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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
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

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

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

At May 4, 2022, there were 74,969,613 common shares outstanding.



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

Factors that could materially and adversely affect us include, but are not limited to, the factors listed below:
Risks associated with COVID-19, or the future outbreak of any additional variants of COVID-19 or other highly infectious or contagious diseases;
Global economic uncertainty and disruptions in financial markets;
The impact of inflation on our customers and our results of operations;
Reduction in discretionary spending by consumers;
Covenants in our debt instruments that limit our ability to take certain actions;
Adverse changes in our credit ratings;
Fluctuations in interest rates;
Defaults in the performance of lease terms by our tenants;
Defaults by our customers and counterparties on their obligations owed to us;
A borrower's bankruptcy or default;
Our ability to renew maturing leases on terms comparable to prior leases and/or our ability to locate substitute lessees for these properties on economically favorable terms;
Risks of operating in the experiential real estate industry;
Our ability to compete effectively;
Risks associated with three tenants representing a substantial portion of our lease revenues;
The ability of our build-to-suit tenants to achieve sufficient operating results within expected time-frames and therefore have capacity to pay their agreed upon rent;
Risks associated with our dependence on third-party managers to operate certain of our properties;
Risks associated with our level of indebtedness;
Risks associated with use of leverage to acquire properties;
Financing arrangements that require lump-sum payments;
Our ability to raise capital;
The concentration of our investment portfolio;
Our continued qualification as a real estate investment trust for U.S. federal income tax purposes and related tax matters;
The ability of our subsidiaries to satisfy their obligations;
Financing arrangements that expose us to funding and completion risks;
Our reliance on a limited number of employees, the loss of which could harm operations;
Risks associated with the employment of personnel by managers of certain of our properties;
Risks associated with the gaming industry;
Risks associated with gaming and other regulatory authorities;
Delays or prohibitions of transfers of gaming properties due to required regulatory approvals;
Risks associated with security breaches and other disruptions;
Changes in accounting standards that may adversely affect our financial statements;
Fluctuations in the value of real estate income and investments;
Risks relating to real estate ownership, leasing and development, including local conditions such as an
i


oversupply of space or a reduction in demand for real estate in the area, competition from other available space, whether tenants and users such as customers of our tenants consider a property attractive, changes in real estate taxes and other expenses, changes in market rental rates, the timing and costs associated with property improvements and rentals, changes in taxation or zoning laws or other governmental regulation, whether we are able to pass some or all of any increased operating costs through to tenants or other customers, and how well we manage our properties;
Our ability to secure adequate insurance and risk of potential uninsured losses, including from natural disasters;
Risks involved in joint ventures;
Risks in leasing multi-tenant properties;
A failure to comply with the Americans with Disabilities Act or other laws;
Risks of environmental liability;
Risks associated with the relatively illiquid nature of our real estate investments;
Risks with owning assets in foreign countries;
Risks associated with owning, operating or financing properties for which the tenants', mortgagors' or our operations may be impacted by weather conditions, climate change and natural disasters;
Risks associated with the development, redevelopment and expansion of properties and the acquisition of other real estate related companies;
Our ability to pay dividends in cash or at current rates;
Risks associated with the impact of inflation or market interest rates on the value of our shares;
Fluctuations in the market prices for our shares;
Certain limits on changes in control imposed under law and by our Declaration of Trust and Bylaws;
Policy changes obtained without the approval of our shareholders;
Equity issuances that could dilute the value of our shares;
Future offerings of debt or equity securities, which may rank senior to our common shares;
Risks associated with changes in foreign exchange rates; and
Changes in laws and regulations, including tax laws and regulations.

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

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


ii


TABLE OF CONTENTS
 
  Page
Item 1.Financial Statements
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 2.Unregistered Sale of Equity Securities and Use of Proceeds
Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
Item 5.Other Information
Item 6.Exhibits
iii


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

EPR PROPERTIES
Consolidated Balance Sheets
(Dollars in thousands except share data)
 March 31, 2022December 31, 2021
(unaudited)
Assets
Real estate investments, net of accumulated depreciation of $1,206,317 and $1,167,734 at March 31, 2022 and December 31, 2021, respectively
$4,738,887 $4,713,091 
Land held for development20,168 20,168 
Property under development10,885 42,362 
Operating lease right-of-use assets177,174 180,808 
Mortgage notes and related accrued interest receivable370,021 370,159 
Investment in joint ventures36,564 36,670 
Cash and cash equivalents323,761 288,822 
Restricted cash2,956 1,079 
Accounts receivable60,704 78,073 
Other assets76,950 69,918 
Total assets$5,818,070 $5,801,150 
Liabilities and Equity
Liabilities:
Accounts payable and accrued liabilities$92,999 $73,462 
Operating lease liabilities215,112 218,795 
Common dividends payable20,946 18,896 
Preferred dividends payable6,033 6,034 
Unearned rents and interest76,013 61,559 
Debt2,805,853 2,804,365 
Total liabilities3,216,956 3,183,111 
Equity:
Common Shares, $0.01 par value; 100,000,000 shares authorized; and 82,485,670 and 82,225,061 shares issued at March 31, 2022 and December 31, 2021, respectively
825 822 
Preferred Shares, $0.01 par value; 25,000,000 shares authorized:
5,392,916 Series C convertible shares issued at March 31, 2022 and December 31, 2021; liquidation preference of $134,822,900
54 54 
3,447,381 Series E convertible shares issued at March 31, 2022 and December 31, 2021; liquidation preference of $86,184,525
34 34 
6,000,000 Series G shares issued at March 31, 2022 and December 31, 2021; liquidation preference of $150,000,000
60 60 
Additional paid-in-capital3,886,240 3,876,817 
Treasury shares at cost: 7,517,572 and 7,416,746 common shares at March 31, 2022 and December 31, 2021, respectively
(269,608)(264,817)
Accumulated other comprehensive income10,471 9,955 
Distributions in excess of net income(1,026,962)(1,004,886)
Total equity$2,601,114 $2,618,039 
Total liabilities and equity$5,818,070 $5,801,150 
See accompanying notes to consolidated financial statements.
1


EPR PROPERTIES
Consolidated Statements of Income (Loss) and Comprehensive Income
(Unaudited)
(Dollars in thousands except per share data)
 Three Months Ended March 31,
 20222021
Rental revenue$139,603 $102,614 
Other income9,305 678 
Mortgage and other financing income8,564 8,473 
Total revenue157,472 111,765 
Property operating expense13,939 15,313 
Other expense8,097 2,552 
General and administrative expense13,224 11,336 
Costs associated with loan refinancing or payoff 241 
Interest expense, net33,260 39,194 
Transaction costs2,247 548 
Credit loss benefit(306)(2,762)
Impairment charges4,351  
Depreciation and amortization40,044 40,326 
Income before equity in loss from joint ventures and other items42,616 5,017 
Equity in loss from joint ventures(106)(1,431)
Gain on sale of real estate 201 
Income before income taxes42,510 3,787 
Income tax expense(318)(407)
Net income42,192 3,380 
Preferred dividend requirements(6,033)(6,034)
Net income (loss) available to common shareholders of EPR Properties$36,159 $(2,654)
Net income (loss) available to common shareholders of EPR Properties per share:
Basic$0.48 $(0.04)
Diluted$0.48 $(0.04)
Shares used for computation (in thousands):
Basic74,843 74,627 
Diluted75,047 74,627 
Other comprehensive income:
Net income$42,192 $3,380 
Foreign currency translation adjustment2,606 2,300 
Change in net unrealized (loss) gain on derivatives(2,090)462 
Comprehensive income attributable to EPR Properties$42,708 $6,142 
See accompanying notes to consolidated financial statements.
2



EPR PROPERTIES
Consolidated Statements of Changes in Equity
(Unaudited)
(Dollars in thousands except per share data)
EPR Properties Shareholders’ Equity 
 Common StockPreferred StockAdditional
paid-in capital
Treasury
shares
Accumulated
other
comprehensive income
Distributions
in excess of
net income
Total
SharesParSharesPar
Balance at December 31, 202081,917,876 $819 14,841,431 $148 $3,857,632 $(261,238)$216 $(966,992)$2,630,585 
Issuance of nonvested shares and performance shares, net of cancellations246,562 2 — — 2,899  — — 2,901 
Purchase of common shares for vesting— — — — — (2,744)— — (2,744)
Share-based compensation expense— — — — 3,784 — — — 3,784 
Foreign currency translation adjustment— — — — — — 2,300 — 2,300 
Change in unrealized gain on derivatives— — — — — — 462 — 462 
Net income— — — — — — — 3,380 3,380 
Issuances of common shares2,509  — — 107 — — — 107 
Dividend equivalents accrued on performance shares— — — — — — — (8)(8)
Dividends to Series C preferred shareholders ($0.359375 per share)
— — — — — — — (1,939)(1,939)
Dividends to Series E preferred shareholders ($0.5625 per share)
— — — — — — — (1,939)(1,939)
Dividends to Series G preferred shareholders ($0.359375 per share)
— — — — — — — (2,156)(2,156)
Balance at March 31, 202182,166,947 $821 14,841,431 $148 $3,864,422 $(263,982)$2,978 $(969,654)$2,634,733 
Balance at December 31, 202182,225,061 $822 14,840,297 $148 $3,876,817 $(264,817)$9,955 $(1,004,886)$2,618,039 
Restricted share units issued to Trustees2,794 — — — — — — —  
Issuance of nonvested shares and performance shares, net of cancellations243,286 3 — — 4,496 (83)— — 4,416 
Purchase of common shares for vesting— — — — — (4,250)— — (4,250)
Share-based compensation expense— — — — 4,245 — — — 4,245 
Foreign currency translation adjustment— — — — — — 2,606 — 2,606 
Change in unrealized loss on derivatives— — — — — — (2,090)— (2,090)
Net income— — — — — — — 42,192 42,192 
Issuances of common shares4,730  — — 228 — — — 228 
Stock option exercises, net9,799  — — 454 (458)— — (4)
Dividend equivalents accrued on performance shares— — — — — — — (136)(136)
Dividends to common shareholders ($0.775 per share)
— — — — — — — (58,099)(58,099)
Dividends to Series C preferred shareholders ($0.359375 per share)
— — — — — — — (1,938)(1,938)
Dividends to Series E preferred shareholders ($0.5625 per share)
— — — — — — — (1,939)(1,939)
Dividends to Series G preferred shareholders ($0.359375 per share)
— — — — — — — (2,156)(2,156)
Balance at March 31, 202282,485,670 $825 14,840,297 $148 $3,886,240 $(269,608)$10,471 $(1,026,962)$2,601,114 
See accompanying notes to consolidated financial statements.
3


EPR PROPERTIES
Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
 Three Months Ended March 31,
 20222021
Operating activities:
Net income$42,192 $3,380 
Adjustments to reconcile net income to net cash provided by operating activities:
Impairment charges4,351  
Gain on sale of real estate (201)
Gain on insurance recovery(552)(30)
Costs associated with loan refinancing or payoff 241 
Equity in loss from joint ventures106 1,431 
Distributions from joint ventures 90 
Credit loss benefit(306)(2,762)
Depreciation and amortization40,044 40,326 
Amortization of deferred financing costs2,071 1,547 
Amortization of above/below market leases and tenant allowances, net(87)(96)
Share-based compensation expense to management and Trustees4,245 3,784 
Change in assets and liabilities:
Operating lease assets and liabilities(49)(120)
Mortgage notes accrued interest receivable310 280 
Accounts receivable17,424 18,687 
Other assets(5,861)(7,323)
Accounts payable and accrued liabilities15,132 997 
Unearned rents and interest9,067 18,075 
Net cash provided by operating activities128,087 78,306 
Investing activities:
Acquisition of and investments in real estate and other assets(20,726)(26,847)
Proceeds from sale of real estate61 13,707 
Investment in unconsolidated joint ventures (1,625)
Investment in mortgage notes receivable (2,436)
Proceeds from mortgage notes receivable paydowns151 5,299 
Investment in promissory notes receivable (4,379)
Proceeds from promissory note receivable paydowns75 105 
Proceeds from insurance recovery609 30 
Additions to properties under development(5,205)(13,748)
Net cash used by investing activities(25,035)(29,894)
Financing activities:
Principal payments on debt (523,765)
Deferred financing fees paid(48) 
Net proceeds from issuance of common shares160 108 
Impact of stock option exercises, net(4) 
Purchase of common shares for treasury for vesting(4,250)(2,744)
Dividends paid to shareholders(62,151)(6,034)
Net cash used by financing activities(66,293)(532,435)
Effect of exchange rate changes on cash57 18 
Net change in cash and cash equivalents and restricted cash36,816 (484,005)
Cash and cash equivalents and restricted cash at beginning of the period289,901 1,028,010 
Cash and cash equivalents and restricted cash at end of the period$326,717 $544,005 
Supplemental information continued on next page.


4


EPR PROPERTIES
Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
Continued from previous page
 Three Months Ended March 31,
 20222021
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents at beginning of the period$288,822 $1,025,577 
Restricted cash at beginning of the period1,079 2,433 
Cash and cash equivalents and restricted cash at beginning of the period$289,901 $1,028,010 
Cash and cash equivalents at end of the period$323,761 $538,077 
Restricted cash at end of the period2,956 5,928 
Cash and cash equivalents and restricted cash at end of the period$326,717 $544,005 
Supplemental schedule of non-cash activity:
Transfer of property under development to real estate investments$35,255 $309 
Issuance of nonvested shares and restricted share units at fair value, including nonvested shares issued for payment of bonuses$19,791 $19,793 
Operating lease right-of-use asset and related operating lease liability recorded for new ground lease$ $18,481 
Supplemental disclosure of cash flow information:
Cash paid during the period for interest$17,298 $33,562 
Cash paid during the period for income taxes$ $285 
Interest cost capitalized$200 $595 
Change in accrued capital expenditures$5,928 $(3,323)
See accompanying notes to consolidated financial statements.
5



EPR PROPERTIES
Notes to Consolidated Financial Statements (Unaudited)

1. Organization

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

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

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

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

The Company’s variable interests 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 March 31, 2022 and December 31, 2021, the Company does not have any investments in consolidated VIEs.

Risks and Uncertainties
The Company continues to be subject to risks and uncertainties resulting from the COVID-19 pandemic. The COVID-19 pandemic severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. In response to the COVID-19 pandemic, many jurisdictions within the United States and abroad instituted health and safety measures, including quarantines, mandated business and school closures and travel restrictions. As a result, the COVID-19 pandemic severely impacted experiential real estate properties, given that such properties involve congregate social activity and discretionary consumer spending. Although many of these health and safety measures have been lifted, the extent of the impact of the COVID-19 pandemic on the Company's business still remains highly uncertain and difficult to predict.

6


As of March 31, 2022, the Company had no properties closed due to COVID-19 restrictions. The continuing impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including, but not limited to, the scope, severity and duration of any resurgence of the pandemic (including COVID-19 variants), the actions taken to contain the outbreak or any resurgence or mitigate their impacts, the distribution and efficacy of vaccines and therapeutics, the ability of communities to achieve herd immunity, the public’s confidence in the health and safety measures implemented by the Company's tenants and borrowers, the continuing direct and indirect economic effects of the outbreak and containment measures, and the ability of the Company's tenants and borrowers to recover from the negative economic impacts of the pandemic as it subsides, and in many cases, service elevated levels of debt resulting from the pandemic, all of which are uncertain and cannot be predicted. During 2020 and 2021, the COVID-19 pandemic negatively affected the Company's business and could continue to have material adverse effects on the Company's financial condition, results of operations and cash flows. The Company considered the impact of, and recovery from, the COVID-19 pandemic on the assumptions and estimates used in determining the Company’s financial condition and results of operations for the three months ended March 31, 2022.

The following were impacts to the Company's financial statements and business during the three months ended March 31, 2022 arising out of or relating to the COVID-19 pandemic:

The Company continued to recognize revenue on a cash basis for certain tenants including American-Multi Cinema, Inc. (AMC) and Regal Cinemas (Regal), a subsidiary of Cineworld Group.
As of March 31, 2022, the Company has deferred amounts due from tenants of approximately $17.4 million that are booked as receivables. Additionally, the Company has amounts due from tenants that were not booked as receivables because the full amounts were not deemed probable of collection as a result of the COVID-19 pandemic. The amounts not booked as receivables remain obligations of the tenants and will be recognized as revenue when received. During the three months ended March 31, 2022, the Company collected $1.6 million in deferred rent from cash basis tenants and from tenants for which the deferred payments were not previously recognized as revenue. In addition, during the three months ended March 31, 2022, the Company collected $10.2 million of deferred rent and interest from accrual basis tenants and borrowers that reduced related accounts and interest receivable. The repayment terms for all of these deferments vary by tenant.

Reportable Segments
The Company has two 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 includes the following property types: early childhood education centers and private schools. See Note 15 for financial information related to these reportable segments.

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

Management reviews the Company's real estate investments, including operating lease right-of-use assets, for impairment whenever events or changes in circumstances indicate that the carrying value of a property 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.

7


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

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 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.

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 $35.4 million and $36.9 million as of March 31, 2022 and December 31, 2021, respectively, are shown as a reduction of debt. The deferred financing costs of $8.2 million and $8.7 million as of March 31, 2022 and December 31, 2021, respectively, related to the unsecured revolving credit facility are included in "Other assets" in the accompanying consolidated balance sheets.

Rental Revenue
The Company leases real estate to its tenants under leases classified as operating leases. The Company's leases generally provide for rent escalations throughout the lease terms. Rents that are fixed are recognized on a straight-line basis over the lease term. Base rent escalations that include a variable component are recognized upon the occurrence of the specified event as defined in the Company's lease agreements. Many of the Company's leasing arrangements include options to extend 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 three months ended March 31, 2022 and 2021, the Company recognized $0.6 million and $1.3 million, respectively, of straight-line rental revenue. There were no straight-line write-offs for the three months ended March 31, 2022 and 2021.

The Company has agreed to defer rent for a substantial portion of its customers in response to the impact of the COVID-19 pandemic on their operations. On April 10, 2020, the FASB issued a Staff Q&A on Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic. In reliance upon the FASB Staff Q&A, the Company has not treated qualifying deferrals or rent concessions during the period affected by the COVID-19 pandemic as lease modifications. While deferments for this and future periods delay rent
8


payments, these deferments generally do not release customers from the obligation to pay the deferred amounts in the future. Deferred rent amounts are reflected in the Company's financial statements as accounts receivable if collection is determined to be probable or recognized when received as variable lease payments if collection is determined to not be probable. Certain agreements with tenants where remaining lease terms are extended, or other changes are made that do not qualify for the treatment in the FASB Staff Q&A, are treated as lease modifications. In these circumstances, upon an executed lease modification, if the tenant is not being recognized on a cash basis, the contractual rent reflected in accounts receivable and straight-line rent receivable will be amortized over the remaining term of the lease against rental revenue. In limited cases, customers may be entitled to the abatement of rent during governmentally imposed prohibitions on business operations which is recognized in the period to which the abatement relates, or the Company may provide rent concessions to tenants. In cases where the Company provides concessions to tenants to which they are not otherwise entitled, those amounts will be recognized in the period in which the concession is granted unless the changes are accounted for as lease modifications.

Most of the Company’s lease contracts are triple-net leases, which require the tenants to make payments to third parties for lessor costs (such as property taxes and insurance) associated with the properties. In accordance with Topic 842, the Company does not include these lessee payments to third parties in rental revenue or property operating expenses. In certain situations, the Company pays these lessor costs directly to third parties and the tenants reimburse the Company. In accordance with Topic 842, these payments are presented on a gross basis in rental revenue and property operating expense. During the three months ended March 31, 2022 and 2021, the Company recognized $0.5 million and $1.0 million, respectively, in tenant reimbursements related to the gross up of these reimbursed expenses which are included in rental revenue.

Certain of the Company's leases, particularly at its entertainment districts, require the tenants to make payments to the Company for property-related expenses such as common area maintenance. The Company has elected to combine these non-lease components with the lease components in rental revenue. For the three months ended March 31, 2022 and 2021, the amounts due for non-lease components included in rental revenue totaled $4.5 million and $3.8 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 $3.4 million and $2.0 million for the three months ended March 31, 2022 and 2021, respectively.

The Company regularly evaluates the collectibility of its receivables on a lease-by-lease basis. The evaluation primarily consists of reviewing past due account balances and considering such factors as the credit quality of the Company's tenants, historical trends of the tenant, current economic conditions and changes in customer payment terms. When the collectibility of lease receivables or future lease payments are no longer probable, the Company records a direct write-off of the receivable to rental revenue and recognizes future rental revenue on a cash basis.

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

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

9


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

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

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

As permitted under Topic 326, the Company made an accounting policy election to not measure an allowance for credit losses for accrued interest receivables related to its mortgage notes and notes receivable. Accordingly, if accrued interest receivable is deemed to be uncollectible, the Company will record any necessary write-offs as a reversal of interest income. There were no accrued interest write-offs for the three months ended March 31, 2022 and 2021. As of March 31, 2022, 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. As of March 31, 2022, 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 parameters have been met as provided by the mortgage agreement. There was no participating interest income for the three months ended March 31, 2022 and 2021.

Concentrations of Risk
AMC, Topgolf USA (Topgolf) and Regal represented a significant portion of the Company's total revenue for the three months ended March 31, 2022 and 2021. The Company began recognizing revenue on a cash basis for AMC at the end of the first quarter of 2020 and for Regal at the end of the third quarter of 2020 and cash payments were reduced due to the impact of the COVID-19 pandemic. The following is a summary of the Company's total revenue derived from rental or interest payments from AMC, Topgolf and Regal (dollars in thousands):
Three Months Ended March 31,
20222021
Total Revenue% of Company's Total RevenueTotal Revenue% of Company's Total Revenue
AMC$23,422 14.9 %$23,835 21.3 %
Topgolf22,383 14.2 %20,486 18.3 %
Regal21,255 13.5 %625 0.6 %

10


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 non-vested 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 income (loss) and comprehensive income.

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 income (loss) and comprehensive income was $4 thousand for both the three months ended March 31, 2022 and 2021.

Nonvested Shares Issued to Employees
The Company grants nonvested shares to employees pursuant to both the Annual Incentive Program and the Long-Term Incentive Plan. The Company amortizes the expense related to the nonvested shares awarded to employees under the Long-Term Incentive Plan and the premium awarded under the nonvested share alternative of the Annual Incentive Program on a straight-line basis over the future vesting period (three years or four years). Expense recognized related to nonvested shares and included in "General and administrative expense" in the accompanying consolidated statements of income (loss) and comprehensive income was $2.0 million and $2.2 million for the three months ended March 31, 2022 and 2021, respectively.

Nonvested Performance Shares Issued to Employees
The Company awards performance shares to the Company's executive officers pursuant to the Long-Term Incentive Plan. The performance shares contain both a market condition and a performance condition. The Company amortizes the expense related to the performance shares over the future performance period of three years. Expense recognized related to performance shares and included in "General and administrative expense" in the accompanying consolidated statements of income (loss) and comprehensive income was $1.6 million and $0.9 million for the three months ended March 31, 2022 and 2021, respectively.

Restricted Share Units Issued to Non-Employee Trustees
The Company issues restricted share units to non-employee Trustees for payment of their annual retainers under the Company's Trustee compensation program. The fair value of the share units granted was based on the share price at the date of grant. The share units vest upon the earlier of the day preceding the next annual meeting of shareholders or a change of control. The settlement date for the shares is selected by the non-employee Trustee, and ranges from one year from the grant date to upon termination of service. This expense is amortized by the Company on a straight-line basis over the year of service by the non-employee Trustees. Total expense recognized related to shares issued to non-employee Trustees and included in "General and administrative expense" in the accompanying consolidated statements of income (loss) and comprehensive income was $0.6 million for both the three months ended March 31, 2022 and 2021.

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

The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to
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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. On March 5, 2021, the Financial Conduct Authority ("FCA") announced that the USD LIBOR will no longer be published after June 30, 2023. At March 31, 2022, the Company had 10 agreements (including debt, derivative, mortgage note and lease agreements) that are indexed to LIBOR, of which three mature prior to June 30, 2023. The Company is monitoring and evaluating the related risks with transitioning these contracts to a replacement index.

In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures. The ASU eliminates the accounting guidance for troubled debt restructurings (TDR) by creditors that have adopted the CECL model and enhances disclosure requirements for loan modifications made with borrowers experiencing financial difficulty. In addition, the amendments require disclosure of current period gross write-offs by year of origination for financing receivables. ASU 2022-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2022. The Company expects to adopt the guidance beginning January 1, 2023 and is currently evaluating the impact that ASU 2022-02 will have on its consolidated financial statements and related disclosures.

3. Real Estate Investments

The following table summarizes the carrying amounts of real estate investments as of March 31, 2022 and December 31, 2021 (in thousands):
March 31, 2022December 31, 2021
Buildings and improvements$4,580,400 $4,523,052 
Furniture, fixtures & equipment108,454 108,907 
Land1,229,363 1,222,149 
Leasehold interests26,987 26,717 
5,945,204 5,880,825 
Accumulated depreciation(1,206,317)(1,167,734)
Total$4,738,887 $4,713,091 
Depreciation expense on real estate investments was $38.8 million and $38.9 million for the three months ended March 31, 2022 and 2021, respectively.

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4. Impairment Charges

The Company reviews its properties for changes in circumstances that indicate that the carrying value of a property may not be recoverable based on an estimate of undiscounted future cash flows. During the three months ended March 31, 2022, the Company received an offer to sell a recently vacated property. As a result, the Company reassessed the expected holding period, and determined that the estimated cash flows were not sufficient to recover the carrying value of the property. The Company estimated the fair value of this property by taking into account the purchase offer. The Company reduced the carrying value of the real estate investment, net to $4.7 million. The Company recognized an impairment charge of $4.4 million on the real estate investment, which is the amount that the carrying value of the asset exceeded the estimated fair value.

5. Investments

The Company's investment spending during the three months ended March 31, 2022 totaled $24.4 million, and included the acquisition of one fitness and wellness property for approximately $19.9 million, as well as spending on build-to-suit experiential development and redevelopment projects.

6. Investment in Mortgage Notes and Notes Receivable

The Company measures expected credit losses on its mortgage notes and notes receivable on an individual basis over the related contractual term as 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 loan by loan basis. As of March 31, 2022, 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.

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Investment in mortgage notes, including related accrued interest receivable, at March 31, 2022 and December 31, 2021 consists of the following (in thousands):
Outstanding principal amount of mortgageCarrying amount as ofUnfunded commitments
DescriptionYear of OriginationInterest RateMaturity DateMarch 31, 2022December 31, 2021March 31, 2022
Attraction property Powells Point, North Carolina20197.75 %6/30/202528,864 28,695 28,243  
Fitness & wellness property Omaha, Nebraska20177.85 %1/3/202710,905 10,952 10,940  
Fitness & wellness property Merriam, Kansas20197.55 %7/31/20299,090 9,171