EPR PROPERTIES - Annual Report: 2008 (Form 10-K)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2008

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

For the transition period from                      to                     

ENTERTAINMENT PROPERTIES TRUST

(Exact name of registrant as specified in its charter)

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

30 West Pershing Road, Suite 201 Kansas City, Missouri (Address of principal executive offices)		64108 (Zip Code)

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

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

Title of each class		Name of each exchange on which registered
Common shares of beneficial interest, par value $.01 per share		New York Stock Exchange
7.75% Series B cumulative redeemable preferred shares of beneficial interest, par value $.01 per share		New York Stock Exchange
5.75% Series C cumulative convertible preferred shares of beneficial interest, par value $.01 per share		New York Stock Exchange
7.375% Series D cumulative redeemable preferred shares of beneficial interest, par value $.01 per share		New York Stock Exchange
9.00% Series E cumulative convertible preferred shares of beneficial interest, par value $.01 per share		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes þ      No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes o     No þ

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 þ      No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Large accelerated filer þ

Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)

Smaller reporting company o

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

The aggregate market value of the common shares of beneficial interest (“common shares”) of the registrant held by non-affiliates, based on the closing price on the last business day of the registrant’s most recently completed second fiscal quarter, as reported on the New York Stock Exchange, was $1,716,987,818

At February 23, 2009, there were 34,728,718 common shares outstanding.

 

 

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement for the 2009 Annual Meeting of Shareholders to be filed with the Commission pursuant to Regulation 14A are incorporated by reference in Part III of this Annual Report on Form 10-K.

CAUTIONARY STATEMENT CONCERNING FORWARD LOOKING STATEMENTS

With the exception of historical information, certain statements contained or incorporated by reference herein constitute forward-looking statements as such term is defined in 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”). The forward-looking statements may refer to our financial condition, results of operations, plans, objectives, acquisition or disposition of properties, future expenditures for development projects, capital resources, future financial performance and business. Forward-looking statements are not guarantees of performance. They involve numerous risks, uncertainties and assumptions. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as “will be,” “continue,” “hope,” “goal,” “forecast,” “approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans” “would,” “may” or other similar expressions in this Annual Report on Form 10-K. In addition, references to our budgeted amounts are forward looking statements. Factors that could materially and adversely affect us include, but are not limited to, the factors listed below:

	•		General international, national, regional and local business and economic conditions;
	•		Current levels of market volatility are unprecedented;
	•		Failure of current governmental efforts to simulate the economy;
	•		The recent downturn in the credit markets;
	•		The failure of a bank to fund a request by us to borrow money;
	•		Failure of banks in which we have deposited funds;
	•		Defaults in the performance of lease terms by our tenants;
	•		Defaults by our customers and counterparties on their obligations owed to us;
	•		A mortgagor’s bankruptcy or default;
	•		A significant loan commitment for a development project that may not be completed as planned;
	•		The obsolescence of older multiplex theaters owned by some of our tenants;
	•		Risks of operating in the entertainment industry;
	•		Our ability to compete effectively;
	•		The majority of our megaplex theater properties are leased by a single tenant;
	•		A single tenant leases or is the mortgagor of all our ski area investments;
	•		A single tenant leases all of our charter schools;
	•		Risks associated with use of leverage to acquire properties;
	•		Financing arrangements that require lump-sum payments;
	•		Our ability to sustain the rate of growth we have had in recent years;
	•		Our ability to raise capital;
	•		Covenants in our debt instrument that limit our ability to take certain actions;
	•		Risks of acquiring and developing properties and real estate companies;
	•		The lack of diversification of our investment portfolio;
	•		Our continued qualification as a REIT;
	•		The ability of our subsidiaries to satisfy their obligations;
	•		Financing arrangements that expose us to funding or purchase risks;

	•		We have a limited number of employees and the loss of personnel could harm operations;
	•		Fluctuations in the value of real estate income and investments;
	•		Risks relating to real estate ownership, leasing and development, for example 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, 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
	•		Our real estate investments are relatively illiquid;
	•		We own assets in foreign countries;
	•		Risks associated with owning or financing properties for which the tenant’s or mortgagor’s operations may be impacted by weather conditions
	•		Risks associated with the ownership of vineyards;
	•		Our ability to pay dividends in cash or at current rates;
	•		Fluctuations in interest rates;
	•		Fluctuations in the market prices for our shares;
	•		Certain limits on change in control imposed under law and by our Declaration of Trust and Bylaws;
	•		Policy changes obtained without the approval of our shareholders;
	•		Equity issuances could dilute the value of our shares;
	•		Risks associated with changes in the Canadian exchange rate; and
	•		Changes in laws and regulations, including tax laws and regulations

These forward-looking statements represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Many of the factors that will determine these items are beyond our ability to control or predict. For further discussion of these factors see “Item 1A. Risk Factors” in this Annual Report on Form 10-K.

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

TABLE OF CONTENTS

				Page
PART I				6
Item 1.		Business		6
Item 1A.		Risk Factors		12
Item 1B.		Unresolved Staff Comments		26
Item 2.		Properties		27
Item 3.		Legal Proceedings		34
Item 4.		Submission of Matters to a Vote of Security Holders		34
PART II				35
Item 5.		Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		35
Item 6.		Selected Financial Data		37
Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		39
Item 7A.		Quantitative and Qualitative Disclosures About Market Risk		65
Item 8.		Financial Statements and Supplementary Data		67
Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		131
Item 9A.		Controls and Procedures		131
Item 9B.		Other Information		133
PART III				133
Item 10.		Directors, Executive Officers and Corporate Governance		133
Item 11.		Executive Compensation		133
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		133
Item 13.		Certain Relationships and Related Transactions, and Director Independence		134
Item 14.		Principal Accountant Fees and Services		134
PART IV				134
Item 15.		Exhibits and Financial Statement Schedules		134
EX-12.1
EX-12.2
EX-21
EX-23
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I

Item 1. Business

General

Entertainment Properties Trust (“we,” “us,” “EPR” or the “Company”) was formed on August 22, 1997 as a Maryland real estate investment trust (“REIT”), and an initial public offering of common shares of beneficial interest (“common shares”) was completed on November 18, 1997. EPR develops, owns, leases and finances properties for consumer preferred high-quality businesses. As further explained under “Growth Strategies” below, our investments are guided by a focus on inflection opportunities that are associated with or support enduring uses, excellent executions, attractive economics and an advantageous market position.

We are a self-administered REIT. As of December 31, 2008, our real estate portfolio was comprised of approximately $2.0 billion in assets (before accumulated depreciation). This portfolio includes 80 megaplex theatre properties (including four joint venture properties) located in 29 states, the District of Columbia and Ontario, Canada, eight theatre anchored entertainment retail centers (including two joint venture properties) located in Westminster, Colorado, New Rochelle, New York, White Plains, New York, Burbank, California and Ontario, Canada, one additional entertainment retail center under development and land parcels leased to restaurant and retail operators or available for development adjacent to several of our theatre properties. We also own a metropolitan ski area located in Bellefontaine, Ohio, ten wineries and eight vineyards located in California and Washington and 22 public charter schools located in eight states and the District of Columbia.

As of December 31, 2008, our real estate portfolio of megaplex theatre properties consisted of 6.6 million square feet and was 100% occupied, and our remaining real estate portfolio consisted of 3.9 million square feet and was 95% occupied. The combined real estate portfolio consisted of 10.5 million square feet and was 98% occupied. Our theatre properties are leased to eleven different leading theatre operators. At December 31, 2008, approximately 51% of our megaplex theatre properties were leased to American Multi-Cinema, Inc. (“AMC”), a subsidiary of AMC Entertainment, Inc. (“AMCE”).

As further described in Note 4 to the consolidated financial statements in this Annual Report on Form 10-K, as of December 31, 2008, our real estate mortgage loan portfolio consisted of nine notes receivable with a carrying value of $508.5 million, including related accrued interest. Our real estate mortgage loan portfolio at December 31, 2008 includes a mortgage note receivable for the development of a water-park anchored entertainment village located in Kansas with a carrying value of $134.9 million, including accrued interest, and a mortgage note receivable for a planned resort development in Sullivan County, New York with a carrying value of $134.2 million, including accrued interest. We also have a mortgage note receivable denominated in Canadian dollars that had a carrying value of US $103.3 million at December 31, 2008, including accrued interest. This mortgage note bears interest at 15%, and has been provided to a partnership for the purpose of developing a 13 level entertainment retail center in downtown Toronto in Ontario, Canada. The development of this center was completed in May 2008 at a total cost of approximately $330 million Canadian, and contains approximately 354,000 square feet of net rentable area (excluding signage). See Item 7 —“Management Discussion and Analysis of Financial Condition and Results of Operations — Recent Developments” for more information regarding these three mortgage notes receivable. Additionally, we have five mortgage notes

receivable with a combined total carrying value of $132.5 million, including accrued interest, secured by ten metropolitan ski areas and related development land covering approximately 6,063 acres located in New Hampshire, Vermont, Missouri, Indiana, Ohio and Pennsylvania.

Our total investments were $2.7 billion at December 31, 2008. Total investments as defined herein include the sum of the carrying values of rental properties (before accumulated depreciation), property under development, mortgage notes receivable (including related accrued interest receivable), investment in joint ventures, intangible assets (before accumulated amortization) and notes receivable less minority interests. Below is a reconciliation of the carrying value of total investments to the consolidated balance sheet at December 31, 2008 (in thousands):

Rental properties, net of accumulated depreciation		$	1,735,617
Add back accumulated depreciation on rental properties			214,078
Property under development			30,835
Mortage notes and related accrued interest receivable			508,506
Investment in joint ventures			2,493
Investment in a direct financing lease, net			166,089
Intangible assets, net of accumulated amortization			12,400
Add back accumlated amortization on intangible assets			7,077
Accounts and notes receivable			73,312
Less accounts receivable			(33,406	)
Less minority interests			(15,217	)
Total investments		$	2,701,784

Of our total investments of $2.7 billion at December 31, 2008, $1.9 billion or 71% related to megaplex theatres, entertainment retail centers and other retail parcels, and $791.9 million or 29% related to recreational and specialty properties. Furthermore, of the $791.9 million related to recreational and specialty properties, $145.5 million related to metropolitan ski areas, $207.5 million related to vineyards and wineries, $169.8 million related to public charter schools, $134.9 million related to the water-park anchored entertainment village development and $134.2 related to the planned resort development discussed above. At December 31, 2008, Peak Resorts, Inc. (“Peak”) is the lessee of our metropolitan ski area in Bellefontaine, Ohio and is the mortgagor on five notes receivable secured by ten metropolitan ski areas and related development land. Similarly, affiliates of Schools, Inc. (“Imagine”) are the lessees of all of our charter schools.

As further described in Note 2 to the consolidated financial statements included in this Annual Report on Form 10-K, during the year ended December 31, 2008, $54.4 million, or approximately 19% of our total revenue was derived from our four entertainment retail centers in Ontario, Canada and the mortgage note receivable secured by property in Canada described above. The Company’s wholly-owned subsidiaries that hold the Canadian entertainment retail centers, third party debt and mortgage note receivable represent approximately $219.5 million or 17% of the Company’s net assets as of December 31, 2008.

We aggregate the financial information of all our investments into one reportable segment because our investments have similar economic characteristics and because we do not internally report and we are not internally organized by investment or transaction type.

We believe destination entertainment, entertainment-related, recreational and specialty properties are important sectors of the real estate industry and that, as a result of our focus on properties in these sectors and the industry relationships of our management, we have a competitive advantage in providing capital to operators of these types of properties. Our principal business objective is to be the nation’s leading destination entertainment, entertainment-related, recreation and specialty real estate company by continuing to develop, acquire or finance high-quality properties. Our investments are generally structured as long-term triple-net leases that require the tenants to pay substantially all expenses associated with the operation and maintenance of the property, or as long-term mortgages with economics similar to our triple-net lease structure.

As discussed below, we believe attractive investment opportunities are available to us that will enable us to continue to grow our asset base; however, depending on the state of the equity and debt capital markets, we may be unable to obtain sufficient capital necessary to take advantage of such opportunities or we may deem the relative cost of such capital to be too high. Due to the recent downturn in the economy and distress in the capital markets, we have been primarily focused on our liquidity and funding our existing commitments. As a result, we may slow the pace of or stop committing to new investments in the short-term. For more information regarding our business, including our investments and capital formation, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” including the sections therein titled “Recent Developments” and “Liquidity and Capital Resources.”

Megaplex Theatres

A significant portion of our assets consist of megaplex theatres. Megaplex theatres typically have at least 10 screens with stadium-style seating (seating with elevation between rows to provide unobstructed viewing) and are equipped with amenities that significantly enhance the audio and visual experience of the patron. We believe the development of new generation megaplex theatres, including the introduction of digital cinema technology, has accelerated the obsolescence of many of the previous generation of multiplex movie theatres by setting new standards for moviegoers, who, in our experience, have demonstrated their preference for the more attractive surroundings, wider variety of films, enhanced quality of visual presentation and superior customer service typical of megaplex theatres.

We expect the development of megaplex theatres to continue in the United States and abroad over the long-term. With the development of the stadium style megaplex theatre as the preeminent format for cinema exhibition, the older generation of smaller sloped theatres has generally experienced a significant downturn in attendance and performance. As a result of the significant capital commitment involved in building megaplex theatres and the experience and industry relationships of our management, we believe we will continue to have opportunities to provide capital to businesses within the United States and abroad that seek to develop and/or operate these properties. In addition, the recent distress in the credit markets has also created opportunities to buy existing megaplex theatres at higher yields than in the past as many current owners seek to generate cash.

Entertainment Retail Centers

We continue to seek opportunities for the development of additional restaurant, retail and other entertainment venues around our existing portfolio. The opportunity to capitalize on the traffic generation of our market-dominant theatres to create entertainment retail centers (“ERC’s”) not

only strengthens the execution of the megaplex movie theatre but adds diversity to our tenant and asset base. We have and will continue to evaluate our existing portfolio for additional development of retail and entertainment density, and we will also continue to evaluate the purchase or financing of existing ERC’s that have demonstrated strong financial performance and meet our quality standards. The leasing and property management requirements of our ERC’s are generally met through the use of third-party professional service providers.

Recreational and Specialty Properties

The venue replacement cycle in theatrical exhibition represents what we consider an inflection opportunity, a demand for new capital stimulated by a need to upgrade to new technologies and related amenities. We expect other destination retail, recreational and specialty properties to undergo similar transformations stimulated by growth, renewal and/or restructuring. We have begun and expect to continue to pursue opportunities to provide capital for such new generations of attractive and successful properties in selected niche markets.

Business Objectives and Strategies

Our long-term primary business objective is to continue to enhance shareholder value by achieving predictable and increasing Funds From Operations (“FFO”) per Share (See Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Funds From Operations” for a discussion of FFO), through the acquisition, development and financing of high-quality properties while maintaining adequate liquidity to meet financial obligations as they come due. We intend to achieve this objective by continuing to execute the Growth Strategies, Operating Strategies and Capitalization Strategies described below:

Growth Strategies

As a part of our growth strategy, we will consider developing or acquiring additional megaplex theatre properties, and developing or acquiring single-tenant entertainment, entertainment-related, recreational or specialty properties. We will also consider developing or acquiring additional ERC’s. We may also pursue opportunities to provide mortgage financing for these same property types in certain situations where this structure is more advantageous than owning the underlying real estate.

Our investing strategy centers on five guiding principles:

Inflection Opportunity

We look for a new generation of facilities emerging as a result of age, technology, or change in the lifestyle of consumers which create development, renewal or restructuring opportunities requiring significant capital.

Enduring Value

We look for real estate that supports activities that are commercially successful and have a reasonable basis for continued and sustainable customer demand in the future. Further, we seek circumstances where the magnitude of change in the new generation of facilities adds substantially to the customer experience.

Excellent Execution

We seek attractive locations and best-of-class executions that create market-dominant properties which we believe create a competitive advantage and enhance sustainable customer demand

within the category despite a potential change in tenant. We minimize the potential for turnover by seeking quality tenants with a reliable track record of customer service and satisfaction.

Attractive Economics

We seek investments that provide accretive returns initially and increasing returns over time with rent escalators and percentage rent features that allow participation in the financial performance of the property. Further, we are interested in investments that provide a depth of opportunity to invest sufficient capital to be meaningful to our total financial results and also provide a diversity by market, geography or tenant operator.

Advantageous Position

In combination with the preceding principles, when investing we look for a competitive advantage such as unique knowledge of the category, access to industry information, a preferred tenant relationship, or other relationships that provide access to sites and development projects.

Operating Strategies

Lease Risk Minimization

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

Lease Structure

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

Mortgage Structure

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

Tenant and Customer Relationships

We intend to continue developing and maintaining long-term working relationships with theatre, restaurant, retail, entertainment, recreation and specialty business operators and developers by providing capital for multiple properties on an international, national or regional basis, thereby creating efficiency and value for both the operators and the Company.

Portfolio Diversification

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

Development

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

Capitalization Strategies

Debt and Equity Financing

In 2008 we deleveraged our balance sheet primarily by issuing equity in excess of debt during the year. Our debt to total capitalization ratio (i.e. long-term debt of the Company as a percentage of shareholders’ equity plus total liabilities) was reduced from 50% at December 31, 2007 to 48% at December 31, 2008. Also, in January and early February 2009, we further deleveraged our balance sheet through the issuance of additional equity, and we expect to maintain a debt to total capitalization ratio of between 45% and 50% throughout the remainder of 2009. While additional equity issuances mitigate the growth in per share results, we believe reduced leverage and an emphasis on liquidity are prudent during the current economic downturn.

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

Joint Ventures

We will examine and may pursue potential additional joint venture opportunities with institutional investors or developers if the investments to which they relate meet our guiding principles discussed above. We may employ higher leverage in joint ventures.

Payment of Regular Distributions

We have paid and expect to continue to pay quarterly dividend distributions to our common and preferred shareholders. Our Series B cumulative redeemable preferred shares (“Series B preferred shares”) have a dividend rate of 7.75%, our Series C cumulative convertible preferred shares (“Series C preferred shares”) have a dividend rate of 5.75%, our Series D cumulative redeemable

preferred shares (“Series D preferred shares”) have a dividend rate of 7.375%, and our Series E cumulative convertible preferred shares (“Series E preferred shares”) have a dividend rate of 9.00%. Among the factors the Company’s board of trustees (“Board of Trustees”) considers in setting the common share distribution rate are the applicable REIT tax rules and regulations that apply to distributions, the Company’s results of operations, including FFO per share, and the Company’s Cash Available for Distribution (defined as net cash flow available for distribution after payment of operating expenses, debt service, and other obligations).

Competition

We compete for real estate financing opportunities with other companies that invest in real estate, as well as traditional financial sources such as banks and insurance companies. REITs have financed and may continue to seek to finance destination entertainment, entertainment-related, recreational or specialty properties as new properties are developed or become available for acquisition. The current economic crisis may impact the competitive landscape in which we operate in a manner that is not currently foreseeable, thus reducing our ability to react to competitive challenges.

Employees

As of December 31, 2008, we had 22 full time employees.

Principal Executive Offices

The Company’s principal executive offices are located at 30 W. Pershing Road, Suite 201, Kansas City, Missouri 64108; telephone (816) 472-1700.

Materials Available on Our Website

Our internet website address is www.eprkc.com. We make available, free of charge, through our website copies of our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) as soon as reasonably practicable after we electronically file such material with, or furnish it to the Securities and Exchange Commission (the “Commission” or “SEC”). You may also view our Code of Business Conduct and Ethics, Company Governance Guidelines, Independence Standards for Trustees and the charters of our audit, nominating/company governance, finance and compensation committees on our website. Copies of these documents are also available in print to any person who requests them.

Item 1A. Risk Factors

There are many risks and uncertainties that can affect our current or future business, operating results, financial performance or share price. Here is a brief description of some of the important factors which could adversely affect our current or future business, operating results, financial condition or share price. This discussion includes a number of forward-looking statements. See “Forward Looking Statements.”

Risks That May Impact Our Financial Condition or Performance

In response to the continued economic crises affecting the banking system, financial markets, real estate markets and our economy as a whole, President Obama signed the American Recovery and Reinvestment Act of 2009 (“ARRA”) into law on February 17, 2009. There can be no assurance what impact the ARRA will have on the banking system, financial markets, real estate markets or the general economy. Although we are not one of the institutions that will be directly affected by the ARRA, the ultimate effects of ARRA on the financial markets and the economy in general could materially and adversely affect our business, financial condition and results of operations, or the trading price of our common stock.

Current levels of market volatility are unprecedented.

The capital and credit markets have been experiencing extreme volatility and disruption for more than 12 months. In recent months, the volatility and disruption have reached unprecedented levels. In many cases, the markets have exerted downward pressure on stock prices and credit capacity for certain issuers. Our plans for growth require regular access to the capital and credit markets. If current levels of market disruption and volatility continue or worsen, access to capital and credit markets could be disrupted making growth through acquisitions and development projects difficult or impractical to pursue until such time as markets stabilize.

Recent events in the financial markets have had an adverse impact on the credit markets and, as a result, credit has become more expensive and difficult to obtain. Some lenders are imposing more stringent restrictions on the terms of credit and there has been a general reduction in the amount of credit available in the markets in which we conduct business. The negative impact on the tightening of the credit markets may have a material adverse effect on us resulting from, but not limited to, an inability to finance the acquisition or development of properties on favorable terms, if at all, increased financing costs or financing with increasingly restrictive covenants.

The negative impact of the recent adverse changes in the credit markets on the real estate sector generally or our inability to obtain financing on favorable terms, if at all, may have a material adverse effect on our results of operations, business, financial condition or performance.

We have existing credit facilities with several banking institutions. If any of these banking institutions which are a party to such credit facilities fails to fund a request (or any portion of such request) by us to borrow money under one of these existing credit facilities, our ability to make investments in our business, fund our operations and pay debt service and dividends could be reduced, each of which could result in a decline in the value of your investment.

We have diversified our cash and cash equivalents between several banking institutions in an attempt to minimize exposure to any one of these entities. However, the Federal Deposit

Insurance Corporation, or “FDIC,” only insures interest-bearing accounts in amounts up to $250,000 per depositor per insured bank. We currently have cash and cash equivalents and restricted cash deposited in certain financial institutions in excess of federally insured levels. If any of the banking institutions in which we have deposited funds ultimately fails, we may lose our deposits over $250,000. The loss of our deposits may have a material adverse effect on our financial condition.

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

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

Our business is subject to credit risk. There is a risk that a customer or counterparty will fail to meet its obligations when due, particularly given the current state of the economy. Customers and counterparties that owe us money may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure or other reasons. Although we have procedures for reviewing credit exposures to specific customers and counterparties to address present credit concerns, default risk may arise from events or circumstances that are difficult to detect or foresee. Some of our risk management methods depend upon the evaluation of information regarding markets, clients or other matters that are publicly available or otherwise accessible by us. That information may not, in all cases, be accurate, complete, up-to-date or properly evaluated. In addition, concerns about, or a default by, one customer or counterparty could lead to significant liquidity problems, losses or defaults by other customers or counterparties, which in turn could adversely affect us. We may be materially and adversely affected in the event of a significant default by our customers and counterparties.

If a mortgagor becomes bankrupt or insolvent or defaults under its mortgage, that could force us to declare a default and foreclose on the underlying property. As a result, future interest income recognition related to the applicable mortgage note receivable could be significantly reduced or eliminated. There is also a risk that the fair value of the property will be less than the carrying

value of the note and accrued interest receivable at the time of the foreclosure and we may have to take a charge against earnings. We may experience costs and delays in recovering a property in foreclosure or finding a substitute operator for the property. If the mortgage we hold is subordinated to senior financing secured by the property, our recovery would be limited to any amount remaining after satisfaction of all amounts due to the holder of the senior financing. In addition, to protect our subordinated investment, we may desire to refinance any senior financing. However, there is no assurance that such refinancing would be available or, if it were to be available, that the terms would be attractive. We have agreed to subordinate our Canadian mortgage financing to bank construction financing obtained by the borrower.

During 2009, we expect to advance up to $91.8 million to Concord Resorts, LLC (Concord Resorts), which is the remaining loan commitment under the $225.0 million secured first mortgage loan commitment related to a planned resort development in Sullivan County, New York. Due to the economic downturn, certain other lenders on the development have either reduced their commitments or withdrawn from the project. Concord Resorts is attempting to restructure the development at a level requiring substantially less capital. As a result, the development project could be delayed, and there can be no assurance that Concord Resorts will successfully downsize the project and receive the financing necessary to complete it. Due to significance of this investment, the timing of our additional advances, if any, may materially impact our results of operations for 2009 (i.e., an earlier additional investment would permit us to recognize greater interest income in 2009, versus a later or no additional investment). If the development is cancelled or delayed indefinitely, there can be no assurance that our investment in Concord Resorts (the net carrying value of which was $134.2 million at December 31, 2008) may not be subject to impairment, which could result in a material adverse impact on our financial condition and results of operations. In addition, Concord Resorts is controlled by Louis Cappelli, a real estate developer with whom we have several investments, including the entertainment retail centers in New Rochelle, New York and White Plains, New York and loans to Mr. Cappelli. There can be no assurance that the cancellation or indefinite delay of the Concord Resorts development would not have a material adverse effect on our other investments with Mr. Cappelli.

The development of megaplex movie theatres has rendered many older multiplex theatres obsolete. To the extent our tenants own a substantial number of multiplexes, they have been, or may in the future be, required to take significant charges against their earnings resulting from the impairment of these assets. Megaplex theatre operators have also been and could in the future be adversely affected by any overbuilding of megaplex theatres in their markets and the cost of financing, building and leasing megaplex theatres.

The ability of our tenants to operate successfully in the entertainment industry and remain current on their lease obligations depends on a number of factors, including the availability and popularity of motion pictures, the performance of those pictures in tenants’ markets, the allocation of popular pictures to tenants and the terms on which the pictures are licensed. Neither we nor our tenants control the operations of motion picture distributors. Megaplex theatres represent a greater capital investment, and generate higher rents, than the previous generation of

multiplex theatres. For this reason, the ability of our tenants to operate profitably and perform under their leases could be dependent on their ability to generate higher revenues per screen than multiplex theatres typically produce. The success of “out-of-home” entertainment venues such as megaplex theatres, entertainment retail centers and recreational properties also depends on general economic conditions and the willingness of consumers to spend time and money on out-of-home entertainment.

Real estate is a competitive business

Our business operates in highly competitive environments. We compete with a large number of real estate property owners and developers, some of which may be willing to accept lower returns on their investments. Principal factors of competition are rent or interest charged, attractiveness of location, the quality of the property and breadth and quality of services provided. If our competitors offer space at rental rates below the rental rates we are currently charging our tenants, we may lose potential tenants, and we may be pressured to reduce our rental rates below those we currently charge in order to retain tenants when our tenants’ leases expire. Our success depends upon, among other factors, trends of the national and local economies, financial condition and operating results of current and prospective tenants and customers, availability and cost of capital, construction and renovation costs, taxes, governmental regulations, legislation and population trends.

A single tenant represents a substantial portion of our lease revenues

Approximately 51% of our megaplex theatre properties are leased to AMC, one of the nation’s largest movie exhibition companies. AMCE has guaranteed AMC’s performance under substantially all of their leases. We have diversified and expect to continue to diversify our real estate portfolio by entering into lease transactions with a number of other leading operators. Nevertheless, our revenues and our continuing ability to pay shareholder dividends are currently substantially dependent on AMC’s performance under its leases and AMCE’s performance under its guarantee.

We believe AMC occupies a strong position in the industry and we intend to continue acquiring and leasing back or developing new AMC theatres. However, AMC and AMCE are susceptible to the same risks as our other tenants described herein. If for any reason AMC failed to perform under its lease obligations and AMCE did not perform under its guarantee, we could be required to reduce or suspend our shareholder dividends and may not have sufficient funds to support operations until substitute tenants are obtained. If that happened, we cannot predict when or whether we could obtain substitute quality tenants on acceptable terms.

Peak is the lessee of our metropolitan ski area in Bellefontaine, Ohio and is the mortgagor on five notes receivable secured by ten metropolitan ski areas and related development land. Similarly, Imagine is the lessee of all of our charter schools. If Peak failed to perform under its lease and mortgage loan obligations, and/or Imagine failed to perform under its master lease, we may need to reduce our shareholder dividends and may not have sufficient funds to support operations until substitute operators are obtained. If that happened, we cannot predict when or whether we could obtain quality substitute tenants or mortgagors on acceptable terms.

We currently utilize debt to fund portions of our operations and acquisitions. In a rising interest rate environment, the cost of our variable rate debt and any new variable rate debt will increase. We have used leverage to acquire properties and expect to continue to do so in the future. Although the use of leverage is common in the real estate industry, our use of debt exposes us to some risks. If a significant number of our tenants fail to make their lease payments and we don’t have sufficient cash to pay principal and interest on the debt, we could default on our debt obligations. A substantial amount of our debt financing is secured by mortgages on our properties. If we fail to meet our mortgage payments, the lenders could declare a default and foreclose on those properties. In addition, if the tenants of properties in the borrowing bases of our unsecured revolving credit facility or term loans default on their leases or mortgage obligations, or if the properties otherwise fail to qualify for inclusion in the borrowing bases, that could trigger pay-down requirements and may limit the amounts we are able to borrow under the credit facility and the term loans in the future.

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

We have experienced rapid growth in recent years. We may not be able to maintain a similar rate of growth in the future or manage our growth effectively. Our failure to do so may have a material adverse effect on our financial condition and results of operations and ability to pay dividends to our shareholders.

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

The mortgages on our properties contain customary covenants such as those that limit our ability, without the prior consent of the lender, to further mortgage the applicable property or to discontinue insurance coverage. Our unsecured revolving credit facility, our term loan and other loans that we may obtain in the future contain customary restrictions, requirements and other

limitations on our ability to incur indebtedness, including covenants that limit our ability to incur debt based upon the level of our ratio of total debt to total assets, our ratio of secured debt to total assets, our ratio of EBITDA to interest expense, and fixed charges, and that require us to maintain a certain level of unencumbered assets to unsecured debt. Our ability to borrow under our credit facilities and our term loan is also subject to compliance with certain other covenants. In addition, failure to comply with our covenants could cause a default under the applicable debt instrument, and we may then be required to repay such debt with capital from other sources. Under those circumstances, other sources of capital may not be available to us, or be available only on unattractive terms. Additionally, our ability to satisfy current or prospective lenders’ insurance requirements may be adversely affected if lenders generally insist upon greater insurance coverage against acts of terrorism than is available to us in the marketplace or on commercially reasonable terms.

We rely on debt financing, including borrowings under our unsecured revolving credit facility, our term loan and debt secured by individual properties, to finance our acquisition and development activities and for working capital. If we are unable to obtain financing from these or other sources, or to refinance existing indebtedness upon maturity, our financial condition and results of operations would likely be adversely affected.

We may acquire or develop properties or acquire other real estate related companies when we believe that an acquisition or development is consistent with our business strategies. We may not, however, succeed in consummating desired acquisitions or in completing developments on time. In addition, we may face competition in pursuing acquisition or development opportunities that could increase our costs. Difficulties in integrating acquisitions may prove costly or time-consuming and could divert management’s attention. Acquisitions or developments in new markets or industries where we do not have the same level of market knowledge may expose us to unanticipated risks in those markets and industries to which we are unable to effectively respond and, as a result, our performance in those new markets and industries and overall may be worse than anticipated. In addition, there is no assurance that planned third party financing related to acquisition and development opportunities will be provided on a timely basis or at all, thus increasing the risk that such opportunities are delayed or fail to be completed as originally contemplated. We may also abandon acquisition or development opportunities that we have begun pursuing and consequently fail to recover expenses already incurred and have devoted management time to a matter not consummated. Furthermore, our acquisitions of new properties or companies will expose us to the liabilities of those properties or companies, some of which we may not be aware at the time of acquisition. In addition, development of our existing properties presents similar risks.

We acquire, develop or finance entertainment, entertainment-related and recreational properties. A significant portion of our investments are in megaplex theatre properties. Although we are subject to the general risks inherent in concentrating investments in real estate, the risks resulting from a lack of diversification become even greater as a result of investing primarily in entertainment, entertainment-related and recreational properties. These risks are further heightened by the fact that a significant portion of our investments are in megaplex theatre

properties. Although a downturn in the real estate industry could significantly adversely affect the value of our properties, a downturn in the entertainment, entertainment-related and recreational industries could compound this adverse affect. These adverse effects could be more pronounced than if we diversified our investments to a greater degree outside of entertainment, entertainment-related and recreational properties or, more particularly, outside of megaplex theater properties.

If we fail to qualify as a REIT for federal income tax purposes, we will be taxed as a corporation. We are organized and believe we qualify as a REIT, and intend to operate in a manner that will allow us to continue to qualify as a REIT. However, we cannot assure you that we will remain qualified in the future. This is because qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code on which there are only limited judicial and administrative interpretations, and depends on facts and circumstances not entirely within our control. In addition, future legislation, new regulations, administrative interpretations or court decisions may significantly change the tax laws, the application of the tax laws to our qualification as a REIT or the federal income tax consequences of that qualification.

If we fail to qualify as a REIT we will face tax consequences that will substantially reduce the funds available for payment of dividends:

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

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

Substantially all of our assets are held through our subsidiaries. We depend on these subsidiaries for substantially all of our cash flow. The creditors of each of our direct and indirect subsidiaries are entitled to payment of that subsidiary’s obligations to them, when due and payable, before distributions may be made by that subsidiary to its equity holders. Thus, our ability to make distributions to holders of our common and preferred shares depends on our subsidiaries’ ability first to satisfy their obligations to their creditors and then to make distributions to us.

Our ability to meet our construction financing obligations which we have undertaken or may enter into in the future depends on our ability to obtain equity or debt financing in the required amounts. There is no assurance we can obtain this financing or that the financing rates available

will ensure a spread between our cost of capital and the rent or interest payable to us under the related leases or mortgage notes receivable. As a result, we could fail to meet our construction financing obligations which, in turn, could result in failed projects and related foreclosures and penalties, each of which could have a material adverse impact on our results of operations and business.

We had 22 full-time employees as of December 31, 2008 and, therefore, the impact we may feel from the loss of an employee may be greater than the impact such a loss would have on a larger organization. We are dependent on the efforts of the following individuals: David M. Brain, our President and Chief Executive Officer; Gregory K. Silvers, our Vice President, Chief Operating Officer, General Counsel and Secretary; Mark A. Peterson, our Vice President and Chief Financial Officer; and Michael L. Hirons, our Vice President — Finance. While we believe that we could find replacements for our personnel, the loss of their services could harm our operations and adversely affect the value of our common shares.

Risks That Apply to our Real Estate Business

The value of real estate fluctuates depending on conditions in the general economy and the real estate business. These conditions may also limit our revenues and available cash.

The factors that affect the value of our real estate include, among other things:

	•		international, national, regional and local economic conditions;
	•		consequences of any armed conflict involving, or terrorist attack against, the United States;
	•		our ability to secure adequate insurance;
	•		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;
	•		the financial condition of our tenants, including the extent of tenant bankruptcies or defaults;
	•		whether we are able to pass some or all of any increased operating costs through to tenants;
	•		how well we manage our properties;
	•		fluctuations in interest rates;
	•		changes in real estate taxes and other expenses;
	•		changes in market rental rates;
	•		the timing and costs associated with property improvements and rentals;
	•		changes in taxation or zoning laws;
	•		government regulation;
	•		our failure to continue to qualify as a real estate investment trust;
	•		availability of financing on acceptable terms or at all;
	•		potential liability under environmental or other laws or regulations; and general competitive factors.

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

There are risks associated with owning and leasing real estate

Although our lease terms obligate the tenants to bear substantially all of the costs of operating the properties, investing in real estate involves a number of risks, including:

	•		The risk that tenants will not perform under their leases, reducing our income from the leases or requiring us to assume the cost of performing obligations (such as taxes, insurance and maintenance) that are the tenant’s responsibility under the lease
	•		The risk that changes in economic conditions or real estate markets may adversely affect the value of our properties
	•		The risk that local conditions could adversely affect the value of our properties
	•		We may not always be able to lease properties at favorable rates
	•		We may not always be able to sell a property when we desire to do so at a favorable price
	•		Changes in tax, zoning or other laws could make properties less attractive or less profitable

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

Some potential losses are not covered by insurance

Our leases require the tenants to carry comprehensive liability, casualty, workers’ compensation, extended coverage and rental loss insurance on our properties. We believe the required coverage is of the type, and amount, customarily obtained by an owner of similar properties. We believe all of our properties are adequately insured. However, there are some types of losses, such as catastrophic acts of nature, acts of war or riots, for which we or our tenants cannot obtain insurance at an acceptable cost. If there is an uninsured loss or a loss in excess of insurance limits, we could lose both the revenues generated by the affected property and the capital we have invested in the property. We would, however, remain obligated to repay any mortgage indebtedness or other obligations related to the property. Since September 11, 2001, the cost of insurance protection against terrorist acts has risen dramatically. There can be no assurance our tenants will be able to obtain terrorism insurance coverage, or that any coverage they do obtain will adequately protect our properties against loss from terrorist attack.

Joint ventures may limit flexibility with jointly owned investments

We may continue to acquire or develop properties in joint ventures with third parties when those transactions appear desirable. We would not own the entire interest in any property acquired by a joint venture. Major decisions regarding a joint venture property may require the consent of our

partner. If we have a dispute with a joint venture partner, we may feel it necessary or become obligated to acquire the partner’s interest in the venture. However, we cannot ensure that the price we would have to pay or the timing of the acquisition would be favorable to us. If we own less than a 50% interest in any joint venture, or if the venture is jointly controlled, the assets and financial results of the joint venture may not be reportable by us on a consolidated basis. To the extent we have commitments to, or on behalf of, or are dependent on, any such “off-balance sheet” arrangements, or if those arrangements or their properties or leases are subject to material contingencies, our liquidity, financial condition and operating results could be adversely affected by those commitments or off-balance sheet arrangements.

Our multi-tenant properties expose us to additional risks

Our entertainment retail centers in Westminster, Colorado, New Rochelle, New York, White Plains, New York, Burbank, California and Ontario, Canada, and similar properties we may seek to acquire or develop in the future, involve risks not typically encountered in the purchase and lease-back of megaplex theatres which are operated by a single tenant. The ownership or development of multi-tenant retail centers could expose us to the risk that a sufficient number of suitable tenants may not be found to enable the center to operate profitably and provide a return to us. This risk may be compounded by the failure of existing tenants to satisfy their obligations due to various factors, including the current economic crisis. These risks, in turn, could cause a material adverse impact to our results of operations and business.

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

Our theatres must comply with the Americans with Disabilities Act (“ADA”). The ADA requires that public accommodations reasonably accommodate individuals with disabilities and that new construction or alterations be made to commercial facilities to conform to accessibility guidelines. Failure to comply with the ADA can result in injunctions, fines, damage awards to private parties and additional capital expenditures to remedy noncompliance. Our leases require the tenants to comply with the ADA.

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

Potential liability for environmental contamination could result in substantial costs

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

•

As owner we may have to pay for property damage and for investigation and clean-up costs incurred in connection with the contamination

	•		The law may impose clean-up responsibility and liability regardless of whether the owner or operator knew of or caused the contamination
	•		Even if more than one person is responsible for the contamination, each person who shares legal liability under environmental laws may be held responsible for all of the clean-up costs
	•		Governmental entities and third parties may sue the owner or operator of a contaminated site for damages and costs

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

Real estate investments are relatively non-liquid

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

There are risks in owning assets outside the United States

Our properties in Canada and the property securing our Canadian mortgage financing are subject to the risks normally associated with international operations. The rentals under our Canadian leases, the debt service on our Canadian mortgage financing and the payments to be received on our Canadian mortgage receivable are payable or collectible (as applicable) in Canadian dollars, which could expose us to losses resulting from fluctuations in exchange rates to the extent we have not hedged our position. Canadian real estate and tax laws are complex and subject to change, and we cannot assure you we will always be in compliance with those laws or that compliance will not expose us to additional expense. We may also be subject to fluctuations in Canadian real estate values or markets or the Canadian economy as a whole, which may adversely affect our Canadian investments.

Additionally, we may enter other international markets which may have similar risks as described above as well as unique risks associated with a specific country.

We have acquired and financed metropolitan ski areas as well as vineyards and wineries, and may continue to do so in the future. The operators of these properties, our tenants or mortgagors, are dependent upon the operations of the properties to pay their rents and service their loans. The ski area operator’s ability to attract visitors is influenced by weather conditions and the amount of snowfall during the ski season. Adverse weather conditions may discourage visitors from participating in outdoor activities. In addition, unseasonably warm weather may result in inadequate natural snowfall, which increases the cost of snowmaking, and could render snowmaking wholly or partially ineffective in maintaining quality skiing conditions. Excessive natural snowfall may materially increase the costs incurred for grooming trails and may also make it difficult for visitors to obtain access to the ski resorts. Prolonged periods of adverse weather conditions, or the occurrence of such conditions during peak visitation periods, could have a material adverse effect on the operator’s financial results and could impair the ability of the operator to make rental payments or service our loans.

The ability to grow quality wine grapes and a sufficient quantity of wine grapes is influenced by weather conditions. Droughts, freezes and other weather conditions or phenomena, such as “El Nino,” may adversely affect the timing, quality or quantity of wine grape harvests, and this can have a material adverse effect on the operating results of our vineyard and winery operators. In these circumstances, the ability of our tenants to make rental payments or service our loans could be impaired.

Winemaking and wine grape growing are subject to a variety of agricultural risks. In addition to weather, various diseases, pests, fungi and viruses can affect the quality and quantity of wine grapes and negatively impact the profitability of our tenants. Furthermore, wine grape growing requires adequate water supplies. The water needs of our properties are generally supplied through wells and reservoirs located on the properties. Although we believe that there are adequate water supplies to meet the needs of all of our properties, a substantial reduction in water supplies could result in material losses of wine crops and vines. If our tenants suffer a downturn in their business due to any of the factors described above, they may be unable to make their lease or loan payments, which could adversely affect our results of operations and financial condition.

Risks That May Affect the Market Price of our Shares

Our dividend policy is determined by our Board of Trustees. Our ability to continue paying dividends on our common shares, to pay dividends on our preferred shares at their stated rates or to increase our common share dividend rate will depend on a number of factors, including our liquidity, our financial condition and results of future operations, the performance of lease and mortgage terms by our tenants and customers, our ability to acquire, finance and lease additional properties at attractive rates, and provisions in our loan covenants. If we do not maintain or increase our common share dividend rate, that could have an adverse effect on the market price of our common shares and possibly our preferred shares. Furthermore, if the Board of Trustees decides to pay dividends on our common shares partially or substantially all in common shares, that could have an adverse effect on the market price of our common shares and possibly our preferred shares.

Market interest rates may have an effect on the value of our shares

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

To the extent any of our tenants or customers, or their competition, report losses or slower earnings growth, take charges against earnings or enter bankruptcy proceedings, the market price for our shares could be adversely affected. The market price for our shares could also be affected by any weakness in the performance of REIT stocks generally or weakness in any of the sectors in which our tenants and customers operate.

There are a number of provisions in our Declaration of Trust, Bylaws, Maryland law and agreements we have with others which could make it more difficult for a party to make a tender offer for our shares or complete a takeover of the Company which is not approved by our Board of Trustees. These include:

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

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

We may change our policies without obtaining the approval of our shareholders

Our operating and financial policies, including our policies with respect to acquiring or financing real estate or other companies, growth, operations, indebtedness, capitalization and dividends, are exclusively determined by our Board of Trustees. Accordingly, our shareholders do not control these policies.

Dilution could affect the value of our shares

Our future growth will depend in part on our ability to raise additional capital. If we raise additional capital through the issuance of equity securities, the interests of holders of our common shares could be diluted. Likewise, our Board of Trustees is authorized to cause us to issue preferred shares in one or more series, the holders of which would be entitled to dividends and voting and other rights as our Board of Trustees determines, and which could be senior to or convertible into our common shares. Accordingly, an issuance by us of preferred shares could be dilutive to or otherwise adversely affect the interests of holders of our common shares. As of December 31, 2008, our Series C preferred shares are convertible, at each of the holder’s option, into our common shares at a conversion rate of 0.3572 common shares per $25.00 liquidation preference, which is equivalent to a conversion price of approximately $69.99 per common share (subject to adjustment in certain events). Additionally, as of December 31, 2008, our Series E preferred shares are convertible, at each of the holder’s option, into our common shares at a conversion rate of 0.4512 common shares per $25.00 liquidation preference, which is equivalent to a conversion price of approximately $55.41 per common share (subject to adjustment in certain events). Depending upon the number of Series C and Series E preferred shares being converted at one time, a conversion of Series C and Series E preferred shares could be dilutive to or otherwise adversely affect the interests of holders of our common shares.

Changes in foreign currency exchange rates may have an impact on the value of our shares

The functional currency for our Canadian operations and mortgage note receivable is the Canadian dollar. As a result, our future earnings could be affected by fluctuations in the exchange rate between U.S. and Canadian dollars, which in turn could affect our share price. We have attempted to mitigate our exposure to Canadian currency exchange risk by having both our Canadian lease rentals and the debt service on our Canadian mortgage financing payable in the same currency. We have also entered into foreign currency exchange contracts to hedge in part our exposure to exchange rate fluctuations. Foreign currency derivatives are subject to future risk of loss. We do not engage in purchasing foreign exchange contracts for speculative purposes.

Additionally, we may enter other international markets which pose similar currency fluctuation risks as described above.

Tax reform could adversely affect the value of our shares

There have been a number of proposals in Congress for major revision of the federal income tax laws, including proposals to adopt a flat tax or replace the income tax system with a national sales tax or value-added tax. Any of these proposals, if enacted, could change the federal income tax laws applicable to REITS, subject us to federal tax or reduce or eliminate the current deduction for dividends paid to our shareholders, any of which could negatively affect the market for our shares.

Item 1B. Unresolved Staff Comments

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

Item 2. Properties

As of December 31, 2008, our real estate portfolio consisted of 80 megaplex theatre properties and various restaurant, retail and other properties located in 29 states, the District of Columbia and Ontario, Canada. Except as otherwise noted, all of the real estate investments listed below are owned or ground leased directly by us. The following table lists our properties, their locations, acquisition dates, number of theatre screens, number of seats, gross square footage, and the tenant.

				Acquisition								Building
Property		Location		date		Screens		Seats				(gross sq. ft)				Tenant
Megaplex Theatre Properties:
Grand 24 (8)		Dallas, TX		11/97		24			5,067				98,175			AMC
Mission Valley 20 (1) (8)		San Diego, CA		11/97		20			4,361				84,352			AMC
Promenade 16 (8)		Los Angeles, CA		11/97		16			2,860				129,822			AMC
Ontario Mills 30 (8)		Ontario, CA		11/97		30			5,469				131,534			AMC
Lennox 24 (1) (8)		Columbus, OH		11/97		24			4,412				98,261			AMC
West Olive 16 (8)		Creve Coeur, MO		11/97		16			2,817				60,418			AMC
Studio 30 (8)		Houston, TX		11/97		30			6,032				136,154			AMC
Huebner Oaks 24 (8)		San Antonio, TX		11/97		24			4,400				96,004			AMC
First Colony 24 (1) (29)		Sugar Land, TX		11/97		24			5,098				107,690			AMC
Oakview 24 (30)		Omaha, NE		11/97		24			5,098				107,402			AMC
Leawood Town Center 20 (31)		Leawood, KS		2/98		20			2,995				75,224			AMC
Gulf Pointe 30 (2) (34)		Houston, TX		3/98		30			6,008				130,891			AMC
South Barrington 30 (35)		South Barrington, IL		3/98		30			6,210				130,757			AMC
Cantera 30 (2) (4)		Warrenville, IL		4/98		30			6,210				130,757			AMC
Mesquite 30 (2) (33)		Mesquite, TX		6/98		30			6,008				130,891			AMC
Hampton Town Center 24 (37)		Hampton, VA		8/98		24			5,098				107,396			AMC
Raleigh Grand 16 (3)		Raleigh, NC		8/98		16			2,596				51,450			Carolina Cinemas
Pompano 18 (3)		Pompano Beach, FL		11/98		18			3,424				73,637			Muvico
Paradise 24 (22)		Davie, FL		12/98		24			4,180				96,497			Muvico
Boise Stadium 21 (1) (3)		Boise, ID		12/98		21			4,734				140,300			Regal
Aliso Viejo Stadium 20 (21)		Aliso Viejo, CA		12/98		20			4,352				98,557			Regal
Westminster 24 (6)		Westminster, CO		6/99		24			4,812				89,260			AMC
Woodridge 18 (2) (9)		Woodridge, IL		6/99		18			4,384				82,000			AMC
Tampa Starlight 20 (9)		Tampa, FL		1/00		20			3,928				84,000			Muvico
Palm Promenade 24 (9)		San Diego, CA		1/00		24			4,586				88,610			AMC
Cary Crossroads 20 (9)		Cary, NC		3/02		20			3,936				77,475			Regal
Elmwood Palace 20 (9)		Harahan, LA		3/02		20			4,357				90,391			AMC
Hammond Palace 10 (9)		Hammond, LA		3/02		10			1,531				39,850			AMC
Houma Palace 10 (9)		Houma, LA		3/02		10			1,871				44,450			AMC
Westbank Palace 16 (9)		Harvey, LA		3/02		16			3,176				71,607			AMC
Clearview Palace 12 (1) (9)		Metairie, LA		3/02		12			2,495				70,000			AMC
Olathe Studio 30 (9)		Olathe, KS		6/02		30			5,731				100,000			AMC
Forum 30 (9)		Sterling Heights, MI		6/02		30			5,041				107,712			AMC
Cherrydale 16 (9)		Greenville, SC		6/02		16			2,744				52,800			Regal
Livonia 20 (9)		Livonia, MI		8/02		20			3,808				76,106			AMC
Hoffman Town Centre 22 (1) (9)		Alexandria, VA		10/02		22			4,150				132,903			AMC
Colonel Glenn 18 (3)		Little Rock, AR		12/02		18			4,122				79,330			Rave
AmStar Cinema 16 (16)		Macon, GA		3/03		16			2,950				66,400			Southern
Subtotal Megaplex Theatres, carried over to next page						821			161,051				3,569,063

				Acquisition										Building
Property		Location		date			Screens			Seats				(gross sq. ft)				Tenant
Megaplex Theatre Properties:
Subtotal from previous page		n/a		n/a			821				161,051				3,569,063			n/a
Star Southfield 20 (8)		Southfield, MI		5/03			20				7,000				112,119			AMC
Southwind 12 (27)		Lawrence, KS		6/03			12				2,481				42,497			Wallace
Veterans 24 (10)		Tampa, FL		6/03			24				4,580				94,774			AMC
New Roc City 18 and IMAX (11)		New Rochelle, NY		10/03			18				3,400				103,000			Regal
Harbour View Grande 16 (8)		Suffolk, VA		11/03			16				3,036				61,500			Regal
Columbiana Grande 14 (13)		Columbia, SC		11/03			14				3,000				56,705			Regal
The Grande 18 (8)		Hialeah, FL		12/03			18				4,900				77,400			Cobb
Mississauga 16 (7) (49)		Mississauga, ON		3/04			16				3,856				92,971			AMC
Oakville 24 (7) (49)		Oakville, ON		3/04			24				4,772				89,290			AMC
Whitby 24 (7) (49)		Whitby, ON		3/04			24				4,688				89,290			AMC
Kanata 24 (7) (49)		Kanata, ON		3/04			24				4,764				89,290			AMC
Mesa Grand 24 (20)		Mesa, AZ		3/04			24				4,530				94,774			AMC
Deer Valley 30 (3)		Phoenix, AZ		3/04			30				5,877				113,768			AMC
Hamilton 24 (3)		Hamilton, NJ		3/04			24				4,268				95,466			AMC
Grand Prairie 18 (8)		Peoria, IL		7/04			18				4,063				82,330			Rave
Lafayette Grand 16 (1) (17)		Lafayette, LA		7/04			16				2,744				61,579			Southern
Northeast Mall 18 (19)		Hurst, TX		11/04			18				3,886				94,000			Rave
The Grand 18 (24)		D’Iberville, MS		12/04			18				2,984				48,000			Southern
Avenue 16 (8)		Melbourne, FL		12/04			16				3,600				75,850			Rave
Mayfaire Cinema 16 (14)		Wilmington, NC		2/05			16				3,050				57,338			Regal
East Ridge 18 (32)		Chattanooga, TN		3/05			18				4,133				82,330			Rave
Burbank 16 (12)		Burbank, CA		3/05			16				4,232				86,551			AMC
ShowPlace 12 (26)		Indianapolis, IN		6/05			12				2,200				45,270			Kerasotes
The Grand 14 (8)		Conroe, TX		6/05			14				2,400				45,000			Southern
The Grand 18 (28)		Hattiesburg, MS		9/05			18				2,675				57,367			Southern
Auburn Stadium 10 (5)		Auburn, CA		12/05			10				1,573				32,185			Regal
Arroyo Grande Stadium 10 (2) (18)		Arroyo Grande, CA		12/05			10				1,714				34,500			Regal
Modesto Stadium 10 (15)		Modesto, CA		12/05			10				1,885				38,873			Regal
Manchester Stadium 16 (25)		Fresno, CA		12/05			16				3,860				80,600			Regal
Firewheel 18 (36)		Garland, TX		3/06			18				3,156				72,252			AMC
Columbia 14 (1) (8)		Columbia, MD		3/06			14				2,512				77,731			AMC
White Oak Village Cinema 14 (8)		Garner, NC		4/06			14				2,626				50,810			Regal
Valley Bend 18 (8)		Huntsville, AL		8/06			18				4,150				90,200			Rave
The Grand 18 (1) (8)		Winston Salem, NC		7/06			18				3,496				75,605			Southern
Cityplace 14 (8)		Kalamazoo, MI		11/06			14				2,770				70,000			Rave
Bayou 15 (8)		Pensacola, FL		12/06			15				3,361				74,400			Rave
The Grand 16 (1) (39)		Slidell, LA		12/06			16				2,750				62,300			Southern
City Center 15: Cinema de Lux (23)		White Plains, NY		5/07			15				3,500				80,000			National Amusements
Pier Park Grand 16 (8)		Panama City Beach, FL		5/07			16				3,496				75,605			Southern
Kalispell Stadium 14 (8)		Kalispell, MT		8/07			14				2,000				44,650			Signature
Four Seasons Station Grand 18 (1) (8)		Greensboro, NC		11/07			18				3,343				74,517			Southern
Glendora 12 (1)		Glendora, CA		10/08			12				2,264				50,710			AMC
Subtotal Megaplex Theatres							1,537				306,626				6,602,460

				Acquisition						Building
Property		Location		date		Screens		Seats		(gross sq. ft)				Tenant
Retail, Restaurant and Other Properties:
On The Border (8)		Mesquite, TX		1/99		—		—			6,683			Brinker International
Texas Roadhouse (8)		Mesquite, TX		1/99		—		—			6,400			Texas Roadhouse
Westminster Promenade (8)		Westminster, CO		6/99		—		—			135,226			Multi-Tenant
Texas Land & Cattle (8)		Houston, TX		5/00		—		—			7,733			Tx.C.C., Inc.
Vacant (formerly Bennigan’s) (8)		Houston, TX		5/00		—		—			6,575			S & A
Vacant (formerly Bennigan’s) (8)		Mesquite, TX		5/00		—		—			6,575			S & A
Cherrydale Shops (9)		Greenville, SC		6/02		—		—			10,000			Multi-Tenant
Johnny Carino’s (8)		Mesquite, TX		3/03		—		—			6,200			Kona Rest. Group, Inc.
Star Southfield Center(8)		Southfield, MI		5/03		—		—			48,478			Multi-Tenant
New Roc City (11)		New Rochelle, NY		10/03		—		—			343,809			Multi-Tenant
Harbour View Station(8)		Suffolk, SC		11/03		—		—			21,416			Multi-Tenant
Kanata Entertainment Centrum (7) (49)		Kanata, ON		3/04		—		—			308,089			Multi-Tenant
Mississauga Entertainment Centrum
(7) (49)		Mississauga, ON		3/04		—		—			89,777			Multi-Tenant
Oakville Entertainment Centrum (7) (49)		Oakville, ON		3/04		—		—			134,222			Multi-Tenant
Whitby Entertainment Centrum (7) (49)		Whitby, ON		3/04		—		—			124,620			Multi-Tenant
V-Land (8)		Warrenville, IL		7/04		—		—			11,755			V-Land Warrenville
Stir Crazy (8)		Warrenville, IL		9/04		—		—			7,500			Stir Crazy Café
Burbank Village (12)		Burbank, CA		3/05		—		—			34,713			Multi-Tenant
La Cantina (8)		Houston, TX		8/05		—		—			9,000			La Cantina Gulf Fwy, Inc.
Mad River Mountain (37)(40)		Bellefontaine, OH		11/05		—		—			48,427			Mad River Mountain
Sizzler		Arroyo Grande, CA		12/05		—		—			5,850			Arroyo Grande Sizzler
Havens Wine Cellars (41) (38)		Yountville, CA		12/06		—		—			11,960			Billington Imports
Rack and Riddle Winery (38) (42)		Hopland, CA		4/07		—		—			76,000			Rb Wine Associates
City Center at White Plains (23)		White Plains, NY		5/07		—		—			317,943			Multi-Tenant
Austell Promenade (8)		Austell, GA		6/07		—		—			18,410			East-West Promenade
Cosentino Wineries (44)		Pope Valley, Lockeford and Clements, CA		8/07		—		—			71,540			Cosentino Winery, LLC, et al
EOS Estate Winery (43)		Pasa Robles, CA		8/07		—		—			120,000			Sapphire Wines
Imagine College Prep		St. Louis, MO		10/07		—		—			103,000			Imagine
East Mesa Charter Elementary		Mesa, AZ		10/07		—		—			45,214			Imagine
Rosefield Charter Elementary		Surprise, AZ		10/07		—		—			45,578			Imagine
Academy of Columbus		Columbus, OH		10/07		—		—			71,949			Imagine
South Lake Charter Elementary		Clermont, FL		10/07		—		—			39,956			Imagine
Renaissance Public School Academy		Mt. Pleasant, MI		10/07		—		—			36,278			Imagine
100 Academy of Excellence		Las Vegas, NV		10/07		—		—			59,060			Imagine
Imagine Charter Elementary		Phoenix, AZ		10/07		—		—			47,186			Imagine
Groveport Community School		Groveport, OH		10/07		—		—			66,420			Imagine
Harvard Avenue Charter School		Cleveland, OH		10/07		—		—			57,652			Imagine
Hope Community Charter School		Washington, DC		10/07		—		—			34,962			Imagine
Marietta Charter School		Marietta, GA		10/07		—		—			24,503			Imagine
Crotched Mountain		Bennington, NH		1/08		—		—			34,100			Crotched Mountain
Buena Vista Winery & Vineyards (38) (45)		Sonoma, CA		6/08		—		—			105,735			Ascentia Wine Estates
Columbia Winery (38) (46)		Sunnyside, WA		6/08		—		—			35,880			Ascentia Wine Estates
Gary Farrell Winery (38) (47)		Healdsburg, CA		6/08		—		—			21,001			Ascentia Wine Estates
Geyser Peak Winery & Vineyards (38) (48)		Geyserville, CA		6/08		—		—			360,813			Ascentia Wine Estates
Academy of Academic Success		St. Louis, MO		6/08		—		—			66,644			Imagine
Academy of Careers Elementary		St. Louis, MO		6/08		—		—			43,975			Imagine
Subtotal Retail, Restaurant and Other Properties, carried over to next page						—		—			3,288,807

				Acquisition										Building
Property		Location		date		Screens				Seats				(gross sq. ft)				Tenant
Retail, Restaurant and Other Properties:
Subtotal from previous page		n/a		n/a			—				—				3,288,807			n/a
Academy of Careers Middle School		St. Louis, MO		6/08			—				—				56,213			Imagine
Academy of Environmental Science & Math		St. Louis, MO		6/08			—				—				153,000			Imagine
International Academy of Mableton		Mableton, GA		6/08			—				—				43,188			Imagine
Master Academy		Fort Wayne, IN		6/08			—				—				161,500			Imagine
Renaissance Academy (Kensington Campus)		Kansas City, MO		6/08			—				—				53,763			Imagine
Renaissance Academy (Wallace Campus)		Kansas City, MO		6/08			—				—				79,940			Imagine
Romig Road Community School		Akron, OH		6/08			—				—				40,400			Imagine
Wesley International Academy		Atlanta, GA		6/08			—				—				40,358			Imagine
Subtotal Retail, Restaurant and Other Properties							—				—				3,917,169
Total							1,537				306,626				10,519,629

As of December 31, 2008, our portfolio of megaplex theatre properties consisted of 6.6 million square feet and was 100% occupied, and our portfolio of retail, restaurant and other properties consisted of 3.9 million square feet and was 95% occupied. The combined portfolio consisted of 10.5 million square feet and was 98% occupied. For the year ended December 31, 2008, approximately 75% of our rental revenue and 55% of total revenue was derived from theatre tenants. The following table sets forth information regarding EPR’s megaplex theatre portfolio as of December 31, 2008 (dollars in thousands). This data does not include the two megaplex theatre properties held by our unconsolidated joint ventures.

Megaplex Theatre Portfolio
		Total
		Number of								Rental Revenue for				% of
		Leases				Square				the Year Ended				Rental
Year		Expiring				Footage				December 31, 2008				Revenue
2009			—				—			$	—				—
2010			4				443,883				11,271				7.3	%
2011			4				390,837				9,403				6.2	%
2012			3				290,316				6,546				4.3	%
2013			4				499,935				14,117				9.2	%
2014			—				—				—				—
2015			—				—				—				—
2016			2				187,400				3,200				2.1	%
2017			3				224,497				4,661				3.1	%
2018			6				542,584				12,839				8.4	%
2019			7				647,264				19,616				12.8	%
2020			7				416,183				8,027				5.3	%
2021			3				219,673				6,159				4.0	%
2022			9				636,822				15,829				10.4	%
2023			1				77,731				1,254				0.8	%
2024			9				754,421				15,823				10.4	%
2025			7				452,191				12,476				8.2	%
2026			5				347,710				7,328				4.8	%
2027			3				194,772				3,939				2.6	%
2028			1				50,710				194				0.1	%
			78				6,376,929			$	152,682				100.0	%

Our properties are located in 29 states, the District of Columbia and in the Canadian province of Ontario. The following table sets forth certain state-by-state and Ontario, Canada information regarding our real estate portfolio as of December 31, 2008 (dollars in thousands). This data does not include the two theatre properties owned by our unconsolidated joint ventures.

						Rental Revenue
						for the
		Building				year ended				% of Rental
Location		(gross sq. ft)				December 31, 2008				Revenue
California			1,663,906				35,294				17.4	%
Ontario, Canada			1,017,549				26,668				13.2	%
Texas			960,223				22,638				11.2	%
New York			844,752				20,726				10.2	%
Florida			557,389				12,603				6.2	%
Louisiana			440,177				9,676				4.8	%
Michigan			414,415				10,794				5.3	%
North Carolina			387,195				7,859				3.9	%
Virginia			323,215				7,820				3.9	%
Illinois			314,342				8,109				4.0	%
Colorado			224,486				5,415				2.7	%
Kansas			217,721				4,876				2.4	%
Arizona			208,542				3,993				2.0	%
Ohio			146,688				2,834				1.4	%
Idaho			140,300				1,892				0.9	%
South Carolina			119,505				2,100				1.0	%
Nebraska			107,402				2,744				1.4	%
Mississippi			105,367				2,580				1.3	%
New Jersey			95,466				2,185				1.1	%
Alabama			90,200				1,956				1.0	%
Georgia			84,810				1,259				0.6	%
Tennessee			82,330				1,633				0.8	%
Arkansas			79,330				1,616				0.8	%
Maryland			77,731				1,254				0.6	%
Missouri			60,418				2,262				1.1	%
Indiana			45,270				663				0.3	%
Montana			44,650				902				0.4	%
Washington			35,880				196				0.1	%
New Hampshire			34,100				34				0.0	%
			8,923,359				$202,581				100.0	%

Office Location

Our executive office is located in Kansas City, Missouri and is leased from a third party landlord. The office occupies approximately 19,513 square feet with annual rentals of $322 thousand. The lease expires in December 2009. We can extend the lease, at our option, for two option periods of five years each, with annual rent increasing $0.50 per square foot per year.

Tenants and Leases

Our existing leases on rental property (on a consolidated basis — excluding unconsolidated joint venture properties) provide for aggregate annual rentals of approximately $200 million (not including periodic rent escalations or percentage rent). The megaplex theatre leases have an average remaining base term lease life of approximately 12 years and may be extended for predetermined extension terms at the option of the tenant. The theatre leases are typically triple-net leases that require the tenant to pay substantially all expenses associated with the operation of the properties, including taxes, other governmental charges, insurance, utilities, service, maintenance and any ground lease payments.

Property Acquisitions in 2008

The following table lists the significant rental properties we acquired or developed during 2008:

						Development Cost/
Property		Location		Tenant		Purchase Price
Charter Public School Properties		Various		Affiliates of Imagine Schools, Inc.		$39.5 million (1)
Ascentia Wine Estates		Various		Ascentia Wine Estates		$116.5 million
Charter Public School Properties		Various		Affiliates of Imagine Schools, Inc.		$82.3. million (2)
Glendora 12		Glendora, CA		AMC		$10.9 million

Item 3. Legal Proceedings

Other than routine litigation and administrative proceedings arising in the ordinary course of business, we are not presently involved in any litigation nor, to our knowledge, is any litigation threatened against us or our properties, which is reasonably likely to have a material adverse effect on our liquidity or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth quarter of the year ended December 31, 2008.

PART II

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

The following table sets forth, for the quarterly periods indicated, the high and low sales prices per share for our common shares on the New York Stock Exchange (“NYSE”) under the trading symbol “EPR” and the distributions declared.

		Share price								Declared
		High				Low				Distribution
2008:
Fourth quarter		$	54.62			$	18.81			$	0.8400
Third quarter			59.02				48.03				0.8400
Second quarter			56.31				48.23				0.8400
First quarter			55.54				42.76				0.8400
2007:
Fourth quarter		$	56.17			$	46.15			$	0.7600
Third quarter			55.74				42.30				0.7600
Second quarter			63.50				51.49				0.7600
First quarter			68.60				58.04				0.7600

The closing price for our common shares on the NYSE on February 23, 2009 was $17.81 per share.

We declared quarterly distributions to common shareholders aggregating $3.36 per common share in 2008 and $3.04 per common share in 2007.

While we intend to continue paying regular quarterly dividends, future dividend declarations will be at the discretion of the Board of Trustees and will depend on our actual cash flow, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code, debt covenants and other factors the Board of Trustees deems relevant. The actual cash flow available to pay dividends may be affected by a number of factors, including the revenues received from rental properties and mortgage notes, our operating expenses, debt service on our borrowings, the ability of tenants and customers to meet their obligations to us and any unanticipated capital expenditures. Our Series B preferred shares have a fixed dividend rate of 7.75%, our Series C preferred shares have a fixed dividend rate of 5.75%, our Series D preferred shares have a fixed dividend rate of 7.375% and our Series E preferred shares have a fixed dividend rate of 9.00%.

During the year ended December 31, 2008, the Company did not sell any unregistered securities.

On February 23, 2009, there were approximately 590 holders of record of our outstanding common shares.

During the quarter ended December 31, 2008, the Company did not repurchase any of its equity securities.

Stock Performance Chart

Total Return Analysis

		12/31/2003				12/31/2004				12/31/2005				12/31/2006				12/31/2007				12/31/2008
Entertainment Properties Trust		$	100.00			$	135.82			$	131.59			$	199.92			$	170.30			$	116.61
MSCI US REIT Index		$	100.00			$	131.49			$	143.13			$	186.35			$	148.76			$	87.01
Russell 2000 Index		$	100.00			$	117.00			$	120.88			$	141.43			$	137.55			$	89.68

Source: Zacks Investment Research, Inc.

As a company with shares listed on the NYSE, we are required to comply with the corporate governance rules of the NYSE. Our CEO is required to certify to the NYSE that we are in compliance with the governance rules not later than 30 days after the date of each annual shareholder meeting. Our CEO complied with this requirement in 2008. We also filed with the SEC as exhibits to our annual report on Form 10-K for the year ended December 31, 2008 the certifications of our CEO and CFO required under Sections 302 and 906 of the Sarbanes-Oxley Act. With respect to this Annual Report on Form 10-K for the year ended December 31, 2008, we have filed as exhibits hereto the certification of our CEO and CFO required under Sections 302 and 906 of the Sarbanes-Oxley Act.

Item 6. Selected Financial Data

Operating statement data
(Unaudited, dollars in thousands except per share data)

		Years Ended December 31,
		2008				2007				2006				2005				2004
Rental revenue		$	202,581				185,873				167,168				144,838				123,989
Other income			2,241				2,402				3,274				3,517				557
Mortgage and other financing income			60,435				28,841				10,968				4,882				1,957
Property operating expense, net of tenant reimbursements			5,892				4,511				4,314				3,593				2,292
Other expense			2,103				4,205				3,486				2,985				—
General and administrative expense			16,914				12,970				12,515				7,249				6,093
Costs associated with loan refinancing			—				—				673				—				1,134
Interest expense, net			70,951				60,505				48,866				43,749				40,011
Depreciation and amortization			43,829				37,422				31,021				27,473				23,241
Income before gain on sale of land, equity in income from joint ventures, minority interests and discontinued operations			125,568				97,503				80,535				68,188				53,732
Gain on sale of land			—				129				345				—				—
Equity in income from joint ventures			1,962				1,583				759				728				654
Minority interests			2,353				1,370				—				(34	)			(953	)
Income from continuing operations		$	129,883				100,585				81,639				68,882				53,433
Discontinued operations:
Income (loss) from discontinued operations			(26	)			839				650				178				280
Gain on sale of real estate			119				3,240				—				—				—
Net income			129,976				104,664				82,289				69,060				53,713
Preferred dividend requirements			(28,266	)			(21,312	)			(11,857	)			(11,353	)			(5,463	)
Series A preferred share redemption costs			—				(2,101	)			—				—				—
Net income available to common shareholders		$	101,710				81,251				70,432				57,707				48,250
Per share data:
Basic earnings per share data:
Income from continuing operations available to common shareholders		$	3.32				2.89				2.67				2.30				2.11
Income from discontinued operations			—				0.15				0.02				0.01				0.01
Net income available to common shareholders		$	3.32				3.04				2.69				2.31				2.12
Diluted earnings per share data:
Income from continuing operations available to common shareholders		$	3.28				2.84				2.62				2.25				2.06
Income from discontinued operations			—				0.15				0.03				0.01				0.01
Net income available to common shareholders		$	3.28				2.99				2.65				2.26				2.07
Shares used for computation (in thousands):
Basic			30,628				26,690				26,147				25,019				22,721
Diluted			31,006				27,171				26,627				25,504				23,664
Cash dividends declared per common share		$	3.36				3.04				2.75				2.50				2.25