EPR PROPERTIES - Quarter Report: 2022 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended March 31, 2022


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

For the transition period from to

Commission file number: 001-13561

EPR PROPERTIES

(Exact name of registrant as specified in its charter)


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

909 Walnut Street,	Suite 200
Kansas City,	Missouri	64106
(Address of principal executive offices)		(Zip Code)


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

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

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common shares, par value $0.01 per share

EPR

New York Stock Exchange

5.75% Series C cumulative convertible preferred shares, par value $0.01 per share

EPR PrC

New York Stock Exchange

9.00% Series E cumulative convertible preferred shares, par value $0.01 per share

EPR PrE

New York Stock Exchange

5.75% Series G cumulative redeemable preferred shares, par value $0.01 per share

EPR PrG

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

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

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

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

Factors that could materially and adversely affect us include, but are not limited to, the factors listed below:

•Risks associated with COVID-19, or the future outbreak of any additional variants of COVID-19 or other highly infectious or contagious diseases;

•Global economic uncertainty and disruptions in financial markets;

•The impact of inflation on our customers and our results of operations;

•Reduction in discretionary spending by consumers;

•Covenants in our debt instruments that limit our ability to take certain actions;

•Adverse changes in our credit ratings;

•Fluctuations in interest rates;

•Defaults in the performance of lease terms by our tenants;

•Defaults by our customers and counterparties on their obligations owed to us;

•A borrower's bankruptcy or default;

•Our ability to renew maturing leases on terms comparable to prior leases and/or our ability to locate substitute lessees for these properties on economically favorable terms;

•Risks of operating in the experiential real estate industry;

•Our ability to compete effectively;

•Risks associated with three tenants representing a substantial portion of our lease revenues;

•The ability of our build-to-suit tenants to achieve sufficient operating results within expected time-frames and therefore have capacity to pay their agreed upon rent;

•Risks associated with our dependence on third-party managers to operate certain of our properties;

•Risks associated with our level of indebtedness;

•Risks associated with use of leverage to acquire properties;

•Financing arrangements that require lump-sum payments;

•Our ability to raise capital;

•The concentration of our investment portfolio;

•Our continued qualification as a real estate investment trust for U.S. federal income tax purposes and related tax matters;

•The ability of our subsidiaries to satisfy their obligations;

•Financing arrangements that expose us to funding and completion risks;

•Our reliance on a limited number of employees, the loss of which could harm operations;

•Risks associated with the employment of personnel by managers of certain of our properties;

•Risks associated with the gaming industry;

•Risks associated with gaming and other regulatory authorities;

•Delays or prohibitions of transfers of gaming properties due to required regulatory approvals;

•Risks associated with security breaches and other disruptions;

•Changes in accounting standards that may adversely affect our financial statements;

•Fluctuations in the value of real estate income and investments;

•Risks relating to real estate ownership, leasing and development, including local conditions such as an

oversupply of space or a reduction in demand for real estate in the area, competition from other available space, whether tenants and users such as customers of our tenants consider a property attractive, changes in real estate taxes and other expenses, changes in market rental rates, the timing and costs associated with property improvements and rentals, changes in taxation or zoning laws or other governmental regulation, whether we are able to pass some or all of any increased operating costs through to tenants or other customers, and how well we manage our properties;

•Our ability to secure adequate insurance and risk of potential uninsured losses, including from natural disasters;

•Risks involved in joint ventures;

•Risks in leasing multi-tenant properties;

•A failure to comply with the Americans with Disabilities Act or other laws;

•Risks of environmental liability;

•Risks associated with the relatively illiquid nature of our real estate investments;

•Risks with owning assets in foreign countries;

•Risks associated with owning, operating or financing properties for which the tenants', mortgagors' or our operations may be impacted by weather conditions, climate change and natural disasters;

•Risks associated with the development, redevelopment and expansion of properties and the acquisition of other real estate related companies;

•Our ability to pay dividends in cash or at current rates;

•Risks associated with the impact of inflation or market interest rates on the value of our shares;

•Fluctuations in the market prices for our shares;

•Certain limits on changes in control imposed under law and by our Declaration of Trust and Bylaws;

•Policy changes obtained without the approval of our shareholders;

•Equity issuances that could dilute the value of our shares;

•Future offerings of debt or equity securities, which may rank senior to our common shares;

•Risks associated with changes in foreign exchange rates; and

•Changes in laws and regulations, including tax laws and regulations.

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

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

TABLE OF CONTENTS

Page

PART I

Item 1.

Financial Statements

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

PART II

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sale of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

Other Information

Item 6.

Exhibits

iii

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

EPR PROPERTIES

Consolidated Balance Sheets

(Dollars in thousands except share data)


	March 31, 2022		December 31, 2021
	(unaudited)
Assets
Real estate investments, net of accumulated depreciation of $1,206,317 and $1,167,734 at March 31, 2022 and December 31, 2021, respectively	$	4,738,887	$	4,713,091
Land held for development	20,168		20,168
Property under development	10,885		42,362
Operating lease right-of-use assets	177,174		180,808
Mortgage notes and related accrued interest receivable	370,021		370,159

Investment in joint ventures	36,564		36,670
Cash and cash equivalents	323,761		288,822
Restricted cash	2,956		1,079


Accounts receivable	60,704		78,073

Other assets	76,950		69,918
Total assets	$	5,818,070	$	5,801,150
Liabilities and Equity
Liabilities:
Accounts payable and accrued liabilities	$	92,999	$	73,462
Operating lease liabilities	215,112		218,795
Common dividends payable	20,946		18,896
Preferred dividends payable	6,033		6,034
Unearned rents and interest	76,013		61,559
Debt	2,805,853		2,804,365
Total liabilities	3,216,956		3,183,111
Equity:
Common Shares, $0.01 par value; 100,000,000 shares authorized; and 82,485,670 and 82,225,061 shares issued at March 31, 2022 and December 31, 2021, respectively	825		822
Preferred Shares, $0.01 par value; 25,000,000 shares authorized:
5,392,916 Series C convertible shares issued at March 31, 2022 and December 31, 2021; liquidation preference of $134,822,900	54		54
3,447,381 Series E convertible shares issued at March 31, 2022 and December 31, 2021; liquidation preference of $86,184,525	34		34
6,000,000 Series G shares issued at March 31, 2022 and December 31, 2021; liquidation preference of $150,000,000	60		60
Additional paid-in-capital	3,886,240		3,876,817
Treasury shares at cost: 7,517,572 and 7,416,746 common shares at March 31, 2022 and December 31, 2021, respectively	(269,608)		(264,817)
Accumulated other comprehensive income	10,471		9,955
Distributions in excess of net income	(1,026,962)		(1,004,886)


Total equity	$	2,601,114	$	2,618,039
Total liabilities and equity	$	5,818,070	$	5,801,150

See accompanying notes to consolidated financial statements.

EPR PROPERTIES

Consolidated Statements of Income (Loss) and Comprehensive Income

(Unaudited)

(Dollars in thousands except per share data)


	Three Months Ended March 31,
	2022		2021
Rental revenue	$	139,603	$	102,614
Other income	9,305		678
Mortgage and other financing income	8,564		8,473
Total revenue	157,472		111,765
Property operating expense	13,939		15,313
Other expense	8,097		2,552
General and administrative expense	13,224		11,336


Costs associated with loan refinancing or payoff	—		241

Interest expense, net	33,260		39,194
Transaction costs	2,247		548
Credit loss benefit	(306)		(2,762)
Impairment charges	4,351		—
Depreciation and amortization	40,044		40,326
Income before equity in loss from joint ventures and other items	42,616		5,017
Equity in loss from joint ventures	(106)		(1,431)

Gain on sale of real estate	—		201

Income before income taxes	42,510		3,787
Income tax expense	(318)		(407)









Net income	42,192		3,380
Preferred dividend requirements	(6,033)		(6,034)

Net income (loss) available to common shareholders of EPR Properties	$	36,159	$	(2,654)

Net income (loss) available to common shareholders of EPR Properties per share:


Basic	$	0.48	$	(0.04)




Diluted	$	0.48	$	(0.04)
Shares used for computation (in thousands):
Basic	74,843		74,627
Diluted	75,047		74,627

Other comprehensive income:
Net income	$	42,192	$	3,380

Foreign currency translation adjustment	2,606		2,300
Change in net unrealized (loss) gain on derivatives	(2,090)		462
Comprehensive income attributable to EPR Properties	$	42,708	$	6,142

See accompanying notes to consolidated financial statements.

EPR PROPERTIES

Consolidated Statements of Changes in Equity

(Unaudited)

(Dollars in thousands except per share data)


	EPR Properties Shareholders’ Equity
	Common Stock			Preferred Stock			Additional paid-in capital		Treasury shares		Accumulated other comprehensive income		Distributions in excess of net income		Total
	Shares	Par		Shares	Par
Balance at December 31, 2020	81,917,876	$	819	14,841,431	$	148	$	3,857,632	$	(261,238)	$	216	$	(966,992)	$	2,630,585

Issuance of nonvested shares and performance shares, net of cancellations	246,562	2		—	—		2,899		—		—		—		2,901
Purchase of common shares for vesting	—	—		—	—		—		(2,744)		—		—		(2,744)
Share-based compensation expense	—	—		—	—		3,784		—		—		—		3,784

Foreign currency translation adjustment	—	—		—	—		—		—		2,300		—		2,300

Change in unrealized gain on derivatives	—	—		—	—		—		—		462		—		462

Net income	—	—		—	—		—		—		—		3,380		3,380
Issuances of common shares	2,509	—		—	—		107		—		—		—		107





Dividend equivalents accrued on performance shares	—	—		—	—		—		—		—		(8)		(8)

Dividends to Series C preferred shareholders ($0.359375 per share)	—	—		—	—		—		—		—		(1,939)		(1,939)
Dividends to Series E preferred shareholders ($0.5625 per share)	—	—		—	—		—		—		—		(1,939)		(1,939)
Dividends to Series G preferred shareholders ($0.359375 per share)	—	—		—	—		—		—		—		(2,156)		(2,156)

Balance at March 31, 2021	82,166,947	$	821	14,841,431	$	148	$	3,864,422	$	(263,982)	$	2,978	$	(969,654)	$	2,634,733






Balance at December 31, 2021	82,225,061	$	822	14,840,297	$	148	$	3,876,817	$	(264,817)	$	9,955	$	(1,004,886)	$	2,618,039
Restricted share units issued to Trustees	2,794	—		—	—		—		—		—		—		—
Issuance of nonvested shares and performance shares, net of cancellations	243,286	3		—	—		4,496		(83)		—		—		4,416
Purchase of common shares for vesting	—	—		—	—		—		(4,250)		—		—		(4,250)
Share-based compensation expense	—	—		—	—		4,245		—		—		—		4,245

Foreign currency translation adjustment	—	—		—	—		—		—		2,606		—		2,606

Change in unrealized loss on derivatives	—	—		—	—		—		—		(2,090)		—		(2,090)

Net income	—	—		—	—		—		—		—		42,192		42,192
Issuances of common shares	4,730	—		—	—		228		—		—		—		228




Stock option exercises, net	9,799	—		—	—		454		(458)		—		—		(4)
Dividend equivalents accrued on performance shares	—	—		—	—		—		—		—		(136)		(136)
Dividends to common shareholders ($0.775 per share)	—	—		—	—		—		—		—		(58,099)		(58,099)
Dividends to Series C preferred shareholders ($0.359375 per share)	—	—		—	—		—		—		—		(1,938)		(1,938)
Dividends to Series E preferred shareholders ($0.5625 per share)	—	—		—	—		—		—		—		(1,939)		(1,939)
Dividends to Series G preferred shareholders ($0.359375 per share)	—	—		—	—		—		—		—		(2,156)		(2,156)
Balance at March 31, 2022	82,485,670	$	825	14,840,297	$	148	$	3,886,240	$	(269,608)	$	10,471	$	(1,026,962)	$	2,601,114

See accompanying notes to consolidated financial statements.

EPR PROPERTIES

Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)


	Three Months Ended March 31,
	2022		2021
Operating activities:
Net income	$	42,192	$	3,380
Adjustments to reconcile net income to net cash provided by operating activities:

Impairment charges	4,351		—



Gain on sale of real estate	—		(201)
Gain on insurance recovery	(552)		(30)


Costs associated with loan refinancing or payoff	—		241
Equity in loss from joint ventures	106		1,431
Distributions from joint ventures	—		90
Credit loss benefit	(306)		(2,762)
Depreciation and amortization	40,044		40,326
Amortization of deferred financing costs	2,071		1,547
Amortization of above/below market leases and tenant allowances, net	(87)		(96)
Share-based compensation expense to management and Trustees	4,245		3,784

Change in assets and liabilities:
Operating lease assets and liabilities	(49)		(120)
Mortgage notes accrued interest receivable	310		280
Accounts receivable	17,424		18,687

Other assets	(5,861)		(7,323)
Accounts payable and accrued liabilities	15,132		997
Unearned rents and interest	9,067		18,075


Net cash provided by operating activities	128,087		78,306
Investing activities:
Acquisition of and investments in real estate and other assets	(20,726)		(26,847)
Proceeds from sale of real estate	61		13,707
Investment in unconsolidated joint ventures	—		(1,625)

Investment in mortgage notes receivable	—		(2,436)
Proceeds from mortgage notes receivable paydowns	151		5,299
Investment in promissory notes receivable	—		(4,379)
Proceeds from promissory note receivable paydowns	75		105

Proceeds from insurance recovery	609		30


Additions to properties under development	(5,205)		(13,748)



Net cash used by investing activities	(25,035)		(29,894)
Financing activities:

Principal payments on debt	—		(523,765)
Deferred financing fees paid	(48)		—

Net proceeds from issuance of common shares	160		108

Impact of stock option exercises, net	(4)		—

Purchase of common shares for treasury for vesting	(4,250)		(2,744)


Dividends paid to shareholders	(62,151)		(6,034)


Net cash used by financing activities	(66,293)		(532,435)
Effect of exchange rate changes on cash	57		18
Net change in cash and cash equivalents and restricted cash	36,816		(484,005)
Cash and cash equivalents and restricted cash at beginning of the period	289,901		1,028,010
Cash and cash equivalents and restricted cash at end of the period	$	326,717	$	544,005
Supplemental information continued on next page.

EPR PROPERTIES

Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)


Continued from previous page
	Three Months Ended March 31,
	2022		2021
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents at beginning of the period	$	288,822	$	1,025,577
Restricted cash at beginning of the period	1,079		2,433
Cash and cash equivalents and restricted cash at beginning of the period	$	289,901	$	1,028,010

Cash and cash equivalents at end of the period	$	323,761	$	538,077
Restricted cash at end of the period	2,956		5,928
Cash and cash equivalents and restricted cash at end of the period	$	326,717	$	544,005

Supplemental schedule of non-cash activity:
Transfer of property under development to real estate investments	$	35,255	$	309


Issuance of nonvested shares and restricted share units at fair value, including nonvested shares issued for payment of bonuses	$	19,791	$	19,793






Operating lease right-of-use asset and related operating lease liability recorded for new ground lease	$	—	$	18,481







Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	17,298	$	33,562
Cash paid during the period for income taxes	$	—	$	285
Interest cost capitalized	$	200	$	595
Change in accrued capital expenditures	$	5,928	$	(3,323)

See accompanying notes to consolidated financial statements.

EPR PROPERTIES

Notes to Consolidated Financial Statements (Unaudited)

1. Organization

Description of Business

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

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

Basis of Presentation

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

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

The Company’s variable interests in VIEs currently are in the form of equity ownership and loans provided by the Company to a VIE or other partner. The Company examines specific criteria and uses its judgment when determining if the Company is the primary beneficiary of a VIE. The primary beneficiary generally is defined as the party with the controlling financial interest. Consideration of various factors include, but are not limited to, the Company’s ability to direct the activities that most significantly impact the entity’s economic performance and its obligation to absorb losses from or right to receive benefits of the VIE that could potentially be significant to the VIE. As of March 31, 2022 and December 31, 2021, the Company does not have any investments in consolidated VIEs.

Risks and Uncertainties

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

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

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

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

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

Reportable Segments

The Company has two reportable operating segments: Experiential and Education. The Experiential segment includes the following property types: theatres, eat & play (including seven theatres located in entertainment districts), attractions, ski, experiential lodging, gaming, cultural and fitness & wellness. The Education segment includes the following property types: early childhood education centers and private schools. See Note 15 for financial information related to these reportable segments.

Real Estate Investments

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

Management reviews the Company's real estate investments, including operating lease right-of-use assets, for impairment whenever events or changes in circumstances indicate that the carrying value of a property may not be recoverable, which is based on an estimate of undiscounted future cash flows expected to result from its use and eventual disposition. If impairment exists due to the inability to recover the carrying value of the property, an impairment loss is recorded to the extent that the carrying value of the property exceeds its estimated fair value.

The Company evaluates the held-for-sale classification of its real estate as of the end of each quarter. Assets that are classified as held for sale are recorded at the lower of their carrying amount or fair value less costs to sell and are generally classified as held for sale once management has initiated an active program to market them for sale and it is probable the assets will be sold within one year. On occasion, the Company will receive unsolicited offers from third parties to buy individual Company properties. Under these circumstances, the Company will classify the properties as held for sale when a sales contract is executed with no contingencies and the prospective buyer has funds at risk to ensure performance.

Real Estate Acquisitions

Upon acquisition of real estate properties, the Company evaluates the acquisition to determine if it is a business combination or an asset acquisition. If the acquisition is determined to be an asset acquisition, the Company records the purchase price and other related costs incurred to the acquired tangible assets and identified intangible assets and liabilities on a relative fair value basis. In addition, costs incurred for asset acquisitions, including transaction costs, are capitalized.

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

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

Deferred Financing Costs

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

Rental Revenue

The Company leases real estate to its tenants under leases classified as operating leases. The Company's leases generally provide for rent escalations throughout the lease terms. Rents that are fixed are recognized on a straight-line basis over the lease term. Base rent escalations that include a variable component are recognized upon the occurrence of the specified event as defined in the Company's lease agreements. Many of the Company's leasing arrangements include options to extend the lease, which are not included in the minimum lease terms unless it is reasonably certain to be exercised. Straight-line rental revenue is subject to an evaluation for collectibility, and the Company records a direct write-off against rental revenue if collectibility of these future rents is not probable. For the three months ended March 31, 2022 and 2021, the Company recognized $0.6 million and $1.3 million, respectively, of straight-line rental revenue. There were no straight-line write-offs for the three months ended March 31, 2022 and 2021.

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

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

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

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

In addition, most of the Company's tenants are subject to additional rents (above base rents) if gross revenues of the properties exceed certain thresholds defined in the lease agreements (percentage rents). Percentage rents are recognized at the time when specific triggering events occur as provided by the lease agreement. Rental revenue included percentage rents of $3.4 million and $2.0 million for the three months ended March 31, 2022 and 2021, respectively.

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

Property Sales

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

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

Mortgage Notes and Other Notes Receivable

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

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

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

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

In the event the Company has a past due mortgage note or note receivable and the Company determines it is collateral dependent, the Company measures expected credit losses based on the fair value of the collateral. As of March 31, 2022, the Company does not have any mortgage notes or notes receivable with past due principal balances.

Mortgage and Other Financing Income

Certain of the Company's borrowers are subject to additional interest based on certain thresholds defined in the mortgage agreements (participating interest). Participating interest income is recognized at the time when specific parameters have been met as provided by the mortgage agreement. There was no participating interest income for the three months ended March 31, 2022 and 2021.

Concentrations of Risk

AMC, Topgolf USA (Topgolf) and Regal represented a significant portion of the Company's total revenue for the three months ended March 31, 2022 and 2021. The Company began recognizing revenue on a cash basis for AMC at the end of the first quarter of 2020 and for Regal at the end of the third quarter of 2020 and cash payments were reduced due to the impact of the COVID-19 pandemic. The following is a summary of the Company's total revenue derived from rental or interest payments from AMC, Topgolf and Regal (dollars in thousands):


	Three Months Ended March 31,
	2022				2021
	Total Revenue		% of Company's Total Revenue		Total Revenue		% of Company's Total Revenue
AMC	$	23,422	14.9	%	$	23,835	21.3	%
Topgolf	22,383		14.2	%	20,486		18.3	%
Regal	21,255		13.5	%	625		0.6	%

Share-Based Compensation

Share-based compensation to employees of the Company is granted pursuant to the Company's Annual Incentive Program and Long-Term Incentive Plan and share-based compensation to non-employee Trustees of the Company is granted pursuant to the Company's Trustee compensation program.

Share-based compensation expense consists of share option expense and amortization of non-vested share grants issued to employees, and amortization of share units issued to non-employee Trustees for payment of their annual retainers. Share-based compensation is included in "General and administrative expense" in the accompanying consolidated statements of income (loss) and comprehensive income.

Share Options

Share options are granted to employees pursuant to the Long-Term Incentive Plan. The fair value of share options granted is estimated at the date of grant using the Black-Scholes option pricing model. Share options granted to employees vest over a period of four years and share option expense for these options is recognized on a straight-line basis over the vesting period. Expense recognized related to share options and included in "General and administrative expense" in the accompanying consolidated statements of income (loss) and comprehensive income was $4 thousand for both the three months ended March 31, 2022 and 2021.

Nonvested Shares Issued to Employees

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

Nonvested Performance Shares Issued to Employees

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

Restricted Share Units Issued to Non-Employee Trustees

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

Derivative Instruments

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

The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to

changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as foreign currency risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. For its net investment hedges that hedge the foreign currency exposure of its Canadian investments, the Company has elected to assess hedge effectiveness using a method based on changes in spot exchange rates and record the changes in the fair value amounts excluded from the assessment of effectiveness into earnings on a systematic and rational basis. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. If hedge accounting is not applied, realized and unrealized gains or losses are reported in earnings.

The Company's policy is to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

Impact of Recently Issued Accounting Standards

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848). The ASU contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the year ended December 31, 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. On March 5, 2021, the Financial Conduct Authority ("FCA") announced that the USD LIBOR will no longer be published after June 30, 2023. At March 31, 2022, the Company had 10 agreements (including debt, derivative, mortgage note and lease agreements) that are indexed to LIBOR, of which three mature prior to June 30, 2023. The Company is monitoring and evaluating the related risks with transitioning these contracts to a replacement index.

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

3. Real Estate Investments

The following table summarizes the carrying amounts of real estate investments as of March 31, 2022 and December 31, 2021 (in thousands):


	March 31, 2022		December 31, 2021
Buildings and improvements	$	4,580,400	$	4,523,052
Furniture, fixtures & equipment	108,454		108,907
Land	1,229,363		1,222,149
Leasehold interests	26,987		26,717
	5,945,204		5,880,825
Accumulated depreciation	(1,206,317)		(1,167,734)
Total	$	4,738,887	$	4,713,091

Depreciation expense on real estate investments was $38.8 million and $38.9 million for the three months ended March 31, 2022 and 2021, respectively.

4. Impairment Charges

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

5. Investments

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

6. Investment in Mortgage Notes and Notes Receivable

The Company measures expected credit losses on its mortgage notes and notes receivable on an individual basis over the related contractual term as its financial instruments do not have similar risk characteristics. The Company has not experienced historical losses on its mortgage note portfolio; therefore, the Company uses a forward-looking commercial real estate loss forecasting tool to estimate its expected credit losses. The loss forecasting tool is comprised of a probability of default model and a loss given default model that utilizes the Company’s loan specific inputs as well as selected forward-looking macroeconomic variables and mean loss rates. Based on certain inputs, such as origination year, balance, interest rate as well as collateral value and borrower operating income, the model produces life of loan expected losses on a loan by loan basis. As of March 31, 2022, the Company did not anticipate any prepayments; therefore, the contractual term of its mortgage notes was used for the calculation of the expected credit losses. The Company updates the model inputs at each reporting period to reflect, if applicable, any newly originated loans, changes to loan specific information on existing loans and current macroeconomic conditions.

Investment in mortgage notes, including related accrued interest receivable, at March 31, 2022 and December 31, 2021 consists of the following (in thousands):


					Outstanding principal amount of mortgage		Carrying amount as of				Unfunded commitments
Description	Year of Origination	Interest Rate		Maturity Date			March 31, 2022		December 31, 2021		March 31, 2022
Attraction property Powells Point, North Carolina	2019	7.75	%	6/30/2025	28,864		28,695		28,243		—
Fitness & wellness property Omaha, Nebraska	2017	7.85	%	1/3/2027	10,905		10,952		10,940		—
Fitness & wellness property Merriam, Kansas	2019	7.55	%	7/31/2029	9,090		9,171		9,159		—
Ski property Girdwood, Alaska	2019	8.20	%	12/31/2029	45,599		45,623		45,877		11,401
Fitness & wellness property Omaha, Nebraska	2016	7.85	%	6/30/2030	10,539		10,602		10,615		379
Experiential lodging property Nashville, Tennessee	2019	7.01	%	9/30/2031	71,223		71,277		70,896		—
Eat & play property Austin, Texas	2012	11.31	%	6/1/2033	10,629		10,629		10,874		—
Ski property West Dover and Wilmington, Vermont	2007	11.96	%	12/1/2034	51,050		51,049		51,047		—
Four ski properties Ohio and Pennsylvania	2007	11.07	%	12/1/2034	37,562		37,538		37,519		—
Ski property Chesterland, Ohio	2012	11.55	%	12/1/2034	4,550		4,529		4,516		—
Ski property Hunter, New York	2016	8.88	%	1/5/2036	21,000		21,000		21,000		—
Eat & play property Midvale, Utah	2015	10.25	%	5/31/2036	17,505		17,505		17,639		—
Eat & play property West Chester, Ohio	2015	9.75	%	8/1/2036	18,068		18,066		18,198		—
Fitness & wellness property Fort Collins, Colorado	2018	7.85	%	1/31/2038	10,292		10,048		10,277		—
Early childhood education center Lake Mary, Florida	2019	7.98	%	5/9/2039	4,200		4,337		4,329		—
Eat & play property Eugene, Oregon	2019	8.13	%	6/17/2039	14,700		15,018		14,996		—
Early childhood education center Lithia, Florida	2017	8.58	%	10/31/2039	3,959		3,982		4,034		—
					$	369,735	$	370,021	$	370,159	$	11,780

Investment in notes receivable, including related accrued interest receivable, was $7.2 million and $7.3 million at March 31, 2022 and December 31, 2021, respectively, and is included in "Other assets" in the accompanying consolidated balance sheets.

During the year ended December 31, 2020, the Company entered into an amended and restated loan and security agreement with one of its notes receivable borrowers in response to the impacts of the COVID-19 pandemic. Although the borrower was not in default, nor had the borrower declared bankruptcy, the Company determined these modifications resulted in a TDR. At March 31, 2022, this note receivable is considered collateral-dependent and expected credit losses are based on the fair value of the underlying collateral at the reporting date. The note is secured by the working capital and non-real estate assets of the borrower. The Company assessed the fair value of the collateral as of March 31, 2022 and the note remains fully reserved with an allowance for credit loss totaling $8.6 million, which represents the outstanding principal balance of the note as of March 31, 2022. Income for this borrower is recognized on a cash basis.

At March 31, 2022, the Company's investment in this note receivable was a variable interest investment and the underlying entity is a VIE. The Company is not the primary beneficiary of this VIE because the Company does not individually have the power to direct the activities that are most significant to the entity and accordingly, this investment is not consolidated. The Company's maximum exposure to loss associated with this VIE is limited to the Company's outstanding note receivable in the amount of $8.6 million, which is fully reserved in the allowance for credit losses at March 31, 2022.

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


	Mortgage notes receivable		Unfunded commitments - mortgage notes receivable		Notes receivable		Unfunded commitments - notes receivable		Total
Allowance for credit losses at December 31, 2021	$	2,124	$	76	$	8,686	$	—	$	10,886
Credit loss (benefit) expense	(323)		(13)		30		—		(306)
Charge-offs	—		—		—		—		—
Recoveries	—		—		—		—		—
Allowance for credit losses at March 31, 2022	$	1,801	$	63	$	8,716	$	—	$	10,580

7. Accounts Receivable

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


	March 31, 2022		December 31, 2021
Receivable from tenants	$	19,731	$	37,417
Receivable from non-tenants	2,102		2,237



Straight-line rent receivable	38,871		38,419

Total	$	60,704	$	78,073

As of March 31, 2022, receivable from tenants includes payments of approximately $17.4 million that were deferred due to the COVID-19 pandemic and determined to be collectible. Additionally, the Company has amounts due from tenants that were not booked as receivables because the full amounts were not deemed probable of collection as a result of the COVID-19 pandemic. While deferments for this and future periods delay rent payments, these deferments do not release tenants from the obligation to pay the deferred amounts in the future.

8. Capital Markets and Dividends

During the three months ended March 31, 2022, the Company declared cash dividends totaling $0.775 per common share. Additionally, during the three months ended March 31, 2022, the Board declared cash dividends of $0.359375 per share on each of the Company's 5.75% Series C cumulative convertible preferred shares and the Company's 5.75% Series G cumulative redeemable preferred shares and cash dividends of $0.5625 per share on the Company's 9.00% Series E cumulative convertible preferred shares.

On January 14, 2022, the Company amended the note purchase agreement governing its private placement notes (Note Purchase Agreement) to, among other things: (i) amend certain financial and other covenants and provisions in the existing Note Purchase Agreement to conform generally to the changes beneficial to the Company in the corresponding covenants and provisions contained in the Company's Third Amended, Restated and Consolidated Credit Agreement, dated October 6, 2021, and (ii) amend certain financial and other covenants and provisions in the existing Note Purchase Agreement to reflect the prior termination of the Covenant Relief Period (as defined in the existing Note Purchase Agreement) and removal of related provisions.

9. Unconsolidated Real Estate Joint Ventures

As of March 31, 2022 and December 31, 2021, the Company had a 65% investment interest in two unconsolidated real estate joint ventures related to two experiential lodging properties located in St. Petersburg Beach, Florida. The Company's partner, Gencom Acquisition, LLC and its affiliates, own the remaining 35% interest in the joint ventures. There are two separate joint ventures, one that holds the investment in the real estate of the experiential

lodging properties and the other that holds lodging operations, which are facilitated by a management agreement with an eligible independent contractor. The Company's investment in the operating entity is held in a taxable REIT subsidiary (TRS). The Company accounts for its investment in these joint ventures under the equity method of accounting. As of March 31, 2022 and December 31, 2021, the Company had equity investments of $27.1 million and $25.9 million, respectively, in these joint ventures.

The joint venture that holds the real property has a secured mortgage loan of $85.0 million at March 31, 2022, that was due April 1, 2022 but the joint venture has temporarily extended the maturity date to July 1, 2022. The note can be extended for two additional one-year periods from the original maturity date upon the satisfaction of certain conditions. The mortgage loan bears interest at an annual rate equal to the greater of 6.00% or LIBOR plus 3.75%. Interest is payable monthly beginning on May 1, 2019 until the maturity date. The joint venture has an interest rate cap agreement to limit the variable portion of the interest rate (LIBOR) on this note to 3.0% from March 28, 2019 to April 1, 2023.

The Company recognized gains of $1.2 million and losses of $1.5 million during the three months ended March 31, 2022 and 2021, respectively, and received no distributions during the three months ended March 31, 2022 and 2021 related to the equity investments in these joint ventures.

As of March 31, 2022 and December 31, 2021, the Company's investments in these joint ventures were considered to be variable interest investments and the underlying entities are VIEs. The Company is not the primary beneficiary of the VIEs because the Company does not individually have the power to direct the activities that are most important to the joint ventures and accordingly, these investments are not consolidated. The Company's maximum exposure to loss at March 31, 2022, is its investment in the joint ventures in the amount of $27.1 million.

As of March 31, 2022 and December 31, 2021, the Company had a 95% investment interest in two unconsolidated real estate joint ventures related to experiential lodging located in Warrens, Wisconsin. The Company's investments in these joint ventures were considered to be variable interest investments, however, the underlying entities are not VIEs. The Company's partner, TJO Warrens, LLC and its affiliates, owns the remaining 5% interest in the joint ventures. There are two separate joint ventures, one that holds the investment in the real estate of the experiential lodging property and the other that holds lodging operations, which are facilitated by a management agreement. The Company's investment in the operating entity is held in a TRS. The Company accounts for its investment in these joint ventures under the equity method of accounting because control over major decisions is shared. As of March 31, 2022 and December 31, 2021, the Company had equity investments of $8.8 million and $10.1 million, respectively, in these joint ventures.

The joint venture that holds the real property has a secured mortgage loan of $15.0 million at March 31, 2022 and provides for additional draws of approximately $9.6 million to fund renovations. The maturity date of this mortgage loan is September 15, 2031. The loan bears interest at an annual fixed rate of 4.00% with monthly interest payments required. Additionally, the Company has guaranteed the completion of the renovations in the amount of approximately $8.7 million, with $6.6 million remaining to fund at March 31, 2022.

The Company recognized losses of $1.3 million during the three months ended March 31, 2022 and received no distributions during the three months ended March 31, 2022 related to the equity investments in these joint ventures.

In addition, as of both March 31, 2022 and December 31, 2021, the Company had equity investments of $0.7 million in unconsolidated joint ventures for three theatre projects located in China. The Company recognized losses of $10 thousand during the three months ended March 31, 2022 and income of $55 thousand during the three months ended March 31, 2021, and received distributions of $90 thousand from its investment in these joint ventures for the three months ended March 31, 2021. No distributions were received during the three months ended March 31, 2022.

10. Derivative Instruments

All derivatives are recognized at fair value in the consolidated balance sheets within the line items "Other assets" and "Accounts payable and accrued liabilities" as applicable. The Company has elected not to offset its derivative

position for purposes of balance sheet presentation and disclosure. The Company had derivative assets of $0.6 million at March 31, 2022 and no derivative assets at December 31, 2021. The Company had derivative liabilities of $7.6 million and $4.9 million at March 31, 2022 and December 31, 2021, respectively. The Company has not posted or received collateral with its derivative counterparties as of March 31, 2022 or December 31, 2021. See Note 11 for disclosures relating to the fair value of the derivative instruments.

Risk Management Objective of Using Derivatives

The Company is exposed to certain risk arising from both its business operations and economic conditions including the effect of changes in foreign currency exchange rates on foreign currency transactions and interest rates on its LIBOR-based borrowings. The Company manages this risk by following established risk management policies and procedures including the use of derivatives. The Company’s objective in using derivatives is to add stability to reported earnings and to manage its exposure to foreign exchange and interest rate movements or other identified risks. To accomplish this objective, the Company primarily uses interest rate swaps, cross-currency swaps and foreign currency forwards.

Cash Flow Hedges of Interest Rate Risk

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

At March 31, 2022, the Company had one interest rate swap agreement designated as a cash flow hedge of interest rate risk related to its variable rate secured bonds totaling $25.0 million. The interest rate swap agreement outstanding as of March 31, 2022 is summarized below:

Fixed rate

Notional Amount (in millions)

Index

Maturity

1.3925%

25.0

USD LIBOR

September 30, 2024

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

Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. As of March 31, 2022, the Company estimates that during the twelve months ending March 31, 2023, $0.1 million of gains will be reclassified from AOCI to other income.

Cash Flow Hedges of Foreign Exchange Risk

The Company is exposed to foreign currency exchange risk against its functional currency, USD, on CAD denominated cash flow from its four Canadian properties. The Company uses cross-currency swaps to mitigate its exposure to fluctuations in the USD-CAD exchange rate on cash inflows associated with these properties which should hedge a significant portion of the Company's expected CAD denominated cash flows.

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

On April 12, 2022, the Company entered into three USD-CAD cross-currency swaps that will be effective July 1, 2022 with a total fixed original notional value of $150.0 million CAD and $118.7 million USD. The net effect of these swaps is to lock in an exchange rate of $1.27 CAD per USD on approximately $10.8 million annual CAD denominated cash flows through September 2024.

Additionally, on April 29, 2022, the Company entered into two additional cross-currency swaps effective May 1, 2022 with a total fixed notional value of $200.0 million CAD and $156.0 million USD. The net effect of these swaps is to lock in exchange rate of $1.29 CAD per USD on approximately $4.5 million of additional annual CAD denominated cash flows through October 1, 2024.

The change in the fair value of foreign currency derivatives designated and that qualify as cash flow hedges of foreign exchange risk is recorded in AOCI and reclassified into earnings in the period that the hedged forecasted transaction affects earnings within the same income statement line item as the earnings effect of the hedged transaction. As of March 31, 2022, the Company estimates that during the twelve months ending March 31, 2023, $0.1 million of losses will be reclassified from AOCI to other expense.

Net Investment Hedges

The Company is exposed to fluctuations in the USD-CAD exchange rate on its net investments in Canada. As such, the Company uses either currency forward agreements or cross-currency swaps to manage its exposure to changes in foreign exchange rates on certain of its foreign net investments. As of March 31, 2022, the Company had the following cross-currency swaps designated as net investment hedges:

Fixed rate

Notional Amount (in millions, CAD)

Maturity

$1.32 CAD per USD

100.0

July 1, 2023

$1.32 CAD per USD

100.0

July 1, 2023

Total

200.0

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

On April 29, 2022, the Company de-designated these CAD to USD cross-currency swaps in conjunction with entering into new agreements, effectively terminating the cross-currency swap agreements. These contracts were previously designated as net investment hedges. The Company paid $3.8 million in connection with the settlement of the CAD to USD cross-currency swap agreements.

On April 29, 2022, the Company entered into two forward contracts with a fixed notional value of $200.0 million CAD and $156.0 million USD with a settlement date of October 1, 2024. The exchange rate of this forward contract is approximately $1.28 CAD per USD.

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

Below is a summary of the effect of derivative instruments on the consolidated statements of changes in equity and income for the three months ended March 31, 2022 and 2021.

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


	Three Months Ended March 31,
Description	2022		2021
Cash Flow Hedges
Interest Rate Swaps
Amount of Gain Recognized in AOCI on Derivative	$	825	$	259
Amount of Expense Reclassified from AOCI into Earnings (1)	(76)		(2,033)
Cross-Currency Swaps
Amount of Loss Recognized in AOCI on Derivative	(26)		(93)
Amount of Expense Reclassified from AOCI into Earnings (2)	(54)		(49)
Net Investment Hedges
Cross-Currency Swaps
Amount of Loss Recognized in AOCI on Derivative	(3,019)		(1,786)
Amount of Income Recognized in Earnings (2) (3)	99		102



Total
Amount of Loss Recognized in AOCI on Derivatives	$	(2,220)	$	(1,620)
Amount of Expense Reclassified from AOCI into Earnings	(130)		(2,082)
Amount of Income Recognized in Earnings	99		102

Interest expense, net in accompanying consolidated statements of income (loss) and comprehensive income	$	33,260	$	39,194
Other income in accompanying consolidated statements of income (loss) and comprehensive income	$	9,305	$	678

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

(2) Included in "Other income" in the accompanying consolidated statements of income (loss) and comprehensive income for the three months ended March 31, 2022 and 2021.

(3) Amounts represent derivative gains excluded from the effectiveness testing.

Credit-risk-related Contingent Features

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

As of March 31, 2022, the fair value of the Company's derivatives in a liability position related to these agreements was $7.6 million. If the Company breached any of the contractual provisions of these derivative contracts, it would be required to settle its obligations under the agreements at their termination value of $7.1 million. As of March 31, 2022, the Company had not posted any collateral related to these agreements and was not in breach of any provisions in these agreements.

11. Fair Value Disclosures

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

As a basis for considering market participant assumptions in fair value measurements, the FASB’s Fair Value Measurement guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified

within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). Level 1 inputs use quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Derivative Financial Instruments

The Company uses interest rate swaps, foreign currency forwards and cross currency swaps to manage its interest rate and foreign currency risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, foreign exchange rates, and implied volatilities. The fair value of interest rate swaps is determined using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The variable cash payments are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. In conjunction with the FASB's fair value measurement guidance, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

Although the Company determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives also use Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by itself and its counterparties. As of March 31, 2022, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives and therefore, classified its derivatives as Level 2 within the fair value reporting hierarchy.

The table below presents the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021 aggregated by the level in the fair value hierarchy within which those measurements are classified and by derivative type.

Assets and Liabilities Measured at Fair Value on a Recurring Basis at

March 31, 2022 and December 31, 2021

(Dollars in thousands)


Description	Quoted Prices in Active Markets for Identical Assets (Level I)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at end of period
March 31, 2022

Cross-Currency Swaps (1)	$	—	$	(7,618)	$	—	$	(7,618)


Interest Rate Swap Agreements (2)	—		639		—		639
December 31, 2021

Cross-Currency Swaps (1)	$	—	$	(4,626)	$	—	$	(4,626)


Interest Rate Swap Agreements (1)	—		(262)		—		(262)

(1) Included in "Accounts payable and accrued liabilities" in the accompanying consolidated balance sheets.

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

Non-recurring fair value measurements

The table below presents the Company's assets measured at fair value on a non-recurring basis as of March 31, 2022, aggregated by the level in the fair value hierarchy within which those measurements are classified.

Assets Measured at Fair Value on a Non-Recurring Basis at March 31, 2022 and December 31, 2021

(Dollars in thousands)


Description	Quoted Prices in Active Markets for Identical Assets (Level I)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at end of period
March 31, 2022
Real estate investments, net	$	—	$	4,700	$	—	$	4,700
Other assets (1)	—		—		—		—
December 31, 2021
Real estate investments, net	$	—	$	6,956	$	—	$	6,956
Other assets (1)	—		—		—		—

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

As discussed further in Note 4, during the three months ended March 31, 2022, the Company recorded an impairment charge of $4.4 million related to real estate investments, net on one of its properties. Additionally, during the year ended December 31, 2021, the Company recorded impairment charges of $2.7 million related to real estate investments, net on two of its properties. Management estimated the fair values of these investments taking into account various factors including purchase offers, shortened hold periods and market conditions. The Company determined, based on the inputs, that the valuation of these properties with purchase offers were classified within Level 2 of the fair value hierarchy and were measured at fair value.

Fair Value of Financial Instruments

The following methods and assumptions were used by the Company to estimate the fair value of each class of financial instruments at March 31, 2022 and December 31, 2021:

Mortgage notes receivable and related accrued interest receivable:

The fair value of the Company’s mortgage notes and related accrued interest receivable is estimated by discounting the future cash flows of each instrument using current market rates. At March 31, 2022, the Company had a carrying value of $370.0 million in fixed rate mortgage notes receivable outstanding, including

related accrued interest and allowance for credit losses, with a weighted average interest rate of approximately 9.04%. The fixed rate mortgage notes bear interest at rates of 7.01% to 11.96%. Discounting the future cash flows for fixed rate mortgage notes receivable using rates of 7.50% to 9.25%, management estimates the fair value of the fixed rate mortgage notes receivable to be approximately $401.9 million with an estimated weighted average market rate of 7.98% at March 31, 2022.

At December 31, 2021, the Company had a carrying value of $370.2 million in fixed rate mortgage notes receivable outstanding, including related accrued interest, with a weighted average interest rate of approximately 9.04%. The fixed rate mortgage notes bear interest at rates of 7.01% to 11.96%. Discounting the future cash flows for fixed rate mortgage notes receivable using rates of 7.50% to 9.25%, management estimates the fair value of the fixed rate mortgage notes receivable to be $400.1 million with an estimated weighted average market rate of 8.05% at December 31, 2021.

Derivative instruments:

Derivative instruments are carried at their fair value.

Debt instruments:

The fair value of the Company's debt is estimated by discounting the future cash flows of each instrument using current market rates. At March 31, 2022, the Company had a carrying value of $25.0 million in variable rate debt outstanding with an average interest rate of approximately 0.55%. The carrying value of the variable rate debt outstanding approximated the fair value at March 31, 2022.

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

At both March 31, 2022 and December 31, 2021, the $25.0 million of variable rate debt outstanding, discussed above, had been effectively converted to a fixed rate by interest rate swap agreements. See Note 10 for additional information related to the Company's interest rate swap agreements.

At March 31, 2022, the Company had a carrying value of $2.82 billion in fixed rate long-term debt outstanding with a weighted average interest rate of approximately 4.34%. Discounting the future cash flows for fixed rate debt using March 31, 2022 market rates of 4.21% to 4.92%, management estimates the fair value of the fixed rate debt to be approximately $2.75 billion with an estimated weighted average market rate of 4.69% at March 31, 2022.

At December 31, 2021, the Company had a carrying value of $2.82 billion in fixed rate long-term debt outstanding with an average weighted interest rate of approximately 4.34%. Discounting the future cash flows for fixed rate debt using December 31, 2021 market rates of 2.25% to 4.56%, management estimates the fair value of the fixed rate debt to be approximately $2.93 billion with an estimated weighted average market rate of 3.43% at December 31, 2021.

12. Earnings Per Share

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


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



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


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


	Three Months Ended March 31, 2021
	Income (numerator)		Shares (denominator)	Per Share Amount
Basic EPS:
Net income	$	3,380
Less: preferred dividend requirements	(6,034)



Net loss available to common shareholders	$	(2,654)	74,627	$	(0.04)
Diluted EPS:
Net loss available to common shareholders	$	(2,654)	74,627
Effect of dilutive securities:
Share options and performance shares	—		—


Net loss available to common shareholders	$	(2,654)	74,627	$	(0.04)

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

The following shares have an anti-dilutive effect and are therefore excluded from the calculation of diluted earnings per share:

•The additional 2.2 million common shares that would result from the conversion of the Company’s 5.75% Series C cumulative convertible preferred shares and the corresponding add-back of the preferred dividends declared on those shares for both the three months ended March 31, 2022 and 2021.

•The additional 1.7 million common shares that would result from the conversion of the Company’s 9.0% Series E cumulative convertible preferred shares and the corresponding add-back of the preferred dividends declared on those shares for both the three months ended March 31, 2022 and 2021.

•Outstanding options to purchase 89 thousand common shares at per share prices ranging from $44.44 to $76.63 for the three months ended March 31, 2022.

•Outstanding options to purchase 114 thousand common shares at per share prices ranging from $44.44 to $76.63 for the three months ended March 31, 2021.

•The effect of 102 thousand contingently issuable performance shares granted during 2021 for the three months ended March 31, 2021.

•The effect of 56 thousand contingently issuable performance shares granted during 2020 for the three months ended March 31, 2022 and 2021.

13. Equity Incentive Plans

All grants of common shares and options to purchase common shares were issued under the Company's 2007 Equity Incentive Plan prior to May 12, 2016 and under the 2016 Equity Incentive Plan on and after May 12, 2016. Under the 2016 Equity Incentive Plan, an aggregate of 3,950,000 common shares, options to purchase common shares and restricted share units, subject to adjustment in the event of certain capital events, may be granted. Additionally, the 2020 Long Term Incentive Plan (2020 LTIP) is a sub-plan under the Company's 2016 Equity Incentive Plan. Under the 2020 LTIP, the Company awards performance shares and restricted shares to the Company's executive officers. At March 31, 2022, there were 2,022,200 shares available for grant under the 2016 Equity Incentive Plan.

Share Options

Share options have exercise prices equal to the fair market value of a common share at the date of grant. The options may be granted for any reasonable term, not to exceed 10 years. The Company generally issues new common shares upon option exercise. A summary of the Company’s share option activity and related information is as follows:


	Number of options	Option price per share					Weighted avg. exercise price
Outstanding at December 31, 2021	108,671	$	44.44	—	$	76.63	$	56.79
Exercised	(9,799)	44.62		—	47.15		46.30


Outstanding at March 31, 2022	98,872	$	44.44	—	$	76.63	$	57.83

The weighted average fair value of options granted was $20.34 during the three months ended March 31, 2021. No options were granted during the three months ended March 31, 2022. The intrinsic value of share options exercised was $38 thousand for the three months ended March 31, 2022. No options were exercised during the three months ended March 31, 2021.

The following table summarizes outstanding and exercisable options at March 31, 2022:


	Options outstanding						Options exercisable
Exercise price range	Options outstanding	Weighted avg. life remaining	Weighted avg. exercise price		Aggregate intrinsic value (in thousands)		Options exercisable	Weighted avg. life remaining	Weighted avg. exercise price		Aggregate intrinsic value (in thousands)



$44.44 - 49.99	11,510	5.1					10,132	2.0
50.00 - 59.99	31,008	2.3					31,008	2.3
60.00 - 69.99	52,198	4.3					50,754	3.6
70.00 - 76.63	4,156	5.8					3,671	5.7
	98,872	3.8	$	57.83	$	176	95,565	3.1	$	57.77	$	162

Nonvested Shares

A summary of the Company’s nonvested share activity and related information is as follows:


	Number of shares	Weighted avg. grant date fair value		Weighted avg. life remaining
Outstanding at December 31, 2021	478,554	$	56.57
Granted	243,286	46.65
Vested	(215,096)	59.97
Forfeited	(2,176)	46.98
Outstanding at March 31, 2022	504,568	$	50.38	1.37

The holders of nonvested shares have voting rights and receive dividends from the date of grant. The fair value of the nonvested shares that vested was $10.2 million and $6.5 million for the three months ended March 31, 2022 and 2021, respectively. At March 31, 2022, unamortized share-based compensation expense related to nonvested shares was $15.4 million.

Nonvested Performance Shares

A summary of the Company's nonvested performance share activity and related information is as follows:


			Target Number of Performance Shares
Outstanding at December 31, 2021			158,776
Granted			98,610


Outstanding at March 31, 2022			257,386

The number of common shares issuable upon settlement of the performance shares granted during the three months ended March 31, 2022, 2021 and 2020 will be based upon the Company's achievement level relative to the following performance measures at December 31, 2024, 2023 and 2022, respectively: 50% based upon the Company's Total Shareholder Return (TSR) relative to the TSRs of the Company's peer group companies, 25% based upon the Company's TSR relative to the TSRs of companies in the MSCI US REIT Index and 25% based upon the Company's Compounded Annual Growth Rate (CAGR) in AFFO per share over the three-year performance period. The Company's achievement level relative to the performance measures is assigned a specific payout percentage which is multiplied by a target number of performance shares.

The performance shares based on relative TSR performance have market conditions and are valued using a Monte Carlo simulation model on the grant date, which resulted in a grant date fair value of approximately $6.0 million and $6.6 million for the three months ended March 31, 2022 and 2021, respectively. The estimated fair value is amortized to expense over the three-year performance periods, which end on December 31, 2024, 2023 and 2022 for performance shares granted in 2022, 2021 and 2020, respectively. The following assumptions were used in the Monte Carlo simulation for computing the grant date fair value of the performance shares with a market condition for the three months ended March 31, 2022: risk-free interest rate of 1.7%, volatility factors in the expected market price of the Company's common shares of 71% and an expected life of approximately three years.

The performance shares based on growth in AFFO have a performance condition. The probability of achieving the performance condition is assessed at each reporting period. If it is deemed probable that the performance condition will be met, compensation cost will be recognized based on the closing price per share of the Company's common stock on the date of the grant multiplied by the number of awards expected to be earned. If it is deemed that it is not probable that the performance condition will be met, the Company will discontinue the recognition of compensation cost and any compensation cost previously recorded will be reversed. At March 31, 2022, achievement of the performance condition was deemed probable for the performance shares granted during the three months ended March 31, 2022 and 2021 with an expected payout percentage of 200%, which resulted in a grant date fair value of approximately $2.3 million for each period. Achievement of the minimum performance condition for the performance shares granted during the three months ended March 31, 2020 was deemed not probable at March 31, 2022, resulting in no expected payout.

At March 31, 2022, unamortized share-based compensation expense related to nonvested performance shares was $13.5 million.

The performance shares accrue dividend equivalents which are paid only if common shares are issued upon settlement of the performance shares. During the three months ended March 31, 2022 and 2021, the Company accrued dividend equivalents expected to be paid on earned awards of $136 thousand and $9 thousand, respectively.

Restricted Share Units

A summary of the Company’s restricted share unit activity and related information is as follows:


	Number of shares	Weighted avg. grant date fair value		Weighted avg. life remaining
Outstanding at December 31, 2021	43,306	$	49.15
Granted	2,794	46.61
Vested	—	—
Outstanding at March 31, 2022	46,100	$	49.15	0.17

The holders of restricted share units receive dividend equivalents from the date of grant. At March 31, 2022, unamortized share-based compensation expense related to restricted share units was $0.4 million.

14. Operating Leases

The Company’s real estate investments are leased under operating leases. In addition to its lessor arrangements on its real estate investments, as of both March 31, 2022 and December 31, 2021, the Company was lessee in 51 operating ground leases. The Company's tenants, who are generally sub-tenants under these ground leases, are responsible for paying the rent under these ground leases. As of March 31, 2022, rental revenue from several of the Company's tenants, who are also sub-tenants under the ground leases, is being recognized on a cash basis. In most cases, the ground lease sub-tenants have continued to pay the rent under these ground leases. In addition, two of these properties do not currently have sub-tenants. In the event the tenant fails to pay the ground lease rent or if the property does not have sub-tenants, the Company is primarily responsible for the payment, assuming the Company does not sell or re-tenant the property. The Company is also the lessee in an operating lease of its executive office.

The following table summarizes rental revenue, including sublease arrangements and lease costs, for the three months ended March 31, 2022 and 2021 (in thousands):


		Three Months Ended March 31,
	Classification	2022		2021
Operating leases	Rental revenue	$	133,828	$	97,672
Sublease income - operating ground leases	Rental revenue	5,775		4,942

Lease costs
Operating ground lease cost	Property operating expense	$	5,969	$	5,413
Operating office lease cost	General and administrative expense	226		226

15. Segment Information

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

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


Balance Sheet Data:
	As of March 31, 2022
	Experiential		Education		Corporate/Unallocated		Consolidated
Total Assets	$	4,983,264	$	500,369	$	334,437	$	5,818,070

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


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

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

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




Interest expense, net							(33,260)
Transaction costs							(2,247)
Credit loss benefit							306
Impairment charges							(4,351)
Depreciation and amortization							(40,044)
Equity in loss from joint ventures							(106)



Income tax expense							(318)




Net income							42,192

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


Operating Data:
	Three Months Ended March 31, 2021
	Experiential		Education		Corporate/Unallocated		Consolidated
Rental revenue	$	93,276	$	9,338	$	—	$	102,614
Other income	329		—		349		678
Mortgage and other financing income	8,141		332		—		8,473
Total revenue	101,746		9,670		349		111,765

Property operating expense	14,992		82		239		15,313
Other expense	2,552		—		—		2,552
Total investment expenses	17,544		82		239		17,865
Net operating income - before unallocated items	84,202		9,588		110		93,900

Reconciliation to Consolidated Statements of Income (Loss) and Comprehensive Income:
General and administrative expense							(11,336)


Costs associated with loan refinancing or payoff							(241)

Interest expense, net							(39,194)
Transaction costs							(548)
Credit loss benefit							2,762

Depreciation and amortization							(40,326)
Equity in loss from joint ventures							(1,431)

Gain on sale of real estate							201

Income tax expense							(407)



Net income							3,380
Preferred dividend requirements							(6,034)
Net loss available to common shareholders of EPR Properties							$	(2,654)

16. Other Commitments and Contingencies

As of March 31, 2022, the Company had 15 development projects with commitments to fund an aggregate of approximately $105.2 million. Development costs are advanced by the Company in periodic draws. If the Company determines that construction is not being completed in accordance with the terms of the development agreement, it can discontinue funding construction draws. The Company has agreed to lease the properties to the operators at pre-determined rates upon completion of construction.

The Company has certain commitments related to its mortgage notes and notes receivable investments that it may be required to fund in the future. The Company is generally obligated to fund these commitments at the request of the borrower or upon the occurrence of events outside of its direct control. As of March 31, 2022, the Company had two mortgage notes with commitments totaling approximately $11.8 million. If commitments are funded in the future, interest will be charged at rates consistent with the existing investments.

In connection with construction of the Company's development projects and related infrastructure, certain public agencies require posting of surety bonds to guarantee that the Company's obligations are satisfied. These bonds expire upon the completion of the improvements or infrastructure. As of March 31, 2022, the Company had four surety bonds outstanding totaling $33.3 million.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q of EPR Properties (the “Company”, “EPR”, “we” or “us”). The forward-looking statements included in this discussion and elsewhere in this Quarterly Report on Form 10-Q involve risks and uncertainties, including anticipated financial performance, anticipated liquidity and capital resources, business prospects, industry trends, shareholder returns, performance of leases by tenants, performance on loans to customers and other matters, which reflect management's best judgment based on factors currently known. See “Cautionary Statement Concerning Forward-Looking Statements” which is incorporated herein by reference. Actual results and experience could differ materially from the anticipated results and other expectations expressed in our forward-looking statements as a result of a number of factors, including but not limited to those discussed in Item 1A - "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 23, 2022.

Overview

Business

Our principal business objective is to enhance shareholder value by achieving predictable and increasing Funds From Operations As Adjusted ("FFOAA") and dividends per share. Our strategy is to focus on long-term investments in the Experiential sector which benefit from our depth of knowledge and relationships, and which we believe offer sustained performance throughout most economic cycles.

Our investment portfolio includes ownership of and long-term mortgages on Experiential and Education properties. Substantially all of our owned single-tenant properties are leased pursuant to long-term, triple-net leases, under which the tenants typically pay all operating expenses of the property. Tenants at our owned multi-tenant properties are typically required to pay common area maintenance charges to reimburse us for their pro-rata portion of these costs. We also own certain experiential lodging assets structured using traditional REIT lodging structures.

It has been our strategy to structure leases and financings to ensure a positive spread between our cost of capital and the rentals or interest paid by our tenants. We have primarily acquired or developed new properties that are pre-leased to a single tenant or multi-tenant properties that have a high occupancy rate. We have also entered into certain joint ventures and we have provided mortgage note financing. We intend to continue entering into some or all of these types of arrangements in the foreseeable future.

Historically, our primary challenges have been locating suitable properties, negotiating favorable lease or financing terms (on new or existing properties), and managing our portfolio as we have continued to grow. We believe our management’s knowledge and industry relationships have facilitated opportunities for us to acquire, finance and lease properties. Our business is subject to a number of risks and uncertainties, including those described in Item 1A - “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 23, 2022.

As of March 31, 2022, our total assets were approximately $5.8 billion (after accumulated depreciation of approximately $1.2 billion) with properties located in 44 states and Ontario, Canada. Our total investments (a non-GAAP financial measure) were approximately $6.5 billion at March 31, 2022. See "Non-GAAP Financial Measures" for the calculation of total investments and reconciliation of total investments to "Total assets" in the consolidated balance sheet at March 31, 2022 and December 31, 2021. We group our investments into two reportable segments, Experiential and Education. As of March 31, 2022, our Experiential investments comprised $5.9 billion, or 91%, and our Education investments comprised $0.6 billion, or 9%, of our total investments.

As of March 31, 2022, our Experiential segment (excluding property under development and undeveloped land inventory) consisted of the following property types (owned or financed):

•175 theatre properties;

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

•18 attraction properties;

•11 ski properties;

•eight experiential lodging properties;

•one gaming property;

•three cultural properties; and

•eight fitness & wellness properties.

As of March 31, 2022, our owned Experiential real estate portfolio consisted of approximately 19.4 million square feet, which was 96.0% leased and included $10.9 million in property under development and $20.2 million in undeveloped land inventory.

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

•65 early childhood education center properties; and

•nine private school properties.

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

The combined owned portfolio consisted of 20.8 million square feet and was 96.3% leased.

COVID-19 Update

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

As of March 31, 2022, we had no properties closed due to COVID-19 restrictions. The continuing impact of the COVID-19 pandemic on our business will depend on several factors, including, but not limited to, the scope,

severity and duration or any resurgence of the pandemic (including COVID-19 variants), the actions taken to contain the outbreak or any resurgence or mitigate their impacts, the distribution and efficacy of vaccines and therapeutics, the ability of communities to achieve herd immunity, the public’s confidence in the health and safety measures implemented by our tenants and borrowers, the continuing direct and indirect economic effects of the outbreak and containment measures, and the ability of our tenants and borrowers to recover from the negative economic impacts of the pandemic as it subsides and, in many cases, service elevated levels of debt resulting from the pandemic, all of which are uncertain and cannot be predicted. During 2020 and 2021, the COVID-19 pandemic negatively affected our business, and could continue to have material adverse effects on our financial condition, results of operations and cash flows.

Our consolidated financial statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting periods presented. We considered the impact of, and recovery from, the COVID-19 pandemic on the assumptions and estimates used in determining our financial condition and results of operations for the three months ended March 31, 2022.

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

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

•As of March 31, 2022, we have deferred amounts due from tenants of approximately $17.4 million that are booked as receivables. Additionally, we have amounts due from tenants that were not booked as receivables because the full amounts were not deemed probable of collection as a result of the COVID-19 pandemic. The amounts not booked as receivables remain obligations of the tenants and will be recognized as revenue when any such amounts are received. During the three months ended March 31, 2022, we collected $1.6 million in deferred rent from cash basis tenants and from tenants for which the deferred payments were not previously recognized as revenue. In addition, during the three months ended March 31, 2022, we collected $10.2 million of deferred rent and interest from accrual basis tenants and borrowers that reduced related accounts and interest receivable. The repayment terms for all of these deferments vary by tenant.

While deferments for this and future periods delay rent or mortgage payments, these deferments generally do not release customers from the obligation to pay the deferred amounts in the future. Deferred rent amounts are reflected in our financial statements as accounts receivable if collection is determined to be probable or will be recognized when received as variable lease payments if collection is determined to not be probable, while deferred mortgage payments are reflected as mortgage notes and related accrued interest receivable, less any allowance for credit loss. Certain agreements with tenants where remaining lease terms are extended, or other changes are made that do not qualify for the treatment in the Financial Accounting Standards Board ("FASB") Staff Q&A on Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic, are treated as lease modifications. In these circumstances upon an executed lease modification, if the tenant is not being recognized on a cash basis, the contractual rent reflected in accounts receivable and the straight-line rent receivable will be amortized over the remaining term of the lease against rental revenue. In limited cases, tenants may be entitled to the abatement of rent during governmentally imposed prohibitions on business operations which is recognized in the period to which it relates, or we may provide rent concessions to tenants. In cases where we provide concessions to tenants to which they are not otherwise entitled, those amounts are recognized in the period in which the concession is granted unless the changes are accounted for as lease modifications.

Operating Results

Our total revenue, net income (loss) available to common shareholders per diluted share and Funds From Operations As Adjusted ("FFOAA") per diluted share (a non-GAAP financial measure) are detailed below for the three months ended March 31, 2022 and 2021 (in millions, except per share information):


	Three Months Ended March 31,
	2022		2021		Change
Total revenue	$	157.5	$	111.8	41	%
Net income (loss) available to common shareholders per diluted share	0.48		(0.04)		1,300	%
FFOAA per diluted share	1.10		0.48		129	%

The major factors impacting our results for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021 were as follows:

•The increase in rental revenue due to an increase in contractual rental payments from cash basis tenants and from tenants which were previously receiving abatements;

•The effect of property acquisitions as well as dispositions that occurred in 2022 and 2021;

•The change in other income and other expenses primarily due to the government-required closure of the Kartrite Resort and Indoor Waterpark in Sullivan County, New York due to the COVID-19 pandemic in mid-March of 2020 and the re-opening of this property in July of 2021;

•The decrease in interest expense due to the repayment of our unsecured term loan facility and revolving credit facility as well as exiting the covenant relief period in July of 2021 which caused higher interest rates on certain debt;

•A decrease in equity in loss from joint ventures; and

•The increase in impairment charges, general and administrative expense and transaction costs offset by a decrease in credit loss benefit.

For further detail on items impacting our operating results, see the section below titled "Results of Operations". FFOAA is a non-GAAP financial measure. For the definitions and further details on the calculations of FFOAA and certain other non-GAAP financial measures, see the section below titled "Non-GAAP Financial Measures."

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related notes. In preparing these financial statements, management has made its best estimates and assumptions that affect the reported assets and liabilities and the reported amounts of revenues and expenses during the reporting period. The most significant assumptions and estimates relate to the valuation of real estate, accounting for real estate acquisitions, assessing the collectibility of receivables and the credit loss related to mortgage and other notes receivable. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates. A summary of critical accounting policies is included in our Annual Report on Form 10-K for the year ended December 31, 2021. For the three months ended March 31, 2022, there were no changes to critical accounting policies.

Recent Developments

Investment Spending

Our investment spending during the three months ended March 31, 2022 and 2021 totaled $24.4 million and $52.1 million, respectively, and is detailed below (in thousands):


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

Experiential Lodging	1,256		309		299		—		—		648

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

Education:


Total Education	—		—		—		—		—		—

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


Three Months Ended March 31, 2021
Operating Segment	Total Investment Spending		New Development		Re-development		Asset Acquisition		Mortgage Notes or Notes Receivable		Investment in Joint Ventures
Experiential:
Theatres	$	2,440	$	2,382	$	58	$	—	$	—	$	—
Eat & Play	30,847		4,061		111		26,675		—		—
Attractions	14		—		14		—		—		—
Ski	1,013		—		—		—		1,013		—
Experiential Lodging	11,993		6,680		3,688		—		—		1,625

Cultural	4,383		—		4		—		4,379		—
Fitness & Wellness	1,423		—		—		—		1,423		—
Total Experiential	52,113		13,123		3,875		26,675		6,815		1,625

Education:



Total Education	—		—		—		—		—		—

Total Investment Spending	$	52,113	$	13,123	$	3,875	$	26,675	$	6,815	$	1,625

The above amounts include $0.2 million and $0.6 million in capitalized interest for the three months ended March 31, 2022 and 2021, respectively, and $51 thousand and $25 thousand in capitalized other general and administrative direct project costs for the three months ended March 31, 2022 and 2021, respectively. Excluded from the table above is approximately $1.4 million and $0.8 million of maintenance capital expenditures and other spending for the three months ended March 31, 2022 and 2021, respectively.

Impairment charges

During the three months ended March 31, 2022, we received an offer to purchase a recently vacated property. As a result, we reassessed the expected holding period of the property and determined that the estimated cash flows were not sufficient to recover the carrying value of the property. Accordingly, we recognized an impairment charge of $4.4 million on the real estate investment of this property.

Results of Operations

Three months ended March 31, 2022 compared to the three months ended March 31, 2021

Analysis of Revenue

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


	Three Months Ended March 31,
	2022		2021		Change
Minimum rent (1)	$	130,275	$	94,190	$	36,085
Percentage rent (2)	3,443		2,030		1,413
Straight-line rent	595		1,289		(694)
Tenant reimbursements	5,001		4,822		179
Other rental revenue	289		283		6
Total Rental Revenue	$	139,603	$	102,614	$	36,989

Other income (3)	9,305		678		8,627
Mortgage and other financing income	8,564		8,473		91
Total revenue	$	157,472	$	111,765	$	45,707

(1) For the three months ended March 31, 2022 compared to the three months ended March 31, 2021, the increase in minimum rent resulted primarily from an increase of $35.1 million related to rental revenue on existing properties including improved collections of rent being recognized on a cash basis and from tenants which were previously receiving abatements, as well as scheduled rent increases. In addition, there was an increase in minimum rent of $2.5 million related to property acquisitions and developments completed in 2022 and 2021. This was partially offset by a decrease in rental revenue of $1.5 million from property dispositions.

During the three months ended March 31, 2022, there were no significant lease renewals on existing properties.

(2) The increase in percentage rent (amounts above base rent) for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was due primarily to higher percentage rent recognized from our gaming and golf entertainment tenants as well as one cultural tenant. This increase was partially offset by less percentage rent recognized from one early childhood education center tenant due to the restructured lease having higher base rents in 2022.

(3) The increase in other income for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 related primarily to an increase in operating income as a result of the re-opening of the Kartrite Resort, which was previously closed due to the COVID-19 pandemic. Additionally, during the three months ended March 31, 2022 the increase in other income was the result of increased operating income from two theatre properties and a gain on insurance recovery.

Analysis of Expenses and Other Line Items

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


	Three Months Ended March 31,
	2022		2021		Change
Property operating expense	$	13,939	$	15,313	$	(1,374)
Other expense (1)	8,097		2,552		5,545
General and administrative expense (2)	13,224		11,336		1,888


Costs associated with loan refinancing or payoff	—		241		(241)
Interest expense, net (3)	33,260		39,194		(5,934)
Transaction costs (4)	2,247		548		1,699
Credit loss benefit (5)	(306)		(2,762)		2,456
Impairment charges (6)	4,351		—		4,351
Depreciation and amortization	40,044		40,326		(282)
Equity in loss from joint ventures (7)	(106)		(1,431)		1,325

Gain on sale of real estate	—		201		(201)

Income tax expense	(318)		(407)		89


Preferred dividend requirements	(6,033)		(6,034)		1

(1) The increase in other expense for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 related primarily to an increase in operating expenses as a result of the re-opening of the Kartrite Resort, which was previously closed due to the COVID-19 pandemic as well as increases in operating expenses from two theatre properties.

(2) The increase in general and administrative expense for the three months ended March 31, 2022 related to an increase in payroll and benefit costs as well as professional fees and travel expenses.

(3) The decrease in interest expense, net for the three months ended March 31, 2022 compared to the three months ended March 31, 2021, resulted primarily from a decrease in average borrowings and a decrease in the weighted average interest rate on outstanding debt.

(4) The increase in transaction costs for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was due to an increase in costs related to terminated transactions.

(5) The change in credit loss benefit for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was primarily due to a change in the credit loss model related to the expected timing of the economic recovery from the impacts of the COVID-19 pandemic.

(6) Impairment charges recognized during the three months ended March 31, 2022 related to one recently vacated property that we intend to sell and we determined that the cash flows were not sufficient to recover the carrying value.

(7) The decrease in equity in loss from joint ventures related primarily to more income recognized at two experiential lodging properties located in St. Petersburg, Florida. This was partially offset by losses recognized at our experiential lodging property located in Warrens, Wisconsin which was acquired in August of 2021.

Liquidity and Capital Resources

Cash and cash equivalents were $323.8 million at March 31, 2022. In addition, we had restricted cash of $3.0 million at March 31, 2022. Of the restricted cash at March 31, 2022, $1.9 million related to cash held for our tenants' off-season rent reserves and $1.1 million related to escrow deposits required for property management agreements or held for potential acquisitions and redevelopments.

Mortgage Debt, Senior Notes and Unsecured Revolving Credit Facility

At March 31, 2022, we had total debt outstanding of $2.8 billion, of which 99% was unsecured.

At March 31, 2022, we had outstanding $2.5 billion in aggregate principal amount of unsecured senior notes (excluding the private placement notes discussed below) ranging in interest rates from 3.60% to 4.95%. The notes contain various covenants, including: (i) a limitation on incurrence of any debt that would cause the ratio of our debt to adjusted total assets to exceed 60%; (ii) a limitation on incurrence of any secured debt that would cause the ratio of secured debt to adjusted total assets to exceed 40%; (iii) a limitation on incurrence of any debt that would cause our debt service coverage ratio to be less than 1.5 times; and (iv) the maintenance at all times of our total unencumbered assets such that they are not less than 150% of our outstanding unsecured debt.

At March 31, 2022, we had no outstanding balance under our $1.0 billion unsecured revolving credit facility. Our unsecured revolving credit facility is governed by the terms of a Third Amended, Restated and Consolidated Credit Agreement, dated as of October 6, 2021 (the "Third Consolidated Credit Agreement"). The facility will mature on October 6, 2025. We have two options to extend the maturity date of the facility by an additional six months each (for a total of 12 months), subject to paying additional fees and the absence of any default. The facility provides for an initial maximum principal amount of borrowing availability of $1.0 billion with an "accordion" feature under which we may increase the total maximum principal amount available by $1.0 billion, to a total of $2.0 billion, subject to lender consent. The unsecured revolving credit facility bears interest at a floating rate of LIBOR plus 1.20% (based on our unsecured debt ratings and with a LIBOR floor of zero), which was 1.66% at March 31, 2022. Additionally, the facility fee on the revolving credit facility is 0.25%.

At March 31, 2022, we had outstanding $316.2 million of senior unsecured notes that were issued in a private placement transaction. The private placement notes were issued in two tranches with $148.0 million due August 22, 2024, and $192.0 million due August 22, 2026. At March 31, 2022, the interest rates for the private placement notes were 4.35% and 4.56% for the Series A notes due 2024 and the Series B notes due 2026, respectively.

On January 14, 2022, we amended the note purchase agreement governing our private placement notes (the "Note Purchase Agreement") to, among other things: (i) amend certain financial and other covenants and provisions in the Note Purchase Agreement to conform generally to the changes beneficial to us in the corresponding covenants and provisions contained in the Third Consolidated Credit Agreement, and (ii) amend certain financial and other covenants and provisions in the existing Note Purchase Agreement to reflect the prior termination of the Covenant Relief Period (as defined in the existing Note Purchase Agreement) and removal of related provisions.

Our unsecured revolving credit facility and the private placement notes contain financial covenants or restrictions that limit our levels of consolidated debt, secured debt, investments outside certain categories, stock repurchases and dividend distributions and require us to maintain a minimum consolidated tangible net worth and meet certain coverage levels for fixed charges and debt service. Additionally, these debt instruments contain cross-default provisions if we default under other indebtedness exceeding certain amounts. Those cross-default thresholds vary from $50.0 million to $75.0 million, depending upon the debt instrument. We were in compliance with all financial and other covenants under our debt instruments at March 31, 2022.

Our principal investing activities are acquiring, developing and financing Experiential and Education properties. These investing activities have generally been financed with senior unsecured notes, as well as the proceeds from equity offerings. Our unsecured revolving credit facility is also used to finance the acquisition or development of properties, and to provide mortgage financing. We have and expect to continue to issue debt securities in public or private offerings. We have and may in the future assume mortgage debt in connection with property acquisitions or incur new mortgage debt on existing properties. We may also issue equity securities in connection with acquisitions. Continued growth of our real estate investments and mortgage financing portfolios will depend in part on our continued ability to access funds through additional borrowings and securities offerings and, to a lesser extent, our ability to assume debt in connection with property acquisitions. We may also fund investments with the proceeds from asset dispositions.

Liquidity Requirements

Short-term liquidity requirements consist primarily of normal recurring corporate operating expenses, debt service requirements and distributions to shareholders. We have historically met these requirements primarily through cash provided by operating activities. The table below summarizes our cash flows (dollars in thousands):


	Three Months Ended March 31,
	2022		2021
Net cash provided by operating activities	$	128,087	$	78,306
Net cash used by investing activities	(25,035)		(29,894)
Net cash used by financing activities	(66,293)		(532,435)

As previously disclosed, we have agreed to rent and mortgage payment deferral arrangements with most of our customers as a result of the COVID-19 pandemic. Under these deferral arrangements, our customers are required to resume rent and mortgage payments at negotiated times, and begin repaying deferred amount under negotiated schedules. In addition, the continuing impact of the COVID-19 pandemic may result in further extensions or adjustments for our customers, which we cannot predict at this time.

Commitments

As of March 31, 2022, we had 15 development projects with commitments to fund an aggregate of approximately $105.2 million, of which approximately $47.4 million is expected to be funded in 2022. Development costs are advanced by us in periodic draws. If we determine that construction is not being completed in accordance with the terms of the development agreement, we can discontinue funding construction draws. We have agreed to lease the properties to the operators at pre-determined rates upon completion of construction.

We have certain commitments related to our mortgage notes and notes receivable investments that we may be required to fund in the future. We are generally obligated to fund these commitments at the request of the borrower or upon the occurrence of events outside of our direct control. As of March 31, 2022, we had two mortgage notes with commitments totaling approximately $11.8 million of which approximately $5.1 million is expected to be funded in 2022. If commitments are funded in the future, interest will be charged at rates consistent with the existing investments.

In connection with construction of our development projects and related infrastructure, certain public agencies require posting of surety bonds to guarantee that our obligations are satisfied. These bonds expire upon the completion of the improvements or infrastructure. As of March 31, 2022, we had four surety bonds outstanding totaling $33.3 million.

Liquidity Analysis

We currently anticipate that our cash on hand, cash from operations, funds available under our unsecured revolving credit facility and proceeds from asset dispositions will provide adequate liquidity to meet our financial commitments, including to fund our operations, make recurring debt service payments, and allow distributions to our shareholders and avoid corporate level federal income or excise tax in accordance with REIT Internal Revenue Code requirements.

Long-term liquidity requirements consist primarily of maturities of debt. We have no scheduled debt payments due until 2024. We currently believe that we will be able to repay, extend, refinance or otherwise settle our debt maturities as the debt comes due and that we will be able to fund our remaining commitments, as necessary. However, there can be no assurance that additional financing or capital will be available, or that terms will be acceptable or advantageous to us, particularly in light of the continuing economic uncertainty caused by the COVID-19 pandemic.

Our primary use of cash after paying operating expenses, debt service, distributions to shareholders and funding existing commitments is in growing our investment portfolio through the acquisition, development and financing of additional properties. We expect to finance these investments with borrowings under our unsecured revolving credit facility as well as debt and equity financing alternatives or proceeds from asset dispositions. The availability and

terms of any such financing or sales will depend upon market and other conditions. If we borrow the maximum amount available under our unsecured revolving credit facility, there can be no assurance that we will be able to obtain additional or substitute investment financing. We may also assume mortgage debt in connection with property acquisitions.

Capital Structure

We believe that our shareholders are best served by a conservative capital structure. Therefore, we seek to maintain a conservative debt level on our balance sheet as measured primarily by our net debt to adjusted EBITDAre ratio (see "Non-GAAP Financial Measures" for definitions). We also seek to maintain conservative interest, fixed charge, debt service coverage and net debt to gross asset ratios. Our net debt to adjusted EBITDAre ratio was 5.1x and our net debt to gross assets ratio was 38% as of March 31, 2022 (see "Non-GAAP Financial Measures" for calculation).

Non-GAAP Financial Measures

Funds From Operations (FFO), Funds From Operations As Adjusted (FFOAA) and Adjusted Funds From Operations (AFFO)

The National Association of Real Estate Investment Trusts (“NAREIT”) developed FFO as a relative non-GAAP financial measure of performance of an equity REIT in order to recognize that income-producing real estate historically has not depreciated on the basis determined under GAAP. Pursuant to the definition of FFO by the Board of Governors of NAREIT, we calculate FFO as net income (loss) available to common shareholders, computed in accordance with GAAP, excluding gains and losses from disposition of real estate and impairment losses on real estate, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships, joint ventures and other affiliates. Adjustments for unconsolidated partnerships, joint ventures and other affiliates are calculated to reflect FFO on the same basis. We have calculated FFO for all periods presented in accordance with this definition.

In addition to FFO, we present FFOAA and AFFO. FFOAA is presented by adding to FFO costs associated with loan refinancing or payoff, transaction costs, severance expense, preferred share redemption costs, impairment of operating lease right-of-use assets and credit loss (benefit) expense and subtracting gain on insurance recovery and deferred income tax (benefit) expense. AFFO is presented by adding to FFOAA non-real estate depreciation and amortization, deferred financing fees amortization, share-based compensation expense to management and Trustees and amortization of above and below market leases, net and tenant allowances; and subtracting maintenance capital expenditures (including second generation tenant improvements and leasing commissions), straight-lined rental revenue (removing the impact of straight-line ground sublease expense), and the non-cash portion of mortgage and other financing income.

FFO, FFOAA and AFFO are widely used measures of the operating performance of real estate companies and are provided here as supplemental measures to GAAP net income (loss) available to common shareholders and earnings per share, and management provides FFO, FFOAA and AFFO herein because it believes this information is useful to investors in this regard. FFO, FFOAA and AFFO are non-GAAP financial measures. FFO, FFOAA and AFFO do not represent cash flows from operations as defined by GAAP and are not indicative that cash flows are adequate to fund all cash needs and are not to be considered alternatives to net income or any other GAAP measure as a measurement of the results of our operations or our cash flows or liquidity as defined by GAAP. It should also be noted that not all REITs calculate FFO, FFOAA and AFFO the same way so comparisons with other REITs may not be meaningful.

The following table summarizes our FFO, FFOAA and AFFO including per share amounts for FFO and FFOAA, for the three months ended March 31, 2022 and 2021 and reconciles such measures to net income (loss) available to common shareholders, the most directly comparable GAAP measure (unaudited, in thousands, except per share information):


	Three Months Ended March 31,
	2022		2021
FFO:
Net income (loss) available to common shareholders of EPR Properties	$	36,159	$	(2,654)
Gain on sale of real estate	—		(201)

Impairment of real estate investments, net	4,351		—

Real estate depreciation and amortization	39,827		40,109
Allocated share of joint venture depreciation	1,487		354

FFO available to common shareholders of EPR Properties	$	81,824	$	37,608

FFO available to common shareholders of EPR Properties	$	81,824	$	37,608
Add: Preferred dividends for Series C preferred shares	1,938		—
Add: Preferred dividends for Series E preferred shares	1,939		—
Diluted FFO available to common shareholders of EPR Properties	$	85,701	$	37,608

FFOAA:
FFO available to common shareholders of EPR Properties	$	81,824	$	37,608
Costs associated with loan refinancing or payoff	—		241
Transaction costs	2,247		548





Credit loss benefit	(306)		(2,762)


Gain on insurance recovery (included in other income)	(552)		(30)


FFOAA available to common shareholders of EPR Properties	$	83,213	$	35,605

FFOAA available to common shareholders of EPR Properties	$	83,213	$	35,605
Add: Preferred dividends for Series C preferred shares	1,938		—
Add: Preferred dividends for Series E preferred shares	1,939		—
Diluted FFOAA available to common shareholders of EPR Properties	$	87,090	$	35,605

AFFO:
FFOAA available to common shareholders of EPR Properties	$	83,213	$	35,605
Non-real estate depreciation and amortization	217		217
Deferred financing fees amortization	2,071		1,547
Share-based compensation expense to management and trustees	4,245		3,784
Amortization of above and below market leases, net and tenant allowances	(87)		(96)
Maintenance capital expenditures (1)	(1,351)		(756)
Straight-lined rental revenue	(595)		(1,288)
Straight-lined ground sublease expense	248		84
Non-cash portion of mortgage and other financing income	(116)		(171)
AFFO available to common shareholders of EPR Properties	$	87,845	$	38,926

AFFO available to common shareholders of EPR Properties	$	87,845	$	38,926
Add: Preferred dividends for Series C preferred shares	1,938		—
Add: Preferred dividends for Series E preferred shares	1,939		—
Diluted AFFO available to common shareholders of EPR Properties	$	91,722	$	38,926

FFO per common share:
Basic	$	1.09	$	0.50
Diluted	1.09		0.50
FFOAA per common share:
Basic	$	1.11	$	0.48
Diluted	1.10		0.48
Shares used for computation (in thousands):
Basic	74,843		74,627
Diluted	75,047		74,669


	Three Months Ended March 31,
	2022		2021
Weighted average shares outstanding-diluted EPS	75,047		74,669
Effect of dilutive Series C preferred shares	2,241		—
Effect of dilutive Series E preferred shares	1,664		—
Adjusted weighted average shares outstanding-diluted Series C and Series E	78,952		74,669

Other financial information:
Dividends per common share	$	0.7750	$	—

(1) Includes maintenance capital expenditures and certain second-generation tenant improvements and leasing commissions.

The effect of the conversion of our convertible preferred shares is calculated using the if-converted method and the conversion which results in the most dilution is included in the computation of per share amounts. The additional common shares that would result from the conversion of the 5.75% Series C cumulative convertible preferred shares and the 9.00% Series E cumulative convertible preferred shares for the three months ended March 31, 2021, and the corresponding add-back of the preferred dividends declared on those shares are not included in the calculation of diluted FFO, FFOAA and AFFO per share because the effect is anti-dilutive. The conversion of the 5.75% Series C cumulative convertible preferred shares and the 9.00% Series E cumulative convertible preferred shares would be dilutive to FFO, FFOAA and AFFO per share for the three months ended March 31, 2022. Therefore, the additional common shares that would result from the conversion and the corresponding add-back of the preferred dividends declared on those shares are included in the calculation of diluted FFO, FFOAA and AFFO per share.

Net Debt

Net Debt represents debt (reported in accordance with GAAP) adjusted to exclude deferred financing costs, net and reduced for cash and cash equivalents. By excluding deferred financing costs, net and reducing debt for cash and cash equivalents on hand, the result provides an estimate of the contractual amount of borrowed capital to be repaid, net of cash available to repay it. We believe this calculation constitutes a beneficial supplemental non-GAAP financial disclosure to investors in understanding our financial condition. Our method of calculating Net Debt may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

Gross Assets

Gross Assets represents total assets (reported in accordance with GAAP) adjusted to exclude accumulated depreciation and reduced for cash and cash equivalents. By excluding accumulated depreciation and reducing cash and cash equivalents, the result provides an estimate of the investment made by us. We believe that investors commonly use versions of this calculation in a similar manner. Our method of calculating Gross Assets may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

Net Debt to Gross Assets Ratio

Net Debt to Gross Assets Ratio is a supplemental measure derived from non-GAAP financial measures that we use to evaluate capital structure and the magnitude of debt to gross assets. We believe that investors commonly use versions of this ratio in a similar manner. Our method of calculating the Net Debt to Gross Assets Ratio may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

EBITDAre

NAREIT developed EBITDAre as a relative non-GAAP financial measure of REITs, independent of a company's capital structure, to provide a uniform basis to measure the enterprise value of a company. Pursuant to the definition of EBITDAre by the Board of Governors of NAREIT, we calculate EBITDAre as net income (loss), computed in accordance with GAAP, excluding interest expense (net), income tax (benefit) expense, depreciation and amortization, gains and losses from disposition of real estate, impairment losses on real estate, costs associated with loan refinancing or payoff and adjustments for unconsolidated partnerships, joint ventures and other affiliates.

Management provides EBITDAre herein because it believes this information is useful to investors as a supplemental performance measure as it can help facilitate comparisons of operating performance between periods and with other REITs. Our method of calculating EBITDAre may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. EBITDAre is not a measure of performance under GAAP, does not represent cash generated from operations as defined by GAAP and is not indicative of cash available to fund all cash needs, including distributions. This measure should not be considered an alternative to net income or any other GAAP measure as a measurement of the results of our operations or cash flows or liquidity as defined by GAAP.

Adjusted EBITDAre

Management uses Adjusted EBITDAre in its analysis of the performance of the business and operations of the Company. Management believes Adjusted EBITDAre is useful to investors because it excludes various items that management believes are not indicative of operating performance, and that it is an informative measure to use in computing various financial ratios to evaluate the Company. We define Adjusted EBITDAre as EBITDAre (defined above) for the quarter excluding gain on insurance recovery, severance expense, credit loss (benefit) expense, transaction costs, impairment losses on operating lease right-of-use assets and prepayment fees.

Our method of calculating Adjusted EBITDAre may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. Adjusted EBITDAre is not a measure of performance under GAAP, does not represent cash generated from operations as defined by GAAP and is not indicative of cash available to fund all cash needs, including distributions. This measure should not be considered as an alternative to net income or any other GAAP measure as a measurement of the results of our operations or cash flows or liquidity as defined by GAAP.

Net Debt to Adjusted EBITDAre Ratio

Net Debt to Adjusted EBITDAre Ratio is a supplemental measure derived from non-GAAP financial measures that we use to evaluate our capital structure and the magnitude of our debt against our operating performance. We believe that investors commonly use versions of this ratio in a similar manner. In addition, financial institutions use versions of this ratio in connection with debt agreements to set pricing and covenant limitations. Our method of calculating the Net Debt to Adjusted EBITDAre Ratio may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

Reconciliations of debt, total assets and net income (loss) (all reported in accordance with GAAP) to Net Debt, Gross Assets, Net Debt to Gross Assets Ratio, EBITDAre, Adjusted EBITDAre and Net Debt to Adjusted EBITDAre Ratio (each of which is a non-GAAP financial measure), as applicable, are included in the following tables (unaudited, in thousands):


	March 31,
	2022			2021
Net Debt:
Debt	$	2,805,853		$	3,171,193
Deferred financing costs, net	35,376			35,036
Cash and cash equivalents	(323,761)			(538,077)
Net Debt	$	2,517,468		$	2,668,152

Gross Assets:
Total Assets	$	5,818,070		$	6,208,102
Accumulated depreciation	1,206,317			1,101,727
Cash and cash equivalents	(323,761)			(538,077)
Gross Assets	$	6,700,626		$	6,771,752

Net Debt to Gross Assets Ratio	38		%	39		%


	Three Months Ended March 31,
	2022		2021
EBITDAre and Adjusted EBITDAre:
Net income	$	42,192	$	3,380
Interest expense, net	33,260		39,194
Income tax expense	318		407
Depreciation and amortization	40,044		40,326
Gain on sale of real estate	—		(201)

Impairment of real estate investments, net	4,351		—

Costs associated with loan refinancing or payoff	—		241

Allocated share of joint venture depreciation	1,487		354
Allocated share of joint venture interest expense	1,121		789

EBITDAre	$	122,773	$	84,490

Gain on insurance recovery (1)	(552)		(30)


Transaction costs	2,247		548

Credit loss benefit	(306)		(2,762)




Adjusted EBITDAre (for the quarter)	$	124,162	$	82,246

Adjusted EBITDAre (2)	$	496,648	Footnote 3

Net Debt/Adjusted EBITDAre Ratio	5.1		Footnote 3


(1) Included in "Other income" in the consolidated statements of (loss) income and comprehensive income for the quarter. Other income includes the following:
	Three Months Ended March 31,
	2022		2021
Income from settlement of foreign currency swap contracts	$	45	$	52
Gain on insurance recovery	552		30
Operating income from operated properties	8,648		295
Miscellaneous income	60		301
Other income	$	9,305	$	678













(2) Adjusted EBITDA for the quarter is multiplied by four to calculate an annual amount.
(3) Not presented as ratio is not meaningful given the disruption caused by COVID-19 and the associated accounting for tenant rent deferrals and other lease modifications.

Total Investments

Total investments is a non-GAAP financial measure defined as the sum of the carrying values of real estate investments (before accumulated depreciation), land held for development, property under development, mortgage notes receivable (including related accrued interest receivable), investment in joint ventures, intangible assets, gross (before accumulated amortization and included in other assets) and notes receivable and related accrued interest receivable, net (included in other assets). Total investments is a useful measure for management and investors as it illustrates across which asset categories the Company's funds have been invested. Our method of calculating total investments may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. A reconciliation of total investments to total assets (computed in accordance with GAAP) is included in the following table (unaudited, in thousands):


	March 31, 2022		December 31, 2021
Total Investments:
Real estate investments, net of accumulated depreciation	$	4,738,887	$	4,713,091
Add back accumulated depreciation on real estate investments	1,206,317		1,167,734
Land held for development	20,168		20,168
Property under development	10,885		42,362
Mortgage notes and related accrued interest receivable	370,021		370,159

Investment in joint ventures	36,564		36,670
Intangible assets, gross (1)	60,109		57,962
Notes receivable and related accrued interest receivable, net (1)	7,222		7,254
Total investments	$	6,450,173	$	6,415,400

Total investments	$	6,450,173	$	6,415,400
Operating lease right-of-use assets	177,174		180,808
Cash and cash equivalents	323,761		288,822
Restricted cash	2,956		1,079
Accounts receivable	60,704		78,073
Less: accumulated depreciation on real estate investments	(1,206,317)		(1,167,734)
Less: accumulated amortization on intangible assets (1)	(20,976)		(20,163)
Prepaid expenses and other current assets (1)	30,595		24,865
Total assets	$	5,818,070	$	5,801,150

(1) Included in "Other assets" in the accompanying consolidated balance sheet. Other assets include the following:

	March 31, 2022		December 31, 2021
Intangible assets, gross	$	60,109	$	57,962
Less: accumulated amortization on intangible assets	(20,976)		(20,163)
Notes receivable and related accrued interest receivable, net	7,222		7,254
Prepaid expenses and other current assets	30,595		24,865
Total other assets	$	76,950	$	69,918

Impact of Recently Issued Accounting Standards

See Note 2 to the consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information on the impact of recently issued accounting standards on our business.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks, primarily relating to potential losses due to changes in interest rates and foreign currency exchange rates. We seek to mitigate the effects of fluctuations in interest rates by matching the term of new investments with new long-term fixed rate borrowings whenever possible. As of March 31, 2022, we had a $1.0 billion unsecured revolving credit facility with no outstanding balance. We also had a $25.0 million bond that bears interest at a floating rate but has been fixed through an interest rate swap agreement.

As of March 31, 2022, we had a 65% investment interest in two unconsolidated real estate joint ventures related to two experiential lodging properties located in St. Petersburg Beach, Florida. At March 31, 2022, the joint venture had a secured mortgage loan with an outstanding balance of $85.0 million. The mortgage loan bears interest at an annual rate equal to the greater of 6.00% or LIBOR plus 3.75%. The joint venture has an interest rate cap agreement to limit the variable portion of the interest rate (LIBOR) on this note to 3.0% from March 28, 2019 to April 1, 2023.

We are subject to risks associated with debt financing, including the risk that existing indebtedness may not be refinanced or that the terms of such refinancing may not be as favorable as the terms of current indebtedness. The majority of our borrowings are subject to contractual agreements or mortgages which limit the amount of indebtedness we may incur. Accordingly, if we are unable to raise additional equity or borrow money due to these limitations, our ability to make additional real estate investments may be limited.

We are exposed to foreign currency risk against our functional currency, the U.S. dollar, on our four Canadian properties and the rents received from tenants of the properties are payable in CAD. In order to hedge our net investment in our four Canadian properties, we entered into two fixed-to-fixed cross-currency swaps, with a fixed notional value of $200.0 million CAD. These investments became effective on July 1, 2018, mature on July 1, 2023 and are designated as net investment hedges of our Canadian net investments. The net effect of this hedge is to lock in an exchange rate of $1.32 CAD per U.S. dollar on $200.0 million CAD of our foreign net investments. The cross-currency swaps also have a monthly settlement feature locked in at an exchange rate of $1.32 CAD per USD on $4.5 million of CAD annual cash flows, the net effect of which is an excluded component from the effectiveness testing of this hedge. On April 29, 2022, we de-designated these CAD to USD cross-currency swaps in conjunction with entering into new agreements, effectively terminating the cross-currency swap agreements. These contracts were previously designated as net investment hedges. We paid $3.8 million in connection with the settlement of the CAD to USD cross-currency swap agreements.

On April 29, 2022, we entered into two forward contracts with a fixed notional value of $200.0 million CAD and $156.0 million USD with a settlement date of October 1, 2024. The exchange rate of this forward contract is approximately $1.28 CAD per USD.

In order to also hedge our net investment on the four Canadian properties, we entered into three USD-CAD cross-currency swaps that were effective July 1, 2020 with a total fixed original notional value of $100.0 million CAD and $76.6 million USD. The net effect of these swaps is to lock in an exchange rate of $1.31 CAD per USD on approximately $7.2 million annual CAD denominated cash flows through June 2022.

On April 12, 2022, we entered into three USD-CAD cross-currency swaps that will be effective July 1, 2022 with a total fixed original notional value of $150.0 million CAD and $118.7 million USD. The net effect of these swaps is to lock in an exchange rate of $1.27 CAD per USD on approximately $10.8 million annual CAD denominated cash flows through September 2024.

Additionally, on April 29, 2022, we entered into two additional cross-currency swaps effective May 1, 2022 with a total fixed notional value of $200.0 million CAD and $156.0 million USD. The net effect of these swaps is to lock in exchange rate of $1.29 CAD per USD on approximately $4.5 million of additional annual CAD denominated cash flows through October 1, 2024.

For foreign currency derivatives designated as net investment hedges, the change in the fair value of the derivatives are reported in AOCI as part of the cumulative translation adjustment. Amounts are reclassified out of AOCI into earnings when the hedged net investment is either sold or substantially liquidated.

See Note 10 to the consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information on our derivative financial instruments and hedging activities.

Item 4. Controls and Procedures

Evaluation of disclosures controls and procedures

As of March 31, 2022, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based upon and as of the date of that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Limitations on the effectiveness of controls

Our disclosure controls were designed to provide reasonable assurance that the controls and procedures would meet their objectives. Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable assurance of achieving the designed control objectives and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusions of two or more people, or by management override of the control. Because of the inherent limitations in a cost-effective, maturing control system, misstatements due to error or fraud may occur and not be detected.

Change in internal controls

There have not been any changes in the Company's internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter of the fiscal year to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are subject to certain claims and lawsuits in the ordinary course of business, the outcome of which cannot be determined at this time. In the opinion of management, any liability we might incur upon the resolution of these claims and lawsuits will not, in the aggregate, have a material adverse effect on our consolidated financial position or results of operations.

Item 1A. Risk Factors

There have been no material changes to the risk factors associated with our business previously disclosed in Item 1A - "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on February 23, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities


Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 through January 31, 2022 common shares	88,819	(1)	$	47.49	—	$	—
February 1 through February 28, 2022 common shares	699	(1)	46.11		—	—
March 1 through March 31, 2022 common shares	—		—		—	—

Total	89,518		$	47.48	—	$	—

(1) The repurchases of equity securities during January and February 2022 were completed in conjunction with the vesting of employee nonvested shares. These repurchases were not made pursuant to a publicly announced plan or program.

Item 3. Defaults Upon Senior Securities

There were no reportable events during the quarter ended March 31, 2022.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

There were no reportable events during the quarter ended March 31, 2022.

Item 6. Exhibits


4.1			Fourth Amendment to Note Purchase Agreement, dated January 14, 2022, by and among the Company and the purchasers named therein, which is attached as Exhibit 4.11.5 to the Company's Form 10-K filed on February 23, 2022, is hereby incorporated by reference as Exhibit 4.1.
31.1*			Certification of Gregory K. Silvers pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, is attached hereto as Exhibit 31.1.
31.2*			Certification of Mark A. Peterson pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, is attached hereto as Exhibit 31.2.
32.1**			Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is attached hereto as Exhibit 32.1.
32.2**			Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is attached hereto as Exhibit 32.2.
101.INS*			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*			Inline XBRL Taxonomy Extension Schema
101.CAL*			Inline XBRL Extension Calculation Linkbase
101.DEF*			Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB*			Inline XBRL Taxonomy Extension Label Linkbase
101.PRE*			Inline XBRL Taxonomy Extension Presentation Linkbase
104*			Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

* Filed herewith.

** Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

EPR Properties

Dated:

May 5, 2022

/s/ Gregory K. Silvers

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

Dated:

May 5, 2022

/s/ Tonya L. Mater

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