may not be treated as qualifying income for purposes of these requirements if the leases are not respected as true leases or qualified financing arrangements for U.S. federal income tax purposes and instead are treated as service contracts, joint ventures or some other type of arrangement. If some or all of our leases are not respected as true leases or qualified financing arrangements for U.S. federal income tax purposes and are not otherwise treated as generating qualifying REIT income, we may fail to qualify to be taxed as a REIT. Furthermore, our qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. Our ability to satisfy the asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we may not obtain independent appraisals. In addition, future legislation, new regulations, administrative interpretations or court decisions may significantly change the tax laws, the application of the tax laws to our qualification as a REIT or the U.S. federal income tax consequences of that qualification.

If we were to fail to qualify as a REIT in any taxable year (including any prior taxable year for which the statute of limitations remains open), we would face tax consequences that could substantially reduce the funds available for the service of our debt and payment of dividends:

we would not be allowed a deduction for dividends paid to shareholders in computing our taxable income and would be subject to federal income tax at regular corporate rates;
we could be subject to increased state and local taxes;
unless we are entitled to relief under statutory provisions, we could not elect to be treated as a REIT for four taxable years following the year in which we were disqualified; and
we could be subject to tax penalties and interest.

In addition, if we fail to qualify as a REIT, we will no longer be required to pay dividends. As a result of these factors, our failure to qualify as a REIT could adversely affect the market price for our shares.

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Even if we remain qualified for taxation as a REIT under the Internal Revenue Code, we may face other tax liabilities that reduce our funds available for payment of dividends to our shareholders or the repurchase of shares.
Even if we remain qualified for taxation as a REIT under the Internal Revenue Code, we may be subject to federal, state and local taxes on our income and assets, including taxes on any undistributed income, excise taxes, state or local income, property and transfer taxes, and other taxes. Also, some jurisdictions may in the future limit or eliminate favorable income tax deductions, including the dividends paid deduction, which could increase our income tax expense. In addition, in order to meet the requirements for qualification and taxation as a REIT under the Internal Revenue Code, prevent the recognition of particular types of non-cash income, or avert the imposition of a 100% tax that applies to specified gains derived by a REIT from dealer property or inventory, we may hold or dispose of some of our assets and conduct some of our operations through our TRSs or other subsidiary corporations that will be subject to corporate level income tax at regular rates. In addition, while we intend that our transactions with our TRSs will be conducted on arm's length bases, we may be subject to a 100% excise tax on a transaction that the Internal Revenue Service ("IRS") or a court determines was not conducted at arm's length. Any of these taxes would decrease cash available for distribution to our shareholders or the repurchase of shares under our share repurchase program.

Distribution requirements imposed by law limit our flexibility.
To maintain our status as a REIT for federal income tax purposes, we are generally required to distribute to our shareholders at least 90% of our taxable income for that calendar year. Our taxable income is determined without regard to any deduction for dividends paid and by excluding net capital gains. To the extent that we satisfy the distribution requirement but distribute less than 100% of our taxable income, we will be subject to federal corporate income tax on our undistributed income. In addition, we will incur a 4% nondeductible excise tax on the amount, if any, by which our distributions in any year are less than the sum of (i) 85% of our ordinary income for that year, (ii) 95% of our capital gain net income for that year and (iii) 100% of our undistributed taxable income from prior years. We intend to continue to make distributions to our shareholders to comply with the distribution requirements of the Internal Revenue Code and to reduce exposure to federal income and nondeductible excise taxes. Differences in timing between the receipt of income and the payment of expenses in determining our taxable income and the effect of required debt amortization payments could require us to borrow funds on a short-term basis in order to meet the distribution requirements that are necessary to achieve the tax benefits associated with qualifying as a REIT.

If arrangements involving our TRSs fail to comply as intended with the REIT qualification and taxation rules, we may fail to qualify for taxation as a REIT under the Internal Revenue Code or be subject to significant penalty taxes.
We lease some of our experiential lodging properties to our TRSs pursuant to arrangements that, under the Internal Revenue Code, are intended to qualify the rents we receive from our TRSs as income that satisfies the REIT gross income tests. We also intend that our transactions with our TRSs be conducted on arm's length bases so that we and our TRSs will not be subject to penalty taxes under the Internal Revenue Code applicable to mispriced transactions. While relief provisions can sometimes excuse REIT gross income test failures, significant penalty taxes may still be imposed.

For our TRS arrangements to comply as intended with the REIT qualification and taxation rules under the Internal Revenue Code, a number of requirements must be satisfied, including:

our TRSs may not directly or indirectly operate or manage a lodging facility, as defined by the Internal Revenue Code;
the leases to our TRSs must be respected as true leases for federal income tax purposes and not as service contracts, partnerships, joint ventures, financings or other types of arrangements;
the leased properties must constitute qualified lodging facilities (including customary amenities and facilities) under the Internal Revenue Code;
our leased properties must be managed and operated on behalf of the TRSs by independent contractors who are less than 35% affiliated with us and who are actively engaged (or have affiliates so engaged) in the trade or business of managing and operating qualified lodging facilities for persons unrelated to us; and
the rental and other terms of the leases must be arm's length.
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We cannot be sure that the IRS or a court will agree with our assessment that our TRS arrangements comply as intended with REIT qualification and taxation rules. If arrangements involving our TRSs fail to comply as we intended, we may fail to qualify for taxation as a REIT under the Internal Revenue Code or be subject to significant penalty taxes.

We may depend on distributions from our direct and indirect subsidiaries to service our debt, pay dividends to our shareholders and repurchase shares. The creditors of these subsidiaries, and our direct creditors, are entitled to amounts payable to them before we pay any dividends to our shareholders or repurchase shares.
Substantially all of our assets are held through our subsidiaries. We depend on these subsidiaries for substantially all of our cash flow from operations. The creditors of each of our direct and indirect subsidiaries are entitled to payment of that subsidiary's obligations to them, when due and payable, before distributions may be made by that subsidiary to us. In addition, our creditors, whether secured or unsecured, are entitled to amounts payable to them before we may pay any dividends to our shareholders or repurchase shares under our share repurchase program. Thus, our ability to service our debt obligations, pay dividends to holders of our common and preferred shares and repurchase shares depends on our subsidiaries' ability first to satisfy their obligations to their creditors and then to pay distributions to us and our ability to satisfy our obligations to our direct creditors. Our subsidiaries are separate and distinct legal entities and have no obligations, other than limited guaranties of certain of our debt, to make funds available to us.

Our development financing arrangements expose us to funding and completion risks.
Our ability to meet our construction financing obligations which we have undertaken or may enter into in the future depends on our ability to obtain equity or debt financing in the required amounts. There is no assurance we can obtain this financing or that the financing rates available will ensure a spread between our cost of capital and the rent or interest payable to us under the related leases or mortgage notes receivable. As a result, we could fail to meet our construction financing obligations or decide to cease such funding which, in turn, could result in failed projects and penalties, each of which could have a material adverse impact on our results of operations and business.

We have a limited number of employees and loss of personnel could harm our operations and adversely affect the value of our shares.
We had 53 full-time employees as of December 31, 2020 and, therefore, the impact we may feel from the loss of an employee may be greater than the impact such a loss would have on a larger organization. We are dependent on the efforts of the following individuals: Gregory K. Silvers, our President and Chief Executive Officer; Mark A. Peterson, our Executive Vice President and Chief Financial Officer; Craig L. Evans, our Executive Vice President, General Counsel and Secretary; Greg Zimmerman, our Executive Vice President and Chief Investment Officer; and Tonya L. Mater, our Senior Vice President and Chief Accounting Officer. While we believe that we could find replacements for our personnel, the loss of their services could harm our operations and adversely affect the value of our shares.

We are subject to risks associated with the employment of personnel by managers of certain of our properties.
Managers of certain of our properties are responsible for hiring and maintaining the labor force at each of these properties. Although we do not directly employ or manage employees at these properties, we are subject to many of the costs and risks associated with such labor force, including but not limited to risks associated with that certain union contract binding the manager of our Kartrite Resort and Indoor Waterpark. From time to time, the operations of our properties that are managed by third parties may be disrupted as a result of strikes, lockouts, public demonstrations or other negative actions and publicity. We may also incur increased legal costs and indirect labor costs as a result of contract disputes and other events. The resolution of labor disputes or renegotiated labor contracts could lead to increased labor costs, either by increases in wages or benefits or by changes in work rules.

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We may in the future have greater dependence upon the gaming industry and may be susceptible to the risks associated with it, which could materially and adversely affect our business, financial condition, liquidity, results of operations and prospects.
As a landlord of gaming facilities or secured creditor to gaming operators, we may be impacted by the risks associated with the gaming industry. Therefore, so long as we make investments in gaming-related assets, our success is dependent on the gaming industry, which could be adversely affected by economic conditions in general, changes in consumer trends and preferences and other factors over which we and our tenants have no control, such as the COVID-19 pandemic. A component of the rent under our gaming facility lease agreements will be based, over time, on the performance of the gaming facilities operated by our tenants on our properties and any decline in the operating results of our gaming tenants could be material and adverse to our business, financial condition, liquidity, results of operations and prospects.

The gaming industry is characterized by a high degree of competition among a large number of participants, including riverboat casinos, dockside casinos, land-based casinos, video lottery, sweepstakes and poker machines not located in casinos, Native American gaming, internet lotteries and other internet wagering gaming services and, in a broader sense, gaming operators face competition from all manner of leisure and entertainment activities. Gaming competition is intense in most of the markets where our facilities are located. Recently, there has been additional significant competition in the gaming industry as a result of the upgrading or expansion of facilities by existing market participants, the entrance of new gaming participants into a market, internet gaming and legislative changes. As competing properties and new markets are opened, we may be negatively impacted. Additionally, decreases in discretionary consumer spending brought about by weakened general economic conditions such as, but not limited to, lackluster recoveries from recessions, high unemployment levels, higher income taxes, low levels of consumer confidence, weakness in the housing market, cultural and demographic changes and increased stock market volatility may negatively impact our revenues and operating cash flows.

We will face extensive regulation from gaming and other regulatory authorities with respect to our gaming properties.
The ownership, operation, and management of gaming facilities are subject to pervasive regulation. These gaming regulations impact our gaming tenants and persons associated with our gaming facilities, which in many jurisdictions include us as the landlord and owner of the real estate. Certain gaming authorities in the jurisdictions in which we hold properties may require us and/or our affiliates to maintain a license as a key business entity or supplier because of our status as landlord. Gaming authorities also retain great discretion to require us to be found suitable as a landlord, and certain of our shareholders, officers and trustees may be required to be found suitable as well.

In many jurisdictions, gaming laws can require certain of our shareholders to file an application, be investigated, and qualify or have his, her or its suitability determined by gaming authorities. Gaming authorities have very broad discretion in determining whether an applicant should be deemed suitable. Subject to certain administrative proceeding requirements, the gaming regulators have the authority to deny any application or limit, condition, restrict, revoke or suspend any license, registration, finding of suitability or approval, or fine any person licensed, registered or found suitable or approved, for any cause deemed reasonable by the gaming authorities.

Gaming authorities may conduct investigations into the conduct or associations of our trustees, officers, key employees or investors to ensure compliance with applicable standards. If we are required to be found suitable and are found suitable as a landlord, we will be registered as a public company with the gaming authorities and will be subject to disciplinary action if, after we receive notice that a person is unsuitable to be a shareholder or to have any other relationship with us, we:

pay that person any distribution or interest upon any of our voting securities;
allow that person to exercise, directly or indirectly, any voting right conferred through securities held by that person;
pay remuneration in any form to that person for services rendered or otherwise; or
fail to pursue all lawful efforts to require such unsuitable person to relinquish his or her voting securities, including, if necessary, the immediate purchase of the voting securities for cash at fair market value.
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Many jurisdictions also require any person who acquires beneficial ownership of more than a certain percentage of voting securities of a gaming company and, in some jurisdictions, non-voting securities, typically 5% of a publicly-traded company, to report the acquisition to gaming authorities, and gaming authorities may require such holders to apply for qualification, licensure or a finding of suitability, subject to limited exceptions for "institutional investors" that hold a company's voting securities for passive investment purposes only.

Required regulatory approvals can delay or prohibit transfers of our gaming properties, which could result in periods in which we are unable to receive rent for such properties.
Our tenant is (and any future tenants of our gaming properties will be) required to be licensed under applicable law in order to operate any of our properties that are gaming facilities. If our gaming facility lease agreements, or any future lease agreement we enter into, are terminated (which could be required by a regulatory agency) or expire, any new tenant must be licensed and receive other regulatory approvals to operate our properties as gaming facilities. Any delay in, or inability of, the new tenant to receive required licenses and other regulatory approvals from the applicable state and county government agencies may prolong the period during which we are unable to collect the applicable rent. Further, in the event that our gaming facility lease agreements or future lease agreements are terminated or expire and a new tenant is not licensed or fails to receive other regulatory approvals, the properties may not be operated as gaming facilities and we will not be able to collect the applicable rent. Moreover, we may be unable to transfer or sell the affected properties as gaming facilities, which could materially and adversely affect our business, financial condition, liquidity, results of operations and prospects.

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer. Our service providers, tenants and managers of our properties and their business partners are exposed to similar risks.
In the ordinary course of our business, we collect and store sensitive data, including our proprietary business information and that of our tenants, managers of our properties and other customers and personally identifiable information of our employees, in our facility and on our network. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our network and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, disrupt our operations, damage our reputation, and cause a loss of confidence, which could adversely affect our business. Our service providers, tenants, managers of our properties and other customers and their business partners are exposed to similar risks and the occurrence of a security breach or other disruption with respect to their information technology and infrastructure could, in turn, have a material adverse impact on our results of operations and business.

Changes in accounting standards issued by the Financial Accounting Standards Board ("FASB") or other standard-setting bodies may adversely affect our business.
Our financial statements are subject to the application of U.S. GAAP, which is periodically revised and/or expanded. From time to time, we are required to adopt new or revised accounting standards issued by recognized authoritative bodies, including the FASB and the SEC. It is possible that accounting standards we are required to adopt may require changes to the current accounting treatment that we apply to our consolidated financial statements and may require us to make significant changes to our systems. Changes in accounting standards could result in a material adverse impact on our business, financial condition and results of operations.

Risks That Apply to Our Real Estate Business

Real estate income and the value of real estate investments fluctuate due to various factors.
The value of real estate fluctuates depending on conditions in the general economy and the real estate business. These conditions may also limit our revenues and available cash. The rents, interest and other payments we receive and the occupancy levels at our properties may decline as a result of adverse changes in any of the factors that affect the value of our real estate. If our revenues decline, we generally would expect to have less cash available to pay our indebtedness, distribute to our shareholders and effect share repurchases. In addition, some of our unreimbursed costs of owning real estate may not decline when the related rents decline.
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The factors that affect the value of our real estate include, among other things:

international, national, regional and local economic conditions;
consequences of any armed conflict involving, or terrorist attack against, the United States or Canada;
the threat of domestic terrorism or pandemic outbreaks (such as COVID-19), which could cause consumers to avoid congregate settings;
our ability or the ability of our tenants or managers to secure adequate insurance;
natural disasters, such as earthquakes, hurricanes and floods, which could exceed the aggregate limits of insurance coverage;
local conditions such as an oversupply of space or lodging properties or a reduction in demand for real estate in the area;
competition from other available space or, in the case of our experiential lodging properties, competition from other lodging properties or alternative lodging options in our markets;
whether tenants and users such as customers of our tenants consider a property attractive;
the financial condition of our tenants, mortgagors and managers, including the extent of bankruptcies or defaults;
whether we are able to pass some or all of any increased operating costs through to tenants or other customers;
how well we manage our properties or how well the managers of properties manage those properties;
in the case of our experiential lodging properties, dependence on demand from business and leisure travelers, which may fluctuate and be seasonal;
fluctuations in interest rates;
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;
government regulation;
availability of financing on acceptable terms or at all;
potential liability under environmental or other laws or regulations; and
general competitive factors.

The rents, interest and other payments we receive and the occupancy levels at our properties may decline as a result of adverse changes in any of these factors. If our revenues decline, we generally would expect to have less cash available to pay our indebtedness and distribute to our shareholders. In addition, some of our unreimbursed costs of owning real estate may not decline when the related rents decline.

There are risks associated with owning and leasing real estate.
Although our lease terms in most cases, obligate the tenants to bear substantially all of the costs of operating the properties and our managers to manage such costs, investing in real estate involves a number of risks, including:

the risk that tenants will not perform under their leases or that managers will not perform under their management agreements, reducing our income from such leases or properties under such management;
we may not always be able to lease properties at favorable rates or certain tenants may require significant capital expenditures by us to conform existing properties to their requirements;
we may not always be able to sell a property when we desire to do so at a favorable price; and
changes in tax, zoning or other laws could make properties less attractive or less profitable.

If a tenant fails to perform on its lease covenants or a manager fails to perform on its management covenants, that would not excuse us from meeting any debt obligation secured by the property and could require us to fund reserves in favor of our lenders, thereby reducing funds available for payment of dividends. We cannot be assured that tenants or managers will elect to renew their leases or management agreements when the terms expire. If a tenant or manager does not renew its lease or agreement or if a tenant or a manager defaults on its lease or management obligations, there is no assurance we could obtain a substitute tenant or manager on acceptable terms. If we cannot
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obtain another quality tenant or manager, we may be required to modify the property for a different use, which may involve a significant capital expenditure and a delay in re-leasing the property or obtaining a new manager. In addition, tenants or managers may seek concessions or other modifications to existing leases and management agreements as a result of the COVID-19 pandemic.

Some potential losses are not covered by insurance.
Our leases with tenants and agreements with managers of our properties require the tenants and managers to carry comprehensive liability, casualty, workers' compensation, extended coverage and rental loss insurance on our properties, as applicable. We believe the required coverage is of the type, and amount, customarily obtained by an owner of similar properties. We believe all of our properties are adequately insured. However, we are exposed to risks that the insurance coverage levels required under our leases with tenants and agreements with managers of our properties may be inadequate, and these risks may be increased as we expand our portfolio into experiential properties that may present more risk of loss as compared to properties in our existing portfolio. In addition, there are some types of losses, such as pandemics, catastrophic acts of nature, acts of war or riots, for which we, our tenants or managers of our properties cannot obtain insurance at an acceptable cost or at all. If there is an uninsured loss or a loss in excess of insurance limits, we could lose both the revenues generated by the affected property and the capital we have invested in the property. We would, however, remain obligated to repay any mortgage indebtedness or other obligations related to the property. In addition, the cost of insurance protection against terrorist acts has risen dramatically over the years. There can be no assurance our tenants or managers of our properties will be able to obtain terrorism insurance coverage, as applicable, or that any coverage they do obtain will adequately protect our properties against loss from terrorist attack.

Joint ventures may limit flexibility with jointly owned investments.
We may continue to acquire or develop properties in joint ventures with third parties when those transactions appear desirable. We would not own the entire interest in any property acquired by a joint venture. Major decisions regarding a joint venture property may require the consent of our partner. If we have a dispute with a joint venture partner, we may feel it necessary or become obligated to acquire the partner's interest in the venture. However, we cannot ensure that the price we would have to pay or the timing of the acquisition would be favorable to us. If we own less than a 50% interest in any joint venture, or if the venture is jointly controlled, the assets and financial results of the joint venture may not be reportable by us on a consolidated basis. To the extent we have commitments to, or on behalf of, or are dependent on, any such "off-balance sheet" arrangements, or if those arrangements or their properties or leases are subject to material contingencies, our liquidity, financial condition and operating results could be adversely affected by those commitments or off-balance sheet arrangements.

Our multi-tenant properties expose us to additional risks.
Our entertainment districts in Colorado, New York, California, and Ontario, Canada, and similar properties we may seek to acquire or develop in the future, involve risks not typically encountered in the purchase and lease-back of real estate properties which are operated by a single tenant. The ownership or development of multi-tenant retail centers could expose us to the risk that a sufficient number of suitable tenants may not be found to enable the centers to operate profitably and provide a return to us. This risk may be compounded by the failure of existing tenants to satisfy their obligations due to various factors, including economic downturns. In addition, the COVID-19 pandemic is severely impacting our retail tenants' businesses, financial condition and liquidity, which has resulted in most of these tenants failing to satisfy their obligations to us or otherwise seeking modifications to their lease arrangements. These risks, in turn, could cause a material adverse impact to our results of operations and business.

Retail centers are also subject to tenant turnover and fluctuations in occupancy rates, which could affect our operating results. Multi-tenant retail centers also expose us to the risk of potential "CAM slippage," which may occur when the actual cost of taxes, insurance and maintenance at the property exceeds the CAM fees paid by tenants.

Failure to comply with the Americans with Disabilities Act and other laws could result in substantial costs.
Most of our properties must comply with the ADA. The ADA requires that public accommodations reasonably accommodate individuals with disabilities and that new construction or alterations be made to commercial facilities to conform to accessibility guidelines. Failure to comply with the ADA can result in injunctions, fines, damage
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awards to private parties and additional capital expenditures to remedy noncompliance. Our leases with tenants and agreements with managers of our properties require them to comply with the ADA.

Our properties are also subject to various other federal, state and local regulatory requirements. We do not know whether existing requirements will change or whether compliance with future requirements will involve significant unanticipated expenditures. Although these expenditures would be the responsibility of our tenants in most cases and for our managers to oversee at our properties, if these tenants or managers fail to perform these obligations, we may be required to do so.

Potential liability for environmental contamination could result in substantial costs.
Under federal, state and local environmental laws, we may be required to investigate and clean up any release of hazardous or toxic substances or petroleum products at our properties, regardless of our knowledge or actual responsibility, simply because of our current or past ownership of the real estate. If unidentified environmental problems arise, we may have to make substantial payments, which could adversely affect our cash flow and our ability to service our debt and pay dividends to our shareholders. This is because:

as owner, we may have to pay for property damage and for investigation and clean-up costs incurred in connection with the contamination;
the law may impose clean-up responsibility and liability regardless of whether the owner or operator knew of or caused the contamination;
even if more than one person is responsible for the contamination, each person who shares legal liability under environmental laws may be held responsible for all of the clean-up costs; and
governmental entities and third parties may sue the owner or operator of a contaminated site for damages and costs.

These costs could be substantial and in extreme cases could exceed the value of the contaminated property. The presence of hazardous substances or petroleum products or the failure to properly remediate contamination may adversely affect our ability to borrow against, sell or lease an affected property. In addition, some environmental laws create liens on contaminated sites in favor of the government for damages and costs it incurs in connection with a contamination. Most of our loan agreements require the Company or a subsidiary to indemnify the lender against environmental liabilities. Our leases with tenants and agreements with managers of our properties require them to operate the properties in compliance with environmental laws and to indemnify us against environmental liability arising from the operation of the properties. We believe all of our properties are in material compliance with environmental laws. However, we could be subject to strict liability under environmental laws because we own the properties. There is also a risk that tenants may not satisfy their environmental compliance and indemnification obligations under the leases or other agreements. Any of these events could substantially increase our cost of operations, require us to fund environmental indemnities in favor of our lenders, limit the amount we could borrow under our unsecured revolving credit facility and term loan facility and reduce our ability to service our debt and pay dividends to shareholders.

Real estate investments are relatively illiquid.
We may desire to sell properties in the future because of changes in market conditions, poor tenant performance or default of any mortgage we hold, or to avail ourselves of other opportunities. We may also be required to sell a property in the future to meet debt obligations or avoid a default. Specialty real estate projects such as we have cannot always be sold quickly, and we cannot assure you that we could always obtain a favorable price. In addition, the Internal Revenue Code limits our ability to sell our properties. We may be required to invest in the restoration or modification of a property before we can sell it. The inability to respond promptly to changes in the performance of our property portfolio could adversely affect our financial condition and ability to service our debt, pay dividends to our shareholders and effect share repurchases.

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There are risks in owning assets outside the United States.
Our properties in Canada are subject to the risks normally associated with international operations. The rentals under our Canadian leases are payable in Canadian dollars ("CAD"), which could expose us to losses resulting from fluctuations in exchange rates to the extent we have not hedged our position. Canadian real estate and tax laws are complex and subject to change, and we cannot assure you we will always be in compliance with those laws or that compliance will not expose us to additional expense. We may also be subject to fluctuations in Canadian real estate values or markets or the Canadian economy as a whole, which may adversely affect our Canadian investments.

Additionally, we have made investments in projects located in China and may enter other international markets, which may have similar risks as described above as well as unique risks associated with a specific country.

There are risks in owning or financing properties for which the tenant's, mortgagor's, or our operations may be impacted by weather conditions, climate change and natural disasters.
We have acquired and financed ski properties and expect to do so in the future. The operators of these properties, our tenants or mortgagors, are dependent upon the operations of the properties to pay their rents and service their loans. The ski property operator's ability to attract visitors is influenced by weather conditions and climate change in general, each of which may impact the amount of snowfall during the ski season. Adverse weather conditions may discourage visitors from participating in outdoor activities. In addition, unseasonably warm weather may result in inadequate natural snowfall, which increases the cost of snowmaking, and could render snowmaking wholly or partially ineffective in maintaining quality skiing conditions and attracting visitors. Excessive natural snowfall may materially increase the costs incurred for grooming trails and may also make it difficult for visitors to obtain access to ski properties. We also own and finance attractions (including waterparks) which would also be subject to risks relating to weather conditions such as in the case of waterparks and amusement parks, excessive rainfall or unseasonable temperatures. Prolonged periods of adverse weather conditions, or the occurrence of such conditions during peak visitation periods, could have a material adverse effect on the operator's financial results and could impair the ability of the operator to make rental or other payments or service our loans.

A severe natural disaster, such as a forest fire, may interrupt the operations of an operator, damage our properties, reduce the number of guests who visit the resorts in affected areas and negatively impact an operator's revenue and profitability. Damage to our properties could take a long time to repair and there is no guarantee that we would have adequate insurance to cover the costs of repair and recoup lost profits. Furthermore, such a disaster may interrupt or impede access to our affected properties or require evacuations and may cause visits to our affected properties to decrease for an indefinite period. The ability of our operators to attract visitors to our experiential lodging properties is also influenced by the aesthetics and natural beauty of the outdoor environment where these resorts are located. A severe forest fire or other severe impacts from naturally occurring events could negatively impact the natural beauty of our resort properties and have a long-term negative impact on an operator's overall guest visitation as it could take several years for the environment to recover.

We face risks associated with the development, redevelopment and expansion of properties and the acquisition of other real estate related companies.
We may develop, redevelop or expand new or existing properties or acquire other real estate related companies, and these activities are subject to various risks. We may not be successful in pursuing such development or acquisition opportunities. In addition, newly developed or redeveloped/expanded properties or newly acquired companies may not perform as well as expected. We are subject to other risks in connection with any such development or acquisition activities, including the following:

we may not succeed in completing developments or consummating desired acquisitions on time;
we may face competition in pursuing development or acquisition opportunities, which could increase our costs;
we may encounter difficulties and incur substantial expenses in integrating acquired properties into our operations and systems and, in any event, the integration may require a substantial amount of time on the part of both our management and employees and therefore divert their attention from other aspects of our business;
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we may undertake developments or acquisitions in new markets or industries where we do not have the same level of market knowledge, which may expose us to unanticipated risks in those markets and industries to which we are unable to effectively respond, such as an inability to attract qualified personnel with knowledge of such markets and industries;
we may incur construction costs in connection with developments, which may be higher than projected, potentially making the project unfeasible or unprofitable;
we may incur unanticipated capital expenditures in order to maintain or improve acquired properties;
we may be unable to obtain zoning, occupancy or other governmental approvals;
we may experience delays in receiving rental payments for developments that are not completed on time;
our developments or acquisitions may not be profitable;
we may need the consent of third parties such as anchor tenants, mortgage lenders and joint venture partners, and those consents may be withheld;
we may incur adverse tax consequences if we fail to qualify as a REIT for U.S. federal income tax purposes following an acquisition;
we may be subject to risks associated with providing mortgage financing to third parties in connection with transactions, including any default under such mortgage financing;
we may face litigation or other claims in connection with, or as a result of, acquisitions, including claims from terminated employees, tenants, former stockholders or other third parties;
the market price of our common shares, preferred shares and debt securities may decline, particularly if we do not achieve the perceived benefits of any acquisition as rapidly or to the extent anticipated by securities or industry analysts or if the effect of an acquisition on our financial condition, results of operations and cash flows is not consistent with the expectations of these analysts;
we may issue shares in connection with acquisitions resulting in dilution to our existing shareholders; and
we may assume debt or other liabilities in connection with acquisitions.

In addition, there is no assurance that planned third-party financing related to development and acquisition opportunities will be provided on a timely basis or at all, thus increasing the risk that such opportunities are delayed or fail to be completed as originally contemplated. We may also abandon development or acquisition opportunities that we have begun pursuing and consequently fail to recover expenses already incurred and have devoted management time to a matter not consummated. In some cases, we may agree to lease or other financing terms for a development project in advance of completing and funding the project, in which case we are exposed to the risk of an increase in our cost of capital during the interim period leading up to the funding, which can reduce, eliminate or result in a negative spread between our cost of capital and the payments we expect to receive from the project. Furthermore, our acquisitions of new properties or companies will expose us to the liabilities of those properties or companies, some of which we may not be aware at the time of acquisition. In addition, development of our existing properties presents similar risks. If a development or acquisition is unsuccessful, either because it is not meeting our expectations or was not completed according to our plans, we could lose our investment in the development or acquisition.

Risks That May Affect the Market Price of Our Shares

We cannot assure you we will continue paying cash dividends at current rates.
Our dividend policy is determined by our Board of Trustees. Our ability to pay dividends on our common shares or to pay dividends on our preferred shares at their stated rates depends on a number of factors, including our liquidity, our financial condition and results of future operations, the performance of lease and mortgage terms by our tenants and customers, our ability to acquire, finance and lease additional properties at attractive rates, and provisions in our loan covenants.

The financial impact of the COVID-19 pandemic has negatively impacted our compliance with financial covenants of our credit facility and other debt agreements. During 2020, we temporarily suspended our monthly cash dividend to common shareholders after the common share dividend payable May 15, 2020, and we are subject to restrictions on the payment of common share dividends during the Covenant Relief Period (except as may be necessary to maintain REIT status and to not owe income tax) under the amendments to our unsecured revolving credit facility, our unsecured term loan facility and the debt instruments governing certain of our private placement notes, as
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described below under "Management's Discussion and Analysis of Financial Condition and Results of Operations". If we do not reinstate common share dividends in future periods or maintain or increase any future common share dividend rate, the market price of our common shares and possibly our preferred shares could be adversely affected. Furthermore, if the Board of Trustees decides to pay dividends on our common shares partially or substantially all in common shares, that could have an adverse effect on the market price of our common shares and possibly our preferred shares. There can be no assurances as to our ability to reinstitute cash dividend payments to common shareholders or the timing thereof or to continue paying dividends on our preferred shares.

Market interest rates may have an effect on the value of our shares.
One of the factors that investors may consider in deciding whether to buy or sell our common shares or preferred shares is our dividend rate as a percentage of our share price, relative to market interest rates. If market interest rates increase, prospective investors may desire a higher dividend rate on our common shares or seek securities paying higher dividends or interest.

Broad market fluctuations could negatively impact the market price of our shares.
The stock market has experienced extreme price and volume fluctuations as a result of the COVID-19 pandemic that have affected the market price of the common equity of many companies, including companies in industries similar or related to ours. These broad market fluctuations could reduce the market price of our shares. Furthermore, our operating results and prospects may be below the expectations of public market analysts and investors or may be lower than those of companies with comparable market capitalizations. Either of these factors could lead to a material decline in the market price of our shares.

Market prices for our shares may be affected by perceptions about the financial health or share value of our tenants, mortgagors and managers or the performance of REIT stocks generally.
To the extent any of our tenants or customers, or their competition, report losses or slower earnings growth, take charges against earnings or enter bankruptcy proceedings, the market price for our shares could be adversely affected. The reduced economic activity resulting from the COVID-19 pandemic is severely impacting our tenants' businesses, financial condition and liquidity, which could adversely affect the market price for our shares. The market price for our shares could also be affected by any weakness in the performance of REIT stocks generally or weakness in any of the sectors in which our tenants and customers operate.

Limits on changes in control may discourage takeover attempts which may be beneficial to our shareholders.
There are a number of provisions in our Declaration of Trust and Bylaws and under Maryland law and agreements we have with others, any of which could make it more difficult for a party to make a tender offer for our shares or complete a takeover of the Company which is not approved by our Board of Trustees. These include:

a limit on beneficial ownership of our shares, which acts as a defense against a hostile takeover or acquisition of a significant or controlling interest, in addition to preserving our REIT status;
the ability of the Board of Trustees to issue preferred or common shares, to reclassify preferred or common shares, and to increase the amount of our authorized preferred or common shares, without shareholder approval;
limits on the ability of shareholders to remove trustees without cause;
requirements for advance notice of shareholder proposals at shareholder meetings;
provisions of Maryland law restricting business combinations and control share acquisitions not approved by the Board of Trustees and unsolicited takeovers;
provisions of Maryland law protecting corporations (and by extension REITs) against unsolicited takeovers by limiting the duties of the trustees in unsolicited takeover situations;
provisions in Maryland law providing that the trustees are not subject to any higher duty or greater scrutiny than that applied to any other director under Maryland law in transactions relating to the acquisition or potential acquisition of control;
provisions of Maryland law creating a statutory presumption that an act of the trustees satisfies the applicable standards of conduct for trustees under Maryland law;
provisions in loan or joint venture agreements putting the Company in default upon a change in control; and
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provisions of our compensation arrangements with our employees calling for severance compensation and vesting of equity compensation upon termination of employment upon a change in control or certain events of the employees' termination of service.

Any or all of these provisions could delay or prevent a change in control of the Company, even if the change was in our shareholders' interest or offered a greater return to our shareholders.

We may change our policies without obtaining the approval of our shareholders.
Our operating and financial policies, including our policies with respect to acquiring or financing real estate or other companies, growth, operations, indebtedness, capitalization and dividends, are exclusively determined by our Board of Trustees. Accordingly, our shareholders do not control these policies.

Dilution could affect the value of our shares.
Our future growth will depend in part on our ability to raise additional capital. If we raise additional capital through the issuance of equity securities, the interests of holders of our common shares could be diluted. Likewise, our Board of Trustees is authorized to cause us to issue preferred shares in one or more series, the holders of which would be entitled to dividends and voting and other rights as our Board of Trustees determines, and which could be senior to or convertible into our common shares. Accordingly, an issuance by us of preferred shares could be dilutive to or otherwise adversely affect the interests of holders of our common shares. As of December 31, 2020, our Series C preferred shares are convertible, at each of the holder's option, into our common shares at a conversion rate of 0.4137 common shares per $25.00 liquidation preference, which is equivalent to a conversion price of approximately $60.43 per common share (subject to adjustment in certain events). Additionally, as of December 31, 2020, our Series E preferred shares are convertible, at each of the holder's option, into our common shares at a conversion rate of 0.4826 common shares per $25.00 liquidation preference, which is equivalent to a conversion price of approximately $51.80 per common share (subject to adjustment in certain events). Under certain circumstances in connection with a change in control of the Company, holders of our Series G preferred shares may elect to convert some or all of their Series G preferred shares into a number of our common shares per Series G preferred share equal to the lesser of (a) the $25.00 per share liquidation preference, plus accrued and unpaid dividends divided by the market value of our common shares or (b) 0.7389 shares. Depending upon the number of Series C, Series E and Series G preferred shares being converted at one time, a conversion of Series C, Series E and Series G preferred shares could be dilutive to or otherwise adversely affect the interests of holders of our common shares. In addition, we may issue a significant amount of equity securities in connection with acquisitions or investments, with or without seeking shareholder approval, which could result in significant dilution to our existing shareholders.

Future offerings of debt or equity securities, which may rank senior to our common shares, may adversely affect the market price of our common shares.
If we decide to issue debt securities in the future, which would rank senior to our common shares, it is likely that they will be governed by an indenture or other instrument containing covenants restricting our operating flexibility. Additionally, any equity securities or convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common shares and may result in dilution to owners of our common shares. We and, indirectly, our shareholders, will bear the cost of issuing and servicing such securities. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, holders of our common shares will bear the risk of our future offerings reducing the market price of our common shares and diluting the value of their shareholdings in us.

Changes in foreign currency exchange rates may have an impact on the value of our shares.
The functional currency for our Canadian operations is the Canadian dollar. As a result, our future operating results could be affected by fluctuations in the exchange rate between U.S. and Canadian dollars, which in turn could affect our share price. We have attempted to mitigate our exposure to Canadian currency exchange risk by entering into foreign currency exchange contracts to hedge in part our exposure to exchange rate fluctuations. Foreign currency derivatives are subject to future risk of loss. We do not engage in purchasing foreign exchange contracts for speculative purposes.
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Additionally, we have made investments in China and may enter other international markets which pose similar currency fluctuation risks as described above.

We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our shares.
At any time, the U.S. federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or regulations may be changed, possibly with retroactive effect. We cannot predict if or when any new U.S. federal income tax law, regulation or administrative interpretation, or any amendment to any existing U.S. federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective or whether any such law, regulation or interpretation may take effect retroactively. We and our shareholders could be adversely affected by any such change in, or any new, U.S. federal income tax law, regulation or administrative interpretation. Furthermore, any proposals seeking broader reform of U.S. federal income tax laws, if enacted, could change the federal income tax laws applicable to REITs, subject us to federal tax or reduce or eliminate the current deduction for dividends paid to our shareholders, any of which could negatively affect the market for our shares.

Item 1B. Unresolved Staff Comments

There are no unresolved comments from the staff of the SEC required to be disclosed herein as of the date of this Annual Report on Form 10-K.

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Item 2. Properties

As of December 31, 2020, our real estate portfolio consisted of investments in our Experiential and Education reportable segments. Except as otherwise noted, all of the real estate investments listed below are owned or ground leased directly by us.

The following table sets forth our owned properties (excludes properties under development, land held for development and properties securing our mortgage notes) listed by segment and property type, gross square footage (except for certain ski and attraction properties where such number is not meaningful), percentage leased and total rental revenue for the year ended December 31, 2020 (dollars in thousands). At certain properties included below, we are the tenant under third-party ground leases and have assumed responsibility for performing the obligations thereunder. However, pursuant to the facility leases, the tenants are generally responsible for performing substantially all of our obligations under the ground leases.
Number of PropertiesBuilding Gross Square FootagePercentage LeasedRental Revenue for the Year
Ended December 31, 2020
% of Company's Rental Revenue
Experiential
Theatres178 12,203,123 94.1 %$103,984 28.0 %
Eat & Play (1)51 4,922,523 90.1 %120,186 32.3 %
Attractions17 21,205 100.0 %26,605 7.1 %
Ski608,255 100.0 %28,466 7.6 %
Experiential Lodging871,417 100.0 %16,303 4.4 %
Gaming (2)— — %10,631 2.9 %
Cultural512,768 100.0 %2,639 0.7 %
Fitness & Wellness186,900 100.0 %2,316 0.6 %
Total Experiential263 19,326,191 93.8 %$311,130 83.6 %
Education
Early Childhood Education Centers63 1,115,821 100.0 %$24,649 6.6 %
Private Schools292,362 100.0 %36,397 9.8 %
Total Education72 1,408,183 100.0 %$61,046 16.4 %
Total335 20,734,374 94.2 %$372,176 100.0 %

(1) Includes seven theatres located in entertainment districts.
(2) Represents land under ground lease to a casino operator.


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The following table sets forth lease expirations regarding EPR’s owned portfolio as of December 31, 2020 excluding non-theatre tenant leases at entertainment districts and experiential lodging properties operated through a traditional REIT lodging structure (dollars in thousands):
YearNumber of
Properties
Square
Footage
Rental Revenue for the Year
Ended December 31, 2020
% of Company's Rental
Revenue
2021— — $— — %
2022113,770 1,814 0.5 %
202390,134 953 0.3 %
2024458,240 6,294 1.7 %
202539,240 2,673 0.7 %
2026287,693 3,595 1.0 %
202711 657,881 18,660 5.0 %
202811 824,306 9,912 2.7 %
202912 679,171 10,401 2.8 %
203022 1,663,772 22,405 6.0 %
203113 688,919 6,702 1.8 %
203219 979,167 11,988 3.2 %
2033423,882 8,343 2.2 %
203441 2,459,231 28,130 7.6 %
203533 2,691,756 58,482 15.7 %
203622 1,619,365 21,634 5.8 %
203732 1,941,997 38,372 10.3 %
203835 1,717,060 26,223 7.0 %
2039176,156 6,739 1.8 %
2040101,159 1,923 0.5 %
Thereafter35 472,852 25,630 6.9 %
320 18,085,751 $310,873 83.5 %





















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Our owned properties are located in 41 states and in the Canadian province of Ontario. The following table sets forth certain state-by-state and Ontario, Canada information regarding our owned real estate portfolio as of December 31, 2020 (dollars in thousands):
LocationBuilding (gross sq. ft.)Rental Revenue for the Year Ended
December 31, 2020
% of Rental Revenue
Texas3,287,154 $52,102 14.0 %
Florida1,584,699 22,956 6.2 %
California1,274,020 44,402 11.9 %
Ontario, Canada1,204,639 21,788 5.9 %
Pennsylvania932,661 27,035 7.3 %
Illinois844,991 12,077 3.2 %
Virginia816,508 19,187 5.2 %
Ohio814,269 13,464 3.6 %
Colorado720,447 15,512 4.2 %
Michigan699,275 8,030 2.2 %
North Carolina667,317 7,642 2.0 %
New York646,711 30,650 8.2 %
Missouri627,308 1,945 0.5 %
Louisiana624,032 5,952 1.6 %
Kansas512,002 5,880 1.6 %
Arizona465,755 10,127 2.7 %
Indiana457,998 3,369 0.9 %
Tennessee435,433 5,687 1.5 %
Georgia430,695 8,868 2.4 %
New Jersey392,930 6,335 1.7 %
Kentucky365,971 2,701 0.7 %
South Carolina349,388 4,498 1.2 %
Maryland340,986 4,311 1.2 %
Alabama323,972 2,618 0.7 %
Oregon201,532 3,604 1.0 %
Connecticut185,074 3,830 1.0 %
Minnesota181,764 4,971 1.3 %
Idaho179,036 1,424 0.4 %
Arkansas165,219 3,484 0.9 %
Mississippi116,900 916 0.2 %
Massachusetts111,166 1,020 0.3 %
Nebraska107,402 331 0.1 %
Maine107,000 487 0.1 %
New Hampshire97,400 591 0.2 %
Iowa93,755 1,402 0.4 %
Nevada92,697 2,550 0.7 %
Oklahoma90,737 6,058 1.6 %
New Mexico71,297 163 — %
Washington47,004 2,154 0.6 %
Montana44,650 993 0.3 %
Wisconsin22,580 377 0.1 %
Hawaii— 685 0.2 %
20,734,374 $372,176 100.0 %

 



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Office Location
Our executive office is located in Kansas City, Missouri and is leased from a third-party landlord. The lease has projected 2021 annual rent of approximately $884 thousand and is scheduled to expire on September 30, 2026, with two separate five-year extension options available. In March, our employees transitioned to a fully remote work force to protect the safety and well-being of our personnel. Our prior investments in technology, business continuity planning and cyber-security protocols have enabled us to continue working with limited operational impacts.
Tenants and Leases
Our existing leases on real estate investments (on a consolidated basis - excluding unconsolidated joint venture properties) provide for aggregate annual minimum rentals for 2021 of approximately $461.5 million (not including the impact of rent deferrals, ground lease payments for leases in which we are a sub-lessor, periodic rent escalations that are not fixed, percentage rent or straight-line rent). Our leases have an average remaining base lease term life of approximately 12 years. These leases may be extended for predetermined extension terms at the option of the tenants. Our leases are typically triple-net leases that require the tenant to pay substantially all expenses associated with the operation of the properties, including taxes, other governmental charges, insurance, utilities, service, maintenance and any ground lease payments.

Property Acquisitions and Developments in 2020
Our property acquisitions and developments in 2020 consisted primarily of spending on Experiential properties. The percentage of total investment spending related to build-to-suit projects, including investment spending for mortgage notes on such projects, increased to approximately 55% in 2020, from approximately 20% in 2019. While we expect that acquisitions will continue to be the greater portion of our investment spending in future years, we also expect that build-to-suit projects will remain a component of such spending as well. Many of our build-to-suit opportunities come to us from our existing strong relationships with property operators and developers and we expect to continue to pursue these opportunities. During the year ended December 31, 2020, we limited our investment spending to enhance our liquidity position in light of the negative impact of the COVID-19 pandemic. We will continue to limit our investment spending during the Covenant Relief Period under the amendments to the agreements governing our bank credit facilities and private placement notes.

Item 3. 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 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common shares are listed on the New York Stock Exchange (“NYSE”) under the trading symbol “EPR.”

During the year ended December 31, 2020, the Company did not sell any unregistered equity securities.

On February 24, 2021, there were approximately 6,707 holders of record of our outstanding common shares.

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Issuer Purchases of Equity Securities 
PeriodTotal Number of Shares PurchasedAverage Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
October 1 through October 31, 2020 common shares— $— — $44,006,350 
November 1 through November 30, 2020 common shares— — — 44,006,350 
December 1 through December 31, 2020 common shares— — — 44,006,350 
Total— $— — $— (1)
(1) On March 24, 2020, we announced that our Board of Trustees approved a share repurchase program pursuant to which we may repurchase up to $150 million of our common shares. The share repurchase program was set to expire on December 31, 2020; however, we suspended the program upon the effective date of the covenant modification agreements, June 29, 2020, as discussed below under "Management's Discussion and Analysis of Financial Condition and Results of Operations." Under the share repurchase program, we could repurchase our common shares in the open market, through block trades, in privately negotiated transactions, pursuant to a trading plan separately adopted in the future, or by other means, in accordance with federal securities laws and other applicable laws. The actual timing, number and value of common shares repurchased under the share repurchase program was determined by management at its discretion and depended on a number of factors, including, but not limited to, the market price of our common shares, general market and economic conditions, our financial condition, and applicable legal requirements. We were not obligated to repurchase a minimum number of common shares under the share repurchase program. There can be no assurances as to our ability to reinstitute the share repurchase program in future periods or the timing thereof.

Dividends
As discussed below under "Management's Discussion and Analysis of Financial Condition and Results of Operations," on June 29, 2020 and November 3, 2020, we amended our Consolidated Credit Agreement, which governs our unsecured revolving credit facility and our unsecured term loan facility, and on June 29, 2020 and December 24, 2020, we also amended the Note Purchase Agreement which governs our private placement notes. The amendments modified certain provisions and waived our obligation to comply with certain covenants under these debt agreements in light of the continuing financial and operational impacts of the COVID-19 pandemic on us and our tenants and borrowers. The amendments also impose certain restrictions including our ability to pay common dividends during the Covenant Relief Period, subject to certain exceptions. Accordingly, in connection with these amendments, we temporarily suspended our monthly cash dividend to common shareholders after the common share dividend payable May 15, 2020 (except as may be necessary to maintain REIT status and to not owe income tax). There can be no assurances as to our ability to reinstitute cash dividend payments to common shareholders in future periods or the timing thereof.
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Share Performance Graph

The following graph compares the cumulative return on our common shares during the five-year period ended December 31, 2020, to the cumulative return on the MSCI U.S. REIT Index and the Russell 1000 Index for the same period. The comparisons assume an initial investment of $100 and the reinvestment of all dividends during the comparison period. Performance during the comparison period is not necessarily indicative of future performance.

epr-20201231_g1.jpg
Total Return Analysis      
 12/31/201512/31/201612/31/201712/31/201812/31/201912/31/2020
EPR Properties$100.00 $129.65 $125.22 $131.16 $153.63 $73.48 
MSCI U.S. REIT Index$100.00 $108.60 $114.11 $108.89 $137.03 $126.65 
Russell 1000 Index$100.00 $112.05 $136.36 $129.83 $170.63 $206.40 
Source: S&P Global Market Intelligence
The performance graph and related text are being furnished to and not filed with the SEC, and will not be deemed "soliciting material" or subject to Regulation 14A or 14C under the Exchange Act or to the liabilities of Section 18 of the Exchange Act, and will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent we specifically incorporate such information by reference into such a filing.

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Item 6. Selected Financial Data

The following table sets forth selected consolidated financial and other information of the Company as of and for each of the years ended December 31, 2020, 2019, 2018, 2017, and 2016. The table should be read in conjunction with the Company's consolidated financial statements and notes thereto and Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in this Annual Report on Form 10-K.

The operating data below reflects the reclassification of discontinued operations for public charter school investments disposed of during the year ended December 31, 2019. For additional detail, see Note 17 to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
Operating Statement Data
(Dollars in thousands, except per share data)
 Year Ended December 31,
 20202019201820172016
Total revenue$414,661 $651,969 $639,921 $518,320 $451,038 
Net (loss) income attributable to EPR Properties(131,728)202,243 266,983 262,968 224,982 
Preferred dividend requirements(24,136)(24,136)(24,142)(24,293)(23,806)
Preferred share redemption costs— — — (4,457)— 
Net (loss) income available to common shareholders of EPR Properties(155,864)178,107 242,841 234,218 201,176 
Net (loss) income available to common shareholders per common share:
Continuing operations$(2.05)$1.70 $2.66 $2.76 $2.62 
Discontinued operations— 0.62 0.61 0.53 0.55 
Basic$(2.05)$2.32 $3.27 $3.29 $3.17 
Continuing operations$(2.05)$1.70 $2.66 $2.76 $2.62 
Discontinued operations— 0.62 0.61 0.53 0.55 
Diluted$(2.05)$2.32 $3.27 $3.29 $3.17 
Shares used for computation (in thousands):
Basic75,994 76,746 74,292 71,191 63,381 
Diluted75,994 76,782 74,337 71,254 63,474 
Cash dividends declared per common share$1.515 $4.500 $4.320 $4.080 $3.840 
Balance Sheet Data (at period end)
(Dollars in thousands)
Cash and cash equivalents$1,025,577 $528,763 $5,872 $41,917 $19,335 
Total assets6,704,185 6,577,511 6,131,390 6,191,493 4,865,022 
Debt3,694,443 3,102,830 2,986,054 3,028,827 2,485,625 
Total liabilities4,073,600 3,571,706 3,266,367 3,264,168 2,679,121 
Equity2,630,585 3,005,805 2,865,023 2,927,325 2,185,901 


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Item 7. 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 Annual Report on Form 10-K. The forward-looking statements included in this discussion and elsewhere in this Annual Report on Form 10-K involve risks and uncertainties, including anticipated financial performance, 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.” 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 this Item and in Item 1A - “Risk Factors.”

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. See Item 1 - "Business" for further discussion regarding our strategic rationale for our focus on Experiential properties.

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 as discussed in Item 1 - "Business."

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.

Prior to the COVID-19 pandemic, our primary challenges 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. The current economic situation created by the pandemic has impeded our growth in the near term while our focus has been addressing challenges brought on by the pandemic, including monitoring customer status and working with customers to help ensure long-term stability as well as assisting them in reopening plans. See more discussion on the impact of the pandemic on our business below. We expect to return to growth as our customers' businesses continue to recover and, in turn, our cashflows stabilize. Our business is subject to a number of risks and uncertainties, including those described in Item 1A - “Risk Factors” of this report.

As of December 31, 2020, our total assets were approximately $6.7 billion (after accumulated depreciation of approximately $1.1 billion) with properties located in 44 states and Ontario, Canada. Our total investments (a non-GAAP financial measure) were approximately $6.5 billion at December 31, 2020. See "Non-GAAP Financial Measures" for the calculation of total investments and reconciliation of total investments to "Total assets" in the consolidated balance sheet at December 31, 2020 and 2019. We group our investments into two reportable segments, Experiential and Education. As of December 31, 2020, our Experiential investments comprised $5.9 billion, or 91%, and our Education investments comprised $0.6 billion, or 9%, of our total investments.
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As of December 31, 2020, our Experiential segment consisted of the following property types (owned or financed):
178 theatre properties;
55 eat & play properties (including seven theatres located in entertainment districts);
18 attraction properties;
13 ski properties;
six experiential lodging properties;
one gaming property;
three cultural properties; and
seven fitness & wellness properties.

As of December 31, 2020, our owned Experiential real estate portfolio consisted of approximately 19.3 million square feet, was 93.8% leased and included $57.6 million in property under development and $20.2 million in undeveloped land inventory.

As of December 31, 2020, our Education segment consisted of the following property types (owned or financed):
65 early childhood education center properties; and
10 private school properties.

As of December 31, 2020, our owned Education real estate portfolio consisted of approximately 1.4 million square feet, was 100% leased and included $3.0 million in undeveloped land inventory.

The combined owned portfolio consisted of 20.7 million square feet and was 94.2% leased.

COVID-19 Update
We are subject to risks and uncertainties as a result of the COVID-19 pandemic. The outbreak of the COVID-19 pandemic severely impacted global economic activity during 2020 and caused significant volatility and negative pressure in financial markets, which is expected to continue into 2021. The extent of the impact of the COVID-19 pandemic on our business is highly uncertain and difficult to predict, as information is rapidly evolving. As a result, the COVID-19 pandemic severely impacted experiential real estate properties, given that such properties involve congregate social activity and discretionary consumer spending. Substantially all of our non-theatre locations and many of our theatre locations have re-opened as of December 31, 2020. However, certain theatre locations remain closed due to local restrictions or operator decision to close as a result of the impact of the COVID-19 pandemic, specifically the decision by many major studios to delay the release of blockbuster movies in hopes that larger audiences will be available as additional markets open. 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 of the pandemic, the actions taken to contain the outbreak or mitigate its impact, the development and distribution of vaccines and the efficacy of those vaccines, the public’s confidence in the health and safety measures implemented by our tenants and borrowers, and the direct and indirect economic effects of the outbreak and containment measures, all of which are uncertain and cannot be predicted. During 2020, the COVID-19 pandemic negatively affected our business, and could 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 the COVID-19 pandemic on the assumptions and estimates used in determining our financial condition and results of operations for the year ended December 31, 2020. The following were adverse impacts to our financial statements and business during the year ended December 31, 2020:
We wrote-off receivables from tenants and straight-line rent receivables totaling $65.1 million directly to rental revenue upon determination that the collectibility of these receivables or future lease payments from
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these tenants were no longer probable. Additionally, we determined that future rental revenue related to these tenants, including American-Multi Cinema, Inc. ("AMC") and Regal Cinemas ("Regal"), a subsidiary of Cineworld Group, will be recognized on a cash basis. The straight-line rent receivable represented $38.0 million of this write-off and was comprised of $26.5 million of straight-line rent receivable and $11.5 million of sub-lessor ground lease straight-line rent receivable.
We reduced rental revenue by $13.6 million due to rent abatements.
We deferred approximately $76.0 million of amounts due from tenants and $3.4 million due from borrowers that were booked as receivables. Additionally, we have amounts due from tenants that were not booked as receivables as 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 tenants and will be recognized as revenue when received. The repayment terms for all of these deferments vary by tenant or borrower.
We recognized $85.7 million in impairment charges during the year ended December 31, 2020, which was comprised of $70.7 million of impairments of real estate investments, and $15.0 million of impairments of operating lease right-of-use assets. We also recognized impairment charges on joint ventures of $3.2 million related to our equity investments in three theatre projects located in China.
We increased our expected credit losses by $30.7 million from our implementation estimate of $2.2 million. This increase was primarily due to credit loss expense related to fully reserving the outstanding principal balance of $12.6 million and unfunded commitment to fund $12.9 million, totaling $25.5 million, related to notes receivable from one borrower, as a result of recent changes in the borrower's financial status due to the impact of the COVID-19 pandemic. The remaining increase was due to economic uncertainty and the rapidly changing environment surrounding the pandemic.
We recognized a full valuation allowance of $18.0 million during third quarter 2020 on our net deferred tax assets related to our taxable REIT subsidiary ("TRS") and Canadian tax paying entity as a result of the uncertainty of realization caused by the impact of the COVID-19 pandemic. At December 31, 2020, we have a valuation allowance totaling $24.9 million on our net deferred tax assets.
On March 20, 2020, we borrowed $750.0 million under our unsecured revolving credit facility as a precautionary measure to increase our cash position and preserve financial flexibility given the global uncertainty caused by the COVID-19 pandemic. On December 30, 2020, we paid down our revolving credit facility by $160.0 million, following the sale of six private schools and four early childhood education centers. Subsequent to year-end, we paid down an additional $500.0 million on our revolving credit facility.
We amended our Consolidated Credit Agreement, which governs our unsecured revolving credit facility and our unsecured term loan facility, and our Note Purchase Agreement, which governs our private placement notes. The amendments modified certain provisions and waived our obligation to comply with certain covenants under these debt agreements during the Covenant Relief Period in light of the uncertainty related to impacts of the COVID-19 pandemic on us and our tenants and borrowers. We pay higher interest costs during the Covenant Relief Period. The amendments to the Consolidated Credit Agreement and Note Purchase Agreement also impose additional restrictions on us during the Covenant Relief Period, including limitations on making investments, incurring indebtedness, making capital expenditures, paying dividends and making other distributions, repurchasing our shares, voluntarily prepaying certain indebtedness, encumbering certain assets and maintaining a minimum liquidity amount, in each case subject to certain exceptions. See below and Note 8 to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional details.
In connection with the loan amendments discussed above, certain of our key subsidiaries guaranteed our obligations based on our unsecured debt ratings. If our unsecured debt rating is further downgraded by Moody's, we will be required to pledge the equity interest in certain of these subsidiary guarantors to secure our obligations under our unsecured credit facilities and private placement notes. See Note 8 to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional details.

On March 24, 2020, our Board of Trustees (the "Board") announced approval of a $150 million share repurchase program in response to the extraordinary dislocation in our common share price. The share repurchase program was set to expire on December 31, 2020; however, the program was suspended upon the effective date of the loan amendments on June 29, 2020, discussed above. During the year ended December 31, 2020, we repurchased 4,066,716 common shares under the share repurchase program for approximately $106.0 million. The repurchases
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were made under a Rule 10b5-1 trading plan. There can be no assurances as to our ability to reinstitute the share repurchase program in future periods or the timing thereof.

The monthly cash dividends to common shareholders were suspended following the common share dividend paid on May 15, 2020 to shareholders of record as of April 30, 2020. The suspension of the monthly cash dividend to common shareholders will continue through the Covenant Relief Period, except as may be necessary to maintain REIT status and to not owe income tax. There can be no assurances as to our ability to reinstitute cash dividend payments to common shareholders or the timing thereof.

Collections of rent and interest were impacted during the year by the COVID-19 pandemic and approximately 92% of our non-theatre and 58% of our theatre locations were open for business as of December 31, 2020. During the year ended December 31, 2020, tenants and borrowers paid approximately 46% of fourth quarter, 43% of third quarter and 29% of second quarter 2020 pre-COVID contractual cash revenue. Pre-COVID contractual cash revenue is an operational measure and represents aggregate cash payments for which we were entitled under existing contracts prior to the COVID-19 pandemic, excluding percentage rent (rents received over base amounts) and cash payments for subsequently disposed properties, net. The Company has reached resolution with customers representing approximately 95% of its pre-COVID contractual revenue. 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.

In March 2020, our employees transitioned to a fully remote work force to protect the safety and well-being of our personnel. Our prior investments in technology, business continuity planning and cyber-security protocols have enabled us to continue working with limited operational impacts.

Operating Results
Our total revenue from continuing operations, net (loss) income available to common shareholders per diluted share and FFOAA per diluted share (a non-GAAP financial measure) are detailed below for the years ended December 31, 2020 and 2019 (in millions, except per share information):
Year ended December 31,
20202019Change
Total revenue from continuing operations$414.7 $652.0 (36)%
Net (loss) income available to common shareholders per diluted share(2.05)2.32 (188)%
FFOAA per diluted share1.43 5.44 (74)%

The major factors impacting our results for the year ended December 31, 2020, as compared to the year ended December 31, 2019 were as follows:
The effects of the COVID-19 pandemic as described above;
The effect of investment spending that occurred in 2020 and 2019;
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The effect of property dispositions and mortgage note payoffs that occurred in 2020 and 2019;
The decrease in other income and other expenses primarily from the operations of the Kartrite Resort and Indoor Waterpark in Sullivan County, New York and the impacts of the COVID-19 pandemic on this property;
The decrease in termination fees included in gain on sale related to the sale of Education properties;
The decrease in general and administrative expense;
The decrease in costs associated with loan refinancing or payoff;
The decrease in transaction costs; and
The decrease in common shares outstanding.

For further detail on items impacting our operating results, see 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 section below titled "Non-GAAP Financial Measures."

Critical Accounting Policies

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 periods. 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.

Impairment of Real Estate Values
We are required to make subjective assessments as to whether there are impairments in the value of our real estate investments. These estimates of impairment may have a direct impact on our consolidated financial statements. We assess the carrying value of our real estate investments whenever events or changes in circumstances indicate that the carrying amount of a property may not be recoverable. Certain factors may indicate that impairments exist which include, but are not limited to, under-performance relative to projected future operating results, change in the time period we expect to hold the property, tenant difficulties and significant adverse industry or market economic trends. If an indicator of possible impairment exists, the property is evaluated for impairment by comparing the carrying amount of the property to the estimated future cash flows (undiscounted and without interest charges), including the residual value of the real estate. If an impairment is indicated, a loss will be recorded for the amount by which the carrying value of the asset exceeds its estimated fair value. Estimating future cash flows is highly subjective and such estimates could differ materially from actual results.

Real Estate Acquisitions
Upon acquisition of real estate properties, we evaluate the acquisition to determine if it is a business combination or an asset acquisition.

If the acquisition is determined to be an asset acquisition, we record 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. Typically, relative fair values are based on recent independent appraisals or methods similar to those used by independent appraisers, as well as management judgment. In addition, acquisition-related costs incurred for asset acquisitions are capitalized.

If the acquisition is determined to be a business combination, we record the fair value of acquired tangible assets and identified intangible assets and liabilities as well as any non-controlling interest. Typically, fair values are based on recent independent appraisals or methods similar to those used by independent appraisers, as well as management judgment. In addition, acquisition-related costs incurred for business combinations are expensed as incurred. Costs
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related to such transactions, as well as costs associated with terminated transactions, are included in the accompanying consolidated statements of (loss) income and comprehensive (loss) income as transaction costs.

Collectibility of Lease Receivables
Our accounts receivable balance is comprised primarily of rents and operating cost recoveries due from tenants as well as accrued rental rate increases to be received over the life of the existing leases. We regularly evaluate the collectibility of our 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 our tenants, historical trends of the tenant, current economic conditions and changes in customer payment terms. We suspend revenue recognition when the collectibility of amounts due are no longer probable and record a direct write-off of the receivable to revenue. Prior to 2019, we reduced our accounts receivable by an allowance for doubtful accounts and recorded bad debt expense included in property operating expenses when loss was probable.

Collectibility of Mortgage and Notes Receivables
Our mortgage and notes receivables consist of loans originated by us and the related accrued and unpaid interest income. We regularly evaluate the collectibility of our receivables by reviewing past due balances and considering such factors as the credit quality of our borrowers, historical trends of the borrower, our historical loss experience, current portfolio, market and economic conditions and changes in borrower payment terms. We estimate our current expected credit losses on a loan-by-loan basis using a forward-looking commercial real estate forecasting tool. We record credit loss expense and reduce our mortgage note and note receivables balances by the allowance for credit losses on a quarterly basis in accordance with ASC 326. In the event we have a past due mortgage note or note receivable and we determine it is collateral dependent, we measure expected credit losses based on the fair value of the collateral. If foreclosure is deemed probable, and we expect to sell rather than operate the collateral, we adjust the fair value of the collateral for the estimated costs to sell. Prior to 2020, we evaluated the collectibility of our mortgage and notes receivables to determine whether the loan was impaired and if it was probable that we would be unable to collect all amounts due according to the contractual terms.

Recent Developments

Investment Spending
Our investment spending during the years ended December 31, 2020 and 2019 totaled $85.1 million and $794.7 million, respectively, and is detailed below (in thousands):
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For the Year Ended December 31, 2020
Investment TypeTotal Investment SpendingNew DevelopmentRe-developmentAsset AcquisitionMortgage Notes or Notes ReceivableInvestment in Joint Ventures
Experiential:
Theatres$33,162 $5,760 $5,183 $22,219 $— $— 
Eat & Play19,679 18,852 827 — — — 
Attractions669 — 669 — — — 
Ski2,088 — — — 2,088 — 
Experiential Lodging17,114 13,775 1,649 — — 1,690 
Cultural6,293 — 159 — 6,134 — 
Fitness & Wellness6,049 — — — 6,049 — 
Total Experiential85,054 38,387 8,487 22,219 14,271 1,690 
Education:
Early Childhood Education Centers— — — — 
Total Education— — — — 
Total Investment Spending$85,057 $38,387 $8,487 $22,219 $14,274 $1,690 
For the Year Ended December 31, 2019
Investment TypeTotal Investment SpendingNew DevelopmentRe-developmentAsset AcquisitionMortgage Notes or Notes ReceivableInvestment in Joint Ventures
Experiential:
Theatres$459,393 $4,500 $28,429 $426,464 $— $— 
Eat & Play76,739 51,209 6,901 1,429 17,200 — 
Attractions102 — — — 102 — 
Ski37,288 — 288 — 37,000 — 
Experiential Lodging125,170 53,130 935 — 70,000 1,105 
Gaming608 608 — — — — 
Cultural30,661 198 — 23,963 6,500 — 
Fitness & Wellness5,950 — — — 5,950 — 
Total Experiential735,911 109,645 36,553 451,856 136,752 1,105 
Education:
Private Schools18,798 2,300 1,474 5,871 9,153 — 
Early Childhood Education Centers4,914 4,914 — — — — 
Public Charter Schools35,068 29,953 — — 5,115 — 
Total Education58,780 37,167 1,474 5,871 14,268 — 
Total Investment Spending$794,691 $146,812 $38,027 $457,727 $151,020 $1,105 
The above amounts include $9 thousand and $35 thousand in capitalized payroll, $1.2 million and $5.3 million in capitalized interest and $0.3 million and $0.4 million in capitalized other general and administrative direct project costs for the years ended December 31, 2020 and 2019, respectively. Excluded from the table above is $11.3 million and $15.2 million of maintenance capital expenditures and other spending for the years ended December 31, 2020 and 2019, respectively.

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We limited our investment spending during the year ended December 31, 2020 to enhance our liquidity position in light of the negative impact of the COVID-19 pandemic. We will continue to limit our investment spending during the Covenant Relief Period under the amendments to the agreements governing our bank credit facilities and private placement notes as discussed above.

Dispositions
On December 29, 2020, pursuant to a tenant purchase option, we completed the sale of six private schools and four early childhood education centers for net proceeds of approximately $201.2 million and recognized a gain on sale of approximately $39.7 million. Additionally, during the year ended December 31, 2020, we completed the sale of three early education properties, four experiential properties and two land parcels for net proceeds totaling $26.6 million and recognized a combined gain on sale of $10.4 million.

AMC Restructuring
On July 31, 2020, we entered into a Forbearance Agreement (the “Forbearance Agreement”), a Master Lease Agreement (the “Master Lease”) and seven amended lease agreements (the “Transitional Leases” and collectively with the Master Lease, the “Leases”) with American Multi-Cinema, Inc. and certain affiliates (“AMC”) relating to 53 properties leased by us to AMC (the “Leased Properties”) on the date the agreement was executed. We entered into the Master Lease with AMC relating to 46 theatres (“Master Lease Properties”) and amended the Transitional Leases relating to seven theatres (“Transitional Properties”), each of which was effective July 1, 2020. Subsequent to the effective date, we terminated the Transitional Leases during the second and third quarter of 2020.

We agreed to reduce total annual fixed rent on the 46 Master Lease Properties by approximately 18%, or $19.4 million to approximately $87.8 million (including approximately $6.8 million of ground rent and the repayment of deferral amounts for the months of April, May and June 2020 which we had agreed to defer and amortize as part of fixed rent over the first 14 years of the Master Lease term). Additionally, the Master Lease has fixed escalators of 7.5% every five years on fixed rent excluding the portion attributable to deferred rent.

Each lease for the seven Transitional Properties was amended by the parties. We agreed to reduce the aggregate annual fixed rent on the Transitional Properties by approximately $6.2 million to approximately $8.1 million (including approximately $1.2 million of ground rent and the repayment of deferral amounts for the months of April, May and June 2020 which we had agreed to defer and amortize as part of fixed rent over the remaining terms of the new leases). The total amount deferred under each Transitional Lease prior to us terminating these agreements is still due by AMC and is scheduled to be paid over what would have been the remaining terms of the related property leases.

Pursuant to the Leases and the Forbearance Agreement, during the period of July 1, 2020 through December 31, 2020, AMC agreed to pay percentage rent (15% of gross receipts) in lieu of fixed rent for the Leased Properties prior to any lease terminations. The difference between the percentage rent paid and fixed rent due under the Master Lease represents an additional deferred amount that, beginning in February 2021, will be added to fixed cash rent and amortized over the first 14 years of the Master Lease and beginning January 2021 will be rent due related to the Transitional Leases amortized over the prior lease terms. During the year ended December 31, 2020, we recognized $1.7 million in percentage rent from AMC which related to the period they were open beginning in late August. The payment expected for December will be recognized in the first quarter of 2021 when the payment is received due to recognizing AMC's revenue on a cash basis.

The Master Lease Properties have been divided into four tranches, with the initial term of each tranche expiring annually from June 30, 2034 to June 30, 2037. The Transitional Leases have expiration dates occurring between November 2026 and March 2029. Prior to December 31, 2020, we terminated all Transitional Leases with AMC.

We believe that the AMC restructuring significantly improves our long-term position with respect to AMC, while providing AMC with deferrals it needs during the pandemic and better performing theatres in the future. Specifically:

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The Master Lease was designed with the intention that the parties will respect the master lease characterization at all times, which we believe will enhance our position in the event of a reorganization proceeding regarding AMC;
The lease terms on properties included in the Master Lease were increased by an average of nine years; and
We have reduced our exposure to AMC through the termination of each of the seven Transitional Lease and plan to re-brand or sell these properties with one property sold in December of 2020.

Impairment Charges
As a result of the COVID-19 pandemic, we experienced vacancies at some of our properties and at others we negotiated lease modifications that included rent reductions. As part of this process, we reassessed the expected holding periods and expected future cash flows of such properties and determined that the estimated cash flows were not sufficient to recover the carrying values of nine properties. Accordingly, we recognized impairment charges of $85.7 million, which were comprised of $70.7 million of impairments of real estate investments at nine properties and $15.0 million of impairments of operating lease right-of-use assets at two of these properties. See Note 4 to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional information related to these impairment charges.

During the year ended December 31, 2020, we recognized other-than-temporary impairment charges of $3.2 million on our equity investments in three theatre projects located in China. See Note 7 to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional information related to these impairment charges.

Severance Expense
On December 31, 2020, our Senior Vice President - Asset Management, Michael L. Hirons, retired. His retirement was a "Qualifying Termination" under our Employee Severance and Retirement Vesting Plan. For the year ended December 31, 2020, severance expense totaled $2.9 million and included cash payments totaling $1.6 million, and accelerated vesting of nonvested shares and performance shares totaling $1.3 million.

Attraction Tenant Update
During the year ended December 31, 2020, we entered into an amended and restated loan and security agreement with one of our notes receivable borrowers in response to the impacts of the COVID-19 pandemic on the borrower. The restated note receivable consisted of the previous note balance of $6.5 million and provides the borrower with a term loan for up to $13.0 million and a $6.0 million revolving line of credit. The restated note receivable has a maturity date of June 30, 2032 and the line of credit matures on December 31, 2022. Interest is deferred through June 30, 2022, at which time monthly principal and interest payments will be due over 10 years and will be recognized as income on a cash basis. Although the borrower is not in default, nor has the borrower declared bankruptcy, we determined these modifications resulted in a troubled debt restructuring at December 31, 2020 due to the impacts of the COVID-19 pandemic on the borrower's financial condition. We recognized credit loss expense for the outstanding principal balance of $12.6 million and the $12.9 million unfunded commitment on the term loan and line of credit as of December 31, 2020.

Amended Consolidated Credit Agreement and Note Purchase Agreement
During the year ended December 31, 2020, we amended our Consolidated Credit Agreement, which governs our unsecured revolving credit facility and our unsecured term loan facility, and our Note Purchase Agreement, which governs our private placement notes. The amendments modified certain provisions and waived our obligation to comply with certain covenants under these debt agreements through December 31, 2020, or when the Company provides notice that it elects to terminate the Covenant Relief Period, both subject to certain conditions. See discussion below in Liquidity and Capital Resources and Note 8 to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional information related to these amendments.
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Results of Operations

Year ended December 31, 2020 compared to year ended December 31, 2019

Analysis of Revenue

The following table summarizes our total revenue (dollars in thousands):
Year Ended December 31,Change
20202019
Minimum rent (1)$372,546 $544,279 $(171,733)
Percentage rent (2)8,554 14,962 (6,408)
Straight-line rent (3)(24,550)10,557 (35,107)
Tenant reimbursements (4)15,111 22,864 (7,753)
Other rental revenue515 360 155 
Total Rental Revenue$372,176 $593,022 $(220,846)
Other income (5)9,139 25,920 (16,781)
Mortgage and other financing income33,346 33,027 319 
Total revenue$414,661 $651,969 $(237,308)

(1) For the year ended December 31, 2020 compared to the year ended December 31, 2019, the decrease in minimum rent resulted primarily from the impact of the COVID-19 pandemic, with approximately $176.0 million related to tenants with rent recognized on a cash basis or as restructured, as well as for properties with deferred rent not recognized because collection was determined not probable or there were rent abatements. In addition, there was a decrease in rental revenue of $7.0 million from property dispositions not classified in discontinued operations. This was partially offset by an increase in minimum rent of $5.5 million related to property acquisitions and developments completed in 2020 and 2019 and $5.8 million in increases on existing properties. Minimum rent for the year ended December 31, 2020 includes $5.2 million in variable rent from tenants that paid a portion of minimum rent based on a percentage of gross revenue.

During the year ended December 31, 2020, we renewed 15 lease agreements on approximately 0.9 million square feet. These extension agreements (which exclude restructured agreements with AMC as discussed in "Recent Developments") were negotiated with our tenants in conjunction with rent deferrals as a result of the impact of the COVID-19 pandemic. The extension periods for these agreements will begin in future periods, between 2021 and 2031. Upon the commencement of the extension periods, we expect a weighted average increase of approximately 8% in rental rates. We paid no leasing commissions with respect to these lease renewals.

(2) The decrease in percentage rent (amounts above base rent) related primarily to lower percentage rent recognized during the year ended December 31, 2020 from five theatre properties, one ski property, five attraction properties, one eat and play tenant and one early education tenant. These decreases were partially offset by increases in percentage rent from one private school tenant.

(3) For the year ended December 31, 2020 compared to the year ended December 31, 2019, the decrease in straight-line rent resulted primarily from write-offs totaling $38.0 million during the year ended December 31, 2020, which was comprised of $26.5 million of straight-line accounts receivable and $11.5 million of sub-lessor ground lease straight-line accounts receivable, due to the COVID-19 pandemic. This was partially offset by an increase in straight-line rent related to property acquisitions and developments completed in 2020 and 2019.

(4) The decrease in tenant reimbursements during the year ended December 31, 2020 was primarily due to COVID-19 contractual abatements (which in certain cases included tenant reimbursements), tenant deferrals that were not recognized because collection was not probable and vacancies. Additionally, during the year ended December 31, 2020, we had $4.7 million less in the gross-up of tenant reimbursed expenses for property taxes at various properties as certain tenants at these properties are now paying these costs directly.

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(5) The decrease in other income for the year ended December 31, 2020 related primarily to a decrease in operating income as a result of COVID-19 closures at the Kartrite Resort and a theatre property.

Analysis of Expenses and Other Line Items

The following table summarizes our expenses and other line items (dollars in thousands):
Year Ended December 31,Change
20202019
Property operating expense (1)$58,587 $60,739 $(2,152)
Other expense (2)16,474 29,667 (13,193)
General and administrative expense (3)42,596 46,371 (3,775)
Severance expense2,868 2,364 504 
Costs associated with loan refinancing or payoff (4)1,632 38,269 (36,637)
Interest expense, net (5)157,675 142,002 15,673 
Transaction costs (6)5,436 23,789 (18,353)
Credit loss expense (7)30,695 — 30,695 
Impairment charges (8)85,657 2,206 83,451 
Depreciation and amortization (9)170,333 158,834 11,499 
Equity in loss from joint ventures (10)(4,552)(381)(4,171)
Impairment charges on joint ventures (11)(3,247)— (3,247)
Gain on sale of real estate (12)50,119 4,174 45,945 
Income tax (expense) benefit (13)(16,756)3,035 (19,791)
Income from discontinued operations before other items (14)— 37,241 (37,241)
Impairment on public charter school portfolio sale (15)— (21,433)21,433 
Gain on sale of real estate from discontinued operations (16)— 31,879 (31,879)
Preferred dividend requirements(24,136)(24,136)— 

(1) Our property operating expenses arise from the operations of our entertainment districts and other specialty properties as well as operating ground lease expense and the gross-up of tenant reimbursed expenses. The decrease in property operating expenses resulted from bad debt expense booked in 2019, as well as a decrease in the gross-up of tenant reimbursed expenses for property taxes at various properties as certain tenants at these properties are now paying these costs directly. These decreases were partially offset by an increase in costs due to higher vacancies.

(2) The decrease in other expense for the year ended December 31, 2020 related to a decrease in operating expenses as a result of COVID-19 closures at the Kartrite Resort and a theatre property.

(3) The decrease in general and administrative expense for the year ended December 31, 2020 was primarily due to a decrease in payroll and benefits costs, as well as travel expenses, partially offset by increases in professional fees.

(4) Costs associated with loan refinancing or payoff for the year ended December 31, 2020 related to fees paid to third parties in connection with amendments to our Consolidated Credit Agreement and Note Purchase Agreement. Costs associated with loan refinancing or payoff for the year ended December 31, 2019 related to the tender and redemption of the 5.75% Senior Notes due 2022.

(5) The increase in our net interest expense for the year ended December 31, 2020 compared to the year ended December 31, 2019 resulted primarily from an increase in average borrowings as well as a decrease in interest cost capitalized on development projects. This was partially offset by a decrease in our weighted average interest rate on outstanding debt and an increase in interest income from short-term investments related to cash on hand.

(6) The decrease in transaction costs for the year ended December 31, 2020 compared to the year ended December 31, 2019 was primarily due to pre-opening costs related to the Kartrite Resort, which opened in May 2019, as well as less costs related to the transfer of our CLA properties to Crème.

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(7) Credit loss expense for the year ended December 31, 2020 was recognized in conjunction with our implementation of the new current expected credit losses standard (Topic 326). In addition, credit loss expense for the year ended December 31, 2020 included $25.5 million of credit loss expense that was recognized to reserve the outstanding principal balance of notes receivable from one borrower and an unfunded commitment to fund an additional $12.9 million, as a result of to recent changes in the borrower's financial status due to the COVID-19 pandemic.

(8) Impairment charges recognized during the year ended December 31, 2020, related to nine properties with revised estimated undiscounted cash flows and shorter hold periods as a result of the COVID-19 pandemic. Impairment charges recognized during the year ended December 31, 2020 were comprised of $70.7 million of impairments of real estate investments and $15.0 million of impairments of operating lease right-of-use assets. Impairment charges recognized during the year ended December 31, 2019, related to one theatre property.

(9) The increase in depreciation and amortization expense resulted primarily from acquisitions and developments completed in 2019 and 2020 as well as the acceleration of amortization on an in-place lease intangible related to a vacant property. This increase was partially offset by decreases related to property dispositions that occurred during 2019 and 2020.

(10) The increase in equity in loss from joint ventures resulted primarily from losses recognized at our joint ventures projects located in St. Petersburg Beach, Florida, and our joint ventures in three theatre projects in China. These properties were negatively impacted due to COVID-19 closures.

(11) Impairment charges on joint ventures for the year ended December 31, 2020 related to other-than-temporary impairment charges on three theatre projects located in China. See Note 7 to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information.

(12) The gain on sale of real estate for the year ended December 31, 2020 related to the exercise of a tenant purchase option on six private schools and four early childhood education centers as well as the sale of three early education center properties, four experiential properties and two land parcels. The gain on sale of real estate for the year ended December 31, 2019 related to the sale of one early childhood education center property, one attraction property and four land parcels.

(13) The increase in income tax expense for the year ended December 31, 2020 compared to income tax benefit for the year ended December 31, 2019 is primarily related to the recognition of a full valuation allowance on deferred tax assets for our Canadian operations and certain TRSs as a result of the economic uncertainty caused by the COVID-19 pandemic.

(14) Income from discontinued operations before other items for the year ended December 31, 2019 related to the operating results of all public charter school investments disposed in 2019. See Note 17 to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information on discontinued operations.

(15) Impairment on public charter school portfolio sale for the year ended December 31, 2019 related to the sale of substantially all of our public charter school portfolio, consisting of 47 public charter school related assets. See Note 4 to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information on these impairment charges.

(16) Gain on sale of real estate from discontinued operations for the year ended December 31, 2019 was due to the disposition of ten public charter schools pursuant to tenant purchase options and seven other public charter school properties sold during 2019.

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Year ended December 31, 2019 compared to year ended December 31, 2018

Analysis of Revenue

The following table summarizes our total revenue (dollars in thousands):
Year Ended December 31,Change
20192018
Minimum rent (1)$544,279 $478,087 $66,192 
Percentage rent (2)14,962 10,663 4,299 
Straight-line rent (3)10,557 4,703 5,854 
Tenant reimbursements (4)22,864 15,305 7,559 
Other rental revenue360 328 32 
Total Rental Revenue$593,022 $509,086 $83,936 
Other income (5)25,920 2,076 23,844 
Mortgage and other financing income (6)33,027 128,759 (95,732)
Total revenue$651,969 $639,921 $12,048 

(1) For the year ended December 31, 2019 compared to the year ended December 31, 2018, the increase in minimum rent resulted from $41.2 million of rental revenue related to property acquisitions and developments completed in 2019 and 2018, an increase of $3.5 million in rental revenue related to our 21 early childhood education center properties that were transferred from CLA to Crème and an increase of $0.2 million in rental revenue on existing properties. In addition, during the year ended December 31, 2019, we recognized $22.6 million in lease revenue on our existing operating ground leases in which we are sub-lessor, in connection with our adoption of Topic 842. These increases were partially offset by a decrease of $1.3 million from property dispositions not included in discontinued operations.

During the year ended December 31, 2019, we renewed 10 lease agreements on approximately 783 thousand square feet and funded or agreed to fund an average of $17.25 per square foot in tenant improvements. We experienced a decrease of approximately 6.3% in rental rates and paid no leasing commissions with respect to these lease renewals.

(2) The increase in percentage rent related primarily to higher percentage rent recognized during the year ended December 31, 2019 from one of our ski properties, our gaming property and several attraction and Education properties.

(3) The increase in straight-line rent related primarily to property acquisitions and developments completed in 2019 and 2018 as well as $0.9 million in straight-line revenue on our existing operating ground leases in which we are a sub-lessor, in connection with our adoption of Topic 842.

(4) The increase in tenant reimbursements related primarily to the gross-up of tenant reimbursed expenses of $6.9 million recognized during the year ended December 31, 2019 in accordance with Topic 842.

(5) The increase in other income for the year ended December 31, 2019 related primarily to the operating income from the Kartrite Resort, as well as the operating income from a theatre.

(6) The decrease in mortgage and other financing income was primarily due to prepayment fees received in connection with prepayments on two non-Education mortgage notes during the year ended December 31, 2018 totaling $71.3 million as well as note and direct financing lease payoffs in 2018 and 2019.
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Analysis of Expenses and Other Line Items
The following table summarizes our expenses and other line items (dollars in thousands):
Year Ended December 31,Change
20192018
Property operating expense (1)$60,739 $29,654 $31,085 
Other expense (2)29,667 443 29,224 
General and administrative expense46,371 48,889 (2,518)
Severance expense2,364 5,938 (3,574)
Litigation settlement expense— 2,090 (2,090)
Costs associated with loan refinancing or payoff (3)38,269 31,958 6,311 
Interest expense, net (4)142,002 135,870 6,132 
Transaction costs (5)23,789 3,698 20,091 
Impairment charges (6)2,206 27,283 (25,077)
Depreciation and amortization (7)158,834 138,395 20,439 
Equity in loss from joint ventures(381)(22)(359)
Gain on sale of real estate4,174 3,037 1,137 
Gain on sale of investment in direct financing leases (8)— 5,514 (5,514)
Income tax benefit (expense) (9)3,035 (2,285)5,320 
Income from discontinued operations before other items (10)37,241 45,036 (7,795)
Impairment on public charter school portfolio sale (11)(21,433)— (21,433)
Gain on sale of real estate from discontinued operations (12)31,879 — 31,879 
Preferred dividend requirements(24,136)(24,142)

(1) Our property operating expenses arise from the operations of our entertainment districts and other specialty properties as well as operating ground lease expense and the gross-up of tenant reimbursed expenses. The increase in property operating expenses resulted primarily from ground lease expense of $24.6 million from our existing operating ground leases as well as the gross-up of tenant reimbursed expenses of $6.9 million recognized during the year ended December 31, 2019, in accordance with Topic 842, adopted January 1, 2019.
(2) The increase in other expense for the year ended December 31, 2019 related to operating expenses for the Kartrite Resort, as well as operating expense for a theatre.

(3) Costs associated with loan refinancing or payoff for the year ended December 31, 2019 related to the tender and redemption of the 5.75% Senior Notes due 2022. Costs associated with loan refinancing or payoff for the year ended December 31, 2018 related to the redemption of the 7.75% Senior Notes due 2020.

(4) The increase in our net interest expense for the year ended December 31, 2019 compared to the year ended December 31, 2018 resulted primarily from an increase in average borrowings used to finance our real estate acquisitions and fund our mortgage notes receivable as well as a decrease in interest cost capitalized on development projects. This was partially offset by an increase in interest income recognized during the year ended December 31, 2019.

(5) The increase in transaction costs for the year ended December 31, 2019 compared to the year ended December 31, 2018 was primarily due to pre-opening costs related to the Kartrite Resort, which opened in May 2019, as well as costs related to the transfer of our CLA properties to Crème.

(6) Impairment charges recognized during the year ended December 31, 2019 related to one theatre property. Impairment charges recognized during the year ended December 31, 2018 related to two partially completed early childhood education centers and two land parcels with site improvements, as well as an impairment charge related to two guarantees of the payment of certain economic development revenue bonds secured by leasehold interest and improvements at two theatres in Louisiana. See Note 4 to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information on these impairment charges.

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(7) The increase in depreciation and amortization expense resulted primarily from acquisitions and developments completed in 2018 and 2019 and was partially offset by property dispositions that occurred during 2018 and 2019.

(8) Gain on sale of investment in direct financing leases for the year ended December 31, 2018 related to the sale of four public charter school properties leased to Imagine Schools, Inc. ("Imagine").

(9) The change in income tax benefit for the year ended December 31, 2019 compared to the income tax expense for the year ended December 31, 2018 is primarily related to lower deferred taxes due to the treatment of pre-opening costs and other expected tax losses for the Kartrite Resort, as well as certain expenses related to our Canadian trust.

(10) Income from discontinued operations before other items for the year ended December 31, 2019 and 2018 related to the operating results of all public charter school investments disposed in 2019. See Note 17 to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information on discontinued operations.

(11) Impairment on public charter school portfolio sale for the year ended December 31, 2019 related to the sale of substantially all of our public charter school portfolio, consisting of 47 public charter school related assets, which occurred on November 22, 2019. See Note 4 to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information on these impairment charges.

(12) Gain on sale of real estate from discontinued operations for the year ended December 31, 2019 was due to the disposition of ten public charter schools pursuant to tenant purchase options and seven other public charter school properties sold during 2019.

Liquidity and Capital Resources

Cash and cash equivalents were $1.0 billion at December 31, 2020. In addition, we had restricted cash of $2.4 million at December 31, 2020. Of the restricted cash at December 31, 2020, $1.3 million related to cash held for our tenants' off-season rent reserves and $1.1 million related to escrow deposits required for property management agreements or held for potential acquisitions and redevelopments.

Mortgage Debt, Senior Notes, Unsecured Revolving Credit Facility and Unsecured Term Loan Facility

As of December 31, 2020, we had total debt outstanding of $3.7 billion of which 99% was unsecured.

At December 31, 2020, we had outstanding $2.4 billion in aggregate principal amount of unsecured senior notes (excluding the private placement notes discussed below) ranging in interest rates from 3.75% to 5.25%. 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.

In light of the continuing financial and operational impacts of the COVID-19 pandemic on us, our tenants and borrowers, on June 29, 2020 and November 3, 2020, we amended our Consolidated Credit Agreement, which governs our unsecured revolving credit facility and our unsecured term loan facility. The amendments modified certain provisions and waived our obligation to comply with certain covenants under this debt agreement through December 31, 2021. We can elect to terminate the Covenant Relief Period early, subject to certain conditions.

On June 29, 2020 and December 24, 2020, we further amended our Note Purchase Agreement, which governs our private placement notes. The amendments modified certain provisions and waived our obligation to comply with certain covenants under these debt agreements through October 1, 2021. We can elect to extend such period through January 1, 2022 and may elect to terminate the Covenant Relief Period early, subject to certain conditions. See Note 8 to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional details.
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At December 31, 2020, we had $590.0 million outstanding balance under our $1.0 billion unsecured revolving credit facility with interest at a floating rate of LIBOR plus 1.625% (with a LIBOR floor of 0.50%), which was 2.125%, with a facility fee of 0.375%. During the three months ended December 31, 2020, our unsecured debt rating was downgraded to BB+ by both Fitch and Standard & Poor's. If our unsecured debt rating is further downgraded by Moody's, the interest rate on the revolving credit facility would increase by 0.35% during the Covenant Relief Period. After the Covenant Relief Period and based on our current unsecured debt ratings, the interest rate will be LIBOR plus 1.20% (with a LIBOR floor of zero) and the facility fee will be 0.25%, however these rates are subject to change based on our unsecured debt ratings. Subsequent to December 31, 2020, due to stronger collections, disposition proceeds and significant liquidity, we used a portion of our cash on hand to reduce borrowing under our unsecured revolving credit facility by $500.0 million, resulting in a remaining balance of $90.0 million on our $1.0 billion facility.

At December 31, 2020, our unsecured term loan facility had a balance of $400.0 million with interest at a floating rate of LIBOR plus 2.00% (with a LIBOR floor of 0.50%), which was 2.50%. Similar to the unsecured revolving credit facility discussed above, if our unsecured debt rating is further downgraded by Moody's, the interest rate on the term loan facility would increase by 0.35% during the Covenant Relief Period. After the Covenant Relief Period and based on our current unsecured debt ratings, the interest rate will be LIBOR plus 1.35% (with a LIBOR floor of zero), however these rates are subject to change based on our unsecured debt ratings. As of December 31, 2020, all of this LIBOR-based debt was fixed with interest rate swaps from April 5, 2019 to February 7, 2022. During the Covenant Relief Period and based on our current unsecured debt ratings, the interest rate swaps are fixed at 4.40% for $350.0 million of borrowings and 4.60% for the remaining $50.0 million of borrowings, and after the Covenant Relief Period will be 3.40% for $350.0 million of borrowings and 3.60% for the remaining $50.0 million of borrowings, however these rates are subject to change based on the Company’s unsecured debt ratings.

At December 31, 2020, we had outstanding $340.0 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. As noted above, we amended the Note Purchase Agreement, which governs our private placement notes, on June 29, 2020 and December 24, 2020 to modify certain provisions and obtain covenant waivers. At December 31, 2020, the interest rates for the private placement notes were 5.60% and 5.81% for the Series A notes due 2024 and the Series B notes due 2026, respectively. After the Covenant Relief Period, the interest rates for the private placement notes are scheduled to return to 4.35% and 4.56% for the Series A notes due 2024 and the Series B notes due 2026, respectively. Subsequent to December 31, 2020, we used a portion of our cash proceeds from property sales to reduce the principal of our private placement notes by $23.8 million in accordance with the above amendments to the Note Purchase Agreement.
Our unsecured credit facilities and the private placement notes contain financial covenants or restrictions that limit our levels of consolidated debt, secured debt, investment levels 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. The amendments to these debt agreements imposed a new minimum liquidity financial covenant during the Covenant Relief Period, provided relief from compliance with certain other financial covenants during the Covenant Relief Period and permanently modified certain other financial covenants. The amendments also imposed additional restrictions on us during the Covenant Relief Period, including limitations on making investments, incurring indebtedness, making capital expenditures and paying dividends and making other distributions, repurchasing our shares, voluntarily prepaying certain indebtedness, encumbering certain assets and maintaining a minimum liquidity amount, in each case subject to certain exceptions. In addition, the amendments required us to cause certain of our key subsidiaries to guarantee our obligations based on our unsecured debt ratings, and we are required to pledge the equity interests of such subsidiary guarantors if certain subsequent events occur; however, both of these requirements end when the Covenant Relief Period is over. See Note 8 to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional details regarding these amendments.
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
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the debt instrument. We were in compliance with these financial and other covenants under our debt instruments at December 31, 2020.
Our principal investing activities are acquiring, developing and financing Experiential and Education 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 is 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, after the expiration of the Covenant Relief Period, 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.

Capital Markets

During the year ended December 31, 2020, our Board of Trustees approved a share repurchase program to repurchase up to $150.0 million of our common shares. The share repurchase program was set to expire on December 31, 2020; however, we suspended the program on the effective date of the covenant modification agreements, June 29, 2020, as discussed above. During the year ended December 31, 2020, we repurchased 4,066,716 common shares under the share repurchase program for approximately $106.0 million. The repurchases were made under a Rule 10b5-1 trading plan.

During the year ended December 31, 2020, we issued an aggregate of 36,176 common shares under our DSP Plan for net proceeds of $1.1 million.

Liquidity Requirements

Short-term liquidity requirements consist primarily of normal recurring corporate operating expenses, debt service requirements, distributions to shareholders and, to a lesser extent, share repurchases. We have historically met these requirements primarily through cash provided by operating activities. The table below summarizes our cash flows (dollars in thousands):
Year Ended December 31,
20202019
Net cash provided by operating activities$65,273 $439,530 
Net cash provided by investing activities133,986 96,505 
Net cash provided (used) by financing activities297,169 (23,223)

We currently anticipate that our cash on hand, cash from operations and proceeds from asset dispositions will provide adequate liquidity to meet our financial commitments for the next 12 months, including to fund our operations, make interest and principal payments on our debt, allow distributions to our preferred shareholders, and allow distributions to our common shareholders to avoid corporate level federal income or excise tax in accordance with REIT Internal Revenue Code requirements. We may also use funds available under our unsecured revolving credit facility, subject to compliance with financial covenants.

As discussed above, 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, which will begin at various times in the future. 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. In the near term, we believe we can fund our short-term liquidity requirements primarily with cash on hand, including funds borrowed under our unsecured revolving credit facility.

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Liquidity requirements at December 31, 2020 consisted primarily of maturities of debt. Contractual obligations as of December 31, 2020 are as follows (in thousands):
 Year ended December 31,
Contractual Obligations20212022202320242025ThereafterTotal
Long Term Debt Obligations$— $590,000 $675,000 $148,000 $300,000 $2,016,995 $3,729,995 
Interest on Long Term Debt Obligations157,078 131,911 117,895 106,927 92,653 175,670 782,134 
Operating Lease Obligation - Corporate Office884 967 967 967 967 724 5,476 
Operating Ground Lease Obligations (1)22,520 22,058 21,340 20,840 20,936 203,467 311,161 
Total$180,482 $744,936 $815,202 $276,734 $414,556 $2,396,856 $4,828,766 

(1) Our tenants, who are generally sub-tenants under the ground leases, are responsible for paying the rent under these ground leases. As of December 31, 2020, rental revenue from several of our tenants, who are also sub-tenants under the ground leases, are being recognized on a cash basis. In most cases, the ground lease sub-tenants have continued to pay the rent under these ground leases. In addition, two of these properties are vacant. In the event the tenant fails to pay the ground lease rent or the property is vacant, we would be primarily responsible for the payment, assuming we do not sell or re-tenant the property. The above amounts exclude contingent rent due under leases where the ground lease payment, or a portion thereof, is based on the level of the tenant's sales.

Commitments

As of December 31, 2020, we had 17 development projects with commitments to fund an aggregate of approximately $118.3 million, of which approximately $46.9 million is expected to be funded in 2021. 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 its direct control. As of December 31, 2020, we had three mortgage notes and one note receivable with commitments totaling approximately $31.8 million, of which approximately $21.7 million is expected to be funded in 2021. 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 December 31, 2020, we had two surety bonds outstanding totaling $31.6 million.

Liquidity Analysis

As noted above, we had $590.0 million outstanding under our unsecured revolving credit facility at December 31, 2020. We borrowed $750.0 million on March 20, 2020 as a precautionary measure to increase our cash position and preserve financial flexibility in light of uncertainty in the global markets due to the COVID-19 pandemic. In addition, during 2020, we deferred our anticipated gaming venue investment and all other uncommitted investment spending. On December 30, 2020, we paid down our unsecured revolving credit facility by $160.0 million. In January 2021, due to stronger collections, disposition proceeds and significant liquidity, we used $500.0 million of our cash on hand to reduce the balance outstanding on our $1.0 billion unsecured revolving credit facility from
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$590.0 million to $90.0 million. We believe our unrestricted cash position and borrowing capacity on our unsecured revolving credit facility will provide us with sufficient liquidity and aid us in this time of market disruption.

We have no scheduled debt payments due until 2022. 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 current economic uncertainty caused by the COVID-19 pandemic.

Our primary use of cash after paying operating expenses, debt service, distributions to shareholders, funding share repurchases 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, which have been negatively impacted by the COVID-19 pandemic. 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.

Our investment spending and uses of cash during the Covenant Relief Period will be subject to limitations under the amendments to the agreements governing our Consolidated Credit Agreement and Note Purchase Agreement as discussed above. In addition, in certain circumstances, we will be required to apply 100% of the proceeds, net of certain costs, received during the Covenant Relief Period from certain sales and dispositions, debt issuances or equity issuances, in each case, subject to certain exceptions, to repay amounts outstanding under our Consolidated Credit Agreement and Note Purchase Agreement.

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 EBITDA 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 net debt to adjusted EBITDAre ratio was not meaningful at December 31, 2020 given the temporary disruption caused by the COVID-19 pandemic and the associated accounting for tenant rent deferrals and other lease modifications. Our net debt to gross assets ratio was 40% as of December 31, 2020 (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 (loss) 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 costs associated with loan refinancing or payoff, transaction costs, severance expense, preferred share redemption costs, impairment of
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operating lease right-of-use assets, termination fees associated with tenants' exercises of public charter school buy-out options and credit loss expense and subtracting 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 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 a supplemental measure to GAAP net (loss) 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 years ended December 31, 2020, 2019 and 2018 and reconciles such measures to net (loss) income available to common shareholders, the most directly comparable GAAP measure (unaudited, in thousands, except per share information):

 Year ended December 31,
 202020192018
FFO:
Net (loss) income available to common shareholders of EPR Properties$(155,864)$178,107 $242,841 
Gain on sale of real estate(50,119)(36,053)(3,037)
Gain on sale of investment in direct financing leases— — (5,514)
Impairment of real estate investments, net (1)70,648 23,639 27,283 
Real estate depreciation and amortization169,253 170,717 152,508 
Allocated share of joint venture depreciation1,491 2,213 226 
Impairment charges on joint ventures3,247 — — 
FFO available to common shareholders of EPR Properties$38,656 $338,623 $414,307 
FFO available to common shareholders of EPR Properties$38,656 $338,623 $414,307 
Add: Preferred dividends for Series C preferred shares— 7,754 7,759 
Add: Preferred dividends for Series E preferred shares— 7,756 7,756 
Diluted FFO available to common shareholders of EPR Properties$38,656 $354,133 $429,822 
FFOAA:
FFO available to common shareholders of EPR Properties$38,656 $338,623 $414,307 
Costs associated with loan refinancing or payoff1,632 38,450 31,958 
Transaction costs5,436 23,789 3,698 
Severance expense2,868 2,364 5,938 
Litigation settlement expense— — 2,090 
Termination fee included in gain on sale— 24,075 1,864 
Gain on insurance recovery (included in other income)(809)— — 
Impairment of operating lease right-of-use assets (1)15,009 — — 
Credit loss expense30,695 — — 
Deferred income tax expense (benefit)15,246 (4,115)573 
FFOAA available to common shareholders of EPR Properties$108,733 $423,186 $460,428 
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FFOAA available to common shareholders of EPR Properties$108,733 $423,186 $460,428 
Add: Preferred dividends for Series C preferred shares— 7,754 7,759 
Add: Preferred dividends for Series E preferred shares— 7,756 7,756 
Diluted FFOAA available to common shareholders of EPR Properties$108,733 $438,696 $475,943 
AFFO:
FFOAA available to common shareholders of EPR Properties$108,733 $423,186 $460,428 
Non-real estate depreciation and amortization1,080 1,045 922 
Deferred financing fees amortization6,606 6,192 5,797 
Share-based compensation expense to management and trustees13,819 13,180 15,111 
Amortization of above/below-market leases, net and tenant allowances(480)(343)(581)
Maintenance capital expenditures (2)(11,377)(5,453)(2,101)
Straight-lined rental revenue24,550 (13,552)(10,229)
Straight-lined ground sublease expense749 882 — 
Non-cash portion of mortgage and other financing income(250)(2,411)(3,043)
AFFO available to common shareholders of EPR Properties$143,430 $422,726 $466,304 
FFO per common share:
Basic$0.51 $4.41 $5.58 
Diluted0.51 4.39 5.51 
FFOAA per common share:
Basic$1.43 $5.51 $6.20 
Diluted1.43 5.44 6.10 
Shares used for computation (in thousands):
Basic75,994 76,746 74,292 
Diluted75,994 76,782 74,337 
Weighted average shares outstanding-diluted EPS75,994 76,782 74,337 
Effect of dilutive Series C preferred shares— 2,164 2,114 
Effect of dilutive Series E preferred shares— 1,631 1,607 
Adjusted weighted average shares outstanding - diluted Series C and Series E75,994 80,577 78,058 
Other financial information:
Dividends per common share$1.515 $4.500 $4.320 
Amounts above include the impact of discontinued operations, which are separately classified in the consolidated statements of (loss) income and comprehensive (loss) income included in this Annual Report on Form 10-K. See Note 17 to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional information related to discontinued operations.

(1) Impairment charges recognized during the year ended December 31, 2020 totaled $85.7 million, which was comprised of $70.7 million of impairments of real estate investments and $15.0 million of impairments of operating lease right-of-use assets.
(2) 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 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 and FFOAA per share for years ended December 31, 2019 and 2018. 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 and FFOAA per share for these periods.

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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

Net Debt to Gross Assets 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 Net Debt to Gross Assets 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 (loss) 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 as 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 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 gain on insurance recovery, severance expense, credit loss expense, transaction costs, impairment losses on operating lease right-of-use assets and prepayment fees. For the three months ended December 31, 2020, Adjusted EBITDAre was further adjusted to add back prior period receivable write-offs related to certain theatre tenants placed on cash basis or receiving abatements during the quarter.

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
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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.

Reconciliations of debt, total assets and net (loss) income available to common shareholders (all reported in accordance with GAAP) to Net Debt, Gross Assets, Net Debt to Gross Assets, EBITDAre and Adjusted EBITDAre (each of which is a non-GAAP financial measure) are included in the following tables (unaudited, in thousands):
December 31,
20202019
Net Debt:
Debt$3,694,443 $3,102,830 
Deferred financing costs, net35,552 37,165 
Cash and cash equivalents(1,025,577)(528,763)
Net Debt$2,704,418 $2,611,232 
Gross Assets:
Total Assets$6,704,185 $6,577,511 
Accumulated depreciation1,062,087 989,254 
Cash and cash equivalents(1,025,577)(528,763)
Gross Assets$6,740,695 $7,038,002 
Net Debt to Gross Assets40 %37 %
Three Months Ended December 31,
20202019
EBITDAre and Adjusted EBITDAre:
Net (loss) income$(19,977)$36,297 
Interest expense, net42,838 34,907 
Income tax expense (benefit)402 (530)
Depreciation and amortization42,014 44,530 
Gain on sale of real estate(49,877)(5,648)
Impairment of real estate investments, net22,832 23,639 
Costs associated with loan refinancing or payoff812 43 
Allocated share of joint venture depreciation361 551 
Allocated share of joint venture interest expense872 735 
EBITDAre (for the quarter)$40,277 $134,524 
Gain on insurance recovery (1)(809)— 
Severance expense2,868 423 
Transaction costs814 5,784 
Credit loss expense20,312 — 
Accounts receivable write-offs from prior periods (2)4,301 — 
Straight-line receivable write-offs from prior periods (2)870 — 
Adjusted EBITDAre (for the quarter)$68,633 $140,731 
Amounts above include the impact of discontinued operations, which are separately classified in the consolidated statements of (loss) income and comprehensive (loss) income included in this Annual Report on Form 10-K.
(1) Included in other income in the consolidated statements of (loss) income and comprehensive (loss) income for the quarter. Other income includes the following:
Three Months Ended December 31,
20202019
Income from settlement of foreign currency swap contracts$110 $252 
Gain on insurance recovery809 — 
Operating income from operated properties45 7,996 
Miscellaneous income138 
Other income$968 $8,386 
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(2) Included in rental revenue from continuing operations in the consolidated statements of (loss) income and comprehensive (loss) income for the quarter. Rental revenue includes the following:
Three Months Ended December 31,
20202019
Minimum rent$79,342 $139,529 
Accounts receivable write-offs from prior periods(4,301)— 
Tenant reimbursements4,831 5,790 
Percentage rent3,040 6,428 
Straight-line rental revenue1,768 2,926 
Straight-line receivable write-offs from prior periods(870)— 
Other rental revenue201 92 
Rental revenue$84,011 $154,765 

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 related accrued interest receivable), 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) is included in the following table (unaudited, in thousands):
December 31, 2020December 31, 2019
Total Investments:
Real estate investments, net of accumulated depreciation$4,851,302 $5,197,308 
Add back accumulated depreciation on real estate investments1,062,087 989,254 
Land held for development23,225 28,080 
Property under development57,630 36,756 
Mortgage notes and related accrued interest receivable365,628 357,391 
Investment in joint ventures28,208 34,317 
Intangible assets, gross (1)57,962 57,385 
Notes receivable and related accrued interest receivable, net (1)7,300 14,026 
Total investments$6,453,342 $6,714,517 
Total investments$6,453,342 $6,714,517 
Operating lease right-of-use assets163,766 211,187 
Cash and cash equivalents1,025,577 528,763 
Restricted cash2,433 2,677 
Accounts receivable116,193 86,858 
Less: accumulated depreciation on real estate investments(1,062,087)(989,254)
Less: accumulated amortization on intangible assets (1)(16,330)(12,693)
Prepaid expenses and other current assets (1)21,291 35,456 
Total assets$6,704,185 $6,577,511 
(1) Included in other assets in the accompanying consolidated balance sheet. Other assets include the following:
December 31, 2020December 31, 2019
Intangible assets, gross$57,962 $57,385 
Less: accumulated amortization on intangible assets(16,330)(12,693)
Notes receivable and related accrued interest receivable, net7,300 14,026 
Prepaid expenses and other current assets21,291 35,456 
Total other assets$70,223 $94,174 

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Impact of Recently Issued Accounting Standards
See Note 2 to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information on the impact of recently issued accounting standards on our business.

Inflation
Investments by EPR are financed with a combination of equity and debt. During inflationary periods, which are generally accompanied by rising interest rates, our ability to grow may be adversely affected because the yield on new investments may increase at a slower rate than new borrowing costs.
A substantial portion of our leases provide for base and participating rent features. In addition, certain of our mortgage notes receivable similarly provide for base and participating interest. To the extent inflation causes tenant or borrower revenues at our properties to increase, we would participate in those revenue increases through our right to receive variable rent and annual percentage rent and/or participating interest over the base amounts, as applicable.
Our leases and mortgage notes receivable also may provide for escalation in base rents or interest in the event of increases in the Consumer Price Index, with generally a limit of 2% per annum, or fixed periodic increases. During deflationary periods, the escalations in base rents or interest that are dependent on increases in the Consumer Price Index in our leases and mortgage notes receivable may be adversely affected.
Our leases are generally triple-net leases requiring the tenants to pay substantially all expenses associated with the operation of the properties, thereby minimizing our exposure to increases in costs and operating expenses resulting from inflation. A portion of our leases are non-triple-net leases. These non-triple net leases represent approximately 18% of our total real estate square footage. To the extent any of those leases contain fixed expense reimbursement provisions or limitations, we may be subject to increases in costs resulting from inflation that are not fully passed through to tenants.
Some of our investments have been structured using more traditional REIT lodging structures or are managed through a third-party manager. In the traditional REIT lodging structure, we hold qualified lodging facilities under the REIT and we separately hold the operations of the facilities in taxable REIT subsidiaries (TRSs) which are facilitated by management agreements with eligible independent contractors. Under this structure and when we manage properties through a third-party manager, we rely on the performance of our properties and the ability of the properties' managers to increase revenues to keep pace with inflation which may be limited by competitive pressures.
Additionally, our general and administrative costs may be subject to increases resulting from inflation.

Item 7A. 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 December 31, 2020, we had a $1.0 billion unsecured revolving credit facility with $590.0 million outstanding. Subsequent to December 31, 2020, we paid down $500.0 million on our revolving credit facility. We also had a $400.0 million unsecured term loan facility and a $25.0 million bond that bear interest at a floating rate but have been fixed through interest rate swap agreements.
As of December 31, 2020, 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 December 31, 2020, the joint venture had a secured mortgage loan with an outstanding balance of $85.0 million. The mortgage loan bears interest at an annual rate equal to the greater of 6.00% or LIBOR plus 3.75%. The joint venture has an interest rate cap agreement to limit the variable portion of the interest rate (LIBOR) on this note to 3.0% from March 28, 2019 to April 1, 2023. In response to the COVID-19 pandemic, on May 28, 2020, the joint venture was granted a three-month interest deferral, which is required to be paid on the maturity date of the loan and is not considered a troubled debt restructuring.

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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, particularly in light of the current economic uncertainty caused by the COVID-19 pandemic. 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.
The following table presents the principal amounts, weighted average interest rates, and other terms required by year of expected maturity to evaluate the expected cash flows and sensitivity to interest rate changes as of December 31 (including the impact of the interest rate swap agreements described below):
Expected Maturities (dollars in millions)
20212022202320242025ThereafterTotalEstimated
Fair Value
December 31, 2020:
Fixed rate debt$— $— $675.0 $148.0 $300.0 $2,017.0 $3,140.0 $3,114.8 
Average interest rate— %— %4.76 %5.60 %4.50 %4.55 %4.67 %4.64 %
Variable rate debt$— $590.0 $— $— $— $— $590.0 $590.0 
Average interest rate (as of December 31, 2020)— %2.13 %— %— %— %— %2.13 %2.13 %
20202021202220232024ThereafterTotalEstimated
Fair Value
December 31, 2019:
Fixed rate debt$— $— $— $675.0 $148.0 $2,317.0 $3,140.0 $3,295.5 
Average interest rate— %— %— %4.02 %4.35 %4.44 %4.34 %3.45 %
Variable rate debt$— $— $— $— $— $— $— $— 
Average interest rate (as of December 31, 2019)— %— %— %— %— %— %— %— %

The fair value of our debt as of December 31, 2020 and 2019 is estimated by discounting the future cash flows of each instrument using current market rates including current market spreads.
We are exposed to foreign currency risk against our functional currency, the U.S. dollar, on our four Canadian properties and the rents received from tenants of the properties are payable in CAD. In order to hedge our net investment in our four Canadian properties, we entered into two fixed-to-fixed cross-currency swaps, with a fixed notional value of $200.0 million CAD. These investments became effective on July 1, 2018, mature on July 1, 2023 and are designated as net investment hedges of our Canadian net investments. The net effect of this hedge is to lock in an exchange rate of $1.32 CAD per U.S. dollar on $200.0 million CAD of our foreign net investments. The cross-currency swaps also have a monthly settlement feature locked in at an exchange rate of $1.32 CAD per USD on $4.5 million of CAD annual cash flows, the net effect of which is an excluded component from the effectiveness testing of this hedge.
During the year ended December 31, 2020, we entered into three USD-CAD cross-currency swaps that were effective July 1, 2020 with a total fixed original notional value of $100.0 million CAD and $76.6 million USD. The net effect of these swaps is to lock in an exchange rate of $1.31 CAD per USD on approximately $7.2 million annual CAD denominated cash flows through June 2022.
For foreign currency derivatives designated as net investment hedges, the change in the fair value of the derivatives are reported in accumulated other comprehensive income (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 9 to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional information on our derivative financial instruments and hedging activities.

65



Item 8. Financial Statements and Supplementary Data
EPR Properties

Contents
 
Report of Independent Registered Public Accounting Firm
Audited Financial Statements
Consolidated Balance Sheets
Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Financial Statement Schedules
Schedule II – Valuation and Qualifying Accounts
Schedule III - Real Estate and Accumulated Depreciation
66


Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders
EPR Properties:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of EPR Properties and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of (loss) income and comprehensive (loss) income, changes in equity, and cash flows for each of the years in the three‑year period ended December 31, 2020, and the related notes and financial statement schedules II and III (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2020, based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Adoption of New Accounting Pronouncements
As discussed in Note 2 to the consolidated financial statements, the Company has changed its method for accounting for expected credit losses as of January 1, 2020 due to the adoption of Accounting Standards Update (ASU) No. 2016‑13, Measurement of Credit Losses on Financial Instruments (Topic 326).

As discussed in Note 15 to the consolidated financial statements, the Company has changed its method for accounting for its leases as of January 1, 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases.

Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
67



Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of indicators real estate investments may not be recoverable
As discussed in Notes 2 and 3 to the consolidated financial statements, the real estate investments, net balance as of December 31, 2020 was $4.9 billion. The Company reviews a real estate investment for impairment whenever events or changes in circumstances indicate that the carrying value of the real estate investment may not be recoverable.

We identified the evaluation of indicators real estate investments may not be recoverable as a critical audit matter. There is a high degree of subjective judgement in evaluating the events or changes in circumstances that may indicate the carrying value of real estate investments may not be recoverable. In particular, the judgments regarding the expected period the Company will hold the real estate investments and the impact of changes in market and tenant conditions on the determination of the recoverability of the real estate investments required a higher degree of auditor judgment.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the critical audit matter. This included controls related to the Company’s process to identify and evaluate events or changes in circumstances that may indicate the carrying amount of real estate investments may not be recoverable, including controls related to determining the period the Company will hold the real estate investments. We inquired of Company officials and inspected documents such as meeting minutes of the Board of Trustees to evaluate the likelihood that a real estate investment would be sold prior to the estimated holding period. We also performed independent evaluations, including examining current tenant information including status of accounts receivable and committee minutes related to lease negotiations for indications that the carrying value of the real estate investments may not be recoverable.

68


Impairment of real estate investments and right‑of‑use assets
As discussed in Notes 2, 3, 4 and 15 to the consolidated financial statements, the real estate investments, net balance and operating lease right‑of‑use assets balance as of December 31, 2020 was $4.9 billion and $163.8 million, respectively. The Company reviews a property for impairment whenever events or changes in circumstances indicate that the carrying value of the property may not be recoverable. The Company recognized impairment charges of $70.7 million on real estate investments and $15.0 million on the operating lease right‑of‑use assets, which are the amounts that the carrying value of the assets exceeded the estimated fair value.

We identified the assessment of the fair values of real estate investments and operating lease right‑of‑use assets based on recent independent appraisals used to determine the impairment charges as a critical audit matter. There is a high degree of subjective auditor judgment in evaluating the relevance of comparable land sales, market rents, capitalization rates, and discount rates used to determine the fair value of these assets.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the critical audit matter. This included controls related to the determination of comparable land sales, market rents, capitalization rates and discount rates. We involved valuation professionals with specialized skills and knowledge, who assisted in:

Comparing the Company’s estimated fair value of land to a range of independently developed estimates based on publicly available and comparable land sales.

Comparing the Company’s estimated assumptions of market rents, capitalization rates, and discount rates to a range of independently developed estimates based on publicly available industry data.

Collectability of lease receivables
As discussed in Notes 2 and 5 to the consolidated financial statements, the Company assesses the probability of collecting lease 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 tenants, current economic conditions, and changes in customer payment terms. Whenever the results of that assessment, events, or changes in circumstances indicate that it is no longer probable that the Company will be able to collect substantially all lease receivables or future lease payments, the Company records a charge to rental revenue for the outstanding receivable balance and suspends revenue recognition. The Company recorded charges to rental revenue of $65.1 million during the year ended December 31, 2020.

We identified the evaluation of the probability of collection of substantially all lease receivables as a critical audit matter. The assessment required subjective auditor judgment to evaluate the financial strength of tenants and the expected operating performance of the leased property.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s determination of lease receivable collectability. This included controls related to the evaluation of the financial strength of tenants, and the expected operating performance of the leased property. To assess the financial strength of tenants and the expected operating performance of the leased property, for certain tenants we evaluated (1) the aging of outstanding accounts receivable, (2) recent payment history, (3) certain publicly available information about the tenants, and (4) property financial information regarding the tenant.


/s/ KPMG LLP

We have served as the Company’s auditor since 2002.
Kansas City, Missouri
February 25, 2021
69



EPR PROPERTIES
Consolidated Balance Sheets
(Dollars in thousands except share data)
 December 31,
 20202019
Assets
Real estate investments, net of accumulated depreciation of $1,062,087 and $989,254 at December 31, 2020 and 2019, respectively$4,851,302 $5,197,308 
Land held for development23,225 28,080 
Property under development57,630 36,756 
Operating lease right-of-use assets163,766 211,187 
Mortgage notes and related accrued interest receivable365,628 357,391 
Investment in joint ventures28,208 34,317 
Cash and cash equivalents1,025,577 528,763 
Restricted cash2,433 2,677 
Accounts receivable116,193 86,858 
Other assets70,223 94,174 
Total assets$6,704,185 $6,577,511 
Liabilities and Equity
Liabilities:
Accounts payable and accrued liabilities$105,379 $122,939 
Operating lease liabilities202,223 235,650 
Common dividends payable36 29,424 
Preferred dividends payable6,034 6,034 
Unearned rents and interest65,485 74,829 
Debt3,694,443 3,102,830 
Total liabilities4,073,600 3,571,706 
Equity:
Common Shares, $0.01 par value; 100,000,000 shares authorized; and 81,917,876 and 81,588,489 shares issued at December 31, 2020 and 2019, respectively819 816 
Preferred Shares, $0.01 par value; 25,000,000 shares authorized:
5,394,050 Series C convertible shares issued at December 31, 2020 and 2019; liquidation preference of $134,851,25054 54 
3,447,381 Series E convertible shares issued at December 31, 2020 and 2019; liquidation preference of $86,184,52534 34 
6,000,000 Series G shares issued at December 31, 2020 and 2019; liquidation preference of $150,000,00060 60 
Additional paid-in-capital3,857,632 3,834,858 
Treasury shares at cost: 7,315,087 and 3,125,569 common shares at December 31, 2020 and 2019, respectively(261,238)(147,435)
Accumulated other comprehensive income216 7,275 
Distributions in excess of net income(966,992)(689,857)
Total equity$2,630,585 $3,005,805 
Total liabilities and equity$6,704,185 $6,577,511 
See accompanying notes to consolidated financial statements.
70



EPR PROPERTIES
Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income
(Dollars in thousands except per share data)
 Year Ended December 31,
 202020192018
Rental revenue$372,176 $593,022 $509,086 
Other income9,139 25,920 2,076 
Mortgage and other financing income33,346 33,027 128,759 
Total revenue414,661 651,969 639,921 
Property operating expense58,587 60,739 29,654 
Other expense16,474 29,667 443 
General and administrative expense42,596 46,371 48,889 
Severance expense2,868 2,364 5,938 
Litigation settlement expense2,090 
Costs associated with loan refinancing or payoff1,632 38,269 31,958 
Interest expense, net157,675 142,002 135,870 
Transaction costs5,436 23,789 3,698 
Credit loss expense30,695 
Impairment charges85,657 2,206 27,283 
Depreciation and amortization170,333 158,834 138,395 
(Loss) income before equity in loss from joint ventures, other items and discontinued operations(157,292)147,728 215,703 
Equity in loss from joint ventures(4,552)(381)(22)
Impairment charges on joint ventures(3,247)
Gain on sale of real estate50,119 4,174 3,037 
Gain on sale of investment in a direct financing lease5,514 
(Loss) income before income taxes(114,972)151,521 224,232 
Income tax (expense) benefit(16,756)3,035 (2,285)
(Loss) income from continuing operations$(131,728)$154,556 $221,947 
Discontinued operations:
Income from discontinued operations before other items37,241 45,036 
Impairment on public charter school portfolio sale(21,433)
Gain on sale of real estate from discontinued operations31,879 
Income from discontinued operations47,687 45,036 
Net (loss) income(131,728)202,243 266,983 
Preferred dividend requirements(24,136)(24,136)(24,142)
Net (loss) income available to common shareholders of EPR Properties$(155,864)$178,107 $242,841 
Net (loss) income available to common shareholders of EPR Properties per share:
Continuing operations$(2.05)$1.70 $2.66 
Discontinued operations0.62 0.61 
Basic$(2.05)$2.32 $3.27 
Continuing operations$(2.05)$1.70 $2.66 
Discontinued operations0.62 0.61 
Diluted$(2.05)$2.32 $3.27 
Shares used for computation (in thousands):
Basic75,994 76,746 74,292 
Diluted75,994 76,782 74,337 
Other comprehensive (loss) income:
Net (loss) income$(131,728)$202,243 $266,983 
Foreign currency translation adjustment3,494 9,253 (16,177)
Change in unrealized (loss) gain on derivatives(10,553)(14,063)15,779 
Comprehensive (loss) income attributable to EPR Properties$(138,787)$197,433 $266,585 
See accompanying notes to consolidated financial statements.
71



EPR PROPERTIES
Consolidated Statements of Changes in Equity
Years Ended December 31, 2020, 2019 and 2018
(Dollars in thousands)
 EPR Properties Shareholders’ Equity 
 Common StockPreferred StockAdditional
paid-in capital
Treasury
shares
Accumulated
other
comprehensive
income (loss)
Distributions
in excess of
net income (loss)
Total
 SharesParSharesPar
Balance at December 31, 201776,858,632 $769 14,848,165 $148 $3,478,986 $(121,591)$12,483 $(443,470)$2,927,325 
Restricted share units issued to Trustees23,571 — — — — — — — 
Issuance of nonvested shares, net of cancellations295,202 — — 4,588 (617)— — 3,974 
Purchase of common shares for vesting— — — — — (7,156)— — (7,156)
Share-based compensation expense— — — — 15,111 — — — 15,111 
Share-based compensation included in severance expense— — — — 3,218 — — — 3,218 
Foreign currency translation adjustment— — — — — — (16,177)— (16,177)
Change in unrealized gain on derivatives— — — — — — 15,779 — 15,779 
Net income— — — — — — — 266,983 266,983 
Issuances of common shares20,553 — — 1,286 — — — 1,286 
Conversion of Series E Convertible Preferred shares to common shares800 — (1,734)— — — — 
Conversion of Series C Convertible Preferred shares to common shares1,964 — (5,000)— — — — 
Stock option exercises, net25,721 — — 1,305 (1,364)— — (59)
Dividends to common shareholders ($4.32 per share)— — — — — — — (321,119)(321,119)
Dividends to Series C preferred shareholders ($1.4375 per share)— — — — — — — (7,760)(7,760)
Dividends to Series E preferred shareholders ($2.25 per share)— — — — — — — (7,757)(7,757)
Dividends to Series G preferred shareholders ($1.4375 per share)— — — — — — — (8,625)(8,625)
Balance at December 31, 201877,226,443 $772 14,841,431 $148 $3,504,494 $(130,728)$12,085 $(521,748)$2,865,023 
Restricted share units issued to Trustees27,392 — — — — — — — 
Issuance of nonvested shares, net of cancellations208,755 — — 4,926 (498)— — 4,430 
Purchase of common shares for vesting— — — — — (9,691)— — (9,691)
Share-based compensation expense— — — — 13,180 — — — 13,180 
Share-based compensation included in severance expense— — — — 580 — — — 580 
Foreign currency translation adjustment— — — — — — 9,253 — 9,253 
Change in unrealized loss on derivatives— — — — — — (14,063)— (14,063)
Net income— — — — — — — 202,243 202,243 
Issuances of common shares4,007,113 41 — — 305,893 — — — 305,934 
Stock option exercises, net118,786 — — 5,785 (6,518)— — (732)
Dividends to common shareholders ($4.50 per share)— — — — — — — (346,216)(346,216)
Dividends to Series C preferred shareholders ($1.4375 per share)— — — — — — — (7,756)(7,756)
Dividends to Series E preferred shareholders ($2.25 per share)— — — — — — — (7,756)(7,756)
Dividends to Series G preferred shareholders ($1.4375 per share)— — — — — — — (8,624)(8,624)
Balance at December 31, 201981,588,489 $816 14,841,431 $148 $3,834,858 $(147,435)$7,275 $(689,857)$3,005,805 
Continued on next page.
72


EPR PROPERTIES
Consolidated Statements of Changes in Equity
Years Ended December 31, 2020, 2019 and 2018
(Dollars in thousands) (continued)
 EPR Properties Shareholders’ Equity 
 Common StockPreferred StockAdditional
paid-in capital
Treasury
shares
Accumulated
other
comprehensive
income (loss)
Distributions
in excess of
net income (loss)
Total
 SharesParSharesPar
Continued from previous page.
Balance at December 31, 201981,588,489 $816 14,841,431 $148 $3,834,858 $(147,435)$7,275 $(689,857)$3,005,805 
Credit loss expense for implementation of Current Expected Credit Loss standard— — — — — — — (2,163)(2,163)
Restricted share units issued to Trustees74,767 — — — — — — 
Issuance of nonvested shares and performance shares, net of cancellations217,034 — — 6,505 (359)— — 6,148 
Purchase of common shares for vesting— — — — — (7,387)— — (7,387)
Share-based compensation expense— — — — 13,819 — — — 13,819 
Share-based compensation included in severance expense— — — — 1,258 — — — 1,258 
Foreign currency translation adjustment— — — — — — 3,494 — 3,494 
Change in unrealized loss on derivatives— — — — — — (10,553)— (10,553)
Net loss— — — — — — — (131,728)(131,728)
Issuances of common shares36,176 — — 1,129 — — — 1,129 
Repurchase of common shares— — — — — (105,994)— — (105,994)
Stock option exercises, net1,410 — — 63 (63)— — 
Dividend equivalents accrued on performance shares— — — — — — — (50)(50)
Dividends to common shareholders ($1.515 per share)— — — — — — — (119,058)(119,058)
Dividends to Series C preferred shareholders ($1.4375 per share)— — — — — — — (7,756)(7,756)
Dividends to Series E preferred shareholders ($2.25 per share)— — — — — — — (7,756)(7,756)
Dividends to Series G preferred shareholders ($1.4375 per share)— — — — — — — (8,624)(8,624)
Balance at December 31, 202081,917,876 $819 14,841,431 $148 $3,857,632 $(261,238)$216 $(966,992)$2,630,585 

See accompanying notes to consolidated financial statements.
73



EPR PROPERTIES
Consolidated Statements of Cash Flows
(Dollars in thousands)

 Year Ended December 31,
 202020192018
Operating activities:
Net (loss) income$(131,728)$202,243 $266,983 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Impairment charges85,657 23,639 27,283 
Impairment charges on joint ventures3,247 
Gain on sale of real estate(50,119)(36,053)(3,037)
Gain on insurance recovery(809)
Deferred income tax expense (benefit), net15,246 (4,115)573 
Credit loss expense30,695 
Gain on sale of investment in a direct financing lease(5,514)
Costs associated with loan refinancing or payoff1,632 38,450 31,958 
Equity in loss from joint ventures4,552 381 22 
Distributions from joint ventures112 567 
Depreciation and amortization170,333 171,763 153,430 
Amortization of deferred financing costs6,606 6,192 5,797 
Amortization of above/below market leases and tenant allowances, net(480)(343)(581)
Share-based compensation expense to management and Trustees13,819 13,180 15,111 
Share-based compensation expense included in severance expense1,258 580 3,218 
Change in assets and liabilities:
Operating lease assets and liabilities344 1,194 
Mortgage notes accrued interest receivable(7,576)(381)(517)
Accounts receivable(47,383)(1,385)(22,300)
Direct financing lease receivable(186)(563)
Other assets(2,698)(1,301)(1,055)
Accounts payable and accrued liabilities(16,128)27,540 4,979 
Unearned rents and interest(11,195)(1,980)7,974 
Net cash provided by operating activities65,273 439,530 484,328 
Investing activities:
Acquisition of and investments in real estate and other assets(38,714)(500,629)(187,460)
Proceeds from sale of real estate227,742 216,020 22,134 
Proceeds from sale of public charter school portfolio449,555 
Investment in unconsolidated joint ventures(1,690)(325)(29,473)
Proceeds from settlement of derivative30,796 
Investment in mortgage notes receivable(8,141)(142,456)(36,105)
Proceeds from mortgage note receivable paydown481 217,459 335,168 
Investment in promissory notes receivable(6,134)(12,271)(7,863)
Proceeds from promissory note receivable paydown103 3,738 7,500 
Proceeds from insurance recovery809 
Proceeds from sale of investment in direct financing leases, net43,447 
Additions to properties under development(40,470)(134,586)(274,956)
Net cash provided (used) by investing activities133,986 96,505 (96,812)
Financing activities:
Proceeds from long-term debt facilities and senior unsecured notes750,000 962,000 908,000 
Principal payments on debt(160,000)(866,735)(949,684)
Deferred financing fees paid(6,330)(9,386)(8,642)
Costs associated with loan refinancing or payoff (cash portion)(1,632)(36,918)(28,650)
Net proceeds from issuance of common shares972 305,556 956 
Impact of stock option exercises, net(732)(62)
Purchase of common shares for treasury for vesting(7,387)(9,691)(7,156)
Purchase of common shares under share repurchase program(105,994)
Dividends paid to shareholders(172,460)(367,317)(342,315)
Net cash provided (used) by financing activities297,169 (23,223)(427,553)
Effect of exchange rate changes on cash142 121 (442)
Net change in cash and cash equivalents and restricted cash496,570 512,933 (40,479)
Cash and cash equivalents and restricted cash at beginning of the year531,440 18,507 58,986 
Cash and cash equivalents and restricted cash at end of the year$1,028,010 $531,440 $18,507 
Supplemental information continued on next page.
74


EPR PROPERTIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
Continued from previous page.
 Year Ended December 31,
 202020192018
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents at beginning of the year$528,763 $5,872 $41,917 
Restricted cash at beginning of the year2,677 12,635 17,069 
Cash and cash equivalents and restricted cash at beginning of the year$531,440 $18,507 $58,986 
Cash and cash equivalents at end of the year$1,025,577 $528,763 $5,872 
Restricted cash at end of the year2,433 2,677 12,635 
Cash and cash equivalents and restricted cash at end of the year$1,028,010 $531,440 $18,507 
Supplemental schedule of non-cash activity:
Transfer of property under development to real estate investments$20,657 $354,568 $228,572 
Issuance of nonvested shares and restricted share units at fair value, including nonvested shares issued for payment of bonuses$20,062 $17,590 $18,252 
Credit loss expense related to adoption of ASC Topic 326$2,163 $$
Conversion or reclassification of mortgage notes receivable to real estate investments$$$155,185 
Mortgage note received for sale of real estate investments$$27,423 $
Amounts related to adoption of ASC Topic 842:
Operating lease right-of-use assets$$229,620 $
Operating lease liabilities$$253,486 $
Sub-lessor straight-line receivable$$24,454 $
Acquisition of real estate in exchange for assumption of debt at fair value$$14,000 $
Assumption of debt$$18,585 $
Supplemental disclosure of cash flow information:
Cash paid during the year for interest$152,393 $143,530 $145,559 
Cash paid during the year for income taxes$1,507 $1,842 $1,363 
Interest cost capitalized$1,233 $5,326 $9,903 
Change in accrued capital expenditures$(12,376)$(35,155)$32,993 
See accompanying notes to consolidated financial statements.
75


EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018

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 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 and Canada.

2. Summary of Significant Accounting Policies

Principles of Consolidation
The consolidated financial statements include the accounts of EPR Properties and its subsidiaries, all of which are wholly owned.

Risks and Uncertainties
On March 11, 2020, the World Health Organization declared a novel strain of coronavirus (COVID-19) a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on the Company’s business is highly uncertain and difficult to predict, as information is rapidly evolving. The outbreak of COVID-19 has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving and many jurisdictions within the United States and abroad reacted by instituting quarantines, mandating business and school closures and restricting travel. As a result, the COVID-19 pandemic has severely impacted experiential real estate properties, given that such properties involve congregate social activity and discretionary consumer spending. Substantially all the Company's non-theatre locations and many of the Company's theatre locations have re-opened as of December 31, 2020. However, certain theatre locations remain closed due to local restrictions or operator decision to close as a result of the impact of the COVID-19 pandemic, specifically the decision by many movie studios to delay the release of blockbuster movies in hopes that larger audiences will be available as additional markets open. The severity of the 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 the pandemic, the actions taken to contain the outbreak or mitigate its impact, the development and distribution of vaccines and the efficacy of those vaccines, the public’s confidence in the health and safety measures implemented by the Company's tenants and borrowers, and the direct and indirect economic effects of the outbreak and containment measures, all of which are uncertain and cannot be predicted. During 2020, the COVID-19 pandemic 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’s 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. The Company considered the impact of the COVID-19 pandemic on the assumptions and estimates used in determining the Company’s financial condition and results of operations for the year ended December 31, 2020. The following were adverse impacts to its financial statements and business during the year ended December 31, 2020:

The Company wrote-off receivables from tenants and straight-line rent receivables totaling $65.1 million directly to rental revenue in the accompanying consolidated statements of (loss) income and comprehensive (loss) income upon determination that the collectibility of these receivables or future lease payments from these tenants were no longer probable. Additionally, the Company determined that future rental revenue related to these tenants, including American-Multi Cinema, Inc. (AMC) and Regal Cinemas (Regal), a subsidiary of Cineworld Group, will be recognized on a cash basis. The straight line rent receivable
76


EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
represented $38.0 million of this write-off and was comprised of $26.5 million of straight-line rent receivable and $11.5 million of sub-lessor ground lease straight-line rent receivable.
The Company reduced rental revenue by $13.6 million due to rent abatements.
The Company deferred approximately $76.0 million of amounts due from tenants and $3.4 million due from borrowers that were booked as receivables. Additionally, the Company has amounts due from tenants that were not booked as receivables as 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 tenants and will be recognized as revenue when received. The repayment terms for all of these deferments vary by tenant or borrower.
The Company recognized $85.7 million in impairment charges during the year ended December 31, 2020, which was comprised of $70.7 million of impairments of real estate investments, and $15.0 million of impairments of operating lease right-of-use assets. The Company also recognized impairment charges on joint ventures of $3.2 million related to its equity investments in 3 theatre projects located in China.
The Company increased its expected credit losses by $30.7 million from its implementation estimate of $2.2 million. This increase was primarily due to credit loss expense related to fully reserving the outstanding principal balance of $12.6 million and unfunded commitment to fund $12.9 million, totaling $25.5 million, related to notes receivable from 1 borrower, as a result of recent changes in the borrower's financial status due to the impact of the COVID-19 pandemic. The remaining increase was due to economic uncertainty and the rapidly changing environment surrounding the pandemic.
The Company recognized a full valuation allowance of $18.0 million during the third quarter 2020 on the Company's net deferred tax assets related to the Company's taxable REIT subsidiary (TRS) and Canadian tax paying entity as a result of the uncertainty of realization caused by the impact of the COVID-19 pandemic. At December 31, 2020, the Company had a valuation allowance totaling $24.9 million on its net deferred tax assets.
On March 20, 2020, the Company borrowed $750.0 million under its unsecured revolving credit facility as a precautionary measure to increase the Company's cash position and preserve financial flexibility given the global uncertainty caused by the COVID-19 pandemic. On December 30, 2020, the Company paid down its revolving credit facility by $160.0 million, following the sale of 6 private schools and 4 early childhood education centers. Subsequent to year-end, the Company paid down an additional $500.0 million on its revolving credit facility.
The Company amended the agreement which governs its unsecured revolving credit facility and its unsecured term loan facility (Consolidated Credit Agreement) and the agreement which governs its private placement notes (Note Purchase Agreement). The amendments modified certain provisions and waived the Company's obligation to comply with certain covenants under these debt agreements during the Covenant Relief Period in light of the uncertainty related to impacts of the COVID-19 pandemic on the Company and its tenants and borrowers. The Company pays higher interest costs during the Covenant Relief Period. The amendments to the Consolidated Credit Agreement and Note Purchase Agreement also impose additional restrictions on the Company during the Covenant Relief Period, including limitations on making investments, incurring indebtedness, making capital expenditures, paying dividends or making other distributions, repurchasing the Company's shares, voluntarily prepaying certain indebtedness, encumbering certain assets and maintaining a minimum liquidity amount, in each case subject to certain exceptions. See Note 8 for additional details. The term "Covenant Relief Period," as used in these notes to consolidated financial statements, generally means the period of time beginning on June 29, 2020 and ending on (i) December 31, 2021, in the case of the Company's Consolidated Credit Agreement, or (ii) October 1, 2021 (subject to extension to January 1, 2022 at the Company's election, subject to certain conditions), in the case of the Company's Note Purchase Agreement governing its private placement notes. The Company has the right under certain circumstances to terminate the Covenant Relief Period earlier.
In connection with the loan amendments discussed above, certain of the Company's key subsidiaries guaranteed the Company's obligations based on the Company's unsecured debt ratings. If the Company's unsecured debt rating is further downgraded by Moody's, it will be required to pledge the equity interest in certain subsidiary guarantors to secure its obligations under its unsecured credit facilities and private placement notes. See Note 8 for additional details.

77


EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
On June 29, 2020, the effective date of the loan amendments discussed above, the Company suspended its share repurchase plan. Prior to the effective date, during the year ended December 31, 2020, the Company repurchased 4,066,716 common shares under the share repurchase program for approximately $106.0 million. The repurchases were made under a Rule 10b5-1 trading plan.

The monthly cash dividends to common shareholders were suspended following the common share dividend paid on May 15, 2020 to shareholders of record as of April 30, 2020. The suspension of the monthly cash dividend to common shareholders will continue through the Covenant Relief Period, except as may be necessary to maintain REIT status and to not owe income tax.

On July 31, 2020, the Company entered into a Forbearance Agreement (the Forbearance Agreement), a Master Lease Agreement (the Master Lease) and seven amended lease agreements (the Transitional Leases and collectively with the Master Lease, the Leases) with AMC, its affiliate tenants of the Company (AMC and such affiliates, collectively, AMC Tenant), and AMC Entertainment Holdings, Inc. (Guarantor), relating to all 53 properties leased to AMC Tenant (the Leased Properties) on the date the agreement was executed. These agreements restructured the then-existing lease terms for the Leased Properties in light of the continuing impact of the COVID-19 pandemic on AMC Tenant's operations. Effective July 1, 2020, the Leased Properties are leased to AMC Tenant pursuant to the following leases:

Master Lease relating to 46 Leased Properties (the Master Lease Properties); and
NaN Transitional Leases relating to 7 Leased Properties (the Transitional Properties). These leases were subsequently terminated by the Company during 2020.

In addition, AMC Tenant and the Company entered into the following related agreements:

Security Agreement granting to the Company a security interest subordinated to AMC's secured credit agreements and indentures in all of AMC Tenant’s property located at the Leased Properties to secure AMC Tenant’s obligations to the Company under the Forbearance Agreement and the Leases;
Guaranty providing a guaranty by Guarantor of AMC Tenant’s obligations to the Company under the Forbearance Agreement and the Leases; and
Capital Improvements Agreement providing a financial mechanism for the Company to provide AMC Tenant with up to $35 million of funds to complete improvements to the Master Lease Properties in exchange for increased annual fixed rent.

The prior leases for the 46 Master Lease Properties were replaced with a single Master Lease. The Company agreed to reduce total annual fixed rent on the 46 Master Lease Properties by approximately $19.4 million to approximately $87.8 million (including approximately $6.8 million of ground rent and the repayment of deferral amounts for the months of April, May and June 2020 which the Company had agreed to defer and amortize as part of fixed rent over the first 14 years of the Master Lease term).

The Master Lease Properties have been divided into four tranches, with the initial term of each tranche expiring on a different date: June 30, 2034, June 30, 2035, June 30, 2036 and June 30, 2037. The AMC Tenant may exercise up to 3 5-year extensions for each tranche. If AMC Tenant elects not to exercise an extension option with respect to a tranche, fixed rent will be reduced by the fair market rental value of Master Lease Properties included in such tranche at that time, determined in accordance with the Master Lease. Upon the expiration of the initial term of each tranche or expiration of any extension option of each tranche and the election by AMC Tenant to further extend the term of such tranche, AMC Tenant may elect to remove up to 2 Master Lease Properties included in the tranche, which will result in a reduction in the annual fixed rent equal to the fair market rental value of such removed Master Lease Properties at that time, determined in accordance with the Master Lease. AMC Tenant may not remove more than 10 Master Lease Properties in total and not more than 3 Master Lease Properties per tranche during the entirety of the Master Lease term.

78


EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
Pursuant to the Leases and the Forbearance Agreement, commencing on July 1, 2020 and continuing through December 31, 2020, in lieu of monthly fixed rent AMC Tenant agreed to pay percentage rent of 15% of total gross receipts during such month, not to exceed the deferred monthly fixed rent for the Leased Properties. The difference between the scheduled monthly fixed rent and the percentage rent actually paid to the Company for the Master Lease became additional deferred rent that, beginning in February 2021, will be added to fixed cash rent and amortized over the remaining portion of the first 14 years of the term of the Master Lease and beginning January 2021 will be rent due related to the Transitional Leases amortized over the prior lease terms. Accordingly, the new annual contractual rent under the Master Lease will increase from $87.8 million to $90.7 million by February 2021 (including approximately $4.9 million of ground rent).

The Leases are triple-net leases requiring AMC Tenant to be responsible at all times for taxes, assessments, maintenance and operating costs, common area charges, association fees, ground rent, insurance premiums, utility charges and similar pass-through charges. Fixed rent of the Master Lease (excluding the portion attributable to deferred rent) will increase by 7.5% every 5 years during the term and any extensions.

Each lease for the 7 Transitional Properties was amended by the parties. The Company agreed to reduce the aggregate annual fixed rent on the Transitional Properties by approximately $6.2 million to approximately $8.1 million (including approximately $1.2 million of ground rent and the repayment of deferral amounts for the months of April, May and June 2020 which the Company had agreed to defer and amortize as part of fixed rent over the remaining terms of the new leases).

The Company had the right to terminate each Transitional Lease by giving the AMC Tenant 90 days' prior notice of termination. Upon termination of a Transitional Lease by the Company, AMC Tenant agreed to (1) cooperate with the Company in transitioning the applicable Transitional Property to a new operator to ensure seamless transfer of management and re-branding, and (2) transfer certain property, including fixtures, furnishings and equipment, located or used at the applicable Transitional Property in exchange for a credit to the unpaid deferred amount due under the Transitional Lease. Prior to December 31, 2020, the Company terminated all Transitional Leases with AMC. The total amount deferred under each Transitional Lease prior to the Company terminating these agreements is still due by AMC and is scheduled to be paid over what would have been the remaining terms of the related property leases.

In March 2020, the Company's employees transitioned to a fully remote work force to protect the safety and well-being of the Company's personnel. The Company's prior investments in technology, business continuity planning and cyber-security protocols have enabled the Company to continue working with limited operational impacts.

Variable Interest Entities
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 significant influence over the entity with respect to its operations and major decisions.

The Company’s variable interest in VIEs currently are in the form of equity ownership and loans provided by the Company to a VIE or other partner. 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 December 31, 2020 and 2019, the Company does not have any investments in consolidated VIEs.

79


EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
Use of Estimates
Management of the Company has made estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP). Actual results could differ from those estimates.

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.

The Company evaluates the held-for-sale classification of its real estate as of the end of each quarter. Assets that are classified as held for sale are recorded at the lower of their carrying amount or fair value less costs to sell. Assets are generally classified as held for sale once management has initiated an active program to market them for sale and it is probable the assets will be sold within one year. On occasion, the Company will receive unsolicited offers from third parties to buy individual Company properties. Under these circumstances, the Company will classify the properties as held for sale when a sales contract 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 and included in transaction costs in the accompanying consolidated statements of (loss) income and comprehensive (loss) income.

In addition to acquisition-related costs in connection with business combinations, transaction costs include costs associated with terminated transactions, pre-opening costs and certain leasing and tenant transition costs. Transaction costs expensed totaled $5.4 million, $23.8 million and $3.7 million for the years ended December 31, 2020, 2019 and 2018, respectively.

For real estate acquisitions (asset acquisitions or business combinations), the fair value (or relative fair value in an asset acquisition) of the tangible assets is determined by valuing the property using recent independent appraisals or methods similar to those used by independent appraisers. Land is valued using the sales comparison approach which uses available market data from recent comparable land sales as an input to estimate the fair value. Site improvements and tenant improvements are valued using the cost approach which uses replacement cost data obtained from industry recognized guides less depreciation as an input to estimate the fair value. The building is valued either using the cost approach described above or a combination of the cost and the income approach. The
80


EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
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.

Intangibles
The fair value of acquired in-place leases also includes management’s estimate, on a lease-by-lease basis, of the present value of the following amounts: (i) the value associated with avoiding the cost of originating the acquired in-place leases (i.e. the market cost to execute the leases, including leasing commissions, legal and other related costs); (ii) the value associated with lost revenue related to tenant reimbursable operating costs estimated to be incurred during the assumed re-leasing period, (i.e. real estate taxes, insurance and other operating expenses); (iii) the value associated with lost rental revenue from existing leases during the assumed re-leasing period; and (iv) the value associated with avoided tenant improvement costs or other inducements to secure a tenant lease. These values are amortized over the lease term of the respective leases.
 
In determining the fair value of acquired above and below-market leases, the Company considers many factors. On a lease-by-lease basis, management considers the present value of the difference between the contractual amounts to be paid pursuant to the leases and management’s estimate of fair market lease rates. For above-market leases and below-market leases, management considers such differences over the lease terms. The capitalized above-market lease values are amortized as a reduction of rental income over the lease terms of the respective leases. The capitalized below-market lease values are amortized as an increase to rental income over the lease terms of the respective leases. The lease term includes the minimum base term plus any extension options that are reasonably certain to be exercised. Management considers several factors in determining the discount rate used in the present value calculations, including the credit risks associated with the respective tenants.

If debt is assumed in the acquisition, the determination of whether it is above or below-market is based upon a comparison of similar financing terms for similar real estate investments at the time of the acquisition.

In determining the fair value of tradenames, the Company historically uses the relief from royalty method, which estimates the fair value of hypothetical royalty income that could be generated if the intangible asset was licensed from an independent third-party.

In determining the fair value of a contract intangible, the Company considers the present value of the difference between the estimated "with" and "without" scenarios. The "with" scenario presents the contract in place and the "without" scenario incorporates the potential profits that may be lost over the period without the contract in place. The capitalized contract value is amortized over the estimated useful life of the underlying asset.

The excess of the cost of an acquired business (in a business combination) over the net of the amounts assigned to assets acquired (including identified intangible assets) and liabilities assumed is recorded as goodwill. Goodwill has an indeterminate life and is not amortized, but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired.
Management of the Company reviews the carrying value of intangible assets for impairment on an annual basis.
Intangible assets and liabilities (included in Other assets and Accounts payable and accrued liabilities in the accompanying consolidated balance sheets) consist of the following at December 31 (in thousands):
81


EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
20202019
Assets:
In-place leases, net of accumulated amortization of $13.9 million and $10.8 million, respectively$21,684 $24,528 
Above-market lease, net of accumulated amortization of $1.2 million and $1.1 million, respectively354 71 
Tradenames, net of accumulated amortization of $317 thousand and $184 thousand, respectively (1)8,847 8,980 
Contract value, net of accumulated amortization of $914 thousand and $548 thousand, respectively10,054 10,420 
Goodwill693 693 
Total intangible assets, net$41,632 $44,692 
Liabilities:
Below-market lease, net of accumulated amortization of $1.5 million and $1.1 million, respectively$8,397 $8,934 
(1) At December 31, 2020 and 2019, $5.4 million in tradenames had indefinite lives and were not amortized.
Aggregate lease intangible amortization included in expense was $5.6 million, $3.7 million and $2.9 million for the years ended December 31, 2020, 2019 and 2018, respectively. The net amount amortized as an increase to rental revenue for capitalized above and below-market lease intangibles was $0.5 million, $0.4 million and $0.6 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Future amortization of in-place leases, net, above-market lease, net, tradenames, net, contract value, net and below-market lease, net at December 31, 2020 is as follows (in thousands):
In place leasesTradenames (1)Contract ValueAbove-market leaseBelow-market lease
Year:
2021$3,283 $133 $365 $51 $(456)
20222,658 133 365 46 (437)
20232,654 133 365 46 (415)
20242,095 133 365 46 (396)
20252,085 133 365 46 (387)
Thereafter8,909 2,827 8,229 119 (6,306)
Total$21,684 $3,492 $10,054 $354 $(8,397)
Weighted average amortization period (years)11.227.227.57.530.1
(1) Excludes $5.4 million in tradenames with indefinite lives.

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 $35.6 million and $37.2 million as of December 31, 2020 and 2019, respectively, are shown as a reduction of debt. The deferred financing costs of $4.8 million and $3.5 million as of December 31, 2020 and 2019, respectively, related to the unsecured revolving credit facility are included in other assets.

Reportable Segments
The Company has 2 reportable operating segments: Experiential and Education. The Experiential segment includes the following property types: theatres, eat & play (including seven theatres located in entertainment districts), attractions, ski, experiential lodging, gaming, cultural and fitness & wellness. The Education segment
82


EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
includes the following property types: early childhood education centers and private schools. See Note 19 for financial information related to these reportable segments.

Rental Revenue
The Company leases real estate to its tenants primarily under leases that are predominately 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 the lease, which are not included in the minimum lease terms unless it 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 year ended December 31, 2020, the Company recognized straight-line write-offs totaling $38.0 million, which were comprised of $26.5 million of straight-line accounts receivable and $11.5 million of sub-lessor ground lease straight-line accounts receivable. Straight-line rental revenue, net of write-offs, was a reduction to total rental revenue of $24.5 million for the year ended December 31, 2020. For the year ended December 31, 2019, the Company recognized straight-line write-offs of $1.4 million (of which $1.2 million has been classified within discontinued operations). There were no straight-line write-offs recognized during the year ended December 31, 2018. For the years ended December 31, 2019 and 2018, the Company recognized straight-line rental revenue, net of write-offs of $13.6 million (of which $3.0 million has been classified within discontinued operations) and $10.2 million (of which $5.5 million has been classified within discontinued operations), respectively.

Substantially all the Company's customers' operations were temporarily closed for a portion of the year ended December 31, 2020, as a result of the COVID-19 pandemic. Many of the Company's non-theatre locations have re-opened. However, certain of the Company's theatre locations remain closed due to local restrictions or operator decision to close as a result of the impact of the COVID-19 pandemic, specifically the decision by many movie studios to delay the release of films. In response, the Company has agreed to defer rent for a substantial portion of its customers. On April 10, 2020, the FASB issued a Staff Q&A on Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic. In reliance upon the FASB Staff Q&A, the Company has not treated qualifying deferrals or rent concessions during the period effected 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 it 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 directly 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 payments made by the lessees 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 year ended December 31, 2020 and 2019, the Company recognized $2.2 million and $6.9 million, respectively, related to the gross-up of these reimbursed expenses which are included in rental revenue and property operating expenses.

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
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EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
combine these non-lease components with the lease components in rental revenue. For the years ended December 31, 2020, 2019 and 2018, the non-lease components included in rental revenue totaled $12.9 million, $16.0 million and $15.3 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 $8.6 million, $15.0 million and $10.7 million for the years ended December 31, 2020, 2019 and 2018, respectively. Furthermore, due to the impact of the COVID-19 pandemic, certain of the Company's tenants paid a portion of base rent in 2020 based on a percentage of gross revenue. This variable rent totaled $5.2 million for the year ended December 31, 2020.

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. Certain reclassifications have been made to prior period amounts to conform to the current period presentation for assets that qualify for presentation as discontinued operations. See Note 17 for further details.

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 based on the stated interest rate over the estimated life of the note. Premiums and discounts are amortized or accreted into income over the estimated life of the note using the effective interest method.

The Company adopted Accounting Standards Update (ASU) No. 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326) effective January 1, 2020, which requires allowance for credit losses to be recorded to reflect that all mortgage notes and notes receivable have some inherent risk of loss regardless of credit quality, collateral, or other mitigating factors. The Company adopted the standard on the effective date and used the effective date as the date of initial application. Accordingly, comparative periods have not been recast, and required disclosures will not be provided for dates and periods prior to January 1, 2020. On the effective date, the Company recognized credit loss expense through retained earnings and the corresponding allowance for credit losses of approximately $2.2 million, which was comprised of $2.1 million related to mortgage notes receivable and $0.1 million related to notes receivable (which are presented within other assets in the accompanying consolidated balance sheet). 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.
84


EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
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 year ended December 31, 2020, the Company wrote off approximately $0.3 million of accrued interest income against interest income related to 1 note receivable. As of December 31, 2020, the Company believes that all outstanding accrued interest is collectible.

In the event the Company has a past due mortgage note or note receivable and the Company determines it is collateral dependent, the Company measures expected credit losses based on the fair value of the collateral. The Company evaluates the collectability of both interest and principal for each of its mortgage notes and notes receivable on a quarterly basis to determine if foreclosure is probable. As of December 31, 2020, the Company does not have any mortgage notes or notes receivable with past due principal balances.

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 triggering events occur as provided by the mortgage agreement. Mortgage and other financing income included participating interest income of $0.6 million for the year ended December 31, 2019. NaN participating interest income was recognized for the years ended December 31, 2020 and 2018. In addition, for the years ended December 31, 2019 and 2018, mortgage and other financing income included $2.7 million (of which $1.8 million has been classified in discontinued operations) and $74.7 million, respectively, in prepayment fees related to mortgage notes that were paid fully in advance of their maturity date. NaN prepayment fees were recognized for the year ended December 31, 2020.

Income Taxes
The Company qualifies as a REIT under the Internal Revenue Code (the Code). A REIT that distributes at least 90% of its taxable income to its shareholders each year and which meets certain other conditions is not taxed on that portion of its taxable income which is distributed to its shareholders. The Company intends to continue to qualify as a REIT and distribute substantially all of its taxable income to its shareholders.

The Company is subject to income tax in certain instances in both the US and in certain foreign jurisdictions, as more fully described herein. The Company’s income tax expense includes deferred income tax expense or benefit, which represents the change in net deferred tax assets and liabilities. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse. The Company evaluates the realizability of its deferred income tax assets and assesses the need for a valuation allowance for each jurisdiction for which it is subject to income tax. The realization of the deferred tax assets depends upon all positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of existing deferred tax assets.

The Company owns certain real estate assets which are subject to income tax in Canada. At December 31, 2020, the net deferred tax assets related to the Company's Canadian operations totaled $17.0 million resulting from the temporary differences between income for financial reporting purposes and taxable income relating primarily to depreciation, capital improvements and straight-line rents. Due to the impacts of the COVID-19 pandemic, it is more likely than not the Company will not generate sufficient taxable income to realize the net deferred tax assets related to the Company's Canadian operations as of December 31, 2020 totaling $17.0 million.
85


EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018

The Company has certain taxable REIT subsidiaries (TRSs), as permitted under the Code, through which it conducts certain business activities and are subject to federal and state income taxes on their net taxable income. The Company uses two such TRS entities exclusively to hold the operational aspect of the traditional REIT lodging structure for three Experiential lodging properties that are facilitated by management agreements with eligible independent contractors. The real estate for these investments are held by the REIT either directly or through an investment in a joint venture and leased to the respective operations entity under a triple-net lease. Management has determined the real estate meets the requirements to be classified as qualified lodging facilities as required in a traditional REIT lodging structure.

At December 31, 2020, the net deferred tax assets related to the Company's TRSs totaled $7.9 million resulting from the temporary differences between income for financial reporting purposes and taxable income relate primarily to net operating loss carryovers and pre-opening cost amortization. Due to the impacts of the COVID-19 pandemic, it is more likely than not the Company will not generate sufficient taxable income to realize the net deferred tax assets related to the Company's TRSs as of December 31, 2020 totaling $7.9 million.

As of December 31, 2020 and 2019, respectively, the Canadian operations and the Company's TRSs had deferred tax assets included in other assets in the accompanying consolidated balance sheet totaling approximately $28.5 million and $19.3 million and deferred tax liabilities included in accounts payable and accrued liabilities in the accompanying consolidated balance sheet totaling approximately $3.6 million and $3.9 million. At December 31, 2020, the Company had a valuation allowance offsetting the net deferred tax assets included in the accompanying consolidated balance sheet totaling $24.9 million. The Company’s consolidated deferred tax position is summarized as follows (in thousands):
20202019
Fixed assets$18,077 $14,462 
Net operating losses6,546 1,656 
Start-up costs2,495 2,768 
Other1,392 367 
Total deferred tax assets$28,510 $19,253 
Capital improvements$(2,888)$(2,765)
Straight-line receivable(706)(1,097)
Other(9)(1)
Total deferred tax liabilities$(3,603)$(3,863)
Valuation allowance(24,907)
Net deferred tax asset$$15,390 

Additionally, during the years ended December 31, 2020, 2019 and 2018, the Company recognized current income and withholding tax expense of $1.5 million, $1.1 million and $1.7 million, respectively, primarily related to certain state income taxes and foreign withholding tax. The table below details the current and deferred income tax benefit (expense) for the years ended December 31, 2020, 2019 and 2018 (in thousands):
202020192018
Current TRS income tax$$376 $(221)
Current state income tax expense(503)(405)(422)
Current foreign income tax
Current foreign withholding tax(1,018)(1,051)(1,069)
Deferred TRS income tax (expense) benefit(4,448)3,719 319 
Deferred foreign withholding tax
Deferred income tax (expense) benefit(10,797)396 (892)
Income tax benefit (expense)$(16,756)$3,035 $(2,285)

86


EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
The Company's effective tax rate for the years ended December 31, 2020, 2019 and 2018 was 13.5%, 1.5% and 0.8%, respectively. The differences between the income tax expense calculated at the statutory U.S. federal income tax rates and the actual income tax expense recorded for continuing operations is mostly attributable to the dividends paid deduction available for REITs.

Furthermore, the Company qualified as a REIT and distributed the necessary amount of taxable income such that 0 current U.S. federal income taxes were due for the years ended December 31, 2020, 2019 and 2018. Accordingly, 0 provision for current U.S. federal income taxes was recorded for any of those years. If the Company fails to qualify as a REIT in any taxable year, without the benefit of certain provisions, it will be subject to federal and state income taxes at regular corporate rates (including any applicable alternative minimum tax for years prior to January 1, 2019) and may not be able to qualify as a REIT for four subsequent taxable years. Even if the Company qualifies for taxation as a REIT, the Company is subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed taxable income. Tax years 2017 through 2019 remain generally open to examination for U.S. federal income tax and state tax purposes and from 2015 through 2019 for Canadian income tax purposes. 

The Company’s policy is to recognize interest and penalties as general and administrative expense. The Company did not recognize any interest and penalties in 2020, 2019 or 2018. The Company did not have any accrued interest and penalties at December 31, 2020, 2019 and 2018. Additionally, the Company did not have any unrecorded tax benefits as of December 31, 2020, 2019 and 2018.

Concentrations of Risk
Topgolf USA (Topgolf), Cinemark, AMC and Regal represented a significant portion of the Company's total revenue for the years ended December 31, 2020, 2019 and 2018. The Company began recognizing revenue on a cash basis for AMC at the end of the first quarter of 2020 and for Regal at the end of the third quarter of 2020 and cash payments have been reduced due to the impact of the COVID-19 pandemic. The following is a summary of the Company's total revenue (including revenue from discontinued operations) from Topgolf, Cinemark, AMC and Regal (dollars in thousands):
Year ended December 31,
202020192018
Total Revenue% of Company's Total RevenueTotal Revenue% of Company's Total RevenueTotal Revenue% of Company's Total Revenue
Topgolf$80,714 19.5 %$78,962 11.2 %$64,459 9.2 %
Cinemark42,065 10.1 %38,927 5.5 %37,303 5.3 %
AMC29,964 7.2 %123,792 17.6 %115,805 16.5 %
Regal13,056 3.1 %75,784 10.8 %57,614 8.2 %

Cash Equivalents
Cash equivalents include bank demand deposits.

Restricted Cash
Restricted cash represents cash held for tenants' off-season rent reserves and escrow deposits required in connection with property management agreements or held for potential acquisitions and redevelopments.
 
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 share option expense and amortization of nonvested share grants 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 (loss) income and comprehensive (loss) income.
87


EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018

Share Options
Share options are granted to employees pursuant to the Long-Term Incentive Plan. The fair value of share options granted is 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 (loss) income and comprehensive (loss) income was $12 thousand, $10 thousand and $0.3 million for the years ended December 31, 2020, 2019 and 2018, respectively.

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 to four years). Expense recognized related to nonvested shares and included in general and administrative expense in the accompanying consolidated statements of (loss) income and comprehensive (loss) income was $10.6 million, $11.3 million and $13.5 million for the years ended December 31, 2020, 2019 and 2018, respectively. Expense related to nonvested shares and included in severance expense in the accompanying consolidated statements of (loss) income and comprehensive (loss) income was $1.0 million, $0.6 million and $3.2 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Nonvested Performance Shares Issued to Employees
During the year ended December 31, 2020, the Compensation and Human Capital Committee of the Company's Board of Trustees (Board) approved the 2020 Long Term Incentive Plan (the 2020 LTIP) as 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. 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 vesting period of three years. Expense recognized related to performance shares and included in general and administrative expense in the accompanying consolidated statements of (loss) income and comprehensive (loss) income was $1.0 million for the year ended December 31, 2020. Expense related to nonvested performance shares and included in severance expense in the accompanying consolidated statements of (loss) income and comprehensive (loss) income was $261 thousand for the year ended December 31, 2020.

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 (loss) income and comprehensive (loss) income was $2.2 million, $1.9 million and $1.3 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Foreign Currency Translation
The Company accounts for the operations of its Canadian properties in Canadian dollars. The assets and liabilities related to the Company’s Canadian properties and mortgage note are translated into U.S. dollars using the spot rates at the respective balance sheet dates; revenues and expenses are translated at average exchange rates. Resulting translation adjustments are recorded as a separate component of comprehensive income.

Derivative Instruments
The Company uses derivative instruments to reduce exposure to fluctuations in foreign currency exchange rates and variable interest rates.
88


EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018

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. For its net investment hedges that hedge the foreign currency exposure of its Canadian investments, the Company has elected to assess hedge effectiveness using a method based on changes in spot exchange rates and record the changes in the fair value amounts excluded from the assessment of effectiveness into earnings on a systematic and rational basis. 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.

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. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur. The Company intends to amend agreements referencing the LIBOR-index to a replacement index and will apply the optional expedients offered in Topic 848.

3. Real Estate Investments

The following table summarizes the carrying amounts of real estate investments as of December 31, 2020 and 2019 (in thousands):
20202019
Buildings and improvements$4,526,342 $4,747,101 
Furniture, fixtures & equipment118,334 123,239 
Land1,242,663 1,290,181 
Leasehold interests26,050 26,041 
5,913,389 6,186,562 
Accumulated depreciation(1,062,087)(989,254)
Total$4,851,302 $5,197,308 
Depreciation expense on real estate investments from continuing operations was $162.6 million, $153.2 million and $133.7 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Acquisitions and Development
During the year ended December 31, 2020, the Company completed the acquisition of real estate investments and lease related intangibles, as further discussed in Note 2, for Experiential properties totaling $22.1 million, that consisted of 2 theatre properties.

89


EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
Additionally, during the year ended December 31, 2020, the Company had investment spending on build-to-suit development and redevelopment for Experiential properties totaling $46.9 million.

During the year ended December 31, 2019, the Company completed the acquisition of real estate investments and lease related intangibles, for Experiential properties totaling $451.9 million, that consisted of 26 theatre properties for approximately $426.5 million, 1 eat & play property for $1.4 million and 2 cultural properties for $24.0 million. The Company completed the acquisition of real estate investments and lease related intangibles for Education properties totaling $5.9 million that consisted of the acquisition of 2 early childhood education centers.

Additionally, during the year ended December 31, 2019, the Company had investment spending on build-to-suit development and redevelopment for Experiential properties totaling $146.2 million and Education properties totaling $38.6 million.

During the year ended December 31, 2019, the Company completed the construction of the Kartrite Resort and Indoor Waterpark in Sullivan County, New York. The indoor waterpark resort is being operated under a traditional REIT lodging structure and facilitated by a management agreement with an eligible independent contractor. The related operating revenue and expense are included in other income and other expense in the accompanying consolidated statements of (loss) income and comprehensive (loss) income for the year ended December 31, 2019. Additionally, during the year ended December 31, 2018, the Company completed the construction of the Resorts World Catskills common infrastructure. In June 2016, the Sullivan County Infrastructure Local Development Corporation issued $110.0 million of Series 2016 Revenue Bonds which funded a substantial portion of such construction costs. For the years ended December 31, 2018, 2017 and 2016, the Company received total reimbursements of $74.2 million of construction costs. During the year ended December 31, 2019, the Company received an additional reimbursement of $11.5 million.

Dispositions
On December 29, 2020, pursuant to a tenant purchase option, the Company completed the sale of 6 private schools and 4 early childhood education centers for net proceeds of approximately $201.2 million and recognized a gain on sale of approximately $39.7 million. Additionally, during the year ended December 31, 2020, the Company completed the sale of 3 early education properties, 4 experiential properties and 2 land parcels for net proceeds totaling $26.6 million and recognized a combined gain on sale of $10.4 million.

During the year ended December 31, 2019, the Company completed the sale of all of its public charter school portfolio through the following transactions:

On November 22, 2019, the Company sold 47 public charter school related assets, classified as real estate investments, mortgage notes receivable and investment in direct financing leases, for net proceeds of approximately $449.6 million. The Company recognized an impairment on this public charter school portfolio sale of $21.4 million that included the write-off of non-cash straight-line rent and effective interest receivables totaling $24.8 million. See Note 4 for additional information related to the impairment.
The Company sold 10 public charter schools pursuant to tenant purchase options for net proceeds totaling $138.5 million and recognized a combined gain on sale of $30.0 million.
The Company sold 7 public charter schools (not as result of exercise of tenant purchase options) for net proceeds totaling $44.4 million and recognized a combined gain on sale of $1.9 million.
See Note 6 for details on repayments of mortgage notes receivable secured by public charter school properties during 2019.

Due to the Company's disposition of its remaining public charter school portfolio in 2019, the operating results of all public charter schools sold during 2019 have been classified within discontinued operations in the accompanying consolidated statements of (loss) income and comprehensive (loss) income for all periods presented. See Note 17 for further details on discontinued operations.

Additionally, during the year ended December 31, 2019, the Company sold 1 attraction property, 1 early childhood education center property and 4 land parcels for net proceeds totaling $21.9 million and sold 1
90


EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
attraction property and received an $11.0 million cash payment and provided seller mortgage financing of $27.4 million. The Company recognized a combined gain on these sales of $4.2 million. See Note 6 for additional information on the seller mortgage note receivable.

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. As a result of the COVID-19 pandemic, the Company experienced vacancies at some of its properties and at others the Company has negotiated lease modifications that included rent reductions. As part of this process, the Company reassessed the expected holding periods and expected future cash flows of such properties, and determined that the estimated cash flows were not sufficient to recover the carrying values of 9 properties. NaN of these 9 properties have operating ground lease arrangements with right-of-use assets. During the year ended December 31, 2020, the Company determined the estimated fair value of the real estate investments and right-of-use assets of these properties using independent appraisals and various purchase offers. The Company reduced the carrying value of the real estate investments, net to $39.5 million and the operating lease right-of-use assets to $13.0 million. The Company recognized impairment charges of $70.7 million on the real estate investments and $15.0 million on the right-of-use assets, which are the amounts that the carrying value of the assets exceeded the estimated fair value.

During the year ended December 31, 2020, the Company also recognized $3.2 million in other-than-temporary impairments related to its equity investments in joint ventures in 3 theatre projects located in China. See Note 7 for further details on these impairments.

On November 22, 2019, the Company completed the sale of substantially all of its public charter school portfolio, consisting of 47 public charter school related assets, for net proceeds of approximately $449.6 million. Prior to the sale, the Company revised its estimated undiscounted cash flows associated with this portfolio, considering a shorter expected hold period and determined that the estimated cash flows were not sufficient to recover the carrying value of this portfolio. The Company estimated the fair value of this portfolio by taking into account the purchase price in the executed sale agreement. The Company recognized an impairment on public charter school portfolio sale of $21.4 million that included the write-off of non-cash straight-line rent and effective interest receivables totaling $24.8 million. This impairment and the operating results of all of the public charter schools sold in 2019 have been classified within discontinued operations in the accompanying consolidated statements of (loss) income and comprehensive (loss) income. See Note 17 for further details on discontinued operations.

During the year ended December 31, 2019, the Company entered into an agreement to sell a theatre property for approximately $6.2 million. As a result, the Company revised its estimated undiscounted cash flow associated with this property, considering a shorter expected hold period and determined that the estimated cash flow was not sufficient to recover the carrying value of this property. The Company estimated the fair value of this property by taking into account the purchase price in the executed sale agreement. The Company recorded an impairment charge of approximately $2.2 million, which is the amount that the carrying value of the asset exceeds the estimated fair value.

During the year ended December 31, 2018, the Company entered into an agreement with Children’s Learning Adventure USA (CLA) in which CLA relinquished control of 4 of the Company’s properties that were still under development as the Company no longer intended to develop these properties for CLA. As a result, the Company revised its estimated undiscounted cash flows for these 4 properties, considering shorter expected holding periods, and determined that those estimated cash flows were not sufficient to recover the carrying values of these 4 properties. During the year ended December 31, 2018, the Company determined the estimated fair value of these properties using Level 3 inputs, including independent appraisals of these properties, and reduced the carrying value of these assets to $9.8 million, recording an impairment charge of $16.5 million. The charge was primarily related to the cost of improvements specific to the development of CLA’s prototype.

During the year ended December 31, 2018, the Company recognized a $10.7 million impairment charge related to the Company’s guarantees of the payment of 2 economic development revenue bonds secured by leasehold
91


EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
interests and improvements at 2 theatres in Louisiana. In accordance with Topic 460, Guarantees, the Company recorded an asset and liability at the inception of the guarantees at fair value, which represented the Company's obligation to stand ready to perform under the terms of the guarantees. During the year ended December 31, 2018, the Company determined that a portion of its asset was no longer recoverable and recorded an impairment charge of $7.8 million.

A contingent future obligation is recognized in accordance with the provisions of Topic 450, Accounting for Contingencies. In the case of the Company’s guarantees, the contingent future obligation is the future payment of the bonds by the Company. At the inception of the guarantees, the Company determined that its future payment of the bonds was not probable, therefore no contingent future obligation was recorded. For the year ended December 31, 2018, the Company determined that its future payment on a portion of the bond obligations was probable due to inadequate performance of the theatre properties and failure of the debtor under the bonds to perform. Accordingly, for the year ended December 31, 2018, the Company recorded an incremental contingent liability of $2.9 million, which in addition to the $7.8 million discussed above, resulted in a total impairment charge recognized relating to the guarantees of $10.7 million.

5. Accounts Receivable

The following table summarizes the carrying amounts of accounts receivable as of December 31, 2020 and 2019 (in thousands):
20202019
Receivable from tenants$81,120 $11,373 
Receivable from non-tenants505 2,103 
Straight-line rent receivable34,568 73,382 
Total$116,193 $86,858 

During the year ended December 31, 2020, the Company wrote-off receivables from tenants totaling $27.1 million and straight-line rent receivables totaling $38.0 million directly to rental revenue in the accompanying consolidated statements of (loss) income and comprehensive (loss) income upon determination that the collectibility of these receivables or future lease payments from these tenants was no longer probable. Additionally, the Company determined that future rental revenue related to these tenants will be recognized on a cash basis. The $38.0 million in write-offs of straight-line rent receivables were comprised of $26.5 million of straight-line rent receivable and $11.5 million of sub-lessor ground lease straight-line rent receivable.

As of December 31, 2020, receivable from tenants includes fixed rent payments of approximately $76.0 million that were deferred due to the COVID-19 pandemic and determined to be collectible. Additionally, the Company has amounts due from tenants that were not booked as receivables as 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. The repayment terms for these deferments vary by tenant and agreements.

6. Investment in Mortgage Notes and Notes Receivable

Effective January 1, 2020, the Company adopted Topic 326, which requires the Company to estimate and record credit losses for each of its mortgage notes and note receivable. The Company measures expected credit losses on its mortgage notes and notes receivable on an individual basis over the related contractual term as its financial instruments do not have similar risk characteristics. The Company has not experienced historical losses on its mortgage note portfolio; therefore, the Company uses a forward-looking commercial real estate loss forecasting tool to estimate its expected credit losses. The loss forecasting tool is comprised of a probability of default model 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 losses on a
92


EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
loan-by-loan basis. As of December 31, 2020, the Company did not anticipate any prepayments therefore the contractual term of its mortgage notes was 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.

During the year ended December 31, 2020, the Company increased its expected credit losses by $30.7 million from its implementation estimate of $2.2 million. This increase was primarily due to credit loss expense related to notes receivable from one borrower as described below as well as adjustments to current macroeconomic conditions resulting from the economic uncertainty and the rapidly changing environment surrounding the COVID-19 pandemic.

In response to the COVID-19 pandemic, the Company deferred interest payments for 7 borrowers. The deferrals require the borrower to pay the deferred interest in future periods. The Company assessed the deferrals and determined that the modifications did not result in troubled debt restructurings at December 31, 2020.


93


EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
Investment in mortgage notes, including related accrued interest receivable, at December 31, 2020 and 2019 consists of the following (in thousands):
Year of OriginationInterest RateMaturity DatePeriodic Payment TermsOutstanding principal amount of mortgageCarrying amount as of December 31,Unfunded commitments
Description20202019 (1)December 31, 2020
Attraction property Powells Point, North Carolina20197.75 %6/30/2025Interest only$28,007 $27,045 $27,423 $
Fitness & wellness property Omaha, Nebraska20177.85 %1/3/2027Interest only10,905 11,225 10,977 
Fitness & wellness property Merriam, Kansas20197.55 %7/31/2029Interest only9,095 9,355 5,985 248 
Ski property Girdwood, Alaska20198.24 %12/31/2029Interest only40,869 40,680 37,000 16,131 
Fitness & wellness property Omaha, Nebraska20167.85 %6/30/2030Interest only8,410 8,630 5,803 2,508 
Experiential lodging property Nashville, Tennessee20197.01 %9/30/2031Interest only71,223 67,235 70,396 
Eat & play property Austin, Texas201211.31 %6/1/2033Principal & Interest-fully amortizing11,361 11,929 11,582 
Ski property West Dover and Wilmington, Vermont200711.78 %12/1/2034Interest only51,050 51,031 51,050 
Four ski properties Ohio and Pennsylvania200710.91 %12/1/2034Interest only37,562 37,413 37,562 
Ski property Chesterland, Ohio201211.38 %12/1/2034Interest only4,550 4,396 4,550 
Ski property Hunter, New York20168.57 %1/5/2036Interest only21,000 21,000 21,000 
Eat & play property Midvale, Utah201510.25 %5/31/2036Interest only17,505 18,289 17,505 
Eat & play property West Chester, Ohio20159.75 %8/1/2036Interest only18,068 18,830 18,068 
Private school property Mableton, Georgia20179.02 %4/30/2037Interest only5,088 5,278 5,048 
Fitness & wellness property Fort Collins, Colorado20187.85 %1/31/2038Interest only10,292 10,408 10,360 
Early childhood education center Lake Mary, Florida20197.87 %5/9/2039Interest only4,200 4,348 4,258 
Eat & play property Eugene, Oregon20198.13 %6/17/2039Interest only14,700 14,799 14,800 
Early childhood education center Lithia, Florida20178.25 %10/31/2039Interest only3,959 3,737 4,024 
$367,844 $365,628 $357,391 $18,887 
(1) Balances as of December 31, 2019 are prior to the adoption of ASC Topic 326.

Investment in notes receivable, including related accrued interest receivable, was $7.3 million and $14.0 million at December 31, 2020 and 2019, respectively, and is included in Other assets in the accompanying consolidated balance sheets.

During the year ended December 31, 2020, the Company entered into an amended and restated loan and security agreement with 1 of its notes receivable borrowers in response to the impacts of the COVID-19 pandemic on the borrower. The restated note receivable consists of the previous note balance of $6.5 million and provides the borrower with a term loan for up to $13.0 million and a $6.0 million revolving line of credit. The restated note receivable has a maturity date of June 30, 2032 and the line of credit matures on December 31, 2022. Interest is deferred through June 30, 2022, at which time monthly principal and interest payments will be due over 10 years. Although the borrower is not in default, nor has the borrower declared bankruptcy, the Company determined these modifications resulted in a troubled debt restructuring (TDR) at December 31, 2020 due to the impacts of the
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EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
COVID-19 pandemic on the borrower's financial condition. These note receivables are considered collateral dependent and expected credit losses are based on the fair value of the underlying collateral at the reporting date. The notes are secured by the working capital and non-real estate assets of the borrower. The Company assessed the fair value of the collateral as of December 31, 2020 and recognized credit loss expense for the year ended December 31, 2020 consisting of the outstanding principal balance of $12.6 million and the $12.9 million unfunded commitment on the term loan and line of credit as of December 31, 2020. Income for this borrower will be recognized on a cash basis.

At December 31, 2020, the Company's investment in this note receivable was a variable interest and the underlying entity is a VIE. The Company is not the primary beneficiary of this VIE, as 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 of $12.6 million and the unfunded commitment of $12.9 million, both of which were fully reserved in the allowance for credit losses at December 31, 2020.

The following summarizes the activity within the allowance for credit losses related to mortgage notes, unfunded commitments and notes receivable for the year ended December 31, 2020 (in thousands):
Mortgage notes receivableUnfunded commitments - mortgage notesNotes receivableUnfunded commitments - notes receivableTotal
Allowance for credit losses at January 1, 2020$2,000 $114 $49 $$2,163 
Credit loss expense5,000 24 12,805 12,866 30,695 
Charge-offs
Recoveries
Allowance for credit losses$7,000 $138 $12,854 $12,866 $32,858 

7. Unconsolidated Real Estate Joint Ventures

As of December 31, 2020 and 2019, the Company had a 65% investment interest in 2 unconsolidated real estate joint ventures related to 2 experiential lodging properties located in St. Petersburg Beach, Florida. The Company's partner, Gencom Acquisition, LLC and its affiliates, own the remaining 35% interest in the joint ventures. There are 2 separate joint ventures, one that holds the investment in the real estate of the experiential lodging properties and the other that holds 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. As of December 31, 2020 and 2019, the Company had invested $27.4 million and $29.7 million, respectively, in these joint ventures.

The joint venture that holds the real property has a secured mortgage loan of $85.0 million at December 31, 2020, that is due April 1, 2022. The note can be extended for 2 additional 1 year periods upon the satisfaction of certain conditions. Additionally, the Company has guaranteed the completion of the renovations in the amount of approximately $32.7 million, with $23.9 million remaining to fund at December 31, 2020. The mortgage loan bears interest at an annual rate equal to the greater of 6.00% or LIBOR plus 3.75%. Interest is payable monthly beginning on May 1, 2019 until the stated maturity date of April 1, 2022, which can be extended to April 1, 2023. The joint venture has an interest rate cap agreement to limit the variable portion of the interest rate (LIBOR) on this note to 3.0% from March 28, 2019 to April 1, 2023. In response to the COVID-19 pandemic, on May 28, 2020, the joint venture was granted a three-month interest deferral, which is required to be paid on the maturity date of the loan and is not considered a troubled debt restructuring.

The Company recognized losses of $4.0 million and $140 thousand and income of $52 thousand during the years ended December 31, 2020, 2019 and 2018, respectively, and received 0 distributions during the years ended December 31, 2020, 2019 and 2018 related to the equity investment in these joint ventures.
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EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018

As of December 31, 2020 and 2019, the Company's investments in these joint ventures were considered to be variable interests and the underlying entities are VIEs. The Company is not the primary beneficiary of the VIEs as the Company does not individually have the power to direct the activities that are most significant to the joint ventures and accordingly these investments are not consolidated. The Company's maximum exposure to loss at December 31, 2020, is its investment in the joint ventures of $27.4 million as well as the Company's guarantee of the estimated costs to complete renovations of approximately $23.9 million.

In addition, as of December 31, 2020 and 2019, the Company had invested $0.8 million and $4.6 million, respectively, in unconsolidated joint ventures for 3 theatre projects located in China. During the year ended December 31, 2020, the Company recognized $3.2 million in other-than-temporary impairment charges on these equity investments. The Company determined the estimated fair value of these investments based primarily on discounted cash flow projections. The Company recognized losses of $559 thousand, $241 thousand and $74 thousand, during the years ended December 31, 2020, 2019 and 2018, respectively, and received distributions of $112 thousand and $567 thousand, from its investment in these joint ventures for the years ended December 31, 2019 and 2018, respectively. NaN distributions were received during the year ended December 31, 2020.

8. Debt

Debt at December 31, 2020 and 2019 consists of the following (in thousands):
20202019
Unsecured revolving variable rate credit facility, LIBOR + 1.625% at December 31, 2020, due February 27, 2022 (1)$590,000 $
Unsecured term loan payable, LIBOR + 2.00% at December 31, 2020 with $350,000 fixed at 4.40% and $50,000 fixed at 4.60%, due February 27, 2023 (1)400,000 400,000 
Senior unsecured notes payable, 5.25%, due July 15, 2023 (2)275,000 275,000 
Senior unsecured notes payable, 5.60% at December 31, 2020, due August 22, 2024 (3)148,000 148,000 
Senior unsecured notes payable, 4.50%, due April 1, 2025 (2)300,000 300,000 
Senior unsecured notes payable, 5.81% at December 31, 2020, due August 22, 2026 (3)192,000 192,000 
Senior unsecured notes payable, 4.75%, due December 15, 2026 (2)450,000 450,000 
Senior unsecured notes payable, 4.50%, due June 1, 2027 (2)450,000 450,000 
Senior unsecured notes payable, 4.95%, due April 15, 2028 (2)400,000 400,000 
Senior unsecured notes payable, 3.75%, due August 15, 2029 (2)500,000 500,000 
Bonds payable, variable rate, fixed at 1.39% through September 30, 2024, due August 1, 204724,995 24,995 
Less: deferred financing costs, net(35,552)(37,165)
Total$3,694,443 $3,102,830 
 
(1) At December 31, 2020, the Company had $590.0 million outstanding under its $1.0 billion unsecured revolving credit facility with interest at a floating rate of LIBOR plus 1.625% (with a LIBOR floor of 0.50%), which was 2.125% with a facility fee of 0.375%. Interest is payable monthly. Subsequent to December 31, 2020, the Company paid down $500.0 million on this credit facility.

The Company's unsecured term loan facility had a balance of $400.0 million with interest at a floating rate of LIBOR plus 2.00% (with a LIBOR floor of 0.50%), which was 2.5% on December 31, 2020. Interest is payable monthly. In addition, there is a $1.0 billion accordion feature on the combined unsecured revolving credit and term loan facility (the combined facility) that increases the maximum borrowing amount available under the combined facility, subject to lender approval, from $1.4 billion to $2.4 billion. If the Company exercises all or any portion of the accordion feature, the resulting increase in the combined facility may have a shorter or longer maturity date and different pricing terms. The combined facility contains financial covenants or restrictions that limit the Company's levels of consolidated debt, secured debt, investment levels outside certain categories and dividend distributions, and require the Company to maintain a minimum consolidated tangible net worth and meet certain coverage levels for
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EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
fixed charges and debt services. As discussed further below, certain of these covenants were modified or waived during 2020.

In light of the continuing financial and operational impacts of the COVID-19 pandemic on the Company and its tenants and borrowers, on June 29, 2020 and November 3, 2020, the Company amended its Consolidated Credit Agreement, which governs its unsecured revolving credit facility and its unsecured term loan facility. As described below, the amendments modified certain provisions and waived the Company's obligation to comply with certain covenants under this debt agreement through December 31, 2021. The Company can elect to terminate the Covenant Relief Period early, subject to certain conditions.

As described below, the loans subject to the modifications bear interest at higher rates during the Covenant Relief Period and will return to the original pre-waiver levels at the end of such period, subject to certain conditions. The rates during and after the Covenant Relief Period continue to be subject to change based on unsecured debt ratings, as defined in the agreement. The amendments also imposed the additional restrictions on the Company discussed below during the Covenant Relief Period. In addition, during the Covenant Relief Period, the amendments require the Company to cause certain of its key subsidiaries to guarantee the Company's obligations based on its unsecured debt ratings, and the Company will be required to pledge the equity interests of certain of those subsidiary guarantors upon the occurrence of certain events, however both of these requirements end when the Covenant Relief Period is over.

During the Covenant Relief Period, the initial interest rates for the revolving credit facility and term loan facility were set at LIBOR plus 1.375% and LIBOR plus 1.75%, respectively, (with a LIBOR floor of 0.50%) and the facility fee on the revolving credit facility was increased to 0.375%. On August 20, 2020, as a result of a downgrade of the Company's unsecured debt rating by Moody's to Baa3, the spreads on the revolving credit and term loan facilities each increased by 0.25%. During the fourth quarter of 2020, the Company's unsecured debt rating was downgraded to BB+ by both Fitch and Standard & Poor's. As a result of these downgrades, certain of the Company's key subsidiaries guarantee the Company's obligations under its bank credit facilities, private placement notes and other outstanding senior unsecured notes in accordance with existing agreements with the holders of such indebtedness. See Note 20 for the Company's supplemental guarantor financial information. If the Company's unsecured debt rating is further downgraded by Moody's, the interest rates on the revolving credit and term loan facilities would both increase by 0.35% during the Covenant Relief Period. After the Covenant Relief Period, the interest rates for the revolving credit and term loan facilities, based on the Company's current unsecured debt ratings, are scheduled to return to LIBOR plus 1.20% and LIBOR plus 1.35%, respectively, (with a LIBOR floor of 0) and the facility fee will be 0.25%, however these rates are subject to change based on the Company's unsecured debt ratings.

The amendments to the Company's revolving credit and term loan facilities permanently modified certain financial covenants and provided relief from compliance with certain financial covenants during the Covenant Relief Period, as follows: (i) a new minimum liquidity financial covenant of $500.0 million during the Covenant Relief Period was added; (ii) compliance with the total-debt-to-total-asset-value, the maximum-unsecured-debt-to-unencumbered-asset-value, the minimum unsecured interest coverage ratio and the minimum fixed charge ratio financial covenants was suspended for the period beginning June 29, 2020 and ending on the earlier to occur of December 31, 2021 or the earlier termination of the Covenant Relief Period; (iii) permanent amendments to the unsecured-debt-to-unencumbered-asset-value financial covenant were made to allow short-term indebtedness to be offset by unrestricted cash in the calculation and to allow unrestricted cash not otherwise offset against short-term indebtedness to be counted as an unencumbered asset; and (iv) permanent amendments to financial covenants were made to allow accrued deferred payments to be included as recurring property revenue in these calculations. The amendments also imposed additional restrictions on the Company and its subsidiaries during the Covenant Relief Period, including limitations on certain investments, incurrences of indebtedness, capital expenditures and payment of dividends or other distributions and stock repurchases, in each case subject to certain exceptions.

97


EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
In connection with the amendments, $0.1 million of fees paid to third parties were expensed and included in costs associated with loan refinancing in the accompanying consolidated statements of (loss) income and comprehensive (loss) income for the year ended December 31, 2020. In addition, the Company paid $5.1 million in fees to existing lenders that were capitalized in deferred financing costs and amortized as part of the effective yield. These fees consisted of $3.6 million related to the unsecured revolving credit facility and included in other assets and $1.5 million related to the term loan and shown as a reduction of debt.

As described under (3) below, on June 29, 2020 and December 24, 2020, the Company also amended its Note Purchase Agreement which governs its private placement notes. Under the most favored nations clause included in the Consolidated Credit Agreement, the additional or more restrictive covenants included in the private placement amendments are incorporated into the Consolidated Credit Agreement.

(2) These notes contain various covenants, including: (i) a limitation on incurrence of any debt that would cause the ratio of the Company’s debt to adjusted total assets to exceed 60%; (ii) a limitation on incurrence of any secured debt that would cause the ratio of the Company’s secured debt to adjusted total assets to exceed 40%; (iii) a limitation on incurrence of any debt that would cause the Company’s debt service coverage ratio to be less than 1.5 times; and (iv) the maintenance at all times of the Company's total unencumbered assets such that they are not less than 150% of the Company’s outstanding unsecured debt.

(3) In light of the continuing financial and operational impacts of the COVID-19 pandemic on the Company and its tenants and borrowers, on June 29, 2020 and December 24, 2020, the Company amended its Note Purchase Agreement, which governs its private placement notes. The amendments modified certain provisions and waived the Company's obligation to comply with certain covenants under these debt agreements through October 1, 2021. The Company can elect to extend such period through January 1, 2022 and may elect to terminate the Covenant Relief Period early, subject to certain conditions. These notes: (i) contain certain financial and other covenants that generally conform to the combined credit facility described above; (ii) provide investors thereunder certain additional guaranty and lien rights, in the event that certain events occur; (iii) contain certain "most favored lender" provisions; and (iv) impose restrictions on debt that can be incurred by certain subsidiaries of the Company. As discussed further below, certain of these covenants were modified or waived during 2020.

The amendments provided for an immediate 0.65% waiver premium to be paid on the private placement notes during the Covenant Relief Period. In addition, during the fourth quarter of 2020, as a result of downgrades of the Company's unsecured debt rating to BB+ by both Fitch and Standard and Poor's, the spreads on the private placement notes each increased by an additional 0.60%. As a result, the interest rates for the private placement notes were increased to 5.60% and 5.81% for the Series A notes due 2024 and the Series B notes due 2026, respectively. After the Covenant Relief Period, the interest rates for the private placement notes are scheduled to return to 4.35% and 4.56% for the Series A notes due 2024 and the Series B notes due 2026, respectively.

If the Company elects to extend the Covenant Relief Period until January 1, 2022, the Company must, or must cause certain of its subsidiaries to, grant mortgages on certain unencumbered properties to a collateral agent, on behalf of the holders of the private placement notes and the lenders under the Company's Consolidated Credit Agreement. If the Company provides such mortgages, they must remain in effect until the later of two consecutive fiscal quarters of demonstrated covenant compliance or June 30, 2022, however the additional 0.60% interest rate premium as a result of the downgrades in the Company's unsecured debt rating is removed while mortgages are outstanding. If the Company elects to extend the Covenant Relief Period until January 1, 2022 as described above, the Covenant Relief Period will automatically end on October 29, 2021 if the Company fails to provide such mortgages.

The amendments provide relief from compliance with the following financial covenants during the Covenant Relief Period: the total-debt-to-total-asset-value covenant; the maximum-unsecured-debt-to-unencumbered-asset-value covenant; the minimum unsecured interest coverage ratio; and the minimum fixed charge ratio. The amended Note Purchase Agreement modifies the maximum secured debt to total asset value covenant as follows: (i) neither the Company nor any of its subsidiaries may incur any secured debt during the period beginning on December 24, 2020 and ending on the last day of the Covenant Relief Period, subject to certain exceptions; and (ii) after the Covenant
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EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
Relief Period the ratio of secured debt to total asset value is reduced from 0.35 to 1.00 to 0.25 to 1.00 until the Company can demonstrate covenant compliance for at least two fiscal quarters.

The amendments impose certain restrictions on the Company during the Covenant Relief Period, including limitations on certain investments, incurrences of indebtedness, capital expenditures, payment of dividends or other distributions and stock repurchases, and maintenance of a minimum liquidity amount of $500.0 million, in each case subject to certain exceptions. The amendments include the following restrictions: (i) the limitation on investments and guarantees of certain indebtedness from October 1, 2020 to the end of the Covenant Relief Period was set at $175.0 million; and (ii) the limitation on capital expenditures from October 1, 2020 to the end of the Covenant Relief Period was set at $175.0 million. In addition, the amount of proceeds from assets sales that are exempt from the requirement to apply such proceeds to the prepayment of outstanding indebtedness under the Company's existing bank credit agreement and the private placement notes is $150.0 million, subject to certain exceptions relating to the sale of specified assets. In addition, the Company is prohibited from voluntarily prepaying its existing public senior notes during the Covenant Relief Period or its term loan debt under its bank facility during the Covenant Relief Period.

In connection with the amendments, $1.5 million of fees paid to third parties were expensed and included in costs associated with loan refinancing in the accompanying consolidated statements of (loss) income and comprehensive (loss) income for the year ended December 31, 2020. In addition, the Company paid $0.9 million in fees to existing lenders that were capitalized in deferred financing costs and amortized as part of the effective yield and shown as a reduction of debt.

Subsequent to year-end, the Company paid down principal of approximately $23.8 million on its private placement notes resulting from the sale of assets in accordance with the amendments.

Certain of the Company’s debt agreements contain customary restrictive covenants related to financial and operating performance as well as certain cross-default provisions. The Company was in compliance with all financial covenants under the Company's debt instruments at December 31, 2020.

Principal payments due on long-term debt obligations subsequent to December 31, 2020 (without consideration of any extensions) are as follows (in thousands):
 Amount
Year:
2021$
2022590,000 
2023675,000 
2024148,000 
2025300,000 
Thereafter2,016,995 
Less: deferred financing costs, net(35,552)
Total$3,694,443 

The Company capitalizes a portion of interest costs as a component of property under development. The following is a summary of interest expense, net from continuing operations for the years ended December 31, 2020, 2019 and 2018 (in thousands):
202020192018
Interest on loans$152,058 $140,697 $137,570 
Amortization of deferred financing costs6,606 6,192 5,797 
Credit facility and letter of credit fees3,064 2,265 2,411 
Interest cost capitalized(1,233)(4,975)(9,541)
Interest income(2,820)(2,177)(367)
Interest expense, net$157,675 $142,002 $135,870 
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EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018

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 $1.1 million at December 31, 2019 and had 0 derivative assets at December 31, 2020. The Company had derivative liabilities of $14.0 million and $4.5 million at December 31, 2020 and 2019, respectively. The Company has not posted or received collateral with its derivative counterparties as of December 31, 2020 and 2019. See Note 10 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 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.

As of December 31, 2020, the Company had 4 interest rate swap agreements designated as cash flow hedges of interest rate risk related to its variable rate unsecured term loan facility totaling $400.0 million. Additionally, at December 31, 2020, the Company had an 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. Interest rate swap agreements outstanding at December 31, 2020 are summarized below:
Fixed rateNotional Amount (in millions)IndexMaturity
4.3950%(1)$116.7 USD LIBORFebruary 7, 2022
4.4075%(1)116.7 USD LIBORFebruary 7, 2022
4.4080%(1)116.6 USD LIBORFebruary 7, 2022
4.5950%(1)50.0 USD LIBORFebruary 7, 2022
Total$400.0 
1.3925%25.0 USD LIBORSeptember 30, 2024
Total$25.0 
(1) As discussed in Note 8, on June 29, 2020 and November 3, 2020, the Company amended its Consolidated Credit Agreement. The above fixed rates increased by 0.90% during the Covenant Relief Period, and as a result of the Company's unsecured debt ratings being downgraded and a LIBOR floor of 0.50% being established. The rates are scheduled to return to previous levels as defined in the agreement at the end of this period, subject to the Company's unsecured debt ratings.

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.

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EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
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 December 31, 2020, the Company estimates that during the twelve months ending December 31, 2020, $8.2 million 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 4 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.

During the year ended December 31, 2020, the Company entered into USD-CAD cross-currency swaps that were effective July 1, 2020 with a fixed original notional value of $100.0 million CAD and $76.6 million USD. The net effect of this swap is to lock in an exchange rate of $1.31 CAD per USD on approximately $7.2 million annual CAD denominated cash flows through June 2022.

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 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. As of December 31, 2020, the Company estimates that during the twelve months ending December 31, 2020, $0.2 million of losses will be reclassified from AOCI to other expense.

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 either currency forward agreements or cross-currency swaps to manage its exposure to changes in foreign exchange rates on certain of its foreign net investments. As of December 31, 2020, the Company had the following cross-currency swaps designated as net investment hedges:
Fixed rateNotional Amount (in millions, CAD)Maturity
$1.32 CAD per USD$100.0 July 1, 2023
$1.32 CAD per USD100.0 July 1, 2023
Total$200.0 

The cross-currency swaps also have a monthly settlement feature locked in at an exchange rate of $1.32 CAD per USD on $4.5 million of CAD annual cash flows, the net effect of which is an excluded component from the effectiveness testing of this hedge.

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.

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Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
Below is a summary of the effect of derivative instruments on the consolidated statements of changes in equity and income for the years ended December 31, 2020, 2019 and 2018:

Effect of Derivative Instruments on the Consolidated Statements of Changes in Equity and Comprehensive (Loss) Income for the Years Ended December 31, 2020, 2019 and 2018
(Dollars in thousands)
 Year Ended December 31,
Description202020192018
Cash Flow Hedges
Interest Rate Swaps
Amount of (Loss) Gain Recognized in AOCI on Derivative$(11,612)$(7,476)$3,172 
Amount of (Expense) Income Reclassified from AOCI into Earnings (1)(6,159)1,138 1,324 
Cross Currency Swaps
Amount of Gain (Loss) Recognized in AOCI on Derivative(450)1,689 
Amount of Income Reclassified from AOCI into Earnings (2)441 545 1,426 
Net Investment Hedges
Cross Currency Swaps
Amount of (Loss) Gain Recognized in AOCI on Derivative(4,664)(4,454)5,108 
Amount of Income Recognized in Earnings (2) (3)599 556 271 
Currency Forward Agreements
Amount of Gain Recognized in AOCI on Derivative8,560 
Total
Amount of (Loss) Gain Recognized in AOCI on Derivative$(16,271)$(12,380)$18,529 
Amount of (Expense) Income Reclassified from AOCI into Earnings(5,718)1,683 2,750 
Amount of Income Recognized in Earnings599 556 271 
Interest expense, net in accompanying consolidated statements of (loss) income and comprehensive (loss) income$157,675 $142,002 $135,870 
Other income in accompanying consolidated statements of (loss) income and comprehensive (loss) income$9,139 $25,920 $2,076 
(1)    Included in “Interest expense, net” in accompanying consolidated statements of (loss) income and comprehensive (loss) income.
(2)    Included in "Other income" in the accompanying consolidated statements of (loss) income and comprehensive (loss) income.
(3)    Amounts represent derivative gains excluded from the effectiveness testing.

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

As of December 31, 2020, the fair value of the Company's derivatives in a liability position related to these agreements was $14.0 million. If the Company breached any of the contractual provisions of these derivative contracts, it would be required to settle its obligations under the agreements at their termination value of $14.8 million. As of December 31, 2020, the Company had not posted any collateral related to these agreements and was not in breach of any provisions in these agreements.

102


EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
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