10-Q 1 epr-20240331.htm 10-Q epr-20240331
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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, 2024
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 accounting 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 Exchange Act). Yes    No 

At May 1, 2024, there were 75,672,637 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 our capital resources and liquidity, our expected pursuit of growth opportunities, our expected cash flows, the performance of our customers, our expected cash collections and our results of operations and financial condition. Forward-looking statements involve numerous risks and uncertainties, and you should not rely on them as predictions of actual events. There is no assurance that the events or circumstances reflected in the forward-looking statements will occur. You can identify forward-looking statements by use of words such as “will be,” “intend,” “continue,” “believe,” “may,” “expect,” “hope,” “anticipate,” “goal,” “forecast,” “pipeline,” “estimates,” “offers,” “plans,” “would” or other similar expressions or other comparable terms or discussions of strategy, plans or intentions in this Quarterly Report on Form 10-Q.

Factors that could materially and adversely affect us include, but are not limited to, the factors listed below:
Global economic uncertainty, disruptions in financial markets, and generally weakening economic conditions;
Risks associated with COVID-19, or the future outbreak of any additional variants of COVID-19 or other highly infectious or contagious diseases;
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;
Rising interest rates;
Defaults in the performance of lease terms by our tenants;
Defaults by our customers and counterparties on their obligations owed to us;
A borrower's bankruptcy or default;
Risks associated with sales or divestitures of properties;
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 or at all;
Risks of operating in the experiential real estate industry (including the impact of labor strikes on the production, supply or theatrical release of motion pictures to our theatre tenants);
Our ability to compete effectively;
Risks associated with three tenants representing a substantial portion of our lease revenues;
The ability of our build-to-suit tenants to achieve sufficient operating results within expected time-frames and therefore have capacity to pay their agreed-upon 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;
i


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;
Risks associated with litigation that could negatively impact our financial condition, cash flows, results of operations and the trading price of our shares;
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, 2023 (the "2023 Annual Report") filed with the Securities and Exchange Commission ("SEC") on February 29, 2024.

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.


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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, 2024December 31, 2023
(unaudited)
Assets
Real estate investments, net of accumulated depreciation of $1,470,507 and $1,435,683 at March 31, 2024 and December 31, 2023, respectively
$4,629,859 $4,537,359 
Land held for development20,168 20,168 
Property under development36,138 131,265 
Operating lease right-of-use assets183,031 186,628 
Mortgage notes and related accrued interest receivable, net578,915 569,768 
Investment in joint ventures46,127 49,754 
Cash and cash equivalents59,476 78,079 
Restricted cash2,929 2,902 
Accounts receivable69,414 63,655 
Other assets67,979 61,307 
Total assets$5,694,036 $5,700,885 
Liabilities and Equity
Liabilities:
Accounts payable and accrued liabilities$84,153 $94,927 
Operating lease liabilities223,077 226,961 
Common dividends payable22,918 25,275 
Preferred dividends payable6,032 6,032 
Unearned rents and interest91,829 77,440 
Debt2,817,710 2,816,095 
Total liabilities3,245,719 3,246,730 
Equity:
Common Shares, $0.01 par value; 125,000,000 shares authorized at March 31, 2024 and December 31, 2023; and 83,553,611 and 82,964,231 shares issued at March 31, 2024 and December 31, 2023, respectively
835 829 
Preferred Shares, $0.01 par value; 25,000,000 shares authorized:
5,392,916 Series C convertible shares issued at March 31, 2024 and December 31, 2023; liquidation preference of $134,822,900
54 54 
3,445,980 Series E convertible shares issued at March 31, 2024 and December 31, 2023; liquidation preference of $86,149,500
34 34 
6,000,000 Series G shares issued at March 31, 2024 and December 31, 2023; liquidation preference of $150,000,000
60 60 
Additional paid-in-capital3,939,242 3,924,467 
Treasury shares at cost: 7,883,581 and 7,631,725 common shares at March 31, 2024 and December 31, 2023, respectively
(285,413)(274,038)
Accumulated other comprehensive income1,119 3,296 
Distributions in excess of net income(1,207,614)(1,200,547)
Total equity$2,448,317 $2,454,155 
Total liabilities and equity$5,694,036 $5,700,885 
See accompanying notes to consolidated financial statements.
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EPR PROPERTIES
Consolidated Statements of Income and Comprehensive Income
(Unaudited)
(Dollars in thousands except per share data)
 Three Months Ended March 31,
 20242023
Rental revenue$142,281 $151,591 
Other income12,037 9,333 
Mortgage and other financing income12,914 10,472 
Total revenue167,232 171,396 
Property operating expense14,920 14,155 
Other expense12,976 8,950 
General and administrative expense13,908 13,965 
Retirement and severance expense1,836  
Transaction costs1 270 
Provision (benefit) for credit losses, net2,737 587 
Depreciation and amortization40,469 41,204 
Total operating expenses86,847 79,131 
Gain (loss) on sale of real estate17,949 (560)
Income from operations98,334 91,705 
Interest expense, net31,651 31,722 
Equity in loss from joint ventures3,627 1,985 
Income before income taxes63,056 57,998 
Income tax expense347 341 
Net income62,709 57,657 
Preferred dividend requirements6,032 6,033 
Net income available to common shareholders of EPR Properties$56,677 $51,624 
Net income available to common shareholders of EPR Properties per share:
Basic$0.75 $0.69 
Diluted$0.75 $0.69 
Shares used for computation (in thousands):
Basic75,398 75,084 
Diluted75,705 75,283 
Other comprehensive income:
Net income$62,709 $57,657 
Foreign currency translation adjustment(6,909)230 
Unrealized gain (loss) on derivatives, net4,732 (304)
Comprehensive income attributable to EPR Properties$60,532 $57,583 

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, 202282,545,501 $825 14,840,297 $148 $3,899,732 $(269,751)$1,897 $(1,097,132)$2,535,719 
Restricted share units issued to Trustees1,449 — — — — — — —  
Issuance of nonvested shares and performance shares, net of cancellations352,090 4 — — 5,956 (588)— — 5,372 
Purchase of common shares for vesting— — — — — (3,565)— — (3,565)
Share-based compensation expense— — — — 4,322 — — — 4,322 
Foreign currency translation adjustment— — — — — — 230 — 230 
Change in unrealized loss on derivatives, net— — — — — — (304)— (304)
Net income— — — — — — — 57,657 57,657 
Issuances of common shares5,557  — — 225 — — — 225 
Conversion of Series E Convertible Preferred shares to common shares632 — (1,311)— — — — —  
Dividend equivalents accrued on performance shares— — — — — — — (353)(353)
Dividends to common shareholders ($0.8250 per share)
— — — — — — — (62,109)(62,109)
Dividends to Series C preferred shareholders ($0.359375 per share)
— — — — — — — (1,938)(1,938)
Dividends to Series E preferred shareholders ($0.5625 per share)
— — — — — — — (1,938)(1,938)
Dividends to Series G preferred shareholders ($0.359375 per share)
— — — — — — — (2,156)(2,156)
Balance at March 31, 202382,905,229 $829 14,838,986 $148 $3,910,235 $(273,904)$1,823 $(1,107,969)$2,531,162 

Balance at December 31, 202382,964,231 $829 14,838,896 $148 $3,924,467 $(274,038)$3,296 $(1,200,547)$2,454,155 
Issuance of nonvested shares and performance shares, net of cancellations583,135 6 — — 9,212  — — 9,218 
Purchase of common shares for vesting— — — — — (11,375)— — (11,375)
Share-based compensation expense— — — — 3,692 — — — 3,692 
Share-based compensation included in retirement and severance expense— — — — 1,598 — — — 1,598 
Foreign currency translation adjustment— — — — — — (6,909)— (6,909)
Change in unrealized gain on derivatives, net— — — — — — 4,732 — 4,732 
Net income— — — — — — — 62,709 62,709 
Issuances of common shares6,245  — — 273 — — — 273 
Dividend equivalents accrued on performance shares— — — — — — — (598)(598)
Dividends to common shareholders ($0.835 per share)
— — — — — — — (63,146)(63,146)
Dividends to Series C preferred shareholders ($0.359375 per share)
— — — — — — — (1,938)(1,938)
Dividends to Series E preferred shareholders ($0.5625 per share)
— — — — — — — (1,938)(1,938)
Dividends to Series G preferred shareholders ($0.359375 per share)
— — — — — — — (2,156)(2,156)
Balance at March 31, 202483,553,611 $835 14,838,896 $148 $3,939,242 $(285,413)$1,119 $(1,207,614)$2,448,317 
See accompanying notes to consolidated financial statements.
3


EPR PROPERTIES
Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
 Three Months Ended March 31,
 20242023
Operating activities:
Net income$62,709 $57,657 
Adjustments to reconcile net income to net cash provided by operating activities:
(Gain) loss on sale of real estate(17,949)560 
Deferred income tax benefit(277)(90)
Equity in loss from joint ventures3,627 1,985 
Provision (benefit) for credit losses, net2,737 587 
Depreciation and amortization40,469 41,204 
Amortization of deferred financing costs2,212 2,129 
Amortization of above/below market leases and tenant allowances, net(84)(89)
Share-based compensation expense to management and Trustees3,692 4,322 
Share-based compensation expense included in retirement and severance expense1,598  
Change in assets and liabilities:
Operating lease assets and liabilities(287)317 
Mortgage notes accrued interest receivable(1,418)(296)
Accounts receivable(5,819)2,998 
Other assets(3,878)(6,276)
Accounts payable and accrued liabilities6,202 8,861 
Unearned rents and interest6,009 7,661 
Net cash provided by operating activities99,543 121,530 
Investing activities:
Acquisition of and investments in real estate and other assets(34,531)(46,669)
Proceeds from sale of real estate46,188 4,029 
Investment in mortgage notes receivable(9,969)(1,427)
Proceeds from mortgage notes receivable paydowns198 132 
Investment in notes receivable (3,025)
Proceeds from note receivable paydowns136 161 
Additions to properties under development(40,573)(14,711)
Net cash used by investing activities(38,551)(61,510)
Financing activities:
Deferred financing fees paid(53)(74)
Net proceeds from issuance of common shares185 141 
Purchase of common shares for treasury for vesting(11,375)(3,565)
Dividends paid to shareholders(68,241)(67,988)
Net cash used by financing activities(79,484)(71,486)
Effect of exchange rate changes on cash(84)(8)
Net change in cash and cash equivalents and restricted cash(18,576)(11,474)
Cash and cash equivalents and restricted cash at beginning of the period80,981 110,511 
Cash and cash equivalents and restricted cash at end of the period$62,405 $99,037 
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,
 20242023
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents at beginning of the period$78,079 $107,934 
Restricted cash at beginning of the period2,902 2,577 
Cash and cash equivalents and restricted cash at beginning of the period$80,981 $110,511 
Cash and cash equivalents at end of the period$59,476 $96,438 
Restricted cash at end of the period2,929 2,599 
Cash and cash equivalents and restricted cash at end of the period$62,405 $99,037 
Supplemental schedule of non-cash activity:
Transfer of property under development to real estate investments$111,154 $134 
Transfer of real estate investments to mortgage note$ $1,321 
Issuance of nonvested shares and restricted share units at fair value, including nonvested shares issued for payment of bonuses$20,096 $21,698 
Supplemental disclosure of cash flow information:
Cash paid during the period for interest$17,265 $17,913 
Cash paid during the period for income taxes$617 $253 
Interest cost capitalized$958 $783 
Change in accrued capital expenditures$(6,762)$(7,510)
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 (U.S.) and Canada.

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

Basis of Presentation
The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. In addition, operating results for the three-month period ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. Amounts as of December 31, 2023 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, 2023 filed with the Securities and Exchange Commission (SEC) on February 29, 2024.

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

The Company examines specific criteria and uses its judgment when determining if the Company is the primary beneficiary of a VIE. The primary beneficiary generally is defined as the party with the controlling financial interest. Consideration of various factors include, but are not limited to, the Company’s ability to direct the activities that most significantly impact the entity’s economic performance and its obligation to absorb losses from or right to receive benefits of the VIE that could potentially be significant to the VIE. As of March 31, 2024 and December 31, 2023, the Company does not have any investments in consolidated VIEs.

Deferred Financing Costs
Deferred financing costs are amortized over the terms of the related debt obligations, as applicable. Deferred financing costs of $23.5 million and $25.1 million as of March 31, 2024 and December 31, 2023, respectively, are shown as a reduction of debt. The deferred financing costs related to the unsecured revolving credit facility of $3.6 million and $4.1 million as of March 31, 2024 and December 31, 2023, respectively, are included in "Other assets" in the accompanying consolidated balance sheets.

Rental Revenue
The Company leases real estate to its tenants under leases classified as operating leases. The Company's leases generally provide for rent escalations throughout the lease terms. Rents that are fixed are recognized on a straight-line basis over the lease term. Base rent escalations that include a variable component are recognized upon the occurrence of the specified event as defined in the Company's lease agreements. Many of the Company's leasing
6


arrangements include options to extend the lease, which are not included in the minimum lease terms unless the option is reasonably certain to be exercised. Straight-line rental revenue is subject to an evaluation for collectibility, and the Company records a direct write-off against rental revenue if collectibility of these future rents is not probable. For the three months ended March 31, 2024 and 2023, the Company recognized $3.7 million and $2.1 million, respectively, of straight-line rental revenue. There were no straight-line write-offs recognized during the three months ended March 31, 2024 and 2023.

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, 2024 and 2023, the Company recognized $0.4 million and $0.7 million, respectively, in tenant reimbursements related to the gross-up of these reimbursed expenses that 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, 2024 and 2023, the amounts due for non-lease components included in rental revenue totaled $4.7 million for both periods.

In addition, most of the Company's tenants are subject to additional rents (above base rents) if gross revenues of the properties exceed certain thresholds defined in the lease agreements (percentage rents). Percentage rents are recognized at the time when specified triggering events occur as provided by the lease agreement. Rental revenue included percentage rents of $1.9 million and $1.8 million for the three months ended March 31, 2024 and 2023, 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.

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).

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, 2024 and 2023. As of March 31, 2024, the Company believes that all outstanding accrued interest is collectible.

In the event the Company has a past due mortgage note or note receivable that the Company determines is collateral-dependent, the Company measures expected credit losses based on the fair value of the collateral. As of March 31, 2024, the Company does not have any mortgage notes or notes receivable with past due principal balances. See Note 5 for further discussion of mortgage notes and notes receivable for which the Company elected to apply the collateral-dependent practical expedient.

7


Concentrations of Risk
Topgolf USA (Topgolf), American-Multi Cinema, Inc. (AMC) and Regal Cinemas (Regal), a subsidiary of Cineworld Group, represented a significant portion of the Company's total revenue for the three months ended March 31, 2024 and 2023. The following is a summary of the Company's total revenue derived from rental or interest payments from Topgolf, AMC and Regal (dollars in thousands):
Three Months Ended March 31,
20242023
Total Revenue% of Company's Total RevenueTotal Revenue% of Company's Total Revenue
Topgolf$24,723 14.8 %$23,672 13.8 %
AMC23,464 14.0 %23,801 13.9 %
Regal18,706 11.2 %28,751 16.8 %

Impact of Recently Issued Accounting Standards
In November 2023, the FASB issued Accounting Standards Update (ASU) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance is effective for fiscal years beginning after December 31, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on the Company's financial statement disclosures.

3. Real Estate Investments

The following table summarizes the carrying amounts of real estate investments as of March 31, 2024 and December 31, 2023 (in thousands):
March 31, 2024December 31, 2023
Buildings and improvements$4,712,831 $4,609,050 
Furniture, fixtures & equipment117,241 115,596 
Land1,241,841 1,219,943 
Leasehold interests28,453 28,453 
6,100,366 5,973,042 
Accumulated depreciation(1,470,507)(1,435,683)
Total$4,629,859 $4,537,359 
Depreciation expense on real estate investments was $39.5 million and $40.0 million for the three months ended March 31, 2024 and 2023, respectively.

4. Investments and Dispositions

The Company's investment spending during the three months ended March 31, 2024 totaled $85.7 million, and included $33.4 million for the acquisition of an attraction property in New York and $14.7 million for the acquisition and financing of land for two build-to-suit eat & play developments in Kansas and Illinois, respectively. Investment spending for the quarter also included experiential build-to-suit development and redevelopment projects.

During the three months ended March 31, 2024, the Company completed the sale of two cultural properties and one vacant theatre property for net proceeds totaling $46.2 million and recognized a gain on sale totaling $17.9 million.

5. Investment in Mortgage Notes and Notes Receivable

The Company measures expected credit losses on its mortgage notes and notes receivable on an individual basis because its financial instruments do not have similar risk characteristics. The Company uses a forward-looking
8


commercial real estate loss 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. As of March 31, 2024, the Company did not anticipate any prepayments. Therefore, the contractual terms of its mortgage notes and notes receivable were used for the calculation of the expected credit losses. The Company updates the model inputs at each reporting period to reflect, if applicable, any newly originated loans, changes to loan specific information on existing loans and current macroeconomic conditions. The CECL allowance is a valuation account that is deducted from the related mortgage note or note receivable. Effective January 1, 2023, the Company adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures.

Certain of the Company’s mortgage notes and notes receivable include commitments to fund future 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 sheets.

Investment in mortgage notes, including related accrued interest receivable, was $578.9 million and $569.8 million at March 31, 2024 and December 31, 2023, respectively.

Investment in notes receivable, including related accrued interest receivable, was $3.7 million and $3.9 million at March 31, 2024 and December 31, 2023, respectively, and is included in "Other assets" in the accompanying consolidated balance sheets.

At March 31, 2024, one of the Company's mortgage notes receivable and two of the Company's notes receivable are considered collateral-dependent and expected credit losses are based on the fair value of the underlying collateral at the reporting date. The Company assessed the fair value of the collateral as of March 31, 2024 on the mortgage note receivable and the notes receivable. The mortgage note receivable has a carrying amount at March 31, 2024 of approximately $10.4 million net of an allowance for credit loss totaling $0.4 million. The notes receivable remain fully reserved with an allowance for credit loss totaling $7.6 million and $1.9 million, respectively, which represents the outstanding principal balance of the notes as of March 31, 2024. Income from these borrowers is recognized on a cash basis. During the three months ended March 31, 2024 and 2023, the Company received cash basis interest payments of $0.2 million for each period from the mortgage note receivable borrower.

At March 31, 2024, the Company's investment in one of the notes receivable was a variable interest investment and the underlying entity is a VIE. The Company is not the primary beneficiary of this VIE because the Company does not individually have the power to direct the activities that are most significant to the entity and, accordingly, this investment is not consolidated. The Company's maximum exposure to loss associated with this VIE is limited to the Company's outstanding note receivable in the amount of $7.6 million, which is fully reserved in the allowance for credit losses at March 31, 2024.

The following summarizes the activity within the allowance for credit losses related to mortgage notes, unfunded commitments and notes receivable for the three months ended March 31, 2024 (in thousands):
Mortgage notes receivableUnfunded commitments - mortgage notes receivableNotes receivableUnfunded commitments - notes receivableTotal
Allowance for credit losses at December 31, 2023$3,656 $1,072 $9,687 $ $14,415 
Provision (benefit) for credit losses, net2,041 701 (5) 2,737 
Charge-offs     
Recoveries     
Allowance for credit losses at March 31, 2024
$5,697 $1,773 $9,682 $ $17,152 

9


6. Accounts Receivable

The following table summarizes the carrying amounts of accounts receivable as of March 31, 2024 and December 31, 2023 (in thousands):
March 31, 2024December 31, 2023
Receivable from tenants$3,398 $7,298 
Receivable from non-tenants (1)6,687 824 
Straight-line rent receivable59,329 55,533 
Total$69,414 $63,655 

(1) Receivable from non-tenants includes a payment of $5.9 million made to the City of Kansas City, Missouri under protest related to an assessment of tax years ending December 31, 2018 through 2022. The City has denied the Company’s necessary deduction for dividends paid for each of these years resulting in assessment of additional tax, penalties and interest. The Company has recorded this payment as a receivable as it intends to petition a court for review of the relevant facts and believes it is more likely than not the Company's position will be upheld by the court and the payment will be refunded.

As of March 31, 2024, as a result of the COVID-19 pandemic, the Company continues to recognize revenue on a cash basis for AMC and two other tenants, one of which has deferred rent from this period that is not booked as a receivable of approximately $11.5 million. The Company has collected all deferred receivables from accrual basis tenants that were deferred due to the COVID-19 pandemic. During the three months ended March 31, 2024 and 2023, the Company collected $0.6 million and $6.5 million, respectively, in deferred rent and interest from cash basis customers and from customers for which the deferred payments were not previously recognized as revenue.

7. Capital Markets and Dividends

During the three months ended March 31, 2024, the Company declared cash dividends totaling $0.835 per common share. Additionally, during the three months ended March 31, 2024, the Company declared cash dividends of $0.359375 per share on each of the Company's 5.75% Series C cumulative convertible preferred shares and the Company's 5.75% Series G cumulative redeemable preferred shares, and cash dividends of $0.5625 per share on the Company's 9.00% Series E cumulative convertible preferred shares.

8. Unconsolidated Real Estate Joint Ventures

The following table summarizes the Company's investments in unconsolidated joint ventures as of March 31, 2024 and December 31, 2023 (in thousands):
Investment as of
(Loss) Income for the Three Months Ended
Property TypeLocationOwnership InterestMarch 31, 2024December 31, 2023March 31, 2024March 31, 2023
Experiential lodgingSt. Pete Beach, FL65 %(1)$14,504 $14,727 $(223)$682 
Experiential lodgingWarrens, WI95 %(2)8,417 9,945 (1,528)(1,215)
Experiential lodgingBreaux Bridge, LA85 %(3)17,368 18,996 (1,628)(1,225)
Experiential lodgingHarrisville, PA62 %(4)5,838 6,086 (248)(227)
TheatresChinavarious    
$46,127 $49,754 $(3,627)$(1,985)

(1) The Company has equity investments in two unconsolidated real estate joint ventures, one that holds the investment in the real estate of the experiential lodging properties and the other that holds the lodging operations,
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which are facilitated by a management agreement. The joint venture that holds the real property has a secured mortgage loan of $105.0 million at March 31, 2024. The maturity date of this mortgage loan is May 18, 2025. The note can be extended for two additional one-year periods from the original maturity date upon the satisfaction of certain conditions. The mortgage loan bears interest at SOFR plus 3.65%, with monthly interest payments required. The joint venture has an interest rate cap agreement to limit the variable portion of the interest rate (SOFR) on this note to 3.5% from May 19, 2022 to June 1, 2024.

(2) The Company has equity investments in two unconsolidated real estate joint ventures, one that holds the investment in the real estate of the experiential lodging property and the other that holds the lodging operations, which are facilitated by a management agreement. The joint venture that holds the real property has a secured mortgage loan of $22.8 million at March 31, 2024 that provides for additional draws of approximately $1.1 million to fund renovations. The maturity date of this mortgage loan is September 15, 2031. The loan bears interest at an annual fixed rate of 4.00% with monthly interest payments required. Additionally, the Company has guaranteed the completion of the renovations in the amount of approximately $14.2 million, with $1.2 million remaining to fund at March 31, 2024.

(3) The Company has equity investments in two unconsolidated real estate joint ventures, one that holds the investment in the real estate of the experiential lodging property and the other that holds the lodging operations, which are facilitated by a management agreement. The joint venture that holds the real estate property has a secured senior mortgage loan of $38.5 million at March 31, 2024. The maturity date of this mortgage loan is March 8, 2034. The mortgage loan bears interest at an annual fixed rate of 3.85% through April 7, 2025 and increases to 4.25% from April 8, 2025 through maturity. Monthly interest payments are required. Additionally, the Company provided a subordinated loan to the joint venture for $11.3 million with a maturity date of March 8, 2034. The mortgage loan bears interest at an annual fixed rate of 7.25% through the sixth anniversary and increases to SOFR plus 7.20% with a cap of 8.00%, through maturity.

(4) The Company has a 92% equity investment in two separate unconsolidated real estate joint ventures, that through subsequent joint ventures (described below), hold the investments in the real estate of the experiential lodging property and the lodging operations, which are facilitated by a management agreement. The Company's investments in these two unconsolidated real estate joint ventures were considered to be variable interest investments and the Company's investment in the joint venture that holds the lodging operations is a VIE. The Company is not the primary beneficiary of the VIE because the Company does not individually have the power to direct the activities that are most important to the joint venture and, accordingly, this investment is not consolidated. Other than the guarantee described below, the Company's maximum exposure to loss is limited to its initial investment, which was nominal.

The Company's investments in the two unconsolidated real estate joint ventures (representing 92% of each joint venture's equity) have a 67% equity interest in two separate consolidated joint ventures, one that holds the investments in the real estate of the experiential lodging property and the other that holds the lodging operations, which are facilitated by a management agreement. The consolidated joint venture that holds the real estate property has a secured senior mortgage loan commitment of up to $22.5 million at March 31, 2024 in order to fund renovations, with $13.0 million outstanding at March 31, 2024. The maturity date of this mortgage loan is November 1, 2029. The mortgage loan bears interest at an annual fixed rate of 6.38% with monthly interest payments required. The Company has guaranteed $10.0 million in principal on the secured mortgage loan, and, upon completion of construction and achieving a specified debt service coverage ratio, the principal guarantee will be reduced to $5.0 million. The guarantee will be removed completely upon achievement of specified debt service coverage for three consecutive calculation periods. Additionally, the Company has guaranteed the completion of the renovations in the amount of approximately $13.9 million, with $5.8 million remaining to fund at March 31, 2024.

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
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$1.6 million and $1.3 million at March 31, 2024 and December 31, 2023, respectively. The Company had derivative liabilities of $0.4 million and $4.9 million at March 31, 2024 and December 31, 2023, respectively. The Company has not posted or received collateral with its derivative counterparties as of March 31, 2024 or December 31, 2023. 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 SOFR-based borrowings. The Company manages this risk by following established risk management policies and procedures including the use of derivatives. The Company’s objective in using derivatives is to add stability to reported earnings and to manage its exposure to foreign exchange and interest rate movements or other identified risks. To accomplish this objective, the Company primarily uses interest rate swaps, cross-currency swaps and foreign currency forwards.

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

At March 31, 2024, the Company had one interest rate swap agreement designated as a cash flow hedge of interest rate risk. The interest rate swap agreement outstanding as of March 31, 2024 is summarized below:

Fixed rateNotional Amount (in millions)IndexMaturity
2.5325%$25.0 USD SOFRSeptember 30, 2026

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

Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. As of March 31, 2024, the Company estimates that during the twelve months ending March 31, 2025, $0.6 million of gains will be reclassified from AOCI to interest expense.

Cash Flow Hedges of Foreign Exchange Risk
The Company is exposed to foreign currency exchange risk against its functional currency, USD, on CAD denominated cash flow from its six Canadian properties. The Company uses cross-currency swaps to mitigate its exposure to fluctuations in the USD-CAD exchange rate on cash inflows associated with these properties, which should hedge a significant portion of the Company's expected CAD denominated cash flows. As of March 31, 2024, the Company had the following cross-currency swaps:
Fixed rateNotional Amount (in millions, CAD)Annual Cash Flow (in millions, CAD)Maturity
$1.26 CAD per USD
$150.0 $10.8 October 1, 2024
$1.28 CAD per USD
200.0 4.5 October 1, 2024
$1.30 CAD per USD
90.0 8.1 December 1, 2024
$440.0 $23.4 

The change in the fair value of foreign currency derivatives designated and that qualify as cash flow hedges of foreign exchange risk is recorded in AOCI and reclassified into earnings in the period that the hedged forecasted transaction affects earnings within the same income statement line item as the earnings effect of the hedged
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transaction. As of March 31, 2024, the Company estimates that during the twelve months ending March 31, 2025, $0.5 million of gains will be reclassified from AOCI to other income.

Net Investment Hedges
The Company is exposed to fluctuations in the USD-CAD exchange rate on its net investments in Canada. As such, the Company uses currency forward agreements to manage its exposure to changes in foreign exchange rates on certain of its foreign net investments. As of March 31, 2024, the Company had the following foreign currency forwards designated as net investment hedges:
Fixed rateNotional Amount (in millions, CAD)Maturity
$1.35 CAD per USD
$200.0 October 1, 2025
$1.35 CAD per USD
90.0 December 1, 2025
Total$290.0 

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

Below is a summary of the effect of derivative instruments on the consolidated statements of changes in equity and income for the three months ended March 31, 2024 and 2023.
Effect of Derivative Instruments on the Consolidated Statements of Changes in Equity and Comprehensive Income for the Three Months Ended March 31, 2024 and 2023 (Dollars in thousands)
 Three Months Ended March 31,
Description20242023
Cash Flow Hedges
Interest Rate Swaps
Amount of Gain (Loss) Recognized in AOCI on Derivative$334 $(298)
Amount of Income Reclassified from AOCI into Earnings (1)183 126 
Cross-Currency Swaps
Amount of Gain Recognized in AOCI on Derivative 342 4 
Amount of Income Reclassified from AOCI into Earnings (2)227 225 
Net Investment Hedges
Currency Forward Agreements
Amount of Gain Recognized in AOCI on Derivative 4,466 341 
Total
Amount of Gain Recognized in AOCI on Derivatives $5,142 $47 
Amount of Income Reclassified from AOCI into Earnings 410 351 
Interest expense, net in accompanying consolidated statements of income and comprehensive income $31,651 $31,722 
Other income in accompanying consolidated statements of income and comprehensive income $12,037 $9,333 
(1) Included in "Interest expense, net" in the accompanying consolidated statements of income and comprehensive income for the three months ended March 31, 2024 and 2023.
(2) Included in "Other income" in the accompanying consolidated statements of income and comprehensive income for the three months ended March 31, 2024 and 2023.

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

As of March 31, 2024, the fair value of the Company's derivatives in a liability position related to these agreements was $0.4 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 $0.3 million, after considering the right of offset. As of March 31, 2024, the Company had not posted any collateral related to these agreements and was not in breach of any provisions in these agreements.

10. Fair Value Disclosures

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

Derivative Financial Instruments
The Company determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives also use Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by itself and its counterparties. As of March 31, 2024, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives and therefore, classified its derivatives as Level 2 within the fair value reporting hierarchy.

The table below presents the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 aggregated by the level in the fair value hierarchy within which those measurements are classified and by derivative type.

Assets and Liabilities Measured at Fair Value on a Recurring Basis at
March 31, 2024 and December 31, 2023
(Dollars in thousands)
DescriptionQuoted Prices in Active Markets for Identical Assets (Level I)Significant Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
Balance at
end of period
March 31, 2024
Cross-Currency Swaps (1)$— $499 $— $499 
Currency Forward Agreements (2)— (442)— (442)
Interest Rate Swap Agreements (1)— 1,121 — 1,121 
December 31, 2023
Cross-Currency Swaps (1)$— $384 $— $384 
Currency Forward Agreements (2)— (4,908)— (4,908)
Interest Rate Swap Agreements (1)— 876 — 876 
(1) Included in "Other assets" in the accompanying consolidated balance sheets.
(2) Included in "Accounts payable and accrued liabilities" in the accompanying consolidated balance sheets.

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Non-recurring fair value measurements
The table below presents the Company's assets measured at fair value on a non-recurring basis as of December 31, 2023, aggregated by the level in the fair value hierarchy within which those measurements are classified.
Assets Measured at Fair Value on a Non-Recurring Basis at December 31, 2023
(Dollars in thousands)
DescriptionQuoted Prices in
Active Markets
for Identical
Assets (Level I)
Significant
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
Balance at
end of period
December 31, 2023
Real estate investments, net$— $ $39,150 $39,150 

During the year ended December 31, 2023, the Company recorded an impairment charge of $67.4 million related to real estate investments, net, on 12 properties. Management estimated the fair values of these investments taking into account various factors including independent appraisals, shortened hold periods and market conditions. The significant inputs and assumptions used in the real estate appraisals included market rents ranging from $4.50 per square foot to $20.00 per square foot, discount rates ranging from 8.50% to 11.50% and terminal capitalization rates ranging from 7.75% to 10.25%. These measurements were classified within Level 3 of the fair value hierarchy because many of the assumptions were not observable.

There were no assets or liabilities measured at fair value on a non-recurring basis at March 31, 2024.

Fair Value of Financial Instruments
The following methods and assumptions were used by the Company to estimate the fair value of each class of financial instruments at March 31, 2024 and December 31, 2023:

Mortgage notes receivable and related accrued interest receivable, net:
The fair value of the Company’s mortgage notes and related accrued interest receivable, net, is estimated by discounting the future cash flows of each instrument using current market rates. At March 31, 2024, the Company had a carrying value of $578.9 million in fixed-rate mortgage notes receivable outstanding, including related accrued interest and allowance for credit losses, with a weighted average interest rate of approximately 8.80%. The fixed-rate mortgage notes bear interest at rates of 6.50% to 12.32%. Discounting the future cash flows for fixed-rate mortgage notes receivable using rates of 6.50% to 10.65%, management estimates the fair value of the fixed-rate mortgage notes receivable to be approximately $618.0 million with an estimated weighted average market rate of 7.90% at March 31, 2024.

At December 31, 2023, the Company had a carrying value of $569.8 million in fixed-rate mortgage notes receivable outstanding, including related accrued interest and allowance for credit losses, with a weighted average interest rate of approximately 8.82%. The fixed-rate mortgage notes bear interest at rates of 6.99% to 12.32%. Discounting the future cash flows for fixed-rate mortgage notes receivable using rates of 7.15% to 10.25%, management estimates the fair value of the fixed-rate mortgage notes receivable to be $611.2 million with an estimated weighted average market rate of 7.84% at December 31, 2023.

Derivative instruments:
Derivative instruments are carried at their fair value.

Debt instruments:
The fair value of the Company's debt is estimated by discounting the future cash flows of each instrument using current market rates. At March 31, 2024, the Company had a carrying value of $25.0 million in variable-rate debt outstanding with an average interest rate of approximately 5.45%. The carrying value of the variable-rate debt outstanding approximated the fair value at March 31, 2024.

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At December 31, 2023, the Company had a carrying value of $25.0 million in variable-rate debt outstanding with an interest rate of approximately 5.48%. The carrying value of the variable-rate debt outstanding approximated the fair value at December 31, 2023.

At both March 31, 2024 and December 31, 2023, the $25.0 million of variable-rate debt outstanding, discussed above, had been effectively converted to a fixed rate by an interest rate swap agreement. See Note 9 for additional information related to the Company's interest rate swap agreement.

At March 31, 2024, the Company had a carrying value of $2.82 billion in fixed-rate long-term debt outstanding with a weighted average interest rate of approximately 4.34%. Discounting the future cash flows for fixed-rate debt using March 31, 2024 market rates of 5.97% to 6.41%, management estimates the fair value of the fixed rate debt to be approximately $2.62 billion with an estimated weighted average market rate of 6.24% at March 31, 2024.

At December 31, 2023, the Company had a carrying value of $2.82 billion in fixed-rate long-term debt outstanding with a weighted average interest rate of approximately 4.34%. Discounting the future cash flows for fixed-rate debt using December 31, 2023 market rates of 6.46% to 6.70%, management estimates the fair value of the fixed rate debt to be approximately $2.58 billion with an estimated weighted average market rate of 6.60% at December 31, 2023.

11. Earnings Per Share

The following table summarizes the Company’s computation of basic and diluted earnings per share (EPS) for the three months ended March 31, 2024 and 2023 (amounts in thousands except per share information):
 Three Months Ended March 31, 2024
 Income
(numerator)
Shares
(denominator)
Per Share
Amount
Basic EPS:
Net income$62,709 
Less: preferred dividend requirements(6,032)
Net income available to common shareholders$56,677 75,398 $0.75 
Diluted EPS:
Net income available to common shareholders$56,677 75,398 
Effect of dilutive securities:
Performance shares— 307 
Net income available to common shareholders$56,677 75,705 $0.75 

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 Three Months Ended March 31, 2023
 Income
(numerator)
Shares
(denominator)
Per Share
Amount
Basic EPS:
Net income$57,657 
Less: preferred dividend requirements (6,033)
Net income available to common shareholders$51,624 75,084 $0.69 
Diluted EPS:
Net income available to common shareholders$51,624 75,084 
Effect of dilutive securities:
Share options and performance shares— 199 
Net income available to common shareholders$51,624 75,283 $0.69 

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

The following shares have been excluded from the calculation of diluted earnings per share because they are anti-dilutive, or in the case of contingently issuable performance shares, are not probable of issuance:
The additional 2.3 million common shares that would result from the conversion of the Company’s 5.75% Series C cumulative convertible preferred shares and the corresponding add-back of the preferred dividends declared on those shares for both the three months ended March 31, 2024 and 2023.
The additional 1.7 million common shares that would result from the conversion of the Company’s 9.0% Series E cumulative convertible preferred shares and the corresponding add-back of the preferred dividends declared on those shares for both the three months ended March 31, 2024 and 2023.
Outstanding options to purchase 57 thousand and 83 thousand common shares at per share prices ranging from $44.44 to $76.63 for the three months ended March 31, 2024 and March 31, 2023, respectively.
The effect of 99 thousand contingently issuable performance shares granted during 2022 for the three months ended March 31, 2023.
The effect of 112 thousand contingently issuable performance shares granted during 2023 for the three months ended March 31, 2023.
The effect of 116 thousand contingently issuable performance shares granted during 2024 for the three months ended March 31, 2024.

12. Retirement of Executive Vice President, General Counsel and Secretary

On March 1, 2024, the Company's Executive Vice President, General Counsel and Secretary, Craig Evans, retired from the Company. Details of Mr. Evans' retirement are included in the previously disclosed Retirement and Release Agreement entered into between the Company and Mr. Evans. The role of General Counsel and Secretary was assumed by Paul Turvey upon Mr. Evans' retirement. For the three months ended March 31, 2024, the Company recorded retirement and severance expense related to Mr. Evans' retirement, as well as the departure of another employee, totaling $1.8 million, which included cash payments totaling $0.2 million and accelerated vesting of nonvested shares totaling $1.6 million.

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13. Equity Incentive Plans

All grants of common shares and options to purchase common shares were issued under the Company's 2007 Equity Incentive Plan prior to May 12, 2016, and under the 2016 Equity Incentive Plan on and after May 12, 2016. Under the 2016 Equity Incentive Plan, an aggregate of 3,950,000 common shares, options to purchase common shares and restricted share units, subject to adjustment in the event of certain capital events, may be granted. Additionally, the 2020 Long Term Incentive Plan (2020 LTIP) is a sub-plan under the Company's 2016 Equity Incentive Plan. Under the 2020 LTIP, the Company awards performance shares and restricted shares to the Company's executive officers. At March 31, 2024, there were 905,470 shares available for grant under the 2016 Equity Incentive Plan.

Nonvested Shares
A summary of the Company’s nonvested share activity and related information is as follows:
Number of sharesWeighted avg. grant date fair valueWeighted avg. life remaining
Outstanding at December 31, 2023609,228 $44.44 
Granted290,271 41.96 
Vested(284,885)45.47 
Outstanding at March 31, 2024614,614 $42.79 1.61

The holders of nonvested shares have voting rights and receive dividends from the date of grant. The fair value of the nonvested shares that vested was $13.7 million and $8.3 million for the three months ended March 31, 2024 and 2023, respectively. Expense recognized related to nonvested shares and included in "General and administrative expense" in the accompanying consolidated statements of income and comprehensive income was $1.8 million and $1.9 million for the three months ended March 31, 2024 and 2023, respectively. Expense related to nonvested shares and included in retirement and severance expense in the accompanying consolidated statements of income and comprehensive income was $0.7 million for the three months ended March 31, 2024. There was no expense related to nonvested shares included in retirement and severance expense for the three months ended March 31, 2023. At March 31, 2024, unamortized share-based compensation expense related to nonvested shares was $14.7 million.

Nonvested Performance Shares
A summary of the Company's nonvested performance share activity and related information is as follows:
Target Number of Performance SharesWeighted avg. grant date fair value (1)
Outstanding at December 31, 2023312,641 $70.04 
Granted116,266 44.76 
Vested (2)(102,438)75.14 
Outstanding at March 31, 2024
326,469 $59.44 
(1) The grant date fair value was determined utilizing (i) a Monte Carlo simulation model to generate an estimate of the Company's future stock price over the three-year performance period for performance shares based on the Company's Total Shareholder Return (TSR) performance further described below and (ii) the Company's grant date fair value for performance shares based on the Company's estimated Compounded Annual Growth Rate (CAGR) in AFFO per share over the three-year performance period.
(2) The achievement of the performance conditions for the performance shares granted during the year ended December 31, 2021 resulted in a performance payout percentage of 250% for both the Company's TSR relative to the TSRs of the Company's peer group companies and the Company's TSR relative to the TSRs of companies in the MSCI US REIT Index and a payout percentage of 200% for the Company's CAGR in AFFO per share over the three-year performance period. The achievement of the performance conditions and the above payout percentages resulted in the issuance of 243,290 common shares and 49,574 common shares from dividend equivalents. The fair value of the performance shares and dividend equivalents that vested was $12.6 million.

The number of common shares issuable upon settlement of the performance shares granted during the three months ended March 31, 2024, 2023 and 2022 will be based upon the Company's achievement level relative to performance
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measures at December 31, 2026, 2025 and 2024, respectively. The achievement level for the performance shares granted during the three months ended March 31, 2024 is 52.2% based upon the Company's TSR relative to the TSRs of the Company's peer group companies, 26.1% based upon the Company's TSR relative to the TSRs of companies in the MSCI US REIT Index and 21.7% based upon the Company's estimated CAGR in AFFO per share over the three-year performance period. The achievement level for the performance shares granted during the years ended December 31, 2023 and 2022 is 50% based upon the Company's Total Shareholder Return (TSR) relative to the TSRs of the Company's peer group companies, 25% based upon the Company's TSR relative to the TSRs of companies in the MSCI US REIT Index and 25% based upon the Company's Compounded Annual Growth Rate (CAGR) in AFFO per share over the three-year performance period. The Company's achievement level relative to the performance measures is assigned a specific payout percentage, which is multiplied by a target number of performance shares.

The performance shares based on relative TSR performance have market conditions and are valued using a Monte Carlo simulation model on the grant date, which resulted in a grant date fair value of approximately $4.1 million and $5.9 million for the three months ended March 31, 2024 and 2023, respectively. The estimated fair value is amortized to expense over the three-year performance periods, which end on December 31, 2026, 2025 and 2024 for performance shares granted in 2024, 2023 and 2022, respectively. The following assumptions were used in the Monte Carlo simulation for computing the grant date fair value of the performance shares with a market condition for the three months ended March 31, 2024: risk-free interest rate of 4.5%, volatility factors in the expected market price of the Company's common shares of 30% and an expected life of approximately three years.

The performance shares based on growth in AFFO per share have a performance condition. The probability of achieving the performance condition is assessed at each reporting period. If it is deemed probable that the performance condition will be met, compensation cost will be recognized based on the closing price per share of the Company's common stock on the date of the grant multiplied by the number of awards expected to be earned. If it is deemed that it is not probable that the performance condition will be met, the Company will discontinue the recognition of compensation cost and any compensation cost previously recorded will be reversed. At March 31, 2024, achievement of the performance condition was deemed probable for the performance shares granted during the three months ended March 31, 2023 and 2022 with an expected payout percentage of 52.3% and 200%, respectively, which resulted in a grant date fair value of approximately $0.6 million and $2.3 million, respectively. Achievement of the performance condition for the performance shares granted during the three months ended March 31, 2024 was deemed not probable at March 31, 2024.

Expense recognized related to performance shares and included in "General and administrative expense" in the accompanying consolidated statements of income and comprehensive income was $1.5 million and $2.0 million for the three months ended March 31, 2024 and 2023, respectively. Expense related to performance shares and included in retirement and severance expense in the accompanying consolidated statements of income and comprehensive income was $0.9 million for the three months ended March 31, 2024. At March 31, 2024, unamortized share-based compensation expense related to nonvested performance shares was $8.9 million.

The performance shares accrue dividend equivalents that are paid only if common shares are issued upon settlement of the performance shares. During the three months ended March 31, 2024 and 2023, the Company accrued dividend equivalents expected to be paid on earned awards of $598 thousand and $353 thousand, respectively.

Restricted Share Units
A summary of the Company’s restricted share unit activity and related information is as follows:
Number of sharesWeighted avg. grant date fair valueWeighted avg. life remaining
Outstanding at December 31, 202342,048 $41.67 
Granted  
Vested  
Outstanding at March 31, 202442,048 $41.67 0.17

19


The holders of restricted share units receive dividend equivalents from the date of grant. Total expense recognized related to shares issued to non-employee Trustees and included in "General and administrative expense" in the accompanying consolidated statements of income and comprehensive income was $0.4 million and $0.5 million for the three months ended March 31, 2024 and 2023, respectively. At March 31, 2024, unamortized share-based compensation expense related to restricted share units was $0.3 million.

14. Operating Leases

The Company’s real estate investments are leased under operating leases. In addition to its lessor arrangements on its real estate investments, as of March 31, 2024 and December 31, 2023, the Company was lessee in 51 operating ground leases. The Company's tenants, who are generally sub-tenants under these ground leases, are responsible for paying the rent under these ground leases. As of March 31, 2024, rental revenue from one of the Company's tenants, who are also sub-tenants under the ground leases, is being recognized on a cash basis. In most cases, the ground lease sub-tenants have continued to pay the rent under these ground leases, however, one of these properties does not currently have a sub-tenant. In the event the tenant fails to pay the ground lease rent or if the property does not have a sub-tenant, the Company is primarily responsible for the payment, assuming the Company does not sell or re-tenant the property. The Company is also the lessee in an operating lease of its executive office.

The following table summarizes rental revenue, including sublease arrangements and lease costs, for the three months ended March 31, 2024 and 2023 (in thousands):
Three Months Ended March 31,
Classification20242023
Operating leasesRental revenue$135,794 $145,235 
Sublease income - operating ground leasesRental revenue6,487 6,356 
Lease costs
Operating ground lease costProperty operating expense$6,547 $6,600 
Operating office lease costGeneral and administrative expense224 224 

15. Segment Information

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

The financial information summarized below is presented by reportable operating segment (in thousands):
Balance Sheet Data:
As of March 31, 2024
ExperientialEducationCorporate/UnallocatedConsolidated
Total Assets$5,201,690