0001045450epr:McHenryMDSkiAreaMember2020-12-31 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ý☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 20172020
or
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o☐ | 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)
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Maryland | | 43-1790877 |
(State or other jurisdiction of incorporation or organization)
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909 Walnut Street, | Suite 200 Kansas City, Missouri
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Kansas City, | Missouri | | 64106 |
(Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code: (816) | | | | | | | | |
Registrant’s telephone number, including area code: | (816) | 472-1700 |
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | | Trading symbol(s) | | Name of each exchange on which registered |
Common shares, of beneficial interest, par value $.01$0.01 per share | | EPR | | New York Stock Exchange |
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5.75% Series C cumulative convertible preferred shares, of beneficial interest, par value $.01$0.01 per share | | EPR PrC | | New York Stock Exchange |
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9.00% Series E cumulative convertible preferred shares, of beneficial interest, par value $.01$0.01 per share | | EPR PrE | | New York Stock Exchange |
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5.75% Series G cumulative redeemable preferred shares, of beneficial interest, par value $.01$0.01 per share | | EPR PrG | | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý☒ No ¨☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨☐ No ý☒
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 ý☒ No ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ý☒ No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨☐
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.
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Large accelerated filer | | ý☒ | | Accelerated filer | | ¨☐ |
Non-accelerated filer | | ¨ (Do not check if a smaller reporting company) ☐ | | Smaller reporting company | | ¨☐ |
| | | | Emerging growth company | | ¨
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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 ifwhether the registrant has elected notfiled a report on and attestation to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)its management's assessment of the Exchange Act. ¨effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨☐ No ý☒
The aggregate market value of the common shares of beneficial interest (“common shares”) of the registrant held by non-affiliates, based on the closing price on the last business day of the registrant’s most recently completed second fiscal quarter, as reported on the New York Stock Exchange, was $5,341,162,143.$2,477,018,949.
At February 27, 2018,24, 2021, there were 74,316,991 common74,766,645 common shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for the 20182021 Annual Meeting of Shareholders to be filed with the Commission pursuant to Regulation 14A are incorporated by reference in Part III of this Annual Report on Form 10-K.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
With the exception of historical information, certain statements contained or incorporated by reference herein may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), such as those pertaining to our acquisition or dispositionthe uncertain financial impact of properties,the COVID-19 pandemic, our capital resources future expenditures for development projects,and liquidity, our expected cash flows and liquidity, continuing waivers of financial covenants related to our bank credit facilities and private placement notes, the performance of our customers, including AMC and Regal, our expected cash collections, expected use of proceeds from dispositions and our results of operations and financial condition. The estimates presented herein are based on the Company's current expectations and, given the current economic uncertainty, there can be no assurances that the Company will be able to continue to comply with other applicable covenants under its debt agreements, which could materially impact actual performance. Forward-looking statements involve numerous risks and uncertainties, and you should not rely on them as predictions of actual events. There is no assurance the events or circumstances reflected in the forward-looking statements will occur. You can identify forward-looking statements by use of words such as “will be,” “intend,” “continue,” “believe,” “may,” “expect,” “hope,” “anticipate,” “goal,” “forecast,” “pipeline,” “estimates,” “offers,” “plans,” “would,”“would” or other similar expressions or other comparable terms or discussions of strategy, plans or intentions in this Annual Report on Form 10-K. In addition, references to our budgeted amounts and guidance
Forward-looking statements necessarily are forward-looking statements.
Factors that could materially and adversely affect us include, but are not limited to, the factors listed below:
Global economic uncertainty and disruptions in financial markets;
Reduction in discretionary spending by consumers;
Adverse changes in our credit ratings;
Fluctuations in interest rates;
The durationdependent on assumptions, data or outcome of litigation, or other factors outside of litigation such as project financing, relating to our significant investment in a planned casino and resort development which may cause the development to be indefinitely delayed or canceled;
Unsuccessful development, operation, financing or compliance with licensing requirements of the planned casino and resort development by the third-party lessee;
Risks related to overruns for the construction of common infrastructure at our planned casino and resort development for which we would be responsible;
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 with theatre tenants on terms comparable to prior leases and/or our ability to lease any re-claimed space from some of our larger theatres at economically favorable terms;
Risks of operating in the entertainment industry;
Our ability to compete effectively;
Risks associated with a single tenant representing a substantial portion of our lease revenues;
The ability of our public charter school tenants to comply with their charters and continue to receive funding from local, state and federal governments, the approval by applicable governing authorities of substitute operators to assume control of any failed public charter schools and our ability to negotiate the terms of new leases with such substitute tenants on acceptable terms, and our ability to complete collateral substitutions as applicable;
The ability of our build-to-suit education tenants to achieve sufficient enrollment within expected timeframes and therefore have capacity to pay their agreed upon rent, including the ability of our early education tenant, Children's Learning Adventure, to successfully negotiate a restructuring and secure capital necessary to achieve positive cash flow;
Risks relating to our tenants' exercise of purchase options or borrowers' exercise of prepayment options related to our education 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;
Covenants in our debt instruments that limit our ability to take certain actions;
The concentration and lack of diversification of our investment portfolio;
Our continued qualification as a real estate investment trust for U.S. federal income tax purposes;
The ability of our subsidiaries to satisfy their obligations;
Financing arrangements that expose us to funding or purchase risks;
Our reliance on a limited number of employees, the loss of which could harm operations;
Risks associated with security breaches and other disruptions;
Changes in accounting standardsmethods 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 spacebe incorrect or a reduction in demand for real estate in the area, competition from other available space, whether tenants and users such as customers of our tenants consider a property attractive, changes in real estate taxes and other expenses, changes in market rental rates, the timing and costs associated with property improvements and rentals, changes in taxation or zoning laws or other governmental regulation, whether we are able to pass some or all of any increased operating costs through to tenants, and how well we manage our properties;
Our ability to secure adequate insurance and risk of potential uninsured losses, including from natural disasters;
Risks involved in joint ventures;
Risks in leasing multi-tenant properties;
A failure to comply with the Americans with Disabilities Act or other laws;
Risks of environmental liability;
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 and climate change;
Risks associated with the development, redevelopment and expansion of properties and the acquisition of other real estate related companies;
Our ability to pay dividends in cash or at current rates;
Fluctuations in the market prices for our shares;
Certain limits on changes in control imposed under law and by our Declaration of Trust and Bylaws;
Policy changes obtained without the approval of our shareholders;
Equity issuances that could dilute the value of our shares;
Future offerings of debt or equity securities, which may rank senior to our common shares;
Risks associated with changes in the Canadian exchange rate; and
Changes in laws and regulations, including tax laws and regulations.
Ourimprecise. These forward-looking statements represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Many of the factors that will determine these items are beyond our ability to control or predict. For further discussion of these factors see "Summary Risk Factors" below and Item 1A - "Risk Factors" in this Annual Report on Form 10-K.
For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K or the date of any document incorporated by reference herein. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except as required by law, we do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances after the date of this Annual Report on Form 10-K.
SUMMARY RISK FACTORS
Our business is subject to varying degrees of risk and uncertainty. You should carefully review and consider the full discussion of our risk factors in Item 1A - “Risk Factors” in this Annual Report on Form 10-K. If any of these risks occur, our business, financial condition or results of operations could be materially and adversely affected. Set forth below is a summary list of the principal risk factors relating to our business:
•Risks associated with the current outbreak of the novel coronavirus, or COVID-19, or the future outbreak of any other highly infectious or contagious diseases;
•Global economic uncertainty and disruptions in financial markets;
•Reduction in discretionary spending by consumers;
•Covenants in our debt instruments that limit our ability to take certain actions;
•Adverse changes in our credit ratings;
•Fluctuations in interest rates;
•Defaults in the performance of lease terms by our tenants;
•Defaults by our customers and counterparties on their obligations owed to us;
•A borrower's bankruptcy or default;
•Our ability to renew maturing leases on terms comparable to prior leases and/or our ability to locate substitute lessees for these properties on economically favorable terms;
•Risks of operating in the experiential real estate industry;
•Our ability to compete effectively;
•Risks associated with four tenants representing a substantial portion of our lease revenues;
•The ability of our build-to-suit tenants to achieve sufficient operating results within expected time-frames and therefore have capacity to pay their agreed upon rent;
•Risks associated with our dependence on third-party managers to operate certain of our properties;
•Risks associated with our level of indebtedness;
•Risks associated with use of leverage to acquire properties;
•Financing arrangements that require lump-sum payments;
•Our ability to raise capital;
•The concentration and lack of diversification of our investment portfolio;
•Our continued qualification as a real estate investment trust for U.S. federal income tax purposes and related tax matters;
•The ability of our subsidiaries to satisfy their obligations;
•Financing arrangements that expose us to funding and completion risks;
•Our reliance on a limited number of employees, the loss of which could harm operations;
•Risks associated with the employment of personnel by managers of certain of our properties;
•Risks associated with the gaming industry;
•Risks associated with gaming and other regulatory authorities;
•Delays or prohibitions of transfers of gaming properties due to required regulatory approvals;
•Risks associated with security breaches and other disruptions;
•Changes in accounting standards that may adversely affect our financial statements;
•Fluctuations in the value of real estate income and investments;
•Risks relating to real estate ownership, leasing and development, including local conditions such as an oversupply of space or a reduction in demand for real estate in the area, competition from other available space, whether tenants and users such as customers of our tenants consider a property attractive, changes in real estate taxes and other expenses, changes in market rental rates, the timing and costs associated with property improvements and rentals, changes in taxation or zoning laws or other governmental regulation, whether we are able to pass some or all of any increased operating costs through to tenants or other customers, and how well we manage our properties;
•Our ability to secure adequate insurance and risk of potential uninsured losses, including from natural disasters;
•Risks involved in joint ventures;
•Risks in leasing multi-tenant properties;
•A failure to comply with the Americans with Disabilities Act or other laws;
•Risks of environmental liability;
•Risks associated with the relatively illiquid nature of our real estate investments;
•Risks with owning assets in foreign countries;
•Risks associated with owning, operating or financing properties for which the tenants', mortgagors' or our operations may be impacted by weather conditions, climate change and natural disasters;
•Risks associated with the development, redevelopment and expansion of properties and the acquisition of other real estate related companies;
•Our ability to pay dividends in cash or at current rates;
•Fluctuations in the market prices for our shares;
•Certain limits on changes in control imposed under law and by our Declaration of Trust and Bylaws;
•Policy changes obtained without the approval of our shareholders;
•Equity issuances that could dilute the value of our shares;
•Future offerings of debt or equity securities, which may rank senior to our common shares;
•Risks associated with changes in foreign exchange rates; and
•Changes in laws and regulations, including tax laws and regulations.
Market and Industry Data
This Annual Report on Form 10-K contains market and industry data and forecasts that have been obtained from publicly available information, various industry publications, and other published industry sources. We have not
independently verified the information from third party sources and cannot make any representation as to the accuracy or completeness of such information. None of the reports and other materials of third party sources referred to in this Annual Report on Form 10-K were prepared for use in, or in connection with, this Annual Report on Form 10-K.
TABLE OF CONTENTS
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PART I
Item 1. Business
General
EPR Properties (“we,” “us,” “our,” “EPR” or the “Company”) was formed on August 22, 1997 as a Maryland real estate investment trust (“REIT”), and an initial public offering of our common shares of beneficial interest (“common shares”) was completed on November 18, 1997. Since that time, the Company has grown intowe have been a leading specialty REIT with an investment portfolio that includes primarily entertainment,net lease investor in experiential real estate, venues which create value by facilitating out of home leisure and recreation experiences where consumers choose to spend their discretionary time and education properties. Themoney. We focus our underwriting of ourexperiential property investments is centered on key industry and property cash flow criteria, as well as the credit metrics of our tenants and customers. As further explained under “Growth Strategies” below,
In 2019, we began the implementation of a strategy focused solely on future growth in experiential properties. We believe experiential is an enduring sector of the real estate industry and that our investments are also guided by a focus on inflection opportunitiesproperties in this sector, industry relationships and the knowledge of our management, provide us with a competitive advantage in providing capital to operators of these types of properties. We believe this focused niche approach aligns with long-term trends in consumer demand and offers the potential for higher growth and better yields. In pursuit of this strategy, we sold our remaining charter school portfolio in the fourth quarter of 2019, as well as a portion of our private school and early education portfolios in the fourth quarter of 2020. Our remaining Education portfolio, consisting of early childhood education centers and private schools, continues as a legacy investment and provides additional geographic and property diversity.
The outbreak of the COVID-19 pandemic severely impacted global economic activity during 2020 and caused significant volatility and negative pressure in financial markets, which is expected to continue into 2021. The global impact of the outbreak rapidly evolved and many jurisdictions within the United States and abroad reacted by instituting quarantines, mandating business and school closures and restricting travel. As a result, the COVID-19 pandemic severely impacted experiential real estate properties, given that such properties involve congregate social activity and discretionary consumer spending. During 2020, the COVID-19 pandemic negatively affected our business, and could continue to have a material adverse effect on our financial condition, results of operations and cash flows. The continuing impact of the COVID-19 pandemic on our business will depend on several factors, including, but not limited to, the scope, severity and duration of the pandemic, the actions taken to contain the outbreak or mitigate its impact, the development and distribution of vaccines and the efficacy of those vaccines, the public’s confidence in the health and safety measures implemented by our tenants and borrowers, and the direct and indirect economic effects of the outbreak and containment measures, all of which are associated with or supportuncertain and cannot be predicted.
While the pandemic has created a very challenging environment, consumers have historically demonstrated an enduring uses, excellent executions, attractive economicsdesire for out-of-home congregate experiences. We expect that as COVID-19 vaccinations reach critical mass, business and an advantageous market position.school closures will be lifted and consumers will return to the leisure and recreation activities our properties offer. We believe that this is further supported by the fact that our customers offer popular and affordable entertainment and social outlet options, particularly through our theatres, eat & play and cultural venues. Additionally, we offer regional destinations (experiential lodging, ski, attractions and gaming properties) which are drive-to locations that do not require air travel.
We are a self-administered REIT. As of December 31, 2017,2020, our total assets were approximately $6.2approximately $6.7 billion (after accumulated depreciation of approximately $0.7$1.1 billion). Our investments are generally structured as long-term triple-net leases that require the tenants to pay substantially all expenses associatedassociated with the operation and maintenance of the property, or as long-term mortgages with economics similar to our triple-net lease structure.
Our total investments (a non-GAAP financial measure) were approximately $6.7approximately $6.5 billion at December 31, 2017.2020. See "Non-GAAPItem 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Financial Measures" for the calculation of total investments and reconciliation of total investments to "Total assets"
in the consolidated balance sheet at December 31, 20172020 and 2016.2019. We currently group our investments into fourtwo reportable operating segments: Entertainment, Recreation, EducationExperiential and Other. Our total investments atEducation. As of December 31, 2017 consisted of interests in the following:
$2.92020, our Experiential investments comprised $5.9 billion, or 44% related to entertainment properties, which includes megaplex theatres, entertainment retail centers (centers typically anchored by an entertainment component such as a megaplex theatre91%, and containing other entertainment-related or retail properties), family entertainment centers and other retail parcels;
$2.2our Education investments comprised $0.6 billion, or 32% related to recreation properties, which includes ski properties, attractions, golf entertainment complexes and other recreation facilities;
$1.4 billion or 21% related to education properties, which consists9%, of our total investments in public charter schools, early education centers and K-12 private schools; and
$179.3 million or 3% related to other properties, which consists. A more detailed description of the Resorts World Catskills (formerly Adelaar) casino and resort project in Sullivan County, New York (excluding $50.6 million related to the Resorts World Catskills indoor waterpark projectproperty types included in recreation).within these segments is provided below.
We believe entertainment, recreation and education are highly enduring sectors of the real estate industry and that, as a result of our focus on properties in these sectors, industry relationships and the knowledge of our management, we have a competitive advantage in providing capital to operators of these types of properties. We believe this focused niche approach offers the potential for higher growth and better yields.
We believe our management’s knowledge and industry relationships have facilitated favorable opportunities for us to acquire, finance and lease properties. Historically,Prior to the pandemic, our primary challenges have beenwere locating suitable properties, negotiating favorable lease or financing terms, and managing our real estate portfolio as we have continued to grow. During the pandemic, our focus has been addressing all challenges brought on by the pandemic including monitoring customer status and working with customers to help ensure long-term stability and assisting them in establishing re-opening plans.
WeGoing forward, we are particularly focused on property categories which allow us to use our experience to mitigate some of the risks inherent in a changing economic environment. We cannot provide any assurance that any such potential investment or acquisition opportunities will arise in the near future, or that we will actively pursue any such opportunities.
Although we are primarily a long-term investor, we may also sell assets if we believe that it is in the best interest of our shareholders or pursuant to contractual rights of our tenants or our customers.
EntertainmentExperiential
As of December 31, 2017,2020, our EntertainmentExperiential segment consistedincluded total investments of investmentsapproximately $5.9 billion in megaplex theatres, entertainment retail centers, family entertainment centers and other retail parcels totaling approximately $2.9 billion with interests in:the following property types (owned or financed):
147 megaplex•178 theatre properties;
•55 eat & play properties (including seven theatres located in 34 states;entertainment districts);
•18 attraction properties;
•13 ski properties;
•six experiential lodging properties;
•one gaming property;
•three cultural properties; and
•seven entertainment retail centers (which included seven additional megaplex theatres) located in Colorado, New York, California, and Ontario, Canada;fitness & wellness properties.
11 family entertainment centers located in Colorado, Georgia, Illinois, Indiana, Florida and Texas;
land parcels leased to restaurant and retail operators adjacent to several of our theatre properties;
$101.3 million in construction in progress primarily for real estate development and redevelopment of megaplex theatres as well as other retail redevelopment projects; and
$4.5 million in undeveloped land inventory.
As of December 31, 2017,2020, our owned Experiential real estate portfolio of megaplex theatres consisted of approximately 11.019.3 million square feet and was 100%93.8% leased and our remaining owned entertainment real estate portfolio consisted of 2.0included $57.6 million square feetin property under development and was 96% leased. The combined owned entertainment real estate portfolio consisted of 13.1$20.2 million square feet and was 99% leased. Our owned theatre properties are leased to 15 different leading theatre operators. A significant portion of our total revenue was derived from rental payments by American Multi-Cinema, Inc. ("AMC"). For the year ended December 31, 2017, approximately $114.4 million or 19.9% of the Company's total revenues were derived from rental payments by AMC.in undeveloped land inventory.
Theatres
A significant portion of our entertainment assets consistExperiential portfolio consists of modern megaplex theatres. The COVID-19 pandemic has had a severe impact on the theatre industry. Many theatre locations remain closed due to local restrictions or operator decision to close as a result of the impact of the COVID-19 pandemic, specifically the decision by many major studios to delay the release of blockbuster movies in hopes that larger audiences will be available as additional markets open. Due to these closures and the lack of content to exhibit, our tenants have required significant rent deferrals and, in some circumstances, restructured lease agreements. While studios pushed the majority of movie content to 2021, certain studios chose hybrid content release strategies in support of their direct-to-consumer streaming services. In these cases, the standard movie release strategy referred to as “release windows” was set aside as movies were either simultaneously released in theatres and through streaming services, or simply released directly through streaming services. While these decisions were made as a result of the pandemic, it is yet to be determined how the industry will again coalesce around a standard release strategy in a post-pandemic environment.
Several theatre tenants have been placed on a cash-basis for revenue recognition purposes due to the ongoing uncertainty. During 2020, we experienced vacancies at certain theatre properties and have determined to either sell these properties or manage them through a third-party manager. As theatres continue to be impacted by the pandemic, we will evaluate the best strategy for any future vacancies on a property-by-property basis.
The modern megaplex theatre provides a significantlygreatly enhanced audio and visual experience for patrons. Prior to the patrons versus other formats. A significantpandemic, there was a trend currently exists among national and local exhibitors to further enhance the customer experience. These enhancements include reserved, luxury seating and expanded food and beverage offerings, including the addition of alcohol and more efficient point of sale systems. The evolution of the theatre industry over the last 20 years from the sloped floor theatre to the megaplex stadium theatre to the expanded amenity theatre has demonstrated that exhibitors and their landlords are willing to make investments in their theatres to take the customer experience to the next level.
Moviegoing has been a dominant out-of-home entertainment option for decades, with over 1.2 billion tickets sold in North America during 2019 according to the Motion Picture Association (MPA) 2019 Theme Report. We believe that the evolution in theatres and enhanced customer experience will bring customers back to enjoy film exhibition in a post-pandemic environment. While consumers have the option of watching streaming content at home, data has shown that theatre exhibition and streaming options have successfully coexisted. In fact, a survey published by EY (The Relationship Between Movie Theater Attendance and Streaming Behavior - February, 2020) illustrated that the most frequent moviegoers also spend the most time streaming. This is in part likely due to the fact that the majority of content streamed in-home is series-based content. Additionally, theatre exhibition remains a critical initial distribution platform for studios to fully monetize titles.
Ultimately, the pace of recovery and stabilization of theatre exhibition will be dependent upon several factors including the success of the deployment of vaccines, consumer confidence in attending theatres and studios' willingness to broadly release content to theatres.
While theatres are the largest property type in our Experiential segment currently, it is expected that over time it will become a smaller percent of the portfolio. We expect this to occur as we grow in other target experiential property types and possibly through dispositions of theatre properties.
As exhibitors improveof December 31, 2020, our owned theatre properties were leased to 17 different leading theatre operators. A significant portion of our total revenue was from Cinemark USA, Inc. ("Cinemark"), American Multi-Cinema, Inc. ("AMC") and Regal Entertainment Group ("Regal"). For the customer experienceyear ended December 31, 2020, approximately $42.1 million or 10.1%, $30.0 million or 7.2% and $13.1 million or 3.1% of the Company's total revenue was from Cinemark, AMC and Regal, respectively.
Eat & Play
The emergence of the "eatertainment" category has inspired an increasing number of successful concepts that appeal to consumers by providing good food and high-quality entertainment options all at one location. Our eat & play portfolio includes golf entertainment complexes, entertainment districts and family entertainment centers.
Our golf entertainment complexes combine golf with more spaciousentertainment, competition and comfortable seating options, they are required to make physical changes to the existing seating configurations that typically result in a significant loss of existing seats. It was once a concern that such seat loss would be a negative to theatres that thrive on opening weekend business of new movie releases; however, customers have responded favorably to these changes. Exhibitors are learning that enhanced amenities are changing the patrons’ movie-going habits resulting in significantly increased seat utilization and increased food and beverage revenue.
As exhibitors pursue the renovation of theatresservice, and are leased to, or we have mortgage receivables from, Topgolf USA ("Topgolf"). By combining interactive entertainment with enhanced amenities, we are working with our tenants generally toward the end of their primary lease terms to extend the terms of their leases beyond the initial option periods, finance improvements where applicablequality food and to recapture land where seat count reductions alleviate parking requirements. In conjunction with these changes, we may also make changesbeverage and a long-lived recreational activity, Topgolf provides an innovative, enjoyable and repeatable customer experience. Due to the rental ratespandemic, our TopGolf locations were closed for a portion of 2020 based on local restrictions. However, these locations have reopened and are recovering quickly as customers return to better reflect the existing market demands and additional capital invested. In addition to positioning expiring theatre assets for continued success, the renovation of these assets creates an opportunity to diversify the Company's tenant base into other entertainment or retail uses adjacent to a movie theatre.
The theatre box office continues to reflect solid performance. Box office revenues reached a record high during 2016 and were less than 3% lower than that record in 2017, according to Box Office Mojo.experience this interactive activity. We expect the development of new megaplex theatres and the conversion or partial conversion of existing theatres to enhanced amenity formats to continue in the United States and abroad over the long-term. As a resultto pursue select opportunities related to golf entertainment complexes. A significant portion of our total revenue was from Topgolf, which totaled approximately $80.7 million, or 19.5%, of the significant capital commitment involvedCompany's total revenue for the year ended December 31, 2020.
in building new megaplex theatres and redeveloping existing theatres, as well as the experience and industry relationships of our management, we believe we will continue to have opportunities to provide capital to exhibition businesses in the future.
We also continue to seek opportunities for the acquisition, financing or development of additionalentertainment districts. Entertainment districts are restaurant, retail and other entertainment venues around our existing portfolio.typically anchored by a megaplex theatre. The opportunity to capitalize on the traffic generation of our existing market-dominant theatres to create
entertainment retail centers (“ERCs”)districts not only strengthens the execution of the megaplex theatre but adds diversity to our tenant and asset base. We have and will continue to evaluate our existing portfolio for additional development of entertainment, retail and entertainmentrestaurant density, and we will also continue to evaluate the purchase or financing of existing ERCsentertainment districts that have demonstrated strong financial performance and meet our quality standards. The leasing and property management requirements of our ERCsentertainment districts are generally met through the use ofusing third-party professional service providers.
Our family entertainment center operators offer a variety of entertainment options including bowling, bocce ball and karting as well as an observation deck on the 94th floor of the John Hancock building in downtown Chicago, Illinois.
karting. We will continue to seek opportunities for the acquisition, financing or development of or acquisition of, other entertainment relatedsuch properties that leverage our expertise in this area.
Recreation
As of December 31, 2017, our Recreation segment consisted of investments in ski properties, attractions, golf entertainment complexes and other recreation totaling approximately $2.2 billion with interests in:
26 ski properties located in 6 states;
20 attractions located in 12 states;
30 golf entertainment complexes located in 17 states;
eight other recreation properties located in 6 states; and
$125.2 million in construction in progress for golf entertainment complexes and the development of an indoor waterpark hotel at the Resorts World Catskills casino and resort project located in Sullivan County, New York.
As of December 31, 2017, our owned recreation real estate portfolio was 100% leased.
Attractions
Our attractions portfolio consists primarily of waterparks and amusement parks, each of which draw a diverse segment of customers. Prior to the pandemic, outdoor waterparks had historically experienced attendance growth since their inception in 1977. Consumer demand for indoor waterparks was also increasing pre-pandemic, making a trip to the waterpark accessible in all four seasons. Today’s amusement parks offer themed experiences designed to appeal to all ages.
Our attraction operators continue to deliver innovative and compelling attractions along with high standards of service, making our attractions a day of fun that is accessible for families, teens, locals and tourists. These attractions offer experiences designed to appeal to all ages while remaining accessible in both cost and proximity. As the attractions industry continues to evolve, innovative technologies and concepts are redefining the attractions experience.
Due to the pandemic, our attraction properties were closed for all or a portion of 2020 based on local restrictions with certain properties still required to be closed. We believe that demand for attractions will normalize in a post-pandemic environment. Our attraction properties are leased to, or we have mortgage notes receivable from, five different operators. We expect to continue to pursue opportunities in this area.
Ski
Our ski properties provideportfolio provides a sustainable advantage for the experience consciousexperience-oriented consumer, providing outdoor entertainment duringin the winter.winter and, in some cases, year-round. All of the ski properties that serve as collateral for our mortgage notes in this area, as well as our five owned properties, offer snowmaking capabilities and provide a variety of terrains and vertical drop options. We believe that the primary appeal of our ski properties lies in the convenient and reliable experience consumers can expect. Given that all of our ski properties are located near major metropolitan areas, they offer skiing, snowboarding and snowboardingother activities without the expense, travel, or lengthy preparations of remote ski resorts. Furthermore, advanced snowmaking capabilities increase the reliability of the experience during the winter versus other ski properties that do not have such capabilities. Our ski properties were minimally impacted by the pandemic in 2020 because the ski season was substantially over when pandemic restrictions began. Additionally, in 2021, due to the outdoor nature of the activity and the convenient location of our properties, we believe that our ski portfolio will perform well through the pandemic. Our ski properties are leased to, or we have mortgage notes receivable from, 10 differentfrom, five different operators. We expect to continue to pursue opportunities in this area.
Experiential Lodging
Experiential lodging meets the needs of consumers by providing a convenient, central location that combines high-quality lodging amenities with entertainment, recreation and leisure activities. The appeal of these properties attracts multiple generations at once. Due to the pandemic, our experiential lodging property in Sullivan County, New York has been closed by state mandate since March of 2020 and our two locations in Florida were required to be closed for a portion of the second quarter of 2020. Additionally, travel restrictions negatively impacted our locations in Florida when they were able to reopen. We believe that demand for experiential lodging will return in a post-pandemic environment. Our attraction portfolio consists of waterparks and amusement parks, bothinvestments in experiential lodging have been typically structured using triple-net leases, however, we currently operate these three properties (two of which draware included in an unconsolidated joint venture) through a diverse segmenttraditional REIT lodging structure. In the traditional REIT lodging structure, we hold qualified
lodging facilities under the REIT and we separately hold the operations of customers. Our attraction operators continue to deliver innovative and compelling attractions alongthe facilities in taxable REIT subsidiaries ("TRSs") which are facilitated by management agreements with high standards of service, making our attractions a day of fun that's accessible for families, teens, locals and tourists. Waterparks and amusement parks offer experiences designed to appeal to all ages while remaining accessible in both cost and proximity. As many waterparks are growing from single-day attendance to a destination getaway, we believe indoor waterpark hotels increase the four-season appeal at many resorts. Our attraction properties are leased to, or we have mortgage notes receivable from, seven different operators.eligible independent contractors. We expect to continue to pursue opportunities for investments in this area.experiential lodging.
Gaming
Our golf entertainment complexes arestrategic focus in our gaming portfolio is on casino resorts and hotels leased to or under mortgage with, Topgolf, which combines golf with entertainment, competition and food and beverage service. By combining an interactive entertainment and food and
beverage experienceleading operators with a long-lived recreational activity,strong regulatory track record that seek to drive consumer loyalty and value through quality customer experiences, superior service, world-class affinity programs and continuous innovation on and off the gaming floor. Additionally, we believe Topgolf provides an innovative, enjoyablefocus on casino resorts and repeatable customer experience. We expect to continue to pursue opportunities related to golf entertainment complexes.
Our other recreation portfolio consists of both classic and innovative activities. This includes our investments in fitness and wellness properties, as well as in new recreation properties such as iFly, which provides a unique indoor sky-diving experience to its guests.
We will continue to seek opportunities for the development of, or acquisition of, other recreation related properties that leverage our expertise in this area.
Education
As of December 31, 2017, our Education segment consisted of investments in public charter schools, early education centers and K-12 private schools totaling approximately $1.4 billion with interests in:
65 public charter schools located in 19 states and the District of Columbia;
65 early education centers located in 17 states;
15 private schools located in 10 states;
$25.5 million in construction in progress for real estate development or expansions of public charter schools and early education centers; and
$12.4 million in undeveloped land inventory.
As of December 31, 2017, our owned education real estate portfolio consisted of approximately 4.2 million square feet and was 92% leased. This reflects the termination of nine CLA leases, as further discussed in Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Recent Developments”.
Public charter schools are tuition-free, independent schools that are publicly funded by local, state and federal tax dollars based on enrollment. Driven by the need to improve the quality of public education and provide more school choices in the U.S., public charter schools are one of the fastest growing segments of the multi-billion dollar educational facilities sector, and we believe a critical need exists for the financing of new and refurbished educational facilities. To meet this need, we have established relationships with public charter school operators, authorizers and developers across the country and expect to continue to develop our leadership position in providing real estate financing in this area. Public charter schools are operated pursuant to charters granted by various state or other regulatory authorities and are dependent upon funding from local, state and federal tax dollars. Like public schools, public charter schools are required to meet both state and federal academic standards. We have 45 different operators for our owned public charter schools.
Various government bodieshotels that provide educational funding have pressurea wide array of experiential offerings outside of lodging and state-of-the-art gaming. Through live entertainment, various recreational opportunities, dining options and night clubs, the combination of amenities appeals to reduce their spending budgetsa broader demographic. In 2020, regional gaming properties demonstrated stronger resilience versus Las Vegas strip casinos, as they are not dependent on air travel and have reduced educational funding in some cases and may continue to reduce educational funding in the future. This can impact our tenants' operations and potentially their ability to pay our scheduled rent. However, these reductions differ state by state and have historically been more significant at the post-secondary education level than at the K-12 level that our tenants serve. Furthermore, while there can be no assurance as to the level of these cuts, we analyze each state's fiscal situation and commitment to the charter school movement before providing financing in a new state, and also factor in anticipated reductions (as applicable) in the states in which we do decide to do business.
As with public charter schools, the Company's expansion into both early education centers and private schools is supported by strong unmet demand, and we expect to increase our investment inconventions, both of these areas.
Early education centers continue to see demand due to the proliferation of dual income families and the increasing emphasis on early childhood education, beyond traditional daycare. There is increased demand for curriculum-based, child-centered learning. We believe this property type is a logical extension of our education platform and allows us to increase our diversity and geographical reach with these assets.
We believe K-12 private schools havewhich saw significant growth potential when they have differentiated, high quality offerings. Many private schools in large urban and suburban areas are at capacity and have large waiting lists making admission more difficult. The demand for nonsectarian private education has increased in recent years as parents and students become more focused on the comprehensive impact of a strong school environment.
We will continue to seek opportunities for the development of, or acquisition of, other education related properties that leverage our expertise in this area.
Many of our education lease and mortgage agreements contain purchase or prepayment options whereby the tenant or borrower can acquire the property or prepay the mortgage loan for a premium over the total development cost at certain pointsdeclines during the terms of the agreements. If these properties meet certain criteria, the tenants may be able to obtain bond or other financing at lower rates and therefore be motivated to exercise these options. We do not anticipate that all of these options will be exercised but cannot determine at this time the amount or timing of such option exercises. Additionally, it is difficult to forecast when these options will be exercised, which can create volatility in our earnings. In accordance with GAAP, prepayment penalties related to mortgage agreements are included in mortgage and other financing income and are included in FFO as adjusted (See Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Funds From Operations” for a discussion of FFO and FFO as adjusted, which are non-GAAP measures). However, if a tenant exercises the option to purchase a property under lease, GAAP requires that a gain on sale be recognized for the amount of cash received over the carrying value of the property and gains on sale are typically excluded from FFO as adjusted. Accordingly, for consistency in presentation and with the wording and intent of the lease provisions, we treat the premium over the total development cost (i.e. the undepreciated cost) as a termination fee and include such fees in FFO as adjusted, and only the difference between the total development cost and the carrying value is treated as gain on sale and excluded from FFO as adjusted.year.
During the year ended December 31, 2017, we received prepayment of $3.4 million on one mortgage note receivable that was secured by a public charter school located in Dallas, Texas and we received a prepayment fee of $0.6 million. In addition, pursuant to tenant purchase options, we completed the sale of eight public charter schools located in Colorado, Arizona, North Carolina and Utah for net proceeds totaling $97.3 million. In connection with these sales, we recognized gains on sale of $20.7 million of which $20.0 million has been included in termination fees in FFO as adjusted (a non-GAAP financial measure) per the methodology discussed above.
As of December 31, 2017, an estimate of the number of education properties potentially impacted by option exercises, the total development cost and the total potential amount of the prepayment penalties or lease termination fees2020, our investments in the first option period by year are as follows (dollars in thousands):
|
| | | | | | | | | | |
Year Option First Exercisable | | Number of Education Properties | | Total Development Cost | | Total Potential Termination Fees/Prepayment Penalties in First Option Period |
2018 | | 9 | | $ | 90,730 |
| | $ | 17,200 |
|
2019 | | 12 | | 136,013 |
| | 24,051 |
|
2020 | | 7 | | 51,154 |
| | 9,300 |
|
2021 | | 12 | | 92,587 |
| | 19,475 |
|
2022 | | 3 | | 35,228 |
| | 5,692 |
|
Thereafter | | 4 | | 155,888 |
| | 22,746 |
|
Other
As of December 31, 2017, our Other segmentgaming consisted primarily of land under ground lease property under development and land held for development totaling approximately $179.3 million related to the Resorts World Catskills casino and resort project in Sullivan County, New York, which we previously referred to as the Adelaar casino and resort project.York. Our ground lease tenant is expected to investhas invested in excessexcess of $920.0$930.0 million in thethe construction of the casino and resort project, and itthe casino first opened for business in February 2018. We will continue to pursue opportunities for investment in gaming under triple net lease structures or mortgages.
Cultural
Our cultural investments seek to engage consumers and create memorable experiences and are evolving to offer immersive and interactive exhibits that encourage repeat visits. Combining an opportunity to experience animals, art or history with a congregate social experience, cultural venues, such as zoos, aquariums and museums, are reemerging as an entertainment option. As appreciation for the importance of leisure time is growing, cultural venues are broadening their appeal to reach a variety of customers.
Desiring to be a preeminent choice in what is now known as location-based experiences, several trends have developed among cultural venues. Many are utilizing new technology, personalizing the guest experience and implementing an element of play that was previously absent. In making new investments in this property type, we will continue to identify the locations and tenants that execute well on these trends and have a history of strong attendance. City Museum in St. Louis is one of our properties and is a great example of an emerging category called “artainment” which is an art display that invites guests to interact and explore.
Due to the pandemic, our cultural investments were closed for a portion of 2020 based on local restrictions but all locations have reopened. Although City Museum is experiencing a slower recovery, our two other cultural investments are recovering quickly. We believe that demand for cultural activities will return in a post-pandemic environment and we expect to continue to pursue opportunities in this area.
Fitness & Wellness
In recent years, consumers have begun to spend more time and money on their well-being. The diverse offerings of boutique and larger fitness centers have caught the interest of many consumers, driving an expansion of both fitness and more broadly, the wellness industry. By allowing fitness club members to focus on their individual interests and goals in a community setting, operators gain loyalty and retention which are essential elements in the ongoing success of a facility. Commercial fitness centers have stayed at the forefront of the industry by offering personalization within congregate settings. Our tenants make it their goal to motivate, educate, and to help consumers look and feel better.
We will continue to seek opportunities for the acquisition, financing or development of other experiential properties that leverage our expertise in this area.
Education
As of December 31, 2020, our Education segment included total investments of approximately $0.6 billion in the following property types (owned or financed):
•65 early childhood education center properties; and
•10 private school properties.
As of December 31, 2020, our owned Education real estate portfolio of approximately 1.4 million square feet was 100% leased and included $3.0 million in undeveloped land inventory.
Private schools were minimally impacted by the pandemic as students were still learning in a remote environment in areas where closures were required. Most of our early education centers have experienced mandated closures and a drop in revenue that we believe is temporary and will continue to recover as people return to work. As discussed above, our growth going forward will be focused on Experiential properties and therefore we do not expect to seek additional opportunities for Education properties.
Business Objectives and Strategies
Our vision is to becomecontinue to build the leading specialty REIT by focusing our unique knowledge and resourcespremier experiential REIT. We focus on select real estate segmentsvenues which providecreate value by facilitating out of home leisure and recreation experiences where consumers choose to spend their discretionary time and money. These are properties which make up the potential for outsized returns.social infrastructure of society.
Our long-term primary business objective is to enhance shareholder value by achieving predictable and increasing Funds From Operations (“FFO”As Adjusted ("FFOAA") and dividends per share (See Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Financial Measures - Funds From Operations”Operations (FFO), Funds From Operations As Adjusted (FFOAA) and Adjusted Funds From Operations (AFFO)” for a discussion of FFO,FFOAA, which is a non-GAAP financial measure). Our prevailinggrowth strategy is to focusfocuses on long-term investments in a limited number of categoriesacquiring or developing experiential properties in which we maintain a depth of knowledge and relationships, and which we believe offer sustained performance throughout allmost economic cycles. We intend to achieve this objective by continuing to execute the Growth Strategies, Operating Strategies and Capitalization Strategies described below.
Growth Strategies
Central to ourOur strategic growth is remaining focused on acquiring or developing properties in our primary investment segments: Entertainment, Recreationexperiential real estate venues which create value by facilitating out of home leisure and Education.recreation experiences where consumers choose to spend their discretionary time and money. We may also pursue opportunities to provide mortgage financing for these investment segmentsinvestments in certain situations where this structure is more advantageous than owning the underlying real estate.
Our segment focus on Experiential properties is consistent with our strategic organizational design which is structured around building centersa center of knowledge and strong operating competencies in each of our primary segments.the experiential real estate market. Retention and building of this knowledge depth creates a competitive advantage allowing us to more quickly identify key market trends.
To this end, we will deliberately apply information and our ingenuity to identify properties which represent potential logical extensions within each of our segments,existing experiential property types, or potential future investment segments.additional experiential property types. As part of our strategic planning and portfolio management process, we assess new opportunities against the following five key underwriting principles:
Inflection Industry
•Experiential Alignment
•Proven Business Model
•Enduring Value
•Addressable Opportunity
Specialty versus commodity Property
•Location Quality
•Competitive Position
•Location Rent Coverage
•Cash Flow Durability
Tenant
•Demonstrated Success
•Commitment
•Reputable Management
•Solid Credit Quality
We believe that our over 20 years of experience and knowledge in the experiential real estate
New or emerging generation of real estate as a result of age, technology or change in consumer lifestyle or habits
Enduring Value
Underlying activity long-lived
Real estate that supports commercially successful activities
Outlook for business stable or growing
Excellent Execution
Best-of-class executions that create market-dominant properties
Sustainable customer demand within market gives us the category despite a potential change in tenancy
Tenants with a reliable track record of customer service and satisfaction
Attractive Economics
Initially accretive with escalating yield over time
Rent participation features which allow for participation in financial performance
Scalable depth of opportunity
Strong, stable rent coverage and to be the potential for cross default features
Advantageous Position
First mover advantage and/or dominant player in real estate ownership or financing
Preferredthis area. Additionally, we have tenant orand borrower relationshiprelationships that providesprovide us with access to sitesinvestment opportunities.
The pandemic has impeded our growth in the near term while our focus has been addressing challenges brought on by the pandemic including monitoring customer status and development projectsworking with customers to help ensure long-term stability and assisting them in establishing re-opening plans. We expect to return to growth as our customers' businesses continue to recover and, in turn, our cash flows stabilize.
Data available to assess and monitor performance
Operating Strategies
Lease Risk Minimization
To avoid initial lease-up risks and produce a predictable income stream, we typically acquire or develop single-tenant properties that are leased under long-term leases. We believe our willingness to make long-term investments in properties offers our tenants financial flexibility and allows tenants to allocate capital to their core businesses. Although we will continue to emphasize single-tenant properties, we have acquired or developed, and may continue to acquire or develop, multi-tenant properties we believe add shareholder value.
Lease Structure
We have structured our leasing arrangements to achieve a positive spread between our cost of capital and the rents paid by our tenants. We typically structure leases on a triple-net basis under which the tenants bear the principal portion of the financial and operational responsibility for the properties. During each lease term and any renewal periods, the leases typically provide for periodic increases in rent and/or percentage rent based upon a percentage of the tenant’s gross sales over a pre-determined level. In our multi-tenant property leases and some of our theatre leases, we generally require the tenant to pay a common area maintenance (“CAM”) charge to defray its pro rata share of insurance, taxes and maintenance costs.
Mortgage Structure
We have structured our mortgages to achieve economics similar to our triple-net lease structure with a positive spread between our cost of capital and the interest paid by our tenants. During each mortgage term and any renewal
periods, the notes typically provide for periodic increases in interest and/or participating features based upon a percentage of the tenant’s gross sales over a pre-determined level.
Traditional REIT Lodging Structure
In certain limited instances, we have utilized traditional REIT lodging structures, where we hold qualified lodging facilities under the REIT and we separately hold the operations of the facilities in TRSs which are facilitated by management agreements with eligible independent contractors. However, we currently anticipate migrating over time what we hold in such structures to more traditional net lease or mortgage arrangements.
Development and Redevelopment
We intend to continue developing properties and redeveloping existing properties that are consistent with our growth strategies. We generally do not begin development of a single-tenant property without a signed lease providing for rental payments that are commensurate with our level of capital investment. In the case of a multi-tenant development, we generally require a significant amount of the development to be pre-leased prior to construction to minimize lease-up risks. In addition, to minimize overhead costs and to provide the greatest amount of flexibility, we generally outsource construction management to third-party firms.
We believe our build-to-suit development program is a competitive advantage. First, we believe our strong relationships with our tenants and developers drive new investment opportunities that are often exclusive to us, rather than bid broadly, and with our deep knowledge of their businesses, we believe we are a value-added partner in the underwriting of each new investment. Second, we offer financing from start to finish for a build-to-suit project such that there is no need for a tenant to seek separate construction and permanent financing, which we believe makes us a more attractive partner. Third, we are actively developing strong relationships with tenants in our select segmentsthe experiential sector leading to multiple investments without strict investment portfolio allocations. Finally, multiple investments with the same tenant allows us in most cases to include cross-default provisions in our lease or financing contracts, meaning a default in an obligation to us at one location is a default under all obligations with that tenant.
We will also investigate opportunities to redevelop certain of our existing properties. We may redevelop properties in conjunction with a lease renewal or new tenant, or we may redevelop properties that have more earnings potential due to the redevelopment. Additionally, certain of our properties have excess land where we will proactivelypro-actively seek opportunities to further develop.
Tenant and Customer Relationships
We intend to continue developing and maintaining long-term working relationships with entertainment, recreation, education and other specialty businessexperiential operators and developers by providing capital for multiple properties on a regional, national and international basis, thereby creating efficiency and value for both the operators and the Company.
Portfolio Diversification
We will endeavor to further diversify our asset base by property type, geographic location and tenant or customer. In pursuing this diversification strategy, we will target entertainment, recreation, education and other specialtyexperiential business operators that we view as leaders in their market segmentsproperty types and have the ability to compete effectively and perform under their agreements with the Company.
Dispositions
We will consider discretionary property dispositions for reasons such as creating price awareness of a certain property type, opportunistically taking advantage of an above marketabove-market offer or reducing exposure related to a certain tenant, property type or geographic area.
Capitalization Strategies
Debt and Equity Financing
Our ratio of net debt to adjusted EBITDA,We believe that our shareholders are best served by a non-GAAP measure (see "Non-GAAP Financial Measures" for definitions and reconciliations), is our primary measure to evaluate our capital structure and the magnitude of our debt against our operating performance. Additionally, we utilize our ratio of net debt to gross assets as a secondary measure to evaluate ourconservative capital structure. We expectTherefore, we seek to maintain a conservative debt level on our balance sheet as measured primarily by our net debt to adjusted EBITDA ratio between 4.6x to 5.6x. SeeEBITDAre, a non-GAAP measure (see Item 7 – “Management’s Discussion and Analysis of Financial Condition - Non-GAAP
Financial Measures" for definitions and Results of Operations - Liquidityreconciliations). We also seek to maintain conservative interest, fixed charge, debt service coverage and Capital Resources” for a further discussion of this ratio.net debt to gross asset ratios.
We rely primarily on an unsecured debt structure. In the future, while we may obtain secured debt from time to time or assume secured debt financing obligations in acquisitions, we intend to issue primarily unsecured debt securities to satisfy our debt financing needs. We believe this strategy increases our access to capital and permits us to more efficiently match available debt and equity financing to our ongoing capital requirements.
During the year ended December 31, 2020, we amended our Consolidated Credit Agreement, which governs our unsecured revolving credit facility and our unsecured term loan facility, and our Note Purchase Agreement, which governs our private placement notes. The amendments modified certain provisions and waived our obligation to comply with certain covenants under these debt agreements during the Covenant Relief Period, subject to certain conditions. These waivers to comply with certain covenants were obtained in light of the uncertainty related to impacts of the COVID-19 pandemic on us and our tenants and borrowers. The amendments also imposed additional restrictions on us during the Covenant Relief Period, including limitations on making investments, incurring indebtedness, making capital expenditures, paying dividends and making other distributions, repurchasing our shares, voluntarily prepaying certain indebtedness, encumbering certain assets and maintaining a minimum liquidity amount, in each case subject to certain exceptions. The term "Covenant Relief Period," as used in this Annual Report on Form 10-K, generally means the period of time beginning on June 29, 2020 and ending on (i) December 31, 2021, in the case of our Consolidated Credit Agreement, or (ii) October 1, 2021 (subject to extension to January 1, 2022 at our election, subject to certain conditions), in the case of our Note Purchase Agreement governing our private placement notes. We have the right under certain circumstances to terminate the Covenant Relief Period earlier.
Our sources of equity financing consist of the issuance of common shares as well as the issuance of preferred shares (including convertible preferred shares). In addition to larger underwritten registered public offerings of both common and preferred shares, we have also offered shares pursuant to registered public offerings through the direct share purchase component of our Dividend Reinvestment and Direct Share Purchase Plan (“DSP Plan”). While such offerings are generally smaller than a typical underwritten public offering, issuing common shares under the direct share purchase component of our DSP Plan allows us to access capital on a more frequent basis in a cost-effective manner. We expect to opportunistically access the equity markets in the future and, depending primarily on the size and timing of our equity capital needs, may continue to issue shares under the direct share purchase component of our DSP Plan. Furthermore, we may issue shares in connection with acquisitions in the future.
Joint Ventures
We will examine and may pursue potential additional joint venture opportunities with institutional investors or developers if the investments to which they relate meet our guiding principles discussed above. We may employ higher leverage in joint ventures.ventures and be more inclined to use secured financing at the property level.
Payment of Regular Dividends
We pay dividend distributions to our common shareholders on a monthly basis (as opposed to a quarterly basis). We expecttemporarily suspended our monthly cash dividend to continuecommon shareholders after the common share dividend payable May 15, 2020. Our plan is to pay dividend distributionsreinstitute such dividends to common shareholders, when conditions allow, however, there can be no assurances as to our preferred shareholders on a quarterly basis.ability to do so or the timing thereof. Our Series C cumulative convertible preferred shares (“Series C preferred shares”) have a dividend rate of 5.75%, our Series E cumulative convertible preferred shares (“Series E preferred shares”) have a dividend rate of 9.00% and our Series G cumulative redeemable preferred shares ("Series G preferred shares") have a dividend rate of 5.75%. Among the factors the Company’s board of trustees (“Board of Trustees”) considers in setting the common share dividend rate are the applicable REIT tax rules and regulations that apply to dividends, the Company’s results of operations, including FFO and FFO as adjustedFFOAA per share, and the Company’s Cash Available for Distribution (defined as net cash flow available for distribution after payment of operating expenses, debt service, preferred dividends and other obligations).
Competition
We compete for real estate financing opportunities with other companies that invest in real estate, as well as traditional financial sources such as banks and insurance companies. REITs have financed, and may continue to seek to finance, entertainment, recreation, educationexperiential and other specialty properties as new properties are developed or become available for acquisition.
EmployeesHuman Capital
Our strategy is specializing in investments in select enduring experiential properties in the real estate industry, and our people are vital to our success in executing on this strategy. As a human-capital intensive business, the long-term success of our firm depends on our people. Our Vice President, Human Resources and Administration works in conjunction with our Executive Vice President and General Counsel, who reports directly to our Chief Executive Officer, to develop and oversee our human capital management objectives, programs and initiatives. In addition, our Board of Trustees is actively involved in our human capital management in its oversight of our long-term strategy and through its Compensation and Human Capital Committee and engagement with management. Our management regularly reports to the Compensation and Human Capital Committee regarding management's human capital objectives, programs and initiatives.
Our key human capital objectives are to attract, retain and develop the highest quality talent to ensure that we have the right talent, in the right place, at the right time. To achieve these objectives, our human capital programs are designed to develop talent to prepare them for critical roles and leadership positions for the future; reward and support employees through competitive pay, benefit, and perquisite programs; enhance our culture through efforts aimed at making the workplace more engaging and inclusive; acquire talent and facilitate internal talent mobility to create a high-performing, diverse workforce; and evolve and invest in technology, tools, and resources to enable employees at work. As of December 31, 2017,2020, we had 6353 full-time employees.
Examples of key programs and initiatives that are focused to attract, develop and retain our diverse workforce include:
•Development. We provide opportunities for our associates to learn and thrive as professionals, including educational reimbursement, mentorship, executive coaching and ongoing professional development. Annually, EPR hosts leadership development sessions for all levels of our organization. In 2020, we hosted and facilitated virtual sessions with an external professional, focused on building our “Feedback Rich Culture.”
•Diversity, equity and inclusion (DE&I). Our DE&I objectives are to ensure our culture is evolving and inclusive, and build teams that reflect the life experiences of our customers and the ultimate consumers of our customers’ services. Specific steps we have taken to address our commitment to DE&I include:
▪Hosting in 2020 multiple culture-changing and learning opportunities regarding DE&I with external experts and the response was overwhelmingly positive;
▪Adopting in 2020 the “Rooney” rule with respect to our recruiting processes to ensure an active approach to diversification at all areas of our organization;
▪Establishing a partnership with a local charter school to provide internship opportunities to diverse alumni as a means to invest in a future and local diverse talent pipeline; and
▪Sponsoring since 2015, the EPR Women’s Initiative Network, or EWIN, that represents and supports our diverse communities within our workforce. EWIN facilitates networking and connections with peers, outreach and mentoring, leadership and skill development. Most of our employees regularly participate in EWIN programs.
•Compensation and Benefits. Our benefits include competitive base pay, performance-based restricted stock awards and a 401(k) with a robust company match. We support our employees’ physical and mental health through paid parental leave, industry-leading health care benefits, unlimited sick leave, flexible paid time
off and employee assistance programs. In addition, we offer yearly wellness reimbursements, an on-site fitness center and fully stocked kitchens.
•Community & Social Impact. Giving back is one of our core values. We demonstrate this through our charitable giving program, EPR Impact, a key cornerstone of our social responsibility. Through a number of employees actively engaged in nonprofits and our commitment to donating to and sponsoring charitable causes and events, we are fortunate to partner with amazing organizations both locally and nationally. As a benefit to employees, EPR Impact’s annual budget includes a pool of funds to support employee-directed contributions to nonprofit organizations where an employee is personally involved. Additionally, EPR will match employee contributions annually up to a given amount for contributions from their personal funds to nonprofit organizations that meet the criteria of the program. In response to the COVID-19 pandemic, “EPRcares” was formed as a way to raise employee funds to provide relief to local front-line workers. This initiative raised over $47,000 and aided 51 organizations in 2020. Additionally, EPR Impact launched a giving initiative, “The Amazing Giving Race,” to support local companies.
Regulation
To maintain our status as a REIT for federal income tax purposes, we must distribute to our shareholders at least 90% of our taxable income for a calendar year, as well as satisfy certain assets, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. In addition, we are subject to numerous federal, state and local laws and regulations applicable to owners of real property. For instance, under federal, state and local environmental laws, we may be liable for the costs of removal or remediation of certain hazardous or toxic substances at, on, in or under our properties, as well as certain other potential costs relating to hazardous or toxic substances (including government fines and penalties and damages for injuries to persons and adjacent property). These laws may impose liability without regard to whether we knew of, or were responsible for, the presence or disposal of those substances. In addition, most of our properties must comply with the Americans with Disabilities Act ("ADA"). The ADA requires that public accommodations reasonably accommodate individuals with disabilities and that new construction or alterations be made to commercial facilities to conform to accessibility guidelines. The ownership, operation, and management of our gaming facilities are also subject to pervasive regulation. These gaming regulations impact our gaming tenants and persons associated with our gaming facilities, which in many jurisdictions include us as the landlord and owner of the real estate.
Our properties are also subject to various other federal, state and local regulatory requirements. We do not know whether existing requirements will change or whether compliance with future requirements will involve significant unanticipated expenditures. Although these expenditures would be the responsibility of our tenants in most cases and for our managers to oversee at our properties, if these tenants or managers fail to perform these obligations, we may be required to do so. For additional information regarding regulations applicable to our business, and risks associated with our failure to comply with such regulations, see Item 1A – "Risk Factors" in this Annual Report on Form 10-K.
Principal Executive Offices
The Company’s principal executive offices are located at 909 Walnut Street, Suite 200, Kansas City, Missouri 64106; telephone (816) 472-1700.
Materials Available on Our Website
Our internet website address is www.eprkc.com. We make available, free of charge, through our website copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “Commission” or “SEC”). You may also view our Code of Business Conduct and Ethics, Company Governance Guidelines, Independence Standards for Trustees and the charters of our Audit, Nominating/Company Governance, Finance and Compensation and Human Capital Committees on our website. Copies of these documents are also
available in print to any person who requests them. We do not intend for information contained in our website to be part of this Annual Report on Form 10-K.
Item 1A. Risk Factors
There are many risks and uncertainties that can affect our current or future business, operating results, financial performancecondition or share price. The following discussion describes important factors which could adversely affect our current or future business, operating results, financial condition or share price. This discussion includes a number of forward-looking statements. See “Cautionary"Cautionary Statement Concerning Forward-Looking Statements.”"
Risks That May Impact Our Financial Condition or Performance
The current outbreak of the novel coronavirus, or COVID-19, has negatively impacted and caused disruption to, and the continued COVID-19 outbreak or the future outbreak of any other highly infectious or contagious diseases could materially and adversely impact or cause disruption to, our performance, financial condition, results of operations and cash flows.
The outbreak of COVID-19 has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. In the United States, governmental authorities have instituted quarantines, mandated business and school closures and restricted travel. As a result, the COVID-19 pandemic continues to severely impact experiential real estate properties given that such properties rely on social interaction and discretionary consumer spending. Most of our tenants and borrowers announced temporary closures of their operations during this pandemic. Many experts predict that the outbreak will trigger a period of global economic slowdown or a global recession. The COVID-19 pandemic has negatively affected, and the COVID-19 pandemic (or a future pandemic) could have material and adverse effects on, our ability, and the ability of our customers, to successfully operate and on our financial condition, results of operations and cash flows due to, among other factors:
•complete or partial closures of, or other operational issues at, our properties resulting from government, tenant or borrower action;
•the reduced economic activity has severely impacted our tenants' and borrowers’ businesses, financial condition and liquidity and caused most of our tenants and borrowers to obtain modifications of their obligations to us;
•most of our tenants obtained varying levels of deferral of rent since the outbreak of COVID-19 and may have difficulty repaying those deferrals as they become due;
•the reduced economic activity could result in a recession, which could negatively impact consumer discretionary spending;
•difficulty accessing debt and equity capital on attractive terms, or at all, and a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our access to capital necessary to fund business operations or address maturing liabilities on a timely basis and our tenants' and borrowers’ ability to fund their business operations and meet their obligations to us;
•a general decline in business activity and demand for real estate transactions would adversely affect our ability or desire to grow our portfolio of experiential real estate properties;
•a deterioration in our and our tenants' and borrowers’ ability to operate in affected areas or delays in the supply of products or services to us and our tenants and borrowers from vendors that are needed for our and our tenants' and borrowers’ efficient operations has adversely affected our operations and those of our tenants and borrowers; and
•the potential negative impact on the health of our personnel, particularly if a significant number of them are impacted, would result in a deterioration in our ability to ensure business continuity during a disruption.
The ultimate extent to which the COVID-19 pandemic impacts our operations and those of our tenants and borrowers will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the outbreak, the actions taken to contain the outbreak or mitigate its impact, the development and distribution of vaccines and the efficacy of those vaccines, the public’s confidence in the health and safety measures implemented by our tenants and borrowers, and the direct and indirect economic effects of the outbreak and containment measures, among others. The financial impact of the COVID-19 pandemic
could negatively impact our future compliance with financial covenants of our credit facility and other debt agreements and result in a default and potentially an acceleration of indebtedness. Such non-compliance could negatively impact our ability to make additional borrowings under our revolving credit facility, pay dividends and repurchase common shares under our share repurchase program. As discussed below under "Management's Discussion and Analysis of Financial Condition and Results of Operations," we entered into amendments to our bank credit facilities and agreements regarding certain private placement notes that provide a temporary suspension or modification of certain of our financial covenants during the Covenant Relief Period. The Covenant Relief Period may be terminated earlier at our election at the end of a fiscal quarter if we would have been in compliance with financial covenants at the end of the quarter if the Covenant Relief Period had not been in effect. In connection with obtaining these covenant modifications, we temporarily suspended our monthly cash dividend to common shareholders and our share repurchase program. There can be no assurances as to our ability to reinstitute cash dividend payments to common shareholders or share repurchases or the timing thereof. The rapid development and fluidity of the COVID-19 pandemic precludes any prediction as to the ultimate adverse impact of the pandemic. Nevertheless, the COVID-19 pandemic has negatively affected, and presents additional material uncertainty and risk with respect to, our performance, financial condition, results of operations and cash flows.
Global economic uncertainty and disruptions in the financial markets may impair our ability to refinance existing obligations or obtain new financing for acquisition or development of properties.
There continues to beexists a high level of global economic uncertainty. Increased uncertainty, inincluding uncertainty regarding the wakeimpact of the "Brexit" referendum inCOVID-19 pandemic after its subsidence. Regarding experiential industries, it is unclear whether the United Kingdom in June 2016,COVID-19 pandemic will negatively impact future consumer preferences regarding congregate activities, such as those offered by theatres, casinos, restaurants, attractions and other industries in which the majority of voters voted in favor of an exit from the European Union, the formal notice by the United Kingdom in March 2017 of its exit from the European Union, as well as political changeswe invest. Political decisions and uncertainty in the U.S. and abroad, such as the direction and levels of stimulus spending in response to the impact of the COVID-19 pandemic, have contributed to volatility in the global financial markets. AlthoughMany economists believe that the aftermath of the COVID-19 pandemic will present a significant risk of a recession to the U.S. economy
has continued to improve, there can be no assurances that the U.S. economy will continue to improve or that a future recession will not occur.economy. We rely in part on debt financing to finance our investments and development. To the extent that turmoil in the financial markets returnscontinues or intensifies, it has the potential to adversely affect our ability to refinance our existing obligations as they mature or obtain new financing for acquisition or development of properties and adversely affect the value of our investments. If we are unable to refinance existing indebtedness on attractive terms at its maturity, we may be forced to dispose of some of our assets. Uncertain economic conditions and disruptions in the financial markets could also result in a substantial decrease in the value of our investments, which could also make it more difficult to refinance existing obligations or obtain new financing. In addition, these factors may make it more difficult for us to sell properties or may adversely affect the price we receive for properties that we do sell, as prospective buyers may experience increased costs of capital or difficulties in obtaining capital. These events in the credit markets may have an adverse effect on other financial markets in the U.S., which may make it more difficult or costly for us to raise capital through the issuance of our common shares or preferred shares. In addition, disruptions in global financial markets may have other adverse effects on us, our tenants, our borrowers or the economy in general.
ManyMost of our customers, consisting primarily of tenants and borrowers, operate properties in market segments that depend upon discretionary spending by consumers. Any continued reduction in discretionary spending by consumers within the market segments in which our customers or potential customers operate could adversely affect such customers' operations and, in turn, reduce the demand for our properties or financing solutions.
Most of our portfolio is leased to or financed with customers operating service or retail businesses on our property locations. Movie theatres, entertainment retail centers, recreationMany of these customers operate services or businesses that are dependent upon consumer experiences. Theatre, eat & play, attraction, ski, experiential lodging, gaming, private school and entertainment venues, early childhood education centers, private K-12 schools, skicenter properties, and attractions represent some of the largest market investments in our portfolio; and AMC, Topgolf, Regal Cinemas, Inc. and Cinemark USA, Inc. represented our largest customers for the yearfiscal year ended December 31, 2017.2020. The success of most of these businesses depends on the willingness or ability of consumers to use their discretionary income to purchase our customers' products or services. In addition, the lodging and gaming industries are also highly sensitive to consumer discretionary spending. A downturn in the economy, or a trend to not want to go "out of home" could cause consumers in each of our property types to reduce their discretionary spending within the market segments in which our customers or potential customers operate, which could adversely affect such customers' operations and, in turn, reduce the demand for our properties or financing solutions. The current
COVID-19 pandemic has significantly reduced consumer discretionary spending, which is severely impacting experiential real estate properties, including those of our customers, and it is unclear whether the COVID-19 pandemic will negatively impact future consumer preferences regarding congregate activities.
Covenants in our debt instruments could adversely affect our financial condition and our acquisitions and development activities.
Our unsecured revolving credit facility, term loan facility, senior notes and other loans that we may obtain in the future contain certain cross-default provisions as well as customary restrictions, requirements and other limitations on our ability to incur indebtedness, including covenants involving our maximum total debt to total asset value; maximum permitted investments; minimum tangible net worth; maximum secured debt to total asset value; maximum unsecured debt to eligible unencumbered properties; minimum unsecured interest coverage; and minimum fixed charge coverage. Our ability to borrow under our unsecured revolving credit facility and our term loan facility is also subject to compliance with certain other covenants. We also have senior notes issued in a private placement transaction that are subject to certain covenants. In addition, some of our properties are subject to mortgages that contain customary covenants such as those that limit our ability, without the prior consent of the lender, to further mortgage the applicable property or to discontinue insurance coverage.
As discussed below under "Management's Discussion and Analysis of Financial Condition and Results of Operations", we entered into amendments to our bank credit facilities and agreements regarding certain private placement notes that provide a temporary suspension or modification of our financial covenants during the Covenant Relief Period. During the Covenant Relief Period, we are subject to certain restrictions, including limitations on certain investments, incurrences of indebtedness, capital expenditures, payment of dividends or other distributions and stock repurchases, and maintenance of a minimum liquidity amount, in each case subject to certain exceptions. There can be no assurance as to the timing of the termination of the Covenant Relief Period. In addition, upon termination of the Covenant Relief Period, failure to comply with our covenants or obtain modifications of such covenants could cause a default under the applicable debt instrument, and we may then be required to repay such debt with capital from other sources. The ongoing financial impact of the COVID-19 pandemic could negatively impact our future compliance with financial covenants of our credit facility and other debt agreements and result in a default and potentially an acceleration of indebtedness. Under those circumstances, other sources of capital may not be available to us, or be available only on unattractive terms. Additionally, our ability to satisfy current or prospective lenders' insurance requirements may be adversely affected if lenders generally insist upon greater insurance coverage against acts of terrorism than is available to us in the marketplace or on commercially reasonable terms.
We rely on debt financing, including borrowings under our unsecured revolving credit facility, term loan facility, issuances of debt securities and debt secured by individual properties, to finance our acquisition and development activities and for working capital. If we are unable to obtain financing from these or other sources, or to refinance existing indebtedness upon maturity, our financial condition and results of operations would likely be adversely affected. The ultimate extent to which the COVID-19 pandemic impacts our ability to comply with existing or modified financial covenants and obtain financing will depend on future developments, which, as discussed above, are highly uncertain and cannot be predicted with confidence.
Adverse changes in our credit ratings could impair our ability to obtain additional debt and equity financing on favorable terms, if at all, and negatively impact the market price of our securities, including our common shares.
The credit ratings of our senior unsecured debt and preferred equity securities are based on our operating performance, liquidity and leverage ratios, overall financial position and other factors employed by the credit rating agencies in their rating analysesanalysis of us. Our credit ratings can affect the amount and type of capital we can access, as well as the terms of any financings we may obtain.obtain, and downward changes in our credit ratings and outlook were recently made by certain credit rating agencies. There can be no assurance that we will be able to maintain our current credit ratings, particularly in light of the effects of the ongoing COVID-19 pandemic, and in the event that our current credit ratings further deteriorate, we would likely incur a higher cost of capital and it may be more difficult or expensive to obtain additional financing or refinance existing obligations and commitments. Also, a downgradefurther downgrades in our credit ratings would trigger additional costs or other potentially negative consequences under our current and future credit facilities and future debt instruments.
An increase in interest rates could increase interest cost on new debt and could materially adversely impact our ability to refinance existing debt, sell assets and limit our acquisition and development activities.
TheAlthough the U.S. Federal Reserve increaseddecreased its benchmark interest rate multiple times in 20172019 and has continued signaling2020, there can be no assurances that rates could continue to rise.the rate will not increase in the future. If interest rates continue to increase, so could our interest costs for any new debt. This increased cost could make the financing of any acquisition and development activity more costly. Rising interest rates could limit our ability to refinance existing debt when it matures or cause us to pay higher interest rates upon refinancing and increase interest expense on refinanced indebtedness. In addition, an increase in interest rates could decrease the amount third parties are willing to pay for our assets, thereby limiting our ability to reposition our portfolio promptly in response to changes in economic or other conditions.
We previously made a significant investment in a planned casino and resort development (the “Resorts World Catskills Project”), which is now the subject of ongoing litigation. We cannot predict the duration or outcome of this litigation. Prolonged litigation or an unfavorable outcome could have a material adverse effect on the Resorts World Catskills Project or our financial condition and results of operations.
Prior proposed casino and resort developers Concord Associates, L.P., Concord Resort, LLC and Concord Kiamesha LLC, which are affiliates of Louis Cappelli and from whom we acquired the Resorts World Catskills resort property (the "Cappelli Group"), commenced litigation against the Company beginning in 2011 regarding matters relating to the acquisition of that property and our relationship with Empire Resorts, Inc. ("Empire Resorts") and certain of its subsidiaries (together with Empire Resorts, collectively, the "Empire Project Parties"). This litigation involves three
separate cases filed in state and federal court. Two of the cases, a state and the federal case, are closed and resulted in no liability to the Company.
The remaining case was filed on October 20, 2011 by the Cappelli Group against the Company and two of its affiliates in the Supreme Court of the State of New York, County of Westchester (the "Westchester Action"), asserting a claim for breach of contract and the implied covenant of good faith, and seeking damages of at least $800 million, based on allegations that the Company had breached an agreement (the "Casino Development Agreement"), dated June 18, 2010. We moved to dismiss the complaint in the Westchester Action based on a decision issued by the Sullivan County Supreme Court (one of the two closed cases discussed above) on June 30, 2014, as affirmed by the Appellate Division, Third Department (the "Sullivan Action"). On January 26, 2016, the Westchester County Supreme Court denied the our motion to dismiss but ordered the Cappelli Group to amend its pleading and remove all claims and allegations previously determined by the Sullivan Action. On February 18, 2016, the Cappelli Group filed an amended complaint asserting a single cause of action for breach of the covenant of good faith and fair dealing based upon allegations the Company had interfered with plaintiffs’ ability to obtain financing which complied with the Casino Development Agreement. On March 23, 2016, the Company filed a motion to dismiss the Cappelli Group’s revised amended complaint. On January 5, 2017, the Westchester County Supreme Court denied the Company’s second motion to dismiss. Discovery is ongoing.
We believe we have meritorious defenses to this litigation and intend to defend it vigorously. There can be no assurances, however, as to the duration or ultimate outcome of this litigation, nor can there be any assurances as to the costs we may incur in defending against or resolving this litigation. In addition, if the outcome of the litigation is unfavorable to us, it could result in a material adverse effect on our financial condition and results of operations.
The success of the Resorts World Catskills Project is largely dependent upon the successful development and operation of the Resorts World Casino and Resort, which requires the Empire Project Parties to comply with the terms of a gaming license. If Empire Resorts fails to satisfy its obligations under the gaming license, the Resorts World Catskills Project may be indefinitely delayed or canceled, and if we are unable to identify suitable alternative uses for the property, this could lead to a material adverse effect on our financial condition and results of operations.
On December 21, 2015, Montreign Operating Company, LLC (“Montreign”), a subsidiary of Empire Resorts, was awarded a license (a “Gaming Facility License”) by the New York State Gaming Commission to operate the Resorts World Catskills Casino and Resort, a key component of the Resorts World Catskills Project. On January 17, 2018, the Resorts World Catskills Casino and Resort announced its plans to open the casino resort to the public on February 8, 2018. The Gaming Facility License is subject to a number of conditions, including the requirement that Montreign invest, or cause to be invested, no less than $854 million in the initial phase of the Resorts World Catskills Project, as well as additional and continuing regulatory conditions imposed by the Gaming Commission.
There can be no assurance that the Resorts World Catskills Casino and Resort will fully comply with the financial or other conditions of the Gaming Facility License. In the event it fails to comply with the conditions of the Gaming Facility License, the Resorts World Catskills Project may be indefinitely delayed or canceled, and there can be no assurance that a suitable alternate use for the property, whether involving gaming or otherwise, will be identified, which could result in a material adverse effect on our investment and on our financial condition and results of operations.
We expect to finance the cost of construction of common infrastructure at the Resorts World Catskills Project primarily through the issuance of tax-exempt public infrastructure bonds, and we could overrun budgeted costs for such infrastructure construction, which could significantly exceed the proceeds from the issuance of such bonds.
We are responsible for the construction of the Resorts World Catskills Project common infrastructure, which is expected to be financed primarily through the issuance of tax-exempt public infrastructure bonds. The debt service of these bonds is expected to be paid primarily through special assessments levied against the property held by the benefited users. In June 2016, the Sullivan County Infrastructure Local Development Corporation issued $110.0 million of Series 2016 Revenue Bonds, which is expected to fund a substantial portion of such construction costs. We received an initial reimbursement of $43.4 million of construction costs and additional reimbursements of $23.9 million during the year ended December 31, 2017, and we expect to receive an additional $21.0 million of reimbursements over the balance of the construction period, which is expected to be completed in 2018. There can be no assurance that the cost of construction of common infrastructure for the Resorts World Catskills Project will not exceed our budgeted amounts
of approximately $90.0 million, subject to budget adjustments and related approvals. If so, such excess may not be funded by the tax-exempt public infrastructure bonds and, to the extent they exceed certain negotiated caps, or are allocated to land held by us for development, may not be proportionately recovered from our tenants.
We depend on leasing space to tenants on economically favorable terms and collecting rent from our tenants, who may not be able to pay.
At any time, a tenant may experience a downturn in its business that may weaken its financial condition. Similarly, a general decline in the economy may result in a decline in demand for space at our commercial properties. Our financial results depend significantly on leasing space at our properties to tenants on economically favorable terms. In addition, because a majority of our income comes from leasing real property, our income, funds available to pay indebtedness and funds available for distribution to our shareholders or share repurchases will decrease if a significant number of our tenants cannot pay their rent or if we are not able to maintain our levels of occupancy on favorable terms. If our tenants cannot pay their rent or we are not able to maintain our levels of occupancy on favorable terms, there is also a risk that the fair value of the underlying property will be considered less than its carrying value and we may have to take a charge against earnings. In addition, if a tenant does not pay its rent, we might not be able to enforce our rights as landlord without significant delays and substantial legal costs.
If a tenant becomes bankrupt or insolvent, that could diminish or eliminate the income we expect from that tenant's leases. If a tenant becomes insolvent or bankrupt, we cannot be sure that we could recover the premises from the tenant promptly or from a trustee or debtor-in-possession in a bankruptcy proceeding relating to the tenant. On the other hand, a bankruptcy court might authorize the tenant to terminate its leases with us. If that happens, our claim against the bankrupt tenant for unpaid future rent would be subject to statutory limitations that might be substantially less than the remaining rent owed under the leases. In addition, any claim we have for unpaid past rent would likely not be paid in full and we would also have to take a charge against earnings for any accrued straight-line rent receivable related to the leases.
The reduced economic activity resulting from the COVID-19 pandemic is severely impacting our tenants' businesses, financial condition and liquidity and has caused most of our tenants to be unable to meet their obligations to us in full, or at all, or to otherwise seek modifications of such obligations. We also anticipate that one or more of our tenants may become bankrupt or insolvent as a result of this reduced economic activity. The ultimate extent to which the COVID-19 pandemic impacts the operations of our tenants will depend on future developments, which, as discussed above, are highly uncertain and cannot be predicted with confidence.
We are exposed to the credit risk of our customers and counterparties and their failure to meet their financial obligations could adversely affect our business.
Our business is subject to credit risk. There is a risk that a customer or counterparty will fail to meet its obligations when due. Customers and counterparties that owe us money may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure or other reasons. Although we have procedures for reviewing credit exposures to specific customers and counterparties to address present credit concerns, default risk may arise from events or circumstances that are difficult to detect or foresee. Some of our risk management methods depend upon the evaluation of information regarding markets, clients or other matters that are publicly available or otherwise accessible by us. That information may not, in all cases, be accurate, complete, up-to-date or properly evaluated. In addition, concerns about, or a default by, one customer or counterparty could lead to significant liquidity problems, losses or defaults by other customers or counterparties, which in turn could adversely affect us. We have experienced customer defaults resulting from the COVID-19 pandemic, and we expect to experience future defaults, the breadth of which will depend upon the scope, severity and duration of the COVID-19 pandemic. We may be materially and adversely affected in the event of a significant default by our customers and counterparties.
We could be adversely affected by a borrower's bankruptcy or default.
If a borrower becomes bankrupt or insolvent or defaults under its loan, that could force us to declare a default and foreclose on any available collateral. As a result, future interest income recognition related to the applicable note receivable could be significantly reduced or eliminated. There is also a risk that the fair value of the collateral, if any, will be less than the carrying value of the note and accrued interest receivable at the time of a foreclosure and we may have to take a charge against earnings. If a property serves as collateral for a note, we may experience costs and delays in recovering the property in foreclosure or finding a substitute operator for the property. If a mortgage we hold is subordinated to senior financing secured by the property, our recovery would be limited to any amount remaining after satisfaction of all amounts due to the holder of the senior financing. In addition, to protect our subordinated investment, we may desire to refinance any senior financing. However, there is no assurance that such refinancing would be available or, if it were to be available, that the terms would be attractive. We experienced borrower defaults resulting from the COVID-19 pandemic, and we may experience future defaults, the breadth of which will depend upon the scope, severity and duration of the COVID-19 pandemic. One or more of our borrowers may become bankrupt or insolvent as a result of this reduced economic activity. The ultimate extent to which the COVID-19 pandemic impacts the operations of our borrowers will depend on future developments, which, as discussed above, are highly uncertain and cannot be predicted with confidence.
TheFrom time to time, the base terms of some of our theatre leases are expiringwill expire and there is no assurance that such leases will be renewed at existing lease terms, or that we can lease any re-claimed space from some of our larger theatres at otherwise economically favorable terms.terms or at all.
TheFrom time to time, the base terms of some of our theatre leases are expiring. For theatres that are not performing as well as they did in the past, thewith our tenants have and may continue to seek rent or other concessions or not renew at all. Furthermore, some tenants of our larger megaplex theatres desire to down-size the theatres they lease to respond to market trends. As a result, thesewill expire. These tenants have and may continue to seek rent or other concessions from us, including requiring us to down-size the theatres or otherwise modify the properties in order to renew their leases. Furthermore, while any such screen reductions would likely create opportunities to reclaim a portion of the former theatres for conversion to other uses, thereThere is no guarantee that we will be able to renew these leases at existing lease terms, at otherwise economically favorable terms or at all. In addition, if we fail to renew these leases, there can re-leasebe no assurances that we will be able to locate substitute tenants for such spaceproperties or that suchenter into leases would be atwith these substitute tenants on economically favorable terms.
Operating risks in the entertainmentexperiential real estate industry may affect the ability of our tenants to perform under their leases.
The ability of our tenants to operate successfully in the entertainmentexperiential real estate industry and remain current on their lease obligations depends on a number of factors, including, with respect to theatres, the availability and popularity of motion pictures, the performance of those pictures in tenants' markets, the allocation of popular pictures to tenants, the release window (represents the time that elapses from the date of a picture's theatrical release to the date it is available on other mediums) and the terms on which the pictures are licensed. Neither we nor our tenants control the operations of motion picture distributors. During the COVID-19 pandemic, motion picture distributors have increasingly relied upon streaming as a method of delivering product, including Warner Bros. announced simultaneous release of “Wonder Woman 1984” to theatres and streaming on HBO Max. There can be no assurances that motion picture distributors will continue to rely on theatres as the primary means of distributing first-run films, and motion picture distributors have and may in the future consider alternative film delivery methods. The success of “out-of-home” entertainment venues such as megaplex theatres, entertainment retail centers and recreational properties also depends on general economic conditions and the willingness of consumers to spend time and money on out-of-home entertainment.
In addition, some of our theatre tenants have disclosed that they are subject to pending anti-trust investigations byin August 2020, a U.S. District Court granted the U.S. Department of Justice and several states regarding such tenants' alleged anticompetitive practices, including seeking agreements with motion picture distributorsJustice's request to terminate the Paramount Consent Decrees, which prohibit movie studios from owning theatres or utilizing "block booking," a practice whereby movie studios sell multiple films as a package to theatres, in addition to other restrictions. The termination was effective immediately for exclusive rightscertain restrictions, while other restrictions are subject to releases in certain markets.a two-year sunset period. There can be no assurances as to the outcomeeffects of such investigationsthis regulatory action or whether such investigationsthis regulatory action will materially adversely affect suchour theatre tenants' operations and, in turn, their ability to perform under their leases.
Our other experiential customers are exposed to the risk of adverse economic conditions that can affect experiential activities. Eat & play, ski, attraction, experiential lodging, gaming, fitness & wellness and cultural properties are discretionary activities that can entail a relatively high cost of participation and may be adversely affected by an economic slowdown or recession. Economic conditions, including high unemployment and erosion of consumer confidence, may potentially have negative effects on our customers and on their results of operations. The reduced economic activity resulting from the COVID-19 pandemic is severely impacting our tenants' businesses, financial condition and liquidity. The ultimate extent to which the COVID-19 pandemic impacts the operations of our tenants will depend on future developments, which, as discussed above, are highly uncertain and cannot be predicted with
confidence. We cannot predict what impact these uncertainties may have on overall guest visitation, guest spending or other related trends and the ultimate impact it will have on our tenants' and mortgagors' operations and, in turn, their ability to perform under their respective leases or mortgages.
Real estate is a competitive business.
Our business operates in highly competitive environments. We compete with a large number of real estate property ownersinvestors and developers someincluding traded and non-traded public REITS, private equity investors and institutional investment funds. Some of whichthese investors may be willing to accept lower returns on their investments. investments, or have greater financial resources than we do, a greater ability to borrow funds to acquire properties and the ability to accept more risk than we prudently manage. This competition may increase the demand for the types of properties in which we typically invest and, therefore, reduce the number of suitable acquisition opportunities available to us and increase the prices paid for such acquisition properties. This competition will increase if investments in real estate become more attractive relative to other types of investment. Accordingly, competition for the acquisition of real property could materially and adversely affect us.
Principal factors of competition are rent or interest charged, attractiveness of location, the quality of the property and breadth and quality of services provided. If our competitors offer space at rental rates below the rental rates we are currently charging our tenants, we may lose potential tenants, and we may be pressured to reduce our rental rates below those we currently charge in order to retain tenants when our tenants' leases expire. Our success depends upon, among other factors, trends of the national and local economies, financial condition and operating results of current and prospective tenants and customers, availability and cost of capital, construction and renovation costs, taxes, governmental regulations, legislation and population trends.
A single tenant representsFour tenants represent a substantialsignificant portion of our lease revenues.
AMC, theatres, one of the nation's largest movie exhibition companies, is the lessee ofTopgolf, Regal Cinemas Inc. and Cinemark USA, Inc., represent a substantial numbersignificant portion of our megaplex theatre properties. On December 21, 2016, AMC announced that it closed its acquisition of Carmike cinemas upon which AMC became responsible for Carmike's performance under its leases with us.total revenue. For the year ended December 31, 2017,2020, total revenues of approximately $114.4$30.0 million or 19.9% of7.2% were from AMC, approximately $80.7 million or 19.5% were from TopGolf, approximately $13.1 million or 3.1% were from Regal and approximately $42.1 million or 10.1% were from Cinemark. The COVID-19 pandemic is severely impacting these tenants', as well as our total revenues were derived from rental payments by AMC (including rental payments for Carmike). AMC Entertainment, Inc. (“AMCE”) has guaranteed AMC's performance under substantially all of their leases. other tenants' businesses, financial condition and liquidity.
We have diversified and expect to continue to diversify our real estate portfolio by entering into lease transactions or financing arrangements with a number of other leading operatorstenants or by acquiring or seeking to acquire other properties. Nevertheless, our revenues and our continuing ability to service our debt and pay shareholder dividends are currently substantially dependent on AMC's performance under its leases, including the leases acquired in the Carmike acquisition, and AMCE's performance under its guarantee.
We believe AMC occupies a strong position in the industry and we intend to continue acquiring and leasing back or developing new AMC theatres. However, AMC and AMCE are susceptible to the same risks as our other tenants described herein.borrowers. If for any reason AMC, TopGolf, Regal and/or Cinemark failed to perform under itstheir lease obligations including the leases acquired in the Carmike acquisition, and AMCE did not performfor a significant period of time, or under its guarantee,any modified lease obligations, we could be required to reduce or suspend our shareholder dividends or share repurchases and may not have sufficient funds to support operations or service our debt until substitute
tenants are obtained. If that happened, we cannot predict when or whether we could obtain substitute quality tenants on acceptable terms.
Public charter schools are operated pursuant to charters granted by various state or other regulatory authorities and are dependent upon compliance with the terms of such charters in order to obtain funding from local, state and federal governments. We could be adversely affected by a public charter school's failure to comply with its charter, non-renewal of a charter upon expiration or by its reduction or loss of funding.
Our public charter school properties operate pursuant to charters granted by various state or other regulatory authorities, which are generally shorter than our lease terms, and most of the schools have undergone or expect to undergo compliance audits or reviews by such regulatory authorities. Such audits and reviews examine the financial as well as the academic performance of the school. Adverse audit or review findings could result in non-renewal or revocation of a public charter school's charter, or in some cases, a reduction in the amount of state funding, repayment of previously received state funding or other economic sanctions. Our public charter school tenants are also dependent upon funding from local, state and federal governments, which are currently experiencing budgetary constraints, and any reduction or loss of such funding could adversely affect a public charter school's ability to comply with its charter and/or pay its obligations.
Our master lease agreement with Imagine Schools, Inc. ("Imagine") provides certain contractual protections designed to mitigate risk, such as risk arising from the revocation of a charter of one or more Imagine schools. Subject to our approval and certain other terms and conditions, the master lease agreement also allows Imagine to repurchase from us the public charter school properties that are causing technical defaults. Imagine may, in substitution for such properties, sell to us public charter school properties that would otherwise comply with the lease agreement. However, there is no guarantee that acceptable schools will be available for substitutions or that such substitutions or repurchases will be completed. In addition, while governing authorities may approve substitute operators for failed public charter schools to ensure continuity for students,Properties we cannot predict when or whether applicable governing authorities would approve such substitute operators, nor can we predict whether we could reach lease agreements with such substitute tenants on acceptable terms. In addition, Imagine has in certain previous sales of properties to third parties agreed to pay us the difference between our carrying value and the sales price. Imagine also has a mortgage note obligation to us as a result of sales of certain properties to Imagine. If Imagine or any other operator is unable to provide adequate substitute collateral under its lease with us, and/or is unable to pay its obligations, we may be required to record an impairment loss or sell schools for less than their net book value.
Our build-to-suit education tenantsdevelop may not achieve sufficient enrollmentoperating results within expected timeframes and therefore the tenant or borrowers may not be able to pay their agreed upon rent or interest, and managed properties may not be able to operate profitably, which could adversely affect our financial results.
A significant portion of our education investments include investments in build-to-suit projects. When construction is completed, for these projects tenants may require some period of time to achieve full enrollment, andtargeted operating results. For properties leased or financed, we may provide themour tenants or borrowers with lease or financing terms that are more favorable to the tenantthem during this timeframe. Tenants and borrowers that fail to achieve sufficient enrollmenttargeted operating results within expected timeframes may be unable to pay their rentobligations pursuant to the agreed upon lease or financing terms or at all. If we are required to restructure lease or financing terms or take other action with respect to the applicable property, our financial results may be impacted by lower lease revenues, recording an impairment or provision for loan loss, writing off rental or interest amounts or otherwise.
During 2017, cash flow of Children’s Learning Adventure USA, LLC (“CLA”) was negatively impacted by challenges brought on by its rapid expansion and related ramp up Additionally, if we have entered into a management agreement to stabilization and by adverse weather events in Texas duringoperate a property we have developed, the third quarter of 2017. During 2017, we participated in negotiations among CLA and other landlords regarding a potential restructuring. Although negotiations are on-going and progress has been made toward a restructuring, investments necessary to accomplish the restructuring haveproject may not yet been secured. Certain subsidiaries of CLA who are tenants under our leases have filed Chapter 11 petitions in bankruptcy seeking the protections of the Bankruptcy Code. We intend to pursue legal remedies to secure possession of these properties as expeditiously as possible. We believe that the time it will take to achieve this outcome gives CLA ample opportunity to negotiate a restructuring which, if successful, would obviate the need to evict CLA from these properties. There can be no assurances as to the ultimate outcome of such a restructuring or our pursuit of our legal remedies with respect to these properties.
We are subject to risks relating to provisions included in some of our leases or financing arrangements with operators of our education properties pursuant to which such operators have the option to purchase leased properties or prepay notes relating to financed education properties.
Some of our leases or financing arrangements with education operators include provisions pursuant to which tenant operators may purchase leased properties and mortgagor operators may prepay notes relating to financed education properties, in each case, subject to option exercise payments or prepayment penalties. Some of these tenant or mortgagor operators may be able to obtain alternative financingachieve targeted operating results which may impact our financial results by lowering income or recording an impairment loss.
We have entered into management agreements to operate certain of our properties and we could be adversely affected if such managers do not manage these properties successfully.
To maintain our status as a REIT, we are generally not permitted to directly operate our properties. As a result, from time to time, we enter into management agreements with third-party managers to operate certain properties. In the past, this practice has been most frequent with our experiential lodging properties. However, as a result of the impact of the COVID-19 pandemic, we have also begun managing a small number of theatres formerly operated by our tenants and may manage a greater number in the future if defaults result in our taking back additional theatre locations. For managed properties, our ability to direct and control how our properties are operated is less than if we were able to manage these properties directly. Under the terms of our management agreements, our participation in operating decisions relating to these properties is generally limited to certain matters. We do not supervise any of these managers or their personnel on more economically favorable terms, in which case, such operators may choose to exercise their purchase option or prepayment right. If such operators exercise their purchase options or prepayment rights, wea day-to-day basis. We cannot provide any assurances that we would be able to redeploy the capital associated with thesemanagers will manage our properties in other investmentsa manner that is consistent with their respective obligations under the applicable management agreement or our obligations under any franchise agreements. We could be materially and adversely affected if any of our managers fail to effectively manage revenues and expenses, provide quality services and amenities, or otherwise fail to manage our properties in our best interests, and we may be financially responsible for the actions and inactions of the managers. In certain situations, we may terminate the management agreement. However, we can provide no assurances that we could identify a replacement manager, or that such investments would provide comparable returns, whichthe replacement manager will manage our property successfully. A failure by our third-party managers to successfully manage our properties could reduce our earnings going forward. Additionally, it can be difficultlead to forecast when tenants will exercise their purchase option or borrowers will prepay, which can create volatilityan increase in our earnings.operating expenses or decrease in our revenue, or both.
Our indebtedness may affect our ability to operate our business and may have a material adverse effect on our financial condition and results of operations.
We have a significant amount of indebtedness.indebtedness. As of December 31, 2017,2020, we had total debt outstanding of approximately $3.1 billion.$3.7 billion, including $590.0 million outstanding under our revolving credit facility, drawn as a precautionary measure to increase our cash position and preserve financial flexibility that was subsequently paid down to $90.0 million in January 2021. Our indebtedness could have important consequences, such as:
•limiting our ability to obtain additional financing to fund our working capital needs, acquisitions, capital expenditures or other debt service requirements or for other purposes;
•limiting our ability to use operating cash flow in other areas of our business because we must dedicate a substantial portion of these funds to service debt;
•limiting our ability to compete with other companies who are not as highly leveraged, as we may be less capable of responding to adverse economic and industry conditions;
•restricting us from making strategic acquisitions, developing properties or exploitingpursuing business opportunities;
•restricting the way in which we conduct our business because of financial and operating covenants in the agreements governing our existing and future indebtedness;
•exposing us to potential events of default (if not cured or waived) under financial and operating covenants contained in our debt instruments that could have a material adverse effect on our business, financial condition and operating results;
•increasing our vulnerability to a downturn in general economic conditions or in pricing of our investments;
•negatively impacting our credit ratings; and
•limiting our ability to react to changing market conditions in our industry and in our customers’ industries.
In addition to our debt service obligations, our operations require substantial investments on a continuing basis. Our ability to make scheduled debt payments, to refinance our obligations with respect to our indebtedness and to fund capital and non-capital expenditures necessary to meet our remaining commitments on existing projects and maintain the condition of our assets, as well as to provide capacity for the growth of our business, depends on our financial and operating performance, which, in turn, is subject to prevailing economic conditions and financial, business, competitive, legal and other factors.
Subject to the restrictions in our unsecured revolving credit facility, our unsecured term loan facility and the debt instruments governing our existing senior notes, we may incur significant additional indebtedness, including additional secured indebtedness. Although the terms of our unsecured revolving credit facility, our unsecured term loan facility and the debt instruments governing our existing senior notes contain restrictions on the incurrence of additional
additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and additional indebtedness incurred in compliance with these restrictions could be significant. If new debt is added to our current debt levels, the risks described above could increase.
The financial impact of the COVID-19 pandemic has negatively impacted our compliance with financial covenants of our credit facility and other debt agreements. As discussed below under "Management's Discussion and Analysis of Financial Condition and Results of Operations", during 2020, we entered into amendments to our unsecured revolving credit facility, our unsecured term loan facility and the debt instruments governing our certain private placement notes to provide for a Covenant Relief Period. Upon expiration of the Covenant Relief Period, those financial covenants will apply and our failure to comply with the financial covenants of our credit facility and other debt agreements could result in a default and potentially an acceleration of indebtedness. Such non-compliance could negatively impact our ability to make additional borrowings under our revolving credit facility, pay dividends and repurchase common shares under our share repurchase program. There can be no assurances that we will be able to comply with financial covenants in future periods. The ultimate extent to which the COVID-19 pandemic impacts our operations will depend on future developments, which, as discussed above, are highly uncertain and cannot be predicted with confidence.
There are risks inherent in having indebtedness and the use ofusing such indebtedness to fund acquisitions.
We currently use debt to fund portions of our operations and acquisitions. In a rising interest rate environment, the cost of our existing variable rate debt and any new debt will increase. We have used leverage to acquire properties and expect to continue to do so in the future. Although the use of leverage is common in the real estate industry, our use of debt exposes us to some risks. If a significant number of our tenants fail to make their lease payments for a significant period of time, the risk of which has been heightened as a result of the COVID-19 pandemic, and we do not have sufficient cash to pay principal and interest on the debt, we could default on our debt obligations. A small amount of our debt financing is secured by mortgages on our properties and we may enter into additional secured mortgage financing in the future. If we fail to meet our mortgage payments, the lenders could declare a default and foreclose on those properties.
Most of our debt instruments contain balloon payments which may adversely impact our financial performance and our ability to pay dividends.
Most of our financing arrangements require us to make a lump-sum or "balloon" payment at maturity. There can be no assurance that we will be able to refinance such debt on favorable terms or at all. To the extent we cannot refinance such debt on favorable terms or at all, we may be forced to dispose of properties on disadvantageous terms or pay higher interest rates, either of which would have an adverse impact on our financial performance and ability to pay dividends to our shareholders.
We must obtain new financing in order to grow.
As a REIT, we are required to distribute at least 90% of our taxable net income to shareholders in the form of dividends. Other than deciding to make these dividends in our common shares, we are limited in our ability to use internal capital to acquire properties and must continually raise new capital in order to continue to grow and diversify our investment portfolio. Our ability to raise new capital depends in part on factors beyond our control, including conditions in equity and credit markets, conditions in the industries in which our tenants are engaged and the performance of real estate investment trusts generally.generally, all of which have been negatively impacted by the COVID-19 pandemic. We continually consider and evaluate a variety of potential transactions to raise additional capital, but we cannot assure that attractive alternatives will always be available to us, nor that our share price will increase or remain at a level that will permit us to continue to raise equity capital publicly or privately.
Covenantsprivately, particularly in our debt instruments could adversely affect our financial condition and our acquisitions and development activities.
Some of our properties are subject to mortgages that contain customary covenants such as those that limit our ability, without the prior consentlight of the lender, to further mortgageeffects of the applicable property or to discontinue insurance coverage. Our unsecured revolving credit facility, term loan facility, senior notes and other loans that we may obtain in the future contain certain cross-default provisions as well as customary restrictions, requirements and other limitations on our ability to incur indebtedness, including covenants involving our maximum total debt to total asset value; maximum permitted investments; minimum tangible net worth; maximum secured debt to total asset value; maximum unsecured debt to eligible unencumbered properties; minimum unsecured interest coverage; and minimum fixed charge coverage. Our ability to borrow under our unsecured revolving credit facility and our term loan facility is also subject to compliance with certain other covenants. We also have senior notes issued in a private placement transaction that are subject to certain covenants. In addition, failure to comply with our covenants could cause a default under the applicable debt instrument, and we may then be required to repay such debt with capital from other sources. Under those circumstances, other sources of capital may not be available to us, or be available only on unattractive terms. Additionally, our ability to satisfy current or prospective lenders' insurance requirements may be adversely affected if lenders generally insist upon greater insurance coverage against acts of terrorism than is available to us in the marketplace or on commercially reasonable terms.ongoing COVID-19 pandemic.
We rely on debt financing, including borrowings under our unsecured revolving credit facility, term loan facility, issuances of debt securities and debt secured by individual properties, to finance our acquisition and development activities and for working capital. If we are unable to obtain financing from these or other sources, or to refinance existing indebtedness upon maturity, our financial condition and results of operations would likely be adversely affected.
Our real estate investments are concentrated in entertainment, recreation and educationexperiential real estate properties and a significant portion of those investments are in megaplex theatre properties, making us more vulnerable economically than if our investments were more diversified.
We acquire, develop or finance entertainment, recreation and educationexperiential real estate properties. A significant portion of our investments are in megaplex theatre properties. Although we are subject to the general risks inherent in concentrating investments in real estate, the risks resulting from a lack of diversification become even greater as a result of investing primarily in entertainment, recreation and educationexperiential real estate properties. These risks are further heightened by the fact that a significant portion of our investments are in megaplex theatre properties. Although a downturn in the real estate industry could significantly adversely affect the value of our properties, a downturn in the entertainment, recreation and education industriesexperiential real estate industry could compound this adverse effect. These adverse effects could be more pronounced than if we diversified our investments to a greater degree outside of entertainment, recreation and educationexperiential real estate properties or, more particularly, outside of megaplex theatre properties. In addition, the COVID-19 pandemic is severely impacting experiential real estate properties, particularly theatre operations, given that such properties rely on social interaction and discretionary consumer spending and have been subject to state and local governmental restrictions.
If we fail to qualify as a REIT, we would be taxed as a corporation, which would substantially reduce funds available for payment of dividends to our shareholders.
If we fail to qualify as a REIT for U.S. federal income tax purposes, we will be taxed as a corporation. We are organized to and believe we qualify as a REIT, and intend to operate in a manner that will allow us to continue to qualify as a REIT. However, we cannot provide any assurance that we have always qualified and will remain qualified in the future. This is because qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), on which there are only limited judicial and administrative interpretations, and depends on facts and circumstances not entirely within our control.control, including requirements relating to the sources of our gross income. Rents received or accrued by us from our tenants may not be treated as qualifying income for purposes of these requirements if the leases are not respected as true leases or qualified financing arrangements for U.S. federal income tax purposes and instead are treated as service contracts, joint ventures or some other type of arrangement. If some or all of our leases are not respected as true leases or qualified financing arrangements for U.S. federal income tax purposes and are not otherwise treated as generating qualifying REIT income, we may fail to qualify to be taxed as a REIT. Furthermore, our qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. Our ability to satisfy the asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we may not obtain independent appraisals. In addition, future legislation, new regulations, administrative interpretations or court decisions may significantly change the tax laws, the application of the tax laws to our qualification as a REIT or the U.S. federal income tax consequences of that qualification.
If we were to fail to qualify as a REIT in any taxable year (including any prior taxable year for which the statute of limitations remains open), we would face tax consequences that could substantially reduce the funds available for the service of our debt and payment of dividends:
•we would not be allowed a deduction for dividends paid to shareholders in computing our taxable income and would be subject to federal income tax at regular corporate rates;
•we could be subject to the federal alternative minimum tax and possibly increased state and local taxes;
•unless we are entitled to relief under statutory provisions, we could not elect to be treated as a REIT for four taxable years following the year in which we were disqualified; and
•we could be subject to tax penalties and interest.
In addition, if we fail to qualify as a REIT, we will no longer be required to pay dividends. As a result of these factors, our failure to qualify as a REIT could adversely affect the market price for our shares.
Even if we remain qualified for taxation as a REIT under the Internal Revenue Code, we may face other tax liabilities that reduce our funds available for payment of dividends to our shareholders or the repurchase of shares.
Even if we remain qualified for taxation as a REIT under the Internal Revenue Code, we may be subject to federal, state and local taxes on our income and assets, including taxes on any undistributed income, excise taxes, state or local income, property and transfer taxes, and other taxes. Also, some jurisdictions may in the future limit or eliminate favorable income tax deductions, including the dividends paid deduction, which could increase our income tax expense. In addition, in order to meet the requirements for qualification and taxation as a REIT under the Internal Revenue Code, prevent the recognition of particular types of non-cash income, or avert the imposition of a 100% tax that applies to specified gains derived by a REIT from dealer property or inventory, we may hold or dispose of some of our assets and conduct some of our operations through our TRSs or other subsidiary corporations that will be subject to corporate level income tax at regular rates. In addition, while we intend that our transactions with our TRSs will be conducted on arm's length bases, we may be subject to a 100% excise tax on a transaction that the Internal Revenue Service ("IRS") or a court determines was not conducted at arm's length. Any of these taxes would decrease cash available for distribution to our shareholders or the repurchase of shares under our share repurchase program.
Distribution requirements imposed by law limit our flexibility.
To maintain our status as a REIT for federal income tax purposes, we are generally required to distribute to our shareholders at least 90% of our taxable income for that calendar year. Our taxable income is determined without regard to any deduction for dividends paid and by excluding net capital gains. To the extent that we satisfy the distribution requirement but distribute less than 100% of our taxable income, we will be subject to federal corporate income tax on our undistributed income. In addition, we will incur a 4% nondeductible excise tax on the amount, if any, by which our distributions in any year are less than the sum of (i) 85% of our ordinary income for that year, (ii) 95% of our capital gain net income for that year and (iii) 100% of our undistributed taxable income from prior years. We intend to continue to make distributions to our shareholders to comply with the distribution requirements of the Internal Revenue Code and to reduce exposure to federal income and nondeductible excise taxes. Differences in timing between the receipt of income and the payment of expenses in determining our taxable income and the effect of required debt amortization payments could require us to borrow funds on a short-term basis in order to meet the distribution requirements that are necessary to achieve the tax benefits associated with qualifying as a REIT.
If arrangements involving our TRSs fail to comply as intended with the REIT qualification and taxation rules, we may fail to qualify for taxation as a REIT under the Internal Revenue Code or be subject to significant penalty taxes.
We lease some of our experiential lodging properties to our TRSs pursuant to arrangements that, under the Internal Revenue Code, are intended to qualify the rents we receive from our TRSs as income that satisfies the REIT gross income tests. We also intend that our transactions with our TRSs be conducted on arm's length bases so that we and our TRSs will not be subject to penalty taxes under the Internal Revenue Code applicable to mispriced transactions. While relief provisions can sometimes excuse REIT gross income test failures, significant penalty taxes may still be imposed.
For our TRS arrangements to comply as intended with the REIT qualification and taxation rules under the Internal Revenue Code, a number of requirements must be satisfied, including:
•our TRSs may not directly or indirectly operate or manage a lodging facility, as defined by the Internal Revenue Code;
•the leases to our TRSs must be respected as true leases for federal income tax purposes and not as service contracts, partnerships, joint ventures, financings or other types of arrangements;
•the leased properties must constitute qualified lodging facilities (including customary amenities and facilities) under the Internal Revenue Code;
•our leased properties must be managed and operated on behalf of the TRSs by independent contractors who are less than 35% affiliated with us and who are actively engaged (or have affiliates so engaged) in the trade or business of managing and operating qualified lodging facilities for persons unrelated to us; and
•the rental and other terms of the leases must be arm's length.
We cannot be sure that the IRS or a court will agree with our assessment that our TRS arrangements comply as intended with REIT qualification and taxation rules. If arrangements involving our TRSs fail to comply as we intended, we may fail to qualify for taxation as a REIT under the Internal Revenue Code or be subject to significant penalty taxes.
We may depend on distributions from our direct and indirect subsidiaries to service our debt, and pay dividends to our shareholders.shareholders and repurchase shares. The creditors of these subsidiaries, and our direct creditors, are entitled to amounts payable to them before we pay any dividends to our shareholders.shareholders or repurchase shares.
Substantially all of our assets are held through our subsidiaries. We depend on these subsidiaries for substantially all of our cash flow.flow from operations. The creditors of each of our direct and indirect subsidiaries are entitled to payment of that subsidiary's obligations to them, when due and payable, before distributions may be made by that subsidiary to us. In addition, our creditors, whether secured or unsecured, are entitled to amounts payable to them before we may pay any dividends to our shareholders.shareholders or repurchase shares under our share repurchase program. Thus, our ability to service our debt obligations, and pay dividends to holders of our common and preferred shares and repurchase shares depends on our subsidiaries' ability first to satisfy their obligations to their creditors and then to pay distributions to us and our ability to satisfy our obligations to our direct creditors. Our subsidiaries are separate and
distinct legal entities and have no obligations, other than limited guaranties of certain of our debt, to make funds available to us.
Our development financing arrangements expose us to funding and completion risks.
Our ability to meet our construction financing obligations which we have undertaken or may enter into in the future depends on our ability to obtain equity or debt financing in the required amounts. There is no assurance we can obtain this financing or that the financing rates available will ensure a spread between our cost of capital and the rent or interest payable to us under the related leases or mortgage notes receivable. As a result, we could fail to meet our construction financing obligations or decide to cease such funding which, in turn, could result in failed projects and penalties, each of which could have a material adverse impact on our results of operations and business.
We have a limited number of employees and loss of personnel could harm our operations and adversely affect the value of our shares.
We had 6353 full-time employees as of December 31, 20172020 and, therefore, the impact we may feel from the loss of an employee may be greater than the impact such a loss would have on a larger organization. We are dependent on the efforts of the following individuals: Gregory K. Silvers, our President and Chief Executive Officer; Mark A. Peterson, our Executive Vice President and Chief Financial Officer; Morgan G. Earnest,Craig L. Evans, our SeniorExecutive Vice President, General Counsel and Secretary; Greg Zimmerman, our Executive Vice President and Chief Investment Officer; Craig L. Evans, our Senior Vice President, General Counsel and Secretary; Michael L. Hirons, our Senior Vice President - Strategy & Asset Management; and Tonya L. Mater, our Senior Vice President and Chief Accounting Officer. While we believe that we could find replacements for our personnel, the loss of their services could harm our operations and adversely affect the value of our shares.
We are subject to risks associated with the employment of personnel by managers of certain of our properties.
Managers of certain of our properties are responsible for hiring and maintaining the labor force at each of these properties. Although we do not directly employ or manage employees at these properties, we are subject to many of the costs and risks associated with such labor force, including but not limited to risks associated with that certain union contract binding the manager of our Kartrite Resort and Indoor Waterpark. From time to time, the operations of our properties that are managed by third parties may be disrupted as a result of strikes, lockouts, public demonstrations or other negative actions and publicity. We may also incur increased legal costs and indirect labor costs as a result of contract disputes and other events. The resolution of labor disputes or renegotiated labor contracts could lead to increased labor costs, either by increases in wages or benefits or by changes in work rules.
We may in the future have greater dependence upon the gaming industry and may be susceptible to the risks associated with it, which could materially and adversely affect our business, financial condition, liquidity, results of operations and prospects.
As a landlord of gaming facilities or secured creditor to gaming operators, we may be impacted by the risks associated with the gaming industry. Therefore, so long as we make investments in gaming-related assets, our success is dependent on the gaming industry, which could be adversely affected by economic conditions in general, changes in consumer trends and preferences and other factors over which we and our tenants have no control, such as the COVID-19 pandemic. A component of the rent under our gaming facility lease agreements will be based, over time, on the performance of the gaming facilities operated by our tenants on our properties and any decline in the operating results of our gaming tenants could be material and adverse to our business, financial condition, liquidity, results of operations and prospects.
The gaming industry is characterized by a high degree of competition among a large number of participants, including riverboat casinos, dockside casinos, land-based casinos, video lottery, sweepstakes and poker machines not located in casinos, Native American gaming, internet lotteries and other internet wagering gaming services and, in a broader sense, gaming operators face competition from all manner of leisure and entertainment activities. Gaming competition is intense in most of the markets where our facilities are located. Recently, there has been additional significant competition in the gaming industry as a result of the upgrading or expansion of facilities by existing market participants, the entrance of new gaming participants into a market, internet gaming and legislative changes. As competing properties and new markets are opened, we may be negatively impacted. Additionally, decreases in discretionary consumer spending brought about by weakened general economic conditions such as, but not limited to, lackluster recoveries from recessions, high unemployment levels, higher income taxes, low levels of consumer confidence, weakness in the housing market, cultural and demographic changes and increased stock market volatility may negatively impact our revenues and operating cash flows.
We will face extensive regulation from gaming and other regulatory authorities with respect to our gaming properties.
The ownership, operation, and management of gaming facilities are subject to pervasive regulation. These gaming regulations impact our gaming tenants and persons associated with our gaming facilities, which in many jurisdictions include us as the landlord and owner of the real estate. Certain gaming authorities in the jurisdictions in which we hold properties may require us and/or our affiliates to maintain a license as a key business entity or supplier because of our status as landlord. Gaming authorities also retain great discretion to require us to be found suitable as a landlord, and certain of our shareholders, officers and trustees may be required to be found suitable as well.
In many jurisdictions, gaming laws can require certain of our shareholders to file an application, be investigated, and qualify or have his, her or its suitability determined by gaming authorities. Gaming authorities have very broad discretion in determining whether an applicant should be deemed suitable. Subject to certain administrative proceeding requirements, the gaming regulators have the authority to deny any application or limit, condition, restrict, revoke or suspend any license, registration, finding of suitability or approval, or fine any person licensed, registered or found suitable or approved, for any cause deemed reasonable by the gaming authorities.
Gaming authorities may conduct investigations into the conduct or associations of our trustees, officers, key employees or investors to ensure compliance with applicable standards. If we are required to be found suitable and are found suitable as a landlord, we will be registered as a public company with the gaming authorities and will be subject to disciplinary action if, after we receive notice that a person is unsuitable to be a shareholder or to have any other relationship with us, we:
•pay that person any distribution or interest upon any of our voting securities;
•allow that person to exercise, directly or indirectly, any voting right conferred through securities held by that person;
•pay remuneration in any form to that person for services rendered or otherwise; or
•fail to pursue all lawful efforts to require such unsuitable person to relinquish his or her voting securities, including, if necessary, the immediate purchase of the voting securities for cash at fair market value.
Many jurisdictions also require any person who acquires beneficial ownership of more than a certain percentage of voting securities of a gaming company and, in some jurisdictions, non-voting securities, typically 5% of a publicly-traded company, to report the acquisition to gaming authorities, and gaming authorities may require such holders to apply for qualification, licensure or a finding of suitability, subject to limited exceptions for "institutional investors" that hold a company's voting securities for passive investment purposes only.
Required regulatory approvals can delay or prohibit transfers of our gaming properties, which could result in periods in which we are unable to receive rent for such properties.
Our tenant is (and any future tenants of our gaming properties will be) required to be licensed under applicable law in order to operate any of our properties that are gaming facilities. If our gaming facility lease agreements, or any future lease agreement we enter into, are terminated (which could be required by a regulatory agency) or expire, any new tenant must be licensed and receive other regulatory approvals to operate our properties as gaming facilities. Any delay in, or inability of, the new tenant to receive required licenses and other regulatory approvals from the applicable state and county government agencies may prolong the period during which we are unable to collect the applicable rent. Further, in the event that our gaming facility lease agreements or future lease agreements are terminated or expire and a new tenant is not licensed or fails to receive other regulatory approvals, the properties may not be operated as gaming facilities and we will not be able to collect the applicable rent. Moreover, we may be unable to transfer or sell the affected properties as gaming facilities, which could materially and adversely affect our business, financial condition, liquidity, results of operations and prospects.
Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer. Our service providers, tenants and managers of our tenantsproperties and their business partners are exposed to similar risks.
In the ordinary course of our business, we collect and store sensitive data, including our proprietary business information and that of our tenants, managers of our properties and clientsother customers and personally identifiable information of our employees, in our facility and on our network. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our network and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, disrupt our operations, damage our reputation, and cause a loss of confidence, which could adversely affect our business. Our service providers, tenants, managers of our properties and our tenantsother customers and their business partners are exposed to similar risks and the occurrence of a security breach or other disruption with respect to their information technology and infrastructure could, in turn, have a material adverse impact on our results of operations and business.
Changes in accounting standards issued by the Financial Accounting Standards Board ("FASB") or other standard-setting bodies may adversely affect our financial statements.business.
Our financial statements are subject to the application of U.S. GAAP, which is periodically revised and/or expanded. From time to time, we are required to adopt new or revised accounting standards issued by recognized authoritative bodies, including the FASB and the SEC. It is possible that future accounting standards we are required to adopt such as the amended guidance for revenue recognition and leases, may require changes to the current accounting treatment that we apply to our consolidated financial statements and may require us to make significant changes to our systems. Such changesChanges in accounting standards could result in a material adverse impact on our business, financial condition and results of operations.
Risks That Apply to Our Real Estate Business
Real estate income and the value of real estate investments fluctuate due to various factors.
The value of real estate fluctuates depending on conditions in the general economy and the real estate business. These conditions may also limit our revenues and available cash. The rents, interest and interestother payments we receive and the occupancy levels at our properties may decline as a result of adverse changes in any of the factors that affect the value of our real estate. If our revenues decline, we generally would expect to have less cash available to pay our indebtedness, and distribute to our shareholders.shareholders and effect share repurchases. In addition, some of our unreimbursed costs of owning real estate may not decline when the related rents decline.
The factors that affect the value of our real estate include, among other things:
•international, national, regional and local economic conditions;
•consequences of any armed conflict involving, or terrorist attack against, the United States or Canada;
•the threat of domestic terrorism or pandemic outbreaks (such as COVID-19), which could cause customersconsumers to avoid congregate settings;
•our ability or the ability of our tenants to avoid public places where large crowds are in attendance, such as megaplex theatres or recreational properties operated by our tenants;
our abilitymanagers to secure adequate insurance;
•natural disasters, such as earthquakes, hurricanes and floods, which could exceed the aggregate limits of insurance coverage;
•local conditions such as an oversupply of space or lodging properties or a reduction in demand for real estate in the area;
•competition from other available space;space or, in the case of our experiential lodging properties, competition from other lodging properties or alternative lodging options in our markets;
•whether tenants and users such as customers of our tenants consider a property attractive;
•the financial condition of our tenants, mortgagors and managers, including the extent of tenant bankruptcies or defaults;
•whether we are able to pass some or all of any increased operating costs through to tenants;tenants or other customers;
•how well we manage our properties or how well the managers of properties manage those properties;
•in the case of our experiential lodging properties, dependence on demand from business and leisure travelers, which may fluctuate and be seasonal;
•fluctuations in interest rates;
•changes in real estate taxes and other expenses;
•changes in market rental rates;
•the timing and costs associated with property improvements and rentals;
•changes in taxation or zoning laws;
•government regulation;
•availability of financing on acceptable terms or at all;
•potential liability under environmental or other laws or regulations; and
•general competitive factors.
The rents, interest and interestother payments we receive and the occupancy levels at our properties may decline as a result of adverse changes in any of these factors. If our revenues decline, we generally would expect to have less cash available to pay our indebtedness and distribute to our shareholders. In addition, some of our unreimbursed costs of owning real estate may not decline when the related rents decline.
There are risks associated with owning and leasing real estate.
Although our lease terms in most cases, obligate the tenants to bear substantially all of the costs of operating the properties and our managers to manage such costs, investing in real estate involves a number of risks, including:
•the risk that tenants will not perform under their leases or that managers will not perform under their management agreements, reducing our income from thesuch leases or requiring us to assume the cost of performing obligations (such as taxes, insurance and maintenance) that are the tenant's responsibilityproperties under the lease;such management;
•we may not always be able to lease properties at favorable rates or certain tenants may require significant capital expenditures by us to conform existing properties to their requirements;
•we may not always be able to sell a property when we desire to do so at a favorable price; and
•changes in tax, zoning or other laws could make properties less attractive or less profitable.
If a tenant fails to perform on its lease covenants or a manager fails to perform on its management covenants, that would not excuse us from meeting any debt obligation secured by the property and could require us to fund reserves in favor of our lenders, thereby reducing funds available for payment of dividends. We cannot be assured that tenants or managers will elect to renew their leases or management agreements when the terms expire. If a tenant or manager does not renew its lease or agreement or if a tenant or a manager defaults on its lease or management obligations, there is no assurance we could obtain a substitute tenant or manager on acceptable terms. If we cannot
obtain another quality tenant or manager, we may be required to modify the property for a different use, which may involve a significant capital expenditure and a delay in re-leasing the property.property or obtaining a new manager. In addition, tenants or managers may seek concessions or other modifications to existing leases and management agreements as a result of the COVID-19 pandemic.
Some potential losses are not covered by insurance.
Our leases with tenants and agreements with managers of our properties require the tenants and managers to carry comprehensive liability, casualty, workers' compensation, extended coverage and rental loss insurance on our properties.properties, as applicable. We believe the required coverage is of the type, and amount, customarily obtained by an owner of similar properties. We believe all of our properties are adequately insured. However, we are exposed to risks that the insurance coverage levels required under our leases with tenants and agreements with managers of our properties may be inadequate, and these risks may be increased as we expand our portfolio into experiential properties that may present more risk of loss as compared to properties in our existing portfolio. In addition, there are some types of losses, such as pandemics, catastrophic acts of nature, acts of war or riots, for which we, or our tenants or managers of our properties cannot obtain insurance at an acceptable cost.cost or at all. If there is an uninsured loss or a loss in excess of insurance limits, we could lose both the revenues generated by the affected property and the capital we have invested in the property. We would, however, remain obligated to repay any mortgage indebtedness or other obligations related to the property. In addition, the cost of insurance protection against terrorist acts has risen dramatically over the years. There can be no assurance our tenants or managers of our properties will be able to obtain terrorism insurance coverage, as applicable, or that any coverage they do obtain will adequately protect our properties against loss from terrorist attack.
Joint ventures may limit flexibility with jointly owned investments.
We may continue to acquire or develop properties in joint ventures with third parties when those transactions appear desirable. We would not own the entire interest in any property acquired by a joint venture. Major decisions regarding a joint venture property may require the consent of our partner. If we have a dispute with a joint venture partner, we may feel it necessary or become obligated to acquire the partner's interest in the venture. However, we cannot ensure that the price we would have to pay or the timing of the acquisition would be favorable to us. If we own less than a 50% interest in any joint venture, or if the venture is jointly controlled, the assets and financial results of the joint venture may not be reportable by us on a consolidated basis. To the extent we have commitments to, or on behalf of, or are dependent on, any such “off-balance sheet”"off-balance sheet" arrangements, or if those arrangements or their properties or leases are subject to material contingencies, our liquidity, financial condition and operating results could be adversely affected by those commitments or off-balance sheet arrangements.
Our multi-tenant properties expose us to additional risks.
Our entertainment retail centersdistricts in Colorado, New York, California, and Ontario, Canada, and similar properties we may seek to acquire or develop in the future, involve risks not typically encountered in the purchase and lease-back of real estate properties which are operated by a single tenant. The ownership or development of multi-tenant retail centers could expose us to the risk that a sufficient number of suitable tenants may not be found to enable the centers to operate profitably and provide a return to us. This risk may be compounded by the failure of existing tenants to satisfy their obligations due to various factors, including economic downturns. In addition, the current economic crisis.COVID-19 pandemic is severely impacting our retail tenants' businesses, financial condition and liquidity, which has resulted in most of these tenants failing to satisfy their obligations to us or otherwise seeking modifications to their lease arrangements. These risks, in turn, could cause a material adverse impact to our results of operations and business.
Retail centers are also subject to tenant turnover and fluctuations in occupancy rates, which could affect our operating results. Multi-tenant retail centers also expose us to the risk of potential “CAM"CAM slippage,”" which may occur when the actual cost of taxes, insurance and maintenance at the property exceeds the CAM fees paid by tenants.
Failure to comply with the Americans with Disabilities Act and other laws could result in substantial costs.
Most of our properties must comply with the Americans with Disabilities Act (“ADA”).ADA. The ADA requires that public accommodations reasonably accommodate individuals with disabilities and that new construction or alterations be made to commercial facilities to conform to accessibility guidelines. Failure to comply with the ADA can result in injunctions, fines, damage
awards to private parties and additional capital expenditures to remedy noncompliance. Our leases with tenants and agreements with managers of our properties require the tenantsthem to comply with the ADA.
Our properties are also subject to various other federal, state and local regulatory requirements. We do not know whether existing requirements will change or whether compliance with future requirements will involve significant unanticipated expenditures. Although these expenditures would be the responsibility of our tenants in most cases and for our managers to oversee at our properties, if these tenants or managers fail to perform these obligations, we may be required to do so.
Potential liability for environmental contamination could result in substantial costs.
Under federal, state and local environmental laws, we may be required to investigate and clean up any release of hazardous or toxic substances or petroleum products at our properties, regardless of our knowledge or actual responsibility, simply because of our current or past ownership of the real estate. If unidentified environmental problems arise, we may have to make substantial payments, which could adversely affect our cash flow and our ability to service our debt and pay dividends to our shareholders. This is because:
•as owner, we may have to pay for property damage and for investigation and clean-up costs incurred in connection with the contamination;
•the law may impose clean-up responsibility and liability regardless of whether the owner or operator knew of or caused the contamination;
•even if more than one person is responsible for the contamination, each person who shares legal liability under environmental laws may be held responsible for all of the clean-up costs; and
•governmental entities and third parties may sue the owner or operator of a contaminated site for damages and costs.
These costs could be substantial and in extreme cases could exceed the value of the contaminated property. The presence of hazardous substances or petroleum products or the failure to properly remediate contamination may adversely affect our ability to borrow against, sell or lease an affected property. In addition, some environmental laws create liens on contaminated sites in favor of the government for damages and costs it incurs in connection with a contamination. Most of our loan agreements require the Company or a subsidiary to indemnify the lender against environmental liabilities. Our leases with tenants and agreements with managers of our properties require the tenantsthem to operate the properties in compliance with environmental laws and to indemnify us against environmental liability arising from the operation of the properties. We believe all of our properties are in material compliance with environmental laws. However, we could be subject to strict liability under environmental laws because we own the properties. There is also a risk that tenants may not satisfy their environmental compliance and indemnification obligations under the leases.leases or other agreements. Any of these events could substantially increase our cost of operations, require us to fund environmental indemnities in favor of our lenders, limit the amount we could borrow under our unsecured revolving credit facility and term loan facility and reduce our ability to service our debt and pay dividends to shareholders.
Real estate investments are relatively illiquid.
We have previously disclosed our intent to undertake certain asset dispositions. In addition, we may desire to sell other properties in the future because of changes in market conditions, poor tenant performance or default of any mortgage we hold, or to avail ourselves of other opportunities. We may also be required to sell a property in the future to meet debt obligations or avoid a default. Specialty real estate projects such as we have cannot always be sold quickly, and
we cannot assure you that we could always obtain a favorable price. In addition, the Internal Revenue Code limits our ability to sell our properties. We may be required to invest in the restoration or modification of a property before we can sell it. The inability to respond promptly to changes in the performance of our property portfolio could adversely affect our financial condition and ability to service our debt, and pay dividends to our shareholders.shareholders and effect share repurchases.
There are risks in owning assets outside the United States.
Our properties in Canada are subject to the risks normally associated with international operations. The rentals under our Canadian leases are payable in Canadian dollars ("CAD"), which could expose us to losses resulting from fluctuations in exchange rates to the extent we have not hedged our position. Canadian real estate and tax laws are complex and subject to change, and we cannot assure you we will always be in compliance with those laws or that compliance will not expose us to additional expense. We may also be subject to fluctuations in Canadian real estate values or markets or the Canadian economy as a whole, which may adversely affect our Canadian investments.
Additionally, we have made investments in projects located in China and may enter other international markets, which may have similar risks as described above as well as unique risks associated with a specific country.
There are risks in owning or financing properties for which the tenant's, mortgagor's, or our operations may be impacted by weather conditions, climate change and climate change.natural disasters.
We have acquired and financed ski properties and expect to do so in the future. The operators of these properties, our tenants or mortgagors, are dependent upon the operations of the properties to pay their rents and service their loans. The ski property operator's ability to attract visitors is influenced by weather conditions and climate change in general, each of which may impact the amount of snowfall during the ski season. Adverse weather conditions may discourage visitors from participating in outdoor activities. In addition, unseasonably warm weather may result in inadequate natural snowfall, which increases the cost of snowmaking, and could render snowmaking wholly or partially ineffective in maintaining quality skiing conditions and attracting visitors. Excessive natural snowfall may materially increase the costs incurred for grooming trails and may also make it difficult for visitors to obtain access to the ski property.properties. We also own and finance attractions (including waterparks) which would also be subject to risks relating to weather conditions such as in the case of waterparks and amusement parks, excessive rainfall or unseasonable temperatures. Prolonged periods of adverse weather conditions, or the occurrence of such conditions during peak visitation periods, could have a material adverse effect on the operator's financial results and could impair the ability of the operator to make rental or other payments or service our loans.
A severe natural disaster, such as a forest fire, may interrupt the operations of an operator, damage our properties, reduce the number of guests who visit the resorts in affected areas and negatively impact an operator's revenue and profitability. Damage to our properties could take a long time to repair and there is no guarantee that we would have adequate insurance to cover the costs of repair and recoup lost profits. Furthermore, such a disaster may interrupt or impede access to our affected properties or require evacuations and may cause visits to our affected properties to decrease for an indefinite period. The ability of our operators to attract visitors to our experiential lodging properties is also influenced by the aesthetics and natural beauty of the outdoor environment where these resorts are located. A severe forest fire or other severe impacts from naturally occurring events could negatively impact the natural beauty of our resort properties and have a long-term negative impact on an operator's overall guest visitation as it could take several years for the environment to recover.
We face risks associated with the development, redevelopment and expansion of properties and the acquisition of other real estate related companies.
We may develop, redevelop or expand new or existing properties or acquire other real estate related companies, and these activities are subject to various risks. We may not be successful in pursuing such development or acquisition opportunities. In addition, newly developed or redeveloped/expanded properties or newly acquired companies may not perform as well as expected. We are subject to other risks in connection with any such development or acquisition activities, including the following:
•we may not succeed in completing developments or consummating desired acquisitions on time;
•we may face competition in pursuing development or acquisition opportunities, which could increase our costs;
•we may encounter difficulties and incur substantial expenses in integrating acquired properties into our operations and systems and, in any event, the integration may require a substantial amount of time on the part of both our management and employees and therefore divert their attention from other aspects of our business;
•we may undertake developments or acquisitions in new markets or industries where we do not have the same level of market knowledge, which may expose us to unanticipated risks in those markets and industries to which we are unable to effectively respond, such as an inability to attract qualified personnel with knowledge of such markets and industries;
•we may incur construction costs in connection with developments, which may be higher than projected, potentially making the project unfeasible or unprofitable;
•we may incur unanticipated capital expenditures in order to maintain or improve acquired properties;
•we may be unable to obtain zoning, occupancy or other governmental approvals;
•we may experience delays in receiving rental payments for developments that are not completed on time;
•our developments or acquisitions may not be profitable;
•we may need the consent of third parties such as anchor tenants, mortgage lenders and joint venture partners, and those consents may be withheld;
•we may incur adverse tax consequences if we fail to qualify as a REIT for U.S. federal income tax purposes following an acquisition;
•we may be subject to risks associated with providing mortgage financing to third parties in connection with transactions, including any default under such mortgage financing;
•we may face litigation or other claims in connection with, or as a result of, acquisitions, including claims from terminated employees, tenants, former stockholders or other third parties;
•the market price of our common shares, preferred shares and debt securities may decline, particularly if we do not achieve the perceived benefits of any acquisition as rapidly or to the extent anticipated by securities or industry analysts or if the effect of an acquisition on our financial condition, results of operations and cash flows is not consistent with the expectations of these analysts;
•we may issue shares in connection with acquisitions resulting in dilution to our existing shareholders; and
•we may assume debt or other liabilities in connection with acquisitions.
In addition, there is no assurance that planned third-party financing related to development and acquisition opportunities will be provided on a timely basis or at all, thus increasing the risk that such opportunities are delayed or fail to be completed as originally contemplated. We may also abandon development or acquisition opportunities that we have begun pursuing and consequently fail to recover expenses already incurred and have devoted management time to a matter not consummated. In some cases, we may agree to lease or other financing terms for a development project in advance of completing and funding the project, in which case we are exposed to the risk of an increase in our cost of capital during the interim period leading up to the funding, which can reduce, eliminate or result in a negative spread between our cost of capital and the payments we expect to receive from the project. Furthermore, our acquisitions of new properties or companies will expose us to the liabilities of those properties or companies, some of which we may not be aware at the time of acquisition. In addition, development of our existing properties presents similar risks. If a development or acquisition is unsuccessful, either because it is not meeting our expectations or was not completed according to our plans, we could lose our investment in the development or acquisition.
Risks That May Affect the Market Price of Our Shares
We cannot assure you we will continue paying cash dividends at current rates.
Our dividend policy is determined by our Board of Trustees. Our ability to continue payingpay dividends on our common shares or to pay dividends on our preferred shares at their stated rates or to increase our common share dividend rate will dependdepends on a number of factors, including our liquidity, our financial condition and results of future operations, the performance of lease and mortgage terms by our tenants and customers, our ability to acquire, finance and lease additional properties at attractive rates, and provisions in our loan covenants.
The financial impact of the COVID-19 pandemic has negatively impacted our compliance with financial covenants of our credit facility and other debt agreements. During 2020, we temporarily suspended our monthly cash dividend to common shareholders after the common share dividend payable May 15, 2020, and we are subject to restrictions on the payment of common share dividends during the Covenant Relief Period (except as may be necessary to maintain REIT status and to not owe income tax) under the amendments to our unsecured revolving credit facility, our unsecured term loan facility and the debt instruments governing certain of our private placement notes, as
described below under "Management's Discussion and Analysis of Financial Condition and Results of Operations". If we do not reinstate common share dividends in future periods or maintain or increase ourany future common share dividend rate, that could have an adverse effect on the market price of our common shares and possibly our preferred shares.shares could be adversely affected. Furthermore, if the Board of Trustees decides to pay dividends on our common shares partially or substantially all in common shares, that could have an adverse effect on the market price of our common shares and possibly our preferred shares. There can be no assurances as to our ability to reinstitute cash dividend payments to common shareholders or the timing thereof or to continue paying dividends on our preferred shares.
Market interest rates may have an effect on the value of our shares.
One of the factors that investors may consider in deciding whether to buy or sell our common shares or preferred shares is our dividend rate as a percentage of our share price, relative to market interest rates. If market interest rates increase, prospective investors may desire a higher dividend rate on our common shares or seek securities paying higher dividends or interest.
Broad market fluctuations could negatively impact the market price of our shares.
The stock market has experienced extreme price and volume fluctuations as a result of the COVID-19 pandemic that have affected the market price of the common equity of many companies, including companies in industries similar or related to ours. These broad market fluctuations could reduce the market price of our shares. Furthermore, our operating results and prospects may be below the expectations of public market analysts and investors or may be lower than those of companies with comparable market capitalizations. Either of these factors could lead to a material decline in the market price of our shares.
Market prices for our shares may be affected by perceptions about the financial health or share value of our tenants, mortgagors and mortgagorsmanagers or the performance of REIT stocks generally.
To the extent any of our tenants or customers, or their competition, report losses or slower earnings growth, take charges against earnings or enter bankruptcy proceedings, the market price for our shares could be adversely affected. The reduced economic activity resulting from the COVID-19 pandemic is severely impacting our tenants' businesses, financial condition and liquidity, which could adversely affect the market price for our shares.The market price for our shares could also be affected by any weakness in the performance of REIT stocks generally or weakness in any of the sectors in which our tenants and customers operate.
Limits on changes in control may discourage takeover attempts which may be beneficial to our shareholders.
There are a number of provisions in our Declaration of Trust and Bylaws and under Maryland law and agreements we have with others, any of which could make it more difficult for a party to make a tender offer for our shares or complete a takeover of the Company which is not approved by our Board of Trustees. These include:
a staggered Board of Trustees that can be increased in number without shareholder approval;
•a limit on beneficial ownership of our shares, which acts as a defense against a hostile takeover or acquisition of a significant or controlling interest, in addition to preserving our REIT status;
•the ability of the Board of Trustees to issue preferred or common shares, to reclassify preferred or common shares, and to increase the amount of our authorized preferred or common shares, without shareholder approval;
•limits on the ability of shareholders to remove trustees without cause;
•requirements for advance notice of shareholder proposals at shareholder meetings;
•provisions of Maryland law restricting business combinations and control share acquisitions not approved by the Board of Trustees and unsolicited takeovers;
•provisions of Maryland law protecting corporations (and by extension REITs) against unsolicited takeovers by limiting the duties of the trustees in unsolicited takeover situations;
•provisions in Maryland law providing that the trustees are not subject to any higher duty or greater scrutiny than that applied to any other director under Maryland law in transactions relating to the acquisition or potential acquisition of control;
•provisions of Maryland law creating a statutory presumption that an act of the trustees satisfies the applicable standards of conduct for trustees under Maryland law;
•provisions in loan or joint venture agreements putting the Company in default upon a change in control; and
•provisions of employment agreements and otherour compensation arrangements with our employees calling for severance compensation and vesting of equity compensation upon termination of employment upon a change in control or certain events of the officers'employees' termination of service.
Any or all of these provisions could delay or prevent a change in control of the Company, even if the change was in our shareholders' interest or offered a greater return to our shareholders.
We may change our policies without obtaining the approval of our shareholders.
Our operating and financial policies, including our policies with respect to acquiring or financing real estate or other companies, growth, operations, indebtedness, capitalization and dividends, are exclusively determined by our Board of Trustees. Accordingly, our shareholders do not control these policies.
Dilution could affect the value of our shares.
Our future growth will depend in part on our ability to raise additional capital. If we raise additional capital through the issuance of equity securities, the interests of holders of our common shares could be diluted. Likewise, our Board of Trustees is authorized to cause us to issue preferred shares in one or more series, the holders of which would be entitled to dividends and voting and other rights as our Board of Trustees determines, and which could be senior to or convertible into our commoncommon shares. Accordingly, an issuance by us of preferred shares could be dilutive to or otherwise adversely affect the interests of holders of our common shares. As of December 31, 2017,2020, our Series C preferred shares are convertible, at each of the holder's option, into our common shares at a conversion rate of 0.38570.4137 common shares per $25.00 liquidation preference, which is equivalent to a conversion price of approximately $64.82$60.43 per common share (subject to adjustment in certain events). Additionally, as of December 31, 2017,2020, our Series E preferred shares are convertible, at each of the holder's option, into our common shares at a conversion rate of 0.46160.4826 common shares per $25.00 liquidation preference, which is equivalent to a conversion price of approximately $54.16$51.80 per common share (subject to adjustment in certain events). Under certain circumstances in connection with a change in control of ourthe Company, holders of our Series G preferred shares may elect to convert some or all of their Series G preferred shares into a number of our common shares per Series G preferred share equal to the lesser of (a) the $25.00 per share liquidation preference, plus accrued and unpaid dividends divided by the market value of our common shares or (b) 0.7389 shares. Depending upon the number of Series C, Series E and Series G preferred shares being converted at one time, a conversion of Series C, Series E and Series G preferred shares could be dilutive to or otherwise adversely affect the interests of holders of our common shares. In addition, we may issue a significant amount of equity securities in connection with acquisitions or investments, with or without seeking shareholder approval, which could result in significant dilution to our existing shareholders.
Future offerings of debt or equity securities, which may rank senior to our common shares, may adversely affect the market price of our common shares.
If we decide to issue debt securities in the future, which would rank senior to our common shares, it is likely that they will be governed by an indenture or other instrument containing covenants restricting our operating flexibility. Additionally, any equity securities or convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common shares and may result in dilution to owners of our common shares. We and, indirectly, our shareholders, will bear the cost of issuing and servicing such securities. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, holders of our common shares will bear the risk of our future offerings reducing the market price of our common shares and diluting the value of their shareholdings in us.
Changes in foreign currency exchange rates may have an impact on the value of our shares.
The functional currency for our Canadian operations is the Canadian dollar. As a result, our future operating results could be affected by fluctuations in the exchange rate between U.S. and Canadian dollars, which in turn could affect
our share price. We have attempted to mitigate our exposure to Canadian currency exchange risk by entering into foreign currency exchange contracts to hedge in part our exposure to exchange rate fluctuations. Foreign currency derivatives are subject to future risk of loss. We do not engage in purchasing foreign exchange contracts for speculative purposes.
Additionally, we have made investments in China and may enter other international markets which pose similar currency fluctuation risks as described above.
We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our shares.
At any time, the U.S. federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or regulations may be changed, possibly with retroactive effect. In addition, there have been a number of proposals in Congress with respect to tax laws, including proposals to adopt a flat tax or replace the income tax system with a national sales tax or value-added tax.
On December 22, 2017, the Tax Cuts and Jobs Act was signed into law. The Tax Cuts and Jobs Act made many significant changes to the U.S. federal income tax laws applicable to businesses and their owners, including REITs and their shareholders. Pursuant to this legislation, as of January 1, 2018, (1) the federal income tax rate applicable to corporations is reduced to 21%, (2) the highest marginal individual income tax rate is reduced to 37%, and (3) the corporate alternative minimum tax is repealed. In addition, individuals, estates and trusts may deduct up to 20% of certain pass-through income, including ordinary REIT dividends that are not “capital gain dividends” or “qualified dividend income,” subject to complex limitations. For taxpayers qualifying for the full deduction, the effective maximum tax rate on ordinary REIT dividends would be 29.6% (through taxable years ending in 2025). The maximum rate of withholding with respect to our distributions to non-U.S. shareholders that are treated as attributable to gains from the sale or exchange of U.S. real property interests is also reduced from 35% to 21%. The deduction of net interest expense is limited for all businesses, other than certain electing businesses, including real estate businesses, which limitation could adversely affect our taxable REIT subsidiaries.
While the changes in the Tax Cuts and Jobs Act generally appear to be favorable with respect to REITs, the extensive changes to non-REIT provisions in the Internal Revenue Code may have unanticipated effects on us or our shareholders. Moreover, Congressional leaders have recognized that the process of adopting extensive tax legislation in a short amount of time without hearings and substantial time for review is likely to have led to drafting errors, issues needing clarification and unintended consequences that will have to be reviewed in subsequent tax legislation. At this point, it is not clear when Congress will address these issues or when the Internal Revenue Service will be able to issue administrative guidance on the changes made in the Tax Cuts and Jobs Act.
We cannot predict if or when any new U.S. federal income tax law, regulation or administrative interpretation, or any amendment to any existing U.S. federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective or whether any such law, regulation or interpretation may take effect retroactively. We and our shareholders could be adversely affected by any such change in, or any new, U.S. federal income tax law, regulation or administrative interpretation. Furthermore, any proposals seeking broader reform of U.S. federal income tax laws, if enacted, could change the federal income tax laws applicable to REITs, subject us to federal tax or reduce or eliminate the current deduction for dividends paid to our shareholders, any of which could negatively affect the market for our shares.
Item 1B. Unresolved Staff Comments
There are no unresolved comments from the staff of the SEC required to be disclosed herein as of the date of this Annual Report on Form 10-K.
Item 2. Properties
As of December 31, 2017,2020, our real estate portfolio (including properties securing our mortgage notes) consisted of investments in each of our four operatingExperiential and Education reportable segments. The Entertainment segment included investments in 147 megaplex theatre properties, seven entertainment retail centers (which include seven additional megaplex theatre properties) and 11 family entertainment centers. The Recreation segment included investments in 26 ski properties, 20 attractions, 30 golf entertainment complexes and eight other recreation properties. The Education segment included investments in 65 public charter school properties, 65 early education centers and 15 private school properties. The Other segment consisted primarily of the land under ground lease, property under development and land held for development related to the Resorts World Catskills casino and resort project in Sullivan County, New York. Our properties are located in 42 states, the District of Columbia and Ontario, Canada. Except as otherwise noted, all of the real estate investments listed below are owned or ground leased directly by us.
The following table listssets forth our owned properties (excludes properties under development, land held for development and properties securing our mortgage notes) listed by segment their locations, acquisition dates, number of theatre screens (if applicable), number of seats (if applicable),and property type, gross square footage (except for certain ski and attraction properties where such number is not meaningful), percentage leased and total rental revenue for the tenant.
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| | | | | | | | | | | | | |
Location | | Acquisition date | | Screens | | Seats | | Building (gross sq. ft) | | Tenant |
Entertainment Properties: | | | | | | | | | | |
San Antonio, TX | | 11/97 | | 14 |
| | 2,722 |
| | 53,583 |
| | Regal |
Dallas, TX | | 11/97 | | 14 |
| | 2,962 |
| | 56,430 |
| | Studio Movie Grill |
Sugar Land, TX (1) | | 11/97 | | 24 |
| | 4,367 |
| | 107,690 |
| | AMC |
Leawood, KS | | 11/97 | | 20 |
| | 962 |
| | 75,224 |
| | AMC |
Omaha, NE | | 11/97 | | 24 |
| | 4,668 |
| | 107,402 |
| | AMC |
Columbus, OH (1) | | 11/97 | | 24 |
| | 4,461 |
| | 98,261 |
| | AMC |
San Diego, CA (1) | | 11/97 | | 20 |
| | 4,173 |
| | 84,352 |
| | AMC |
Ontario, CA | | 11/97 | | 20 |
| | 2,350 |
| | 131,534 |
| | AMC |
Houston, TX | | 11/97 | | 30 |
| | 4,925 |
| | 136,154 |
| | AMC |
Creve Coeur, MO | | 11/97 | | 16 |
| | 1,029 |
| | 60,418 |
| | AMC |
San Antonio, TX | | 11/97 | | — |
| | — |
| | 27,485 |
| | Altitude Trampoline Park |
Houston, TX | | 2/98 | | 29 |
| | 5,115 |
| | 130,891 |
| | AMC |
South Barrington, IL | | 3/98 | | 21 |
| | 2,069 |
| | 130,757 |
| | AMC |
Mesquite, TX | | 4/98 | | 30 |
| | 3,095 |
| | 130,891 |
| | AMC |
Hampton, VA | | 6/98 | | 24 |
| | 4,673 |
| | 107,396 |
| | AMC |
Raleigh, NC | | 8/98 | | 16 |
| | 2,596 |
| | 51,450 |
| | Cinemark |
Davie, FL | | 11/98 | | 24 |
| | 4,180 |
| | 96,497 |
| | Cinemark |
Pompano Beach, FL | | 11/98 | | 18 |
| | 3,424 |
| | 73,637 |
| | AMC |
Aliso Viejo, CA | | 12/98 | | 20 |
| | 4,238 |
| | 98,557 |
| | Regal |
Boise, ID (1) | | 12/98 | | 22 |
| | 4,883 |
| | 140,300 |
| | Regal |
Woodridge, IL (2) | | 6/99 | | 18 |
| | 4,397 |
| | 82,000 |
| | AMC |
Tampa, FL | | 6/99 | | 24 |
| | 2,124 |
| | 84,000 |
| | AMC |
Westminster, CO | | 6/99 | | 24 |
| | 4,693 |
| | 89,260 |
| | AMC |
Cary, NC | | 12/99 | | 20 |
| | 3,883 |
| | 77,475 |
| | Regal |
Houston, TX | | 5/00 | | — |
| | — |
| | 7,808 |
| | Various |
Westminster, CO | | 12/01 | | — |
| | — |
| | 138,051 |
| | Various |
Metairie, LA (1) | | 3/02 | | 11 |
| | 2,127 |
| | 70,000 |
| | AMC |
Harahan, LA | | 3/02 | | 20 |
| | 4,116 |
| | 90,391 |
| | AMC |
Hammond, LA | | 3/02 | | 10 |
| | 1,530 |
| | 39,850 |
| | AMC |
Houma, LA | | 3/02 | | 10 |
| | 1,766 |
| | 44,450 |
| | AMC |
Harvey, LA | | 3/02 | | 16 |
| | 3,053 |
| | 71,607 |
| | AMC |
Greenville, SC | | 6/02 | | 16 |
| | 2,814 |
| | 52,830 |
| | Regal |
Sterling Heights, MI | | 6/02 | | 30 |
| | 4,925 |
| | 107,712 |
| | AMC |
Olathe, KS | | 6/02 | | 28 |
| | 4,191 |
| | 100,251 |
| | AMC |
Greenville, SC | | 6/02 | | — |
| | — |
| | 10,000 |
| | Various |
Livonia, MI | | 8/02 | | 20 |
| | 3,604 |
| | 75,106 |
| | AMC |
Alexandria, VA (1) | | 10/02 | | 22 |
| | 3,640 |
| | 132,903 |
| | AMC |
Little Rock, AR | | 12/02 | | 18 |
| | 3,997 |
| | 79,330 |
| | Cinemark |
Macon, GA | | 3/03 | | 16 |
| | 2,950 |
| | 66,400 |
| | Southern |
Southfield, MI | | 5/03 | | 20 |
| | 5,962 |
| | 112,119 |
| | AMC |
Southfield, MI | | 5/03 | | — |
| | — |
| | 19,852 |
| | Various |
Lawrence, KS | | 6/03 | | 12 |
| | 2,386 |
| | 42,497 |
| | Regal |
New Rochelle, NY | | 10/03 | | 18 |
| | 4,893 |
| | 102,267 |
| | Regal |
New Rochelle, NY | | 10/03 | | — |
| | — |
| | 343,809 |
| | Various |
Columbia, SC | | 11/03 | | 14 |
| | 2,938 |
| | 56,705 |
| | Regal |
Hialeah, FL | | 12/03 | | 18 |
| | 4,900 |
| | 77,400 |
| | Cobb |
Phoenix, AZ | | 3/04 | | 17 |
| | 1,783 |
| | 113,768 |
| | AMC |
Mesa, AZ | | 3/04 | | 14 |
| | 1,257 |
| | 94,774 |
| | AMC |
Hamilton, NJ | | 3/04 | | 24 |
| | 4,183 |
| | 95,466 |
| | AMC |
Mississagua, ON (6) | | 3/04 | | 16 |
| | 3,856 |
| | 92,971 |
| | Cineplex |
Kanata, ON (6) | | 3/04 | | 24 |
| | 4,764 |
| | 89,290 |
| | Landmark Cinemas |
Whitby, ON (6) | | 3/04 | | 24 |
| | 4,688 |
| | 89,290 |
| | Landmark Cinemas |
Oakville, ON (6) | | 3/04 | | 24 |
| | 4,772 |
| | 89,290 |
| | Cineplex |
Subtotal Entertainment Properties, carried over to next page | | 938 |
| | 167,084 |
| | 4,737,831 |
| | |
|
| | | | | | | | | | | | | |
Location | | Acquisition date | | Screens | | Seats | | Building (gross sq. ft) | | Tenant |
Entertainment Properties: | | | | | | | | | | |
Subtotal from previous page | | n/a | | 938 |
| | 167,084 |
| | 4,737,831 |
| | |
Mississagua, ON (6) | | 3/04 | | — |
| | — |
| | 115,934 |
| | Various |
Kanata, ON (6) | | 3/04 | | — |
| | — |
| | 384,373 |
| | Various |
Whitby, ON (6) | | 3/04 | | — |
| | — |
| | 149,487 |
| | Various |
Oakville, ON (6) | | 3/04 | | — |
| | — |
| | 140,830 |
| | Various |
Lafayette, LA (1) | | 7/04 | | 16 |
| | 2,744 |
| | 61,579 |
| | Southern |
Peoria, IL | | 7/04 | | 18 |
| | 4,063 |
| | 82,330 |
| | AMC |
Warrenville, IL | | 7/04 | | — |
| | — |
| | 7,500 |
| | Various |
Hurst, TX | | 11/04 | | 18 |
| | 3,914 |
| | 98,250 |
| | Cinemark |
D'Iberville, MS | | 12/04 | | 18 |
| | 2,802 |
| | 59,533 |
| | Southern |
Melbourne, FL | | 12/04 | | 16 |
| | 3,600 |
| | 75,850 |
| | AMC |
Wilmington, NC | | 2/05 | | 16 |
| | 1,165 |
| | 57,338 |
| | Regal |
Chattanooga, TN | | 3/05 | | 18 |
| | 4,133 |
| | 82,330 |
| | AMC |
Burbank, CA | | 3/05 | | 16 |
| | 3,809 |
| | 86,551 |
| | AMC |
Burbank, CA | | 3/05 | | — |
| | — |
| | 34,818 |
| | Various |
Conroe, TX | | 6/05 | | 14 |
| | 2,403 |
| | 45,000 |
| | Southern |
Indianapolis, IN | | 6/05 | | 12 |
| | 942 |
| | 45,700 |
| | AMC |
Hattiesurg, MS | | 9/05 | | 18 |
| | 2,675 |
| | 57,367 |
| | Southern |
Arroyo Grande, CA | | 12/05 | | 10 |
| | 1,714 |
| | 35,760 |
| | Regal |
Auburn, CA | | 12/05 | | 10 |
| | 1,563 |
| | 35,089 |
| | Regal |
Fresno, CA | | 12/05 | | 16 |
| | 3,866 |
| | 80,600 |
| | Regal |
Modesto, CA (1) | | 12/05 | | 10 |
| | 3,866 |
| | 38,873 |
| | Regal |
Columbia, MD (1) | | 3/06 | | 14 |
| | 2,459 |
| | 63,306 |
| | AMC |
Garland, TX (3) | | 3/06 | | 17 |
| | 3,028 |
| | 75,252 |
| | AMC |
Garner, NC | | 4/06 | | 14 |
| | 2,619 |
| | 50,810 |
| | Regal |
Winston Salem, NC (1) | | 7/06 | | 18 |
| | 3,496 |
| | 75,605 |
| | Southern |
Huntsville, AL | | 8/06 | | 18 |
| | 4,150 |
| | 90,200 |
| | AMC |
Kalamazoo, MI | | 11/06 | | 10 |
| | 1,007 |
| | 65,525 |
| | AMC |
Slidell, LA (1) (4) | | 12/06 | | 16 |
| | 2,695 |
| | 62,300 |
| | Southern |
Pensacola, FL | | 12/06 | | 15 |
| | 3,361 |
| | 74,400 |
| | AMC |
Panama City Beach, FL | | 5/07 | | 16 |
| | 3,636 |
| | 75,605 |
| | Southern |
Kalispell, MT | | 8/07 | | 14 |
| | 2,088 |
| | 44,650 |
| | Cinemark |
Greensboro, NC (1) | | 11/07 | | 18 |
| | 3,320 |
| | 74,517 |
| | Southern |
Glendora, CA (1) | | 10/08 | | 12 |
| | 2,186 |
| | 50,710 |
| | AMC |
Ypsilanti, MI | | 12/09 | | 20 |
| | 5,602 |
| | 131,098 |
| | Cinemark |
Manchester, CT | | 12/09 | | 18 |
| | 4,317 |
| | 87,700 |
| | Cinemark |
Centreville, VA | | 12/09 | | 12 |
| | 3,094 |
| | 73,500 |
| | Cinemark |
Davenport, IA | | 12/09 | | 18 |
| | 3,772 |
| | 93,755 |
| | Cinemark |
Fairfax, VA | | 12/09 | | 14 |
| | 3,544 |
| | 74,689 |
| | Cinemark |
Flint, MI | | 12/09 | | 14 |
| | 3,493 |
| | 85,911 |
| | Cinemark |
Hazlet, NJ | | 12/09 | | 12 |
| | 3,000 |
| | 58,300 |
| | Cinemark |
Huber Heights, OH | | 12/09 | | 16 |
| | 1,624 |
| | 95,830 |
| | Cinemark |
North Haven, CT | | 12/09 | | 14 |
| | 1,329 |
| | 57,202 |
| | Cinemark |
Okolona, KY | | 12/09 | | 16 |
| | 3,264 |
| | 79,453 |
| | Cinemark |
Voorhees, NJ | | 12/09 | | 16 |
| | 3,098 |
| | 62,658 |
| | AMC |
Louisville, KY | | 12/09 | | 20 |
| | 3,194 |
| | 84,202 |
| | AMC |
Beaver Creek, OH | | 12/09 | | 14 |
| | 3,211 |
| | 73,634 |
| | Cinemark |
West Springfield, MA | | 12/09 | | 15 |
| | 3,775 |
| | 111,166 |
| | Cinemark |
Cincinnati, OH | | 12/09 | | 14 |
| | 3,152 |
| | 63,829 |
| | Cinemark |
Beaumont, TX | | 6/10 | | 15 |
| | 2,805 |
| | 63,352 |
| | Cinemark |
Colorado Springs, CO | | 6/10 | | 20 |
| | 4,597 |
| | 109,986 |
| | Cinemark |
El Paso, TX | | 6/10 | | 20 |
| | 4,742 |
| | 109,030 |
| | Cinemark |
Subtotal Entertainment Properties, carried over to next page | | 1,634 |
| | 306,001 |
| | 8,831,098 |
| | |
|
| | | | | | | | | | | | | |
Location | | Acquisition date | | Screens | | Seats | | Building (gross sq. ft) | | Tenant |
Entertainment Properties: | | | | | | | | | | |
Subtotal from previous page | | n/a | | 1,634 |
| | 306,001 |
| | 8,831,098 |
| | |
Grand Prairie, TX | | 6/10 | | 15 |
| | 2,654 |
| | 53,880 |
| | Cinemark |
Houston, TX | | 6/10 | | 16 |
| | 4,369 |
| | 100,656 |
| | Cinemark |
McKinney, TX | | 6/10 | | 14 |
| | 2,603 |
| | 56,088 |
| | Cinemark |
Mishawaka, IN | | 6/10 | | 14 |
| | 2,999 |
| | 62,088 |
| | Cinemark |
Pasadena, TX | | 6/10 | | 20 |
| | 3,156 |
| | 77,324 |
| | Cinemark |
Pflugerville, TX | | 6/10 | | 20 |
| | 4,654 |
| | 103,250 |
| | Cinemark |
Plano, TX | | 6/10 | | 10 |
| | 1,612 |
| | 34,046 |
| | Cinemark |
Pueblo, CO | | 6/10 | | 14 |
| | 2,649 |
| | 55,231 |
| | Cinemark |
Redding, CA | | 6/10 | | 14 |
| | 2,101 |
| | 46,793 |
| | Cinemark |
Virginia Beach, VA (1) | | 12/10 | | 7 |
| | 630 |
| | 20,745 |
| | Beach Cinema Bistro Group, Inc. |
Dallas, TX | | 12/10 | | — |
| | — |
| | 33,250 |
| | GMBG |
Merrimack, NH | | 3/11 | | 12 |
| | 1,810 |
| | 42,400 |
| | Cinemagic |
Hooksett, NH | | 3/11 | | 15 |
| | 2,248 |
| | 55,000 |
| | Cinemagic |
Saco, ME | | 3/11 | | 13 |
| | 2,256 |
| | 54,000 |
| | Cinemagic |
Westbrook, ME | | 3/11 | | 16 |
| | 2,292 |
| | 53,000 |
| | Cinemagic |
Twin Falls, ID (1) | | 4/11 | | 13 |
| | 2,100 |
| | 38,736 |
| | Cinema West |
Northbrook, IL (1) | | 7/11 | | — |
| | — |
| | 39,289 |
| | Pinstripes |
Jacksonville, FL | | 2/12 | | — |
| | — |
| | 46,000 |
| | Main Event |
Indianapolis, IN | | 2/12 | | — |
| | — |
| | 65,000 |
| | Main Event |
Dallas, TX (1) | | 3/12 | | 11 |
| | 1,672 |
| | 62,684 |
| | LOOK Cinemas |
Oakbrook, IL (1) | | 3/12 | | — |
| | — |
| | 66,442 |
| | Pinstripes |
Southern Pines, NC | | 6/12 | | 10 |
| | 1,696 |
| | 36,180 |
| | Frank Theatres, LLC |
Albuquerque, NM (1) | | 6/12 | | 16 |
| | 3,033 |
| | 71,297 |
| | Regal |
Austin, TX | | 9/12 | | 10 |
| | 946 |
| | 36,000 |
| | Alamo Draft House Cinemas |
Champaign, IL (1) | | 9/12 | | 13 |
| | 2,896 |
| | 55,063 |
| | AMC |
Gainesville, VA (1) | | 2/13 | | 10 |
| | 2,906 |
| | 57,943 |
| | Regal |
Lafayette, LA (1) (4) | | 8/13 | | 14 |
| | 2,267 |
| | 52,957 |
| | Southern |
New Iberia, LA (1) (4) | | 8/13 | | 10 |
| | 1,384 |
| | 32,760 |
| | Southern |
San Francisco, CA | | 8/13 | | 5 |
| | 537 |
| | 19,237 |
| | Alamo Draft House Cinemas |
Tuscaloosa, AL (1) | | 9/13 | | 16 |
| | 2,912 |
| | 65,442 |
| | Cobb |
Warrenville, IL (2) | | 10/13 | | 17 |
| | 3,866 |
| | 70,000 |
| | Regal |
Tampa, FL | | 10/13 | | 11 |
| | 762 |
| | 94,774 |
| | AMC |
Warrenville, IL | | 10/13 | | — |
| | — |
| | 35,000 |
| | Main Event |
Opelika, AL | | 11/12 | | 13 |
| | 2,896 |
| | 55,063 |
| | AMC |
Bedford, IN | | 4/14 | | 7 |
| | 1,009 |
| | 22,152 |
| | Regal |
Seymour, IN | | 4/14 | | 8 |
| | 1,216 |
| | 24,905 |
| | Regal |
Wilder, KY | | 4/14 | | 14 |
| | 991 |
| | 54,645 |
| | Regal |
Bowling Green, KY | | 4/14 | | 12 |
| | 1,803 |
| | 48,658 |
| | Regal |
New Albany, IN | | 4/14 | | 16 |
| | 2,824 |
| | 68,575 |
| | Regal |
Clarksville, TN | | 4/14 | | 16 |
| | 2,824 |
| | 73,208 |
| | Regal |
Williamsport, PA | | 4/14 | | 12 |
| | 1,872 |
| | 44,608 |
| | Regal |
Noblesville, IN | | 4/14 | | 12 |
| | 708 |
| | 33,892 |
| | Regal |
Moline, IL | | 4/14 | | 14 |
| | 2,270 |
| | 54,817 |
| | Regal |
O'Fallon, MO | | 4/14 | | 14 |
| | 2,114 |
| | 51,958 |
| | Regal |
McDonough, GA | | 4/14 | | 16 |
| | 2,602 |
| | 57,941 |
| | Regal |
Virginia Beach, VA | | 2/15 | | 12 |
| | 1,200 |
| | 43,764 |
| | Regal |
Yulee, FL | | 2/15 | | 10 |
| | 1,796 |
| | 36,200 |
| | AMC |
Schaumburg, IL | | 4/15 | | — |
| | — |
| | 25,052 |
| | Punch Bowl Social |
Jacksonville, FL | | 5/15 | | 24 |
| | 1,951 |
| | 82,064 |
| | AMC |
Denham Springs, LA (1) | | 5/15 | | 14 |
| | 2,200 |
| | 46,360 |
| | Southern |
Crystal Lake, IL | | 7/15 | | 16 |
| | 1,173 |
| | 73,000 |
| | Regal |
Laredo, TX | | 12/15 | | 7 |
| | 816 |
| | 31,800 |
| | Alamo Draft House Cinemas |
Corpus Christi, TX | | 12/15 | | 7 |
| | 794 |
| | 30,360 |
| | Alamo Draft House Cinemas |
Marietta, GA | | 2/16 | | — |
| | — |
| | 105,470 |
| | Andretti Indoor Karting & Games |
Stapleton, CO | | 5/16 | | — |
| | — |
| | 24,799 |
| | Punch Bowl Social |
Orlando, FL | | 5/16 | | — |
| | — |
| | 128,000 |
| | Andretti Indoor Karting & Games |
Delmont, PA | | 6/16 | | 12 |
| | 1,720 |
| | 45,319 |
| | AMC |
Subtotal Entertainment Properties, carried over to next page | | 2,246 |
| | 403,790 |
| | 11,886,263 |
| | |
|
| | | | | | | | | | | | | |
Location | | Acquisition date | | Screens | | Seats | | Building (gross sq. ft) | | Tenant |
Entertainment Properties: | | | | | | | | | | |
Subtotal from previous page | | n/a | | 2,246 |
| | 403,790 |
| | 11,886,263 |
| | |
Kennewick, WA | | 6/16 | | 12 |
| | 1,722 |
| | 47,004 |
| | AMC |
Franklin, TN | | 6/16 | | 20 |
| | 3,300 |
| | 109,956 |
| | AMC |
Mobile, AL | | 6/16 | | 16 |
| | 1,885 |
| | 60,471 |
| | AMC |
El Paso, TX | | 6/16 | | 16 |
| | 1,792 |
| | 60,283 |
| | AMC |
Edinburg, TX | | 6/16 | | 20 |
| | 2,500 |
| | 87,539 |
| | AMC |
Hendersonville, TN | | 7/16 | | 16 |
| | 3,027 |
| | 65,966 |
| | Regal |
Houston, TX | | 10/16 | | 10 |
| | 1,082 |
| | 46,525 |
| | Star Cinema Grill |
Detroit, MI | | 11/16 | | 9 |
| | 1,026 |
| | 56,804 |
| | Emagine Entertainment |
Dallas, TX | | 12/16 | | — |
| | — |
| | 49,950 |
| | Pinstack |
Fort Wayne, IN | | 05/17 | | 14 |
| | 1,200 |
| | 69,212 |
| | Regal |
Wichita, KS | | 05/17 | | 18 |
| | 4,044 |
| | 93,905 |
| | Regal |
Wichita, KS | | 05/17 | | 7 |
| | 690 |
| | 28,875 |
| | Regal |
Richmond, TX | | 8/17 | | 22 |
| | 5,221 |
| | 180,000 |
| | Regal |
Tomball, TX | | 8/17 | | 19 |
| | 2,138 |
| | 100,000 |
| | Regal |
Cleveland, OH (2) | | 8/17 | | 24 |
| | 2,198 |
| | 100,717 |
| | Cinemark |
Cleveland, OH | | 8/17 | | — |
| | — |
| | 25,739 |
| | Various |
Subtotal Entertainment Properties | | | | 2,469 |
| | 435,615 |
| | 13,069,209 |
| | |
| | | | | | | | | | |
Education Properties: | | | | | | | | | | |
Columbus, OH | | 9/07 | | — |
| | — |
| | 38,808 |
| | Imagine Schools, Inc. |
Mesa, AZ | | 9/07 | | — |
| | — |
| | 45,214 |
| | Imagine Schools, Inc. |
Surprise, AZ | | 9/07 | | — |
| | — |
| | 45,578 |
| | Imagine Schools, Inc. |
Las Vegas, NV | | 10/07 | | — |
| | — |
| | 49,690 |
| | Imagine Schools, Inc. |
Groveport, OH | | 10/07 | | — |
| | — |
| | 150,346 |
| | Imagine Schools, Inc. |
Cleveland, OH | | 10/07 | | — |
| | — |
| | 57,652 |
| | Harvard Avenue Community School |
Washington, DC | | 10/07 | | — |
| | — |
| | 34,962 |
| | Imagine Schools, Inc. |
Phoenix, AZ | | 10/07 | | — |
| | — |
| | 47,186 |
| | Imagine Schools, Inc. |
Baton Rouge, LA | | 3/11 | | — |
| | — |
| | 54,975 |
| | CSDC |
Goodyear, AZ | | 4/11 | | — |
| | — |
| | 37,502 |
| | Bradley Project Development |
Phoenix, AZ | | 11/11 | | — |
| | — |
| | 56,724 |
| | Skyline Schools Project Development |
Buckeye, AZ | | 4/12 | | — |
| | — |
| | 85,154 |
| | Schoolhouse Buckeye LLC |
Tarboro, NC | | 7/12 | | — |
| | — |
| | 110,000 |
| | NE Carolina Prep Acad Project Development |
Chester Upland, PA | | 3/13 | | — |
| | — |
| | 25,200 |
| | CSMI |
Hollywood, SC | | 3/13 | | — |
| | — |
| | 59,181 |
| | Lowcountry Leadership Project Development |
Lake Pleasant, AZ | | 3/13 | | — |
| | — |
| | 15,309 |
| | CLA Properties |
Camden, NJ | | 4/13 | | — |
| | — |
| | 59,024 |
| | Mastery Academy |
Vista, CA | | 5/13 | | — |
| | — |
| | 26,454 |
| | Bella Mente Project Development |
Columbus, OH | | 5/13 | | — |
| | — |
| | 40,905 |
| | Imagine Schools, Inc. |
Dayton, OH | | 5/13 | | — |
| | — |
| | 56,385 |
| | Imagine Schools, Inc. |
Toledo, OH | | 5/13 | | — |
| | — |
| | 48,375 |
| | Imagine Schools, Inc. |
Gilbert, AZ | | 5/13 | | — |
| | — |
| | 52,723 |
| | CAFA Gilbert Investments |
Chicago, IL | | 5/13 | | — |
| | — |
| | 62,900 |
| | Concept Schools |
Chandler, AZ | | 7/13 | | — |
| | — |
| | 70,000 |
| | Skyline Chandler Project Development |
Columbus, OH | | 11/13 | | — |
| | — |
| | 67,059 |
| | Imagine Schools, Inc. |
Goodyear, AZ | | 6/13 | | — |
| | — |
| | 20,746 |
| | CLA Properties |
Salt Lake City, UT | | 7/13 | | — |
| | — |
| | 160,000 |
| | Schoolhouse Galleria LLC |
Oklahoma City, OK | | 8/13 | | — |
| | — |
| | 25,737 |
| | CLA Properties |
Las Vegas, NV | | 9/13 | | — |
| | — |
| | 16,534 |
| | CLA Properties |
Coppell, TX | | 9/13 | | — |
| | — |
| | 25,737 |
| | CLA Properties |
Las Vegas, NV | | 9/13 | | — |
| | — |
| | 25,737 |
| | CLA Properties |
Palm Beach, FL | | 10/13 | | — |
| | — |
| | 80,000 |
| | Discovery Schools |
Mesa, AZ | | 12/13 | | — |
| | — |
| | 34,647 |
| | iLEAD Lancaster Project Development |
Kernersville, NC | | 12/13 | | — |
| | — |
| | 38,448 |
| | NC Leadership Project Development |
San Jose, CA | | 12/13 | | — |
| | — |
| | 80,604 |
| | Highmark Independent LLC |
Brooklyn, NY (1) | | 12/13 | | — |
| | — |
| | 89,556 |
| | Highmark Independent LLC |
Subtotal Education Properties, carried over to next page | | — |
| | — |
| | 1,995,052 |
| | |
|
| | | | | | | | | | | | | |
Location | | Acquisition
date
| | Screens | | Seats | | Building
(gross sq. ft)
| | Tenant |
Education Properties: | | | | | | | | | | |
Subtotal from previous page | | n/a | | — |
| | — |
| | 1,995,052 |
| | |
Mesa, AZ | | 1/14 | | — |
| | — |
| | 25,744 |
| | CLA Properties |
Fort Collins, CO | | 2/14 | | — |
| | — |
| | 51,180 |
| | GVA FC Project Development |
Chicago, IL | | 2/14 | | — |
| | — |
| | 102,000 |
| | British Schools of America |
Wilson, NC | | 3/14 | | — |
| | — |
| | 52,355 |
| | Wilson Prep Project Development |
Gilbert, AZ | | 3/14 | | — |
| | — |
| | 25,737 |
| | CLA Properties |
Baker, LA | | 4/14 | | — |
| | — |
| | 34,033 |
| | ICE Project Development LLC |
Charlotte, NC | | 5/14 | | — |
| | — |
| | 38,607 |
| | Bradford Charter Holdings LLC |
Chicago, IL | | 5/14 | | — |
| | — |
| | 65,885 |
| | Concept Schools |
Cedar Park, TX | | 7/14 | | — |
| | — |
| | 25,737 |
| | CLA Properties |
Thornton, CO | | 7/14 | | — |
| | — |
| | 25,737 |
| | CLA Properties |
Chicago, IL | | 7/14 | | — |
| | — |
| | 16,000 |
| | TGS Holdings, LLC |
Chandler, AZ | | 8/14 | | — |
| | — |
| | 31,240 |
| | American Charter Development |
Centennial, CO | | 8/14 | | — |
| | — |
| | 25,737 |
| | CLA Properties |
Port Royal, SC | | 9/14 | | — |
| | — |
| | 28,070 |
| | Lowcountry Charter Holdings LLC |
McKinney, TX | | 11/14 | | — |
| | — |
| | 33,237 |
| | CLA Properties |
Parker, CO | | 1/15 | | — |
| | — |
| | 37,180 |
| | Global Village Academy |
Parker, CO | | 1/15 | | — |
| | — |
| | 6,260 |
| | Global Village International |
Lakewood, CO | | 1/15 | | — |
| | — |
| | 4,995 |
| | Jacob Academy |
Castle Rock, CO | | 1/15 | | — |
| | — |
| | 8,619 |
| | Global Village International |
Memphis, TN | | 2/15 | | — |
| | — |
| | 135,959 |
| | DuBois Lanier Project Development LLC |
Macon, GA | | 2/15 | | — |
| | — |
| | 64,362 |
| | Vacant |
Palm Bay, FL | | 3/15 | | — |
| | — |
| | 47,895 |
| | Pineapple Cove Classical Academy |
Emeryville, CA | | 3/15 | | — |
| | — |
| | 8,520 |
| | LePort Educational Institute, Inc. |
Rock Hill, SC | | 4/15 | | — |
| | — |
| | 50,000 |
| | Riverwalk Academy |
Lafayette, CO | | 4/15 | | — |
| | — |
| | 4,950 |
| | Autana Montessori Bilingual School |
East Point, GA | | 5/15 | | — |
| | — |
| | 40,000 |
| | Fulton Leadership Academy |
McLean, VA | | 6/15 | | — |
| | — |
| | 215,275 |
| | BASIS Independent |
Ashburn, VA (20) | | 06/15 | | — |
| | — |
| | 33,237 |
| | Vacant |
West Chester, OH (20) | | 07/15 | | — |
| | — |
| | 33,237 |
| | Vacant |
Ellisville, MO (20) | | 07/15 | | — |
| | — |
| | 33,237 |
| | Vacant |
Trenton, NJ | | 07/15 | | — |
| | — |
| | 76,785 |
| | SABIS |
Chanhassen, MN (20) | | 08/15 | | — |
| | — |
| | 33,237 |
| | Vacant |
Maple Grove, MN | | 8/15 | | — |
| | — |
| | 33,237 |
| | CLA Properties |
Memphis, TN | | 9/15 | | — |
| | — |
| | 37,310 |
| | Du Bois Consortium |
Carmel, IN | | 9/15 | | — |
| | — |
| | 33,237 |
| | CLA Properties |
Atlanta, GA | | 10/15 | | — |
| | — |
| | 13,797 |
| | Nobel Learning Communities Inc |
Atlanta, GA | | 10/15 | | — |
| | — |
| | 13,930 |
| | Nobel Learning Communities Inc |
Macon, GA | | 11/15 | | — |
| | — |
| | 45,045 |
| | Cirrus Education Group, Inc. |
Galloway, NJ | | 12/15 | | — |
| | — |
| | 26,872 |
| | CSMI, LLC |
Fishers, IN (20) | | 12/15 | | — |
| | — |
| | 33,237 |
| | Vacant |
Bronx, NY | | 1/16 | | — |
| | — |
| | 20,000 |
| | Family Life Academy Charter School |
Parker, CO | | 4/16 | | — |
| | — |
| | 52,183 |
| | Parker Performing Arts School |
Holland, OH | | 4/16 | | — |
| | — |
| | 30,120 |
| | iLead Schools Development |
Westerville, OH (20) | | 4/16 | | — |
| | — |
| | 33,237 |
| | Vacant |
Las Vegas, NV (20) | | 6/16 | | — |
| | — |
| | 33,237 |
| | Vacant |
Louisville, KY | | 8/16 | | — |
| | — |
| | 8,983 |
| | Cadence Education |
Louisville, KY | | 8/16 | | — |
| | — |
| | 6,319 |
| | Cadence Education |
Mission Viejo, CA | | 9/16 | | — |
| | — |
| | 21,286 |
| | Stratford Schools |
Cheshire, CT | | 11/16 | | — |
| | — |
| | 16,005 |
| | EPC |
Edina, MN | | 11/16 | | — |
| | — |
| | 20,060 |
| | TGS Holdings, LLC |
Eagan, MN | | 11/16 | | — |
| | — |
| | 16,068 |
| | TGS Holdings, LLC |
Louisville, KY | | 12/16 | | — |
| | — |
| | 15,936 |
| | Cadence Education |
Bala Cynwyd, PA | | 12/16 | | — |
| | — |
| | 20,881 |
| | Cadence Education |
Kennesaw, GA | | 1/17 | | — |
| | — |
| | 7,156 |
| | Cadence Education |
New Berlin, WI | | 2/17 | | — |
| | — |
| | 11,093 |
| | Cadence Education |
Oak Creek, WI | | 2/17 | | — |
| | — |
| | 11,487 |
| | Cadence Education |
Holly Springs, NC | | 3/17 | | — |
| | — |
| | 46,057 |
| | Pine Springs Preparatory Academy |
Minnetonka, MN | | 3/17 | | — |
| | — |
| | 17,762 |
| | TGS Holdings, LLC |
Subtotal Education Properties, carried over to next page | | — |
| | — |
| | 4,034,634 |
| | |
|
| | | | | | | | | | | | | |
Location | | Acquisition
date
| | Screens | | Seats | | Building
(gross sq. ft)
| | Tenant |
Education Properties: | | | | | | | | | | |
Subtotal from previous page | | n/a | | — |
| | — |
| | 4,034,634 |
| | |
Wallingford, CT | | 3/17 | | — |
| | — |
| | 4,918 |
| | KLA Schools |
Chicopee, MA | | 5/17 | | — |
| | — |
| | 53,862 |
| | Hampden Charter School of Science |
Fort Worth, TX | | 5/17 | | — |
| | — |
| | 14,850 |
| | Nobel Learning Communities Inc |
Crowley, TX | | 5/17 | | — |
| | — |
| | 15,063 |
| | Nobel Learning Communities Inc |
Berlin, CT | | 6/17 | | — |
| | — |
| | 11,000 |
| | EPC |
Walnut Creek, CA | | 7/17 | | — |
| | — |
| | 43,702 |
| | Contra Costa School of Performing Arts |
Subtotal Education Properties | | | | — |
| | — |
| | 4,178,029 |
| | |
| | | | | | | | | | |
Recreation Properties: | | | | | | | | | | |
Bellfontaine, OH (1) (5) | | 11/05 | | — |
| | — |
| | 48,427 |
| | Peak Resorts, Inc. |
Allen, TX (1) | | 2/12 | | — |
| | — |
| | 63,242 |
| | Topgolf USA |
Dallas, TX (1) | | 2/12 | | — |
| | — |
| | 46,400 |
| | Topgolf USA |
Houston, TX (1) | | 9/12 | | — |
| | — |
| | 65,000 |
| | Topgolf USA |
McHenry, MD (1) (7) | | 12/12 | | — |
| | — |
| | 113,135 |
| | Everbright Pacific, LLC |
Colony, TX | | 12/12 | | — |
| | — |
| | 64,100 |
| | Topgolf USA |
Tannersville, PA (8) | | 9/13 | | — |
| | — |
| | 155,669 |
| | CBK |
Alpharetta, GA | | 5/13 | | — |
| | — |
| | 64,232 |
| | Topgolf USA |
Scottsdale, AZ (1) | | 6/13 | | — |
| | — |
| | 59,850 |
| | Topgolf USA |
Spring, TX | | 7/13 | | — |
| | — |
| | 64,232 |
| | Topgolf USA |
San Antonio, TX (1) | | 12/13 | | — |
| | — |
| | 64,232 |
| | Topgolf USA |
Tampa, FL (1) | | 2/14 | | — |
| | — |
| | 64,232 |
| | Topgolf USA |
Gilbert, AZ | | 2/14 | | — |
| | — |
| | 64,232 |
| | Topgolf USA |
Overland Park, KS | | 5/14 | | — |
| | — |
| | 65,000 |
| | Topgolf USA |
Ashburn, VA (1) | | 6/14 | | — |
| | — |
| | 64,232 |
| | Topgolf USA |
Atlanta, GA | | 6/14 | | — |
| | — |
| | 65,000 |
| | Topgolf USA |
Centennial, CO | | 6/14 | | — |
| | — |
| | 64,232 |
| | Topgolf USA |
Naperville, IL | | 8/14 | | — |
| | — |
| | 64,232 |
| | Topgolf USA |
Oklahoma City, OK | | 9/14 | | — |
| | — |
| | 65,000 |
| | Topgolf USA |
Webster, TX | | 11/14 | | — |
| | — |
| | 64,232 |
| | Topgolf USA |
Virginia Beach, VA | | 12/14 | | — |
| | — |
| | 64,232 |
| | Topgolf USA |
Wintergreen, VA (1) (9) | | 2/15 | | — |
| | — |
| | 164,612 |
| | Pacific Group Resorts Inc. |
Edison, NJ (1) | | 4/15 | | — |
| | — |
| | 65,000 |
| | Topgolf USA |
Tannersville, PA (1) | | 5/15 | | — |
| | — |
| | 580,527 |
| | CBK Lodge & CBH20 |
Jacksonville, FL | | 9/15 | | — |
| | — |
| | 64,232 |
| | Topgolf USA |
Roseville, CA | | 10/15 | | — |
| | — |
| | 64,232 |
| | Topgolf USA |
Portland, OR (1) | | 11/15 | | — |
| | — |
| | 64,232 |
| | Topgolf USA |
Orlando, FL | | 1/16 | | — |
| | — |
| | 65,000 |
| | Topgolf USA |
Charlotte, NC | | 4/16 | | — |
| | — |
| | 65,000 |
| | Topgolf USA |
Fort Worth, TX | | 8/16 | | — |
| | — |
| | 65,000 |
| | Topgolf USA |
Powells Point, NC (10) | | 10/16 | | — |
| | — |
| | — |
| | OBX Waterpark Adventure |
Nashville, TN (1) | | 12/16 | | — |
| | — |
| | 72,900 |
| | Topgolf USA |
Denver, CO | | 2/17 | | — |
| | — |
| | 4,081 |
| | iFly Indoor Skydiving |
Fort Worth, TX | | 3/17 | | — |
| | — |
| | 5,000 |
| | iFly Indoor Skydiving |
Olathe, KS | | 3/17 | | — |
| | — |
| | 106,250 |
| | Genesis Health Clubs |
Northstar, CA (11) | | 4/17 | | — |
| | — |
| | 126,412 |
| | Vail Resorts |
Huntsville, AL | | 8/17 | | — |
| | — |
| | 52,796 |
| | Topgolf USA |
Corfu, NY (12) | | 4/17 | | — |
| | — |
| | — |
| | Premier Parks |
Oklahoma City, OK (13) | | 4/17 | | — |
| | — |
| | — |
| | Premier Parks |
Hot Springs, AR (14) | | 4/17 | | — |
| | — |
| | — |
| | Premier Parks |
Riviera Beach, FL (15) | | 4/17 | | — |
| | — |
| | — |
| | Premier Parks |
Oklahoma City, OK (16) | | 4/17 | | — |
| | — |
| | — |
| | Premier Parks |
Palm Springs, CA (17) | | 4/17 | | — |
| | — |
| | — |
| | Premier Parks |
Spring, TX (18) | | 4/17 | | — |
| | — |
| | — |
| | Premier Parks |
Glendale, AZ (1) | | 4/17 | | — |
| | — |
| | — |
| | Premier Parks |
Kapolei, HI (1) | | 4/17 | | — |
| | — |
| | — |
| | Premier Parks |
Federal Way, WA (1) | | 4/17 | | — |
| | — |
| | — |
| | Premier Parks |
Colony, TX (1) | | 4/17 | | — |
| | — |
| | — |
| | Source Capital |
Subtotal Recreation Properties, carried over to next page | | — |
| | — |
| | 3,018,417 |
| | |
|
| | | | | | | | | | | | | |
Location | | Acquisition date | | Screens | | Seats | | Building (gross sq. ft) | | Tenant |
| | | | | | | | | | |
Subtotal from previous page | | n/a | | — |
| | — |
| | 3,018,417 |
| | |
Garland, TX (1) | | 4/17 | | — |
| | — |
| | — |
| | Source Capital |
Santa Monica, CA (1) | | 4/17 | | — |
| | — |
| | — |
| | Santa Monica Amusements |
Concord, CA (1) | | 4/17 | | — |
| | — |
| | — |
| | Six Flags |
Tampa, FL (1) | | 8/17 | | — |
| | — |
| | 6,062 |
| | iFly Indoor Skydiving |
Roseville, CA | | 9/17 | | — |
| | — |
| | 34,000 |
| | 24 Hour Fitness, Inc. |
Fort Lauderdale, FL (1) | | 10/17 | | — |
| | — |
| | 6,062 |
| | iFly Indoor Skydiving |
Subtotal Recreation Properties | | | | — |
| | — |
| | 3,064,541 |
| | |
| | | | | | | | | | |
Other Properties: | | | | | | | | | | |
Kiamesha Lake, NY (19) | | 07/10 | | — |
| | — |
| | — |
| | Montreign Operating Company, LLC |
Subtotal Other Properties | | | | — |
|
| — |
| | — |
| | |
| | | | | | | | | | |
Total | | | | 2,469 |
| | 435,615 |
| | 20,311,779 |
| | |
| | | | | | | | | | |
| |
(1) | Third-party ground leased property. Although we are the tenant under a ground lease and have assumed responsibility for performing the obligations thereunder, pursuant to the lease, the tenant is responsible for performing our obligations under the ground lease. |
| |
(2) | In addition to the theatre property itself, we have acquired land parcels adjacent to the theatre property, which we have or intend to lease or sell to restaurant or other entertainment themed operators. |
| |
(3) | Property is included as security for a $11.7 million mortgage note payable. |
| |
(4) | Property is included as security for $25.0 million bond payable. |
| |
(5) | Property includes 324 acres, of which 60 are skiable. |
| |
(6) | Property is located in Ontario, Canada. |
| |
(7) | Property includes 690 acres, of which 172 are skiable. |
| |
(8) | Property includes 354 acres, of which 166 are skiable. |
| |
(9) | Property includes 809 acres, of which 129 are skiable. |
| |
(10) | Property includes 81 acres. |
| |
(11) | Property includes 6,627 acres, of which 3,170 are skiable. |
| |
(12) | Property includes 969 acres. |
| |
(13) | Property includes 108 acres. |
| |
(14) | Property includes 70 acres. |
| |
(15) | Property includes 29 acres. |
| |
(16) | Property includes 23 acres. |
| |
(17) | Property includes 22 acres. |
| |
(18) | Property includes 80 acres. |
| |
(19) | Property includes 1,735 acres. |
| |
(20) | These leases have been terminated, however, the former tenant, CLA, continues to occupy the property. |
As of year ended December 31, 2017,2020 (dollars in thousands). At certain properties included below, we are the tenant under third-party ground leases and have assumed responsibility for performing the obligations thereunder. However, pursuant to the facility leases, the tenants are generally responsible for performing substantially all of our owned portfolio ofobligations under the ground leases.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Number of Properties | | Building Gross Square Footage | | Percentage Leased | | Rental Revenue for the Year Ended December 31, 2020 | | % of Company's Rental Revenue |
Experiential | | | | | | | | | |
Theatres | 178 | | | 12,203,123 | | | 94.1 | % | | $ | 103,984 | | | 28.0 | % |
Eat & Play (1) | 51 | | | 4,922,523 | | | 90.1 | % | | 120,186 | | | 32.3 | % |
Attractions | 17 | | | 21,205 | | | 100.0 | % | | 26,605 | | | 7.1 | % |
Ski | 5 | | | 608,255 | | | 100.0 | % | | 28,466 | | | 7.6 | % |
Experiential Lodging | 5 | | | 871,417 | | | 100.0 | % | | 16,303 | | | 4.4 | % |
Gaming (2) | 1 | | | — | | | — | % | | 10,631 | | | 2.9 | % |
Cultural | 3 | | | 512,768 | | | 100.0 | % | | 2,639 | | | 0.7 | % |
Fitness & Wellness | 3 | | | 186,900 | | | 100.0 | % | | 2,316 | | | 0.6 | % |
Total Experiential | 263 | | | 19,326,191 | | | 93.8 | % | | $ | 311,130 | | | 83.6 | % |
Education | | | | | | | | | |
Early Childhood Education Centers | 63 | | | 1,115,821 | | | 100.0 | % | | $ | 24,649 | | | 6.6 | % |
Private Schools | 9 | | | 292,362 | | | 100.0 | % | | 36,397 | | | 9.8 | % |
Total Education | 72 | | | 1,408,183 | | | 100.0 | % | | $ | 61,046 | | | 16.4 | % |
| | | | | | | | | |
Total | 335 | | | 20,734,374 | | | 94.2 | % | | $ | 372,176 | | | 100.0 | % |
(1) Includes seven theatres located in entertainment properties consisted of 13.1 million square feet and was 99% leased, including 11.0 million square feet of owned megaplex theatre properties that were 100% leased. districts.
(2) Represents land under ground lease to a casino operator.
The following table sets forth lease expirations regarding EPR’s owned megaplex theatre portfolio as of December 31, 2017 (dollars in thousands).
|
| | | | | | | | | | | | | | |
Megaplex Theatre Portfolio | |
Year | |
Number of Properties | | Square Footage | | Revenue for the Year Ended December 31, 2017 (1) | | % of Company's Total Revenue | |
2018 | | 4 |
| | 424,613 |
| | $ | 8,572 |
| | 1.5 | % | |
2019 | | 3 |
| | 286,486 |
| | 8,261 |
| | 1.4 | % | |
2020 | | 3 |
| | 186,512 |
| | 3,943 |
| | 0.7 | % | |
2021 | | 8 |
| | 566,379 |
| | 10,966 |
| | 1.9 | % | |
2022 | | 10 |
| | 822,146 |
| | 19,949 |
| | 3.5 | % | |
2023 | | 8 |
| | 718,900 |
| | 16,163 |
| | 2.8 | % | |
2024 | | 14 |
| | 1,133,549 |
| | 27,156 |
| | 4.7 | % | |
2025 | | 4 |
| | 248,315 |
| | 9,399 |
| | 1.6 | % | |
2026 | | 7 |
| | 405,874 |
| | 12,961 |
| | 2.3 | % | |
2027 | | 20 |
| | 1,174,176 |
| | 29,070 |
| | 5.0 | % | |
2028 | | 8 |
| | 540,534 |
| | 12,749 |
| | 2.2 | % | |
2029 | | 10 |
| | 714,593 |
| | 12,397 |
| | 2.2 | % | |
2030 | | 22 |
| | 1,844,099 |
| | 31,309 |
| | 5.5 | % | |
2031 | | 11 |
| | 738,229 |
| | 18,117 |
| | 3.1 | % | |
2032 | | 5 |
| | 242,346 |
| | 3,748 |
| | 0.7 | % | |
2033 | | 8 |
| | 422,466 |
| | 4,816 |
| | 0.8 | % | |
2034 | | 2 |
| | 111,493 |
| | 1,977 |
| | 0.3 | % | |
2035 | | 2 |
| | 51,037 |
| | 2,297 |
| | 0.4 | % | |
2036 | | 2 |
| | 103,164 |
| | 2,393 |
| | 0.4 | % | |
2037 | | 3 |
| | 310,360 |
| | 3,175 |
| | 0.6 | % | |
Thereafter | | — |
| | — |
| | — |
| | — | % | |
| | 154 |
| | 11,045,271 |
| | $ | 239,418 |
| | 41.6 | % | |
| |
(1) | Consists of rental revenue and tenant reimbursements. |
As of December 31, 2017, our owned portfolio of education properties consisted of 4.2 million square feet and was 92% leased. This reflects the termination of nine CLA leases, as further discussed in Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Recent Developments”.The following table sets forth lease expirations regarding EPR’s owned education portfolio as of December 31, 20172020 excluding non-theatre tenant leases at entertainment districts and experiential lodging properties operated through a traditional REIT lodging structure (dollars in thousands).:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
Year | | Number of Properties | | Square Footage | | Rental Revenue for the Year Ended December 31, 2020 | | % of Company's Rental Revenue | |
2021 | | — | | | — | | | $ | — | | | — | % | |
2022 | | 2 | | | 113,770 | | | 1,814 | | | 0.5 | % | |
2023 | | 2 | | | 90,134 | | | 953 | | | 0.3 | % | |
2024 | | 6 | | | 458,240 | | | 6,294 | | | 1.7 | % | |
2025 | | 2 | | | 39,240 | | | 2,673 | | | 0.7 | % | |
2026 | | 7 | | | 287,693 | | | 3,595 | | | 1.0 | % | |
2027 | | 11 | | | 657,881 | | | 18,660 | | | 5.0 | % | |
2028 | | 11 | | | 824,306 | | | 9,912 | | | 2.7 | % | |
2029 | | 12 | | | 679,171 | | | 10,401 | | | 2.8 | % | |
2030 | | 22 | | | 1,663,772 | | | 22,405 | | | 6.0 | % | |
2031 | | 13 | | | 688,919 | | | 6,702 | | | 1.8 | % | |
2032 | | 19 | | | 979,167 | | | 11,988 | | | 3.2 | % | |
2033 | | 9 | | | 423,882 | | | 8,343 | | | 2.2 | % | |
2034 | | 41 | | | 2,459,231 | | | 28,130 | | | 7.6 | % | |
2035 | | 33 | | | 2,691,756 | | | 58,482 | | | 15.7 | % | |
2036 | | 22 | | | 1,619,365 | | | 21,634 | | | 5.8 | % | |
2037 | | 32 | | | 1,941,997 | | | 38,372 | | | 10.3 | % | |
2038 | | 35 | | | 1,717,060 | | | 26,223 | | | 7.0 | % | |
2039 | | 4 | | | 176,156 | | | 6,739 | | | 1.8 | % | |
2040 | | 2 | | | 101,159 | | | 1,923 | | | 0.5 | % | |
Thereafter | | 35 | | | 472,852 | | | 25,630 | | | 6.9 | % | |
| | 320 | | | 18,085,751 | | | $ | 310,873 | | | 83.5 | % | |
|
| | | | | | | | | | | | | | |
| Education Portfolio | | |
Year | |
Number of Properties | | Square Footage | | Revenue for the Year Ended December 31, 2017 | | % of Company's Total Revenue | |
2018 | | 1 |
| | 26,872 |
| | $ | 272 |
| | — | % | |
2019 | | — |
| | — |
| | — |
| | — | % | |
2020 | | — |
| | — |
| | — |
| | — | % | |
2021 | | — |
| | — |
| | — |
| | — | % | |
2022 | | — |
| | — |
| | — |
| | — | % | |
2023 | | — |
| | — |
| | — |
| | — | % | |
2024 | | 1 |
| | 59,024 |
| | 3,064 |
| | 0.5 | % | |
2025 | | — |
| | — |
| | — |
| | — | % | |
2026 | | — |
| | — |
| | — |
| | — | % | |
2027 | | — |
| | — |
| | — |
| | — | % | |
2028 | | — |
| | — |
| | — |
| | — | % | |
2029 | | — |
| | — |
| | — |
| | — | % | |
2030 | | — |
| | — |
| | — |
| | — | % | |
2031 | | 13 |
| | 350,719 |
| | 6,171 |
| | 1.1 | % | |
2032 | | 10 |
| | 561,560 |
| | 10,960 |
| | 1.9 | % | |
2033 | | 9 |
| | 442,906 |
| | 8,145 |
| | 1.4 | % | |
2034 | | 14 |
| | 812,260 |
| | 24,140 |
| | 4.2 | % | |
2035 | | 20 |
| | 693,322 |
| | 10,508 |
| | 1.8 | % | |
2036 | | 14 |
| | 630,187 |
| | 14,049 |
| | 2.4 | % | |
2037 | | 9 |
| (1) | 292,091 |
| | 3,104 |
| | 0.5 | % | |
Thereafter | | 3 |
| (2) | 76,429 |
| | 1,505 |
| | 0.4 | % | |
| | 94 |
| | 3,945,370 |
| | $ | 81,918 |
| | 14.2 | % | |
(1) Excludes five leases that have been terminated, however the former tenant, CLA, continues to occupy the properties.
(2) Excludes two leases that have been terminated, however the former tenant, CLA, continues to occupy the properties.
As of December 31, 2017, ourOur owned portfolio of recreation properties consisted of approximately 3.1 million square feet of buildings and 10,458 acres of land, and was 100% leased. The following table sets forth lease expirations regarding EPR’s owned recreation portfolio as of December 31, 2017 (dollars in thousands).
|
| | | | | | | | | | | | | | |
| Recreation Portfolio | | |
Year | |
Number of Properties | | Square Footage | | Revenue for the Year Ended December 31, 2017 | | % of Company's Total Revenue | |
2018 | | — |
| | — |
| | $ | — |
| | — | % | |
2019 | | — |
| | — |
| | — |
| | — | % | |
2020 | | — |
| | — |
| | — |
| | — | % | |
2021 | | — |
| | — |
| | — |
| | — | % | |
2022 | | — |
| | — |
| | — |
| | — | % | |
2023 | | — |
| | — |
| | — |
| | — | % | |
2024 | | — |
| | — |
| | — |
| | — | % | |
2025 | | 1 |
| | — |
| | 1,233 |
| | 0.2 | % | |
2026 | | 1 |
| | — |
| | 3,806 |
| | 0.8 | % | |
2027 | | 3 |
| | 239,547 |
| | 14,005 |
| | 2.4 | % | |
2028 | | — |
| | — |
| | — |
| | — | % | |
2029 | | 2 |
| | — |
| | 1,875 |
| | 0.3 | % | |
2030 | | — |
| | — |
| | — |
| | — | % | |
2031 | | — |
| | — |
| | — |
| | — | % | |
2032 | | 5 |
| | 183,723 |
| | 5,726 |
| | 1.0 | % | |
2033 | | 2 |
| | 64,100 |
| | 3,131 |
| | 0.5 | % | |
2034 | | 7 |
| | 399,205 |
| | 11,094 |
| | 1.9 | % | |
2035 | | 11 |
| | 1,481,200 |
| | 40,887 |
| | 7.1 | % | |
2036 | | 5 |
| | 263,758 |
| | 9,567 |
| | 1.7 | % | |
2037 | | 15 |
| | 433,008 |
| | 20,172 |
| | 3.5 | % | |
Thereafter | | 2 |
| | — |
| | 1,267 |
| | 0.2 | % | |
| | 54 |
| | 3,064,541 |
| | $ | 112,763 |
| | 19.6 | % | |
Our properties are locatedlocated in 42 states, the District of Columbia41 states and in the Canadian province of Ontario. The following table sets forth certain state-by-state and Ontario, Canada information regarding our owned real estate portfolio as of December 31, 20172020 (dollars in thousands). This data does not include the public charter schools recorded as a direct financing lease.:
| | | | | | | | | | | | | | | | | | | | |
Location | | Building (gross sq. ft.) | | Rental Revenue for the Year Ended December 31, 2020 | | % of Rental Revenue |
Texas | | 3,287,154 | | | $ | 52,102 | | | 14.0 | % |
Florida | | 1,584,699 | | | 22,956 | | | 6.2 | % |
California | | 1,274,020 | | | 44,402 | | | 11.9 | % |
Ontario, Canada | | 1,204,639 | | | 21,788 | | | 5.9 | % |
Pennsylvania | | 932,661 | | | 27,035 | | | 7.3 | % |
Illinois | | 844,991 | | | 12,077 | | | 3.2 | % |
Virginia | | 816,508 | | | 19,187 | | | 5.2 | % |
Ohio | | 814,269 | | | 13,464 | | | 3.6 | % |
Colorado | | 720,447 | | | 15,512 | | | 4.2 | % |
Michigan | | 699,275 | | | 8,030 | | | 2.2 | % |
North Carolina | | 667,317 | | | 7,642 | | | 2.0 | % |
New York | | 646,711 | | | 30,650 | | | 8.2 | % |
Missouri | | 627,308 | | | 1,945 | | | 0.5 | % |
Louisiana | | 624,032 | | | 5,952 | | | 1.6 | % |
Kansas | | 512,002 | | | 5,880 | | | 1.6 | % |
Arizona | | 465,755 | | | 10,127 | | | 2.7 | % |
Indiana | | 457,998 | | | 3,369 | | | 0.9 | % |
Tennessee | | 435,433 | | | 5,687 | | | 1.5 | % |
Georgia | | 430,695 | | | 8,868 | | | 2.4 | % |
New Jersey | | 392,930 | | | 6,335 | | | 1.7 | % |
Kentucky | | 365,971 | | | 2,701 | | | 0.7 | % |
South Carolina | | 349,388 | | | 4,498 | | | 1.2 | % |
Maryland | | 340,986 | | | 4,311 | | | 1.2 | % |
Alabama | | 323,972 | | | 2,618 | | | 0.7 | % |
Oregon | | 201,532 | | | 3,604 | | | 1.0 | % |
Connecticut | | 185,074 | | | 3,830 | | | 1.0 | % |
Minnesota | | 181,764 | | | 4,971 | | | 1.3 | % |
Idaho | | 179,036 | | | 1,424 | | | 0.4 | % |
Arkansas | | 165,219 | | | 3,484 | | | 0.9 | % |
Mississippi | | 116,900 | | | 916 | | | 0.2 | % |
Massachusetts | | 111,166 | | | 1,020 | | | 0.3 | % |
Nebraska | | 107,402 | | | 331 | | | 0.1 | % |
Maine | | 107,000 | | | 487 | | | 0.1 | % |
New Hampshire | | 97,400 | | | 591 | | | 0.2 | % |
Iowa | | 93,755 | | | 1,402 | | | 0.4 | % |
Nevada | | 92,697 | | | 2,550 | | | 0.7 | % |
Oklahoma | | 90,737 | | | 6,058 | | | 1.6 | % |
New Mexico | | 71,297 | | | 163 | | | — | % |
Washington | | 47,004 | | | 2,154 | | | 0.6 | % |
Montana | | 44,650 | | | 993 | | | 0.3 | % |
Wisconsin | | 22,580 | | | 377 | | | 0.1 | % |
Hawaii | | — | | | 685 | | | 0.2 | % |
| | 20,734,374 | | | $ | 372,176 | | | 100.0 | % |
|
| | | | | | | | | | |
Location | | Building (gross sq. ft) | | Rental revenue for the year ended December 31, 2017 (1) | | % of Rental Revenue |
Texas | | 2,801,513 |
| | $ | 59,524 |
| | 12.3 | % |
Florida | | 1,277,910 |
| | 32,729 |
| | 6.8 | % |
California | | 1,182,731 |
| | 54,853 |
| | 11.3 | % |
Ontario, Canada | | 1,151,465 |
| | 34,247 |
| | 7.1 | % |
Ohio | | 1,062,561 |
| | 9,054 |
| | 1.9 | % |
Virginia | | 1,052,528 |
| | 24,508 |
| | 5.1 | % |
Illinois | | 1,032,267 |
| | 26,497 |
| | 5.4 | % |
Pennsylvania | | 872,204 |
| | 21,868 |
| | 4.5 | % |
North Carolina | | 773,842 |
| | 19,166 |
| | 4.0 | % |
Arizona | | 753,503 |
| | 21,552 |
| | 4.4 | % |
Colorado | | 702,481 |
| | 15,411 |
| | 3.2 | % |
Louisiana | | 661,262 |
| | 13,608 |
| | 2.8 | % |
Michigan | | 654,127 |
| | 11,551 |
| | 2.4 | % |
Tennessee | | 577,629 |
| | 10,955 |
| | 2.3 | % |
New York | | 555,632 |
| | 31,605 |
| | 6.5 | % |
Georgia | | 543,333 |
| | 10,938 |
| | 2.3 | % |
Kansas | | 512,002 |
| | 10,226 |
| | 2.1 | % |
Indiana | | 457,998 |
| | 5,922 |
| | 1.2 | % |
New Jersey | | 444,105 |
| | 12,210 |
| | 2.5 | % |
Alabama | | 323,972 |
| | 6,303 |
| | 1.3 | % |
Kentucky | | 298,196 |
| | 5,474 |
| | 1.1 | % |
South Carolina | | 256,786 |
| | 5,127 |
| | 1.1 | % |
Idaho | | 179,036 |
| | 2,743 |
| | 0.6 | % |
Connecticut | | 176,825 |
| | 3,244 |
| | 0.7 | % |
Maryland | | 176,441 |
| | 4,151 |
| | 0.9 | % |
Massachusetts | | 165,028 |
| | 1,213 |
| | 0.2 | % |
Utah | | 160,000 |
| | 3,450 |
| | 0.7 | % |
Missouri | | 145,613 |
| | 1,970 |
| | 0.4 | % |
Minnesota | | 120,364 |
| | (194 | ) | | — | % |
Mississippi | | 116,900 |
| | 3,265 |
| | 0.7 | % |
Nebraska | | 107,402 |
| | 1,836 |
| | 0.4 | % |
Maine | | 107,000 |
| | 1,870 |
| | 0.4 | % |
New Hampshire | | 97,400 |
| | 2,279 |
| | 0.5 | % |
Iowa | | 93,755 |
| | 1,170 |
| | 0.2 | % |
Oklahoma | | 90,737 |
| | 4,327 |
| | 0.9 | % |
Arkansas | | 79,330 |
| | 2,166 |
| | 0.3 | % |
Nevada | | 75,508 |
| | 74 |
| | — | % |
New Mexico | | 71,297 |
| | 1,251 |
| | 0.3 | % |
Oregon | | 64,232 |
| | 2,165 |
| | 0.3 | % |
Washington | | 47,004 |
| | 1,822 |
| | 0.4 | % |
Montana | | 44,650 |
| | 936 |
| | 0.2 | % |
Wisconsin | | 22,580 |
| | 345 |
| | 0.1 | % |
Hawaii | | — |
| | 792 |
| | 0.2 | % |
| | 20,089,149 |
| | $ | 484,203 |
| | 100.0 | % |
| |
(1) | Consists of rental revenue and tenant reimbursements. |
Office Location
Our executive office is located in Kansas City, Missouri and is leased from a third-party landlord. The lease has projected 20182021 annual rent of approximately $856approximately $884 thousand and is scheduled to expire on September 30, 2026, with two separate five-year extension options available. In March, our employees transitioned to a fully remote work force to protect the safety and well-being of our personnel. Our prior investments in technology, business continuity planning and cyber-security protocols have enabled us to continue working with limited operational impacts.
Tenants and Leases
Our existing leases on rental propertyreal estate investments (on a consolidated basis - excluding unconsolidated joint venture properties) provide for aggregate annual minimum rentals for 2021 of approximately $474.6$461.5 million (not including the impact of rent deferrals, ground lease payments for leases in which we are a sub-lessor, periodic rent escalations that are not fixed, percentage rent or straight-line rent). Our entertainment portfolio hasleases have an average remaining base lease term life of approximately 12 years, our recreation portfolio has an average remaining base lease term life of approximately 17 years, and our education portfolio has an average remaining base lease term life of approximately 15 years. These leases may be extended for predetermined extension terms at the option of the tenant.tenants. Our leases are typically triple-net leases that require the tenanttenant to pay substantially all expenses associated with the operation of the properties, including taxes, other governmental charges, insurance, utilities, service, maintenance and any ground lease payments.
Property Acquisitions and Developments in 20172020
Our property acquisitions and developments in 20172020 consisted primarily of spending in each of our primary segments of Entertainment, Recreation and Education.on Experiential properties. The percentage of total investment spending related to build-to-suit projects, including investment spending for mortgage notes decreasedon such projects, increased to approximately 47%55% in 2017,2020, from approximately 72%20% in 2016. Excluding our transaction with CNL Lifestyle Properties Inc. ("CNL Lifestyle"),2019. While we expect that acquisitions will continue to be the percentage of total investment spending related to build-to-suit projects in 2017 decreased to approximately 59%. Build-to-suit projects remain a significant componentgreater portion of our investment spending and we expect this to continue to be the case in future years.years, we also expect that build-to-suit projects will remain a component of such spending as well. Many of our build-to-suit opportunities come to us from our existing strong relationships with property operators and developers and we expect to continue to pursue these opportunities. During the year ended December 31, 2020, we limited our investment spending to enhance our liquidity position in light of the negative impact of the COVID-19 pandemic. We will continue to limit our investment spending during the Covenant Relief Period under the amendments to the agreements governing our bank credit facilities and private placement notes.
Item 3. Legal Proceedings
Resort Project in Sullivan County, New York
Prior proposed casinoWe are subject to certain claims and resort developers Concord Associates, L.P., Concord Resort, LLC and Concord Kiamesha LLC, which are affiliates of Louis Cappelli and from whom the Company acquired the Resorts World Catskills resort property (the "Cappelli Group"), commenced litigation against the Company beginning in 2011 regarding matters relating to the acquisition of that property and our relationship with Empire Resorts, Inc. and certain of its subsidiaries. This litigation involves three separate cases filed in state and federal court. Two of the cases, a state and the federal case, are closed and resulted in no liability to the Company.
The remaining case was filed on October 20, 2011 by the Cappelli Group against the Company and two of its affiliateslawsuits in the Supreme Courtordinary course of the State of New York, County of Westchester (the "Westchester Action"), asserting a claim for breach of contract and the implied covenant of good faith, and seeking damages of at least $800 million, based on allegations that the Company had breached an agreement (the "Casino Development Agreement"), dated June 18, 2010. The Company moved to dismiss the complaint in the Westchester Action based on a decision issued by the Sullivan County Supreme Court (one of the two closed cases referenced above) on June 30, 2014, as affirmed by the Appellate Division, Third Department (the "Sullivan Action"). On January 26, 2016, the Westchester County Supreme Court denied the Company's motion to dismiss but ordered the Cappelli Group to amend its pleading and remove all claims and allegations previously determined by the Sullivan Action. On February 18, 2016, the Cappelli Group filed an amended complaint asserting a single cause of action for breach of the covenant of good faith and fair dealing based upon allegations the Company had interfered with plaintiffs’ ability to obtain financing which complied with the Casino Development Agreement. On March 23, 2016, the Company filed a motion to dismiss the Cappelli Group’s revised amended complaint. On January 5, 2017, the Westchester County Supreme Court denied the Company’s second motion to dismiss. Discovery is ongoing.
The Company has not determined that losses related to the remaining Westchester Action are probable. In light of the inherent difficulty of predictingbusiness, the outcome of litigation generally,which cannot be determined at this time. In the Company does not have sufficient information to determineopinion of management, any liability we might incur upon the amount or rangeresolution of reasonably possible loss with respect to these matters. The Company’s assessments are based on estimates and assumptions that have been deemed reasonable by management, but that may prove to be incomplete or
inaccurate, and unanticipated events and circumstances may occur that might cause the Company to change those estimates and assumptions. The Company intends to vigorously defend the claims asserted against the Company and certain of its subsidiaries by the Cappelli Group and its affiliates, for which the Company believes it has meritorious defenses, but there can be no assurances as to the outcome of the claims and related litigation.
Early Childhood Education Tenant
During 2017, cash flow of Children’s Learning Adventure USA, LLC (“CLA Parent”) and its subsidiaries (“CLA”) was negatively impacted by challenges broughtlawsuits will not, in the aggregate, have a material adverse effect on by its rapid expansion and related ramp up to stabilization and by adverse weather conditions in Texas during the third quarter of 2017. During 2017, the Company participated in negotiations among CLA and other landlords regarding a potential restructuring. Although negotiations are on-going and progress has been made toward a restructuring, investments necessary to accomplish the restructuring have not yet been secured. As a result, the Company sent CLA notices of lease termination on October 12, 2017 for the following CLA properties: (i) Broomfield, Colorado, (ii) Ashburn, Virginia, (iii) West Chester, Ohio, (iv) Chanhassen, Minnesota, (v) Ellisville, Missouri, (vi) Farm Road-Las Vegas, Nevada, (vii) Fishers, Indiana, (viii) Tredyffrin, Pennsylvania, and (ix) Westerville, Ohio.
On December 18, 2017, ten subsidiaries of CLA Parent filed separate voluntary petitions for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code with the United States Bankruptcy Court for the District of Arizona (Jointly Administered under Case No. 2:17-bk-14851-BMW). The debtors in those cases include CLA Properties SPE, LLC, CLA Maple Grove, LLC, CLA Carmel, LLC, CLA West Chester, LLC, CLA One Loudoun, LLC, LLC, CLA Fishers, LLC, CLA Chanhassen, LLC, CLA Ellisville, LLC, CLA Farm, LLC, and CLA Westerville, LLC (collectively, the “CLA Debtors”). CLA Parent has not filed a petition for bankruptcy. The CLA Debtors include each of the Company's tenants to 24 out of our 25 CLA properties, including 21 operating properties, two partially completed properties and one unimproved land parcel. The only CLA tenant unaffected by the bankruptcy is CLA King of Prussia, LLC, which is the CLA tenant entity for an unimproved land parcel located in Tredyffrin, Pennsylvania. It is the Company's understanding that the CLA Debtors filed bankruptcy petitions to stay the termination of the remaining CLA leases and delay the eviction process.
CLA continues to negotiate a restructuring with third parties. The Company will continue to consider whether allconsolidated financial position or a portion of the Company's properties should be leased to other operators based on results of the restructuring process. Absent an acceptable restructuring, the Company's intention is to vigorously pursue the process of regaining possession of the properties with the goal of securing leases with one or more new tenants. On January 8, 2018, the Company filed with the Court motions seeking rent for the post-petition period beginning on December 18, 2017. The hearing for these motions has been scheduled for March 14, 2018. On January 8, 2018, the Company also filed with the Court motions seeking relief from the automatic stay seeking the right to terminate the remaining leases and evict the CLA Debtors from the properties. There can be no assurance as to the outcome or timing of such proceedings.operations.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information and Dividends
The following table sets forth, for the quarterly periods indicated, the high and low sales prices per share for ourOur common shares are listed on the New York Stock Exchange (“NYSE”) under the trading symbol “EPR” and the dividends declared.“EPR.”
|
| | | | | | | | | | | |
| High | | Low | | Dividend |
2017: | | | | | |
Fourth quarter | $ | 71.43 |
| | $ | 63.10 |
| | $ | 1.020 |
|
Third quarter | 74.15 |
| | 66.66 |
| | 1.020 |
|
Second quarter | 76.90 |
| | 68.13 |
| | 1.020 |
|
First quarter | 77.70 |
| | 70.08 |
| | 1.020 |
|
2016: | | | | | |
Fourth quarter | $ | 78.67 |
| | $ | 65.50 |
| | $ | 0.960 |
|
Third quarter | 84.67 |
| | 74.93 |
| | 0.960 |
|
Second quarter | 80.69 |
| | 64.00 |
| | 0.960 |
|
First quarter | 66.71 |
| | 53.00 |
| | 0.960 |
|
We declared dividends to common shareholders aggregating $4.08 and $3.84 per common share in 2017 and 2016, respectively.
While we intend to continue paying regular dividends, future dividend declarations will be at the discretion of the Board of Trustees and will depend on our actual cash flow, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code, debt covenants and other factors the Board of Trustees deems relevant. We pay dividends to our common shareholders on a monthly basis and expect to continue to pay such dividends monthly. Additionally, we pay dividends to our preferred shareholders on a quarterly basis and expect to continue to pay such dividends quarterly. The actual cash flow available to pay dividends may be affected by a number of factors, including the revenues received from rental properties and mortgage notes, our operating expenses, debt service on our borrowings, the ability of tenants and customers to meet their obligations to us and any unanticipated capital expenditures. Our Series C convertible preferred shares have a fixed dividend rate of 5.75%, our Series E convertible preferred shares have a fixed dividend rate of 9.00% and our Series G redeemable preferred shares have a fixed dividend rate of 5.75%.
During the year ended December 31, 2017,2020, the Company did not sell any unregistered equity securities.
On February 27, 2018,24, 2021, there were approximately 8,319 holdersapproximately 6,707 holders of record of our outstanding common shares.
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 | |
October 1 through October 31, 2020 common shares | | — | | | $ | — | | | — | | | $ | 44,006,350 | | |
November 1 through November 30, 2020 common shares | | — | | | — | | | — | | | 44,006,350 | | |
December 1 through December 31, 2020 common shares | | — | | | — | | | — | | | 44,006,350 | | |
| | | | | | | | | |
Total | | — | | | $ | — | | | — | | | $ | — | | (1) | |
|
| | | | | | | | | | | | | | | |
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 |
October 1 through October 31, 2017 common stock | | — |
| | | $ | — |
| | — |
| | $ | — |
|
November 1 through November 30, 2017 common stock | | — |
| | | — |
| | — |
| | — |
|
December 1 through December 31, 2017 common stock | | 244 |
| (1) | | 63.37 |
| | — |
| | — |
|
| | | | | | | | | |
Total | | 244 |
| | | $ | 63.37 |
| | — |
| | $ | — |
|
| | | | | | | | | |
(1) On March 24, 2020, we announced that our Board of Trustees approved a share repurchase program pursuant to which we may repurchase up to $150 million of our common shares. The repurchasesshare repurchase program was set to expire on December 31, 2020; however, we suspended the program upon the effective date of equity securities during Decemberthe covenant modification agreements, June 29, 2020, as discussed below under "Management's Discussion and Analysis of 2017 were completedFinancial Condition and Results of Operations." Under the share repurchase program, we could repurchase our common shares in conjunction with employee stock option exercises. These repurchases were not madethe open market, through block trades, in privately negotiated transactions, pursuant to a publicly announcedtrading plan separately adopted in the future, or by other means, in accordance with federal securities laws and other applicable laws. The actual timing, number and value of common shares repurchased under the share repurchase program was determined by management at its discretion and depended on a number of factors, including, but not limited to, the market price of our common shares, general market and economic conditions, our financial condition, and applicable legal requirements. We were not obligated to repurchase a minimum number of common shares under the share repurchase program. There can be no assurances as to our ability to reinstitute the share repurchase program in future periods or the timing thereof.
Dividends
As discussed below under "Management's Discussion and Analysis of Financial Condition and Results of Operations," on June 29, 2020 and November 3, 2020, we amended our Consolidated Credit Agreement, which governs our unsecured revolving credit facility and our unsecured term loan facility, and on June 29, 2020 and December 24, 2020, we also amended the Note Purchase Agreement which governs our private placement notes. The amendments modified certain provisions and waived our obligation to comply with certain covenants under these debt agreements in light of the continuing financial and operational impacts of the COVID-19 pandemic on us and our tenants and borrowers. The amendments also impose certain restrictions including our ability to pay common dividends during the Covenant Relief Period, subject to certain exceptions. Accordingly, in connection with these amendments, we temporarily suspended our monthly cash dividend to common shareholders after the common share dividend payable May 15, 2020 (except as may be necessary to maintain REIT status and to not owe income tax). There can be no assurances as to our ability to reinstitute cash dividend payments to common shareholders in future periods or the timing thereof.
Share Performance Graph
The following graph compares the cumulative return on our common shares during the five yearfive-year period ended December 31, 2017,2020, to the cumulative return on the MSCI U.S. REIT Index and the Russell 1000 Index for the same period.Theperiod. The comparisons assume an initial investment of $100 and the reinvestment of all dividends during the comparison period. Performance during the comparison period is not necessarily indicative of future performance.
| | Total Return Analysis | | | | | | | | | | | | Total Return Analysis | | | | | | | | | | | |
| 12/31/2012 | | 12/31/2013 | | 12/31/2014 | | 12/31/2015 | | 12/31/2016 | | 12/31/2017 | | 12/31/2015 | | 12/31/2016 | | 12/31/2017 | | 12/31/2018 | | 12/31/2019 | | 12/31/2020 |
EPR Properties | $ | 100.00 |
| | $ | 113.37 |
| | $ | 141.54 |
| | $ | 152.91 |
| | $ | 198.25 |
| | $ | 189.54 |
| EPR Properties | $ | 100.00 | | | $ | 129.65 | | | $ | 125.22 | | | $ | 131.16 | | | $ | 153.63 | | | $ | 73.48 | |
MSCI US REIT Index | $ | 100.00 |
| | $ | 102.47 |
| | $ | 133.60 |
| | $ | 136.97 |
| | $ | 148.78 |
| | $ | 156.29 |
| |
MSCI U.S. REIT Index | | MSCI U.S. REIT Index | $ | 100.00 | | | $ | 108.60 | | | $ | 114.11 | | | $ | 108.89 | | | $ | 137.03 | | | $ | 126.65 | |
Russell 1000 Index | $ | 100.00 |
| | $ | 133.11 |
| | $ | 150.73 |
| | $ | 152.12 |
| | $ | 170.45 |
| | $ | 207.42 |
| Russell 1000 Index | $ | 100.00 | | | $ | 112.05 | | | $ | 136.36 | | | $ | 129.83 | | | $ | 170.63 | | | $ | 206.40 | |
Source: SNL FinancialS&P Global Market Intelligence
The performance graph and related text are being furnished to and not filed with the SEC, and will not be deemed "soliciting material" or subject to Regulation 14A or 14C under the Exchange Act or to the liabilities of Section 18 of the Exchange Act, and will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent we specifically incorporate such information by reference into such a filing.
Item 6. Selected Financial Data
Operating statement
The following table sets forth selected consolidated financial and other information of the Company as of and for each of the years ended December 31, 2020, 2019, 2018, 2017, and 2016. The table should be read in conjunction with the Company's consolidated financial statements and notes thereto and Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in this Annual Report on Form 10-K.
The operating data below reflects the reclassification of discontinued operations for public charter school investments disposed of during the year ended December 31, 2019. For additional detail, see Note 17 to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
(Dollars in thousands except per share data) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Operating Statement Data | | | | | | | | | |
(Dollars in thousands, except per share data) | | | | | | | | | |
| Year Ended December 31, |
| 2020 | | 2019 | | 2018 | | 2017 | | 2016 |
Total revenue | $ | 414,661 | | | $ | 651,969 | | | $ | 639,921 | | | $ | 518,320 | | | $ | 451,038 | |
Net (loss) income attributable to EPR Properties | (131,728) | | | 202,243 | | | 266,983 | | | 262,968 | | | 224,982 | |
Preferred dividend requirements | (24,136) | | | (24,136) | | | (24,142) | | | (24,293) | | | (23,806) | |
Preferred share redemption costs | — | | | — | | | — | | | (4,457) | | | — | |
Net (loss) income available to common shareholders of EPR Properties | (155,864) | | | 178,107 | | | 242,841 | | | 234,218 | | | 201,176 | |
| | | | | | | | | |
Net (loss) income available to common shareholders per common share: | | | | | | | | | |
Continuing operations | $ | (2.05) | | | $ | 1.70 | | | $ | 2.66 | | | $ | 2.76 | | | $ | 2.62 | |
Discontinued operations | — | | | 0.62 | | | 0.61 | | | 0.53 | | | 0.55 | |
Basic | $ | (2.05) | | | $ | 2.32 | | | $ | 3.27 | | | $ | 3.29 | | | $ | 3.17 | |
| | | | | | | | | |
Continuing operations | $ | (2.05) | | | $ | 1.70 | | | $ | 2.66 | | | $ | 2.76 | | | $ | 2.62 | |
Discontinued operations | — | | | 0.62 | | | 0.61 | | | 0.53 | | | 0.55 | |
Diluted | $ | (2.05) | | | $ | 2.32 | | | $ | 3.27 | | | $ | 3.29 | | | $ | 3.17 | |
| | | | | | | | | |
Shares used for computation (in thousands): | | | | | | | | | |
Basic | 75,994 | | | 76,746 | | | 74,292 | | | 71,191 | | | 63,381 | |
Diluted | 75,994 | | | 76,782 | | | 74,337 | | | 71,254 | | | 63,474 | |
| | | | | | | | | |
Cash dividends declared per common share | $ | 1.515 | | | $ | 4.500 | | | $ | 4.320 | | | $ | 4.080 | | | $ | 3.840 | |
| | | | | | | | | |
Balance Sheet Data (at period end) | | | | | | | | | |
(Dollars in thousands) | | | | | | | | | |
Cash and cash equivalents | $ | 1,025,577 | | | $ | 528,763 | | | $ | 5,872 | | | $ | 41,917 | | | $ | 19,335 | |
Total assets | 6,704,185 | | | 6,577,511 | | | 6,131,390 | | | 6,191,493 | | | 4,865,022 | |
Debt | 3,694,443 | | | 3,102,830 | | | 2,986,054 | | | 3,028,827 | | | 2,485,625 | |
Total liabilities | 4,073,600 | | | 3,571,706 | | | 3,266,367 | | | 3,264,168 | | | 2,679,121 | |
Equity | 2,630,585 | | | 3,005,805 | | | 2,865,023 | | | 2,927,325 | | | 2,185,901 | |
|
| | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2017 | | 2016 | | 2015 | | 2014 (1) | | 2013 |
Rental revenue | $ | 468,648 |
| | $ | 399,589 |
| | $ | 330,886 |
| | $ | 286,673 |
| | $ | 248,709 |
|
Tenant reimbursements | 15,555 |
| | 15,595 |
| | 16,320 |
| | 17,663 |
| | 18,401 |
|
Other income | 3,095 |
| | 9,039 |
| | 3,629 |
| | 1,009 |
| | 1,682 |
|
Mortgage and other financing income | 88,693 |
| | 69,019 |
| | 70,182 |
| | 79,706 |
| | 74,272 |
|
Total revenue | 575,991 |
| | 493,242 |
| | 421,017 |
| | 385,051 |
| | 343,064 |
|
Property operating expense | 31,653 |
| | 22,602 |
| | 23,433 |
| | 24,897 |
| | 26,016 |
|
Other expense | 242 |
| | 5 |
| | 648 |
| | 771 |
| | 658 |
|
General and administrative expense | 43,383 |
| | 37,543 |
| | 31,021 |
| | 27,566 |
| | 25,613 |
|
Retirement severance expense | — |
| | — |
| | 18,578 |
| | — |
| | — |
|
Costs associated with loan refinancing or payoff, net | 1,549 |
| | 905 |
| | 270 |
| | 301 |
| | 6,166 |
|
Gain on early extinguishment of debt | (977 | ) | | — |
| | — |
| | — |
| | (4,539 | ) |
Interest expense, net | 133,124 |
| | 97,144 |
| | 79,915 |
| | 81,270 |
| | 81,056 |
|
Transaction costs | 523 |
| | 7,869 |
| | 7,518 |
| | 2,452 |
| | 1,955 |
|
Provision for loan losses | — |
| | — |
| | — |
| | 3,777 |
| | — |
|
Impairment charges | 10,195 |
| | — |
| | — |
| | — |
| | — |
|
Depreciation and amortization | 132,946 |
| | 107,573 |
| | 89,617 |
| | 66,739 |
| | 53,946 |
|
Income before equity in income from joint ventures and other items | 223,353 |
| | 219,601 |
| | 170,017 |
| | 177,278 |
| | 152,193 |
|
Equity in income from joint ventures | 72 |
| | 619 |
| | 969 |
| | 1,273 |
| | 1,398 |
|
Gain on sale of real estate | 41,942 |
| | 5,315 |
| | 23,829 |
| | 1,209 |
| | 3,017 |
|
Gain on sale of investment in a direct financing lease | — |
| | — |
| | — |
| | 220 |
| | — |
|
Gain on previously held equity interest | — |
| | — |
| | — |
| | — |
| | 4,853 |
|
Income before income taxes | 265,367 |
| | 225,535 |
| | 194,815 |
| | 179,980 |
| | 161,461 |
|
Income tax benefit (expense) | (2,399 | ) | | (553 | ) | | (482 | ) | | (4,228 | ) | | 14,176 |
|
Income from continuing operations | $ | 262,968 |
| | $ | 224,982 |
| | $ | 194,333 |
| | $ | 175,752 |
| | $ | 175,637 |
|
Discontinued operations: | | | | | | | | | |
Income from discontinued operations | — |
| | — |
| | 199 |
| | 505 |
| | 333 |
|
Transaction benefit | — |
| | — |
| | — |
| | 3,376 |
| | — |
|
Gain on sale, net from discontinued operations | — |
| | — |
| | — |
| | — |
| | 4,256 |
|
Net income attributable to EPR Properties | 262,968 |
| | 224,982 |
| | 194,532 |
| | 179,633 |
| | 180,226 |
|
Preferred dividend requirements | (24,293 | ) | | (23,806 | ) | | (23,806 | ) | | (23,807 | ) | | (23,806 | ) |
Preferred share redemption costs | (4,457 | ) | | — |
| | — |
| | — |
| | — |
|
Net income available to common shareholders of EPR Properties | $ | 234,218 |
| | $ | 201,176 |
| | $ | 170,726 |
| | $ | 155,826 |
| | $ | 156,420 |
|
Per share data attributable to EPR Properties shareholders: | | | | | | | | | |
Basic earnings per share data: | | | | | | | | | |
Income from continuing operations | $ | 3.29 |
| | $ | 3.17 |
| | $ | 2.93 |
| | $ | 2.80 |
| | $ | 3.16 |
|
Income from discontinued operations | — |
| | — |
| | 0.01 |
| | 0.07 |
| | 0.10 |
|
Net income available to common shareholders | $ | 3.29 |
| | $ | 3.17 |
| | $ | 2.94 |
| | $ | 2.87 |
| | $ | 3.26 |
|
Diluted earnings per share data: | | | | | | | | | |
Income from continuing operations | $ | 3.29 |
| | $ | 3.17 |
| | $ | 2.92 |
| | $ | 2.79 |
| | $ | 3.15 |
|
Income from discontinued operations | — |
| | — |
| | 0.01 |
| | 0.07 |
| | 0.09 |
|
Net income available to common shareholders | $ | 3.29 |
| | $ | 3.17 |
| | $ | 2.93 |
| | $ | 2.86 |
| | $ | 3.24 |
|
Shares used for computation (in thousands): | | | | | | | | | |
Basic | 71,191 |
| | 63,381 |
| | 58,138 |
| | 54,244 |
| | 48,028 |
|
Diluted | 71,254 |
| | 63,474 |
| | 58,328 |
| | 54,444 |
| | 48,214 |
|
Cash dividends declared per common share | $ | 4.08 |
| | $ | 3.84 |
| | $ | 3.63 |
| | $ | 3.42 |
| | $ | 3.16 |
|
(1) The Company adopted FASB Accounting Standards Update (ASU) No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, in 2014.
Balance sheet data
(Dollars in thousands)
|
| | | | | | | | | | | | | | | | | | | |
| December 31, |
| 2017 | | 2016 | | 2015 | | 2014 | | 2013 |
Net real estate investments | $ | 4,895,552 |
| | $ | 3,915,402 |
| | $ | 3,427,729 |
| | $ | 2,839,333 |
| | $ | 2,394,966 |
|
Mortgage notes and related accrued interest receivable, net | 970,749 |
| | 613,978 |
| | 423,780 |
| | 507,955 |
| | 486,337 |
|
Investment in direct financing leases, net | 57,903 |
| | 102,698 |
| | 190,880 |
| | 199,332 |
| | 242,212 |
|
Total assets | 6,191,493 |
| | 4,865,022 |
| | 4,217,270 |
| | 3,686,275 |
| | 3,254,372 |
|
Dividends payable | 30,185 |
| | 26,318 |
| | 24,352 |
| | 22,233 |
| | 19,552 |
|
Debt | 3,028,827 |
| | 2,485,625 |
| | 1,981,920 |
| | 1,629,750 |
| | 1,457,432 |
|
Total liabilities | 3,264,168 |
| | 2,679,121 |
| | 2,143,402 |
| | 1,759,786 |
| | 1,566,358 |
|
Equity | 2,927,325 |
| | 2,185,901 |
| | 2,073,868 |
| | 1,926,489 |
| | 1,688,014 |
|
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in this Annual Report on Form 10-K. The forward-looking statements included in this discussion and elsewhere in this Annual Report on Form 10-K involve risks and uncertainties, including anticipated financial performance, business prospects, industry trends, shareholder returns, performance of leases by tenants, performance on loans to customers and other matters, which reflect management’s best judgment based on factors currently known. See “Cautionary Statement Concerning Forward-Looking Statements.” Actual results and experience could differ materially from the anticipated results and other expectations expressed in our forward-looking statements as a result of a number of factors, including but not limited to those discussed in this Item and in Item 1A - “Risk Factors.”
Overview
Business
Our principal business objective is to enhance shareholder value by achieving predictable and increasing FFOFunds From Operations As Adjusted ("FFOAA") and dividends per share. Our prevailing strategy is to focus on long-term investments in a limited number of categories inthe Experiential sector which we maintain abenefit from our depth of knowledge and relationships, and which we believe offer sustained performance throughout allmost economic cycles. See Item 1 - "Business" for further discussion regarding our strategic rationale for our focus on Experiential properties.
Our investment portfolio includes ownership of and long-term mortgages on entertainment, recreationExperiential and educationEducation properties. Substantially all of our owned single-tenant properties are leased pursuant to long-term, triple-net leases, under which the tenants typically pay all operating expenses of the property. Tenants at our owned multi-tenant properties are typically required to pay common area maintenance charges to reimburse us for their pro-rata portion of these costs. We also own certain experiential lodging assets structured using traditional REIT lodging structures as discussed in Item 1 - "Business."
It has been our strategy to structure leases and financings to ensure a positive spread between our cost of capital and the rentals or interest paid by our tenants. We have primarily acquired or developed new properties that are pre-leased to a single tenant or multi-tenant properties that have a high occupancy rate. We have also entered into certain joint ventures and we have provided mortgage note financing. We intend to continue entering into some or all of these types of arrangements in the foreseeable future.
Historically,Prior to the COVID-19 pandemic, our primary challenges havehad been locating suitable properties, negotiating favorable lease or financing terms (on new or existing properties), and managing our portfolio as we have continued to grow. We believe our management’s knowledge and industry relationships have facilitated opportunities for us to acquire, finance and lease properties. The current economic situation created by the pandemic has impeded our growth in the near term while our focus has been addressing challenges brought on by the pandemic, including monitoring customer status and working with customers to help ensure long-term stability as well as assisting them in reopening plans. See more discussion on the impact of the pandemic on our business below. We expect to return to growth as our customers' businesses continue to recover and, in turn, our cashflows stabilize. Our business is subject to a number of risks and uncertainties, including those described in Item 1A - “Risk Factors” in Item 1A of this report.
We group our investments into four reportable operating segments: Entertainment, Recreation, Education and Other. As of December 31, 2017,2020, our total assets were approximately $6.2approximately $6.7 billion (after accumulated depreciation of approximately $0.7$1.1 billion) which included investments in each of our four operating segments with properties located in 4244 states the District of Columbia and Ontario, Canada. Our total investments (a non-GAAP financial measure) were approximately $6.5 billion at December 31, 2020. See "Non-GAAP Financial Measures" for the calculation of total investments and reconciliation of total investments to "Total assets" in the consolidated balance sheet at December 31, 2020 and 2019. We group our investments into two reportable segments, Experiential and Education. As of December 31, 2020, our Experiential investments comprised $5.9 billion, or 91%, and our Education investments comprised $0.6 billion, or 9%, of our total investments.
As of December 31, 2020, our Experiential segment included investments in 147 megaplex theatres, seven entertainment retail centers (which included seven additional megaplex theatres) and 11 family entertainment centers. Our portfolio of owned entertainment properties consisted of 13.1the following property types (owned or financed):
•178 theatre properties;
•55 eat & play properties (including seven theatres located in entertainment districts);
•18 attraction properties;
•13 ski properties;
•six experiential lodging properties;
•one gaming property;
•three cultural properties; and
•seven fitness & wellness properties.
As of December 31, 2020, our owned Experiential real estate portfolio consisted of approximately 19.3 million square feet, was 93.8% leased and was 99% leased, including megaplex theatres that were 100% leased.
Our Recreation segment included investments$57.6 million in 26 ski properties, 20 attractions, 30 golf entertainment complexes and eight other recreation facilities. Our portfolio of owned recreation properties was 100% leased.
Our Education segment included investments in 65 public charter schools, 65 early education centers and 15 private schools. Our portfolio of owned education properties consisted of 4.2 million square feet and was 92% leased. This reflects the termination of nine CLA leases, as further discussed in Recent Developments below.
Our Other segment consisted primarily of land under ground lease, property under development and $20.2 million in undeveloped land held for development related toinventory.
As of December 31, 2020, our Education segment consisted of the Resorts World Catskills casinofollowing property types (owned or financed):
•65 early childhood education center properties; and resort project
•10 private school properties.
As of December 31, 2020, our owned Education real estate portfolio consisted of approximately 1.4 million square feet, was 100% leased and included $3.0 million in Sullivan County, New York.undeveloped land inventory.
The combined owned portfolio consisted of 20.320.7 million square feet and was 98%94.2% leased.
COVID-19 Update
We are subject to risks and uncertainties as a result of the COVID-19 pandemic. The outbreak of the COVID-19 pandemic severely impacted global economic activity during 2020 and caused significant volatility and negative pressure in financial markets, which is expected to continue into 2021. The extent of the impact of the COVID-19 pandemic on our business is highly uncertain and difficult to predict, as information is rapidly evolving. As a result, the COVID-19 pandemic severely impacted experiential real estate properties, given that such properties involve congregate social activity and discretionary consumer spending. Substantially all of our non-theatre locations and many of our theatre locations have re-opened as of December 31, 2017,2020. However, certain theatre locations remain closed due to local restrictions or operator decision to close as a result of the impact of the COVID-19 pandemic, specifically the decision by many major studios to delay the release of blockbuster movies in hopes that larger audiences will be available as additional markets open. The continuing impact of the COVID-19 pandemic on our business will depend on several factors, including, but not limited to, the scope, severity and duration of the pandemic, the actions taken to contain the outbreak or mitigate its impact, the development and distribution of vaccines and the efficacy of those vaccines, the public’s confidence in the health and safety measures implemented by our tenants and borrowers, and the direct and indirect economic effects of the outbreak and containment measures, all of which are uncertain and cannot be predicted. During 2020, the COVID-19 pandemic negatively affected our business, and could continue to have material, adverse effects on our financial condition, results of operations and cash flows.
Our Consolidated Financial Statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and reported amounts of revenue and expenses during the reporting periods presented. We considered the impact of the COVID-19 pandemic on the assumptions and estimates used in determining our financial condition and results of operations for the year ended December 31, 2020. The following were adverse impacts to our financial statements and business during the year ended December 31, 2020:
•We wrote-off receivables from tenants and straight-line rent receivables totaling $65.1 million directly to rental revenue upon determination that the collectibility of these receivables or future lease payments from
these tenants were no longer probable. Additionally, we also had investeddetermined that future rental revenue related to these tenants, including American-Multi Cinema, Inc. ("AMC") and Regal Cinemas ("Regal"), a subsidiary of Cineworld Group, will be recognized on a cash basis. The straight-line rent receivable represented $38.0 million of this write-off and was comprised of $26.5 million of straight-line rent receivable and $11.5 million of sub-lessor ground lease straight-line rent receivable.
•We reduced rental revenue by$13.6 million due to rent abatements.
•We deferred approximately $257.6$76.0 million of amounts due from tenants and $3.4 million due from borrowers that were booked as receivables. Additionally, we have amounts due from tenants that were not booked as receivables as the full amounts were not deemed probable of collection as a result of the COVID-19 pandemic. The amounts not booked as receivables remain obligations of the tenants and will be recognized as revenue when received. The repayment terms for all of these deferments vary by tenant or borrower.
•We recognized $85.7 million in propertyimpairment charges during the year ended December 31, 2020, which was comprised of $70.7 million of impairments of real estate investments, and $15.0 million of impairments of operating lease right-of-use assets. We also recognized impairment charges on joint ventures of $3.2 million related to our equity investments in three theatre projects located in China.
•We increased our expected credit losses by $30.7 million from our implementation estimate of $2.2 million. This increase was primarily due to credit loss expense related to fully reserving the outstanding principal balance of $12.6 million and unfunded commitment to fund $12.9 million, totaling $25.5 million, related to notes receivable from one borrower, as a result of recent changes in the borrower's financial status due to the impact of the COVID-19 pandemic. The remaining increase was due to economic uncertainty and the rapidly changing environment surrounding the pandemic.
•We recognized a full valuation allowance of $18.0 million during third quarter 2020 on our net deferred tax assets related to our taxable REIT subsidiary ("TRS") and Canadian tax paying entity as a result of the uncertainty of realization caused by the impact of the COVID-19 pandemic. At December 31, 2020, we have a valuation allowance totaling $24.9 million on our net deferred tax assets.
•On March 20, 2020, we borrowed $750.0 million under development.our unsecured revolving credit facility as a precautionary measure to increase our cash position and preserve financial flexibility given the global uncertainty caused by the COVID-19 pandemic. On December 30, 2020, we paid down our revolving credit facility by $160.0 million, following the sale of six private schools and four early childhood education centers. Subsequent to year-end, we paid down an additional $500.0 million on our revolving credit facility.
•We amended our Consolidated Credit Agreement, which governs our unsecured revolving credit facility and our unsecured term loan facility, and our Note Purchase Agreement, which governs our private placement notes. The amendments modified certain provisions and waived our obligation to comply with certain covenants under these debt agreements during the Covenant Relief Period in light of the uncertainty related to impacts of the COVID-19 pandemic on us and our tenants and borrowers. We pay higher interest costs during the Covenant Relief Period. The amendments to the Consolidated Credit Agreement and Note Purchase Agreement also impose additional restrictions on us during the Covenant Relief Period, including limitations on making investments, incurring indebtedness, making capital expenditures, paying dividends and making other distributions, repurchasing our shares, voluntarily prepaying certain indebtedness, encumbering certain assets and maintaining a minimum liquidity amount, in each case subject to certain exceptions. See below and Note 8 to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional details.
•In connection with the loan amendments discussed above, certain of our key subsidiaries guaranteed our obligations based on our unsecured debt ratings. If our unsecured debt rating is further downgraded by Moody's, we will be required to pledge the equity interest in certain of these subsidiary guarantors to secure our obligations under our unsecured credit facilities and private placement notes. See Note 8 to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional details.
On March 24, 2020, our Board of Trustees (the "Board") announced approval of a $150 million share repurchase program in response to the extraordinary dislocation in our common share price. The share repurchase program was set to expire on December 31, 2020; however, the program was suspended upon the effective date of the loan amendments on June 29, 2020, discussed above. During the year ended December 31, 2020, we repurchased 4,066,716 common shares under the share repurchase program for approximately $106.0 million. The repurchases
were made under a Rule 10b5-1 trading plan. There can be no assurances as to our ability to reinstitute the share repurchase program in future periods or the timing thereof.
The monthly cash dividends to common shareholders were suspended following the common share dividend paid on May 15, 2020 to shareholders of record as of April 30, 2020. The suspension of the monthly cash dividend to common shareholders will continue through the Covenant Relief Period, except as may be necessary to maintain REIT status and to not owe income tax. There can be no assurances as to our ability to reinstitute cash dividend payments to common shareholders or the timing thereof.
Collections of rent and interest were impacted during the year by the COVID-19 pandemic and approximately 92% of our non-theatre and 58% of our theatre locations were open for business as of December 31, 2020. During the year ended December 31, 2020, tenants and borrowers paid approximately 46% of fourth quarter, 43% of third quarter and 29% of second quarter 2020 pre-COVID contractual cash revenue. Pre-COVID contractual cash revenue is an operational measure and represents aggregate cash payments for which we were entitled under existing contracts prior to the COVID-19 pandemic, excluding percentage rent (rents received over base amounts) and cash payments for subsequently disposed properties, net. The Company has reached resolution with customers representing approximately 95% of its pre-COVID contractual revenue. While deferments for this and future periods delay rent or mortgage payments, these deferments generally do not release customers from the obligation to pay the deferred amounts in the future. Deferred rent amounts are reflected in our financial statements as accounts receivable if collection is determined to be probable or will be recognized when received as variable lease payments if collection is determined to not be probable, whiledeferred mortgage payments are reflected as mortgage notes and related accrued interest receivable, less any allowance for credit loss. Certain agreements with tenants where remaining lease terms are extended, or other changes are made that do not qualify for the treatment in the Financial Accounting Standards Board (FASB) Staff Q&A on Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic, are treated as lease modifications. In these circumstances upon an executed lease modification, if the tenant is not being recognized on a cash basis, the contractual rent reflected in accounts receivable and the straight-line rent receivable will be amortized over the remaining term of the lease against rental revenue. In limited cases, tenants may be entitled to the abatement of rent during governmentally imposed prohibitions on business operations which is recognized in the period to which it relates, or we may provide rent concessions to tenants. In cases where we provide concessions to tenants to which they are not otherwise entitled, those amounts are recognized in the period in which the concession is granted unless the changes are accounted for as lease modifications.
In March 2020, our employees transitioned to a fully remote work force to protect the safety and well-being of our personnel. Our prior investments in technology, business continuity planning and cyber-security protocols have enabled us to continue working with limited operational impacts.
Operating Results
Our total revenue from continuing operations, net (loss) income available to common shareholders and Funds From Operations As Adjusted ("FFOAA") per diluted share and FFOAA per diluted share (a non-GAAP financial measure) are detailed below for the years ended December 31, 20172020 and 20162019 (in millions, except per share information):
| | | | | | | | | | | | | | | | | |
| Year ended December 31, | | |
| 2020 | | 2019 | | Change |
Total revenue from continuing operations | $ | 414.7 | | | $ | 652.0 | | | (36) | % |
Net (loss) income available to common shareholders per diluted share | (2.05) | | | 2.32 | | | (188) | % |
FFOAA per diluted share | 1.43 | | | 5.44 | | | (74) | % |
|
| | | | | | | | | | |
| Year ended December 31, | | |
| 2017 | | 2016 | | Increase |
Total revenue (1) | $ | 576.0 |
| | $ | 493.2 |
| | 17 | % |
Net income available to common shareholders per diluted share (2) | 3.29 |
| | 3.17 |
| | 4 | % |
FFOAA per diluted share (3) | 5.02 |
| | 4.82 |
| | 4 | % |
(1) Total revenueThe major factors impacting our results for the year ended December 31, 2017, versus2020, as compared to the year ended December 31, 2016, was favorably impacted by2019 were as follows:
•The effects of the COVID-19 pandemic as described above;
•The effect of investment spending that occurred in 20172020 and 2016, including our transaction with CNL Lifestyle Properties Inc. ("CNL Lifestyle") and funds affiliated with Och-Ziff Real estate ("OZRE") which closed on April 6, 2017. Total revenue for the year ended December 31, 2017 versus the year ended December 31, 2016 was unfavorably impacted by lower straight-line rental revenue and the reversal2019;
•The effect of prior period straight-line rent receivables of $4.0 million and $7.4 million, respectively, as well as a reduction in rental revenue of $2.7 million relating to one of our early education tenants. In addition, total revenue for the year ended December 31, 2017 was unfavorably impacted by property dispositions and mortgage note payoffs that occurred in 20172020 and 2016,2019;
•The decrease in other income and by lower gainsother expenses primarily from the operations of the Kartrite Resort and Indoor Waterpark in Sullivan County, New York and the impacts of the COVID-19 pandemic on this property;
•The decrease in termination fees included in gain on sale related to insurance claims in 2017. Total revenue for the year ended December 31, 2017 was also unfavorably impacted by $2.8 million less recognized in prepayment fees from the early payoff of mortgage notes than recognized for the year ended December 31, 2016.
(2) Net income available to common shareholders per diluted share for the year ended December 31, 2017, versus the year ended December 31, 2016, was also impacted by the items affecting total revenue as described above. Additionally, net income available to common shareholders per diluted share for the year ended December 31, 2017, versus the year ended December 31, 2016 was favorably impacted by lower transaction costs, higher gains on sale of real estate and a gain on early extinguishment of debt recognizedEducation properties;
•The decrease in 2017. Net income available to common shareholders per diluted share for the year ended December 31, 2017, versus the year ended December 31, 2016 was unfavorably impacted by increases in interest expense, general and administrative expense, bad debt expense (relating to one of our early education tenants), income tax expenseexpense;
•The decrease in costs associated with loan refinancing or payoff;
•The decrease in transaction costs; and
•The decrease in common shares outstanding primarily due to shares issued in connection with the transactions with CNL Lifestyle and OZRE. Additionally, net income available to common shareholders per diluted share for the year ended December 31, 2017, versus the year ended December 31, 2016 was unfavorably impacted by a $10.2 million impairment charge recognized in 2017 and $4.5 million in preferred share redemption costs.outstanding.
(3) FFOAA per diluted share for the year ended December 31, 2017, versus the year ended December 31, 2016, was favorably impacted by the effectFor further detail on items impacting our operating results, see section below titled "Results of investment spending in 2017 and 2016, including our transaction with CNL Lifestyle and OZRE which closed on April 6, 2017, and higher termination fees primarily recognized with the exercise of tenant purchase options. FFOAA per diluted share for the year ended December 31, 2017, versus the year ended December 31, 2016 was unfavorably impacted by increases in interest expense, general and administrative expense, common shares outstanding (primarily due to shares issued in connection with the transactions with CNL Lifestyle and OZRE), as well as property dispositions and note payoffs that occurred in 2017 and 2016. Additionally, FFOAA per diluted share for the year ended December 31, 2017, versus the year ended December 31, 2016, was unfavorably impacted by lower straight-line rental revenue and the reversal of prior period straight-line rent receivables of $4.0 million and $7.4 million, respectively, a reduction in rental revenue of $2.7 million and in increase in bad debt expense of $6.0 million relating to one of our early education tenants. FFOAA per diluted share for the year ended December 31, 2017 was also unfavorably impacted by $2.8 million less recognized in prepayment fees from the early payoff of mortgage notes than recognized for the year ended December 31, 2016.
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 "Funds From Operations (FFO), Funds From Operations As Adjusted (FFOAA) and Adjusted Funds from Operations (AFFO)."Non-GAAP Financial Measures."
Investment Spending Overview
During 2017, our total investment spending was $1.6 billion compared to $805.0 million in the prior year with increases in our Entertainment and Recreation segments, offset by a decrease in our Education and Other segments.
During 2017, our investment spending in our Entertainment segment was $319.7 million compared to $266.1 million in the prior year. The current year included spending on build-to-suit development and redevelopment of megaplex theatres, entertainment retail centers and family entertainment centers, as well as $154.1 million in acquisitions of six megaplex theatres. We continued to have build-to-suit opportunities available for megaplex theatres and family entertainment centers at attractive terms with both existing and new tenants. Additionally, many megaplex theatre operators are pursuing the renovation of theatres to include enhanced amenities such as luxury seating and expanded food and beverage offerings. This trend has provided us with redevelopment and build-to-suit opportunities that are expected to continue in the future.
During 2017, our investment spending in our Recreation segment was $1.0 billion compared to $198.3 million in the prior year, and primarily related to our transaction with CNL Lifestyle and OZRE valued at $730.8 million discussed below. Additionally, included in recreation investment spending was build-to-suit golf entertainment complexes and attractions, redevelopment of ski properties, $62.7 million in acquisitions of six other recreation facilities and an investment of $10.8 million in a mortgage note secured by one other recreation facility. We expect to continue to pursue opportunities in this segment.
On April 6, 2017, we completed a transaction with CNL Lifestyle and OZRE. We acquired the Northstar California Resort, 15 attraction properties (waterparks and amusement parks), five small family entertainment centers and certain related working capital for aggregate consideration valued at $479.8 million, including final purchase price adjustments. Additionally, we provided $251.0 million of secured debt financing to OZRE for its purchase of 14 CNL Lifestyle ski properties valued at $374.5 million. Subsequent to the transaction, we sold the five family entertainment centers for approximately $6.8 million and one waterpark for approximately $2.5 million. No gain or loss was recognized on these sales. See Note 3 to the consolidated financial statements included in this Annual Report Form 10-K for further detail.
During 2017, our investment spending in our Education segment was $255.1 million compared to $338.7 million in the prior year. The current year included spending on build-to-suit development and redevelopment of public charter schools, early education centers and private schools, as well as $38.5 million in acquisitions of seven early education centers and two public charter schools and an investment of $97.6 million in mortgage notes receivable. The current year investment spending decreased over the prior year, primarily due to a large investment of $100.0 million in mortgage notes that occurred at the end of 2016. During 2017, we continued to significantly diversify our tenant base in public charter schools and early education centers and we expect to continue to do so in 2018.
During 2017, our investment spending in our Other segment was $1.1 million compared to $1.9 million in prior year, and related to the Resorts World Catskills casino and resort project in Sullivan County, New York.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related notes. In preparing these financial statements, management has made its best estimates and assumptions that affect the reported assets and liabilities.liabilities and the reported amounts of revenues and expenses during the reporting periods. The most significant assumptions and estimates relate to the valuation of real estate, accounting for real estate acquisitions, estimating reserves for uncollectibleassessing the collectibility of receivables and the impairment ofcredit loss related to mortgage and other notes receivable. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates.
Impairment of Real Estate Values
We are required to make subjective assessments as to whether there are impairments in the value of our rental properties.real estate investments. These estimates of impairment may have a direct impact on our consolidated financial statements. We assess the carrying value of our rental propertiesreal estate investments whenever events or changes in circumstances indicate that the carrying amount
of a property may not be recoverable. Certain factors may indicate that impairments exist which include, but are not limited to, underperformanceunder-performance relative to projected future operating results, change in the time period we expect to hold the property, tenant difficulties and significant adverse industry or market economic trends. If an indicator of possible impairment exists, athe property that is held and used by the Company is evaluated for impairment by comparing the carrying amount of the property to the estimated undiscounted future cash flows expected to be generated by(undiscounted and without interest charges), including the property.residual value of the real estate. If the carrying amount of a property exceeds its estimated future cash flows on an undiscounted basis, an impairment charge is recognized inindicated, a loss will be recorded for the amount by which the carrying amount of the property exceeds the fair value of the property. For assets and asset groups that are held for sale, an impairment loss is measured by comparing theexceeds its estimated fair value of the property, less costs to sell, to the asset (group) carrying value. Management estimates fair value of our rental properties utilizing independent appraisals and/or based on projected discountedEstimating future cash flows using a discount rate determined by management to be commensurate with the risk inherent in the property.is highly subjective and such estimates could differ materially from actual results.
Real Estate Acquisitions
Upon acquisition of real estate properties, we evaluate the acquisition to determine if it is a business combination or an asset acquisition. In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards
Update ("ASU") No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The update
clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether acquisitions should be accounted for as business combinations or asset acquisitions. The standard is effective for annual
reporting periods beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption of the guidance permitted. We have elected to early adopt ASU 2017-01 as of January 1, 2017. As a result,
we expect that fewer of our real estate acquisitions will be accounted for as business combinations.
Prior to the adoption of ASU 2017-01, we typically accounted for (1) acquired vacant properties, (2) acquired single tenant properties when a new lease or leases were signed at the time of acquisition, and (3) acquired single tenant properties that had an existing long-term triple-net lease or leases (greater than seven years) as asset acquisitions. Acquisitions of properties with shorter-term leases or properties with multiple tenants that require business related activities to manage and maintain the properties (i.e. those properties that involve a process) were treated as business combinations.
If the acquisition is determined to be an asset acquisition, we record the purchase price and other related costs incurred to the acquired tangible assets (consisting of land, building, tenant improvements, and furniture, fixtures and equipment) and identified intangible assets and liabilities (consisting of above and below market leases, in-place leases, tenant relationships and assumed financing that is determined to be above or below market terms) on a relative fair value basis. Typically, relative fair values are based on recent independent appraisals or methods similar to those used by independent appraisers, andas well as management judgment. In addition, acquisition-related costs incurred for asset acquisitions including transaction costs, are capitalized.
If the acquisition is determined to be a business combination, we record the fair value of acquired tangible assets (consisting of land, building, tenant improvements, and furniture, fixtures and equipment) and identified intangible assets and liabilities (consisting of above and below market leases, in-place leases, tenant relationships and assumed financing that is determined to be above or below market terms) as well as any noncontrollingnon-controlling interest. Typically, fair values are based on recent independent appraisals.appraisals or methods similar to those used by independent appraisers, as well as management judgment. In addition, acquisition-related costs in connection withincurred for business combinations are expensed as incurred. Costs
related to such transactions, as well as costs associated with terminated transactions, are included in the accompanying consolidated statements of (loss) income and comprehensive (loss) income as transaction costs.
Allowance for Doubtful AccountsCollectibility of Lease Receivables
Management makes quarterly estimatesOur accounts receivable balance is comprised primarily of rents and operating cost recoveries due from tenants as well as accrued rental rate increases to be received over the life of the existing leases. We regularly evaluate the collectibility of its accounts receivable related to base rents,our receivables on a lease by lease basis. The evaluation primarily consists of reviewing past due account balances and considering such factors as the credit quality of our tenants, historical trends of the tenant, escalations (straight-line rents), reimbursements and other revenue or income. Management specifically monitors trends in accounts receivable, historical bad debts, customer credit worthiness, current economic trendsconditions and changes in customer payment termsterms. We suspend revenue recognition when evaluating the adequacycollectibility of itsamounts due are no longer probable and record a direct write-off of the receivable to revenue. Prior to 2019, we reduced our accounts receivable by an allowance for doubtful accounts. In addition,accounts and recorded bad debt expense included in property operating expenses when customers are in bankruptcy, management makes estimates of the expected recovery of pre-petition administrative and damage claims. These estimates have a direct impact on our net income.loss was probable.
ImpairmentCollectibility of Mortgage and Notes Receivables
Our mortgage and Other Notes Receivable
notes receivables consist of loans originated by us and the related accrued and unpaid interest income. We regularly evaluate the collectibility of both interestour receivables by reviewing past due balances and principalconsidering such factors as the credit quality of our borrowers, historical trends of the borrower, our historical loss experience, current portfolio, market and economic conditions and changes in borrower payment terms. We estimate our current expected credit losses on a loan-by-loan basis using a forward-looking commercial real estate forecasting tool. We record credit loss expense and reduce our mortgage note and note receivables balances by the allowance for each loan to determine whether it is impaired. A loan is considered to be impaired when, basedcredit losses on current informationa quarterly basis in accordance with ASC 326. In the event we have a past due mortgage note or note receivable and events, we determine it is collateral dependent, we measure expected credit losses based on the fair value of the collateral. If foreclosure is deemed probable, and we expect to sell rather than operate the collateral, we adjust the fair value of the collateral for the estimated costs to sell. Prior to 2020, we evaluated the collectibility of our mortgage and notes receivables to determine whether the loan was impaired and if it was probable that we willwould be unable to collect all amounts due according to the existing contractual terms. Certain factors that may occur and indicate that impairments may exist include, but are not limited to: underperformance relative to projected future operating results, borrower difficulties and significant adverse industry or market economic trends. When a loan is considered to be impaired, the amount of loss is calculated by comparing the recorded investment to the value determined by discounting the expected future cash flows at the loan’s effective interest rate or to the fair value of the underlying collateral, less costs to sell, if the loan is collateral dependent. For impaired loans, interest income is recognized on a cash basis, unless we determine based on the loan to estimated fair value ratio the loan should be on the cost recovery method, and any cash payments received would then be reflected as a reduction of principal. Interest income recognition is recommenced if and when the impaired loan becomes contractually current and performance is demonstrated to be resumed.
Recent Developments
Debt Financing
During the year ended December 31, 2017, we prepaid in full nine mortgage notes payable totaling $73.0 million that were secured by nine theatre properties. In addition, we prepaid in full a mortgage note payable of $87.0 million that was secured by 11 theatre properties. In connection with this note payoff, we recorded a gain on early extinguishment of debt of $1.0 million for the year ended December 31, 2017. The gain represents the difference between the carrying value of the note and the amount due at payoff as the note was recorded at fair value upon acquisition and was not anticipated to be paid off in advance of maturity.
On May 23, 2017, we issued $450.0 million in aggregate principal amount of senior notes due on June 1, 2027 pursuant to an underwritten public offering. The notes bear interest at an annual rate of 4.50%. Interest is payable on June 1 and December 1 of each year beginning on December 1, 2017 until the stated maturity date of June 1, 2027. The notes were issued at 99.393% of their face value and are unsecured. We used the net proceeds from the note offering to pay down our unsecured revolving credit facility, invest in mortgage notes secured by education properties and for general business purposes.
On August 30, 2017, we refinanced our variable-rate bonds payable totaling $25.0 million which are secured by three theatre properties. The maturity date was extended from October 1, 2037 to August 1, 2047 and the outstanding principal balance and interest rate were not changed.
On September 27, 2017, we amended our unsecured consolidated credit agreement which governs our unsecured revolving credit facility and our unsecured term loan facility.
The amendments to the unsecured revolving portion of the credit facility, among other things, (i) increase the initial maximum available amount from $650.0 million to $1.0 billion, (ii) extend the maturity date from April 24, 2019, to February 27, 2022 (with us having the right to extend the loan for an additional seven months) and (iii) lower the interest rate and facility fee pricing based on a grid related to our senior unsecured credit ratings which at closing was LIBOR plus 1.00% and 0.20%, versus LIBOR plus 1.25% and 0.25%, respectively, under the previous terms. In connection with the amendment, $19 thousand of deferred financing costs (net of accumulated amortization) were written off during the year ended December 31, 2017 and are included in costs associated with loan refinancing. At December 31, 2017, we had $210.0 million outstanding under this portion of the facility.
The amendments to the unsecured term loan portion of the credit facility, among other things, (i) increase the initial amount from $350.0 million to $400.0 million, (ii) extend the maturity date from April 24, 2020, to February 27, 2023 and (iii) lower the interest rate based on a grid related to our senior unsecured credit ratings which at closing was LIBOR plus 1.10% versus LIBOR plus 1.40% under the previous terms. In connection with the amendment, $1.5 million of deferred financing costs (net of accumulated amortization) were written off during the year ended December 31, 2017 and are included in costs associated with loan refinancing. At closing, we borrowed the remaining $50.0 million available on the $400.0 million term loan portion of the facility, which was used to pay down a portion of our unsecured revolving
credit facility. On October 31, 2017, we entered into three interest rate swap agreements to fix the interest rate at 3.15% on an additional $50.0 million of borrowings under our unsecured term loan facility from November 6, 2017 to April 4, 2019 and on $350.0 million of borrowings under the unsecured term loan facility from April 5, 2019 to February 7, 2022.
In addition, there is a $1.0 billion accordion feature on the combined unsecured revolving credit and term loan facility that increases the maximum amount available under the combined facility, subject to lender approval, from $1.4 billion to $2.4 billion. If we exercise all or any portion of the accordion feature, the resulting increase in the facility may have a shorter or longer maturity date and different pricing terms.
In connection with the amendment to the unsecured consolidated credit agreement, the obligations of our subsidiaries that were co-borrowers under our prior senior unsecured revolving credit and term loan facility were released. As a result, simultaneously with the amendment, the guarantees by our subsidiaries that were guarantors with respect to our outstanding 4.50% Senior Notes due 2027, 4.75% Senior Notes due 2026, 4.50% Senior Notes due 2025, 5.25% Senior Notes due 2023, 5.75% Senior Notes due 2022, and 7.75% Senior Notes due 2020 were released in accordance with the terms of the applicable indentures governing such notes.
In addition, the guarantees by our subsidiaries that were guarantors of our outstanding 4.35% Series A Guaranteed Senior Notes due August 22, 2024 and 4.56% Series B Guaranteed Senior Notes due August 22, 2026 (referred to herein as the "private placement notes") were also released. The foregoing release was effected by us entering into an amendment to the Note Purchase Agreement, dated as of September 27, 2017. The amendment to the private placement notes releases our subsidiary guarantors as described above and among other things: (i) amends certain financial and other covenants and provisions in the Note Purchase Agreement to conform generally to the corresponding covenants and provisions contained in the amended unsecured consolidated credit agreement; (ii) provides the investors thereunder certain additional guaranty and lien rights, in the event that certain subsequent events occur; (iii) expands the scope of the “most favored lender” covenant contained in the Note Purchase Agreement; and (iv) imposes restrictions on debt that can be incurred by certain of our subsidiaries.
Subsequent to December 31, 2017, we prepaid in full a mortgage note payable totaling $11.7 million that was secured by a theatre property. Additionally, on February 28, 2018, we redeemed all of the outstanding 7.75% Senior Notes due July 15, 2020. The notes were redeemed at a price equal to the principal amount of $250.0 million plus a premium calculated pursuant to the terms of the indenture of $28.6 million (which will be expensed in the first quarter of 2018), together with accrued and unpaid interest up to, but not including the redemption date.
Issuance of Common Shares
During the year ended December 31, 2017, we issued an aggregate of 1,382,730 common shares under the direct share purchase component of our Dividend Reinvestment and Direct Share Purchase Plan ("DSPP") for total net proceeds of $98.2 million. These proceeds were used to pay down a portion of our unsecured revolving credit facility.
During the year ended December 31, 2017, we also issued 8,851,264 common shares in connection with our transaction with CNL Lifestyle and OZRE.
Issuance of Series G Preferred Shares
On November 30, 2017, we issued 6.0 million shares of 5.75% Series G cumulative redeemable preferred shares ("Series G preferred shares") in a registered public offering at a purchase price of $25.00 per share resulting in net proceeds of approximately $144.5 million, after underwriting discounts and expenses. We will pay cumulative dividends on the Series G preferred shares from the date of original issuance in the amount of $1.4375 per share each year, which is equivalent to 5.75% of the $25.00 liquidation preference per share. See Note 11 to the consolidated financial statements in this Annual Report on Form 10-K for further details.
Redemption of Series F Preferred Shares
On December 21, 2017, we redeemed all 5.0 million of our 6.625% Series F cumulative redeemable preferred shares ("Series F preferred shares"). The shares were redeemed at a redemption price of $25.299045 per share ($25.00 per share liquidation preference plus accrued dividends up to, but not including the redemption date) for a total aggregate
redemption price of approximately $126.5 million. In conjunction with the redemption, we recognized a charge representing the original issuance costs that were paid in 2012 and other redemption related expenses. The aggregate reduction to net income available to common shareholders was approximately $4.5 million. See Note 11 to the consolidated financial statements in this Annual Report on Form 10-K for further details.
Investment Spending
Our investment spending during the year ended December 31, 2017 totaled $1.6 billion, and included investments in each of our four operating segments.
Entertainment investment spending during the year ended December 31, 2017 totaled $319.7 million, including spending on build-to-suit development and redevelopment of megaplex theatres, entertainment retail centers and family entertainment centers, as well as $154.1 million in acquisitions of six megaplex theatres.
Recreation investment spending during the year ended December 31, 2017 totaled $1.0 billion, including the transaction with CNL Lifestyle and OZRE valued at $730.8 million discussed below. Additionally, included in recreation investment spending was build-to-suit development of golf entertainment complexes and attractions, redevelopment of ski properties, $62.7 million in acquisitions of six other recreation facilities and an investment of $10.8 million in a mortgage note secured by one other recreation facility.
On April 6, 2017, we completed a transaction with CNL Lifestyle and OZRE. We acquired the Northstar California Resort, 15 attraction properties (waterparks and amusement parks), five small family entertainment centers and certain related working capital for aggregate consideration valued at $479.8 million, including final purchase price adjustments. Additionally, we provided $251.0 million of secured debt financing to OZRE for its purchase of 14 CNL Lifestyle ski properties valued at $374.5 million. Subsequent to the transaction, we sold the five family entertainment centers for approximately $6.8 million and one waterpark for approximately $2.5 million. No gain or loss was recognized on these sales. See Note 3 to the consolidated financial statements included in this Annual Report on Form 10-K for further detail.
Education investment spending during the year ended December 31, 2017 totaled $255.1 million, including spending on build-to-suit development and redevelopment of public charter schools, early education centers and private schools, as well as $38.5 million in acquisitions of seven early education centers and two public charter schools and an investment of $97.6 million in mortgage notes receivable.
Other investment spending during the year ended December 31, 2017 totaled $1.1 million and was related to the Resorts World Catskills casino and resort project in Sullivan County, New York.
The following details our investment spending during the years ended December 31, 20172020 and 20162019 totaled $85.1 million and $794.7 million, respectively, and is detailed below (in thousands):
|
| | | | | | | | | | | | | | | | | | | | |
For the Year Ended December 31, 2017 |
Operating Segment | | Total Investment Spending | | New Development | | Re-development | | Asset Acquisition | | Investment in Mortgage Notes and Notes Receivable |
Entertainment | | $ | 319,665 |
| | $ | 62,521 |
| | $ | 95,520 |
| | $ | 154,144 |
| | $ | 7,480 |
|
Recreation | | 1,006,741 |
| | 189,907 |
| | 1,223 |
| | 542,453 |
| | 273,158 |
|
Education | | 255,127 |
| | 119,047 |
| | — |
| | 38,497 |
| | 97,583 |
|
Other | | 1,079 |
| | 1,079 |
| | — |
| | — |
| | — |
|
Total Investment Spending | | $ | 1,582,612 |
| | $ | 372,554 |
| | $ | 96,743 |
| | $ | 735,094 |
| | $ | 378,221 |
|
| | | | | | | | | | |
For the Year Ended December 31, 2016 |
Operating Segment | | Total Investment Spending | | New Development | | Re-development | | Asset Acquisition | | Investment in Mortgage Notes and Notes Receivable |
Entertainment | | $ | 266,101 |
| | $ | 37,265 |
| | $ | 56,820 |
| | $ | 148,398 |
| | $ | 23,618 |
|
Recreation | | 198,345 |
| | 134,195 |
| | 7,598 |
| | — |
| | 56,552 |
|
Education | | 338,659 |
| | 208,288 |
| | — |
| | 16,456 |
| | 113,915 |
|
Other | | 1,903 |
| | 1,903 |
| | — |
| | — |
| | — |
|
Total Investment Spending | | $ | 805,008 |
| | $ | 381,651 |
| | $ | 64,418 |
| | $ | 164,854 |
| | $ | 194,085 |
|
| | | | | | | | | | | | | | | | | | | | |
For the Year Ended December 31, 2020 |
Investment Type | Total Investment Spending | New Development | Re-development | Asset Acquisition | Mortgage Notes or Notes Receivable | Investment in Joint Ventures |
Experiential: | | | | | | |
Theatres | $ | 33,162 | | $ | 5,760 | | $ | 5,183 | | $ | 22,219 | | $ | — | | $ | — | |
Eat & Play | 19,679 | | 18,852 | | 827 | | — | | — | | — | |
Attractions | 669 | | — | | 669 | | — | | — | | — | |
Ski | 2,088 | | — | | — | | — | | 2,088 | | — | |
Experiential Lodging | 17,114 | | 13,775 | | 1,649 | | — | | — | | 1,690 | |
| | | | | | |
Cultural | 6,293 | | — | | 159 | | — | | 6,134 | | — | |
Fitness & Wellness | 6,049 | | — | | — | | — | | 6,049 | | — | |
Total Experiential | 85,054 | | 38,387 | | 8,487 | | 22,219 | | 14,271 | | 1,690 | |
| | | | | | |
Education: | | | | | | |
Early Childhood Education Centers | 3 | | — | | — | | — | | 3 | | — | |
| | | | | | |
| | | | | | |
Total Education | 3 | | — | | — | | — | | 3 | | — | |
| | | | | | |
Total Investment Spending | $ | 85,057 | | $ | 38,387 | | $ | 8,487 | | $ | 22,219 | | $ | 14,274 | | $ | 1,690 | |
| | | | | | |
For the Year Ended December 31, 2019 |
Investment Type | Total Investment Spending | New Development | Re-development | Asset Acquisition | Mortgage Notes or Notes Receivable | Investment in Joint Ventures |
Experiential: | | | | | | |
Theatres | $ | 459,393 | | $ | 4,500 | | $ | 28,429 | | $ | 426,464 | | $ | — | | $ | — | |
Eat & Play | 76,739 | | 51,209 | | 6,901 | | 1,429 | | 17,200 | | — | |
Attractions | 102 | | — | | — | | — | | 102 | | — | |
Ski | 37,288 | | — | | 288 | | — | | 37,000 | | — | |
Experiential Lodging | 125,170 | | 53,130 | | 935 | | — | | 70,000 | | 1,105 | |
Gaming | 608 | | 608 | | — | | — | | — | | — | |
Cultural | 30,661 | | 198 | | — | | 23,963 | | 6,500 | | — | |
Fitness & Wellness | 5,950 | | — | | — | | — | | 5,950 | | — | |
Total Experiential | 735,911 | | 109,645 | | 36,553 | | 451,856 | | 136,752 | | 1,105 | |
| | | | | | |
Education: | | | | | | |
Private Schools | 18,798 | | 2,300 | | 1,474 | | 5,871 | | 9,153 | | — | |
Early Childhood Education Centers | 4,914 | | 4,914 | | — | | — | | — | | — | |
Public Charter Schools | 35,068 | | 29,953 | | — | | — | | 5,115 | | — | |
Total Education | 58,780 | | 37,167 | | 1,474 | | 5,871 | | 14,268 | | — | |
| | | | | | |
Total Investment Spending | $ | 794,691 | | $ | 146,812 | | $ | 38,027 | | $ | 457,727 | | $ | 151,020 | | $ | 1,105 | |
The above amounts include $118$9 thousand and $192$35 thousand in capitalized payroll, $9.9$1.2 million and $10.7$5.3 million in capitalized interest and $3.3$0.3 million and $5.1$0.4 million in capitalized other general and administrative direct project costs for the years ended December 31, 20172020 and 2016,2019, respectively. Excluded from the table above is $4.7$11.3 million and $5.0$15.2 million of maintenance capital expenditures and other spending for the years ended December 31, 20172020 and 2016,2019, respectively.
We limited our investment spending during the year ended December 31, 2020 to enhance our liquidity position in light of the negative impact of the COVID-19 pandemic. We will continue to limit our investment spending during the Covenant Relief Period under the amendments to the agreements governing our bank credit facilities and private placement notes as discussed above.
Dispositions
On December 29, 2020, pursuant to a tenant purchase option, we completed the sale of six private schools and four early childhood education centers for net proceeds of approximately $201.2 million and recognized a gain on sale of approximately $39.7 million. Additionally, during the year ended December 31, 2020, we completed the sale of three early education properties, four experiential properties and two land parcels for net proceeds totaling $26.6 million and recognized a combined gain on sale of $10.4 million.
AMC Restructuring
On July 31, 2020, we entered into a Forbearance Agreement (the “Forbearance Agreement”), a Master Lease Agreement (the “Master Lease”) and seven amended lease agreements (the “Transitional Leases” and collectively with the Master Lease, the “Leases”) with American Multi-Cinema, Inc. and certain affiliates (“AMC”) relating to 53 properties leased by us to AMC (the “Leased Properties”) on the date the agreement was executed. We entered into the Master Lease with AMC relating to 46 theatres (“Master Lease Properties”) and amended the Transitional Leases relating to seven theatres (“Transitional Properties”), each of which was effective July 1, 2020. Subsequent to the effective date, we terminated the Transitional Leases during the second and third quarter of 2020.
We agreed to reduce total annual fixed rent on the 46 Master Lease Properties by approximately 18%, or $19.4 million to approximately $87.8 million (including approximately $6.8 million of ground rent and the repayment of deferral amounts for the months of April, May and June 2020 which we had agreed to defer and amortize as part of fixed rent over the first 14 years of the Master Lease term). Additionally, the Master Lease has fixed escalators of 7.5% every five years on fixed rent excluding the portion attributable to deferred rent.
Each lease for the seven Transitional Properties was amended by the parties. We agreed to reduce the aggregate annual fixed rent on the Transitional Properties by approximately $6.2 million to approximately $8.1 million (including approximately $1.2 million of ground rent and the repayment of deferral amounts for the months of April, May and June 2020 which we had agreed to defer and amortize as part of fixed rent over the remaining terms of the new leases). The total amount deferred under each Transitional Lease prior to us terminating these agreements is still due by AMC and is scheduled to be paid over what would have been the remaining terms of the related property leases.
Pursuant to the Leases and the Forbearance Agreement, during the period of July 1, 2020 through December 31, 2020, AMC agreed to pay percentage rent (15% of gross receipts) in lieu of fixed rent for the Leased Properties prior to any lease terminations. The difference between the percentage rent paid and fixed rent due under the Master Lease represents an additional deferred amount that, beginning in February 2021, will be added to fixed cash rent and amortized over the first 14 years of the Master Lease and beginning January 2021 will be rent due related to the Transitional Leases amortized over the prior lease terms. During the year ended December 31, 2020, we recognized $1.7 million in percentage rent from AMC which related to the period they were open beginning in late August. The payment expected for December will be recognized in the first quarter of 2021 when the payment is received due to recognizing AMC's revenue on a cash basis.
The Master Lease Properties have been divided into four tranches, with the initial term of each tranche expiring annually from June 30, 2034 to June 30, 2037. The Transitional Leases have expiration dates occurring between November 2026 and March 2029. Prior to December 31, 2020, we terminated all Transitional Leases with AMC.
We believe that the AMC restructuring significantly improves our long-term position with respect to AMC, while providing AMC with deferrals it needs during the pandemic and better performing theatres in the future. Specifically:
•The Master Lease was designed with the intention that the parties will respect the master lease characterization at all times, which we believe will enhance our position in the event of a reorganization proceeding regarding AMC;
•The lease terms on properties included in the Master Lease were increased by an average of nine years; and
•We have reduced our exposure to AMC through the termination of each of the seven Transitional Lease and plan to re-brand or sell these properties with one property sold in December of 2020.
Impairment Charges
As a result of the COVID-19 pandemic, we experienced vacancies at some of our properties and at others we negotiated lease modifications that included rent reductions. As part of this process, we reassessed the expected holding periods and expected future cash flows of such properties and determined that the estimated cash flows were not sufficient to recover the carrying values of nine properties. Accordingly, we recognized impairment charges of $85.7 million, which were comprised of $70.7 million of impairments of real estate investments at nine properties and $15.0 million of impairments of operating lease right-of-use assets at two of these properties. See Note 4 to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional information related to these impairment charges.
During the year ended December 31, 2017, we completed the sale of four entertainment properties for net proceeds totaling $72.4 million. In connection with these sales,2020, we recognized other-than-temporary impairment charges of $3.2 million on our equity investments in three theatre projects located in China. See Note 7 to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional information related to these impairment charges.
Severance Expense
On December 31, 2020, our Senior Vice President - Asset Management, Michael L. Hirons, retired. His retirement was a gain"Qualifying Termination" under our Employee Severance and Retirement Vesting Plan. For the year ended December 31, 2020, severance expense totaled $2.9 million and included cash payments totaling $1.6 million, and accelerated vesting of nonvested shares and performance shares totaling $1.3 million.
Attraction Tenant Update
During the year ended December 31, 2020, we entered into an amended and restated loan and security agreement with one of our notes receivable borrowers in response to the impacts of the COVID-19 pandemic on salethe borrower. The restated note receivable consisted of $19.4 million.the previous note balance of $6.5 million and provides the borrower with a term loan for up to $13.0 million and a $6.0 million revolving line of credit. The restated note receivable has a maturity date of June 30, 2032 and the line of credit matures on December 31, 2022. Interest is deferred through June 30, 2022, at which time monthly principal and interest payments will be due over 10 years and will be recognized as income on a cash basis. Although the borrower is not in default, nor has the borrower declared bankruptcy, we determined these modifications resulted in a troubled debt restructuring at December 31, 2020 due to the impacts of the COVID-19 pandemic on the borrower's financial condition. We recognized credit loss expense for the outstanding principal balance of $12.6 million and the $12.9 million unfunded commitment on the term loan and line of credit as of December 31, 2020.
Amended Consolidated Credit Agreement and Note Purchase Agreement
During the year ended December 31, 2017, pursuant2020, we amended our Consolidated Credit Agreement, which governs our unsecured revolving credit facility and our unsecured term loan facility, and our Note Purchase Agreement, which governs our private placement notes. The amendments modified certain provisions and waived our obligation to tenant purchase options, we completed the sale of eight public charter schools located in Colorado, Arizona, North Carolina and Utah for net proceeds totaling $97.3 million. In connectioncomply with certain covenants under these sales, we recognized a gain on sale of $20.7 million. Additionally, we completed the sale of three other education facilities for net proceeds of $10.5 million. In connection with these sales, we recognized a gain on sale of $1.8 million.
Mortgage Notes Receivable
During the year endeddebt agreements through December 31, 2017, we received a partial prepayment of $4.0 million on one mortgage note receivable that is secured by the observation deck of the John Hancock building in Chicago, Illinois. On December 22, 2016,2020, or when the Company entered into an amendmentprovides notice that it elects to terminate the Covenant Relief Period, both subject to certain conditions. See discussion below in Liquidity and Capital Resources and Note 8 to the loan agreement with the borrower which eliminated the full prepayment option with penalty in 2017 per the original agreement and replaced it with partial prepayment options in 2017 and 2027 with penalty. This amendment also reduced the interest rate to 9.25% which began on July 1, 2017. In connection with the partial prepayment of this note, we received a prepayment fee of $0.8 million, which is being recognized over the term of the remaining note using the effective interest method due to the related amendment to the loan agreement. Additionally, we received a partial prepayment of $0.7 million on one mortgage note receivable that
is secured by 14 ski properties. In connection with the partial prepayment, we received a prepayment fee of $0.2 million. This fee is included in mortgage and other financing income.
During the year ended December 31, 2017, we received a prepayment of $3.4 million on one mortgage note receivable that was secured by a public charter school property located in Dallas, Texas. In connection with this prepayment, we received a prepayment fee of $0.6 million which is included in mortgage and other financing income. In conjunction with this payoff, we wrote off $58 thousand of prepaid mortgage fees to costs associated with loan refinancing or payoff.
On December 22, 2017, per the terms of a mortgage note agreement, a borrower exercised their option to convert its $9.1 million mortgage note agreement to a 15-year triple-net lease agreement. As a result, we recorded the carrying value of the investment into rental property, which approximated the fair value of the property on the conversion date. There was no gain or loss recognized on this transaction.
Subsequent to December 31, 2017, a borrower exercised its put option to convert its $142.9 million mortgage note agreement to a lease agreement. As a result, in 2018, we recorded the rental property at fair value, which approximated the carrying value of its investment on the conversion date. There was no gain or loss recognized on this transaction. The properties are leased pursuant to a triple-net master-lease with a 25-year term.
Investment in a Direct Financing Lease
As previously discussed, we are committed to increasing the tenant diversity of our public charter school portfolio and reducing the concentration with Imagine Schools, Inc. ("Imagine"). As part of this effort, we have engaged various brokers to helpConsolidated Financial Statements in this process and part of their feedback included the needAnnual Report on Form 10-K for additional lease term on these assets. During the year ended December 31, 2017, we entered into revised lease terms with Imagine which reduced rental payments and the lease term on six properties. In exchange for lowering the existing annual cash payments by approximately $0.5 million and reducing the remaining lease term to 10 years, Imagine agreed that upon the sale of these properties, they would enter into new 20-year leases with the buyer(s). While we believe the restructure will aid in the disposition of these assets, the changes resulted in the lease structure no longer being classified as a direct financing lease. Accordingly, we recorded an impairment charge of $9.6 million during the year ended December 31, 2017, which included an allowance for lease loss of $7.3 million and an impairment charge of $2.3 millioninformation related to the estimated unguaranteed residual value.these amendments.
Additionally, during the year ended December 31, 2017, we performed our annual review of the estimated unguaranteed residual value on our other properties leased to Imagine and determined that the residual value on one of these properties was impaired. As such, we recorded an impairment of the unguaranteed residual value of $0.6 million during the year ended December 31, 2017.
Early Childhood Education Tenant Update
During 2017, cash flow of Children’s Learning Adventure USA, LLC (“CLA”) was negatively impacted by challenges brought on by its rapid expansion and related ramp up to stabilization and by adverse weather events in Texas during the third quarter of 2017. During 2017, we participated in negotiations among CLA and other landlords regarding a potential restructuring. Although negotiations are on-going and progress has been made toward a restructuring, investments necessary to accomplish the restructuring have not yet been secured. As a result of the slow progress with negotiations, in October 2017, we terminated nine leases with various subsidiaries of CLA, seven of which relate to completed construction and two of which relate to unimproved land. These subsidiaries of CLA continue to operate these properties (other than the two unimproved properties) as holdover tenants. In December 2017, these CLA subsidiaries (other than one of the CLA tenants for an unimproved land parcel) and other CLA subsidiaries that are tenants of our remaining leases (“CLA Debtors”) filed petitions in bankruptcy under Chapter 11 seeking the protections of the Bankruptcy Code. It is our understanding that the CLA Debtors filed these bankruptcy petitions to stay our termination of the remaining CLA leases and delay the eviction process.
While we continue to support negotiation of a restructuring that would permit CLA to continue operations, we are not willing to negotiate indefinitely. We intend to pursue our legal remedies to secure possession of our properties as
expeditiously as possible. We believe the time it will take to achieve this outcome gives CLA ample opportunity to negotiate a restructuring which, if successful, would obviate the need to evict CLA from our properties. There can be no assurances as to the ultimate outcome of such a restructuring or the Company's pursuit of its legal remedies with respect to the CLA properties.
We fully reserved approximately $6.0 million in receivables from CLA at December 31, 2017. Additionally, during the three months ended December 31, 2017, we wrote-off the full amount of non-cash straight-line rent receivables of approximately $9.0 million related to CLA to straight-line rental revenue classified in rental revenue in the accompanying consolidated statements of income. If we receive payments from CLA in the future, we will recognize them on a cash basis until a successful restructuring is completed. At December 31, 2017, we had approximately $255.7 million related to CLA classified in rental properties, net, in the accompanying consolidated balance sheets at December 31, 2017. Additionally, we had approximately $11.2 million classified in Land held for development and $14.5 million classified in Property under development in the accompanying consolidated balance sheets at December 31, 2017. We reviewed these balances for impairment at December 31, 2017 and determined that the estimated undiscounted future cash flows exceeded the carrying value of these properties.
Results of Operations
Year ended December 31, 20172020 compared to year ended December 31, 20162019
RentalAnalysis of Revenue
The following table summarizes our total revenue (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Change |
| | 2020 | | 2019 | | |
Minimum rent (1) | | $ | 372,546 | | | $ | 544,279 | | | $ | (171,733) | |
Percentage rent (2) | | 8,554 | | | 14,962 | | | (6,408) | |
Straight-line rent (3) | | (24,550) | | | 10,557 | | | (35,107) | |
Tenant reimbursements (4) | | 15,111 | | | 22,864 | | | (7,753) | |
Other rental revenue | | 515 | | | 360 | | | 155 | |
Total Rental Revenue | | $ | 372,176 | | | $ | 593,022 | | | $ | (220,846) | |
| | | | | | |
Other income (5) | | 9,139 | | | 25,920 | | | (16,781) | |
Mortgage and other financing income | | 33,346 | | | 33,027 | | | 319 | |
Total revenue | | $ | 414,661 | | | $ | 651,969 | | | $ | (237,308) | |
(1) For the year ended December 31, 2020 compared to the year ended December 31, 2019, the decrease in minimum rent resulted primarily from the impact of the COVID-19 pandemic, with approximately $176.0 million related to tenants with rent recognized on a cash basis or as restructured, as well as for properties with deferred rent not recognized because collection was $468.6determined not probable or there were rent abatements. In addition, there was a decrease in rental revenue of $7.0 million from property dispositions not classified in discontinued operations. This was partially offset by an increase in minimum rent of $5.5 million related to property acquisitions and developments completed in 2020 and 2019 and $5.8 million in increases on existing properties. Minimum rent for the year ended December 31, 20172020 includes $5.2 million in variable rent from tenants that paid a portion of minimum rent based on a percentage of gross revenue.
During the year ended December 31, 2020, we renewed 15 lease agreements on approximately 0.9 million square feet. These extension agreements (which exclude restructured agreements with AMC as discussed in "Recent Developments") were negotiated with our tenants in conjunction with rent deferrals as a result of the impact of the COVID-19 pandemic. The extension periods for these agreements will begin in future periods, between 2021 and 2031. Upon the commencement of the extension periods, we expect a weighted average increase of approximately 8% in rental rates. We paid no leasing commissions with respect to these lease renewals.
(2) The decrease in percentage rent (amounts above base rent) related primarily to lower percentage rent recognized during the year ended December 31, 2020 from five theatre properties, one ski property, five attraction properties, one eat and play tenant and one early education tenant. These decreases were partially offset by increases in percentage rent from one private school tenant.
(3) For the year ended December 31, 2020 compared to $399.6the year ended December 31, 2019, the decrease in straight-line rent resulted primarily from write-offs totaling $38.0 million during the year ended December 31, 2020, which was comprised of $26.5 million of straight-line accounts receivable and $11.5 million of sub-lessor ground lease straight-line accounts receivable, due to the COVID-19 pandemic. This was partially offset by an increase in straight-line rent related to property acquisitions and developments completed in 2020 and 2019.
(4) The decrease in tenant reimbursements during the year ended December 31, 2020 was primarily due to COVID-19 contractual abatements (which in certain cases included tenant reimbursements), tenant deferrals that were not recognized because collection was not probable and vacancies. Additionally, during the year ended December 31, 2020, we had $4.7 million less in the gross-up of tenant reimbursed expenses for property taxes at various properties as certain tenants at these properties are now paying these costs directly.
(5) The decrease in other income for the year ended December 31, 2016. This2020 related primarily to a decrease in operating income as a result of COVID-19 closures at the Kartrite Resort and a theatre property.
Analysis of Expenses and Other Line Items
The following table summarizes our expenses and other line items (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Change | |
| | 2020 | | 2019 | | | |
Property operating expense (1) | | $ | 58,587 | | | $ | 60,739 | | | $ | (2,152) | | |
Other expense (2) | | 16,474 | | | 29,667 | | | (13,193) | | |
General and administrative expense (3) | | 42,596 | | | 46,371 | | | (3,775) | | |
Severance expense | | 2,868 | | | 2,364 | | | 504 | | |
| | | | | | | |
Costs associated with loan refinancing or payoff (4) | | 1,632 | | | 38,269 | | | (36,637) | | |
Interest expense, net (5) | | 157,675 | | | 142,002 | | | 15,673 | | |
Transaction costs (6) | | 5,436 | | | 23,789 | | | (18,353) | | |
Credit loss expense (7) | | 30,695 | | | — | | | 30,695 | | |
Impairment charges (8) | | 85,657 | | | 2,206 | | | 83,451 | | |
Depreciation and amortization (9) | | 170,333 | | | 158,834 | | | 11,499 | | |
Equity in loss from joint ventures (10) | | (4,552) | | | (381) | | | (4,171) | | |
Impairment charges on joint ventures (11) | | (3,247) | | | — | | | (3,247) | | |
Gain on sale of real estate (12) | | 50,119 | | | 4,174 | | | 45,945 | | |
| | | | | | | |
Income tax (expense) benefit (13) | | (16,756) | | | 3,035 | | | (19,791) | | |
Income from discontinued operations before other items (14) | | — | | | 37,241 | | | (37,241) | | |
Impairment on public charter school portfolio sale (15) | | — | | | (21,433) | | | 21,433 | | |
Gain on sale of real estate from discontinued operations (16) | | — | | | 31,879 | | | (31,879) | | |
| | | | | | | |
Preferred dividend requirements | | (24,136) | | | (24,136) | | | — | | |
(1) Our property operating expenses arise from the operations of our entertainment districts and other specialty properties as well as operating ground lease expense and the gross-up of tenant reimbursed expenses. The decrease in property operating expenses resulted from bad debt expense booked in 2019, as well as a decrease in the gross-up of tenant reimbursed expenses for property taxes at various properties as certain tenants at these properties are now paying these costs directly. These decreases were partially offset by an increase in costs due to higher vacancies.
(2) The decrease in other expense for the year ended December 31, 2020 related to a decrease in operating expenses as a result of COVID-19 closures at the Kartrite Resort and a theatre property.
(3) The decrease in general and administrative expense for the year ended December 31, 2020 was primarily due to a decrease in payroll and benefits costs, as well as travel expenses, partially offset by increases in professional fees.
(4) Costs associated with loan refinancing or payoff for the year ended December 31, 2020 related to fees paid to third parties in connection with amendments to our Consolidated Credit Agreement and Note Purchase Agreement. Costs associated with loan refinancing or payoff for the year ended December 31, 2019 related to the tender and redemption of the 5.75% Senior Notes due 2022.
(5) The increase in our net interest expense for the year ended December 31, 2020 compared to the year ended December 31, 2019 resulted primarily from $82.6an increase in average borrowings as well as a decrease in interest cost capitalized on development projects. This was partially offset by a decrease in our weighted average interest rate on outstanding debt and an increase in interest income from short-term investments related to cash on hand.
(6) The decrease in transaction costs for the year ended December 31, 2020 compared to the year ended December 31, 2019 was primarily due to pre-opening costs related to the Kartrite Resort, which opened in May 2019, as well as less costs related to the transfer of our CLA properties to Crème.
(7) Credit loss expense for the year ended December 31, 2020 was recognized in conjunction with our implementation of the new current expected credit losses standard (Topic 326). In addition, credit loss expense for the year ended December 31, 2020 included $25.5 million of credit loss expense that was recognized to reserve the outstanding principal balance of notes receivable from one borrower and an unfunded commitment to fund an additional $12.9 million, as a result of to recent changes in the borrower's financial status due to the COVID-19 pandemic.
(8) Impairment charges recognized during the year ended December 31, 2020, related to nine properties with revised estimated undiscounted cash flows and shorter hold periods as a result of the COVID-19 pandemic. Impairment charges recognized during the year ended December 31, 2020 were comprised of $70.7 million of impairments of real estate investments and $15.0 million of impairments of operating lease right-of-use assets. Impairment charges recognized during the year ended December 31, 2019, related to one theatre property.
(9) The increase in depreciation and amortization expense resulted primarily from acquisitions and developments completed in 2019 and 2020 as well as the acceleration of amortization on an in-place lease intangible related to a vacant property. This increase was partially offset by decreases related to property dispositions that occurred during 2019 and 2020.
(10) The increase in equity in loss from joint ventures resulted primarily from losses recognized at our joint ventures projects located in St. Petersburg Beach, Florida, and our joint ventures in three theatre projects in China. These properties were negatively impacted due to COVID-19 closures.
(11) Impairment charges on joint ventures for the year ended December 31, 2020 related to other-than-temporary impairment charges on three theatre projects located in China. See Note 7 to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information.
(12) The gain on sale of real estate for the year ended December 31, 2020 related to the exercise of a tenant purchase option on six private schools and four early childhood education centers as well as the sale of three early education center properties, four experiential properties and two land parcels. The gain on sale of real estate for the year ended December 31, 2019 related to the sale of one early childhood education center property, one attraction property and four land parcels.
(13) The increase in income tax expense for the year ended December 31, 2020 compared to income tax benefit for the year ended December 31, 2019 is primarily related to the recognition of a full valuation allowance on deferred tax assets for our Canadian operations and certain TRSs as a result of the economic uncertainty caused by the COVID-19 pandemic.
(14) Income from discontinued operations before other items for the year ended December 31, 2019 related to the operating results of all public charter school investments disposed in 2019. See Note 17 to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information on discontinued operations.
(15) Impairment on public charter school portfolio sale for the year ended December 31, 2019 related to the sale of substantially all of our public charter school portfolio, consisting of 47 public charter school related assets. See Note 4 to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information on these impairment charges.
(16) Gain on sale of real estate from discontinued operations for the year ended December 31, 2019 was due to the disposition of ten public charter schools pursuant to tenant purchase options and seven other public charter school properties sold during 2019.
Year ended December 31, 2019 compared to year ended December 31, 2018
Analysis of Revenue
The following table summarizes our total revenue (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Change | |
| | 2019 | | 2018 | | | |
Minimum rent (1) | | $ | 544,279 | | | $ | 478,087 | | | $ | 66,192 | | |
Percentage rent (2) | | 14,962 | | | 10,663 | | | 4,299 | | |
Straight-line rent (3) | | 10,557 | | | 4,703 | | | 5,854 | | |
Tenant reimbursements (4) | | 22,864 | | | 15,305 | | | 7,559 | | |
Other rental revenue | | 360 | | | 328 | | | 32 | | |
Total Rental Revenue | | $ | 593,022 | | | $ | 509,086 | | | $ | 83,936 | | |
| | | | | | | |
Other income (5) | | 25,920 | | | 2,076 | | | 23,844 | | |
Mortgage and other financing income (6) | | 33,027 | | | 128,759 | | | (95,732) | | |
Total revenue | | $ | 651,969 | | | $ | 639,921 | | | $ | 12,048 | | |
(1) For the year ended December 31, 2019 compared to the year ended December 31, 2018, the increase in minimum rent resulted from $41.2 million of rental revenue related to property acquisitions and developments completed in 20172019 and 2016, including2018, an increase of $3.5 million in rental revenue related to our transaction21 early childhood education center properties that were transferred from CLA to Crème and an increase of $0.2 million in rental revenue on existing properties. In addition, during the year ended December 31, 2019, we recognized $22.6 million in lease revenue on our existing operating ground leases in which we are sub-lessor, in connection with CNL Lifestyle which closed on April 6, 2017. This increase wasour adoption of Topic 842. These increases were partially offset by a decrease of $13.6$1.3 million in rental revenue on existing properties, primarily due to lower straight-line rental revenue and the reversal of prior period straight-line receivables of $4.0 million and $7.4 million, respectively, as well as a reduction in rental revenue of $2.7 million all relating to one of our early education tenants. In addition,from property dispositions contributed to this decrease. Percentage rents of $7.8 million and $4.7 million were recognized during the years ended December 31, 2017 and 2016, respectively. Straight-line rents, net of $4.3 million and $17.0 million were recognized during the years ended December 31, 2017 and 2016, respectively. The decrease of $12.7 millionnot included in straight-line rent is due primarily to lower straight-line rent and the reversal of prior period straight-line rent receivables from one of our early education tenants, CLA.discontinued operations.
During the year ended December 31, 2017,2019, we renewed 2710 lease agreements on approximately 2.2 million783 thousand square feet and funded or agreed to fund an average of $28.44$17.25 per square foot in tenant improvements. We experienced an increasea decrease of approximately 15%6.3% in rental rates and paid no leasing commissions with respect to these lease renewals.
Other income was $3.1 million for the year ended December 31, 2017 compared to $9.0 million for the year ended December 31, 2016.
(2) The $5.9 million decrease wasincrease in percentage rent related primarily due to higher gains from insurance recovery and fee incomepercentage rent recognized during the year ended December 31, 2016.2019 from one of our ski properties, our gaming property and several attraction and Education properties.
Mortgage
(3) The increase in straight-line rent related primarily to property acquisitions and developments completed in 2019 and 2018 as well as $0.9 million in straight-line revenue on our existing operating ground leases in which we are a sub-lessor, in connection with our adoption of Topic 842.
(4) The increase in tenant reimbursements related primarily to the gross-up of tenant reimbursed expenses of $6.9 million recognized during the year ended December 31, 2019 in accordance with Topic 842.
(5) The increase in other financing income for the year ended December 31, 2017 was $88.7 million compared2019 related primarily to $69.0 million for the year ended year ended December 31, 2016.operating income from the Kartrite Resort, as well as the operating income from a theatre.
(6) The $19.7 million increasedecrease in mortgage and other financing income was primarily due to additional real estate lending activities during 2017 and 2016, including our investment in a mortgage note receivable with OZRE secured by 14 ski properties which closed on April 6, 2017. This increase was offset by a decrease of $2.8 million in prepayment fees received in connection with prepayments ofon two non-Education mortgage notes receivable during the year ended December 31, 2017,2018 totaling $71.3 million as well as the sale of nine public charter school properties that were accounted for asnote and direct financing leases during 2016.lease payoffs in 2018 and 2019.
Analysis of Expenses and Other Line Items
The following table summarizes our expenses and other line items (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Change | |
| | 2019 | | 2018 | | | |
Property operating expense (1) | | $ | 60,739 | | | $ | 29,654 | | | $ | 31,085 | | |
Other expense (2) | | 29,667 | | | 443 | | | 29,224 | | |
General and administrative expense | | 46,371 | | | 48,889 | | | (2,518) | | |
Severance expense | | 2,364 | | | 5,938 | | | (3,574) | | |
Litigation settlement expense | | — | | | 2,090 | | | (2,090) | | |
Costs associated with loan refinancing or payoff (3) | | 38,269 | | | 31,958 | | | 6,311 | | |
| | | | | | | |
Interest expense, net (4) | | 142,002 | | | 135,870 | | | 6,132 | | |
Transaction costs (5) | | 23,789 | | | 3,698 | | | 20,091 | | |
Impairment charges (6) | | 2,206 | | | 27,283 | | | (25,077) | | |
Depreciation and amortization (7) | | 158,834 | | | 138,395 | | | 20,439 | | |
Equity in loss from joint ventures | | (381) | | | (22) | | | (359) | | |
Gain on sale of real estate | | 4,174 | | | 3,037 | | | 1,137 | | |
Gain on sale of investment in direct financing leases (8) | | — | | | 5,514 | | | (5,514) | | |
Income tax benefit (expense) (9) | | 3,035 | | | (2,285) | | | 5,320 | | |
Income from discontinued operations before other items (10) | | 37,241 | | | 45,036 | | | (7,795) | | |
Impairment on public charter school portfolio sale (11) | | (21,433) | | | — | | | (21,433) | | |
Gain on sale of real estate from discontinued operations (12) | | 31,879 | | | — | | | 31,879 | | |
Preferred dividend requirements | | (24,136) | | | (24,142) | | | 6 | | |
| | | | | | | |
(1) Our property operating expense totaled $31.7 million for the year ended December 31, 2017 compared to $22.6 million for the year ended December 31, 2016. These property operating expenses arise from the operations of our retail centersentertainment districts and other specialty properties.properties as well as operating ground lease expense and the gross-up of tenant reimbursed expenses. The $9.1 million increase in property operating expenses resulted primarily from an increase in bad debtground lease expense related to one of $24.6 million from our early education tenants, CLA,existing operating ground leases as well as higher property operatingthe gross-up of tenant reimbursed expenses at our multi-tenant properties.of $6.9 million recognized during the year ended December 31, 2019, in accordance with Topic 842, adopted January 1, 2019.
Our general and administrative(2) The increase in other expense totaled $43.4 million for the year ended December 31, 2017 compared2019 related to $37.5 millionoperating expenses for the year ended December 31, 2016. The increase of $5.9 million was primarily due to an increase in payroll and benefits costs, including share based compensation,Kartrite Resort, as well as increases in professional fees and franchise taxes.operating expense for a theatre.
(3) Costs associated with loan refinancing or payoff for the year ended December 31, 2017 was $1.5 million and primarily2019 related to the amendment to our unsecured revolving credit facilitytender and term loan andredemption of the prepayment of secured fixed rate mortgage notes payable.5.75% Senior Notes due 2022. Costs associated with loan refinancing or payoff totaled $0.9 million for the year ended December 31, 2016 and2018 related to fees associated with the repaymentredemption of a secured fixed rate mortgage note payable and the write off of prepaid mortgage fees7.75% Senior Notes due 2020.
(4) The increase in conjunction with our borrowers' prepayments of two mortgage notes receivable.
Gain on early extinguishment of debtnet interest expense for the year ended December 31, 2017 was $1.0 million and related2019 compared to a note payoff in advance of maturity that was initially recorded at fair value upon acquisition. There was no gain on early extinguishment of debt for the year ended December 31, 2016.
Our net interest expense increased by $36.0 million to $133.1 million for the year ended December 31, 2017 from $97.1 million for the year ended December 31, 2016. This increase2018 resulted primarily from an increase in average borrowings used to finance our real estate acquisitions and fund our mortgage notes receivable.receivable as well as a decrease in interest cost capitalized on development projects. This was partially offset by an increase in interest income recognized during the year ended December 31, 2019.
Transaction(5) The increase in transaction costs totaled $0.5 million for the year ended December 31, 20172019 compared to $7.9 million for the year ended December 31, 2016. The decrease of $7.4 million2018 was primarily due to a decreasepre-opening costs related to the Kartrite Resort, which opened in potential and terminated transactionsMay 2019, as well as costs related to the transfer of our early adoption of ASU 2017-01.CLA properties to Crème.
(6) Impairment charges forrecognized during the year ended December 31, 2017 totaled $10.2 million and2019 related to six charter school properties previously included in our investment in a direct financing lease. There were no impairmentone theatre property. Impairment charges forrecognized during the year ended December 31, 2016. See Note 6 to the consolidated financial statements included in this Annual Report on Form 10-K for further information.
Depreciation and amortization expense totaled $132.9 million for the year ended December 31, 2017 compared to $107.6 million for the year ended December 31, 2016. The $25.3 million increase resulted primarily from asset acquisitions and developments completed in 2017 and 2016, including our transaction with CNL Lifestyle which closed on April 6, 2017. This increase was partially offset by property dispositions.
Gain on sale of real estate was $41.9 million for the year ended December 31, 2017 and2018 related to the sale of four entertainment properties, the exercise of eight tenant purchase options on public charter school propertiestwo partially completed early childhood education centers and the sale of three other education properties. Gain on sale of real estate was $5.3 million for the year ended December 31, 2016 and related to the sale of three retailtwo land parcels and the exercise of two tenant purchase options on public charter schools properties.
Income tax expense was $2.4 million for the year ended December 31, 2017 compared to $0.6 million for the year ended December 31, 2016 and related primarily to Canadian income taxes on our Canadian trust and Federal income taxes on our taxable REIT subsidiaries,with site improvements, as well as state income taxes and withholding tax for distributionsan impairment charge related to our unconsolidated joint venture projects locatedtwo guarantees of the payment of certain economic development revenue bonds secured by leasehold interest and improvements at two theatres in China. The $1.8 million increase in expense related primarilyLouisiana. See Note 4 to the reversal of a valuation allowance associated with the taxable REIT subsidiaries, deferred tax assets recorded in the year ended December 31, 2016, as well as higher deferred tax expense in 2017 related to our Canadian trust. See Note 2 to the consolidated financial statementsConsolidated Financial Statements included in this Annual Report on Form 10-K for further information on the impact to our resultsthese impairment charges.
(7) The increase in depreciation and amortization expense resulted primarily from acquisitions and developments completed in 2018 and 2019 and was partially offset by property dispositions that occurred during 2018 and 2019.
(8) Gain on sale of operations from the recent Tax Cuts and Jobs Act, which is expected to be minimal.
Preferred dividend requirementsinvestment in direct financing leases for the year ended December 31, 2017 were $24.3 million compared2018 related to $23.8 millionthe sale of four public charter school properties leased to Imagine Schools, Inc. ("Imagine").
(9) The change in income tax benefit for the year ended December 31, 2016. The $0.5 million increase is due to an increase of $0.7 million due2019 compared to the issuance of 6.0 million 5.75% Series G cumulative redeemable preferred shares on November 30, 2017, offset by a decrease of $0.2 million as a result of the redemption of 5.0 million 6.625% Series F cumulative redeemable preferred shares on December 21, 2017.
Preferred share redemption costs of $4.5 millionincome tax expense for the year ended December 31, 2017 were2018 is primarily related to lower deferred taxes due to the redemptiontreatment of all of our 6.625% Series F cumulative redeemable preferred shares on December 21, 2017. These costs consist of the
original issuancepre-opening costs and other redemptionexpected tax losses for the Kartrite Resort, as well as certain expenses related expenses. There were no preferred share redemption coststo our Canadian trust.
(10) Income from discontinued operations before other items for the year ended December 31, 2016.2019 and 2018 related to the operating results of all public charter school investments disposed in 2019. See Note 17 to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information on discontinued operations.
Year ended December 31, 2016 compared to year ended December 31, 2015
Rental revenue was $399.6 million for the(11) Impairment on public charter school portfolio sale for the year ended December 31, 2016 compared to $330.9 million for the year ended December 31, 2015. Rental revenue increased $68.7 million from the prior period, of which $65.3 million was related to property acquisitions and developments completed in 2016 and 2015, as well as an increase of $3.4 million in rental revenue on existing properties, partially offset by the impact of a weaker Canadian exchange rate and property dispositions. Percentage rents of $4.7 million and $3.0 million were recognized during the years ended December 31, 2016 and 2015, respectively. Straight-line rents of $17.0 million and $12.2 million were recognized during the years ended December 31, 2016 and 2015, respectively.
During the year ended December 31, 2016, we experienced a decrease of approximately 0.5% in rental rates on approximately 1.3 million square feet with respect to 17 lease renewals. Additionally, we have funded or have agreed to fund a weighted average of $31.42 per square foot in tenant improvements. There were no leasing commissions related to these renewals.
Tenant reimbursements totaled $15.6 million for the year ended December 31, 2016 compared to $16.3 million for the year ended December 31, 2015. These tenant reimbursements2019 related to the operationssale of substantially all of our entertainment retail centers. The $0.7 million decrease was primarily due a decrease in tenant reimbursements due to vacancy at our retail centers in Ontario, Canada as well as the impactpublic charter school portfolio, consisting of a weaker Canadian exchange rate.
Other income was $9.0 million for the year ended December 31, 2016 compared to $3.6 million for the year ended December 31, 2015. The $5.4 million increase was primarily due47 public charter school related assets, which occurred on November 22, 2019. See Note 4 to the recognition of gains of $4.7 million from insurance claims during the year ended December 31, 2016, as well as an increase in fee income due to a $1.6 million extension fee recorded in 2016 in conjunction with an extension of a tenant purchase option.
Mortgage and other financing income for the year ended December 31, 2016 was $69.0 million compared to $70.2 million for the year ended year ended December 31, 2015. The $1.2 million decrease was due primarily to the conversion of the mortgage note for Camelback Mountain Resort to a lease agreement during the year ended December 31, 2015 and the payoff of certain mortgage notes in the first half of 2016. Additionally, participating interest income decreased to $0.8 million during the year ended December 31, 2016 from $1.5 million for the year ended December 31, 2015. These decreases were partially offset by a $3.6 million prepayment fee we received in conjunction with the full repayment of one mortgage note receivable and by increased real estate lending activities related to our other mortgage loan agreements.
Our property operating expense totaled $22.6 million for the year ended December 31, 2016 compared to $23.4 million for the year ended December 31, 2015. These property operating expenses arise from the operations of our retail centers and other specialty properties. The $0.8 million decrease resulted primarily from a decrease in bad debt expense as well as a weaker Canadian exchange rate partially offset by higher property operating expenses at certain properties.
Other expense totaled $5 thousand for the year ended December 31, 2016 compared to $648 thousand for the year ended December 31, 2015. The $643 thousand decrease was due to golf course expenses related to a golf course on the Resorts World Catskills resort property which closed during the year ended December 31, 2016.
Our general and administrative expense totaled $37.5 million for the year ended December 31, 2016 compared to $31.0 million for the year ended December 31, 2015. The increase of $6.5 million was primarily due to an increase in payroll and benefits costs including share based compensation, as well as certain professional fees.
Retirement severance expense was $18.6 million for the year ended December 31, 2015 and related to the retirement of our former President and Chief Executive Officer. See Note 13 to the consolidated financial statementsConsolidated Financial Statements included in this Annual Report on Form 10-K for further detail. There was no retirement severance expenseinformation on these impairment charges.
(12) Gain on sale of real estate from discontinued operations for the year ended December 31, 2016.
Costs associated with loan refinancing or payoff for the year ended December 31, 20162019 was $0.9 million and related to fees associated with the repayment of a secured fixed rate mortgage note payable and the write off of prepaid mortgage fees in conjunction with our borrowers' prepayments of two mortgage notes receivable. Costs associated with loan refinancing or payoff totaled $0.3 million for the year ended December 31, 2015 and relateddue to the amendment and restatementdisposition of our unsecured credit facilities on April 24, 2015 as well as the prepayment of seven mortgages notes payable during the year ended December 31, 2015.
Our net interest expense increased by $17.2 million to $97.1 million for the year ended December 31, 2016 from $79.9 million for the year ended December 31, 2015. This increase resulted from an increase in average borrowings as well as a decrease in interest cost capitalized primarily related to the Resorts World Catskills project, which was $1.8 million for the year ended December 31, 2016 compared to $8.7 million for the year ended December 31, 2015. Additionally, the hedged rate on $300.0 million of our unsecured term loan facility increased to an average of 3.61% from an average of 2.60% and returned to an average of 2.94% in July 2017. These increases were partially offset by a decrease in the weighted average interest rate used to finance our real estate acquisitions and fund our mortgage notes receivable.
Depreciation and amortization expense totaled $107.6 million for the year ended December 31, 2016 compared to $89.6 million for the year ended December 31, 2015. The $18.0 million increase resulted primarily from asset acquisitions completed in 2016 and 2015 as well as the acceleration of depreciation on certain existing assets, and was partially offset by dispositions.
Equity in income from joint ventures was $0.6 million for the year ended December 31, 2016 compared to $1.0 million for the year ended December 31, 2015. The $0.4 million decrease resulted from a decrease in income from our joint venture projects located in China.
Gain on sale of real estate was $5.3 million for the year ended December 31, 2016 and related to a gain on sale of $2.5 million from the sale of three retail parcels in Texas and a gain on sale of $2.8 million from the sale of twoten public charter schools in connection with the exercise ofpursuant to tenant purchase options. Gain on sale of real estate was $23.8 million for the year ended December 31, 2015options and related to a gain on sale of $23.7 million from a theatre located in Los Angeles, California and a gain on sale of $0.2 million from a parcel of land adjacent to one of ourseven other public charter school investments. The gain was partially offset by a loss on sale of $0.1 million from a parcel of land adjacent to one of our megaplex theatre properties.properties sold during 2019.
Liquidity and Capital Resources
Cash and cash equivalents were $41.9 million at were $1.0 billion at December 31, 2017. Of cash and cash equivalents at December 31, 2017, $33.8 million related to funds held for a 1031 exchange.2020. In addition, we had restricted cash of $17.1of $2.4 million at December 31, 2017.2020. Of the restricted cash at December 31, 2017, $13.22020, $1.3 million relatedrelated to cash held for our borrowers’ debt service reserves for mortgage notes receivable or tenants' off-season rent reserves and $3.9and $1.1 million related to escrow deposits required for property management agreements or held related tofor potential acquisitions and developments.redevelopments.
Mortgage Debt, Senior Notes, and Unsecured Revolving Credit Facility and Unsecured Term Loan Facility and Equity Issuances
As of December 31, 2017,2020, we had total debt outstanding of $3.0$3.7 billion of which 99% waswas unsecured.
At December 31, 2017,2020, we had outstanding $2.1outstanding $2.4 billion in aggregateaggregate principal amount of unsecured senior notes (excluding the private placement notes discussed below) ranging in interest rates from 4.50%3.75% to 7.75%5.25%. The notes contain various covenants, including: (i) a limitation on incurrence of any debt that would cause the ratio of our debt to adjusted total assets to exceed 60%; (ii) a limitation on incurrence of any secured debt whichthat would cause the ratio of secured debt to adjusted total assets to exceed 40%; (iii) a limitation on incurrence of any debt whichthat 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. As discussed above,
In light of the continuing financial and operational impacts of the COVID-19 pandemic on us, our unsecured senior notes are no longer guaranteed by our subsidiaries.
On September 27, 2017,tenants and borrowers, on June 29, 2020 and November 3, 2020, we amended and restatedour Consolidated Credit Agreement, which governs our unsecured revolving credit facility and our unsecured term loan facilities.facility. The amendments modified certain provisions and waived our obligation to comply with certain covenants under this debt agreement through December 31, 2021. We alsocan elect to terminate the Covenant Relief Period early, subject to certain conditions.
On June 29, 2020 and December 24, 2020, we further amended our Note Purchase Agreement, which governs our private placement notes. The amendments modified certain provisions and waived our obligation to comply with certain covenants under these debt agreements through October 1, 2021. We can elect to extend such period through January 1, 2022 and may elect to terminate the Covenant Relief Period early, subject to certain conditions. See "Recent Developments"Note 8 to the Consolidated Financial Statements in this Annual Report on Form 10-K for further discussion.additional details.
At December 31, 2017,2020, we had $210.0$590.0 million outstanding balance under our $1.0 billion unsecured revolving credit facility with interest at a floating rate of LIBOR plus 100 basis points,1.625% (with a LIBOR floor of 0.50%), which was 2.49% at2.125%, with a facility fee of 0.375%. During the three months ended December 31, 2017. The amount that2020, our unsecured debt rating was downgraded to BB+ by both Fitch and Standard & Poor's. If our unsecured debt rating is further downgraded by Moody's, the interest rate on the revolving credit facility would increase by 0.35% during the Covenant Relief Period. After the Covenant Relief Period and based on our current unsecured debt ratings, the interest rate will be LIBOR plus 1.20% (with a LIBOR floor of zero) and the facility fee will be 0.25%, however these rates are subject to change based on our unsecured debt ratings. Subsequent to December 31, 2020, due to stronger collections, disposition proceeds and significant liquidity, we are ableused a portion of our cash on hand to borrow onreduce borrowing under our unsecured revolving credit facility isby $500.0 million, resulting in a functionremaining balance of the values and advance rates, as defined by the credit agreement, assigned to$90.0 million on our eligible unencumbered assets, less outstanding letters of credit and less other liabilities.$1.0 billion facility.
At December 31, 2017,2020, our unsecured term loan facility had a balance of $400.0 million with interest at a floating rate of LIBOR plus 110 basis points,2.00% (with a LIBOR floor of 0.50%), which was 2.49% at December 31, 2017.2.50%. Similar to the unsecured revolving credit facility discussed above, if our unsecured debt rating is further downgraded by Moody's, the interest rate on the term loan facility would increase by 0.35% during the Covenant Relief Period. After the Covenant Relief Period and based on our current unsecured debt ratings, the interest rate will be LIBOR plus 1.35% (with a LIBOR floor of zero), however these rates are subject to change based on our unsecured debt ratings. As of December 31, 2017, $300.0 million2020, all of this LIBOR-based debt was fixed with interest rate swap agreements at 2.64% from July 6, 2017 to April 5, 2019. In addition, as of December 31, 2017, we have entered into interest rate swap agreements to fix the interest rate at 3.15% on an additional $50.0 million of this LIBOR-based debt from November 6, 2017 to April 5, 2019 and on $350.0 million of this LIBOR-based debtswaps from April 6,5, 2019 to February 7, 2022. During the Covenant Relief Period and based on our current unsecured debt ratings, the interest rate swaps are fixed at 4.40% for $350.0 million of borrowings and 4.60% for the remaining $50.0 million of borrowings, and after the Covenant Relief Period will be 3.40% for $350.0 million of borrowings and 3.60% for the remaining $50.0 million of borrowings, however these rates are subject to change based on the Company’s unsecured debt ratings.
At December 31, 2017,2020, we had outstanding $340.0 million of senior unsecured notes that were issued in a private placement transaction. The private placement notes were issued in two tranches with $148.0 million bearing interest at 4.35% and due August 22, 2024, and $192.0 million bearing interest at 4.56% and due August 22, 2026. As noted above, we amended the Note Purchase Agreement, which governs our private placement notes, on June 29, 2020 and December 24, 2020 to modify certain provisions and obtain covenant waivers. At December 31, 2020, the interest rates for the private placement notes were 5.60% and 5.81% for the Series A notes due 2024 and the Series B notes due 2026, respectively. After the Covenant Relief Period, the interest rates for the private placement notes are scheduled to return to 4.35% and 4.56% for the Series A notes due 2024 and the Series B notes due 2026, respectively. Subsequent to December 31, 2020, we used a portion of our cash proceeds from property sales to reduce the principal of our private placement notes by $23.8 million in accordance with the above amendments to the Note Purchase Agreement.
Our unsecured credit facilities and the private placement notes contain financial covenants or restrictions that limit our levels of consolidated debt, secured debt, investment levels outside certain categories, stock repurchases and dividend distributions and require us to maintain a minimum consolidated tangible net worth and meet certain coverage levels for fixed charges and debt service. The amendments to these debt agreements imposed a new minimum liquidity financial covenant during the Covenant Relief Period, provided relief from compliance with certain other financial covenants during the Covenant Relief Period and permanently modified certain other financial covenants. The amendments also imposed additional restrictions on us during the Covenant Relief Period, including limitations on making investments, incurring indebtedness, making capital expenditures and paying dividends and making other distributions, repurchasing our shares, voluntarily prepaying certain indebtedness, encumbering certain assets and maintaining a minimum liquidity amount, in each case subject to certain exceptions. In addition, the amendments required us to cause certain of our key subsidiaries to guarantee our obligations based on our unsecured debt ratings, and we are required to pledge the equity interests of such subsidiary guarantors if certain subsequent events occur; however, both of these requirements end when the Covenant Relief Period is over. See Note 8 to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional details regarding these amendments.
Additionally, these debt instruments contain cross-default provisions if we default under other indebtedness exceeding certain amounts. Those cross-default thresholds vary from $25.0$50.0 million to in $75.0 million, depending upon
the case of the note purchase agreement governing the private placement notes, $75.0 million.debt instrument. We were in compliance with these financial and other covenants under our debt instruments at December 31, 2017.2020.
Our principal investing activities are acquiring, developing and financing entertainment, recreationExperiential and educationEducation properties. These investing activities have generally been financed with mortgage debt and senior unsecured notes, as well as the proceeds from equity offerings. Our unsecured revolving credit facility is also used to finance the acquisition or development of properties, and to provide mortgage financing. We have and expect to continue to issue debt securities in public or private offerings. We have and may in the future assume mortgage debt in connection with property acquisitions or, after the expiration of the Covenant Relief Period, incur new mortgage debt on existing properties. We may also issue equity securities in connection with acquisitions. Continued growth of our rental propertyreal 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.
Certain of our other long-term debt agreements contain customary restrictive covenants related to financial and operating performance as well as certain cross-default provisions. We were in compliance with all financial covenants at December 31, 2017.Capital Markets
During the year ended December 31, 2017, we issued an aggregate2020, our Board of 1,382,730 common shares under the directTrustees approved a share purchase componentrepurchase program to repurchase up to $150.0 million of our DSPP for total net proceedscommon shares. The share repurchase program was set to expire on December 31, 2020; however, we suspended the program on the effective date of $98.2 million.
the covenant modification agreements, June 29, 2020, as discussed above. During the year ended December 31, 2017,2020, we repurchased 4,066,716 common shares under the share repurchase program for approximately $106.0 million. The repurchases were made under a Rule 10b5-1 trading plan.
During the year ended December 31, 2020, we issued 8,851,264an aggregate of 36,176 common shares in connection with the transactions with CNL Lifestyle and OZRE. See Note 3 to the consolidated financial statements included in this Annual Report on Form 10-Kunder our DSP Plan for further information.net proceeds of $1.1 million.
Subsequent to December 31, 2017, we redeemed all of the outstanding 7.75% Senior Notes due July 15, 2020. The notes were redeemed at a price equal to the principal amount of $250.0 million plus a premium of $28.6 million pursuant to the terms of the indenture, together with accrued and unpaid interest up to, but not including the redemption date. Additionally, we prepaid in full a mortgage note payable totaling $11.7 million that was secured by a theatre property.
Liquidity Requirements
Short-term liquidity requirements consist primarily of normal recurring corporate operating expenses, debt service requirements, distributions to shareholders and, dividends to shareholders.a lesser extent, share repurchases. We meethave historically met these requirements primarily through cash provided by operating activities. NetThe table below summarizes our cash provided by operating activities was $391.1 million, $306.2 million and $278.5 million for the years ended December 31, 2017, 2016 and 2015, respectively. Net cash used by investing activities was $702.2 million, $662.1 million and $568.5 million for the years ended December 31, 2017, 2016 and 2015, respectively. Net cash provided by financing activities was $333.5 million, $371.1 million and $292.0 million for the years ended December 31, 2017, 2016 and 2015, respectively. flows (dollars in thousands):
| | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2020 | | 2019 |
Net cash provided by operating activities | | $ | 65,273 | | | $ | 439,530 | |
Net cash provided by investing activities | | 133,986 | | | 96,505 | |
Net cash provided (used) by financing activities | | 297,169 | | | (23,223) | |
We currently anticipate that our cash on hand, cash from operations and funds available under our unsecured revolving credit facilityproceeds from asset dispositions will provide adequate liquidity to meet our financial commitments for the next 12 months, including to fund our operations, make interest and principal payments on our debt, allow distributions to our preferred shareholders, and allow dividends to be paiddistributions to our common shareholders andto avoid corporate level federal income or excise tax in accordance with REIT Internal Revenue Code requirements. We may also use funds available under our unsecured revolving credit facility, subject to compliance with financial covenants.
As discussed above, we have agreed to rent and mortgage payment deferral arrangements with most of our customers as a result of the COVID-19 pandemic. Under these deferral arrangements, our customers are required to resume rent and mortgage payments at negotiated times, and begin repaying deferred amount under negotiated schedules, which will begin at various times in the future. In addition, the continuing impact of the COVID-19 pandemic may result in further extensions or adjustments for our customers, which we cannot predict at this time. In the near term, we believe we can fund our short-term liquidity requirements primarily with cash on hand, including funds borrowed under our unsecured revolving credit facility.
Liquidity requirements at December 31, 20172020 consisted primarily of maturities of debt. Contractual obligations as of December 31, 20172020 are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, | | | | |
Contractual Obligations | 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | Thereafter | | Total |
Long Term Debt Obligations | $ | — | | | $ | 590,000 | | | $ | 675,000 | | | $ | 148,000 | | | $ | 300,000 | | | $ | 2,016,995 | | | $ | 3,729,995 | |
Interest on Long Term Debt Obligations | 157,078 | | | 131,911 | | | 117,895 | | | 106,927 | | | 92,653 | | | 175,670 | | | 782,134 | |
Operating Lease Obligation - Corporate Office | 884 | | | 967 | | | 967 | | | 967 | | | 967 | | | 724 | | | 5,476 | |
Operating Ground Lease Obligations (1) | 22,520 | | | 22,058 | | | 21,340 | | | 20,840 | | | 20,936 | | | 203,467 | | | 311,161 | |
Total | $ | 180,482 | | | $ | 744,936 | | | $ | 815,202 | | | $ | 276,734 | | | $ | 414,556 | | | $ | 2,396,856 | | | $ | 4,828,766 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, | | | | |
Contractual Obligations | 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | Thereafter | | Total |
Long Term Debt Obligations | $ | 11,684 |
| | $ | — |
| | $ | 250,000 |
| | $ | — |
| | $ | 560,000 |
| | $ | 2,239,995 |
| | $ | 3,061,679 |
|
Interest on Long Term Debt Obligations | 140,745 |
| | 138,191 |
| | 128,059 |
| | 117,564 |
| | 106,960 |
| | 268,179 |
| | 899,698 |
|
Operating Lease Obligations | 856 |
| | 856 |
| | 856 |
| | 884 |
| | 967 |
| | 3,625 |
| | 8,044 |
|
Total | $ | 153,285 |
| | $ | 139,047 |
| | $ | 378,915 |
| | $ | 118,448 |
| | $ | 667,927 |
| | $ | 2,511,799 |
| | $ | 3,969,421 |
|
Commitments
(1) Our tenants, who are generally sub-tenants under the ground leases, are responsible for paying the rent under these ground leases. As of December 31, 2017,2020, rental revenue from several of our tenants, who are also sub-tenants under the ground leases, are being recognized on a cash basis. In most cases, the ground lease sub-tenants have continued to pay the rent under these ground leases. In addition, two of these properties are vacant. In the event the tenant fails to pay the ground lease rent or the property is vacant, we would be primarily responsible for the payment, assuming we do not sell or re-tenant the property. The above amounts exclude contingent rent due under leases where the ground lease payment, or a portion thereof, is based on the level of the tenant's sales.
Commitments
As of December 31, 2020, we had 17 development projects with commitments to fund an aggregate of approximately $168.7$118.3 million, of commitments to fund development projects including 23 entertainment development projects for which we have commitments to fund approximately $61.5 million, seven education development projects for which we have commitments to fund approximately $41.5 million of additional improvements and four recreation development projects for which we have commitments to fund approximately $65.7 million. Of these amounts, approximately $130.3$46.9 million is expectedexpected to be funded in 2018.2021. Development costs are advanced by us in periodic draws. If we determine that construction is not being completed in accordance with the terms of the development agreements,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.
Additionally, as of December 31, 2017, we had a commitment to fund approximately $155.0 million, of which $40.0 million has been funded, to complete an indoor waterpark hotel and adventure park at our casino and resort project in Sullivan County, New York. Of this amount, approximately $80.0 million is expected to be funded in 2018. We are also responsible for the construction of this project's common infrastructure. In June 2016, the Sullivan County Infrastructure Local Development Corporation issued $110.0 million of Series 2016 Revenue Bonds, which is expected to fund a substantial portion of such construction costs. We received an initial reimbursement of $43.4 million of construction costs during the year ended December 31, 2016 and an additional reimbursement of $23.9 million during the year ended December 31, 2017. We expect to receive an additional $21.0 million of reimbursements over the balance of the construction period. Construction of infrastructure improvements is expected to be completed in 2018.
We have certain commitments related to our mortgage notenotes 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 occurrenceoccurrence of events outside of ourits direct control. As of December 31, 2017,2020, we had sixthree mortgage notes and one note receivable with commitments totaling
approximately $22.7$31.8 million, of which $15.0approximately $21.7 million is expected to be funded in 2018.2021. If commitmentscommitments are funded in the future, interest will be charged at rates consistent with the existing investments.
We guarantee the payment of certain economic development revenue bonds that are related to two theatres in Louisiana. During the year ended December 31, 2017, these bonds were re-issued and the maturity date of these bonds was extended to December 22, 2047. At December 31, 2017, the guarantees of the payment of these bonds totaled $24.7 million. We earn a fee at an annual rate of 4.00% over the 30-year terms of the related bonds. We have recorded $13.4 million as a deferred asset included in other assets and $13.4 million included in other liabilities in the accompanying consolidated balance sheet included in this Annual Report on Form 10-K as of December 31, 2017 related to these guarantees. No amounts have been accrued as a loss contingency related to this guarantee because payment by us is not probable.
In connection with construction of our development projects and related infrastructure, certain public agencies require posting of surety bonds to guarantee that the Company'sour obligations are satisfied. These bonds expire upon the completion of the improvements or infrastructure. As of December 31, 2017, the Company2020, we had sixtwo surety bonds outstanding totaling $22.8$31.6 million.
Liquidity Analysis
In analyzing our liquidity,
As noted above, we generally expect that our cash provided by operating activities will meet our normal recurring operating expenses, recurring debt service requirements and dividends to shareholders.
Subsequent to December 31, 2017, we prepaid in full a mortgage note payable totaling $11.7had $590.0 million that was secured by a theatre property and redeemed all of our 7.75% Senior Notes due July 15, 2020. The Senior Notes were redeemed at a price equal to the principal amount of $250.0 million plus a premium calculated pursuant to the terms of the indenture of $28.6 million. Following these payments, we have no debt payments due until 2022. Our sources of liquidity as of December 31, 2017 to make these debt pay-offs and to pay the 2018 commitments described above include the amount available outstanding under our unsecured revolving credit facility at December 31, 2020. We borrowed $750.0 million on March 20, 2020 as a precautionary measure to increase our cash position and preserve financial flexibility in light of approximately $790.0uncertainty in the global markets due to the COVID-19 pandemic. In addition, during 2020, we deferred our anticipated gaming venue investment and all other uncommitted investment spending. On December 30, 2020, we paid down our unsecured revolving credit facility by $160.0 million. In January 2021, due to stronger collections, disposition proceeds and significant liquidity, we used $500.0 million and unrestrictedof our cash on hand to reduce the balance outstanding on our $1.0 billion unsecured revolving credit facility from
$590.0 million to $90.0 million. We believe our unrestricted cash position and borrowing capacity on our unsecured revolving credit facility will provide us with sufficient liquidity and aid us in this time of $41.9 million, which includes $33.8 million related to funds held for a Section 1031 exchange under the Internal Revenue Code. Accordingly, while there can be no assurance, we expect that our sources of cash will exceed our existing commitments over the remainder of 2018.market disruption.
We alsohave no scheduled debt payments due until 2022. We currently believe that we will be able to repay, extend, refinance or otherwise settle our debt obligations for 2019 and thereaftermaturities 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.us, particularly in light of the current economic uncertainty caused by the COVID-19 pandemic.
Our primary use of cash after paying operating expenses, debt service, dividendsdistributions to shareholders, funding share repurchases and funding existing commitments is in growing our investment portfolio through the acquisition, development and financing of additional properties. We expect to finance these investments with borrowings under our unsecured revolving credit facility, as well as debt and equity financing alternatives andor proceeds from asset dispositions. The availability and terms of any such financing or sales will depend upon market and other conditions.conditions, which have been negatively impacted by the COVID-19 pandemic. If we borrow the maximum amount available under our unsecured revolving credit facility, there can be no assurance that we will be able to obtain additional or substitute investment financing (See Item 1A - “Risk Factors”).financing. We may also assume mortgage debt in connection with property acquisitions.
Our investment spending and uses of cash during the Covenant Relief Period will be subject to limitations under the amendments to the agreements governing our Consolidated Credit Agreement and Note Purchase Agreement as discussed above. In addition, in certain circumstances, we will be required to apply 100% of the proceeds, net of certain costs, received during the Covenant Relief Period from certain sales and dispositions, debt issuances or equity issuances, in each case, subject to certain exceptions, to repay amounts outstanding under our Consolidated Credit Agreement and Note Purchase Agreement.
Capital Structure
We believe that our shareholders are best served by a conservative capital structure. Therefore, we seek to maintain a conservative debt level on our balance sheet as measured primarily by our net debt to adjusted EBITDA ratio (see "Non-GAAP Financial Measures" for definitions). We also seek to maintain conservative interest, fixed charge, debt service coverage and net debt to gross asset ratios.
We expect to maintain our net debt to adjusted EBITDA ratio between 4.6x to 5.6x. Our net debt to adjusted EBITDAEBITDAre ratio was 5.39xnot meaningful at December 31, 2020 given the temporary disruption caused by the COVID-19 pandemic and the associated accounting for tenant rent deferrals and other lease modifications. Our net debt to gross assets ratio was 40% as of December 31, 20172020 (see "Non-GAAP Financial Measures" for calculation). Because adjusted EBITDA as defined does not include the annualization of adjustments for projects put in service during the quarter and other items, and net debt includes the debt provided for build-to-suit projects under development that do not have any
current EBITDA, we also look at a ratio adjusted for these items. The level of this additional ratio, along with the timing and size of our equity and debt offerings, may cause us to temporarily operate outside our stated range for the net debt to adjusted EBITDA ratio of 4.6x to 5.6x.
Our net debt (see "Non-GAAP Financial Measures" for definition) to gross assets ratio (i.e. net debt to total assets plus accumulated depreciation less cash and cash equivalents) was 44% as of December 31, 2017. Our net debt as a percentage of our total market capitalization at December 31, 2017 was 37%. We calculate our total market capitalization of $8.2 billion by aggregating the following at December 31, 2017:
Common shares outstanding of 74,125,080 multiplied by the last reported sales price of our common shares on the NYSE of $65.46 per share, or $4.9 billion;
Aggregate liquidation value of our Series C convertible preferred shares of $135.0 million;
Aggregate liquidation value of our Series E convertible preferred shares of $86.2 million;
Aggregate liquidation value of our Series G redeemable preferred shares of $150.0 million; and
Net debt of $3.0 billion.
Non-GAAP Financial Measures
Funds From Operations (FFO), Funds From Operations As Adjusted (FFOAA) and Adjusted Funds from Operations (AFFO)
The National Association of Real Estate Investment Trusts (“NAREIT”) developed FFO as a relative non-GAAP financial measure of performance of an equity REIT in order to recognize that income-producing real estate historically has not depreciated on the basis determined under GAAP. Pursuant to the definition of FFO by the Board of Governors of NAREIT, we calculate FFO as net (loss) income available to common shareholders, computed in accordance with GAAP, excluding gains and losses from salesdisposition of depreciable operating propertiesreal estate and impairment losses of depreciableon 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 (gain) associated with loan refinancing or payoff, net, transaction costs, retirement severance expense, preferred share redemption costs, impairment of
operating lease right-of-use assets, termination fees associated with tenants' exercises of public charter school buy-out options impairment of direct financing lease (allowance for leaseand credit loss portion)expense and provision for loan losses and subtracting gain on early extinguishment of debt, gain (loss) on sale of land, gain on insurance recovery and deferred income tax benefit (expense).(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/above and below market leases, net;net and tenant allowances; and subtracting maintenance capital expenditures (including second generation tenant improvements and leasing commissions), straight-linestraight-lined rental revenue (removing impact of straight-line ground sublease expense), and the non-cash portion of mortgage and other financing income.
FFO, FFOAA and AFFO are widely used measures of the operating performance of real estate companies and are provided here as a supplemental measure to GAAP net (loss) income available to common shareholders and earnings per share, and management provides FFO, FFOAA and AFFO herein because it believes this information is useful to investors in this regard. FFO, FFOAA and AFFO are non-GAAP financial measures. FFO, FFOAA and AFFO do not represent cash flows from operations as defined by GAAP and are not indicative that cash flows are adequate to fund all cash needs and are not to be considered alternatives to net income or any other GAAP measure as a measurement of the results of our operations or our cash flows or liquidity as defined by GAAP. It should also be noted that not all REITs calculate FFO, FFOAA and AFFO the same way so comparisons with other REITs may not be meaningful.
The following table summarizes our FFO, FFOAA and AFFO including per share amounts for FFO and FFOAA, for the years ended December 31, 2017, 20162020, 2019 and 20152018 and reconciles such measures to net (loss) income available to common shareholders, the most directly comparable GAAP measure (unaudited, in thousands, except per share information):
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2020 | | 2019 | | 2018 |
FFO: | | | | | |
Net (loss) income available to common shareholders of EPR Properties | $ | (155,864) | | | $ | 178,107 | | | $ | 242,841 | |
Gain on sale of real estate | (50,119) | | | (36,053) | | | (3,037) | |
Gain on sale of investment in direct financing leases | — | | | — | | | (5,514) | |
Impairment of real estate investments, net (1) | 70,648 | | | 23,639 | | | 27,283 | |
| | | | | |
| | | | | |
Real estate depreciation and amortization | 169,253 | | | 170,717 | | | 152,508 | |
Allocated share of joint venture depreciation | 1,491 | | | 2,213 | | | 226 | |
Impairment charges on joint ventures | 3,247 | | | — | | | — | |
FFO available to common shareholders of EPR Properties | $ | 38,656 | | | $ | 338,623 | | | $ | 414,307 | |
| | | | | |
FFO available to common shareholders of EPR Properties | $ | 38,656 | | | $ | 338,623 | | | $ | 414,307 | |
Add: Preferred dividends for Series C preferred shares | — | | | 7,754 | | | 7,759 | |
Add: Preferred dividends for Series E preferred shares | — | | | 7,756 | | | 7,756 | |
Diluted FFO available to common shareholders of EPR Properties | $ | 38,656 | | | $ | 354,133 | | | $ | 429,822 | |
FFOAA: | | | | | |
FFO available to common shareholders of EPR Properties | $ | 38,656 | | | $ | 338,623 | | | $ | 414,307 | |
Costs associated with loan refinancing or payoff | 1,632 | | | 38,450 | | | 31,958 | |
Transaction costs | 5,436 | | | 23,789 | | | 3,698 | |
Severance expense | 2,868 | | | 2,364 | | | 5,938 | |
Litigation settlement expense | — | | | — | | | 2,090 | |
| | | | | |
Termination fee included in gain on sale | — | | | 24,075 | | | 1,864 | |
| | | | | |
| | | | | |
| | | | | |
Gain on insurance recovery (included in other income) | (809) | | | — | | | — | |
Impairment of operating lease right-of-use assets (1) | 15,009 | | | — | | | — | |
Credit loss expense | 30,695 | | | — | | | — | |
Deferred income tax expense (benefit) | 15,246 | | | (4,115) | | | 573 | |
FFOAA available to common shareholders of EPR Properties | $ | 108,733 | | | $ | 423,186 | | | $ | 460,428 | |
| | | | | |
| | | Year ended December 31, | |
| 2017 | | 2016 | | 2015 | |
FFO: | | | | | | |
Net income available to common shareholders of EPR Properties | $ | 234,218 |
| | $ | 201,176 |
| | $ | 170,726 |
| |
Gain on sale of real estate (excluding land sale) | (41,942 | ) | | (2,819 | ) | | (23,748 | ) | |
Real estate depreciation and amortization | 132,040 |
| | 106,049 |
| | 87,965 |
| |
Allocated share of joint venture depreciation | 218 |
| | 229 |
| | 255 |
| |
Impairment of direct financing lease - residual value portion (1) | 2,897 |
| | — |
| | — |
| |
FFO available to common shareholders of EPR Properties | $ | 327,431 |
| | $ | 304,635 |
| | $ | 235,198 |
| |
| | | | | | |
FFO available to common shareholders of EPR Properties | $ | 327,431 |
| | $ | 304,635 |
| | $ | 235,198 |
| |
Add: Preferred dividends for Series C preferred shares | 7,763 |
| | 7,764 |
| | 7,763 |
| |
Add: Preferred dividends for Series E preferred shares | 7,761 |
| | — |
| | — |
| |
Diluted FFO available to common shareholders of EPR Properties | $ | 342,955 |
| | $ | 312,399 |
| | $ | 242,961 |
| |
| | | | | | |
FFOAA: | | | | | | |
FFO available to common shareholders of EPR Properties | $ | 327,431 |
| | $ | 304,635 |
| | $ | 235,198 |
| |
Costs associated with loan refinancing or payoff | 1,549 |
| | 905 |
| | 270 |
| |
Gain on insurance recovery (included in other income) | (606 | ) | | (4,684 | ) | | — |
| |
Termination fee included in gain on sale | 20,049 |
| | 2,819 |
| | — |
| |
Transaction costs | 523 |
| | 7,869 |
| | 7,518 |
| |
Retirement severance expense | — |
| | — |
| | 18,578 |
| |
Preferred share redemption costs | 4,457 |
| | — |
| | — |
| |
Gain on early extinguishment of debt | (977 | ) | | — |
| | — |
| |
Gain on sale of land | — |
| | (2,496 | ) | | (81 | ) | |
Deferred income tax expense (benefit) | 812 |
| | (1,065 | ) | | (1,136 | ) | |
Impairment of direct financing lease - allowance for lease loss portion (1) | 7,298 |
| | — |
| | — |
| |
FFOAA available to common shareholders of EPR Properties | $ | 360,536 |
| | $ | 307,983 |
| | $ | 260,347 |
| |
| | | | | | | | | | | | | | | | | | | | |
FFOAA available to common shareholders of EPR Properties | $ | 360,536 |
| | $ | 307,983 |
| | $ | 260,347 |
| FFOAA available to common shareholders of EPR Properties | $ | 108,733 | | | $ | 423,186 | | | $ | 460,428 | |
Add: Preferred dividends for Series C preferred shares | 7,763 |
| | 7,764 |
| | 7,763 |
| Add: Preferred dividends for Series C preferred shares | — | | | 7,754 | | | 7,759 | |
Add: Preferred dividends for Series E preferred shares | 7,761 |
| | — |
| | — |
| Add: Preferred dividends for Series E preferred shares | — | | | 7,756 | | | 7,756 | |
Diluted FFOAA available to common shareholders of EPR Properties | $ | 376,060 |
| | $ | 315,747 |
| | $ | 268,110 |
| Diluted FFOAA available to common shareholders of EPR Properties | $ | 108,733 | | | $ | 438,696 | | | $ | 475,943 | |
| | | | | | |
AFFO: | | | | | | AFFO: | | | | | |
FFOAA available to common shareholders of EPR Properties | $ | 360,536 |
| | $ | 307,983 |
| | $ | 260,347 |
| FFOAA available to common shareholders of EPR Properties | $ | 108,733 | | | $ | 423,186 | | | $ | 460,428 | |
Non-real estate depreciation and amortization | 906 |
| | 1,524 |
| | 1,653 |
| Non-real estate depreciation and amortization | 1,080 | | | 1,045 | | | 922 | |
Deferred financing fees amortization | 6,167 |
| | 4,787 |
| | 4,588 |
| Deferred financing fees amortization | 6,606 | | | 6,192 | | | 5,797 | |
Share-based compensation expense to management and trustees | 14,142 |
| | 11,164 |
| | 8,508 |
| Share-based compensation expense to management and trustees | 13,819 | | | 13,180 | | | 15,111 | |
Amortization of above/below-market leases, net and tenant allowances | | Amortization of above/below-market leases, net and tenant allowances | (480) | | | (343) | | | (581) | |
Maintenance capital expenditures (2) | (5,523 | ) | | (6,214 | ) | | (3,856 | ) | Maintenance capital expenditures (2) | (11,377) | | | (5,453) | | | (2,101) | |
Straight-line rental revenue, net | (4,332 | ) | | (17,012 | ) | | (12,159 | ) | |
Straight-lined rental revenue | | Straight-lined rental revenue | 24,550 | | | (13,552) | | | (10,229) | |
Straight-lined ground sublease expense | | Straight-lined ground sublease expense | 749 | | | 882 | | | — | |
Non-cash portion of mortgage and other financing income | (3,080 | ) | | (3,769 | ) | | (9,435 | ) | Non-cash portion of mortgage and other financing income | (250) | | | (2,411) | | | (3,043) | |
Amortization of above/below market leases, net and tenant allowances | (107 | ) | | 183 |
| | 192 |
| |
AFFO available to common shareholders of EPR Properties | $ | 368,709 |
| | $ | 298,646 |
| | $ | 249,838 |
| AFFO available to common shareholders of EPR Properties | $ | 143,430 | | | $ | 422,726 | | | $ | 466,304 | |
| | | | | | |
FFO per common share attributable to EPR Properties: | | | | | | |
FFO per common share: | | FFO per common share: | | | | | |
Basic | $ | 4.60 |
| | $ | 4.81 |
| | $ | 4.05 |
| Basic | $ | 0.51 | | | $ | 4.41 | | | $ | 5.58 | |
Diluted | 4.58 |
| | 4.77 |
| | 4.03 |
| Diluted | 0.51 | | | 4.39 | | | 5.51 | |
FFOAA per common share attributable to EPR Properties: | | | | | | |
FFOAA per common share: | | FFOAA per common share: | |
Basic | $ | 5.06 |
| | $ | 4.86 |
| | $ | 4.48 |
| Basic | $ | 1.43 | | | $ | 5.51 | | | $ | 6.20 | |
Diluted | 5.02 |
| | 4.82 |
| | 4.44 |
| Diluted | 1.43 | | | 5.44 | | | 6.10 | |
Shares used for computation (in thousands): | | | | | | Shares used for computation (in thousands): | |
Basic | 71,191 |
| | 63,381 |
| | 58,138 |
| Basic | 75,994 | | | 76,746 | | | 74,292 | |
Diluted | 71,254 |
| | 63,474 |
| | 58,328 |
| Diluted | 75,994 | | | 76,782 | | | 74,337 | |
| | | | | | |
Weighted average shares outstanding-diluted EPS | 71,254 |
| | 63,474 |
| | 58,328 |
| Weighted average shares outstanding-diluted EPS | 75,994 | | | 76,782 | | | 74,337 | |
Effect of dilutive Series C preferred shares | 2,068 |
| | 2,032 |
| | 2,017 |
| Effect of dilutive Series C preferred shares | — | | | 2,164 | | | 2,114 | |
| Effect of dilutive Series E preferred shares | 1,586 |
| | — |
| | — |
| Effect of dilutive Series E preferred shares | — | | | 1,631 | | | 1,607 | |
| 74,908 |
| | 65,506 |
| | 60,345 |
| |
| | | | | | |
Adjusted weighted average shares outstanding - diluted Series C and Series E | | Adjusted weighted average shares outstanding - diluted Series C and Series E | 75,994 | | | 80,577 | | | 78,058 | |
Other financial information: | | | | | | Other financial information: | | | | | |
Dividends per common share | $ | 4.08 |
| | $ | 3.84 |
| | $ | 3.63 |
| Dividends per common share | $ | 1.515 | | | $ | 4.500 | | | $ | 4.320 | |
|
| |
(1) | Impairment charges recognized during the year ended December 31, 2017 total $10.2 million and related to our investment in a direct financing lease, net, consisting of $2.9 million related to the residual value portion and $7.3 million related to the allowance for lease loss portion. See Note 6 to the consolidated financial statements in this Annual Report on Form 10-K for further details. |
| |
(2) | Includes maintenance capital expenditures and certain second generation tenant improvements and leasing commissions. |
Amounts above include the impact of discontinued operations, which are separately classified in the consolidated statements of (loss) income and comprehensive (loss) income included in this Annual Report on Form 10-K. See Note 17 to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional information related to discontinued operations.
(1) Impairment charges recognized during the year ended December 31, 2020 totaled $85.7 million, which was comprised of $70.7 million of impairments of real estate investments and $15.0 million of impairments of operating lease right-of-use assets.
(2) Includes maintenance capital expenditures and certain second-generation tenant improvements and leasing commissions.
The effect of the conversion of our convertible preferred shares is calculated using the if-converted method and the conversion which results in the most dilution is included in the computation of per share amounts. The conversion of the 5.75% Series C cumulative convertible preferred shares and the 9.00% Series E cumulative convertible preferred shares would be dilutive to FFO and FFOAA per share for the yearyears ended December 31, 2017.2019 and 2018. Therefore, the additional 2.1 million and 1.6 million common shares that would result from the conversion and the corresponding add-back of the preferred dividends declared on those shares are included in the calculation of diluted FFO and diluted FFOAA per share for the year ended December 31, 2017. these periods.
The conversion of 5.75% Series C cumulative convertible preferred shares would be dilutive to FFO and FFOAA per share for the years ended December 31, 2016 and 2015. Therefore, the additional 2.0 million common shares that would result from the conversion and the corresponding add-back of the preferred dividends declared on those shares are included in the calculation of diluted FFO and diluted FFOAA per share for the years ended December 31, 2016 and 2015. The effect of the conversion of our 9.0% Series E cumulative convertible preferred shares and the additional 1.6 million common shares that would result from the conversion do not result in more dilution to per share results and are therefore not included in the calculation of diluted FFO and FFOAA per share data for the years ended December 31, 2016 and 2015.
Net Debt
Net Debt represents debt (reported in accordance with GAAP) adjusted to exclude deferred financing costs, net and reduced for cash and cash equivalents. By excluding deferred financing costs, net and reducing debt for cash and cash equivalents on hand, the result provides an estimate of the contractual amount of borrowed capital to be repaid, net of cash available to repay it. We believe this calculation constitutes a beneficial supplemental non-GAAP financial disclosure to investors in understanding our financial condition. Our method of calculating Net Debt may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.
Gross Assets
Gross Assets represents total assets (reported in accordance with GAAP) adjusted to exclude accumulated depreciation and reduced for cash and cash equivalents. By excluding accumulated depreciation and reducing cash and cash equivalents, the result provides an estimate of the investment made by us. We believe that investors commonly use versions of this calculation in a similar manner. Our method of calculating Gross Assets may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.
Net Debt to Gross Assets
Net Debt to Gross Assets is a supplemental measure derived from non-GAAP financial measures that we use to evaluate capital structure and the magnitude of debt to gross assets. We believe that investors commonly use versions of this ratio in a similar manner. Our method of calculating Net Debt to Gross Assets may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.
EBITDAre
NAREIT developed EBITDAre as a relative non-GAAP financial measure of REITs, independent of a company's capital structure, to provide a uniform basis to measure the enterprise value of a company. Pursuant to the definition of EBITDAre by the Board of Governors of NAREIT, we calculate EBITDAre as net (loss) income, computed in accordance with GAAP, excluding interest expense (net), income tax (benefit) expense, depreciation and amortization, gains and losses from disposition of real estate, impairment losses on real estate, costs associated with loan refinancing or payoff and adjustments for unconsolidated partnerships, joint ventures and other affiliates.
Management provides EBITDAre herein because it believes this information is useful to investors as a supplemental performance measure as it can help facilitate comparisons of operating performance between periods and with other REITs. Our method of calculating EBITDAre may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. EBITDAre is not a measure of performance under GAAP, does not represent cash generated from operations as defined by GAAP and is not indicative of cash available to fund all cash needs, including distributions. This measure should not be considered an alternative to net income or any other GAAP measure as a measurement of the results of our operations or cash flows or liquidity as defined by GAAP.
Adjusted EBITDAEBITDAre
Management uses Adjusted EBITDAEBITDAre in its analysis of the performance of the business and operations of the Company. Management believes Adjusted EBITDAEBITDAre 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 EBITDAEBITDAre as net income available to common shareholdersEBITDAre (defined above) for the quarter excluding costs associated with loan refinancing or payoff, interest expense (net), depreciation and amortization, equity in (income) loss from joint ventures, gain (loss) on the sale of real estate, gain on early extinguishment of debt, gain on insurance recovery, income tax expense (benefit), preferred dividend requirements, preferred share redemption costs, the effect of non-cash impairment charges, retirement severance expense, the provision for loan losses andcredit loss expense, transaction costs, (benefit),impairment losses on operating lease right-of-use assets and which is then multiplied by four to get an annual amount.prepayment fees. For the three months ended December 31, 2017,2020, Adjusted EBITDAEBITDAre was further adjusted to reflect zero Adjusted EBITDAadd back prior period receivable write-offs related to one of our early educationcertain theatre tenants CLA.placed on cash basis or receiving abatements during the quarter.
Our method of calculating Adjusted EBITDAEBITDAre may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. Adjusted EBITDAEBITDAre 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 foror any other GAAP measure as a measurement of the purposeresults of evaluating the Company's performanceour operations or to cash flows or liquidity as a measure of liquidity.defined by GAAP.
Net Debt to Adjusted EBITDA Ratio
Net Debt to Adjusted EBITDA 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 Net Debt to Adjusted EBITDA 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 (loss) income available to common shareholders (both(all reported in accordance with GAAP) to Net Debt, Adjusted EBITDA andGross Assets, Net Debt to Gross Assets, EBITDAre and Adjusted EBITDA RatioEBITDAre (each of which is a non-GAAP financial measure) are included in the following tables (unaudited, in thousands):
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| December 31, |
| 2020 | | 2019 |
Net Debt: | | | |
Debt | $ | 3,694,443 | | | $ | 3,102,830 | |
Deferred financing costs, net | 35,552 | | | 37,165 | |
Cash and cash equivalents | (1,025,577) | | | (528,763) | |
Net Debt | $ | 2,704,418 | | | $ | 2,611,232 | |
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Gross Assets: | | | |
Total Assets | $ | 6,704,185 | | | $ | 6,577,511 | |
Accumulated depreciation | 1,062,087 | | | 989,254 | |
Cash and cash equivalents | (1,025,577) | | | (528,763) | |
Gross Assets | $ | 6,740,695 | | | $ | 7,038,002 | |
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Net Debt to Gross Assets | 40 | % | | 37 | % |
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| Three Months Ended December 31, |
| 2020 | | 2019 |
EBITDAre and Adjusted EBITDAre: | | | |
Net (loss) income | $ | (19,977) | | | $ | 36,297 | |
Interest expense, net | 42,838 | | | 34,907 | |
Income tax expense (benefit) | 402 | | | (530) | |
Depreciation and amortization | 42,014 | | | 44,530 | |
Gain on sale of real estate | (49,877) | | | (5,648) | |
Impairment of real estate investments, net | 22,832 | | | 23,639 | |
Costs associated with loan refinancing or payoff | 812 | | | 43 | |
Allocated share of joint venture depreciation | 361 | | | 551 | |
Allocated share of joint venture interest expense | 872 | | | 735 | |
EBITDAre (for the quarter) | $ | 40,277 | | | $ | 134,524 | |
Gain on insurance recovery (1) | (809) | | | — | |
Severance expense | 2,868 | | | 423 | |
Transaction costs | 814 | | | 5,784 | |
Credit loss expense | 20,312 | | | — | |
Accounts receivable write-offs from prior periods (2) | 4,301 | | | — | |
Straight-line receivable write-offs from prior periods (2) | 870 | | | — | |
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Adjusted EBITDAre (for the quarter) | $ | 68,633 | | | $ | 140,731 | |
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Amounts above include the impact of discontinued operations, which are separately classified in the consolidated statements of (loss) income and comprehensive (loss) income included in this Annual Report on Form 10-K. |
(1) Included in other income in the consolidated statements of (loss) income and comprehensive (loss) income for the quarter. Other income includes the following: |
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| Three Months Ended December 31, |
| 2020 | | 2019 |
Income from settlement of foreign currency swap contracts | $ | 110 | | | $ | 252 | |
Gain on insurance recovery | 809 | | | — | |
Operating income from operated properties | 45 | | | 7,996 | |
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Miscellaneous income | 4 | | | 138 | |
Other income | $ | 968 | | | $ | 8,386 | |
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| December 31, |
| 2017 | | 2016 |
Net Debt: | | | |
Debt | $ | 3,028,827 |
| | $ | 2,485,625 |
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Deferred financing costs, net | 32,852 |
| | 29,320 |
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Cash and cash equivalents | (41,917 | ) | | (19,335 | ) |
Net Debt | $ | 3,019,762 |
| | $ | 2,495,610 |
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| Three Months Ended December 31, |
| 2017 | | 2016 |
Adjusted EBITDA: | | | |
Net income available to common shareholders of EPR Properties | $ | 54,668 |
| | $ | 52,190 |
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Costs associated with loan refinancing or payoff | 58 |
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Interest expense, net | 35,271 |
| | 26,834 |
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Transaction costs | 135 |
| | 2,988 |
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Depreciation and amortization | 37,027 |
| | 28,351 |
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Equity in loss (income) from joint ventures | 14 |
| | (118 | ) |
Gain on sale of real estate | (13,480 | ) | | (1,430 | ) |
Income tax expense (benefit) | 383 |
| | (84 | ) |
Preferred dividend requirements | 6,438 |
| | 5,951 |
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Preferred share redemption costs | 4,457 |
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Gain on insurance recovery (1) | — |
| | (847 | ) |
Straight-line rental revenue write-off related to CLA (2) | 9,010 |
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Bad debt expense related to CLA (3) | 6,003 |
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Adjusted EBITDA (for the quarter) | $ | 139,984 |
| | $ | 113,835 |
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Adjusted EBITDA (4) | $ | 559,936 |
| | $ | 455,340 |
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Net Debt/Adjusted EBITDA Ratio | 5.39 |
| | 5.48 |
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(1) Included in other income in the accompanying consolidated statements of income. Other income includes the |
following:
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| Three Months Ended December 31, |
| 2017 | | 2016 |
Income from settlement of foreign currency swap contracts | $ | 577 |
| | $ | 705 |
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Fee income | — |
| | 1,588 |
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Gain on insurance recovery | — |
| | 847 |
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Miscellaneous income | — |
| | 87 |
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Other income | $ | 577 |
| | $ | 3,227 |
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(2) Included in rental revenue in the accompanying consolidated statements of income. Rental revenue includes the |
following:
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| Three Months Ended December 31, |
| 2017 | | 2016 |
Minimum rent | $ | 123,208 |
| | $ | 99,354 |
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Percentage rent | 3,108 |
| | 1,966 |
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Straight-line rental revenue | 1,925 |
| | 6,062 |
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Straight-line rental revenue write-off related to CLA | (9,010 | ) | | — |
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Other rental revenue | 84 |
| | 92 |
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Rental revenue | $ | 119,315 |
| | $ | 107,474 |
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(3) Included in property operating expense in the accompanying consolidated statements of income. Property |
operating expense includes the following:
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| Three Months Ended December 31, |
| 2017 | | 2016 |
Expenses related to the operations of our retail centers and other specialty properties | $ | 6,649 |
| | $ | 5,778 |
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Bad debt expense | 239 |
| | 137 |
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Bad debt expense related to CLA | 6,003 |
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Property operating expense | $ | 12,891 |
| | $ | 5,915 |
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(2) Included in rental revenue from continuing operations in the consolidated statements of (loss) income and comprehensive (loss) income for the quarter. Rental revenue includes the following: |
| Three Months Ended December 31, |
| 2020 | | 2019 |
Minimum rent | $ | 79,342 | | | $ | 139,529 | |
Accounts receivable write-offs from prior periods | (4,301) | | | — | |
Tenant reimbursements | 4,831 | | | 5,790 | |
Percentage rent | 3,040 | | | 6,428 | |
Straight-line rental revenue | 1,768 | | | 2,926 | |
Straight-line receivable write-offs from prior periods | (870) | | | — | |
Other rental revenue | 201 | | | 92 | |
Rental revenue | $ | 84,011 | | | $ | 154,765 | |
(4) Adjusted EBITDA for the quarter is multiplied by four to calculate an annual amount.
Total Investments
Total investments is a non-GAAP financial measure defined as the sum of the carrying values of rental propertiesreal estate investments (before accumulated depreciation), land held for development, property under development, mortgage notes receivable (including related accrued interest receivable), investment in direct financing leases, net, 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):
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| December 31, 2020 | | December 31, 2019 |
Total Investments: | | | |
Real estate investments, net of accumulated depreciation | $ | 4,851,302 | | | $ | 5,197,308 | |
Add back accumulated depreciation on real estate investments | 1,062,087 | | | 989,254 | |
Land held for development | 23,225 | | | 28,080 | |
Property under development | 57,630 | | | 36,756 | |
Mortgage notes and related accrued interest receivable | 365,628 | | | 357,391 | |
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Investment in joint ventures | 28,208 | | | 34,317 | |
Intangible assets, gross (1) | 57,962 | | | 57,385 | |
Notes receivable and related accrued interest receivable, net (1) | 7,300 | | | 14,026 | |
Total investments | $ | 6,453,342 | | | $ | 6,714,517 | |
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Total investments | $ | 6,453,342 | | | $ | 6,714,517 | |
Operating lease right-of-use assets | 163,766 | | | 211,187 | |
Cash and cash equivalents | 1,025,577 | | | 528,763 | |
Restricted cash | 2,433 | | | 2,677 | |
Accounts receivable | 116,193 | | | 86,858 | |
Less: accumulated depreciation on real estate investments | (1,062,087) | | | (989,254) | |
Less: accumulated amortization on intangible assets (1) | (16,330) | | | (12,693) | |
Prepaid expenses and other current assets (1) | 21,291 | | | 35,456 | |
Total assets | $ | 6,704,185 | | | $ | 6,577,511 | |
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(1) Included in other assets in the accompanying consolidated balance sheet. Other assets include the following: |
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| December 31, 2020 | | December 31, 2019 |
Intangible assets, gross | $ | 57,962 | | | $ | 57,385 | |
Less: accumulated amortization on intangible assets | (16,330) | | | (12,693) | |
Notes receivable and related accrued interest receivable, net | 7,300 | | | 14,026 | |
Prepaid expenses and other current assets | 21,291 | | | 35,456 | |
Total other assets | $ | 70,223 | | | $ | 94,174 | |
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| December 31, 2017 | | December 31, 2016 |
Total Investments: | | | |
Rental properties, net of accumulated depreciation | $ | 4,604,231 |
| | $ | 3,595,762 |
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Add back accumulated depreciation on rental properties | 741,334 |
| | 635,535 |
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Land held for development | 33,692 |
| | 22,530 |
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Property under development | 257,629 |
| | 297,110 |
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Mortgage notes and related accrued interest receivable | 970,749 |
| | 613,978 |
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Investment in direct financing leases, net | 57,903 |
| | 102,698 |
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Investment in joint ventures | 5,602 |
| | 5,972 |
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Intangible assets, gross(1) | 35,209 |
| | 28,787 |
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Notes receivable and related accrued interest receivable, net(1) | 5,083 |
| | 4,765 |
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Total investments | $ | 6,711,432 |
| | $ | 5,307,137 |
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Total investments | $ | 6,711,432 |
| | $ | 5,307,137 |
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Cash and cash equivalents | 41,917 |
| | 19,335 |
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Restricted cash | 17,069 |
| | 9,744 |
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Account receivable, net | 93,693 |
| | 98,939 |
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Less: accumulated depreciation on rental properties | (741,334 | ) | | (635,535 | ) |
Less: accumulated amortization on intangible assets | (6,340 | ) | | (14,008 | ) |
Prepaid expenses and other current assets | 75,056 |
| | 79,410 |
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Total assets | $ | 6,191,493 |
| | $ | 4,865,022 |
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(1) Included in other assets in the accompanying consolidated balance sheet. Other assets includes the following: |
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| December 31, 2017 | | December 31, 2016 |
Intangible assets, gross | $ | 35,209 |
| | $ | 28,787 |
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Less: accumulated amortization on intangible assets | (6,340 | ) | | (14,008 | ) |
Notes receivable and related accrued interest receivable, net | 5,083 |
| | 4,765 |
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Prepaid expenses and other current assets | 75,056 |
| | 79,410 |
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Total other assets | $ | 109,008 |
| | $ | 98,954 |
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Impact of Recently Issued Accounting Standards
See Note 2 to the consolidated financial statementsConsolidated Financial Statements included in this Annual Report on Form 10-K for additional information on the impact of recently issued accounting standards on our business.
Inflation
Investments by EPR are financed with a combination of equity and debt. During inflationary periods, which are generally accompanied by rising interest rates, our ability to grow may be adversely affected because the yield on new investments may increase at a slower rate than new borrowing costs.
Substantially allA substantial portion of our megaplex theatre leases as well as other leases provide for base and participating rent features. In addition, certain of our mortgage notes receivable similarly provide for base and participating interest. To the extent inflation causes tenant or borrower revenues at our properties to increase, over baseline amounts, we would participate in those revenue increases through our right to receive variable rent and annual percentage rent and/or participating interest.interest over the base amounts, as applicable.
Our leases and mortgage notes receivable also may provide for escalation in base rents or interest in the event of increases in the Consumer Price Index, with generally a limitlimit of 2% per annum,annum, or fixed periodic increases. During deflationary periods, the escalations in base rents or interest that are dependent on increases in the Consumer Price Index in our leases and mortgage notes receivable may be adversely affected.
Our leases are generally triple-net leases requiring the tenants to pay substantially all expenses associated with the operation of the properties, thereby minimizing our exposure to increases in costs and operating expenses resulting from inflation. A portion of our megaplex theatre, retail and restaurant leases are non-triple-net leases. These non-triple net entertainment leases represent approximately 14%18% of ourour total real estate square footage. To the extent any of those leases contain fixed expense reimbursement provisions or limitations, we may be subject to increases in costs resulting from inflation that are not fully passed through to tenants.
Some of our investments have been structured using more traditional REIT lodging structures or are managed through a third-party manager. In the traditional REIT lodging structure, we hold qualified lodging facilities under the REIT and we separately hold the operations of the facilities in taxable REIT subsidiaries (TRSs) which are facilitated by management agreements with eligible independent contractors. Under this structure and when we manage properties through a third-party manager, we rely on the performance of our properties and the ability of the properties' managers to increase revenues to keep pace with inflation which may be limited by competitive pressures.
Additionally, our general and administrative costs may be subject to increases resulting from inflation.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks, primarily relating to potential losses due to changes in interest rates and foreign currency exchange rates. We seek to mitigate the effects of fluctuations in interest rates by matching the term of new investments with new long-term fixed rate borrowings whenever possible. As of December 31, 2017,2020, we had a $1.0 billion unsecured revolving credit facility with $210.0with $590.0 million outstanding and $25.0outstanding. Subsequent to December 31, 2020, we paid down $500.0 million in bonds, all of which bear interest at a floating rate.on our revolving credit facility. We also had a $400.0 million unsecured term loan facility and a $25.0 million bond that bearsbear interest at a floating rate based on LIBOR. but have been fixed through interest rate swap agreements.
As of December 31, 2017,2020, we had a 65% investment interest in two unconsolidated real estate joint ventures related to two experiential lodging properties located in St. Petersburg Beach, Florida. At December 31, 2020, the joint venture had a secured mortgage loan with an outstanding balance of $85.0 million. The mortgage loan bears interest at an annual rate equal to the greater of 6.00% or LIBOR plus 3.75%. The joint venture has an interest rate swap agreementscap agreement to fixlimit the variable portion of the interest rate at 2.64%(LIBOR) on $300.0 million of this LIBOR-based debtnote to 3.0% from from July 6, 2017March 28, 2019 to April 5, 2019. Additionally, as1, 2023. In response to the COVID-19 pandemic, on May 28, 2020, the joint venture was granted a three-month interest deferral, which is required to be paid on the maturity date of December 31, 2017,we had three interest rate swap agreements to fix the interest rate at 3.15% on $50.0 million of this LIBOR-basedloan and is not considered a troubled debt from November 6, 2017 to April 5, 2019 and on $350.0 million of this LIBOR-based debt from April 6, 2019 to February 7, 2022.restructuring.
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.indebtedness, particularly in light of the current economic uncertainty caused by the COVID-19 pandemic. The majority of our borrowings are subject to contractual agreements or mortgages which limit the amount of indebtedness we may incur. Accordingly, if we are unable to raise additional equity or borrow money due to these limitations, our ability to make additional real estate investments may be limited.
The following table presents the principal amounts, weighted average interest rates, and other terms required by year of expected maturity to evaluate the expected cash flows and sensitivity to interest rate changes as of December 31 (including the impact of the interest rate swap agreements described below):
Expected Maturities (in(dollars in millions)
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| 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | Thereafter | | Total | | Estimated Fair Value |
December 31, 2020: | | | | | | | | | | | | | | | |
Fixed rate debt | $ | — | | | $ | — | | | $ | 675.0 | | | $ | 148.0 | | | $ | 300.0 | | | $ | 2,017.0 | | | $ | 3,140.0 | | | $ | 3,114.8 | |
Average interest rate | — | % | | — | % | | 4.76 | % | | 5.60 | % | | 4.50 | % | | 4.55 | % | | 4.67 | % | | 4.64 | % |
Variable rate debt | $ | — | | | $ | 590.0 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 590.0 | | | $ | 590.0 | |
Average interest rate (as of December 31, 2020) | — | % | | 2.13 | % | | — | % | | — | % | | — | % | | — | % | | 2.13 | % | | 2.13 | % |
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| 2020 | | 2021 | | 2022 | | 2023 | | 2024 | | Thereafter | | Total | | Estimated Fair Value |
December 31, 2019: | | | | | | | | | | | | | | | |
Fixed rate debt | $ | — | | | $ | — | | | $ | — | | | $ | 675.0 | | | $ | 148.0 | | | $ | 2,317.0 | | | $ | 3,140.0 | | | $ | 3,295.5 | |
Average interest rate | — | % | | — | % | | — | % | | 4.02 | % | | 4.35 | % | | 4.44 | % | | 4.34 | % | | 3.45 | % |
Variable rate debt | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Average interest rate (as of December 31, 2019) | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % |
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| 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | Thereafter | | Total | | Estimated Fair Value |
December 31, 2017: | | | | | | | | | | | | | | | |
Fixed rate debt | $ | 11.7 |
| | $ | — |
| | $ | 250.0 |
| | $ | — |
| | $ | 350.0 |
| | $ | 2,165.0 |
| | $ | 2,776.7 |
| | $ | 2,881.9 |
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Average interest rate | 6.2 | % | | — | % | | 7.8 | % | | — | % | | 5.8 | % | | 4.4 | % | | 4.8 | % | | 3.9 | % |
Variable rate debt | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 210.0 |
| | $ | 75.0 |
| | $ | 285.0 |
| | $ | 285.0 |
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Average interest rate (as of December 31, 2017) | — | % | | — | % | | — | % | | — | % | | 2.5 | % | | 2.2 | % | | 2.4 | % | | 2.4 | % |
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| 2017 | | 2018 | | 2019 | | 2020 | | 2021 | | Thereafter | | Total | | Estimated Fair Value |
December 31, 2016: | | | | | | | | | | | | | | | |
Fixed rate debt | $ | 163.3 |
| | $ | 11.7 |
| | $ | — |
| | $ | 550.0 |
| | $ | — |
| | $ | 1,715.0 |
| | $ | 2,440.0 |
| | $ | 2,507.8 |
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Average interest rate | 4.9 | % | | 6.2 | % | | — | % | | 5.5 | % | | — | % | | 4.9 | % | | 5.1 | % | | 4.2 | % |
Variable rate debt | $ | — |
| | $ | — |
| | $ | — |
| | $ | 50.0 |
| | $ | — |
| | $ | 25.0 |
| | $ | 75.0 |
| | $ | 75.0 |
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Average interest rate (as of December 31, 2016) | — | % | | — | % | | — | % | | 2.2 | % | | — | % | | 0.8 | % | | 1.7 | % | | 1.7 | % |
The fair value of our debt as of December 31, 20172020 and 20162019 is estimated by discounting the future cash flows of each instrument using current market rates including current market spreads.
We are exposed to foreign currency risk against our functional currency, the U.S. dollar, on our four Canadian properties and the rents received from tenants of the properties are payable in CAD. To mitigateIn order to hedge our foreign currency risknet investment in future periods on theseour four Canadian properties, we entered into cross currencytwo fixed-to-fixed cross-currency swaps, with a fixed notional value of $200.0 million CAD. These investments became effective on July 1, 2018, mature on July 1, 2023 and are designated as net investment hedges of our Canadian net investments. The net effect of this hedge is to lock in an exchange rate of $1.32 CAD per U.S. dollar on $200.0 million CAD of our foreign net investments. The cross-currency swaps also have a monthly settlement feature locked in at an exchange rate of $1.32 CAD per USD on $4.5 million of CAD annual cash flows, the net effect of which is an excluded component from the effectiveness testing of this hedge.
During the year ended December 31, 2020, we entered into three USD-CAD cross-currency swaps that were effective July 1, 2020 with a total fixed original notional value of $100.0 million CAD and $98.1$76.6 million U.S.USD. The net effect of these swaps is to lock in an exchange rate of $1.05$1.31 CAD per U.S. dollarUSD on approximately $13.5$7.2 million of annual CAD denominated cash flows on the properties through June 2018. There is no initial or final exchange of the notional amounts on these swaps. These2022.
For foreign currency derivatives should hedge a significant portion of our expected CAD denominated FFO of these four Canadian properties through June 2018designated as their impact on our reported FFO when settled should movenet investment hedges, the change in the opposite directionfair value of the exchange rates used to translate revenues and expenses of these properties. Additionally, on August 30, 2017, we entered into a
cross-currency swap that will be effective July 1, 2018 with a fixed original notional value of $100.0 million CAD and $79.5 million U.S. The net effect of these swaps is to lockderivatives are reported in an exchange rate of 1.26 CAD per U.S. dollar on approximately $13.5 million of annual CAD denominated cash flows on the properties through June 2020.
In order to also hedge our net investment on the four Canadian properties, we entered into a forward contract with a fixed notional value of $100.0 million CAD and $94.3 million U.S. with a July 2018 settlement date. The exchange rate of this forward contract is approximately $1.06 CAD per U.S dollar. Additionally, the Company entered into a forward contract with a fixed notional value of $100.0 million CAD and $88.1 million U.S. with a July 2018 settlement date. The exchange rate of this forward contract is approximately $1.13 CAD per U.S. dollar. These forward contracts should hedge a significant portion of our CAD denominated net investment in these four centers through July 2018 as the impact on accumulated other comprehensive income from marking the derivative to market should move in the opposite direction(AOCI) as part of the cumulative translation adjustment onadjustment. Amounts are reclassified out of AOCI into earnings when the hedged net assets of our four Canadian properties.
investment is either sold or substantially liquidated.
See Note 9 to the consolidated financial statementsConsolidated Financial Statements in this Annual Report on Form 10-K for additional information on our derivative financial instruments and hedging activities.
Item 8.Financial Statements and Supplementary Data
EPR Properties
Contents
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| | | | |
Report of Independent Registered Public Accounting Firm | |
| |
Audited Financial Statements | |
| |
Consolidated Balance Sheets | |
Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income | |
Consolidated Statements of Comprehensive Income | |
Consolidated Statements of Changes in Equity | |
Consolidated Statements of Cash Flows | |
Notes to Consolidated Financial Statements | |
| |
Financial Statement Schedules | |
| |
Schedule II – Valuation and Qualifying Accounts | |
Schedule III - Real Estate and Accumulated Depreciation | |
Report of Independent Registered Public Accounting Firm
The
To the Board of Trustees and Shareholders
EPR Properties:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of EPR Properties and subsidiaries (the “Company”)Company) as of December 31, 20172020 and 2016,2019, the related consolidated statements of (loss) income and comprehensive (loss) income, changes in equity, and cash flows for each of the years in the three-yearthree‑year period ended December 31, 2017,2020, and the related notes and financial statement schedules II and III (collectively, the “consolidatedconsolidated financial statements”)statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2017,2020, based on the criteria established in Internal Control -– Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 20172020 and 2016,2019, and the results of its operations and its cash flows for each of the years in the three-yearthree‑year period ended December 31, 2017,2020, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2020, based on criteria established in Internal Control -– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Adoption of New Accounting Pronouncements
As discussed in Note 2 to the consolidated financial statements, the Company has changed its method for accounting for expected credit losses as of January 1, 2020 due to the adoption of Accounting Standards Update (ASU) No. 2016‑13, Measurement of Credit Losses on Financial Instruments (Topic 326).
As discussed in Note 15 to the consolidated financial statements, the Company has changed its method for accounting for its leases as of January 1, 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases.
Basis for OpinionOpinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management'sManagement’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Evaluation of indicators real estate investments may not be recoverable
As discussed in Notes 2 and 3 to the consolidated financial statements, the real estate investments, net balance as of December 31, 2020 was $4.9 billion. The Company reviews a real estate investment for impairment whenever events or changes in circumstances indicate that the carrying value of the real estate investment may not be recoverable.
We identified the evaluation of indicators real estate investments may not be recoverable as a critical audit matter. There is a high degree of subjective judgement in evaluating the events or changes in circumstances that may indicate the carrying value of real estate investments may not be recoverable. In particular, the judgments regarding the expected period the Company will hold the real estate investments and the impact of changes in market and tenant conditions on the determination of the recoverability of the real estate investments required a higher degree of auditor judgment.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the critical audit matter. This included controls related to the Company’s process to identify and evaluate events or changes in circumstances that may indicate the carrying amount of real estate investments may not be recoverable, including controls related to determining the period the Company will hold the real estate investments. We inquired of Company officials and inspected documents such as meeting minutes of the Board of Trustees to evaluate the likelihood that a real estate investment would be sold prior to the estimated holding period. We also performed independent evaluations, including examining current tenant information including status of accounts receivable and committee minutes related to lease negotiations for indications that the carrying value of the real estate investments may not be recoverable.
Impairment of real estate investments and right‑of‑use assets
As discussed in Notes 2, 3, 4 and 15 to the consolidated financial statements, the real estate investments, net balance and operating lease right‑of‑use assets balance as of December 31, 2020 was $4.9 billion and $163.8 million, respectively. The Company reviews a property for impairment whenever events or changes in circumstances indicate that the carrying value of the property may not be recoverable. The Company recognized impairment charges of $70.7 million on real estate investments and $15.0 million on the operating lease right‑of‑use assets, which are the amounts that the carrying value of the assets exceeded the estimated fair value.
We identified the assessment of the fair values of real estate investments and operating lease right‑of‑use assets based on recent independent appraisals used to determine the impairment charges as a critical audit matter. There is a high degree of subjective auditor judgment in evaluating the relevance of comparable land sales, market rents, capitalization rates, and discount rates used to determine the fair value of these assets.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the critical audit matter. This included controls related to the determination of comparable land sales, market rents, capitalization rates and discount rates. We involved valuation professionals with specialized skills and knowledge, who assisted in:
•Comparing the Company’s estimated fair value of land to a range of independently developed estimates based on publicly available and comparable land sales.
•Comparing the Company’s estimated assumptions of market rents, capitalization rates, and discount rates to a range of independently developed estimates based on publicly available industry data.
Collectability of lease receivables
As discussed in Notes 2 and 5 to the consolidated financial statements, the Company assesses the probability of collecting lease receivables on a lease‑by‑lease basis. The evaluation primarily consists of reviewing past due account balances and considering such factors as the credit quality of the Company’s tenants, historical trends of the tenants, current economic conditions, and changes in customer payment terms. Whenever the results of that assessment, events, or changes in circumstances indicate that it is no longer probable that the Company will be able to collect substantially all lease receivables or future lease payments, the Company records a charge to rental revenue for the outstanding receivable balance and suspends revenue recognition. The Company recorded charges to rental revenue of $65.1 million during the year ended December 31, 2020.
We identified the evaluation of the probability of collection of substantially all lease receivables as a critical audit matter. The assessment required subjective auditor judgment to evaluate the financial strength of tenants and the expected operating performance of the leased property.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s determination of lease receivable collectability. This included controls related to the evaluation of the financial strength of tenants, and the expected operating performance of the leased property. To assess the financial strength of tenants and the expected operating performance of the leased property, for certain tenants we evaluated (1) the aging of outstanding accounts receivable, (2) recent payment history, (3) certain publicly available information about the tenants, and (4) property financial information regarding the tenant.
/s/ KPMG LLP
We have served as the Company’s auditor since 2002.
| | |
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Kansas City, Missouri |
February 28, 201825, 2021 |
EPR PROPERTIES Consolidated Balance Sheets (Dollars in thousands except share data) |
| | | | | | | |
| December 31, |
| 2017 | | 2016 |
Assets | | | |
Rental properties, net of accumulated depreciation of $741,334 and $635,535 at December 31, 2017 and 2016, respectively | $ | 4,604,231 |
| | $ | 3,595,762 |
|
Land held for development | 33,692 |
| | 22,530 |
|
Property under development | 257,629 |
| | 297,110 |
|
Mortgage notes and related accrued interest receivable, net | 970,749 |
| | 613,978 |
|
Investment in direct financing leases, net | 57,903 |
| | 102,698 |
|
Investment in joint ventures | 5,602 |
| | 5,972 |
|
Cash and cash equivalents | 41,917 |
| | 19,335 |
|
Restricted cash | 17,069 |
| | 9,744 |
|
Accounts receivable, net | 93,693 |
| | 98,939 |
|
Other assets | 109,008 |
| | 98,954 |
|
Total assets | $ | 6,191,493 |
| | $ | 4,865,022 |
|
Liabilities and Equity | | | |
Liabilities: | | | |
Accounts payable and accrued liabilities | $ | 136,929 |
| | $ | 119,758 |
|
Common dividends payable | 25,203 |
| | 20,367 |
|
Preferred dividends payable | 4,982 |
| | 5,951 |
|
Unearned rents and interest | 68,227 |
| | 47,420 |
|
Debt | 3,028,827 |
| | 2,485,625 |
|
Total liabilities | 3,264,168 |
| | 2,679,121 |
|
Equity: | | | |
Common Shares, $.01 par value; 100,000,000 shares authorized; and 76,858,632 and 66,263,487 shares issued at December 31, 2017 and 2016, respectively | 769 |
| | 663 |
|
Preferred Shares, $.01 par value; 25,000,000 shares authorized: | | | |
5,399,050 Series C convertible shares issued at December 31, 2017 and 2016; liquidation preference of $134,976,250 | 54 |
| | 54 |
|
3,449,115 and 3,450,000 Series E convertible shares issued at December 31, 2017 and 2016, respectively; liquidation preference of $86,227,875 | 34 |
| | 35 |
|
0 and 5,000,000 Series F shares issued at December 31, 2017 and 2016, respectively; liquidation preference of $125,000,000 | — |
| | 50 |
|
6,000,000 and 0 Series G shares issued at December 31, 2017 and 2016, respectively; liquidation preference of $150,000,000 | 60 |
| | — |
|
Additional paid-in-capital | 3,478,986 |
| | 2,677,046 |
|
Treasury shares at cost: 2,733,552 and 2,616,406 common shares at December 31, 2017 and 2016, respectively | (121,591 | ) | | (113,172 | ) |
Accumulated other comprehensive income | 12,483 |
| | 7,734 |
|
Distributions in excess of net income | (443,470 | ) | | (386,509 | ) |
Total equity | $ | 2,927,325 |
| | $ | 2,185,901 |
|
Total liabilities and equity | $ | 6,191,493 |
| | $ | 4,865,022 |
|
EPR PROPERTIES
Consolidated Balance Sheets
(Dollars in thousands except share data)
| | | | | | | | | | | |
| December 31, |
| 2020 | | 2019 |
Assets | | | |
Real estate investments, net of accumulated depreciation of $1,062,087 and $989,254 at December 31, 2020 and 2019, respectively | $ | 4,851,302 | | | $ | 5,197,308 | |
| | | |
Land held for development | 23,225 | | | 28,080 | |
Property under development | 57,630 | | | 36,756 | |
Operating lease right-of-use assets | 163,766 | | | 211,187 | |
Mortgage notes and related accrued interest receivable | 365,628 | | | 357,391 | |
| | | |
Investment in joint ventures | 28,208 | | | 34,317 | |
Cash and cash equivalents | 1,025,577 | | | 528,763 | |
Restricted cash | 2,433 | | | 2,677 | |
| | | |
| | | |
Accounts receivable | 116,193 | | | 86,858 | |
| | | |
Other assets | 70,223 | | | 94,174 | |
Total assets | $ | 6,704,185 | | | $ | 6,577,511 | |
Liabilities and Equity | | | |
Liabilities: | | | |
Accounts payable and accrued liabilities | $ | 105,379 | | | $ | 122,939 | |
Operating lease liabilities | 202,223 | | | 235,650 | |
Common dividends payable | 36 | | | 29,424 | |
Preferred dividends payable | 6,034 | | | 6,034 | |
Unearned rents and interest | 65,485 | | | 74,829 | |
Debt | 3,694,443 | | | 3,102,830 | |
Total liabilities | 4,073,600 | | | 3,571,706 | |
Equity: | | | |
Common Shares, $0.01 par value; 100,000,000 shares authorized; and 81,917,876 and 81,588,489 shares issued at December 31, 2020 and 2019, respectively | 819 | | | 816 | |
Preferred Shares, $0.01 par value; 25,000,000 shares authorized: | | | |
5,394,050 Series C convertible shares issued at December 31, 2020 and 2019; liquidation preference of $134,851,250 | 54 | | | 54 | |
| | | |
3,447,381 Series E convertible shares issued at December 31, 2020 and 2019; liquidation preference of $86,184,525 | 34 | | | 34 | |
| | | |
6,000,000 Series G shares issued at December 31, 2020 and 2019; liquidation preference of $150,000,000 | 60 | | | 60 | |
Additional paid-in-capital | 3,857,632 | | | 3,834,858 | |
Treasury shares at cost: 7,315,087 and 3,125,569 common shares at December 31, 2020 and 2019, respectively | (261,238) | | | (147,435) | |
Accumulated other comprehensive income | 216 | | | 7,275 | |
Distributions in excess of net income | (966,992) | | | (689,857) | |
| | | |
| | | |
Total equity | $ | 2,630,585 | | | $ | 3,005,805 | |
Total liabilities and equity | $ | 6,704,185 | | | $ | 6,577,511 | |
See accompanying notes to consolidated financial statements.
EPR PROPERTIES Consolidated Statements of Income (Dollars in thousands except per share data) |
| | | | | | | | | | | |
| Year Ended December 31, |
| 2017 | | 2016 | | 2015 |
Rental revenue | $ | 468,648 |
| | $ | 399,589 |
| | $ | 330,886 |
|
Tenant reimbursements | 15,555 |
| | 15,595 |
| | 16,320 |
|
Other income | 3,095 |
| | 9,039 |
| | 3,629 |
|
Mortgage and other financing income | 88,693 |
| | 69,019 |
| | 70,182 |
|
Total revenue | 575,991 |
| | 493,242 |
| | 421,017 |
|
Property operating expense | 31,653 |
| | 22,602 |
| | 23,433 |
|
Other expense | 242 |
| | 5 |
| | 648 |
|
General and administrative expense | 43,383 |
| | 37,543 |
| | 31,021 |
|
Retirement severance expense | — |
| | — |
| | 18,578 |
|
Costs associated with loan refinancing or payoff | 1,549 |
| | 905 |
| | 270 |
|
Gain on early extinguishment of debt | (977 | ) | | — |
| | — |
|
Interest expense, net | 133,124 |
| | 97,144 |
| | 79,915 |
|
Transaction costs | 523 |
| | 7,869 |
| | 7,518 |
|
Impairment charges | 10,195 |
| | — |
| | — |
|
Depreciation and amortization | 132,946 |
| | 107,573 |
| | 89,617 |
|
Income before equity in income from joint ventures and other items | 223,353 |
| | 219,601 |
| | 170,017 |
|
Equity in income from joint ventures | 72 |
| | 619 |
| | 969 |
|
Gain on sale of real estate | 41,942 |
| | 5,315 |
| | 23,829 |
|
Income before income taxes | 265,367 |
| | 225,535 |
| | 194,815 |
|
Income tax expense | (2,399 | ) | | (553 | ) | | (482 | ) |
Income from continuing operations | $ | 262,968 |
| | $ | 224,982 |
| | $ | 194,333 |
|
Discontinued operations: | | | | | |
Income from discontinued operations | — |
| | — |
| | 199 |
|
Net income attributable to EPR Properties | 262,968 |
| | 224,982 |
| | 194,532 |
|
Preferred dividend requirements | (24,293 | ) | | (23,806 | ) | | (23,806 | ) |
Preferred share redemption costs | (4,457 | ) | | — |
| | — |
|
Net income available to common shareholders of EPR Properties | $ | 234,218 |
| | $ | 201,176 |
| | $ | 170,726 |
|
Per share data attributable to EPR Properties common shareholders: | | | | | |
Basic earnings per share data: | | | | | |
Income from continuing operations | $ | 3.29 |
| | $ | 3.17 |
| | $ | 2.93 |
|
Income from discontinued operations | — |
| | — |
| | 0.01 |
|
Net income available to common shareholders | $ | 3.29 |
| | $ | 3.17 |
| | $ | 2.94 |
|
Diluted earnings per share data: | | | | | |
Income from continuing operations | $ | 3.29 |
| | $ | 3.17 |
| | $ | 2.92 |
|
Income from discontinued operations | — |
| | — |
| | 0.01 |
|
Net income available to common shareholders | $ | 3.29 |
| | $ | 3.17 |
| | $ | 2.93 |
|
Shares used for computation (in thousands): | | | | | |
Basic | 71,191 |
| | 63,381 |
| | 58,138 |
|
Diluted | 71,254 |
| | 63,474 |
| | 58,328 |
|
70
See accompanying notes to consolidated financial statements.
EPR PROPERTIES Consolidated Statements of Comprehensive Income (Dollars in thousands) |
| | | | | | | | | | | |
| Year Ended December 31, |
| 2017 | | 2016 | | 2015 |
Net income | $ | 262,968 |
| | $ | 224,982 |
| | $ | 194,532 |
|
Other comprehensive income (loss): | | | | | |
Foreign currency translation adjustment | 12,569 |
| | 5,142 |
| | (33,710 | ) |
Change in unrealized gain (loss) on derivatives | (7,820 | ) | | (3,030 | ) | | 26,766 |
|
Comprehensive income attributable to EPR Properties | $ | 267,717 |
| | $ | 227,094 |
| | $ | 187,588 |
|
EPR PROPERTIES
Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income
(Dollars in thousands except per share data)
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2020 | | 2019 | | 2018 |
Rental revenue | $ | 372,176 | | | $ | 593,022 | | | $ | 509,086 | |
Other income | 9,139 | | | 25,920 | | | 2,076 | |
Mortgage and other financing income | 33,346 | | | 33,027 | | | 128,759 | |
Total revenue | 414,661 | | | 651,969 | | | 639,921 | |
Property operating expense | 58,587 | | | 60,739 | | | 29,654 | |
Other expense | 16,474 | | | 29,667 | | | 443 | |
General and administrative expense | 42,596 | | | 46,371 | | | 48,889 | |
Severance expense | 2,868 | | | 2,364 | | | 5,938 | |
Litigation settlement expense | 0 | | | 0 | | | 2,090 | |
Costs associated with loan refinancing or payoff | 1,632 | | | 38,269 | | | 31,958 | |
| | | | | |
Interest expense, net | 157,675 | | | 142,002 | | | 135,870 | |
Transaction costs | 5,436 | | | 23,789 | | | 3,698 | |
Credit loss expense | 30,695 | | | 0 | | | 0 | |
Impairment charges | 85,657 | | | 2,206 | | | 27,283 | |
Depreciation and amortization | 170,333 | | | 158,834 | | | 138,395 | |
(Loss) income before equity in loss from joint ventures, other items and discontinued operations | (157,292) | | | 147,728 | | | 215,703 | |
Equity in loss from joint ventures | (4,552) | | | (381) | | | (22) | |
Impairment charges on joint ventures | (3,247) | | | 0 | | | 0 | |
Gain on sale of real estate | 50,119 | | | 4,174 | | | 3,037 | |
Gain on sale of investment in a direct financing lease | 0 | | | 0 | | | 5,514 | |
| | | | | |
(Loss) income before income taxes | (114,972) | | | 151,521 | | | 224,232 | |
Income tax (expense) benefit | (16,756) | | | 3,035 | | | (2,285) | |
(Loss) income from continuing operations | $ | (131,728) | | | $ | 154,556 | | | $ | 221,947 | |
Discontinued operations: | | | | | |
Income from discontinued operations before other items | 0 | | | 37,241 | | | 45,036 | |
| | | | | |
| | | | | |
Impairment on public charter school portfolio sale | 0 | | | (21,433) | | | 0 | |
| | | | | |
Gain on sale of real estate from discontinued operations | 0 | | | 31,879 | | | 0 | |
| | | | | |
Income from discontinued operations | 0 | | | 47,687 | | | 45,036 | |
Net (loss) income | (131,728) | | | 202,243 | | | 266,983 | |
| | | | | |
| | | | | |
Preferred dividend requirements | (24,136) | | | (24,136) | | | (24,142) | |
| | | | | |
Net (loss) income available to common shareholders of EPR Properties | $ | (155,864) | | | $ | 178,107 | | | $ | 242,841 | |
Net (loss) income available to common shareholders of EPR Properties per share: | | | | |
Continuing operations | $ | (2.05) | | | $ | 1.70 | | | $ | 2.66 | |
Discontinued operations | 0 | | | 0.62 | | | 0.61 | |
Basic | $ | (2.05) | | | $ | 2.32 | | | $ | 3.27 | |
| | | | | |
Continuing operations | $ | (2.05) | | | $ | 1.70 | | | $ | 2.66 | |
Discontinued operations | 0 | | | 0.62 | | | 0.61 | |
Diluted | $ | (2.05) | | | $ | 2.32 | | | $ | 3.27 | |
Shares used for computation (in thousands): | | | | | |
Basic | 75,994 | | | 76,746 | | | 74,292 | |
Diluted | 75,994 | | | 76,782 | | | 74,337 | |
| | | | | |
Other comprehensive (loss) income: | | | | | |
Net (loss) income | $ | (131,728) | | | $ | 202,243 | | | $ | 266,983 | |
Foreign currency translation adjustment | 3,494 | | | 9,253 | | | (16,177) | |
Change in unrealized (loss) gain on derivatives | (10,553) | | | (14,063) | | | 15,779 | |
Comprehensive (loss) income attributable to EPR Properties | $ | (138,787) | | | $ | 197,433 | | | $ | 266,585 | |
See accompanying notes to consolidated financial statements.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
EPR PROPERTIES Consolidated Statements of Changes in Equity Years Ended December 31, 2020, 2019 and 2018 (Dollars in thousands) |
| EPR Properties Shareholders’ Equity | | | | |
| Common Stock | | Preferred Stock | | Additional paid-in capital | | Treasury shares | | Accumulated other comprehensive income (loss) | | Distributions in excess of net income (loss) | | | | Total |
| Shares | | Par | | Shares | | Par | | |
Balance at December 31, 2017 | 76,858,632 | | | $ | 769 | | | 14,848,165 | | | $ | 148 | | | $ | 3,478,986 | | | $ | (121,591) | | | $ | 12,483 | | | $ | (443,470) | | | | | $ | 2,927,325 | |
Restricted share units issued to Trustees | 23,571 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | 0 | |
Issuance of nonvested shares, net of cancellations | 295,202 | | | 3 | | | — | | | — | | | 4,588 | | | (617) | | | — | | | — | | | | | 3,974 | |
Purchase of common shares for vesting | — | | | — | | | — | | | — | | | — | | | (7,156) | | | — | | | — | | | | | (7,156) | |
Share-based compensation expense | — | | | — | | | — | | | — | | | 15,111 | | | — | | | — | | | — | | | | | 15,111 | |
Share-based compensation included in severance expense | — | | | — | | | — | | | — | | | 3,218 | | | — | | | — | | | — | | | | | 3,218 | |
Foreign currency translation adjustment | — | | | — | | | — | | | — | | | — | | | — | | | (16,177) | | | — | | | | | (16,177) | |
Change in unrealized gain on derivatives | — | | | — | | | — | | | — | | | — | | | — | | | 15,779 | | | — | | | | | 15,779 | |
Net income | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 266,983 | | | | | 266,983 | |
Issuances of common shares | 20,553 | | | 0 | | | — | | | — | | | 1,286 | | | — | | | — | | | — | | | | | 1,286 | |
| | | | | | | | | | | | | | | | | | | |
Conversion of Series E Convertible Preferred shares to common shares | 800 | | | — | | | (1,734) | | | 0 | | | — | | | — | | | — | | | — | | | | | 0 | |
Conversion of Series C Convertible Preferred shares to common shares | 1,964 | | | — | | | (5,000) | | | 0 | | | — | | | — | | | — | | | — | | | | | 0 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Stock option exercises, net | 25,721 | | | 0 | | | — | | | — | | | 1,305 | | | (1,364) | | | — | | | — | | | | | (59) | |
Dividends to common shareholders ($4.32 per share) | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (321,119) | | | | | (321,119) | |
Dividends to Series C preferred shareholders ($1.4375 per share) | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (7,760) | | | | | (7,760) | |
Dividends to Series E preferred shareholders ($2.25 per share) | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (7,757) | | | | | (7,757) | |
| | | | | | | | | | | | | | | | | | | |
Dividends to Series G preferred shareholders ($1.4375 per share) | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (8,625) | | | | | (8,625) | |
| | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2018 | 77,226,443 | | | $ | 772 | | | 14,841,431 | | | $ | 148 | | | $ | 3,504,494 | | | $ | (130,728) | | | $ | 12,085 | | | $ | (521,748) | | | | | $ | 2,865,023 | |
Restricted share units issued to Trustees | 27,392 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | 0 | |
Issuance of nonvested shares, net of cancellations | 208,755 | | | 2 | | | — | | | — | | | 4,926 | | | (498) | | | — | | | — | | | | | 4,430 | |
Purchase of common shares for vesting | — | | | — | | | — | | | — | | | — | | | (9,691) | | | — | | | — | | | | | (9,691) | |
Share-based compensation expense | — | | | — | | | — | | | — | | | 13,180 | | | — | | | — | | | — | | | | | 13,180 | |
Share-based compensation included in severance expense | — | | | — | | | — | | | — | | | 580 | | | — | | | — | | | — | | | | | 580 | |
Foreign currency translation adjustment | — | | | — | | | — | | | — | | | — | | | — | | | 9,253 | | | — | | | | | 9,253 | |
Change in unrealized loss on derivatives | — | | | — | | | — | | | — | | | — | | | — | | | (14,063) | | | — | | | | | (14,063) | |
Net income | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 202,243 | | | | | 202,243 | |
Issuances of common shares | 4,007,113 | | | 41 | | | — | | | — | | | 305,893 | | | — | | | — | | | — | | | | | 305,934 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Stock option exercises, net | 118,786 | | | 1 | | | — | | | — | | | 5,785 | | | (6,518) | | | — | | | — | | | | | (732) | |
Dividends to common shareholders ($4.50 per share) | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (346,216) | | | | | (346,216) | |
Dividends to Series C preferred shareholders ($1.4375 per share) | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (7,756) | | | | | (7,756) | |
Dividends to Series E preferred shareholders ($2.25 per share) | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (7,756) | | | | | (7,756) | |
Dividends to Series G preferred shareholders ($1.4375 per share) | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (8,624) | | | | | (8,624) | |
| | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2019 | 81,588,489 | | | $ | 816 | | | 14,841,431 | | | $ | 148 | | | $ | 3,834,858 | | | $ | (147,435) | | | $ | 7,275 | | | $ | (689,857) | | | | | $ | 3,005,805 | |
Continued on next page. | | | | | | | | | | | | | | | | | | | |
EPR PROPERTIES Consolidated Statements of Changes in Equity Years Ended December 31, 2017, 2016 and 2015 (Dollars in thousands) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| EPR Properties Shareholders’ Equity | | | | |
| Common Stock | | Preferred Stock | | Additional paid-in capital | | Treasury shares | | Accumulated other comprehensive income (loss) | | Distributions in excess of net income | | Noncontrolling interests | | Total |
| Shares | | Par | | Shares | | Par | | |
Balance at December 31, 2014 | 58,952,404 |
| | $ | 589 |
| | 13,850,000 |
| | $ | 139 |
| | $ | 2,283,440 |
| | $ | (67,846 | ) | | $ | 12,566 |
| | $ | (302,776 | ) | | $ | 377 |
| | $ | 1,926,489 |
|
Restricted share units issued to Trustees | 18,036 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Issuance of nonvested shares,net | 218,285 |
| | 2 |
| | — |
| | — |
| | 1,941 |
| | (36 | ) | | — |
| | — |
| | — |
| | 1,907 |
|
Purchase of common shares for vesting | — |
| | — |
| | — |
| | — |
| | — |
| | (8,222 | ) | | — |
| | — |
| | — |
| | (8,222 | ) |
Amortization of nonvested shares and restricted share units | — |
| | — |
| | — |
| | — |
| | 7,038 |
| | — |
| | — |
| | — |
| | — |
| | 7,038 |
|
Share option expense | — |
| | — |
| | — |
| | — |
| | 1,119 |
| | — |
| | — |
| | — |
| | — |
| | 1,119 |
|
Share-based compensation included in retirement severance expense | — |
| | — |
| | — |
| | — |
| | 6,377 |
| | — |
| | — |
| | — |
| | — |
| | 6,377 |
|
Foreign currency translation adjustment | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (33,710 | ) | | — |
| | — |
| | (33,710 | ) |
Change in unrealized gain (loss) on derivatives | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 26,766 |
| | — |
| | — |
| | 26,766 |
|
Net income | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 194,532 |
| | — |
| | 194,532 |
|
Issuances of common shares | 3,530,057 |
| | 36 |
| | — |
| | — |
| | 190,329 |
| | — |
| | — |
| | — |
| | — |
| | 190,365 |
|
Stock option exercises, net | 476,400 |
| | 5 |
| | — |
| | — |
| | 17,824 |
| | (21,224 | ) | | — |
| | — |
| | — |
| | (3,395 | ) |
Dividends to common and preferred shareholders | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (235,398 | ) | | — |
| | (235,398 | ) |
Forfeiture of noncontrolling interest | — |
| | — |
| | — |
| | — |
| | 377 |
| | — |
| | — |
| | — |
| | (377 | ) | | — |
|
Balance at December 31, 2015 | 63,195,182 |
| | $ | 632 |
| | 13,850,000 |
| | $ | 139 |
| | $ | 2,508,445 |
| | $ | (97,328 | ) | | $ | 5,622 |
| | $ | (343,642 | ) | | $ | — |
| | $ | 2,073,868 |
|
Restricted share units issued to Trustees | 15,805 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Issuance of nonvested shares, net | 300,752 |
| | 3 |
| | — |
| | — |
| | 4,472 |
| | — |
| | — |
| | — |
| | — |
| | 4,475 |
|
Purchase of common shares for vesting | — |
| | — |
| | — |
| | — |
| | — |
| | (4,211 | ) | | — |
| | — |
| | — |
| | (4,211 | ) |
Amortization of nonvested shares and restricted share units | — |
| | — |
| | — |
| | — |
| | 10,255 |
| | — |
| | — |
| | — |
| | — |
| | 10,255 |
|
Share option expense | — |
| | — |
| | — |
| | — |
| | 909 |
| | — |
| | — |
| | — |
| | — |
| | 909 |
|
Foreign currency translation adjustment | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 5,142 |
| | — |
| | — |
| | 5,142 |
|
Change in unrealized gain (loss) on derivatives | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (3,030 | ) | | — |
| | — |
| | (3,030 | ) |
Net income | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 224,982 |
| | — |
| | 224,982 |
|
Issuances of common shares | 2,521,071 |
| | 26 |
| | — |
| | — |
| | 142,822 |
| | — |
| | — |
| | — |
| | — |
| | 142,848 |
|
Conversion of Series C Convertible Preferred shares to common shares | 358 |
| | — |
| | (950 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Stock option exercises, net | 230,319 |
| | 2 |
| | — |
| | — |
| | 10,143 |
| | (11,633 | ) | | — |
| | — |
| | — |
| | (1,488 | ) |
Dividends to common and preferred shareholders | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (267,849 | ) | | — |
| | (267,849 | ) |
Balance at December 31, 2016 | 66,263,487 |
| | $ | 663 |
| | 13,849,050 |
| | $ | 139 |
| | $ | 2,677,046 |
| | $ | (113,172 | ) | | $ | 7,734 |
| | $ | (386,509 | ) | | $ | — |
| | $ | 2,185,901 |
|
Continued on next page. | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
EPR PROPERTIES Consolidated Statements of Changes in Equity Years Ended December 31, 2020, 2019 and 2018 (Dollars in thousands) (continued) |
| EPR Properties Shareholders’ Equity | | | | |
| Common Stock | | Preferred Stock | | Additional paid-in capital | | Treasury shares | | Accumulated other comprehensive income (loss) | | Distributions in excess of net income (loss) | | | | Total |
| Shares | | Par | | Shares | | Par | | |
Continued from previous page. | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2019 | 81,588,489 | | | $ | 816 | | | 14,841,431 | | | $ | 148 | | | $ | 3,834,858 | | | $ | (147,435) | | | $ | 7,275 | | | $ | (689,857) | | | | | $ | 3,005,805 | |
Credit loss expense for implementation of Current Expected Credit Loss standard | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (2,163) | | | | | (2,163) | |
Restricted share units issued to Trustees | 74,767 | | | 1 | | | — | | | — | | | — | | | — | | | — | | | — | | | | | 1 | |
Issuance of nonvested shares and performance shares, net of cancellations | 217,034 | | | 2 | | | — | | | — | | | 6,505 | | | (359) | | | — | | | — | | | | | 6,148 | |
Purchase of common shares for vesting | — | | | — | | | — | | | — | | | — | | | (7,387) | | | — | | | — | | | | | (7,387) | |
Share-based compensation expense | — | | | — | | | — | | | — | | | 13,819 | | | — | | | — | | | — | | | | | 13,819 | |
Share-based compensation included in severance expense | — | | | — | | | — | | | — | | | 1,258 | | | — | | | — | | | — | | | | | 1,258 | |
Foreign currency translation adjustment | — | | | — | | | — | | | — | | | — | | | — | | | 3,494 | | | — | | | | | 3,494 | |
Change in unrealized loss on derivatives | — | | | — | | | — | | | — | | | — | | | — | | | (10,553) | | | — | | | | | (10,553) | |
Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (131,728) | | | | | (131,728) | |
Issuances of common shares | 36,176 | | | 0 | | | — | | | — | | | 1,129 | | | — | | | — | | | — | | | | | 1,129 | |
Repurchase of common shares | — | | | — | | | — | | | — | | | — | | | (105,994) | | | — | | | — | | | | | (105,994) | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Stock option exercises, net | 1,410 | | | 0 | | | — | | | — | | | 63 | | | (63) | | | — | | | — | | | | | 0 | |
Dividend equivalents accrued on performance shares | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (50) | | | | | (50) | |
Dividends to common shareholders ($1.515 per share) | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (119,058) | | | | | (119,058) | |
Dividends to Series C preferred shareholders ($1.4375 per share) | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (7,756) | | | | | (7,756) | |
Dividends to Series E preferred shareholders ($2.25 per share) | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (7,756) | | | | | (7,756) | |
Dividends to Series G preferred shareholders ($1.4375 per share) | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (8,624) | | | | | (8,624) | |
Balance at December 31, 2020 | 81,917,876 | | | $ | 819 | | | 14,841,431 | | | $ | 148 | | | $ | 3,857,632 | | | $ | (261,238) | | | $ | 216 | | | $ | (966,992) | | | | | $ | 2,630,585 | |
EPR PROPERTIES Consolidated Statements of Changes in Equity Years Ended December 31, 2017, 2016 and 2015 (Dollars in thousands) (continued) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| EPR Properties Shareholders’ Equity | | | | |
| Common Stock | | Preferred Stock | | Additional paid-in capital | | Treasury shares | | Accumulated other comprehensive income (loss) | | Distributions in excess of net income | | Noncontrolling interests | | Total |
| Shares | | Par | | Shares | | Par | | |
Continued from previous page. | | | | | | | | | | | | | | | | | | |
|
|
Balance at December 31, 2016 | 66,263,487 |
| | $ | 663 |
| | 13,849,050 |
| | $ | 139 |
| | $ | 2,677,046 |
| | $ | (113,172 | ) | | $ | 7,734 |
| | $ | (386,509 | ) | | $ | — |
| | $ | 2,185,901 |
|
Restricted share units issued to Trustees | 19,030 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Issuance of nonvested shares, net | 296,914 |
| | 3 |
| | — |
| | — |
| | 5,585 |
| | (90 | ) | | — |
| | — |
| | — |
| | 5,498 |
|
Purchase of common shares for vesting | — |
| | — |
| | — |
| | — |
| | — |
| | (6,729 | ) | | — |
| | — |
| | — |
| | (6,729 | ) |
Amortization of nonvested shares and restricted share units | — |
| | — |
| | — |
| | — |
| | 13,446 |
| | — |
| | — |
| | — |
| | — |
| | 13,446 |
|
Share option expense | — |
| | — |
| | — |
| | — |
| | 696 |
| | — |
| | — |
| | — |
| | — |
| | 696 |
|
Foreign currency translation adjustment | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 12,569 |
| | — |
| | — |
| | 12,569 |
|
Change in unrealized gain (loss) on derivatives | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (7,820 | ) | | — |
| | — |
| | (7,820 | ) |
Net income | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 262,968 |
| | — |
| | 262,968 |
|
Issuances of common shares | 1,398,280 |
| | 14 |
| | — |
| | — |
| | 99,322 |
| | — |
| | — |
| | — |
| | — |
| | 99,336 |
|
Issuance of common shares for acquisition | 8,851,264 |
| | 89 |
| | — |
| | — |
| | 657,384 |
| | — |
| | — |
| | — |
| | — |
| | 657,473 |
|
Conversion of Series E Convertible Preferred shares to common shares | 404 |
| | — |
| | (885 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (1 | ) |
Issuance of Series G Preferred Shares | — |
| | — |
| | 6,000,000 |
| | 60 |
| | 144,430 |
| | — |
| | — |
| | — |
| | — |
| | 144,490 |
|
Redemption of Series F Preferred Shares | — |
| | — |
| | (5,000,000 | ) | | (50 | ) | | (120,518 | ) | | — |
| | — |
| | (4,457 | ) | | — |
| | (125,025 | ) |
Stock option exercises, net | 29,253 |
| | — |
| | — |
| | — |
| | 1,595 |
| | (1,600 | ) | | — |
| | — |
| | — |
| | (5 | ) |
Dividends to common and preferred shareholders | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (315,472 | ) | | — |
| | (315,472 | ) |
Balance at December 31, 2017 | 76,858,632 |
| | $ | 769 |
| | 14,848,165 |
| | $ | 148 |
| | $ | 3,478,986 |
| | $ | (121,591 | ) | | $ | 12,483 |
| | $ | (443,470 | ) | | $ | — |
| | $ | 2,927,325 |
|
See accompanying notes to consolidated financial statements.
| | | | | | | | | | | | | | | | | |
EPR PROPERTIES Consolidated Statements of Cash Flows (Dollars in thousands)
|
| Year Ended December 31, |
| 2020 | | 2019 | | 2018 |
Operating activities: | | | | | |
Net (loss) income | $ | (131,728) | | | $ | 202,243 | | | $ | 266,983 | |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | | | | | |
| | | | | |
Impairment charges | 85,657 | | | 23,639 | | | 27,283 | |
Impairment charges on joint ventures | 3,247 | | | 0 | | | 0 | |
Gain on sale of real estate | (50,119) | | | (36,053) | | | (3,037) | |
Gain on insurance recovery | (809) | | | 0 | | | 0 | |
Deferred income tax expense (benefit), net | 15,246 | | | (4,115) | | | 573 | |
Credit loss expense | 30,695 | | | 0 | | | 0 | |
| | | | | |
| | | | | |
| | | | | |
Gain on sale of investment in a direct financing lease | 0 | | | 0 | | | (5,514) | |
Costs associated with loan refinancing or payoff | 1,632 | | | 38,450 | | | 31,958 | |
Equity in loss from joint ventures | 4,552 | | | 381 | | | 22 | |
Distributions from joint ventures | 0 | | | 112 | | | 567 | |
Depreciation and amortization | 170,333 | | | 171,763 | | | 153,430 | |
Amortization of deferred financing costs | 6,606 | | | 6,192 | | | 5,797 | |
Amortization of above/below market leases and tenant allowances, net | (480) | | | (343) | | | (581) | |
Share-based compensation expense to management and Trustees | 13,819 | | | 13,180 | | | 15,111 | |
Share-based compensation expense included in severance expense | 1,258 | | | 580 | | | 3,218 | |
Change in assets and liabilities: | | | | | |
Operating lease assets and liabilities | 344 | | | 1,194 | | | 0 | |
Mortgage notes accrued interest receivable | (7,576) | | | (381) | | | (517) | |
Accounts receivable | (47,383) | | | (1,385) | | | (22,300) | |
| | | | | |
Direct financing lease receivable | 0 | | | (186) | | | (563) | |
Other assets | (2,698) | | | (1,301) | | | (1,055) | |
Accounts payable and accrued liabilities | (16,128) | | | 27,540 | | | 4,979 | |
Unearned rents and interest | (11,195) | | | (1,980) | | | 7,974 | |
| | | | | |
| | | | | |
Net cash provided by operating activities | 65,273 | | | 439,530 | | | 484,328 | |
Investing activities: | | | | | |
Acquisition of and investments in real estate and other assets | (38,714) | | | (500,629) | | | (187,460) | |
Proceeds from sale of real estate | 227,742 | | | 216,020 | | | 22,134 | |
Proceeds from sale of public charter school portfolio | 0 | | | 449,555 | | | 0 | |
Investment in unconsolidated joint ventures | (1,690) | | | (325) | | | (29,473) | |
Proceeds from settlement of derivative | 0 | | | 0 | | | 30,796 | |
Investment in mortgage notes receivable | (8,141) | | | (142,456) | | | (36,105) | |
Proceeds from mortgage note receivable paydown | 481 | | | 217,459 | | | 335,168 | |
| | | | | |
Investment in promissory notes receivable | (6,134) | | | (12,271) | | | (7,863) | |
Proceeds from promissory note receivable paydown | 103 | | | 3,738 | | | 7,500 | |
| | | | | |
| | | | | |
Proceeds from insurance recovery | 809 | | | 0 | | | 0 | |
Proceeds from sale of investment in direct financing leases, net | 0 | | | 0 | | | 43,447 | |
Additions to properties under development | (40,470) | | | (134,586) | | | (274,956) | |
| | | | | |
| | | | | |
| | | | | |
Net cash provided (used) by investing activities | 133,986 | | | 96,505 | | | (96,812) | |
Financing activities: | | | | | |
Proceeds from long-term debt facilities and senior unsecured notes | 750,000 | | | 962,000 | | | 908,000 | |
Principal payments on debt | (160,000) | | | (866,735) | | | (949,684) | |
Deferred financing fees paid | (6,330) | | | (9,386) | | | (8,642) | |
Costs associated with loan refinancing or payoff (cash portion) | (1,632) | | | (36,918) | | | (28,650) | |
Net proceeds from issuance of common shares | 972 | | | 305,556 | | | 956 | |
| | | | | |
| | | | | |
Impact of stock option exercises, net | 0 | | | (732) | | | (62) | |
Purchase of common shares for treasury for vesting | (7,387) | | | (9,691) | | | (7,156) | |
Purchase of common shares under share repurchase program | (105,994) | | | 0 | | | 0 | |
Dividends paid to shareholders | (172,460) | | | (367,317) | | | (342,315) | |
| | | | | |
| | | | | |
Net cash provided (used) by financing activities | 297,169 | | | (23,223) | | | (427,553) | |
Effect of exchange rate changes on cash | 142 | | | 121 | | | (442) | |
Net change in cash and cash equivalents and restricted cash | 496,570 | | | 512,933 | | | (40,479) | |
Cash and cash equivalents and restricted cash at beginning of the year | 531,440 | | | 18,507 | | | 58,986 | |
Cash and cash equivalents and restricted cash at end of the year | $ | 1,028,010 | | | $ | 531,440 | | | $ | 18,507 | |
Supplemental information continued on next page. | | | | | |
| | | | | |
EPR PROPERTIES Consolidated Statements of Cash Flows (Dollars in thousands) |
| | | | | | | | | | | |
| Year Ended December 31, |
| 2017 | | 2016 | | 2015 |
Operating activities: | | | | | |
Net income attributable to EPR Properties | $ | 262,968 |
| | $ | 224,982 |
| | $ | 194,532 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Gain on early extinguishment of debt | (977 | ) | | — |
| | — |
|
Impairment charges | 10,195 |
| | — |
| | — |
|
Gain on sale of real estate | (41,942 | ) | | (5,315 | ) | | (23,829 | ) |
Gain on insurance recovery | (606 | ) | | (4,684 | ) | | — |
|
Deferred income tax expense (benefit) | 812 |
| | (1,065 | ) | | (1,136 | ) |
Non-cash fee income | — |
| | (1,588 | ) | | — |
|
Income from discontinued operations | — |
| | — |
| | (199 | ) |
Costs associated with loan refinancing or payoff | 1,549 |
| | 905 |
| | 270 |
|
Equity in income from joint ventures | (72 | ) | | (619 | ) | | (969 | ) |
Distributions from joint ventures | 442 |
| | 816 |
| | 540 |
|
Depreciation and amortization | 132,946 |
| | 107,573 |
| | 89,617 |
|
Amortization of deferred financing costs | 6,167 |
| | 4,787 |
| | 4,588 |
|
Amortization of above/below market leases and tenant allowances, net | (107 | ) | | 183 |
| | 192 |
|
Share-based compensation expense to management and trustees | 14,142 |
| | 11,164 |
| | 8,508 |
|
Share-based compensation expense included in retirement severance expense | — |
| | — |
| | 6,377 |
|
(Increase) decrease in restricted cash | (858 | ) | | (1,619 | ) | | 2,017 |
|
Decrease (increase) in mortgage notes accrued interest receivable | 467 |
| | 572 |
| | (4,133 | ) |
Decrease (increase) in accounts receivable, net | 8,866 |
| | (37,627 | ) | | (11,623 | ) |
Increase in direct financing lease receivable | (1,208 | ) | | (3,255 | ) | | (3,559 | ) |
(Increase) decrease in other assets | (1,691 | ) | | (3,320 | ) | | 343 |
|
(Decrease) increase in accounts payable and accrued liabilities | (4,920 | ) | | 17,025 |
| | 5,711 |
|
Increase (decrease) in unearned rents and interest | 4,927 |
| | (2,713 | ) | | 10,705 |
|
Net operating cash provided by continuing operations | 391,100 |
| | 306,202 |
| | 277,952 |
|
Net operating cash provided by discontinued operations | — |
| | — |
| | 508 |
|
Net cash provided by operating activities | 391,100 |
| | 306,202 |
| | 278,460 |
|
Investing activities: | | | | | |
Acquisition of and investments in rental properties and other assets | (397,697 | ) | | (219,169 | ) | | (179,820 | ) |
Proceeds from sale of real estate | 191,569 |
| | 23,860 |
| | 46,718 |
|
Investment in mortgage notes receivable | (133,697 | ) | | (192,539 | ) | | (72,698 | ) |
Proceeds from mortgage note receivable paydown | 21,784 |
| | 72,072 |
| | 40,956 |
|
Investment in promissory notes receivable | (1,928 | ) | | (1,546 | ) | | — |
|
Proceeds from promissory note receivable paydown | 1,599 |
| | — |
| | — |
|
Proceeds from sale of infrastructure related to issuance of revenue bonds | — |
| | 43,462 |
| | — |
|
Proceeds from insurance recovery | 606 |
| | 4,610 |
| | — |
|
Proceeds from sale of investment in direct financing leases, net | — |
| | 20,951 |
| | 4,741 |
|
Additions to properties under development | (384,449 | ) | | (413,848 | ) | | (408,436 | ) |
Net cash used by investing activities | (702,213 | ) | | (662,147 | ) | | (568,539 | ) |
Financing activities: | | | | | |
Proceeds from long-term debt facilities and senior unsecured notes | 1,371,000 |
| | 1,380,000 |
| | 856,914 |
|
Principal payments on debt | (823,288 | ) | | (865,266 | ) | | (503,314 | ) |
Deferred financing fees paid | (14,318 | ) | | (14,385 | ) | | (7,047 | ) |
Costs associated with loan refinancing or payoff (cash portion) | (7 | ) | | (482 | ) | | — |
|
Net proceeds from issuance of common shares | 99,069 |
| | 142,628 |
| | 190,158 |
|
Net proceeds from issuance of preferred shares | 144,490 |
| | — |
| | — |
|
Redemption of preferred shares | (125,025 | ) | | — |
| | — |
|
Impact of stock option exercises, net | (5 | ) | | (1,488 | ) | | (3,394 | ) |
Purchase of common shares for treasury for vesting | (6,729 | ) | | (4,211 | ) | | (8,222 | ) |
Dividends paid to shareholders | (311,721 | ) | | (265,662 | ) | | (233,073 | ) |
Net cash provided by financing activities | 333,466 |
| | 371,134 |
| | 292,022 |
|
Effect of exchange rate changes on cash | 229 |
| | (137 | ) | | (996 | ) |
Net increase in cash and cash equivalents | 22,582 |
| | 15,052 |
| | 947 |
|
Cash and cash equivalents at beginning of the year | 19,335 |
| | 4,283 |
| | 3,336 |
|
Cash and cash equivalents at end of the year | $ | 41,917 |
| | $ | 19,335 |
| | $ | 4,283 |
|
Supplemental information continued on next page. | | | | | |
EPR PROPERTIES Consolidated Statements of Cash Flows (Dollars in thousands) Continued from previous page. |
| | | | | | | | | | | |
| Year Ended December 31, |
| 2017 | | 2016 | | 2015 |
Supplemental schedule of non-cash activity: | | | | | |
Transfer of property under development to rental property | $ | 408,593 |
| | $ | 454,922 |
| | $ | 392,786 |
|
Transfer of land held for development to property under development | $ | — |
| | $ | — |
| | $ | 167,600 |
|
Issuance of nonvested shares and restricted share units at fair value, including nonvested shares issued for payment of bonuses | $ | 24,062 |
| | $ | 19,626 |
| | $ | 14,285 |
|
Conversion of mortgage note receivable to rental property | $ | 9,237 |
| | $ | — |
| | $ | 120,051 |
|
Conversion of rental property to mortgage note receivable | $ | 11,897 |
| | $ | — |
| | $ | — |
|
Issuance of common shares for acquisition | $ | 657,473 |
| | $ | — |
| | $ | — |
|
Assumption of liabilities net of accounts receivable for acquisition | $ | 12,083 |
| | $ | — |
| | $ | — |
|
Transfer of investment in direct financing lease to rental properties | $ | 35,807 |
| | $ | — |
| | $ | — |
|
Adjustment of noncontrolling interest to additional paid in capital | $ | — |
| | $ | — |
| | $ | 377 |
|
Sale of investment in direct financing leases, net in exchange for mortgage note receivable | $ | — |
| | $ | 70,304 |
| | $ | — |
|
| | | | | |
Supplemental disclosure of cash flow information: | | | | | |
Cash paid during the year for interest | $ | 136,345 |
| | $ | 96,410 |
| | $ | 90,850 |
|
Cash paid during the year for income taxes | $ | 1,499 |
| | $ | 1,684 |
| | $ | 1,956 |
|
Interest cost capitalized | $ | 9,879 |
| | $ | 10,697 |
| | $ | 18,546 |
|
Increase in accrued capital expenditures | $ | 333 |
| | $ | 6,035 |
| | $ | 417 |
|
| | | | | | | | | | | | | | | | | |
EPR PROPERTIES Consolidated Statements of Cash Flows (Dollars in thousands) Continued from previous page. |
| Year Ended December 31, |
| 2020 | | 2019 | | 2018 |
Reconciliation of cash and cash equivalents and restricted cash: | | | | | |
Cash and cash equivalents at beginning of the year | $ | 528,763 | | | $ | 5,872 | | | $ | 41,917 | |
Restricted cash at beginning of the year | 2,677 | | | 12,635 | | | 17,069 | |
Cash and cash equivalents and restricted cash at beginning of the year | $ | 531,440 | | | $ | 18,507 | | | $ | 58,986 | |
| | | | | |
Cash and cash equivalents at end of the year | $ | 1,025,577 | | | $ | 528,763 | | | $ | 5,872 | |
Restricted cash at end of the year | 2,433 | | | 2,677 | | | 12,635 | |
Cash and cash equivalents and restricted cash at end of the year | $ | 1,028,010 | | | $ | 531,440 | | | $ | 18,507 | |
| | | | | |
Supplemental schedule of non-cash activity: | | | | | |
Transfer of property under development to real estate investments | $ | 20,657 | | | $ | 354,568 | | | $ | 228,572 | |
| | | | | |
Issuance of nonvested shares and restricted share units at fair value, including nonvested shares issued for payment of bonuses | $ | 20,062 | | | $ | 17,590 | | | $ | 18,252 | |
Credit loss expense related to adoption of ASC Topic 326 | $ | 2,163 | | | $ | 0 | | | $ | 0 | |
Conversion or reclassification of mortgage notes receivable to real estate investments | $ | 0 | | | $ | 0 | | | $ | 155,185 | |
Mortgage note received for sale of real estate investments | $ | 0 | | | $ | 27,423 | | | $ | 0 | |
Amounts related to adoption of ASC Topic 842: | | | | | |
Operating lease right-of-use assets | $ | 0 | | | $ | 229,620 | | | $ | 0 | |
Operating lease liabilities | $ | 0 | | | $ | 253,486 | | | $ | 0 | |
Sub-lessor straight-line receivable | $ | 0 | | | $ | 24,454 | | | $ | 0 | |
Acquisition of real estate in exchange for assumption of debt at fair value | $ | 0 | | | $ | 14,000 | | | $ | 0 | |
Assumption of debt | $ | 0 | | | $ | 18,585 | | | $ | 0 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Supplemental disclosure of cash flow information: | | | | | |
Cash paid during the year for interest | $ | 152,393 | | | $ | 143,530 | | | $ | 145,559 | |
Cash paid during the year for income taxes | $ | 1,507 | | | $ | 1,842 | | | $ | 1,363 | |
Interest cost capitalized | $ | 1,233 | | | $ | 5,326 | | | $ | 9,903 | |
Change in accrued capital expenditures | $ | (12,376) | | | $ | (35,155) | | | $ | 32,993 | |
See accompanying notes to consolidated financial statements.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 20162020, 2019 and 20152018
1. Organization
Description of Business
EPR Properties (the Company) iswas formed on August 22, 1997 as a specialtyMaryland real estate investment trust (REIT) organized, and an initial public offering of the Company's common shares of beneficial interest (common shares) was completed on August 29, 1997 in Maryland. TheNovember 18, 1997. Since that time, the Company develops, owns, leases and finances propertieshas been a leading Experiential net lease REIT specializing in select market segments primarily related to Entertainment, Recreationenduring experiential properties. The Company's underwriting is centered on key industry and Education.property cash flow criteria, as well as the credit metrics of the Company's tenants and customers. The Company’s properties are located in the United States and Canada.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of EPR Properties and its subsidiaries, all of which are wholly owned.
Risks and Uncertainties
On March 11, 2020, the World Health Organization declared a novel strain of coronavirus (COVID-19) a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on the Company’s business is highly uncertain and difficult to predict, as information is rapidly evolving. The outbreak of COVID-19 has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving and many jurisdictions within the United States and abroad reacted by instituting quarantines, mandating business and school closures and restricting travel. As a result, the COVID-19 pandemic has severely impacted experiential real estate properties, given that such properties involve congregate social activity and discretionary consumer spending. Substantially all the Company's non-theatre locations and many of the Company's theatre locations have re-opened as of December 31, 2020. However, certain theatre locations remain closed due to local restrictions or operator decision to close as a result of the impact of the COVID-19 pandemic, specifically the decision by many movie studios to delay the release of blockbuster movies in hopes that larger audiences will be available as additional markets open. The severity of the impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including, but not limited to, the scope, severity and duration of the pandemic, the actions taken to contain the outbreak or mitigate its impact, the development and distribution of vaccines and the efficacy of those vaccines, the public’s confidence in the health and safety measures implemented by the Company's tenants and borrowers, and the direct and indirect economic effects of the outbreak and containment measures, all of which are uncertain and cannot be predicted. During 2020, the COVID-19 pandemic negatively affected the Company's business, and could continue to have material, adverse effects on the Company's financial condition, results of operations and cash flows.
The Company’s consolidated financial statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting periods presented. The Company considered the impact of the COVID-19 pandemic on the assumptions and estimates used in determining the Company’s financial condition and results of operations for the year ended December 31, 2020. The following were adverse impacts to its financial statements and business during the year ended December 31, 2020:
•The Company wrote-off receivables from tenants and straight-line rent receivables totaling $65.1 million directly to rental revenue in the accompanying consolidated statements of (loss) income and comprehensive (loss) income upon determination that the collectibility of these receivables or future lease payments from these tenants were no longer probable. Additionally, the Company determined that future rental revenue related to these tenants, including American-Multi Cinema, Inc. (AMC) and Regal Cinemas (Regal), a subsidiary of Cineworld Group, will be recognized on a cash basis. The straight line rent receivable
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
represented $38.0 million of this write-off and was comprised of $26.5 million of straight-line rent receivable and $11.5 million of sub-lessor ground lease straight-line rent receivable.
•The Company reduced rental revenue by$13.6 million due to rent abatements.
•The Company deferred approximately $76.0 million of amounts due from tenants and $3.4 million due from borrowers that were booked as receivables. Additionally, the Company has amounts due from tenants that were not booked as receivables as the full amounts were not deemed probable of collection as a result of the COVID-19 pandemic. The amounts not booked as receivables remain obligations of the tenants and will be recognized as revenue when received. The repayment terms for all of these deferments vary by tenant or borrower.
•The Company recognized $85.7 million in impairment charges during the year ended December 31, 2020, which was comprised of $70.7 million of impairments of real estate investments, and $15.0 million of impairments of operating lease right-of-use assets. The Company also recognized impairment charges on joint ventures of $3.2 million related to its equity investments in 3 theatre projects located in China.
•The Company increased its expected credit losses by $30.7 million from its implementation estimate of $2.2 million. This increase was primarily due to credit loss expense related to fully reserving the outstanding principal balance of $12.6 million and unfunded commitment to fund $12.9 million, totaling $25.5 million, related to notes receivable from 1 borrower, as a result of recent changes in the borrower's financial status due to the impact of the COVID-19 pandemic. The remaining increase was due to economic uncertainty and the rapidly changing environment surrounding the pandemic.
•The Company recognized a full valuation allowance of $18.0 million during the third quarter 2020 on the Company's net deferred tax assets related to the Company's taxable REIT subsidiary (TRS) and Canadian tax paying entity as a result of the uncertainty of realization caused by the impact of the COVID-19 pandemic. At December 31, 2020, the Company had a valuation allowance totaling $24.9 million on its net deferred tax assets.
•On March 20, 2020, the Company borrowed $750.0 million under its unsecured revolving credit facility as a precautionary measure to increase the Company's cash position and preserve financial flexibility given the global uncertainty caused by the COVID-19 pandemic. On December 30, 2020, the Company paid down its revolving credit facility by $160.0 million, following the sale of 6 private schools and 4 early childhood education centers. Subsequent to year-end, the Company paid down an additional $500.0 million on its revolving credit facility.
•The Company amended the agreement which governs its unsecured revolving credit facility and its unsecured term loan facility (Consolidated Credit Agreement) and the agreement which governs its private placement notes (Note Purchase Agreement). The amendments modified certain provisions and waived the Company's obligation to comply with certain covenants under these debt agreements during the Covenant Relief Period in light of the uncertainty related to impacts of the COVID-19 pandemic on the Company and its tenants and borrowers. The Company pays higher interest costs during the Covenant Relief Period. The amendments to the Consolidated Credit Agreement and Note Purchase Agreement also impose additional restrictions on the Company during the Covenant Relief Period, including limitations on making investments, incurring indebtedness, making capital expenditures, paying dividends or making other distributions, repurchasing the Company's shares, voluntarily prepaying certain indebtedness, encumbering certain assets and maintaining a minimum liquidity amount, in each case subject to certain exceptions. See Note 8 for additional details. The term "Covenant Relief Period," as used in these notes to consolidated financial statements, generally means the period of time beginning on June 29, 2020 and ending on (i) December 31, 2021, in the case of the Company's Consolidated Credit Agreement, or (ii) October 1, 2021 (subject to extension to January 1, 2022 at the Company's election, subject to certain conditions), in the case of the Company's Note Purchase Agreement governing its private placement notes. The Company has the right under certain circumstances to terminate the Covenant Relief Period earlier.
•In connection with the loan amendments discussed above, certain of the Company's key subsidiaries guaranteed the Company's obligations based on the Company's unsecured debt ratings. If the Company's unsecured debt rating is further downgraded by Moody's, it will be required to pledge the equity interest in certain subsidiary guarantors to secure its obligations under its unsecured credit facilities and private placement notes. See Note 8 for additional details.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
On June 29, 2020, the effective date of the loan amendments discussed above, the Company suspended its share repurchase plan. Prior to the effective date, during the year ended December 31, 2020, the Company repurchased 4,066,716 common shares under the share repurchase program for approximately $106.0 million. The repurchases were made under a Rule 10b5-1 trading plan.
The monthly cash dividends to common shareholders were suspended following the common share dividend paid on May 15, 2020 to shareholders of record as of April 30, 2020. The suspension of the monthly cash dividend to common shareholders will continue through the Covenant Relief Period, except as may be necessary to maintain REIT status and to not owe income tax.
On July 31, 2020, the Company entered into a Forbearance Agreement (the Forbearance Agreement), a Master Lease Agreement (the Master Lease) and seven amended lease agreements (the Transitional Leases and collectively with the Master Lease, the Leases) with AMC, its affiliate tenants of the Company (AMC and such affiliates, collectively, AMC Tenant), and AMC Entertainment Holdings, Inc. (Guarantor), relating to all 53 properties leased to AMC Tenant (the Leased Properties) on the date the agreement was executed. These agreements restructured the then-existing lease terms for the Leased Properties in light of the continuing impact of the COVID-19 pandemic on AMC Tenant's operations. Effective July 1, 2020, the Leased Properties are leased to AMC Tenant pursuant to the following leases:
•Master Lease relating to 46 Leased Properties (the Master Lease Properties); and
•NaN Transitional Leases relating to 7 Leased Properties (the Transitional Properties). These leases were subsequently terminated by the Company during 2020.
In addition, AMC Tenant and the Company entered into the following related agreements:
•Security Agreement granting to the Company a security interest subordinated to AMC's secured credit agreements and indentures in all of AMC Tenant’s property located at the Leased Properties to secure AMC Tenant’s obligations to the Company under the Forbearance Agreement and the Leases;
•Guaranty providing a guaranty by Guarantor of AMC Tenant’s obligations to the Company under the Forbearance Agreement and the Leases; and
•Capital Improvements Agreement providing a financial mechanism for the Company to provide AMC Tenant with up to $35 million of funds to complete improvements to the Master Lease Properties in exchange for increased annual fixed rent.
The prior leases for the 46 Master Lease Properties were replaced with a single Master Lease. The Company agreed to reduce total annual fixed rent on the 46 Master Lease Properties by approximately $19.4 million to approximately $87.8 million (including approximately $6.8 million of ground rent and the repayment of deferral amounts for the months of April, May and June 2020 which the Company had agreed to defer and amortize as part of fixed rent over the first 14 years of the Master Lease term).
The Master Lease Properties have been divided into four tranches, with the initial term of each tranche expiring on a different date: June 30, 2034, June 30, 2035, June 30, 2036 and June 30, 2037. The AMC Tenant may exercise up to 3 5-year extensions for each tranche. If AMC Tenant elects not to exercise an extension option with respect to a tranche, fixed rent will be reduced by the fair market rental value of Master Lease Properties included in such tranche at that time, determined in accordance with the Master Lease. Upon the expiration of the initial term of each tranche or expiration of any extension option of each tranche and the election by AMC Tenant to further extend the term of such tranche, AMC Tenant may elect to remove up to 2 Master Lease Properties included in the tranche, which will result in a reduction in the annual fixed rent equal to the fair market rental value of such removed Master Lease Properties at that time, determined in accordance with the Master Lease. AMC Tenant may not remove more than 10 Master Lease Properties in total and not more than 3 Master Lease Properties per tranche during the entirety of the Master Lease term.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
Pursuant to the Leases and the Forbearance Agreement, commencing on July 1, 2020 and continuing through December 31, 2020, in lieu of monthly fixed rent AMC Tenant agreed to pay percentage rent of 15% of total gross receipts during such month, not to exceed the deferred monthly fixed rent for the Leased Properties. The difference between the scheduled monthly fixed rent and the percentage rent actually paid to the Company for the Master Lease became additional deferred rent that, beginning in February 2021, will be added to fixed cash rent and amortized over the remaining portion of the first 14 years of the term of the Master Lease and beginning January 2021 will be rent due related to the Transitional Leases amortized over the prior lease terms. Accordingly, the new annual contractual rent under the Master Lease will increase from $87.8 million to $90.7 million by February 2021 (including approximately $4.9 million of ground rent).
The Leases are triple-net leases requiring AMC Tenant to be responsible at all times for taxes, assessments, maintenance and operating costs, common area charges, association fees, ground rent, insurance premiums, utility charges and similar pass-through charges. Fixed rent of the Master Lease (excluding the portion attributable to deferred rent) will increase by 7.5% every 5 years during the term and any extensions.
Each lease for the 7 Transitional Properties was amended by the parties. The Company agreed to reduce the aggregate annual fixed rent on the Transitional Properties by approximately $6.2 million to approximately $8.1 million (including approximately $1.2 million of ground rent and the repayment of deferral amounts for the months of April, May and June 2020 which the Company had agreed to defer and amortize as part of fixed rent over the remaining terms of the new leases).
The Company had the right to terminate each Transitional Lease by giving the AMC Tenant 90 days' prior notice of termination. Upon termination of a Transitional Lease by the Company, AMC Tenant agreed to (1) cooperate with the Company in transitioning the applicable Transitional Property to a new operator to ensure seamless transfer of management and re-branding, and (2) transfer certain property, including fixtures, furnishings and equipment, located or used at the applicable Transitional Property in exchange for a credit to the unpaid deferred amount due under the Transitional Lease. Prior to December 31, 2020, the Company terminated all Transitional Leases with AMC. The total amount deferred under each Transitional Lease prior to the Company terminating these agreements is still due by AMC and is scheduled to be paid over what would have been the remaining terms of the related property leases.
In March 2020, the Company's employees transitioned to a fully remote work force to protect the safety and well-being of the Company's personnel. The Company's prior investments in technology, business continuity planning and cyber-security protocols have enabled the Company to continue working with limited operational impacts.
Variable Interest Entities
The Company consolidates certain entities when it is deemed to be the primary beneficiary in a variable interest entity (VIE) in which it has a controlling financial interest in accordance with the consolidation guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC). The equity method of accounting is applied to entities in which the Company is not the primary beneficiary as defined in the FASB ASC Topic on Consolidation (Topic 810), but can exercise significant influence over the entity with respect to its operations and major decisions.
The Company’s variable interest in VIEs currently are in the form of equity ownership and loans provided by the Company to a VIE or other partner. The Company examines specific criteria and uses its judgment when determining if the Company is the primary beneficiary of a VIE. The primary beneficiary generally is defined as the party with the controlling financial interest. Consideration of various factors include, but are not limited to, the Company’s ability to direct the activities that most significantly impact the entity’s economic performance and its obligation to absorb losses from or right to receive benefits of the VIE that could potentially be significant to the VIE. As of December 31, 2020 and 2019, the Company does not have any investments in consolidated VIEs.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
Use of Estimates
Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with U.S. generally accepted accounting principles generally accepted in the United States of America.(GAAP). Actual results could differ from those estimates.
Rental PropertiesReal Estate Investments
Rental propertiesReal estate investments are carried at costinitial 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 baselease term of the lease or the estimated useful life and leasehold interests are depreciated over the useful life of the underlying ground lease. Expenditures for ordinary maintenance and repairs are charged to operations in the period incurred. Significant renovations and improvements, which improve or extend the useful life of the asset, are capitalized and depreciated over their estimated useful life.
Management reviews a propertythe 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. The review of recoverabilityrecoverable, which is based on an estimate of undiscounted future cash flows expected to result from its use and eventual disposition. If impairment exists due to the inability to recover the carrying value of the property, an impairment loss is recorded to the extent that the carrying value of the property exceeds its estimated fair value.
The Company evaluates the held-for-sale classification of its real estate as of the end of each quarter. Assets that are classified as held for sale are recorded at the lower of their carrying amount or fair value less costs to sell. Assets are generally classified as held for sale once management has initiated an active program to market them for sale and it is probable the assets will be sold within one year. On occasion, the Company will receive unsolicited offers from third parties to buy individual Company properties. Under these circumstances, the Company will classify the properties as held for sale when a sales contract is executed with no contingencies and the prospective buyer has funds at risk to ensure performance.
Real Estate Acquisitions
Upon acquisition of real estate properties, the Company determinesevaluates the acquisition to determine if the acquisitionit is a business combination or an asset acquisition. In January 2017, the FASB issued Accounting Standards Update (ASU) No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The update clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether acquisitions should be accounted for as business combinations or asset acquisitions. The standard is effective for annual reporting periods beginning after
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 2016 and 2015
December 15, 2017, including interim periods within those fiscal years, with early application of the guidance permitted. The Company has elected to early adopt ASU No. 2017-01as of January 1, 2017. As a result, the Company expects that fewer of its real estate acquisitions will be accounted for as business combinations.
Prior to the adoption of ASU 2017-01, the Company typically accounted for (1) acquired vacant properties, (2) acquired single tenant properties when a new lease or leases was signed at the time of acquisition, and (3) acquired single tenant properties that had an existing long-term triple-net lease or leases (greater than seven years) as asset acquisitions. Acquisitions of properties with shorter-term leases or properties with multiple tenants that require business related activities to manage and maintain the properties (i.e. those properties that involve a process) were treated as business combinations.
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 (consisting of land, building, site improvements, tenant improvements, leasehold interests and furniture, fixtures and equipment) and identified intangible assets and liabilities (consisting of above and below market leases, in-place leases, tenant relationships and assumed financing that is determined to be above or below market terms) on a relative fair value basis. Typically, relative fair values are based on recent independent appraisals or methods similar to those used by independent appraisers and management judgment. 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 (consisting of land, building, site improvements, tenant improvements, leasehold interests and furniture, fixtures and equipment) and identified intangible assets and liabilities (consisting of above and below market leases, in-place leases, tenant relationships and assumed financing that is determined to be above or below market terms) as well as any noncontrolling interest. Typically, fair values are based on recent independent appraisals. In addition, acquisition-relatedAcquisition-related costs in connection with business combinations are expensed as incurred. Costs related to such transactions, as well asincurred and included in transaction costs associated with terminated transactions, are included in the accompanying consolidated statements of (loss) income asand comprehensive (loss) income.
In addition to acquisition-related costs in connection with business combinations, transaction costs include costs associated with terminated transactions, pre-opening costs and certain leasing and tenant transition costs. Transaction costs expensed totaled $0.5 $5.4 million, $7.9$23.8 million and $7.5$3.7 million for the years ended December 31, 2017, 20162020, 2019 and 2015,2018, respectively.
For rental propertyreal 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 as if it were vacant based on management’s determination of the relative fair values of the assets. Management determines the “as if vacant” fair value of a property using recent independent appraisals or methods similar to those used by independent appraisers. For land acquired with a rental property acquisition,Land is valued using the sales comparison approach which uses available market data from recent comparable land sales is used 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
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
income approach uses market leasing assumptions to estimate the fair value of the land.property as if vacant. The cost and income approaches are reconciled to arrive at an estimated building fair value.
Most of the Company’s rental property acquisitions do not involve in-place leases. Because the Company typically executes these leases simultaneously with the purchase of the real estate, no value is ascribed to in-place leases in these transactions.
Intangibles
The fair value of acquired in-place leases also includes management’s estimate, on a lease-by-lease basis, of the present value of the following amounts: (i) the value associated with avoiding the cost of originating the acquired in-place leases (i.e. the market cost to execute the leases, including leasing commissions, legal and other related costs); (ii) the value associated with lost revenue related to tenant reimbursable operating costs estimated to be incurred during the assumed re-leasing period, (i.e. real estate taxes, insurance and other operating expenses); (iii) the value associated with lost rental revenue from existing leases during the assumed re-leasing period; and (iv) the value associated with avoided tenant improvement costs or other inducements to secure a tenant lease. These values are amortized over the remaining initial lease term of the respective leases.
In determining the fair value of acquired above and below marketbelow-market leases, the Company considers many factors. On a lease-by-lease basis, management considers the present value of the difference between the contractual amounts to be paid pursuant to the leases and management’s estimate of fair market lease rates. For above marketabove-market leases and below-market leases, management considers such differences over the remaining non-cancelable lease terms and for below market leases, management considers such differences over the remaining initial lease terms plus any fixed rate renewal periods.terms. The capitalized above-market lease values are amortized as a reduction of rental income over the remaining non-cancelablelease terms of
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 2016 and 2015
the respective leases. The capitalized below marketbelow-market lease values are amortized as an increase to rental income over the remaining initial lease terms of the respective leases. The lease term includes the minimum base term plus any fixed rate renewal periods.extension options that are reasonably certain to be exercised. Management considers several factors in determining the discount rate used in the present value calculations, including the credit risks associated with the respective tenants.
If debt is assumed in the acquisition, the determination of whether it is above or below marketbelow-market is based upon a comparison of similar financing terms for similar rental propertiesreal estate investments at the time of the acquisition.
In determining the fair value of tradenames, the Company historically uses the relief from royalty method, which estimates the fair value of hypothetical royalty income that could be generated if the intangible asset was licensed from an independent third-party.
TheIn determining the fair value of a contract intangible, the Company also considers the present value if any, associated with customer relationships considering factors such as the nature and extent of the Company’s existing business relationship withdifference between the tenants, growth prospects for developing new business withestimated "with" and "without" scenarios. The "with" scenario presents the tenantscontract in place and expectation of lease renewals.the "without" scenario incorporates the potential profits that may be lost over the period without the contract in place. The capitalized contract value of customer relationship intangibles is required to be amortized over the remaining initial lease terms plus any renewal periods.estimated useful life of the underlying asset.
The excess of the cost of an acquired business (in a business combination) over the net of the amounts assigned to assets acquired (including identified intangible assets) and liabilities assumed is recorded as goodwill. Goodwill has an indeterminate life and is not amortized, but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired.
Management of the Company reviews the carrying value of intangible assets for impairment on an annual basis.
Intangible assets and liabilities (included in Other assets and Accounts payable and accrued liabilities in the accompanying consolidated balance sheets) consist of the following at December 31 (in thousands):
|
| | | | | | | |
| 2017 | | 2016 |
Assets: | | | |
In-place leases, net of accumulated amortization of $5.5 million and $13.4 million, respectively | $ | 21,512 |
| | $ | 13,716 |
|
Above market lease, net of accumulated amortization of $0.8 million and $0.6 million, respectively | 351 |
| | 479 |
|
Tradenames, net of accumulated amortization of $23 thousand | 6,313 |
| | — |
|
Goodwill | 693 |
| | 693 |
|
Total intangible assets, net | $ | 28,869 |
| | $ | 14,888 |
|
| | | |
Liabilities: | | | |
Below market lease, net of accumulated amortization of $0.3 million and $12 thousand, respectively | $ | (8,792 | ) | | $ | (109 | ) |
In-place leases, net at December 31, 2017 and 2016 of approximately $21.5 million and $13.7 million, respectively, relates to 35 and 24 properties, respectively. Amortization expense related to in-place leases is computed using the straight-line method and was $2.0 million, $1.4 million and $1.4 million for the years ended December 31, 2017, 2016 and 2015, respectively. The weighted average life for these in-place leases at December 31, 2017 is 12.5 years.
Above market lease, net at December 31, 2017 and 2016 relates to two properties. Amortization expense related to the above market lease is computed using the straight-line method and was $194 thousand, $192 thousand, and $192 thousand for the years ended December 31, 2017, 2016 and 2015, respectively. The weighted average life for these above market leases at December 31, 2017 is 3.2 years.
Tradenames, net at December 31, 2017 relates to 12 properties. At December 31, 2017, $5.4 million in tradenames had indefinite lives and were not amortized. Amortization expense related to the finite-lived tradenames is computed using the straight-line method and was $23 thousand for the year ended December 31, 2017. The weighted average life for these finite-lived tradenames at December 31, 2017 is 33.2 years.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 20162020, 2019 and 20152018
| | | | | | | | | | | |
| 2020 | | 2019 |
Assets: | | | |
In-place leases, net of accumulated amortization of $13.9 million and $10.8 million, respectively | $ | 21,684 | | | $ | 24,528 | |
Above-market lease, net of accumulated amortization of $1.2 million and $1.1 million, respectively | 354 | | | 71 | |
Tradenames, net of accumulated amortization of $317 thousand and $184 thousand, respectively (1) | 8,847 | | | 8,980 | |
Contract value, net of accumulated amortization of $914 thousand and $548 thousand, respectively | 10,054 | | | 10,420 | |
Goodwill | 693 | | | 693 | |
Total intangible assets, net | $ | 41,632 | | | $ | 44,692 | |
| | | |
Liabilities: | | | |
Below-market lease, net of accumulated amortization of $1.5 million and $1.1 million, respectively | $ | 8,397 | | | $ | 8,934 | |
Goodwill at(1) At December 31, 20172020 and 2016 relates solely to the acquisition of New Roc that2019, $5.4 million in tradenames had indefinite lives and were not amortized.
Aggregate lease intangible amortization included in expense was acquired on October 27, 2003.
Below market lease, net at December 31, 2017 relates to seven properties. Amortization expense related to below market lease is computed using the straight-line method$5.6 million, $3.7 million and was $307 thousand and $12 thousand$2.9 million for the years ended December 31, 20172020, 2019 and 2016,2018, respectively. The weighted average lifenet amount amortized as an increase to rental revenue for these below market leases atcapitalized above and below-market lease intangibles was $0.5 million, $0.4 million and $0.6 million for the years ended December 31, 2017 is 30.8 years.2020, 2019 and 2018, respectively.
Future amortization of in-place leases, net, above marketabove-market lease, net, tradenames, net, contract value, net and below marketbelow-market lease, net at December 31, 20172020 is as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| In place leases | | Tradenames (1) | | Contract Value | | Above-market lease | | Below-market lease |
Year: | | | | | | | | | |
2021 | $ | 3,283 | | | $ | 133 | | | $ | 365 | | | $ | 51 | | | $ | (456) | |
2022 | 2,658 | | | 133 | | | 365 | | | 46 | | | (437) | |
2023 | 2,654 | | | 133 | | | 365 | | | 46 | | | (415) | |
2024 | 2,095 | | | 133 | | | 365 | | | 46 | | | (396) | |
2025 | 2,085 | | | 133 | | | 365 | | | 46 | | | (387) | |
Thereafter | 8,909 | | | 2,827 | | | 8,229 | | | 119 | | | (6,306) | |
Total | $ | 21,684 | | | $ | 3,492 | | | $ | 10,054 | | | $ | 354 | | | $ | (8,397) | |
| | | | | | | | | |
Weighted average amortization period (years) | 11.2 | | 27.2 | | 27.5 | | 7.5 | | 30.1 |
| | | | | | | | | |
(1) Excludes $5.4 million in tradenames with indefinite lives. |
|
| | | | | | | | | | | | | | | |
| In place leases | | Above market lease | | Below market lease | | Tradenames (1) |
Year: | | | | | | | |
2018 | $ | 2,420 |
| | $ | 197 |
| | $ | (458 | ) | | $ | 30 |
|
2019 | 2,181 |
| | 102 |
| | (458 | ) | | 30 |
|
2020 | 1,907 |
| | 6 |
| | (446 | ) | | 30 |
|
2021 | 1,796 |
| | 6 |
| | (426 | ) | | 30 |
|
2022 | 1,695 |
| | 6 |
| | (410 | ) | | 30 |
|
Thereafter | 11,513 |
| | 34 |
| | (6,594 | ) | | 806 |
|
Total | $ | 21,512 |
| | $ | 351 |
| | $ | (8,792 | ) | | $ | 956 |
|
| | | | | | | |
(1) Excludes $5.4 million in tradenames with indefinite lives. |
Deferred Financing Costs
Deferred financing costs are amortized over the terms of the related debt obligations or mortgage note receivable as applicable. Deferred financing costs of $32.9of $35.6 million and $29.3and $37.2 million as of December 31, 20172020 and 2016,2019, respectively, are shown as a reduction of debt. The deferred financing costscosts of $4.8 million and $3.5 million as of December 31, 2020 and 2019, respectively, related to the unsecured revolving credit facility are included in other assets.
Capitalized Development CostsReportable Segments
The Company capitalizes certain costs that relate to property under development including interest and a portion of internal legal personnel costs.
Operating Segments
The Company has four2 reportable operating segments: Entertainment, Recreation,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
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and Other.2018
includes the following property types: early childhood education centers and private schools. See Note 19 for financial information related to these reportable segments.
Rental Revenue
The Company leases real estate to its tenants primarily under leases that are predominately classified as operating segments.
Revenue Recognition
leases. The Company's leases generally provide for rent escalations throughout the lease terms. Rents that are fixed and determinable are recognized on a straight-line basis over the non-cancellable termslease term. Base rent escalations that include a variable component are recognized upon the occurrence of the leases.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 collectability,collectibility, and the Company records a provision for lossesdirect write-off against rental revenuesrevenue if collectabilitycollectibility of these future rents is not reasonably assured.probable. For the year ended December 31, 2020, the Company recognized straight-line write-offs totaling $38.0 million, which were comprised of $26.5 million of straight-line accounts receivable and $11.5 million of sub-lessor ground lease straight-line accounts receivable. Straight-line rental revenue, net of write-offs, was a reduction to total rental revenue of $24.5 million for the year ended December 31, 2020. For the year ended December 31, 2019, the Company recognized straight-line write-offs of $1.4 million (of which $1.2 million has been classified within discontinued operations). There were no straight-line write-offs recognized during the year ended December 31, 2018. For the years ended December 31, 2017, 2016,2019 and 2015,2018, the Company recognized $4.3 million, $17.0 million and $12.2 million, respectively, of straight-line rental revenue, net of write-offs. Basewrite-offs of $13.6 million (of which $3.0 million has been classified within discontinued operations) and $10.2 million (of which $5.5 million has been classified within discontinued operations), respectively.
Substantially all the Company's customers' operations were temporarily closed for a portion of the year ended December 31, 2020, as a result of the COVID-19 pandemic. Many of the Company's non-theatre locations have re-opened. However, certain of the Company's theatre locations remain closed due to local restrictions or operator decision to close as a result of the impact of the COVID-19 pandemic, specifically the decision by many movie studios to delay the release of films. In response, the Company has agreed to defer rent escalationfor a substantial portion of its customers. On April 10, 2020, the FASB issued a Staff Q&A on leases that are dependentTopic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic. In reliance upon increasesthe FASB Staff Q&A, the Company has not treated qualifying deferrals or rent concessions during the period effected by the COVID-19 pandemic as lease modifications. While deferments for this and future periods delay rent payments, these deferments generally do not release customers from the obligation to pay the deferred amounts in the Consumer Price Index (CPI)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 when known. in the period to which it relates, or the Company may provide rent concessions to tenants. In cases where the Company provides concessions to tenants to which they are not otherwise entitled, those amounts will be recognized in the period in which the concession is granted unless the changes are accounted for as lease modifications.
Most of the Company’s lease contracts are triple-net leases, which require the tenants to make payments directly to third parties for lessor costs (such as property taxes and insurance) associated with the properties. In accordance with Topic 842, the Company does not include these payments made by the lessees to third parties in rental revenue or property operating expenses. In certain situations, the Company pays these lessor costs directly to third-parties and the tenants reimburse the Company. In accordance with Topic 842, these payments are presented on a gross basis in rental revenue and property operating expense. During the year ended December 31, 2020 and 2019, the Company recognized $2.2 million and $6.9 million, respectively, related to the gross-up of these reimbursed expenses which are included in rental revenue and property operating expenses.
Certain of the Company's leases, particularly at its entertainment districts, require the tenants to make payments to the Company for property related expenses such as common area maintenance. The Company has elected to
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
combine these non-lease components with the lease components in rental revenue. For the years ended December 31, 2020, 2019 and 2018, the non-lease components included in rental revenue totaled $12.9 million, $16.0 million and $15.3 million, respectively.
In addition, most of the Company's tenants are subject to additional rents (above base rents) if gross revenues of the properties exceed certain thresholds defined in the lease agreements (percentage rents). Percentage rents as well as participating interest for those mortgage agreements that contain similar such clauses are recognized at the time when specific triggering events occur as provided by the lease or mortgage agreements.agreement. Rental revenue included percentage rents of $7.8 $8.6 million, $4.7$15.0 million and $3.0$10.7 million for the years ended December 31, 2017, 20162020, 2019 and 2015,2018, respectively. Mortgage and other financing income included participating interest incomeFurthermore, due to the impact of $0.7the COVID-19 pandemic, certain of the Company's tenants paid a portion of base rent in 2020 based on a percentage of gross revenue. This variable rent totaled $5.2 million $0.8 million and $1.5 million for the years ended December 31, 2017, 2016 and 2015, respectively. For the years ended December 31, 2017 and 2016, mortgage and other financing income also included $0.8 million and $3.6 million, respectively, in prepayment fees related to mortgage notes that were paid fully in advance
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 2016 and 2015
of their maturity dates. There was no prepayment fee included in mortgage and other financing income for the year ended December 31, 2015.2020.
Direct financingThe Company regularly evaluates the collectibility of its receivables on a lease income is recognized onby lease basis. The evaluation primarily consists of reviewing past due account balances and considering such factors as the effective interest method to produce a level yield on funds not yet recovered. Estimated unguaranteed residual values atcredit quality of the dateCompany's tenants, historical trends of the tenant, current economic conditions and changes in customer payment terms. When the collectibility of lease inception represent management's initial estimates of fair valuereceivables or future lease payments are no longer probable, the Company records a direct write-off of the leased assets at the expiration of the lease, notreceivable to exceed original cost. Significant assumptions used in estimating residual values include estimated netrental revenue and recognizes future rental revenue on a cash flows over the remaining lease term and expected future real estate values. The Company evaluates on an annual basis (or more frequently if necessary) the collectability of its direct financing lease receivable and unguaranteed residual value to determine whether they are impaired. A direct financing lease receivable is considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms. When a direct financing lease receivable is considered to be impaired, the amount of loss is calculated by comparing the recorded investment to the value determined by discounting the expected future cash flows at the direct financing lease receivable's effective interest rate or to the fair value of the underlying collateral, less costs to sell, if such receivable is collateralized.basis.
Property Sales
Sales of real estate properties are recognized uponwhen a contract exists and the closingpurchaser has obtained control of the transaction with the purchaser.property. Gains on sales of properties are recognized on thein full accrual method if the Company has received adequate initial and continuing investment and has transferredin a partial sale of nonfinancial assets, to the buyer the usual risks and rewards of ownership and does not have substantial continuing involvement with the property. If the full accrual sales criteriaextent control is not met,retained. Any noncontrolling interest retained by the Company will defer gain recognition and apply the installment or cost recovery methods as appropriate until the full accrual sales criteria are met.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, or an acquired business that is classified as held for sale on the acquisition date.results. If the sale or disposal transaction does not meet the criteria, the operations and related gain or loss on sale is included in income from continuing operations. Certain reclassifications have been made to prior period amounts to conform to the current period presentation for assets that qualify for presentation as discontinued operations. See Note 17 for further details.
Allowance for Doubtful Accounts
Accounts receivable is reduced by an allowance for amounts where collection is not probable. The Company’s accounts receivable balance is comprised primarily of rents and operating cost recoveries due from tenants as well as accrued rental rate increases to be received over the life of the existing leases. The Company regularly evaluates the adequacy of its allowance for doubtful accounts. 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 and/or other debtor, current economic conditions and changes in customer payment terms. Additionally, with respect to tenants in bankruptcy, the Company estimates the expected recovery through bankruptcy claims and increases the allowance for amounts deemed uncollectible. These estimates have a direct impact on the Company's net income. The allowance for doubtful accounts was $7.5 million and $0.9 million at December 31, 2017 and 2016, respectively.
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.borrower less allowance for credit loss. Interest income is recognized using the effective interest method based on the stated interest rate over estimatethe estimated life of the note. Premiums and discounts are amortized or accreted into income over the estimated life of the note using the effective interest method.
The Company evaluatesadopted Accounting Standards Update (ASU) No. 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326) effective January 1, 2020, which requires allowance for credit losses to be recorded to reflect that all mortgage notes and notes receivable have some inherent risk of loss regardless of credit quality, collateral, or other mitigating factors. The Company adopted the collectabilitystandard on the effective date and used the effective date as the date of both interestinitial application. Accordingly, comparative periods have not been recast, and principalrequired disclosures will not be provided for dates and periods prior to January 1, 2020. On the effective date, the Company recognized credit loss expense through retained earnings and the corresponding allowance for credit losses of approximately $2.2 million, which was comprised of $2.1 million related to mortgage notes receivable and $0.1 million related to notes receivable (which are presented within other assets in the accompanying consolidated balance sheet). While Topic 326 does not require any particular method for determining the reserves, it does specify that it should be based on relevant information about past events, including historical loss experience, current portfolio and market conditions, as well as reasonable and supportable forecasts for the term of each mortgage note or note receivable. The Company uses a forward-looking commercial real estate forecasting tool to estimate its current expected credit losses (CECL) for each of its loans to determine whether it is impaired. A loan is considered to be impaired when, basedmortgage notes and notes receivable on current information and events, the Company determines that it is probable that it will be unable to collect all amounts due according to the existing contractual terms. An insignificant delay or shortfall in amounts of payments does not necessarily result in the loan being identified as impaired. When a loan is considered to be impaired, the amount of loss, if any, is calculated by comparing the recorded investment to the value determined by discounting the expected future cash flows at the loan’s effective interest rate or to the fair value of the Company’s interest in the underlying collateral, less costs to sell, if the loan is collateral dependent. Forloan-by-loan basis.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 20162020, 2019 and 20152018
The CECL allowance required by Topic 326 is a valuation account that is deducted from the related mortgage note or note receivable.
impaired loans, interest income
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 recognized onrecorded as a cash basis, unlessliability and is included in Accounts payable and accrued liabilities in the accompanying consolidated balance sheet.
As permitted under Topic 326, the Company determines based onmade 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 loan to estimated fair value ratio the loan should be on the cost recovery method, andCompany will record any cash payments received would then be reflectednecessary write-offs as a reductionreversal of principal. Interest income recognition is recommenced if and when the impaired loan becomes contractually current and performance is demonstrated to be resumed. There were no impaired loans at December 31, 2017, 2016 and 2015.interest income. During the year ended December 31, 2015,2020, the Company wrote off $3.8approximately $0.3 million of a previously impaired and fully reservedaccrued interest income against interest income related to 1 note receivable. As of December 31, 2020, the Company believes that all outstanding accrued interest is collectible.
In the event the Company has a past due mortgage note or note receivable and the Company determines it is collateral dependent, the Company measures expected credit losses based on the fair value of the collateral. The Company evaluates the collectability of both interest and principal for each of its mortgage notes and notes receivable on a quarterly basis to determine if foreclosure is probable. As of December 31, 2020, the Company does not have any mortgage notes or notes receivable with past due principal balances.
Mortgage and Other Financing Income
Certain of the Company's borrowers are subject to additional interest based on certain thresholds defined in the mortgage agreements (participating interest). Participating interest income is recognized at the time when specific triggering events occur as provided by the mortgage agreement. Mortgage and other financing income included participating interest income of $0.6 million for the year ended December 31, 2019. NaN participating interest income was recognized for the years ended December 31, 2020 and 2018. In addition, for the years ended December 31, 2019 and 2018, mortgage and other financing income included $2.7 million (of which $1.8 million has been classified in discontinued operations) and $74.7 million, respectively, in prepayment fees related to mortgage notes that were paid fully in advance of their maturity date. NaN prepayment fees were recognized for the year ended December 31, 2020.
Income Taxes
The Company qualifies as a REIT under the Internal Revenue Code (the Code). A REIT that distributes at least 90% of its taxable income to its shareholders each year and which meets certain other conditions is not taxed on that portion of its taxable income which is distributed to its shareholders. The Company intends to continue to qualify as a REIT and distribute substantially all of its taxable income to its shareholders.
The Company is subject to income tax in certain instances in both the US and in certain foreign jurisdictions, as more fully described herein. The Company’s income tax expense includes deferred income tax expense or benefit, which represents the change in net deferred tax assets and liabilities. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse. The Company evaluates the realizability of its deferred income tax assets and assesses the need for a valuation allowance for each jurisdiction for which it is subject to income tax. The realization of the deferred tax assets depends upon all positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of existing deferred tax assets.
The Company owns certain real estate assets which are subject to income tax in Canada. At December 31, 2017,2020, the net deferred tax assets related to the Company's Canadian operations totaled $11.7$17.0 million and resulting from the temporary differences between income for financial reporting purposes and taxable income relaterelating primarily to depreciation, capital improvements and straight-line rents. Due to the impacts of the COVID-19 pandemic, it is more likely than not the Company will not generate sufficient taxable income to realize the net deferred tax assets related to the Company's Canadian operations as of December 31, 2020 totaling $17.0 million.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
The Company has certain taxable REIT subsidiaries (TRSs), as permitted under the Code, through which it conducts certain business activities and are subject to federal and state income taxes on their net taxable income. OneThe Company uses two such TRS entities exclusively to hold the operational aspect of the taxabletraditional REIT subsidiaries holds four unconsolidated joint ventures located in China.lodging structure for three Experiential lodging properties that are facilitated by management agreements with eligible independent contractors. The Company recordsreal estate for these investments using the equity method; therefore the income reportedare held by the Company is net of income tax paidREIT either directly or through an investment in a joint venture and leased to the Chinese taxing authorities. In addition,respective operations entity under a triple-net lease. Management has determined the company is liable for withholding taxes associated withreal estate meets the current and future repatriation of earnings of the China joint ventures. At December 31, 2017, the amount of this future liability was approximately $125 thousand and represented withholding taxes on 2017 and 2016 earnings. Additionally, the Company paid $44 thousand in withholding taxes during the year ended December 31, 2017 that related to earnings repatriated during 2017.
On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the Tax Reform Act). The legislation significantly changes the U.S. tax law by, among other things, lowering corporate income tax rates and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The Tax Reform Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. The SEC staff issued Staff Accounting Bulletin No 118 to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Reform Act. The Company has recognized the provisional tax impacts related to deemed repatriated earnings and included these amounts in its consolidated financial statements for the year ended December 31, 2017. The ultimate impact may differ from these provisional amounts due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Reform Act. The accounting is expectedrequirements to be complete when the 2017 U.S. corporate income tax return is filedclassified as qualified lodging facilities as required in 2018. The impact of the mandatory repatriation and the revaluation of the deferred tax assets and liabilities is not significant to the Company's financial position or results of operations.a traditional REIT lodging structure.
At December 31, 2017,2020, the net deferred tax assets related to the Company's taxable REIT subsidiariesTRSs totaled $410 thousand and$7.9 million resulting from the temporary differences between income for financial reporting purposes and taxable income relate primarily to net operating loss carryovers.carryovers and pre-opening cost amortization. Due to the impacts of the COVID-19 pandemic, it is more likely than not the Company will not generate sufficient taxable income to realize the net deferred tax assets related to the Company's TRSs as of December 31, 2020 totaling $7.9 million.
As of December 31, 20172020 and 2016,2019, respectively, the Canadian operations and the Company's taxable REIT subsidiariesTRSs had deferred tax assets included in other assets in the accompanying consolidated balance sheet totaling approximately $16.0$28.5 million and $17.0$19.3 million and deferred tax liabilities included in accounts payable and accrued liabilities in the accompanying consolidated balance sheet totaling approximately $3.9$3.6 million and $4.7$3.9 million. Prior to January 1, 2016,At December 31, 2020, the Company had a full valuation allowance had been recorded onoffsetting the net taxable REIT subsidiaries deferred tax assets as it was not more-likely-than not that the TRS operations would generate sufficient taxable income to utilize deferred tax assetsincluded in the future. For the year ended December 31, 2016, the Company reassessed the need for a valuation allowance and reversed its valuation allowance associated with the net TRS deferred tax assets.accompanying consolidated balance sheet totaling $24.9 million. The Company’s consolidated deferred tax position is summarized as follows:follows (in thousands):
| | | | | | | | | | | |
| 2020 | | 2019 |
Fixed assets | $ | 18,077 | | | $ | 14,462 | |
Net operating losses | 6,546 | | | 1,656 | |
Start-up costs | 2,495 | | | 2,768 | |
Other | 1,392 | | | 367 | |
Total deferred tax assets | $ | 28,510 | | | $ | 19,253 | |
| | | |
Capital improvements | $ | (2,888) | | | $ | (2,765) | |
Straight-line receivable | (706) | | | (1,097) | |
Other | (9) | | | (1) | |
Total deferred tax liabilities | $ | (3,603) | | | $ | (3,863) | |
| | | |
Valuation allowance | (24,907) | | | 0 | |
Net deferred tax asset | $ | 0 | | | $ | 15,390 | |
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 2016 and 2015
|
| | | | | | | |
| 2017 | | 2016 |
Fixed assets | $ | 15,445 |
| | $ | 16,022 |
|
Net operating losses | 357 |
| | 578 |
|
Other | 213 |
| | 381 |
|
Total deferred tax assets | $ | 16,015 |
| | $ | 16,981 |
|
| | | |
Capital improvements | (2,006 | ) | | (1,716 | ) |
Straight-line receivable | $ | (1,891 | ) | | $ | (2,177 | ) |
Other | — |
| | (830 | ) |
Total deferred tax liabilities | $ | (3,897 | ) | | $ | (4,723 | ) |
| | | |
Net deferred tax asset | $ | 12,118 |
| | $ | 12,258 |
|
Additionally, during the years ended December 31, 2017, 20162020, 2019 and 2015,2018, the Company recognized current income and withholding tax expense of $1.6$1.5 million, $1.7$1.1 million and $1.6$1.7 million, respectively, primarily related to certain state income taxes and foreign withholding tax. The table below details the current and deferred income tax benefit (expense) for the years ended December 31, 2017, 20162020, 2019 and 20152018 (in thousands):
| | | | | | | | | | | | | | | | | |
| 2020 | | 2019 | | 2018 |
Current TRS income tax | $ | 7 | | | $ | 376 | | | $ | (221) | |
Current state income tax expense | (503) | | | (405) | | | (422) | |
Current foreign income tax | 3 | | | 0 | | | 0 | |
Current foreign withholding tax | (1,018) | | | (1,051) | | | (1,069) | |
Deferred TRS income tax (expense) benefit | (4,448) | | | 3,719 | | | 319 | |
Deferred foreign withholding tax | 0 | | | 0 | | | 0 | |
Deferred income tax (expense) benefit | (10,797) | | | 396 | | | (892) | |
Income tax benefit (expense) | $ | (16,756) | | | $ | 3,035 | | | $ | (2,285) | |
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
|
| | | | | | | | | | | |
| 2017 | | 2016 | | 2015 |
Current TRS income tax | $ | (163 | ) | | $ | (36 | ) | | $ | — |
|
Current state income tax expense | (360 | ) | | (414 | ) | | (899 | ) |
Current foreign income tax | (36 | ) | | (77 | ) | | 431 |
|
Current foreign withholding tax | (1,071 | ) | | (1,130 | ) | | (1,107 | ) |
Deferred TRS income tax | 137 |
| | 273 |
| | — |
|
Deferred foreign withholding tax | 43 |
| | 39 |
| | (43 | ) |
Deferred income tax benefit (expense) | (949 | ) | | 792 |
| | 1,136 |
|
Income tax expense | $ | (2,399 | ) | | $ | (553 | ) | | $ | (482 | ) |
The Company's effective tax rate for the years ended December 31, 2017, 20162020, 2019 and 20152018 was 0.9%13.5%, 0.2%1.5% and 0.2%0.8%, respectively. The differences between the income tax expense calculated at the statutory U.S. federal income tax rates of 35% and the actual income tax expense recorded for continuing operations is mostly attributable to the dividends paid deduction available for REITs.
Furthermore, the Company qualified as a REIT and distributed the necessary amount of taxable income such that no0 current U.S. federal income taxes were due for the years ended December 31, 2017, 20162020, 2019 and 2015.2018. Accordingly, no0 provision for current U.S. federal income taxes was recorded for any of those years. If the Company fails to qualify as a REIT in any taxable year, without the benefit of certain provisions, it will be subject to federal and state income taxes at regular corporate rates (including any applicable alternative minimum tax for years prior to January 1, 2018)2019) and may not be able to qualify as a REIT for four subsequent taxable years. Even if the Company qualifies for taxation as a REIT, the Company is subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed taxable income. Tax years 20142017 through 20172019 remain generally open to examination for U.S. federal income tax and state tax purposes and from 20132015 through 20172019 for Canadian income tax purposes.
The Company’s policy is to recognize interest and penalties as general and administrative expense. The Company did not recognize any interest and penalties in 20172020, 2019 or 2016. In 2015, approximately $65 thousand in interest and penalties related to a state audit were recognized.2018. The Company did not have any accrued interest and penalties at December 31, 2017 or December 31, 2016.2020, 2019 and 2018. Additionally, the Company did not have any unrecorded tax benefits as of December 31, 20172020, 2019 and December 31, 20162018.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 2016 and 2015
Concentrations of Risk
On December 21, 2016, American Multi-Cinema, Inc. (AMC) announced that it closed its acquisition of Carmike Cinemas Inc. (Carmike).Topgolf USA (Topgolf), Cinemark, AMC was the lessee ofand Regal represented a substantialsignificant portion (34%) of the megaplex theatre rental properties held by the Company at December 31, 2017. For the year ended December 31, 2017, approximately $114.4 million or 19.9% of the Company's total revenues were derived from rental payments by AMC. Forrevenue for the yearyears ended December 31, 2016, approximately $90.0 million or 18.2%2020, 2019 and 2018. The Company began recognizing revenue on a cash basis for AMC at the end of the first quarter of 2020 and for Regal at the end of the third quarter of 2020 and cash payments have been reduced due to the impact of the COVID-19 pandemic. The following is a summary of the Company's total revenues were derivedrevenue (including revenue from rental payments bydiscontinued operations) from Topgolf, Cinemark, AMC and approximately $21.7 million or 4.4% of the Company's total revenues were derived from rental payments by Carmike. For the year ended December 31, 2015, approximately $86.1 million or 20% of the Company's total revenues were derived from rental payments by AMC. These rental payments are from AMC under the leases, or from its parent, AMC Entertainment, Inc. (AMCE), as the guarantor of AMC’s obligations under the leases. AMCE is wholly owned by AMC Entertainment Holdings, Inc. (AMCEH). AMCEH is a publicly held company (NYSE: AMC) and its consolidated financial information is publicly available as www.sec.gov.Regal (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2020 | | 2019 | | 2018 |
| Total Revenue | % of Company's Total Revenue | | Total Revenue | % of Company's Total Revenue | | Total Revenue | % of Company's Total Revenue |
Topgolf | $ | 80,714 | | 19.5 | % | | $ | 78,962 | | 11.2 | % | | $ | 64,459 | | 9.2 | % |
Cinemark | 42,065 | | 10.1 | % | | 38,927 | | 5.5 | % | | 37,303 | | 5.3 | % |
AMC | 29,964 | | 7.2 | % | | 123,792 | | 17.6 | % | | 115,805 | | 16.5 | % |
Regal | 13,056 | | 3.1 | % | | 75,784 | | 10.8 | % | | 57,614 | | 8.2 | % |
Cash Equivalents
Cash equivalents include bank demand deposits and shares of highly liquid institutional money market mutual funds for which cost approximates market value. At December 31, 2017, cash equivalents also includes funds held for a Section 1031 exchange under the Code, which can be withdrawn at the Company's discretion.deposits.
Restricted Cash
Restricted cash represents cash held for a borrower’s debt service reserve for mortgage notes receivable,tenants' off-season rent reserves and escrow deposits required in connection with debt service,property management agreements or held for potential acquisitions and payment of real estate taxes and capital improvements.redevelopments.
Share-Based Compensation
Share-based compensation to employees of the Company is granted pursuant to the Company's Annual Incentive Program and Long-Term Incentive Plan. Share-basedPlan and share-based compensation to non-employee Trustees of the Company is granted pursuant to the Company's Trustee compensation program. Prior to May 12, 2016, share-based compensation granted to employees and non-employee Trustees were issued under the 2007 Equity Incentive Plan. The 2016 Equity Incentive Plan was approved by shareholders at the May 11, 2016 annual shareholder meeting and this plan replaced the 2007 Equity Incentive Plan. Accordingly, all share-based compensation granted on or after May 12, 2016 has been issued under the 2016 Equity Incentive Plan.
Share based compensation expense consists of share option expense and amortization of nonvested share grants issued to employees, and amortization of share units issued to non-employee Trustees for payment of their annual retainers. Share based compensation is included in general and administrative expense in the accompanying consolidated statements of (loss) income and totaled $14.1 million, $11.2 million and $8.5 million for the years ended comprehensive (loss) income.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 20162020, 2019 and 2015, respectively. Share-based compensation included in retirement severance expense in the accompanying consolidated statements of income totaled $6.4 million for the year ended December 31, 2015 and related to the retirement of the Company's former President and Chief Executive Officer.2018
Share Options
Share options are granted to employees pursuant to the Long-Term Incentive Plan. The fair value of share options granted is estimated at the date of grant using the Black-Scholes option pricing model. Share options granted to employees vest over a period of four years and share option expense for these options is recognized on a straight-line basis over the vesting period. Expense recognized related to share options and included in general and administrative expense in the accompanying consolidated statements of (loss) income and comprehensive (loss) incomewas $0.7 million, $0.9 million$12 thousand, $10 thousand and $1.1$0.3 million for the years ended December 31, 2017, 20162020, 2019 and 2015,2018, respectively. Expense recognized related to share options and included in retirement severance expense in the accompanying consolidated statements of income was $1.4 million for the year ended December 31, 2015 and related to the retirement of the Company's former President and Chief Executive Officer.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 2016 and 2015
Nonvested Shares Issued to Employees
The Company grants nonvested shares to employees pursuant to both the Annual Incentive Program and the Long-Term Incentive Plan. The Company amortizes the expense related to the nonvested shares awarded to employees under the Long-Term Incentive Plan and the premium awarded under the nonvested share alternative of the Annual Incentive Program on a straight-line basis over the future vesting period (three years to four years). Expense recognized related to nonvested shares and included in general and administrative expense inin the accompanying consolidated statements of (loss) income and comprehensive (loss) income was $12.2$10.6 million, $9.2$11.3 million and $6.3$13.5 million for the years ended December 31, 2017, 20162020, 2019 and 2015,2018, respectively. Expense related to nonvested shares and included in retirementseverance expense in the accompanying consolidated statements of (loss) income and comprehensive (loss) income was $1.0 million, $0.6 million and $3.2 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Nonvested Performance Shares Issued to Employees
During the year ended December 31, 2020, the Compensation and Human Capital Committee of the Company's Board of Trustees (Board) approved the 2020 Long Term Incentive Plan (the 2020 LTIP) as a sub-plan under the Company's 2016 Equity Incentive Plan. Under the 2020 LTIP, the Company awards performance shares and restricted shares to the Company's executive officers. The performance shares contain both a market condition and a performance condition. The Company amortizes the expense related to the performance shares over the future vesting period of three years. Expense recognized related to performance shares and included in general and administrative expense in the accompanying consolidated statements of (loss) income and comprehensive (loss) income was $1.0 million for the year ended December 31, 2020. Expense related to nonvested performance shares and included in severance expense in the accompanying consolidated statements of (loss) income and comprehensive (loss) income was $5.0 million$261 thousand for the year ended December 31, 2015 and related to the retirement of the Company's former President and Chief Executive Officer.2020.
Restricted Share Units Issued to Non-Employee Trustees
The Company issues restricted share units to non-employee Trustees for payment of their annual retainers under the Company's Trustee compensation program. The fair value of the share units granted was based on the share price at the date of grant. The share units vest upon the earlier of the day preceding the next annual meeting of shareholders or a change of control. The settlement date for the shares is selected by the non-employee Trustee, and ranges from one year from the grant date to upon termination of service. This expense is amortized by the Company on a straight-line basis over the year of service by the non-employee Trustees. Total expense recognized related to shares issued to non-employee Trustees and included in general and administrative expense in the accompanying consolidated statements of (loss) income and comprehensive (loss) income was $1.3$2.2 million, $1.1$1.9 million and $1.0$1.3 million for the years ended December 31, 2017, 20162020, 2019 and 2015,2018, respectively.
Foreign Currency Translation
The Company accounts for the operations of its Canadian properties in Canadian dollars. The assets and liabilities related to the Company’s Canadian properties and mortgage note are translated into U.S. dollars using the spot rates at the respective balance sheet dates; revenues and expenses are translated at average exchange rates. Resulting translation adjustments are recorded as a separate component of comprehensive income.
Derivative Instruments
In August 2017, the FASB issued ASU No. 2017-012, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The update amended existing guidance in order to better align a company's financial reporting for hedging activities with the economic objectives of those activities. It requires the Company to disclose the effect of its hedging activities on its consolidated statements of income and eliminated the periodic measurement and recognition of hedging ineffectiveness. The standard is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those fiscal years, with early application of the guidance permitted. The Company elected to early adopt ASU No. 2017-012as of October 1, 2017. Early adoption had no impact on the Company's financial position or results of operations.
The Company has entered into certainuses derivative instruments to reduce exposure to fluctuations in foreign currency exchange rates and variable interest rates. The Company has established policies
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities. These derivatives consist of foreign currency forward contracts, cross currency swaps and interest rate swaps.2018
The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rateforeign currency risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. 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 of the hedged asset or liability that are attributable to the hedged risk in a 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
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 2016 and 2015
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 May 2014,March 2020, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers when it satisfies performance obligations.2020-04, Reference Rate Reform (Topic 848). The ASU will replace most existing revenue recognitioncontains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in U.S. GAAP when it becomes effective.
In February 2017,ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the FASB issued ASU No. 2017-05, Other Income: Gains and Losses from the Derecognition of Nonfinancial Assets, which amends ASC Topic 610-20. ASU No. 2017-05 provides guidance on how entities recognize sales, including partial sales, of nonfinancial assets (and in-substance nonfinancial assets) to non-customers. ASU No. 2017-05 requires the seller to recognize a full gain or loss 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. Both ASU No. 2014-09 and 2017-05 will become effective foryear ended December 31, 2020, the Company beginningelected 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 the first quarter of 2018. The standards permit the use of either the full retrospective method or the modified retrospective method.past presentation. The Company has concluded itcontinues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur. The Company intends to amend agreements referencing the LIBOR-index to a replacement index and will useapply the modified retrospective method for transition under both standards,optional expedients offered in which case the cumulative effect of applying the standards, if any, would be recognized at the date of initial application.Topic 848.
3. Real Estate Investments
The Company has reviewed its revenue streams and determinedfollowing table summarizes the significant majority of its revenue is derived from lease revenue (which will be impacted upon adoption of the lease standard in 2019 discussed below) and mortgage and other financing income (which is not in scope of the revenue standard). In addition, the Company also has salescarrying amounts of real estate which have historically been primarily all-cash transactions with no contingenciesinvestments as of December 31, 2020 and no future involvement in2019 (in thousands):
| | | | | | | | | | | |
| 2020 | | 2019 |
Buildings and improvements | $ | 4,526,342 | | | $ | 4,747,101 | |
Furniture, fixtures & equipment | 118,334 | | | 123,239 | |
Land | 1,242,663 | | | 1,290,181 | |
Leasehold interests | 26,050 | | | 26,041 | |
| 5,913,389 | | | 6,186,562 | |
Accumulated depreciation | (1,062,087) | | | (989,254) | |
Total | $ | 4,851,302 | | | $ | 5,197,308 | |
Depreciation expense on real estate investments from continuing operations was $162.6 million, $153.2 million and $133.7 million for the operations. For its all-cash sale transactions,years ended December 31, 2020, 2019 and 2018, respectively.
Acquisitions and Development
During the year ended December 31, 2020, the Company does not anticipate a significant change tocompleted the timingacquisition of revenue recognition upon adoptionreal estate investments and lease related intangibles, as further discussed in Note 2, for Experiential properties totaling $22.1 million, that consisted of this new revenue standard. The Company had two property sale transactions that occurred in 2017 in which the Company received $12.1 million in mortgage notes receivable as consideration for the sale. The Company has evaluated these transactions under ASU 2014-09 and ASU 2017-05 and determined that these transactions do not qualify for sale treatment under the new revenue recognition guidance. Accordingly, the Company expects to record an adjustment in 2018 to reclassify these assets from mortgage notes receivable to rental properties on its consolidated balance sheet.2 theatre properties.
In February 2016, the FASB issued ASU No. 2016-02, Leases, which amends existing accounting standards for lease accounting and is intended to improve financial reporting related to lease transactions. The ASU will require lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Lessor accounting will remain largely unchanged from current U.S. GAAP. However, ASU No. 2016-02 will impact the Company’s consolidated financial statements and disclosures as the Company has certain operating land leases and other arrangements for which it is the lessee and will be required to recognize these arrangements on the financial statements. The ASU will become effective for the Company for interim and annual reporting periods in fiscal years beginning after December 15, 2018. The Company expects to adopt the new standard on its effective date. The Company has assembled an implementation team that is assessing the effect that ASU No. 2016-02 will have on its consolidated financial statements and related disclosures. Additionally, the Company is continuing to develop an implementation plan based on the results of the assessment and is in process of reviewing its land lease contracts.
The Company currently believes substantially all of its leases in which it is the lessor will continue to be classified as operating leases under the new standard. ASU No. 2016-02 specifies that payments for certain lease-related services, which are often included in lease arrangements, represent “non-lease” components that will become subject to the guidance in ASU No. 2014-09, Revenue from Contracts with Customers, when ASU No. 2016-02 becomes effective. The FASB recently clarified that only new or modified leases subsequent to adoption of ASU No. 2016-02 will require different accounting for “non-lease” components under the guidance in ASU No. 2014-09. On January 5, 2018, the FASB issued a proposed update which includes a practical expedient which would allow lessors not to separate “non-lease” components from the related lease components if both the timing and pattern of the revenue recognition are the
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 20162020, 2019 and 20152018
Additionally, during the year ended December 31, 2020, the Company had investment spending on build-to-suit development and redevelopment for Experiential properties totaling $46.9 million.
same
During the year ended December 31, 2019, the Company completed the acquisition of real estate investments and lease related intangibles, for Experiential properties totaling $451.9 million, that consisted of 26 theatre properties for approximately $426.5 million, 1 eat & play property for $1.4 million and 2 cultural properties for $24.0 million. The Company completed the acquisition of real estate investments and lease related intangibles for Education properties totaling $5.9 million that consisted of the acquisition of 2 early childhood education centers.
Additionally, during the year ended December 31, 2019, the Company had investment spending on build-to-suit development and redevelopment for Experiential properties totaling $146.2 million and Education properties totaling $38.6 million.
During the year ended December 31, 2019, the Company completed the construction of the Kartrite Resort and Indoor Waterpark in Sullivan County, New York. The indoor waterpark resort is being operated under a traditional REIT lodging structure and facilitated by a management agreement with an eligible independent contractor. The related operating revenue and expense are included in other income and other expense in the accompanying consolidated statements of (loss) income and comprehensive (loss) income for the “non-lease” components and includingyear ended December 31, 2019. Additionally, during the “non-lease” components into a combined single lease component would not changeyear ended December 31, 2018, the lease classification. The proposed update also includes a practical expedient which allowsCompany completed the lessors to use the effective date of ASU No. 2016-02 as the date of initial application, without restating comparative periods, and to recognize a cumulative effect adjustment asconstruction of the effective date, if necessary. A set of practical expedients for implementation, which must be elected as a package and for all leases, may also be elected. These practical expedients include relief from re-assessing lease classification at the adoption date for expired or existing leases. The Company has tentatively concluded that it will apply the practical expedients.
Resorts World Catskills common infrastructure. In June 2016, the FASBSullivan County Infrastructure Local Development Corporation issued ASU No. 2016-13, Measurement$110.0 million of Credit Losses on Financial Instruments,Series 2016 Revenue Bonds which amends ASC Topic 326, Financial Instruments - Credit Losses. The ASU changes the methodology for measuring credit losses on financial instruments and timingfunded a substantial portion of when such losses are recorded. ASU No. 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. The Company is currently evaluating the impact that the ASU will have on its consolidated financial statements and related disclosures.
In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, which amends ASC Topic 230, Statement of Cash Flows. The ASU clarifies the treatment of several cash flow issues with the objective of reducing diversity in practice. ASU No. 2016-15 is effective for fiscal years beginning after December 15, 2017. The Company has determined that the adoption of ASU 2016-15 will not impact its financial position or results of operations and there are no known changes in presentation as a result of adopting this standard.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows, which amends ASC Topic 230, Statement of Cash Flows. The ASU requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Entities will also be required to reconcile such total to amounts on the balance sheet and disclose the nature of the restrictions. ASU No. 2016-18 is effective for fiscal years beginning after December 15, 2017. The Company has determined that the adoption of this ASU will result in the Company including restricted cash and cash and cash equivalents on its Consolidated Statement of Cash Flows.
3. Rental Properties
The following table summarizes the carrying amounts of rental properties as of December 31, 2017 and 2016 (in thousands):
|
| | | | | | | |
| 2017 | | 2016 |
Buildings and improvements | $ | 4,123,356 |
| | $ | 3,272,865 |
|
Furniture, fixtures & equipment | 87,630 |
| | 40,684 |
|
Land | 1,108,805 |
| | 917,748 |
|
Leasehold interests | 25,774 |
| | — |
|
| 5,345,565 |
| | 4,231,297 |
|
Accumulated depreciation | (741,334 | ) | | (635,535 | ) |
Total | $ | 4,604,231 |
| | $ | 3,595,762 |
|
Depreciation expense on rental properties was $129.1 million, $103.9 million and $85.9 million forconstruction costs. For the years ended December 31, 2018, 2017 and 2016, and 2015, respectively.the Company received total reimbursements of $74.2 million of construction costs. During the year ended December 31, 2019, the Company received an additional reimbursement of $11.5 million.
AcquisitionsDispositions
On April 6, 2017,December 29, 2020, pursuant to a tenant purchase option, the Company completed the sale of 6 private schools and 4 early childhood education centers for net proceeds of approximately $201.2 million and recognized a transaction with CNL Lifestyle Properties Inc. (CNL Lifestyle) and funds affiliated with Och-Ziff Real Estate (OZRE). The Company acquiredgain on sale of approximately $39.7 million. Additionally, during the Northstar California Resort, 15 attraction properties (waterparks and amusement parks), five small family entertainment centers and certain related working capital for aggregate consideration valued at $479.8 million, including final purchase price adjustments. Additionally,year ended December 31, 2020, the Company provided $251.0completed the sale of 3 early education properties, 4 experiential properties and 2 land parcels for net proceeds totaling $26.6 million and recognized a combined gain on sale of secured debt financing to OZRE for$10.4 million.
During the year ended December 31, 2019, the Company completed the sale of all of its purchase of 14 CNL Lifestyle ski properties valued at $374.5 million. Subsequent topublic charter school portfolio through the transaction,following transactions:
•On November 22, 2019, the Company sold 47 public charter school related assets, classified as real estate investments, mortgage notes receivable and investment in direct financing leases, for net proceeds of approximately $449.6 million. The Company recognized an impairment on this public charter school portfolio sale of $21.4 million that included the five family entertainment centerswrite-off of non-cash straight-line rent and effective interest receivables totaling $24.8 million. See Note 4 for approximately $6.8additional information related to the impairment.
•The Company sold 10 public charter schools pursuant to tenant purchase options for net proceeds totaling $138.5 million and one waterparkrecognized a combined gain on sale of $30.0 million.
•The Company sold 7 public charter schools (not as result of exercise of tenant purchase options) for approximately $2.5net proceeds totaling $44.4 million and recognized a combined gain on sale of $1.9 million. No gain or loss was recognized
•See Note 6 for details on these sales.repayments of mortgage notes receivable secured by public charter school properties during 2019.
Due to the Company's disposition of its remaining public charter school portfolio in 2019, the operating results of all public charter schools sold during 2019 have been classified within discontinued operations in the accompanying consolidated statements of (loss) income and comprehensive (loss) income for all periods presented. See Note 17 for further details on discontinued operations.
Additionally, during the year ended December 31, 2019, the Company sold 1 attraction property, 1 early childhood education center property and 4 land parcels for net proceeds totaling $21.9 million and sold 1
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 20162020, 2019 and 20152018
The secured debtattraction property and received an $11.0 million cash payment and provided seller mortgage financing with OZRE has an initial term of five years with three 2.5-year options to extend. The note bears interest fixed at 8.5%.$27.4 million. The Company receivedrecognized a $3.0 million origination fee upon closing that will be recognized usingcombined gain on these sales of $4.2 million. See Note 6 for additional information on the effective interest method.seller mortgage note receivable.
4. Impairment Charges
The Company assumed long-term, triple-net leasesreviews its properties for changes in circumstances that indicate that the carrying value of a property may not be recoverable based on the Northstar California Resort and threean estimate of undiscounted future cash flows. As a result of the attractionsCOVID-19 pandemic, the Company experienced vacancies at some of its properties and entered into new long-term, triple-net lease agreements on the remaining attractions properties at closing. Additionally,others the Company assumedhas negotiated lease modifications that included rent reductions. As part of this process, the Company reassessed the expected holding periods and expected future cash flows of such properties, and determined that the estimated cash flows were not sufficient to recover the carrying values of 9 properties. NaN of these 9 properties have operating ground lease agreements on nine of the properties.
The Company’s aggregate investment in this transaction was $730.8 million and was fundedarrangements with $657.5 million of the Company’s common shares, consisting of 8,851,264 newly issued registered common shares valued at $74.28 per share, $61.2 million of cash and assumed working capital liabilities (net of assumed accounts receivable) of $12.1 million. CNL Lifestyle subsequently distributed the common shares to its stockholders on April 20, 2017. The Company's portion of the cash purchase price was funded with borrowings under its unsecured revolving credit facility.
This transaction was previously announced as a business combination and, accordingly, related expenses were recognized as transaction costs through December 31, 2016. In connection with the adoption of ASU No. 2017-01 on January 1, 2017, this transaction was determined to be an asset acquisition. As such, transaction costs related to this asset acquisition incurred in 2017 have been capitalized.
The aggregate investment of $730.8 million in this transaction was recorded as follows (in thousands):
|
| | | | |
| | April 6, 2017 |
|
Rental properties, net | | $ | 481,006 |
|
Mortgage notes and related accrued interest receivable | | 251,038 |
|
Tradenames (included in other assets) | | 6,355 |
|
Below market leases (included in accounts payable and accrued liabilities) | | (7,611 | ) |
Total investment | | $ | 730,788 |
|
In addition, duringright-of-use assets. During the year ended December 31, 2017,2020, the Company completeddetermined the acquisitionestimated fair value of six megaplex theatres for approximately $154.1 million, six other recreation facilities for approximately $62.7the real estate investments and right-of-use assets of these properties using independent appraisals and various purchase offers. The Company reduced the carrying value of the real estate investments, net to $39.5 million and seven early education centersthe operating lease right-of-use assets to $13.0 million. The Company recognized impairment charges of $70.7 million on the real estate investments and two public charter schools for approximately $38.5 million.$15.0 million on the right-of-use assets, which are the amounts that the carrying value of the assets exceeded the estimated fair value.
During the year ended December 31, 2016,2020, the Company also recognized $3.2 million in other-than-temporary impairments related to its equity investments in joint ventures in 3 theatre projects located in China. See Note 7 for further details on these impairments.
On November 22, 2019, the Company completed the acquisitionsale of eight megaplex theatressubstantially all of its public charter school portfolio, consisting of 47 public charter school related assets, for net proceeds of approximately $449.6 million. Prior to the sale, the Company revised its estimated undiscounted cash flows associated with this portfolio, considering a shorter expected hold period and a family entertainment centerdetermined that the estimated cash flows were not sufficient to recover the carrying value of this portfolio. The Company estimated the fair value of this portfolio by taking into account the purchase price in the executed sale agreement. The Company recognized an impairment on public charter school portfolio sale of $21.4 million that included the write-off of non-cash straight-line rent and effective interest receivables totaling $24.8 million. This impairment and the operating results of all of the public charter schools sold in 2019 have been classified within discontinued operations in the accompanying consolidated statements of (loss) income and comprehensive (loss) income. See Note 17 for approximately $148.4 million, four early education centers and one private school for approximately $16.5 million.further details on discontinued operations.
Dispositions
During the year ended December 31, 2017,2019, the Company completed the sale of four entertainment propertiesentered into an agreement to sell a theatre property for net proceeds totaling $72.4approximately $6.2 million. In connection with these sales,As a result, the Company recognizedrevised its estimated undiscounted cash flow associated with this property, considering a gain onshorter expected hold period and determined that the estimated cash flow was not sufficient to recover the carrying value of this property. The Company estimated the fair value of this property by taking into account the purchase price in the executed sale agreement. The Company recorded an impairment charge of $19.4 million.approximately $2.2 million, which is the amount that the carrying value of the asset exceeds the estimated fair value.
During the year ended December 31, 2017, pursuant to tenant purchase options,2018, the Company completedentered into an agreement with Children’s Learning Adventure USA (CLA) in which CLA relinquished control of 4 of the sale of eight public charter schools located in Colorado, Arizona and Utah for net proceeds totaling $97.3 million. In connection with these sales,Company’s properties that were still under development as the Company recognizedno longer intended to develop these properties for CLA. As a gain on sale of $20.7 million. Additionally,result, the Company completedrevised its estimated undiscounted cash flows for these 4 properties, considering shorter expected holding periods, and determined that those estimated cash flows were not sufficient to recover the salecarrying values of three other education facilities for net proceeds of $10.5 million. In connection with these sales,4 properties. During the year ended December 31, 2018, the Company recognized a gain on saledetermined the estimated fair value of $1.8these properties using Level 3 inputs, including independent appraisals of these properties, and reduced the carrying value of these assets to $9.8 million, recording an impairment charge of $16.5 million. The charge was primarily related to the cost of improvements specific to the development of CLA’s prototype.
During the year ended December 31, 2016, pursuant to tenant purchase options,2018, the Company completedrecognized a $10.7 million impairment charge related to the saleCompany’s guarantees of two public charter schools located in Colorado for net proceeds totaling $16.6 million and recognized gains on sale totaling $2.8 million. In addition, during the year ended December 31, 2016, the Company completed the salepayment of three retail parcels located in Texas for total net proceeds of $5.3 million and recognized gains on sale totaling $2.5 million. The Company also completed the sale of a land parcel at Resorts World Catskills for net proceeds of $1.5 million and2 economic development revenue bonds secured by leasehold
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 20162020, 2019 and 20152018
interests and improvements at 2 theatres in Louisiana. In accordance with Topic 460, Guarantees, the Company recorded an asset and liability at the inception of the guarantees at fair value, which represented the Company's obligation to stand ready to perform under the terms of the guarantees. During the year ended December 31, 2018, the Company determined that a portion of its asset was no longer recoverable and recorded an impairment charge of $7.8 million.
A contingent future obligation is recognized in accordance with the provisions of Topic 450, Accounting for Contingencies. In the case of the Company’s guarantees, the contingent future obligation is the future payment of the bonds by the Company. At the inception of the guarantees, the Company determined that its future payment of the bonds was not probable, therefore no gain or losscontingent future obligation was recognized. The resultsrecorded. For the year ended December 31, 2018, the Company determined that its future payment on a portion of operationsthe bond obligations was probable due to inadequate performance of thesethe theatre properties have not been classified within discontinued operations.and failure of the debtor under the bonds to perform. Accordingly, for the year ended December 31, 2018, the Company recorded an incremental contingent liability of $2.9 million, which in addition to the $7.8 million discussed above, resulted in a total impairment charge recognized relating to the guarantees of $10.7 million.
4.5. Accounts Receivable Net
The following table summarizes the carrying amounts of accounts receivable net as of December 31, 20172020 and 20162019 (in thousands):
| | | | | | | | | | | |
| 2020 | | 2019 |
Receivable from tenants | $ | 81,120 | | | $ | 11,373 | |
Receivable from non-tenants | 505 | | | 2,103 | |
| | | |
| | | |
| | | |
Straight-line rent receivable | 34,568 | | | 73,382 | |
| | | |
| | | |
Total | $ | 116,193 | | | $ | 86,858 | |
|
| | | | | | | |
| 2017 | | 2016 |
Receivable from tenants | $ | 19,923 |
| | $ | 7,564 |
|
Receivable from non-tenants | 3,932 |
| | 497 |
|
Receivable from insurance proceeds | — |
| | 1,967 |
|
Receivable from Sullivan County Infrastructure Revenue Bonds | 14,718 |
| | 22,164 |
|
Straight-line rent receivable | 62,605 |
| | 67,618 |
|
Allowance for doubtful accounts | (7,485 | ) | | (871 | ) |
Total | $ | 93,693 |
| | $ | 98,939 |
|
In October 2017,During the Company terminated nine leases with various subsidiaries of Children’s Learning Adventure USA, LLC (CLA), seven of which relate to completed construction and two of which relate to unimproved land. These subsidiaries of CLA continue to operate these properties (other than the two unimproved properties) as holdover tenants. In December 2017, these CLA subsidiaries (other than one of the CLA tenants for an unimproved land parcel) and other CLA subsidiaries that are tenants of the Company's remaining leases filed petitions in bankruptcy under Chapter 11 seeking the protections of the Bankruptcy Code.
The above total includes receivable from tenants of approximately $6.0 million from CLA, which were fully reserved in the allowance for doubtful accounts at December 31, 2017. Additionally, during the three monthsyear ended December 31, 2017,2020, the Company wrote-off the full amount ofreceivables from tenants totaling $27.1 million and straight-line rent receivables of approximately $9.0totaling $38.0 million relateddirectly to CLA to straight-line rental revenue classified in rental revenue in the accompanying consolidated statements of income.
At December 31, 2017,(loss) income and comprehensive (loss) income upon determination that the Company had approximately $255.7 million related to CLA classified in rental properties, net, in the accompanying consolidated balance sheets at December 31, 2017.collectibility of these receivables or future lease payments from these tenants was no longer probable. Additionally, the Company had approximately $11.2determined that future rental revenue related to these tenants will be recognized on a cash basis. The $38.0 million classified in land heldwrite-offs of straight-line rent receivables were comprised of $26.5 million of straight-line rent receivable and $11.5 million of sub-lessor ground lease straight-line rent receivable.
As of December 31, 2020, receivable from tenants includes fixed rent payments of approximately $76.0 million that were deferred due to the COVID-19 pandemic and determined to be collectible. Additionally, the Company has amounts due from tenants that were not booked as receivables as the full amounts were not deemed probable of collection as a result of the COVID-19 pandemic. While deferments for developmentthis and $14.5 million classified in property under developmentfuture periods delay rent payments, these deferments do not release tenants from the obligation to pay the deferred amounts in the accompanying consolidated balance sheets at December 31, 2017.future. The repayment terms for these deferments vary by tenant and agreements.
6. Investment in Mortgage Notes and Notes Receivable
Effective January 1, 2020, the Company adopted Topic 326, which requires the Company to estimate and record credit losses for each of its mortgage notes and note receivable. The Company reviewed these balances for impairment at December 31, 2017measures expected credit losses on its mortgage notes and determinednotes 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 estimated undiscounted future cash flows exceededCompany’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 carrying valuemodel produces life of these properties.loan expected losses on a
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 20162020, 2019 and 20152018
5. Investment in Mortgage Notes
Investment inloan-by-loan basis. As of December 31, 2020, the Company did not anticipate any prepayments therefore the contractual term of its mortgage notes including related accrued interest receivable,was used for the calculation of the expected credit losses. The Company updates the model inputs at each reporting period to reflect, if applicable, any newly originated loans, changes to loan specific information on existing loans and current macroeconomic conditions.
During the year ended December 31, 20172020, the Company increased its expected credit losses by $30.7 million from its implementation estimate of $2.2 million. This increase was primarily due to credit loss expense related to notes receivable from one borrower as described below as well as adjustments to current macroeconomic conditions resulting from the economic uncertainty and 2016 consists of the following (in thousands):rapidly changing environment surrounding the COVID-19 pandemic.
In response to the COVID-19 pandemic, the Company deferred interest payments for 7 borrowers. The deferrals require the borrower to pay the deferred interest in future periods. The Company assessed the deferrals and determined that the modifications did not result in troubled debt restructurings at December 31, 2020.
|
| | | | | | | | |
| | 2017 | | 2016 |
(1) | Mortgage note and related accrued interest receivable, borrower exercised option to convert to lease on December 22, 2017 | — |
| | 1,637 |
|
(2) | Mortgage note and related accrued interest receivable, 10.25%, prepaid in full December 28, 2017 | — |
| | 3,508 |
|
(3) | Mortgage note and related accrued interest receivable, 9.00%, due March 11, 2018 | 1,454 |
| | 1,454 |
|
(4) | Mortgage note and related accrued interest receivable, 7.00%, due July 31, 2018 | 1,474 |
| | 1,375 |
|
(5) | Mortgage note and related accrued interest receivable, 7.50%, due January 6, 2019 | 9,056 |
| | — |
|
(6) | Mortgage notes and related accrued interest receivable, 7.00% and 10.00%, due May 1, 2019 | 174,265 |
| | 164,743 |
|
(7) | Mortgage note, 7.00%, due December 20, 2021 | 57,890 |
| | 70,304 |
|
(8) | Mortgage notes, 8.50%, due April 6, 2022 | 249,213 |
| | — |
|
(9) | Mortgage note and related accrued interest receivable, 7.85%, due December 28, 2026 | 5,803 |
| | 5,635 |
|
(10) | Mortgage note and related accrued interest receivable, 7.85%, due January 3, 2027 | 10,880 |
| | — |
|
(11) | Mortgage note and related accrued interest receivable, 9.25%, due June 28, 2032 | 31,105 |
| | 36,032 |
|
(12) | Mortgage note and related accrued interest receivable, 9.00%, due December 31, 2032 | 5,173 |
| | 5,327 |
|
(13) | Mortgage notes and related accrued interest receivable, 9.50%, due April 30, 2033 | 33,269 |
| | 30,849 |
|
(14) | Mortgage note, 11.31%, due July 1, 2033 | 12,249 |
| | 12,530 |
|
(15) | Mortgage note and related accrued interest receivable, 8.50% to 9.15%, due June 30, 2034 | 8,711 |
| | 7,230 |
|
(16) | Mortgage note and related accrued interest receivable, 9.50%, due August 31, 2034 | 12,564 |
| | 12,473 |
|
(17) | Mortgage note, 11.26%, due December 1, 2034 | 51,050 |
| | 51,250 |
|
(18) | Mortgage notes, 10.43%, due December 1, 2034 | 37,562 |
| | 37,562 |
|
(19) | Mortgage note, 10.88%, due December 1, 2034 | 4,550 |
| | 4,550 |
|
(20) | Mortgage note, 8.14%, due January 5, 2036 | 21,000 |
| | 21,000 |
|
(21) | Mortgage note, 10.25%, due May 31, 2036 | 17,505 |
| | 17,505 |
|
(22) | Mortgage note and related accrued interest receivable, 9.95%, due July 31, 2036 | 6,304 |
| | 6,083 |
|
(23) | Mortgage note, 9.75%, due August 1, 2036 | 18,068 |
| | 18,219 |
|
(24) | Mortgage note and related accrued interest receivable, 9.75%, due December 31, 2036 | 9,838 |
| | 4,712 |
|
(25) | Mortgage note and related accrued interest receivable, 8.50%, due April 30, 2037 | 4,717 |
| | — |
|
(26) | Mortgage note and related accrued interest receivable, 8.75%, due June 30, 2037 | 4,111 |
| | — |
|
(27) | Mortgage note and related accrued interest receivable, 8.50%, due July 31, 2037 | 4,235 |
| | — |
|
(28) | Mortgage note, 8.75%, due August 31, 2037 | 11,330 |
| | — |
|
(29) | Mortgage note and related accrued interest receivable, 10.14%, due September 30, 2037 | 2,500 |
| | — |
|
(30) | Mortgage note and related accrued interest receivable, 8.80%, due September 30, 2037 | 11,684 |
| | — |
|
(31) | Mortgage note and related accrued interest receivable, 8.50%, due November 30, 2037 | 9,631 |
| | — |
|
(32) | Mortgage note and related accrued interest receivable, 7.50%, due October 27, 2038 | 658 |
| | — |
|
(33) | Mortgage notes, 7.25%, due November 30, 2041 | 142,900 |
| | 100,000 |
|
| Total mortgage notes and related accrued interest receivable | $ | 970,749 |
| | $ | 613,978 |
|
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 20162020, 2019 and 20152018
(1) The Company's first mortgage loan agreement with Miramesa Star LLC was secured by a theatre development project in Cypress, Texas. On December 22, 2017, per the terms of the mortgage note agreement, the borrower exercised its option to convert the mortgage note agreement to a 15-year triple-net lease agreement. As a result, the Company recorded the carrying value of the investment into rental property, which approximated the fair value of the property on the conversion date. There was no gain or loss recognized on this transaction.
(2) The Company's first mortgage loan agreement with UME Preparatory Academy that was secured by 28 acres of land and a public charter school property located in Dallas, Texas was prepaid on December 28, 2017. In connection with the full payoff of this note, the Company received a prepayment fee of $0.6 million, includedInvestment in mortgage and other financing income, and wrote off $58 thousand of prepaid mortgage fees to costs associated with loan refinancing or payoff.
(3) The Company's first mortgage loan agreement with LBE Investments, Ltd. is secured by approximately 12 acres of land located in Queen Creek, Arizona. At December 31, 2017, the face amount of the mortgage note was $1.4 million. The note bears interest at a fixed rate of 9.00%. The note requires accrued interest and principal to be paid at maturity.
(4) The Company's first mortgage loan agreement with HighMark Land, LLC (HighMark) is secured by approximately 20 acres of land located in Lincoln, California. At December 31, 2017, the face amount of the mortgage note was $1.5 million. The note bears interest at a fixed rate of 7.00% and requires accrued interest and principal to be paid at maturity.
(5) The Company's first mortgage loan agreement with I-90 Bellevue Investments II, LLC, is secured by real estate in Bellevue, Washington. At December 31, 2017, the face amount of the mortgage note was $9.0 million. The note bears interest at a fixed rate of 7.50% and requires monthly interest payments.
(6) The Company’s mortgage loan agreements with SVVI, LLC (SVVI) are secured by one waterpark and adjacent land in Kansas City, Kansas as well as two other waterparks located in New Braunfels and South Padre Island, Texas. At December 31, 2017, the face amount of the mortgage notes, were $173.6 million. The mortgage notes have cross-default and cross-collateral provisions. On March 1, 2017, the Company funded an additional amount under its loan to SVVI. SVVI used these proceeds to pay off their seasonal line of credit secured by the Texas parks. As a result of the payoff, the Company became the first mortgage holder on these two properties. The note accrues monthly interest payments and SVVI is required to fund a debt service reserve for off-season interest payments (those due from September to May). The reserve is to be funded by equal monthly installments during the months of June, July and August. Monthly interest payments are transferred to the Company from this debt service reserve.The mortgage loan agreements also contain certain participating interest and note pay-down provisions. During the years ended December 31, 2017, 2016 and 2015, the Company recognized $0.7 million, $0.8 million and $1.5 million of participating interest income, respectively. SVVI is a VIE, but it was determined that the Company was not the primary beneficiary of this VIE. The Company’s maximum exposure to loss associated with SVVI is limited to the Company’s outstanding mortgage note andincluding related accrued interest receivable. Atreceivable, at December 31, 2017,2020 and 2019 consists of the weighted average interest rate was 7.33%.following (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year of Origination | Interest Rate | Maturity Date | Periodic Payment Terms | Outstanding principal amount of mortgage | Carrying amount as of December 31, | Unfunded commitments |
Description | 2020 | 2019 (1) | December 31, 2020 |
Attraction property Powells Point, North Carolina | 2019 | 7.75 | % | 6/30/2025 | Interest only | $ | 28,007 | | $ | 27,045 | | $ | 27,423 | | $ | 0 | |
Fitness & wellness property Omaha, Nebraska | 2017 | 7.85 | % | 1/3/2027 | Interest only | 10,905 | | 11,225 | | 10,977 | | 0 | |
Fitness & wellness property Merriam, Kansas | 2019 | 7.55 | % | 7/31/2029 | Interest only | 9,095 | | 9,355 | | 5,985 | | 248 | |
Ski property Girdwood, Alaska | 2019 | 8.24 | % | 12/31/2029 | Interest only | 40,869 | | 40,680 | | 37,000 | | 16,131 | |
Fitness & wellness property Omaha, Nebraska | 2016 | 7.85 | % | 6/30/2030 | Interest only | 8,410 | | 8,630 | | 5,803 | | 2,508 | |
Experiential lodging property Nashville, Tennessee | 2019 | 7.01 | % | 9/30/2031 | Interest only | 71,223 | | 67,235 | | 70,396 | | 0 | |
Eat & play property Austin, Texas | 2012 | 11.31 | % | 6/1/2033 | Principal & Interest-fully amortizing | 11,361 | | 11,929 | | 11,582 | | 0 | |
Ski property West Dover and Wilmington, Vermont | 2007 | 11.78 | % | 12/1/2034 | Interest only | 51,050 | | 51,031 | | 51,050 | | 0 | |
Four ski properties Ohio and Pennsylvania | 2007 | 10.91 | % | 12/1/2034 | Interest only | 37,562 | | 37,413 | | 37,562 | | 0 | |
Ski property Chesterland, Ohio | 2012 | 11.38 | % | 12/1/2034 | Interest only | 4,550 | | 4,396 | | 4,550 | | 0 | |
Ski property Hunter, New York | 2016 | 8.57 | % | 1/5/2036 | Interest only | 21,000 | | 21,000 | | 21,000 | | 0 | |
Eat & play property Midvale, Utah | 2015 | 10.25 | % | 5/31/2036 | Interest only | 17,505 | | 18,289 | | 17,505 | | 0 | |
Eat & play property West Chester, Ohio | 2015 | 9.75 | % | 8/1/2036 | Interest only | 18,068 | | 18,830 | | 18,068 | | 0 | |
Private school property Mableton, Georgia | 2017 | 9.02 | % | 4/30/2037 | Interest only | 5,088 | | 5,278 | | 5,048 | | 0 | |
Fitness & wellness property Fort Collins, Colorado | 2018 | 7.85 | % | 1/31/2038 | Interest only | 10,292 | | 10,408 | | 10,360 | | 0 | |
Early childhood education center Lake Mary, Florida | 2019 | 7.87 | % | 5/9/2039 | Interest only | 4,200 | | 4,348 | | 4,258 | | 0 | |
Eat & play property Eugene, Oregon | 2019 | 8.13 | % | 6/17/2039 | Interest only | 14,700 | | 14,799 | | 14,800 | | 0 | |
Early childhood education center Lithia, Florida | 2017 | 8.25 | % | 10/31/2039 | Interest only | 3,959 | | 3,737 | | 4,024 | | 0 | |
| | | | | $ | 367,844 | | $ | 365,628 | | $ | 357,391 | | $ | 18,887 | |
(7) The Company's first mortgage loan agreement with Imagine Schools Non-Profit, Inc. and affiliates (Imagine) is secured by 8 charter school properties located in Indiana, Ohio, South Carolina, and Pennsylvania. At(1) Balances as of December 31, 2017,2019 are prior to the face amountadoption of the mortgage note ASC Topic 326.
Investment in notes receivable, including related accrued interest receivable, was $57.9 million. The note bears interest$7.3 million and $14.0 million at a fixed rate of 7.00%. The note requires monthly principal and interest payments of $608 thousand and additional principal pay downs if certain events occur including property sales. See Note 6 for further discussion.
(8) The Company's mortgage loan agreement with Och-Ziff Real Estate (OZRE) is secured by 14 ski properties located in New Hampshire, Washington, Utah, Tennessee, Maine, Colorado, Vermont, Massachusetts, California and British Columbia, Canada. The Company received a $3.0 million origination fee upon closing. At December 31, 2017,2020 and 2019, respectively, and is included in Other assets in the face amount of the mortgage notes were $250.3 million. The note bears interest at a fixed rate of 8.50% and requires monthly interest payments. Interest income on the notes and the origination fee are being recognized using the effective interest method. The note has an effective interest rate of approximately 8.60%. accompanying consolidated balance sheets.
During the year ended December 31, 2017,2020, the Company entered into an amended and restated loan and security agreement with 1 of its notes receivable borrowers in response to the impacts of the COVID-19 pandemic on the borrower. The restated note receivable consists of the previous note balance of $6.5 million and provides the borrower with a term loan for up to $13.0 million and a $6.0 million revolving line of credit. The restated note receivable has a maturity date of June 30, 2032 and the line of credit matures on December 31, 2022. Interest is deferred through June 30, 2022, at which time monthly principal and interest payments will be due over 10 years. Although the borrower is not in default, nor has the borrower declared bankruptcy, the Company determined these modifications resulted in a troubled debt restructuring (TDR) at December 31, 2020 due to the impacts of the
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 20162020, 2019 and 20152018
COVID-19 pandemic on the Company received a partial prepayment of $0.7 millionborrower's financial condition. These note receivables are considered collateral dependent and a prepayment premium of $0.2 million that is included in mortgage and other financing income.
(9) The Company's first mortgage loan agreement with Genesis Health Clubs of Omaha, Sports West LLC, is secured by a health club facility located in Omaha, Nebraska. At December 31, 2017,expected credit losses are based on the face amountfair value of the mortgage note was $5.8 million.underlying collateral at the reporting date. The note bears interest at 7.85% in years one to six and LIBOR plus 6.85% in years seven to ten. The note requires monthly interest payments.
(10) The Company's first mortgage loan agreement with Genesis Health Clubs Cass Street LLC is secured by a health club facility located in Omaha, Nebraska. At December 31, 2017, the face amount of the mortgage note was $10.8 million. The note bears interest at 7.85% in years one to six and LIBOR plus 6.85% in years seven to ten. The note requires monthly interest payments.
(11) The Company's first mortgage loan agreement with Montparnasse 56 USA isnotes are secured by the observation deckworking capital and non-real estate assets of the John Hancock building in Chicago, Illinois. Atborrower. The Company assessed the fair value of the collateral as of December 31, 2017, the face amount of the mortgage note was $32.0 million. This note requires monthly interest payments. On December 22, 2016, the Company entered into an amendment to the loan agreement with the borrower which eliminated the full prepayment option with penalty in 2017 per the original agreement2020 and replaced it with partial prepayment options in 2017 and 2027 with penalty. This amendment also reduced the interest rate to 9.25% which began on July 1, 2017. The Company received a partial prepayment duringrecognized credit loss expense for the year ended December 31, 20172020 consisting of the outstanding principal balance of $12.6 million and the $12.9 million unfunded commitment on the term loan and line of credit as of December 31, 2020. Income for this borrower will be recognized on a cash basis.
At December 31, 2020, the Company's investment in this note receivable was a variable interest and the underlying entity is a VIE. The Company is not the primary beneficiary of this VIE, as the Company does not individually have the power to direct the activities that are most significant to the entity and accordingly, this investment is not consolidated. The Company's maximum exposure to loss associated with this VIE is limited to the Company's outstanding note receivable of $12.6 million and the unfunded commitment of $12.9 million, both of which were fully reserved in the allowance for credit losses at December 31, 2020.
The following summarizes the activity within the allowance for credit losses related to mortgage notes, unfunded commitments and notes receivable for the year ended December 31, 2020 (in thousands):
| | | | | | | | | | | | | | | | | |
| Mortgage notes receivable | Unfunded commitments - mortgage notes | Notes receivable | Unfunded commitments - notes receivable | Total |
Allowance for credit losses at January 1, 2020 | $ | 2,000 | | $ | 114 | | $ | 49 | | $ | 0 | | $ | 2,163 | |
Credit loss expense | 5,000 | | 24 | | 12,805 | | 12,866 | | 30,695 | |
Charge-offs | 0 | | 0 | | 0 | | 0 | | 0 | |
Recoveries | 0 | | 0 | | 0 | | 0 | | 0 | |
Allowance for credit losses | $ | 7,000 | | $ | 138 | | $ | 12,854 | | $ | 12,866 | | $ | 32,858 | |
7. Unconsolidated Real Estate Joint Ventures
As of December 31, 2020 and 2019, the Company had a 65% investment interest in 2 unconsolidated real estate joint ventures related to 2 experiential lodging properties located in St. Petersburg Beach, Florida. The Company's partner, Gencom Acquisition, LLC and its affiliates, own the remaining 35% interest in the joint ventures. There are 2 separate joint ventures, one that holds the investment in the real estate of the experiential lodging properties and the other that holds lodging operations, which are facilitated by a management agreement with an eligible independent contractor. The Company's investment in the operating entity is held in a taxable REIT subsidiary (TRS). The Company accounts for its investment in these joint ventures under the equity method of accounting. As of December 31, 2020 and 2019, the Company had invested $27.4 million and $29.7 million, respectively, in these joint ventures.
The joint venture that holds the real property has a secured mortgage loan of $85.0 million at December 31, 2020, that is due April 1, 2022. The note can be extended for 2 additional 1 year periods upon the satisfaction of certain conditions. Additionally, the Company has guaranteed the completion of the renovations in the amount of approximately $32.7 million, with $23.9 million remaining to fund at December 31, 2020. The mortgage loan bears interest at an annual rate equal to the greater of 6.00% or LIBOR plus 3.75%. Interest is payable monthly beginning on May 1, 2019 until the stated maturity date of April 1, 2022, which can be extended to April 1, 2023. The joint venture has an interest rate cap agreement to limit the variable portion of the interest rate (LIBOR) on this note to 3.0% from March 28, 2019 to April 1, 2023. In response to the COVID-19 pandemic, on May 28, 2020, the joint venture was granted a three-month interest deferral, which is required to be paid on the maturity date of the loan and is not considered a troubled debt restructuring.
The Company recognized losses of $4.0 million and a prepayment premium$140 thousand and income of $0.8 million. This premium is being recognized through$52 thousand during the effective interest method overyears ended December 31, 2020, 2019 and 2018, respectively, and received 0 distributions during the remaining life of the note dueyears ended December 31, 2020, 2019 and 2018 related to the related amendment to the loan agreement.
(12) The Company's first mortgage loan agreement with LBE Investments, Ltd. is secured by a charter school property locatedequity investment in Queen Creek, Arizona. At December 31, 2017, the face amount of the mortgage note was $5.1 million. The note bears interest at a fixed rate of 9.00%. The note is fully amortizing and requires monthly principal and interest payments of $52 thousand.
(13) The Company's first mortgage loan agreements with LBE Investments, Ltd. are secured by three charter school properties located in Gilbert and Queen Creek, Arizona. At December 31, 2017, the face amount of the mortgage notes were $32.1 million. The notes bear interest beginning at 9.50% with increases of 0.50% every five years. The notes are fully amortizing and require monthly payments of principal and interest. The notes have a weighted average effective interest rate of approximately 9.79%.
(14) The Company's first mortgage loan agreement with Topgolf USA Austin is secured by a golf entertainment complex located in Austin, Texas. At December 31, 2017, the face amount of the mortgage note was $12.2 million. The note bears interest at a fixed rate of 11.31%. The note is fully amortizing and requires monthly principal and interest payments of $141 thousand.
(15) The Company's first mortgage loan agreement with 169 Jenks is secured by a public charter school property located in St. Paul, Minnesota. At December 31, 2017, the face amount of the mortgage note was $8.6 million. The note bears interest beginning at 8.50% which increases annually based on a formula of the rate multiplied by 1.025%. Construction on this note was completed in three phases. At December 31, 2017, the phases bear interest at 9.15%, 8.71% and 8.50%. The note requires monthly interest payments. The note has a weighted average effective interest rate of approximately 10.33%.
(16) The Company's first mortgage loan agreement with Beloved Community Charter School, Inc. is secured by a charter school property located in Jersey City, New Jersey. At December 31, 2017, the face amount of the mortgage note was $12.2 million. The note bears interest beginning at 9.50% with increases of 0.50% every five years and requires monthly interest payments. The note has an effective interest rate of approximately 9.50%, which is net of a servicer fee to HighMark.
(17) The Company's first mortgage loan agreement with Peak Resorts, Inc. (Peak) is secured by one ski property located in Vermont. Mount Snow is approximately 588 acres and is located in both West Dover and Wilmington, Vermont. Atthese joint ventures.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 20162020, 2019 and 20152018
As of December 31, 2017,2020 and 2019, the face amountCompany's investments in these joint ventures were considered to be variable interests and the underlying entities are VIEs. The Company is not the primary beneficiary of the mortgage note was $51.1 million. The note requires monthly interest payments and Peak is requiredVIEs as the Company does not individually have the power to fund a debt service reserve for off-season interest payments (those due from April to December). The reserve is to be funded by equal monthly installments duringdirect the months of January, February and March. Monthly interest paymentsactivities that are transferredmost significant to the Company from this debt service reserve.Annually, this interest rate increases based on a formula dependent in part on increasesjoint ventures and accordingly these investments are not consolidated. The Company's maximum exposure to loss at December 31, 2020, is its investment in the CPI. At December 31, 2017,joint ventures of $27.4 million as well as the interest rate was 11.26%.
(18) The Company's first mortgage loan agreements with Peak are secured by four ski properties located in Ohio and Pennsylvania with a total of approximately 510 acres. At December 31, 2017, the face amountguarantee of the mortgage notes were $37.6estimated costs to complete renovations of approximately $23.9 million. The notes require monthly interest payments and Peak is required to fund a debt service reserve for off-season interest payments (those due from April to December). The reserve is to be funded by equal monthly installments during the months of January, February and March. Monthly interest payments are transferred to the Company from this debt service reserve.Annually, this interest rate increases based on a formula dependent in part on increases in the CPI. At December 31, 2017, the interest rate was 10.43%.
(19) The Company's first mortgage loan agreement with Peak is secured by a ski property located in Chesterland, Ohio with approximately 135 acres. At December 31, 2017, the face amount of the mortgage note was $4.6 million. The note requires monthly interest payments and Peak is required to fund a debt service reserve for off-season interest payments (those due from April to December). The reserve is to be funded by equal monthly installments during the months of January, February and March. Monthly interest payments are transferred to the Company from this debt service reserve.Annually, this interest rate increases based on a formula dependent in part on increases in the CPI.At December 31, 2017, the interest rate was 10.88%.
(20) The Company's first mortgage loan agreement with Peak is secured by a ski property located in Hunter, New York with approximately 240 acres. At December 31, 2017, the face amount of the mortgage note was $21.0 million. The note requires monthly interest payments and Peak is required to fund a debt service reserve for off-season interest payments (those due from April to December). The reserve is to be funded by equal monthly installments during the months of January, February and March. Monthly interest payments are transferred to the Company from this debt service reserve.Annually, this interest rate increases based on a formula dependent in part on increases in the CPI. At December 31, 2017, the interest rate was 8.14%.
(21) The Company's first mortgage loan agreement with Topgolf USA Midvale, LLC is secured by a golf entertainment complex located in Midvale, Utah. On November 1, 2016, this note was amended and restated to change the maturity date to May 31, 2036. At December 31, 2017, the face amount of the mortgage note was $17.5 million. The note bears interest at a fixed rate of 10.25% and requires monthly interest payments.
(22) The Company's first mortgage loan agreement with Friends of Millville Public Charter School is secured by a public charter school property located in Millville, New Jersey. At December 31, 2017, the face amount of the mortgage note was $6.2 million. The note bears interest beginning at 9.75% with annual increases by a factor of approximately 2% and requires monthly interest payments. At December 31, 2017, the interest rate was 9.95%. The note has an effective interest rate of approximately 10.40%, which is net of a servicer fee to HighMark.
(23) The Company's first mortgage loan agreement with Topgolf USA West Chester, LLC is secured by a golf entertainment complex located in West Chester, Ohio. At December 31, 2017, the face amount of the mortgage note was $18.1 million. The note bears interest at a fixed rate of 9.75% and requires monthly interest payments.
(24) The Company's first mortgage loan agreement with Friends of Vineland Public Charter School is secured by a public charter school property located in Vineland, New Jersey. At December 31, 2017, the face amount of the mortgage note was $9.8 million. The note bears interest beginning at 9.75% with annual increases by a factor of approximately 2% and requires monthly interest payments. Interest income will be recognized using the effective interest method upon completion of construction.
(25) The Company's first mortgage loan agreement with The SAE School, Inc. is secured by a private school property located in Mableton, Georgia. At December 31, 2017, the face amount of the mortgage note was $4.7 million. The note
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 2016 and 2015
bears interest beginning at 8.50% with annual increases by a factor of approximately 2% and requires monthly interest payments. The note has an effective interest rate of approximately 9.80%.
(26) The Company's first mortgage loan agreement with International Charter School of Atlanta, Inc. is secured by a public charter school property located in Roswell, Georgia. At December 31, 2017, the face amount of the mortgage note was $4.1 million. The note bears interest beginning at 8.75% with annual increases by a factor of approximately 2% and requires monthly interest payments. Interest income will be recognized using the effective interest method upon completion of construction.
(27) The Company's first mortgage loan agreement with Genesis Innovation Academy, Inc. is secured by a public charter school property located in Atlanta, Georgia. At December 31, 2017, the face amount of the mortgage note was $4.2 million. The note bears interest beginning at 8.50% with annual increases by a factor of approximately 2% and requires monthly interest payments. Interest income will be recognized using the effective interest method upon completion of construction.
(28) The Company's first mortgage loan agreement with CG Educational Holding Corp., is secured by a public charter school property located in Bronx, New York. At December 31, 2017, the face amount of the mortgage note was $11.3 million. The note bears interest beginning at 8.75% with annual increases by a factor of approximately 2% and requires monthly interest payments. Interest income will be recognized using the effective interest method upon completion of construction.
(29) The Company's first mortgage loan agreement with Friends of Bridgeton Public Charter School, is secured by a public charter school property located in Bridgeton, New Jersey. At December 31, 2017, the face amount of the mortgage note was $2.6 million. The note bears interest beginning at 10.14% with annual increases by a factor of approximately 2% and requires monthly interest payments. The note has an effective interest rate of approximately 10.70%, which is net of a servicer fee to HighMark.
(30) The Company's first mortgage loan agreement with Colorado Military Academy Building Corporation is secured by a public charter school property located in Colorado Springs, Colorado. At December 31, 2017, the face amount of the mortgage note was $11.6 million. The note bears interest beginning at 8.80% with annual increases by a factor of approximately 2% and requires monthly interest payments. Interest income will be recognized using the effective interest method upon completion of construction.
(31) The Company's first mortgage loan agreement with SAIL: School for Arts-Infused Learning, Inc. is secured by a public charter school property located in Evans, Georgia. At December 31, 2017, the face amount of the mortgage note was $9.8 million. The note bears interest beginning at 8.50% with annual increases by a factor of approximately 2% and requires monthly interest payments. The note has an effective interest rate of approximately 9.70%.
(32) The Company's first mortgage loan agreement with Ladybird Fish Hawk LLC is secured by an early childhood education property located in Lithia, Florida. At December 31, 2017, the face amount of the mortgage note was $0.7 million. The note bears interest beginning at 7.50% during construction and increases to 8.25% at commencement with annual increases by a factor of approximately 2%. The note requires monthly interest payments upon completion of construction. Interest income will be recognized using the effective interest method upon completion of construction.
(33) The Company's first mortgage loan agreements with Endeavor Schools are secured by 28 education facilities including both early education and private school properties located in California, Florida, Georgia, Minnesota, Nevada, North Carolina, Ohio and Texas. At December 31, 2017, the face amount of the mortgage notes were $142.9 million. The notes bear interest beginning at 7.25% with increases every three years by a multiple of 1.0625 and require monthly interest payments. The notes contain prepayment provisions which allow the borrower to prepay with a premium based on a multiple of the remaining loan balance. In addition, the notes contain a loan to lease conversion option in which the borrower has the right to put the underlying real estate assets to the Company and become the tenant under a lease structure. Interest income on the notes is being recognized using the effective interest method without the fixed interest rate increases due to these prepayment and conversion options. Subsequent to December 31, 2017, the borrower exercised its put option to convert the mortgage note agreement to a lease agreement. As a result, in 2018, the Company
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 2016 and 2015
recorded the rental property at fair value, which approximated the carrying value of its investment on the conversion date. There was no gain or loss recognized on this transaction. The properties are leased pursuant to a triple-net master-lease with a 25-year term.
6. Investment in Direct Financing Leases
The Company’s investment in direct financing leases relates to the Company’s lease of six public charter school properties as of December 31, 2017 and 12 public charter school properties as of December 31, 2016, with affiliates of Imagine Schools, Inc. (Imagine). Investment in direct financing leases, net represents estimated unguaranteed residual values of leased assets2020 and net unpaid rentals, less related deferred income. The following table summarizes2019, the carrying amounts of investment in direct financing leases, net as of December 31, 2017 and 2016 (in thousands):
|
| | | | | | | |
| 2017 | | 2016 |
Total minimum lease payments receivable | $ | 112,411 |
| | $ | 215,753 |
|
Estimated unguaranteed residual value of leased assets | 47,000 |
| | 85,247 |
|
Less deferred income (1) | (101,508 | ) | | (198,302 | ) |
Investment in direct financing leases, net | $ | 57,903 |
| | $ | 102,698 |
|
| | | |
(1) Deferred income is net ofCompany had invested $0.8 million and $1.3 $4.6 million, of initial direct costs at respectively, in unconsolidated joint ventures for 3 theatre projects located in China. During the year ended December 31, 2017 and 2016, respectively.
During 2015,2020, the Company completed the sale of one public charter school property locatedrecognized $3.2 million in Pennsylvania and previously leased to Imagine with a carrying value of $4.7 million. There was no gain or loss recognized on this sale. Additionally, during 2015, the Company terminated a portion of its master lease with Imagine related to one public charter school property located in Ohio. The property was subsequently leased to another operator pursuant to a long-term, triple-net lease agreement that is classified as an operating lease. There was no gain or loss recognized on this lease termination.
During 2016, the Company completed the sale of nine public charter school properties previously leased to Imagine as part of a master lease. Seven of these schools were sold to Imagine and two were sold to third parties. These properties are located in Georgia, Indiana, Ohio, Missouri and South Carolina and had a total net carrying value of $91.3 million when sold. The Company received net cash proceeds totaling $21.0 million (a portion of which was funded through the liquidation of the letter of credit and escrow reserve previously provided by Imagine pursuant to the master lease) and a mortgage note receivable from Imagine for $70.3 million. The note is secured by eight public charter schools as of December 31, 2017. See Note 5 for more detail on this mortgage note receivable. There were no gains or losses recognizedother-than-temporary impairment charges on these sales.equity investments. The Company determined that no allowance forthe estimated fair value of these investments based primarily on discounted cash flow projections. The Company recognized losses onof $559 thousand, $241 thousand and $74 thousand, during the investment in direct financing leases was necessary atyears ended December 31, 2016.
During 2017, the Company entered into revised lease terms with Imagine which reduced the rental payments2020, 2019 and term on six properties. As a result2018, respectively, and received distributions of the revised lease terms, these six properties were classified as operating leases. Due to lease negotiations during the three months ended June 30, 2017, management evaluated whether it could recover$112 thousand and $567 thousand, from its investment in these leases taking into accountjoint ventures for the revised lease termsyears ended December 31, 2019 and independent appraisals prepared as of June 30, 2017, and determined the carrying value of the investment in the direct financing leases exceeded the expected lease payments to be2018, respectively. NaN distributions were received and residual values for these six leases. Accordingly, the Company recorded an impairment charge of $9.6 million during the year ended December 31, 2017, which included an allowance for lease loss of $7.3 million and a charge of $2.3 million related to estimated unguaranteed residual value.2020.
Additionally, during 2017, the Company performed its annual review of the estimated unguaranteed residual value on its other properties leased to Imagine and determined that the residual value on one of these properties was impaired. As such, the Company recorded an impairment charge of the unguaranteed residual value of $0.6 million during the year ended
8. Debt
Debt at December 31, 2017.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 20162020 and 2015
The Company’s direct financing leases have expiration dates ranging from approximately 14 to 16 years. Future minimum rentals receivable on this direct financing lease at December 31, 2017 are as follows (in thousands):
|
| | | |
| Amount |
Year: | |
2018 | $ | 6,301 |
|
2019 | 6,490 |
|
2020 | 6,685 |
|
2021 | 6,885 |
|
2022 | 7,092 |
|
Thereafter | 78,958 |
|
Total | $ | 112,411 |
|
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 2016 and 2015
7. Debt
Debt at December 31, 2017 and 20162019 consists of the following (in thousands):
|
| | | | | | | | |
| | 2017 | | 2016 |
(1) | Mortgage note payable, 6.07%, paid in full on January 6, 2017 | — |
| | 9,331 |
|
(2) | Mortgage note payable, 6.06%, paid in full on February 1, 2017 | — |
| | 8,615 |
|
(3) | Mortgage notes payable, 5.73%-5.95%, paid in full on April 3, 2017 | — |
| | 30,486 |
|
(4) | Mortgage notes payable, 4.00%, paid in full on April 6, 2017 | — |
| | 88,629 |
|
(5) | Mortgage notes payable, 5.86%, paid in full on July 3, 2017 | — |
| | 22,139 |
|
(6) | Mortgage note payable, 5.29%, paid in full on July 7, 2017 | — |
| | 3,298 |
|
(7) | Mortgage note payable, 6.19%, due February 1, 2018 | 11,684 |
| | 12,452 |
|
(8) | Senior unsecured notes payable, 7.75%, due July 15, 2020 | 250,000 |
| | 250,000 |
|
(9) | Unsecured revolving variable rate credit facility, LIBOR + 1.00%, due February 27, 2022 | 210,000 |
| | — |
|
(10) | Senior unsecured notes payable, 5.75%, due August 15, 2022 | 350,000 |
| | 350,000 |
|
(11) | Unsecured term loan payable, LIBOR + 1.10%, $350,000 fixed at 2.71% through April 4, 2019 and 3.15% from April 5, 2019 to February 7, 2022, due February 27, 2023 | 400,000 |
| | 350,000 |
|
(12) | Senior unsecured notes payable, 5.25%, due July 15, 2023 | 275,000 |
| | 275,000 |
|
(13) | Senior unsecured notes payable, 4.35%, due August 22, 2024 | 148,000 |
| | 148,000 |
|
(14) | Senior unsecured notes payable, 4.50%, due April 1, 2025 | 300,000 |
| | 300,000 |
|
(15) | Senior unsecured notes payable, 4.56%, due August 22, 2026 | 192,000 |
| | 192,000 |
|
(16) | Senior unsecured notes payable, 4.75%, due December 15, 2026 | 450,000 |
| | 450,000 |
|
(17) | Senior unsecured notes payable, 4.50%, due June 1, 2027 | 450,000 |
| | — |
|
(18) | Bonds payable, variable rate, due August 1, 2047 | 24,995 |
| | 24,995 |
|
| Less: deferred financing costs, net | (32,852 | ) | | (29,320 | ) |
| Total | $ | 3,028,827 |
| | $ | 2,485,625 |
|
| | | | | | | | | | | | | |
| | 2020 | | 2019 | |
| Unsecured revolving variable rate credit facility, LIBOR + 1.625% at December 31, 2020, due February 27, 2022 (1) | $ | 590,000 | | | $ | 0 | | |
| Unsecured term loan payable, LIBOR + 2.00% at December 31, 2020 with $350,000 fixed at 4.40% and $50,000 fixed at 4.60%, due February 27, 2023 (1) | 400,000 | | | 400,000 | | |
| Senior unsecured notes payable, 5.25%, due July 15, 2023 (2) | 275,000 | | | 275,000 | | |
| Senior unsecured notes payable, 5.60% at December 31, 2020, due August 22, 2024 (3) | 148,000 | | | 148,000 | | |
| Senior unsecured notes payable, 4.50%, due April 1, 2025 (2) | 300,000 | | | 300,000 | | |
| Senior unsecured notes payable, 5.81% at December 31, 2020, due August 22, 2026 (3) | 192,000 | | | 192,000 | | |
| Senior unsecured notes payable, 4.75%, due December 15, 2026 (2) | 450,000 | | | 450,000 | | |
| Senior unsecured notes payable, 4.50%, due June 1, 2027 (2) | 450,000 | | | 450,000 | | |
| Senior unsecured notes payable, 4.95%, due April 15, 2028 (2) | 400,000 | | | 400,000 | | |
| Senior unsecured notes payable, 3.75%, due August 15, 2029 (2) | 500,000 | | | 500,000 | | |
| Bonds payable, variable rate, fixed at 1.39% through September 30, 2024, due August 1, 2047 | 24,995 | | | 24,995 | | |
| Less: deferred financing costs, net | (35,552) | | | (37,165) | | |
| Total | $ | 3,694,443 | | | $ | 3,102,830 | | |
(1) The Company's mortgage note payable was paid in full on January 6, 2017 prior to its maturity date of April 6, 2017. The note was secured by one theatre property.
(2) The Company's mortgage note payable was paid in full on February 1, 2017 prior to its maturity date of March 1, 2017. The note was secured by one theatre property.
(3) The Company’s mortgage notes payable were paid in full on April 3, 2017 prior to their maturity date of May 1, 2017. The notes were secured by four theatre properties.
(4) The Company's mortgage note payable was paid in full on April 6, 2017 prior to its maturity date of July 6, 2017. The note was secured by 11 theatre properties. In connection with this note payoff,At December 31, 2020, the Company recorded a gain on early extinguishment of debt ofhad $590.0 million outstanding under its $1.0 million. The gain represents the difference between the carrying value of the note and the amount due at payoff as the note was recorded at fair value upon acquisition and was not anticipated to be paid off in advance of maturity.
(5) The Company's mortgage note payable was paid in full on July 3, 2017 prior to its maturity date of August 1, 2017. The note was secured by two theatre properties.
(6) The Company's mortgage note payable was paid in full on July 7, 2017. The note was secured by one theatre property.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 2016 and 2015
(7) The Company’s mortgage note payable due February 1, 2018 is secured by one theatre property which had a net book value of approximately $18.5 million at December 31, 2017. On January 2, 2018, this loan was prepaid in full.
(8) On June 30, 2010, the Company issued $250.0 million in seniorbillion unsecured notes due on July 15, 2020. The notes bearrevolving credit facility with interest at 7.75%a floating rate of LIBOR plus 1.625% (with a LIBOR floor of 0.50%), which was 2.125% with a facility fee of 0.375%. Interest is payable on July 15 and January 15 of each year beginning on January 15, 2011 until the stated maturity date of July 15, 2020. The notes were issued at 98.29% of their principal amount. The notes contain various covenants, including: (i) a limitation on incurrence of any debt that would cause the ratio of the Company’s debtmonthly. Subsequent to adjusted total assets to exceed 60%; (ii) a limitation on incurrence of any secured debt which would cause the ratio of the Company’s secured debt to adjusted total assets to exceed 40%; (iii) a limitation on incurrence of any debt which would cause the Company’s debt service coverage ratio to be less than 1.5 times; and (iv) the maintenance at all times of total unencumbered assets not less than 150% of the Company’s outstanding unsecured debt. On February 28, 2018,December 31, 2020, the Company redeemed all of the outstanding 7.75% senior notes. The notes were redeemed at a price equal to the principal amount of $250.0paid down $500.0 million plus a premium of $28.6 million calculated pursuant to the terms of the indenture, together with accrued and unpaid interest up to, but not including the redemption date.on this credit facility.
(9) The Company's unsecured revolving creditterm loan facility (the facility) bearshad a balance of $400.0 million with interest at a floating rate of LIBOR plus 1.00%2.00% (with a LIBOR floor of 0.50%), which was 2.49%2.5% on December 31, 2017.2020. Interest is payable monthly. On September 27, 2017, the Company amended its unsecured revolving credit facility and its unsecured term loan facility. The amendments to the unsecured revolving portion of the credit facility, among other things, (i) increase the initial maximum available amount from $650.0 million to $1.0 billion, (ii) extend the maturity date from April 24, 2019, to February 27, 2022 (with the Company having the right to extend the loan for an additional seven months) and (iii) lower the interest rate and facility fee pricing based on a grid related to the Company's senior unsecured credit ratings which at closing was LIBOR plus 1.00% and 0.20%, versus LIBOR plus 1.25% and 0.25%, respectively, under the previous terms. In connection with the amendment, $19 thousand of deferred financing costs (net of accumulated amortization) were written off during the year ended December 31, 2017 and are included in costs associated with loan refinancing. As of December 31, 2017, the Company had $210.0 million outstanding under the facility and total availability under the revolving credit facility was $790.0 million. In addition, there is a $1.0 billion accordion feature on the combined unsecured revolving credit and term loan facility (the combined facility) that increases the maximum borrowing amount available under the combined facility, subject to lender approval, from $1.4 billion to $2.4 billion. If the Company exercises all or any portion of the accordion feature, the resulting increase in the combined facility may have a shorter or longer maturity date and different pricing terms. The combined facility contains financial covenants or restrictions that limit the Company's levels of consolidated debt, secured debt, investment levels outside certain categories and dividend distributions, and require the Company to maintain a minimum consolidated tangible net worth and meet certain coverage levels for
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
fixed charges and debt service.services. As discussed further below, certain of these covenants were modified or waived during 2020.
In light of the continuing financial and operational impacts of the COVID-19 pandemic on the Company and its tenants and borrowers, on June 29, 2020 and November 3, 2020, the Company amended its Consolidated Credit Agreement, which governs its unsecured revolving credit facility and its unsecured term loan facility. As described below, the amendments modified certain provisions and waived the Company's obligation to comply with certain covenants under this debt agreement through December 31, 2021. The Company can elect to terminate the Covenant Relief Period early, subject to certain conditions.
As described below, the loans subject to the modifications bear interest at higher rates during the Covenant Relief Period and will return to the original pre-waiver levels at the end of such period, subject to certain conditions. The rates during and after the Covenant Relief Period continue to be subject to change based on unsecured debt ratings, as defined in the agreement. The amendments also imposed the additional restrictions on the Company discussed below during the Covenant Relief Period. In addition, during the Covenant Relief Period, the amendments require the Company to cause certain of its key subsidiaries to guarantee the Company's obligations based on its unsecured debt ratings, and the Company will be required to pledge the equity interests of certain of those subsidiary guarantors upon the occurrence of certain events, however both of these requirements end when the Covenant Relief Period is over.
During the Covenant Relief Period, the initial interest rates for the revolving credit facility and term loan facility were set at LIBOR plus 1.375% and LIBOR plus 1.75%, respectively, (with a LIBOR floor of 0.50%) and the facility fee on the revolving credit facility was increased to 0.375%. On August 20, 2020, as a result of a downgrade of the Company's unsecured debt rating by Moody's to Baa3, the spreads on the revolving credit and term loan facilities each increased by 0.25%. During the fourth quarter of 2020, the Company's unsecured debt rating was downgraded to BB+ by both Fitch and Standard & Poor's. As a result of these downgrades, certain of the Company's key subsidiaries guarantee the Company's obligations under its bank credit facilities, private placement notes and other outstanding senior unsecured notes in accordance with existing agreements with the holders of such indebtedness. See Note 20 for the Company's supplemental guarantor financial information. If the Company's unsecured debt rating is further downgraded by Moody's, the interest rates on the revolving credit and term loan facilities would both increase by 0.35% during the Covenant Relief Period. After the Covenant Relief Period, the interest rates for the revolving credit and term loan facilities, based on the Company's current unsecured debt ratings, are scheduled to return to LIBOR plus 1.20% and LIBOR plus 1.35%, respectively, (with a LIBOR floor of 0) and the facility fee will be 0.25%, however these rates are subject to change based on the Company's unsecured debt ratings.
The amendments to the Company's revolving credit and term loan facilities permanently modified certain financial covenants and provided relief from compliance with certain financial covenants during the Covenant Relief Period, as follows: (i) a new minimum liquidity financial covenant of $500.0 million during the Covenant Relief Period was added; (ii) compliance with the total-debt-to-total-asset-value, the maximum-unsecured-debt-to-unencumbered-asset-value, the minimum unsecured interest coverage ratio and the minimum fixed charge ratio financial covenants was suspended for the period beginning June 29, 2020 and ending on the earlier to occur of December 31, 2021 or the earlier termination of the Covenant Relief Period; (iii) permanent amendments to the unsecured-debt-to-unencumbered-asset-value financial covenant were made to allow short-term indebtedness to be offset by unrestricted cash in the calculation and to allow unrestricted cash not otherwise offset against short-term indebtedness to be counted as an unencumbered asset; and (iv) permanent amendments to financial covenants were made to allow accrued deferred payments to be included as recurring property revenue in these calculations. The amendments also imposed additional restrictions on the Company and its subsidiaries during the Covenant Relief Period, including limitations on certain investments, incurrences of indebtedness, capital expenditures and payment of dividends or other distributions and stock repurchases, in each case subject to certain exceptions.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
In connection with the amendmentamendments, $0.1 million of fees paid to third parties were expensed and included in costs associated with loan refinancing in the accompanying consolidated statements of (loss) income and comprehensive (loss) income for the year ended December 31, 2020. In addition, the Company paid $5.1 million in fees to existing lenders that were capitalized in deferred financing costs and amortized as part of the effective yield. These fees consisted of $3.6 million related to the unsecured consolidated credit agreement, the obligations of the Company’s subsidiaries that were co-borrowers under the Company’s prior senior unsecured revolving credit facility and included in other assets and $1.5 million related to the term loan facility were released. and shown as a reduction of debt.
As a result, simultaneously with the amendment, the guarantees by the Company’s subsidiaries that were guarantors with respect to the Company’s outstanding 4.50% Senior Notes due 2027, 4.75% Senior Notes due 2026, 4.50% Senior Notes due 2025, 5.25% Senior Notes due 2023, 5.75% Senior Notes due 2022,described under (3) below, on June 29, 2020 and 7.75% Senior Notes dueDecember 24, 2020, were released in accordance with the terms of the applicable indentures governing such notes.
(10) On August 8, 2012, the Company issued $350.0 millionalso amended its Note Purchase Agreement which governs its private placement notes. Under the most favored nations clause included in senior unsecured notes due on August 15, 2022. The notes bear interest at 5.75%. Interest is payable on February 15 and August 15 of each year beginning on February 15, 2013 until the stated maturity date of August 15, 2022. The notes were issued at 99.998% of their principal amount. TheConsolidated Credit Agreement, the additional or more restrictive covenants included in the private placement amendments are incorporated into the Consolidated Credit Agreement.
(2) These notes contain various covenants, including: (i) a limitation on incurrence of any debt that would cause the ratio of the Company’s debt to adjusted total assets to exceed 60%; (ii) a limitation on incurrence of any secured debt whichthat would cause the ratio of the Company’s secured debt to adjusted total assets to exceed 40%; (iii) a limitation on incurrence of any debt whichthat would cause the Company’s debt service coverage ratio to be less than 1.5 times; and (iv) the maintenance at all times of total unencumbered assets not less than 150% of the Company’s outstanding unsecured debt.
(11) The Company's unsecured term loan payable bears interest at LIBOR plus 1.10%, which was 2.49% on December 31, 2017. Interest is payable monthly. On September 27, 2017, the Company amended its unsecured revolving credit facility and its unsecured term loan facility. The amendments to the unsecured term loan portion of the credit
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 2016 and 2015
facility, among other things, (i) increase the initial amount from $350.0 million to $400.0 million, (ii) extend the maturity date from April 24, 2020 to February 27, 2023 and (iii) lower the interest rate on a grid related to the Company's senior unsecured credit ratings which at closing was LIBOR plus 1.10% versus LIBOR plus 1.40% under previous terms. In connection with the amendment, $1.5 million of deferred financing costs (net of accumulated depreciation) were written off during the year ended December 31, 2017 and are included in costs associated with loan refinancing. At closing, the Company borrowed the remaining $50.0 million available on the $400.0 million term loan portion of the facility, which was used to pay down a portion of the Company's unsecured revolving credit facility. In addition, there is a $1.0 billion accordion feature on the combined unsecured revolving credit and term loan facility that increases the maximum borrowing amount available under the combined facility, subject to lender approval, from $1.4 billion to $2.4 billion. If the Company exercises all or any portion of the accordion feature, the resulting increase in the facility may have a shorter or longer maturity date and different pricing terms. The facility contains financial covenants or restrictions that limit the Company's levels of consolidated debt, secured debt, investment levels outside certain categories and dividend distributions, and require the Company to maintain a minimum consolidated tangible net worth and meet certain coverage levels for fixed charges and debt service.
(12) On June 18, 2013, the Company issued $275.0 million in senior unsecured notes due on July 15, 2023. The notes bear interest at 5.25%. Interest is payable on January 15 and July 15 of each year beginning on January 15, 2014 until the stated maturity date of July 15, 2023. The notes were issued at 99.546% of their principal amount. The notes contain various covenants, including: (i) a limitation on incurrence of any debt that would cause the ratio of the Company’s debt to adjusted total assets to exceed 60%; (ii) a limitation on incurrence of any secured debt which would cause the ratio of the Company’s secured debt to adjusted total assets to exceed 40%; (iii) a limitation on incurrence of any debt which would cause the Company’s debt service coverage ratio to be less than 1.5 times and (iv) the maintenance at all times of the Company's total unencumbered assets such that they are not less than 150% of the Company’s outstanding unsecured debt.
(13) On August 22, 2016, the Company issued $148.0 million of senior unsecured notes in a private placement transaction. The notes bear interest at an annual rate of 4.35% and are due August 22, 2024. In connection with the amendment to the unsecured consolidated credit agreement on September 27, 2017, the guarantees by the Company’s subsidiaries that were guarantors of the Company’s outstanding 4.35% Series A Guaranteed Senior Notes due August 22, 2024 and 4.56% Series B Guaranteed Senior Notes due August 22, 2026 (referred to herein as the "private placement notes") were also released. The foregoing release was effected by the Company entering into an amendment to the Note Purchase Agreement, dated as of September 27, 2017. The amendment to the private placement notes releases the Company’s subsidiary guarantors as described above and among other things: (i) amends certain financial and other covenants and provisions in the Note Purchase Agreement to conform generally to the corresponding covenants and provisions contained in the amended unsecured consolidated credit agreement; (ii) provides the investors thereunder certain additional guaranty and lien rights, in the event that certain subsequent events occur; (iii) expands the scope of the “most favored lender” covenant contained in the Note Purchase Agreement; and (iv) imposes restrictions on debt that can be incurred by certain subsidiaries of the Company.
(14) On March 16, 2015, the Company issued $300.0 million in aggregate principal amount of senior notes due on April 1, 2025 pursuant to an underwritten public offering. The notes bear interest at an annual rate of 4.50%. Interest is payable on April 1 and October 1 of each year beginning on October 1, 2015 until the stated maturity date of April 1, 2025. The notes were issued at 99.638% of their face value. The notes contain various covenants, including: (i) a limitation on incurrence of any debt which would cause the ratio of the Company’s debt to adjusted total assets to exceed 60%; (ii) a limitation on incurrence of any secured debt which would cause the ratio of the Company’s secured debt to adjusted total assets to exceed 40%; (iii) a limitation on incurrence of any debt which would cause the Company’s debt service coverage ratio to be less than 1.5 times and (iv) the maintenance at all times of the Company's total unencumbered assets such that they are not less than 150% of the Company’s outstanding unsecured debt.
(15) On August 22, 2016,(3) In light of the continuing financial and operational impacts of the COVID-19 pandemic on the Company issued $192.0 million of senior unsecured notes in a private placement transaction. The notes bear interest at an annual rate of 4.56% and are due August 22, 2026. In connection with the amendment to the unsecured consolidated credit agreementits tenants and borrowers, on September 27, 2017, the guarantees by the Company’s subsidiaries that were guarantors of the Company’s outstanding 4.35% Series A Guaranteed Senior Notes due August 22, 2024June 29, 2020 and 4.56% Series B Guaranteed Senior Notes due August 22, 2026 (referred to herein as the "private placement
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 2016 and 2015
notes") were also released. The foregoing release was effected by24, 2020, the Company entering into an amendment to theamended its Note Purchase Agreement, dated as of September 27, 2017. The amendment to thewhich governs its private placement notes releasesnotes. The amendments modified certain provisions and waived the Company’s subsidiary guarantors as described aboveCompany's obligation to comply with certain covenants under these debt agreements through October 1, 2021. The Company can elect to extend such period through January 1, 2022 and among other things:may elect to terminate the Covenant Relief Period early, subject to certain conditions. These notes: (i) amendscontain certain financial and other covenants and provisions in the Note Purchase Agreement tothat generally conform generally to the corresponding covenants and provisions contained in the amended unsecured consolidatedcombined credit agreement;facility described above; (ii) provides theprovide investors thereunder certain additional guaranty and lien rights, in the event that certain subsequent events occur; (iii) expands the scope of the “mostcontain certain "most favored lender” covenant contained in the Note Purchase Agreement;lender" provisions; and (iv) imposesimpose restrictions on debt that can be incurred by certain subsidiaries of the Company. As discussed further below, certain of these covenants were modified or waived during 2020.
(16) On December 14, 2016,The amendments provided for an immediate 0.65% waiver premium to be paid on the private placement notes during the Covenant Relief Period. In addition, during the fourth quarter of 2020, as a result of downgrades of the Company's unsecured debt rating to BB+ by both Fitch and Standard and Poor's, the spreads on the private placement notes each increased by an additional 0.60%. As a result, the interest rates for the private placement notes were increased to 5.60% and 5.81% for the Series A notes due 2024 and the Series B notes due 2026, respectively. After the Covenant Relief Period, the interest rates for the private placement notes are scheduled to return to 4.35% and 4.56% for the Series A notes due 2024 and the Series B notes due 2026, respectively.
If the Company issued $450.0 millionelects to extend the Covenant Relief Period until January 1, 2022, the Company must, or must cause certain of its subsidiaries to, grant mortgages on certain unencumbered properties to a collateral agent, on behalf of the holders of the private placement notes and the lenders under the Company's Consolidated Credit Agreement. If the Company provides such mortgages, they must remain in aggregate principal amounteffect until the later of senior notes duetwo consecutive fiscal quarters of demonstrated covenant compliance or June 30, 2022, however the additional 0.60% interest rate premium as a result of the downgrades in the Company's unsecured debt rating is removed while mortgages are outstanding. If the Company elects to extend the Covenant Relief Period until January 1, 2022 as described above, the Covenant Relief Period will automatically end on October 29, 2021 if the Company fails to provide such mortgages.
The amendments provide relief from compliance with the following financial covenants during the Covenant Relief Period: the total-debt-to-total-asset-value covenant; the maximum-unsecured-debt-to-unencumbered-asset-value covenant; the minimum unsecured interest coverage ratio; and the minimum fixed charge ratio. The amended Note Purchase Agreement modifies the maximum secured debt to total asset value covenant as follows: (i) neither the Company nor any of its subsidiaries may incur any secured debt during the period beginning on December 14, 2026 pursuant24, 2020 and ending on the last day of the Covenant Relief Period, subject to an underwritten public offering. The notes bear interest at an annual rate of 4.75%. Interest is payable on June 15certain exceptions; and (ii) after the Covenant
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 15 of each year beginning on June 15, 2017, until the stated maturity date of December 15, 2026. The notes were issued at 98.429% of their face value. The notes contain various covenants, including: (i) a limitation on incurrence of any debt which would cause31, 2020, 2019 and 2018
Relief Period the ratio of the Company’s debt to adjusted total assets to exceed 60%; (ii) a limitation on incurrence of any secured debt which would cause the ratio of the Company’s secured debt to adjusted total assetsasset value is reduced from 0.35 to exceed 40%; (iii)1.00 to 0.25 to 1.00 until the Company can demonstrate covenant compliance for at least two fiscal quarters.
The amendments impose certain restrictions on the Company during the Covenant Relief Period, including limitations on certain investments, incurrences of indebtedness, capital expenditures, payment of dividends or other distributions and stock repurchases, and maintenance of a minimum liquidity amount of $500.0 million, in each case subject to certain exceptions. The amendments include the following restrictions: (i) the limitation on incurrenceinvestments and guarantees of any debt which would cause the Company’s debt service coverage ratio to be less than 1.5 times and (iv) the maintenance at all times of the Company's total unencumbered assets such that they are not less than 150% of the Company’s outstanding unsecured debt.
(17) On May 23, 2017, the Company issued $450.0 million in aggregate principal amount of senior notes due on June 1, 2027 pursuant to an underwritten public offering. The notes bear interest at an annual rate of 4.50%. Interest is payable on June 1 and December 1 of each year beginning on December 1, 2017 until the stated maturity date of June 1, 2027. The notes were issued at 99.393% of their face value. The notes contain various covenants, including: (i) a limitation on incurrence of any debt which would cause the ratio of the Company’s debt to adjusted total assets to exceed 60%; (ii) a limitation on incurrence of any secured debt which would cause the ratio of the Company’s secured debt to adjusted total assets to exceed 40%; (iii) a limitation on incurrence of any debt which would cause the Company’s debt service coverage ratio to be less than 1.5 times and (iv) the maintenance at all times of the Company's total unencumbered assets such that they are not less than 150% of the Company’s outstanding unsecured debt.
(18) On August 30, 2017, the Company refinanced its variable-rate bonds payable. The maturity date was extendedcertain indebtedness from October 1, 20372020 to Augustthe end of the Covenant Relief Period was set at $175.0 million; and (ii) the limitation on capital expenditures from October 1, 20472020 to the end of the Covenant Relief Period was set at $175.0 million. In addition, the amount of proceeds from assets sales that are exempt from the requirement to apply such proceeds to the prepayment of outstanding indebtedness under the Company's existing bank credit agreement and the outstandingprivate placement notes is $150.0 million, subject to certain exceptions relating to the sale of specified assets. In addition, the Company is prohibited from voluntarily prepaying its existing public senior notes during the Covenant Relief Period or its term loan debt under its bank facility during the Covenant Relief Period.
In connection with the amendments, $1.5 million of fees paid to third parties were expensed and included in costs associated with loan refinancing in the accompanying consolidated statements of (loss) income and comprehensive (loss) income for the year ended December 31, 2020. In addition, the Company paid $0.9 million in fees to existing lenders that were capitalized in deferred financing costs and amortized as part of the effective yield and shown as a reduction of debt.
Subsequent to year-end, the Company paid down principal balance and interest rate were not changed. These bonds are secured by three theatres, which had a net book value of approximately $21.2$23.8 million at December 31, 2017, and bear interest at a variable rate which resets on a weekly basis and was 1.60% at December 31, 2017. The bonds requires monthly interest only paymentsits private placement notes resulting from the sale of assets in accordance with principal due at maturity.the amendments.
Certain of the Company’s debt agreements contain customary restrictive covenants related to financial and operating performance as well as certain cross-default provisions. The Company was in compliance with all financial covenants under the Company's debt instruments at December 31, 2017.2020.
Principal payments due on long-term debt obligations subsequent to December 31, 20172020 (without consideration of any extensions) are as follows (in thousands):
| | | | | |
| Amount |
Year: | |
2021 | $ | 0 | |
2022 | 590,000 | |
2023 | 675,000 | |
2024 | 148,000 | |
2025 | 300,000 | |
Thereafter | 2,016,995 | |
Less: deferred financing costs, net | (35,552) | |
Total | $ | 3,694,443 | |
|
| | | |
| Amount |
Year: |
|
2018 | $ | 11,684 |
|
2019 | — |
|
2020 | 250,000 |
|
2021 | — |
|
2022 | 560,000 |
|
Thereafter | 2,239,995 |
|
Less: deferred financing costs, net | (32,852 | ) |
Total | $ | 3,028,827 |
|
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 2016 and 2015
The Company capitalizes a portion of interest costs as a component of property under development. The following is a summary of interest expense, net from continuing operations for the years ended December 31, 2017, 20162020, 2019 and 20152018 (in thousands):
| | | | | | | | | | | | | | | | | |
| 2020 | | 2019 | | 2018 |
Interest on loans | $ | 152,058 | | | $ | 140,697 | | | $ | 137,570 | |
| | | | | |
Amortization of deferred financing costs | 6,606 | | | 6,192 | | | 5,797 | |
| | | | | |
Credit facility and letter of credit fees | 3,064 | | | 2,265 | | | 2,411 | |
Interest cost capitalized | (1,233) | | | (4,975) | | | (9,541) | |
Interest income | (2,820) | | | (2,177) | | | (367) | |
| | | | | |
Interest expense, net | $ | 157,675 | | | $ | 142,002 | | | $ | 135,870 | |
|
| | | | | | | | | | | |
| 2017 | | 2016 | | 2015 |
Interest on loans | $ | 135,023 |
| | $ | 101,181 |
| | $ | 92,140 |
|
Amortization of deferred financing costs | 6,167 |
| | 4,787 |
| | 4,588 |
|
Credit facility and letter of credit fees | 2,005 |
| | 1,873 |
| | 1,759 |
|
Interest cost capitalized | (9,879 | ) | | (10,697 | ) | | (18,547 | ) |
Interest income | (192 | ) | | — |
| | (25 | ) |
Interest expense, net | $ | 133,124 |
| | $ | 97,144 |
| | $ | 79,915 |
|
EPR PROPERTIES
Notes to Consolidated Financial Statements 8. Variable Interest Entities
The Company’s variable interest in VIEs currently are in the form of equity ownership and loans provided by the Company to a VIE or other partner. The Company examines specific criteria and uses its judgment when determining if the Company is the primary beneficiary of a VIE. Factors considered in determining whether the Company is the primary beneficiary include risk and reward sharing, experience and financial condition of other partner(s), voting rights, involvement in day-to-day capital and operating decisions, representation on a VIE’s executive committee, existence of unilateral kick-out rights or voting rights, and level of economic disproportionality between the Company and the other partner(s).
Consolidated VIE
As of December 31, 2017, the Company had invested approximately $20.6 million included in property under development in the accompanying consolidated balance sheet for one real estate project which is a VIE. This entity does not have any other significant assets or liabilities at December 31, 20172020, 2019 and was established to facilitate the development of a theatre project.2018
Unconsolidated VIE
At December 31, 2017, the Company’s recorded investment in two unconsolidated VIEs totaled $178.5 million. The Company’s maximum exposure to loss associated with these VIEs is limited to the Company’s outstanding mortgage notes and related accrued interest receivable of $178.5 million. These mortgage notes are secured by three recreation properties and one public charter school. While these entities are VIEs, the Company has determined that the power to direct the activities of these VIEs that most significantly impact the VIE’s economic performance is not held by the Company.
9. Derivative Instruments
All derivatives are recognized at fair value in the consolidated balance sheets within the line items "Other assets" and "Accounts payable and accrued liabilities" as applicable. The Company's derivatives are subject to a master netting arrangement and the Company has elected not to offset its derivative position for purposes of balance sheet presentation and disclosure. The Company had derivative liabilities of $0.1 million and $2.5 million recorded in “Accounts payable and accrued liabilities” and derivative assets of $25.7$1.1 million and $35.9 million recorded in “Other assets” in the consolidated balance sheet at December 31, 20172019 and 2016,had 0 derivative assets at December 31, 2020. The Company had derivative liabilities of $14.0 million and $4.5 million at December 31, 2020 and 2019, respectively. The Company has not posted or received collateral with its derivative counterparties as of December 31, 20172020 and 2016.2019. See Note 10 for disclosures relating to the fair value of the derivative instruments as of December 31, 2017 and 2016.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 currencycross-currency swaps and foreign currency forwards.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 2016 and 2015
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements on its LIBOR based borrowings. To accomplish this objective, the Company currently 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 exchange for the Company making fixed-rate paymentsrecording net interest expense that is fixed over the life of the agreements without exchange of the underlying notional amount.
As of December 31, 2017,2020, the Company had two4 interest rate swap agreements to fix thedesignated as cash flow hedges of interest rate at 2.64% on $300.0 million of borrowings under therisk related to its variable rate unsecured term loan facility from from July 6, 2017 to April 5, 2019.totaling $400.0 million. Additionally, as ofat December 31, 2017,2020, the Company had three additionalan interest rate swap agreements to fix theagreement designated as a cash flow hedge of interest rate risk related to its variable rate secured bonds totaling $25.0 million. Interest rate swap agreements outstanding at 3.15%December 31, 2020 are summarized below:
| | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | | Notional Amount (in millions) | | Index | | Maturity |
4.3950% | (1) | | $ | 116.7 | | | USD LIBOR | | February 7, 2022 |
4.4075% | (1) | | 116.7 | | | USD LIBOR | | February 7, 2022 |
4.4080% | (1) | | 116.6 | | | USD LIBOR | | February 7, 2022 |
4.5950% | (1) | | 50.0 | | | USD LIBOR | | February 7, 2022 |
Total | | | $ | 400.0 | | | | | |
| | | | | | | |
1.3925% | | | 25.0 | | | USD LIBOR | | September 30, 2024 |
Total | | | $ | 25.0 | | | | | |
(1) As discussed in Note 8, on an additional $50.0 millionJune 29, 2020 and November 3, 2020, the Company amended its Consolidated Credit Agreement. The above fixed rates increased by 0.90% during the Covenant Relief Period, and as a result of borrowings under itsthe Company's unsecured term loan facility from November 6, 2017debt ratings being downgraded and a LIBOR floor of 0.50% being established. The rates are scheduled to April 5, 2019 and on $350.0 millionreturn to previous levels as defined in the agreement at the end of borrowings underthis period, subject to the Company's unsecured term loan facility from April 6, 2019 to February 7, 2022.debt ratings.
The change in the fair value of interest rate derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (AOCI) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings within the same income statement line item as the earnings effect of the hedged transaction. During the years ended
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 20162020, 2019 and 2015, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.2018
Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. As of December 31, 2017,2020, the Company estimates that during the twelve months ending December 31, 2018, $0.52020, $8.2 million will be reclassified from AOCI to interest expense.
Cash Flow Hedges of Foreign Exchange Risk
The Company is exposed to foreign currency exchange risk against its functional currency, the U.S. Dollar (USD),USD, on CAD denominated cash flow from its four4 Canadian properties. The Company uses cross currencycross-currency swaps and foreign currency forwards to mitigate its exposure to fluctuations in the Canadian Dollar (CAD) to USDUSD-CAD exchange rate on its Canadian properties. These foreign currency derivativescash inflows associated with these properties which should hedge a significant portion of the Company's expected CAD denominated cash flow offlows.
During the Canadian properties as their impact on the Company's cash flow when settled should move in the opposite direction of the exchange rates utilized to translate revenues and expenses of these properties.
At year ended December 31, 2017, the Company’s cross-currency swaps had a fixed original notional value of $100.0 million CAD and $98.1 million USD. The net effect of these swaps is to lock in an exchange rate of $1.05 CAD per USD on approximately $13.5 million of annual CAD denominated cash flows on the properties through June 2018. Additionally, on August 30, 2017,2020, the Company entered into aUSD-CAD cross-currency swapswaps that will bewere effective July 1, 20182020 with a fixed original notional value of $100.0 million CAD and $79.5$76.6 million USD. The net effect of these swapsthis swap is to lock in an exchange rate of 1.26$1.31 CAD per USD on approximately $13.5$7.2 million of annual CAD denominated cash flows on the properties through June 2020.2022.
The change in the fair value of foreign currency derivatives designated and that qualify as cash flow hedges of foreign exchange risk is recorded in AOCI and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.earnings within the same income statement line item as the earnings effect of the hedged transaction. As of December 31, 2017,2020, the Company estimates that during the twelve months ending December 31, 2018, $1.02020, $0.2 million of losses will be reclassified from AOCI to other income.expense.
Net Investment Hedges
As discussed above, theThe Company is exposed to fluctuations in foreignthe USD-CAD exchange ratesrate on its four Canadian properties.net investments in Canada. As such, the Company uses either currency forward agreements or cross-currency swaps to hedgemanage its exposure to changes in foreign exchange rates. Currency forward agreements involve fixingrates on certain of its foreign net investments. As of December 31, 2020, the CAD to USD exchange rate for delivery of a specified amount of foreign currency on a specified date. The currency forward agreements are typically cash settled in USD for their fair value at or close to their settlement date. In order to hedgeCompany 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 four of the Canadian properties, the Company entered into a forward contract with a fixed notional value of $100.0 million CAD and $94.3 million USD with a July 2018 settlement date. Theat an exchange rate of this forward contract is approximately $1.06$1.32 CAD per USD.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 2016 and 2015
Additionally,USD on February 28, 2014,$4.5 million of CAD annual cash flows, the Company entered into a forward contract with a fixed notional valuenet effect of $100.0 million CAD and $88.1 million USD with a July 2018 settlement date. The exchange ratewhich is an excluded component from the effectiveness testing of this forward contract is approximately $1.13 CAD per USD. These forward contracts should hedge a significant portion of the Company’s CAD denominated net investment in these four properties through July 2018 as the impact on AOCI from marking the derivative to market should move in the opposite direction of the translation adjustment on the net assets of these four Canadian properties.hedge.
For qualifying foreign currency derivatives designated as net investment hedges, the change in the fair value of the derivatives are reported in AOCI as part of the cumulative translation adjustment. Amounts are reclassified out of AOCI into earnings when the hedged net investment is either sold or substantially liquidated. Gains and losses on the derivative representing hedge components excluded from the assessment of effectiveness are recognized over the life of the hedge on a systematic and rational basis, as documented at hedge inception in accordance with the Company's accounting policy election. The earnings recognition of excluded components are presented in other income.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
Below is a summary of the effect of derivative instruments on the consolidated statements of changes in equity and income for the years ended December 31, 2017, 20162020, 2019 and 2015:2018:
Effect of Derivative Instruments on the Consolidated Statements of Changes in Equity and Comprehensive (Loss) Income for the Years Ended December 31, 2020, 2019 and 2018 Effect of Derivative Instruments on the Consolidated Statements of Changes in Equity and Income for the Years Ended December 31, 2017, 2016 and 2015 (Dollars in thousands) |
| | | | | | | | | | | |
| Year Ended December 31, |
Description | 2017 | | 2016 | | 2015 |
Interest Rate Swaps | | | | | |
Amount of Gain (Loss) Recognized in AOCI on Derivative | $ | 2,479 |
| | $ | (2,044 | ) | | $ | (2,581 | ) |
Amount of Expense Reclassified from AOCI into Earnings (1) | (2,498 | ) | | (5,235 | ) | | (2,004 | ) |
Cross Currency Swaps | | | | | |
Amount of (Loss) Gain Recognized in AOCI on Derivative | (793 | ) | | (754 | ) | | 5,380 |
|
Amount of Income Reclassified from AOCI into Earnings (2) | 2,457 |
| | 2,663 |
| | 2,396 |
|
Currency Forward Agreements | | | | | |
Amount of (Loss) Gain Recognized in AOCI on Derivative | (9,547 | ) | | (2,804 | ) | | 24,359 |
|
Amount of Income Reclassified from AOCI into Earnings (2) | — |
| | — |
| | — |
|
Total | | | | | |
Amount of (Loss) Gain Recognized in AOCI on Derivative | $ | (7,861 | ) | | $ | (5,602 | ) | | $ | 27,158 |
|
Amount of (Expense) Income Reclassified from AOCI into Earnings | (41 | ) | | (2,572 | ) | | 392 |
|
| | | | | |
Interest expense, net in accompanying consolidated statements of income | 133,124 |
| | 97,144 |
| | 79,915 |
|
Other income in accompanying consolidated statements of income | 3,095 |
| | 9,039 |
| | 3,629 |
|
(Dollars in thousands) | |
(1) | Included in “Interest expense, net” in accompanying consolidated statements of income. |
| |
(2) | Included in “Other expense” or "Other income" in the accompanying consolidated statements of income. |
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
Description | 2020 | | 2019 | | 2018 |
Cash Flow Hedges | | | | | |
Interest Rate Swaps | | | | | |
Amount of (Loss) Gain Recognized in AOCI on Derivative | $ | (11,612) | | | $ | (7,476) | | | $ | 3,172 | |
Amount of (Expense) Income Reclassified from AOCI into Earnings (1) | (6,159) | | | 1,138 | | | 1,324 | |
Cross Currency Swaps | | | | | |
Amount of Gain (Loss) Recognized in AOCI on Derivative | 5 | | | (450) | | | 1,689 | |
Amount of Income Reclassified from AOCI into Earnings (2) | 441 | | | 545 | | | 1,426 | |
Net Investment Hedges | | | | | |
Cross Currency Swaps | | | | | |
Amount of (Loss) Gain Recognized in AOCI on Derivative | (4,664) | | | (4,454) | | | 5,108 | |
Amount of Income Recognized in Earnings (2) (3) | 599 | | | 556 | | | 271 | |
Currency Forward Agreements | | | | | |
Amount of Gain Recognized in AOCI on Derivative | 0 | | | 0 | | | 8,560 | |
| | | | | |
Total | | | | | |
Amount of (Loss) Gain Recognized in AOCI on Derivative | $ | (16,271) | | | $ | (12,380) | | | $ | 18,529 | |
Amount of (Expense) Income Reclassified from AOCI into Earnings | (5,718) | | | 1,683 | | | 2,750 | |
Amount of Income Recognized in Earnings | 599 | | | 556 | | | 271 | |
| | | | | |
Interest expense, net in accompanying consolidated statements of (loss) income and comprehensive (loss) income | $ | 157,675 | | | $ | 142,002 | | | $ | 135,870 | |
Other income in accompanying consolidated statements of (loss) income and comprehensive (loss) income | $ | 9,139 | | | $ | 25,920 | | | $ | 2,076 | |
(1) Included in “Interest expense, net” in accompanying consolidated statements of (loss) income and comprehensive (loss) income.
(2) Included in "Other income" in the accompanying consolidated statements of (loss) income and comprehensive (loss) income.
(3) Amounts represent derivative gains excluded from the effectiveness testing.
Credit-risk-related Contingent Features
The Company has agreements with each of its interest rate derivative counterparties that contain a provision where if the Company defaults on any of its obligations for borrowed money or credit in an amount exceeding $25.0 million for two of the agreements and $50.0 million for three of the agreements and such default is not waived or cured within a specified period of time, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its interest rate derivative obligations.
As of December 31, 2017,2020, the fair value of the Company’sCompany's derivatives in a liability position related to these agreements was $0.1$14.0 million. If the Company breached any of the contractual provisions of thethese derivative contracts, it would be required to settle its obligations under the agreements at their termination value. The balance value of this obligation, after considering the right$14.8 million. As of offset, at December 31, 20172020, the Company had not posted any collateral related to these agreements and was zero.not in breach of any provisions in these agreements.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 20162020, 2019 and 20152018
10. Fair Value Disclosures
The Company has certain financial instruments that are required to be measured under the FASB’s Fair Value Measurement guidance. The Company currently does not have any non-financial assets and non-financial liabilities that are required to be measured at fair value on a recurring basis.
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 valuesvalue of interest rate swaps areis 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 has 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 December 31, 2017,2020, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives and therefore, has classified its derivatives as Level 2 within the fair value reporting hierarchy.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 20162020, 2019 and 20152018
The table below presents the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 20172020 and 2016,2019, 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 December 31, 2017 and 2016 (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 December 31, |
2017: | | | | | | | |
Cross Currency Swaps* | $ | — |
| | $ | 1,041 |
| | $ | — |
| | $ | 1,041 |
|
Cross Currency Swaps** | $ | — |
| | $ | (134 | ) | | $ | — |
| | $ | (134 | ) |
Currency Forward Agreements* | $ | — |
| | $ | 22,235 |
| | $ | — |
| | $ | 22,235 |
|
Interest Rate Swap Agreements* | $ | — |
| | $ | 2,496 |
| | $ | — |
| | $ | 2,496 |
|
2016: | | | | | | | |
Cross Currency Swaps* | $ | — |
| | $ | 4,158 |
| | $ | — |
| | $ | 4,158 |
|
Currency Forward Agreements* | $ | — |
| | $ | 31,782 |
| | $ | — |
| | $ | 31,782 |
|
Interest Rate Swap Agreements** | $ | — |
| | $ | (2,482 | ) | | $ | — |
| | $ | (2,482 | ) |
Assets and Liabilities Measured at Fair Value on a Recurring Basis at December 31, 2020 and 2019(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 |
2020: | | | | | | | |
| | | | | | | |
Cross Currency Swaps** | $ | 0 | | | $ | (4,271) | | | $ | 0 | | | $ | (4,271) | |
| | | | | | | |
| | | | | | | |
Interest Rate Swap Agreements** | $ | 0 | | | $ | (9,723) | | | $ | 0 | | | $ | (9,723) | |
2019: | | | | | | | |
Cross Currency Swaps* | $ | 0 | | | $ | 828 | | | $ | 0 | | | $ | 828 | |
| | | | | | | |
| | | | | | | |
Interest Rate Swap Agreements* | $ | 0 | | | $ | 225 | | | $ | 0 | | | $ | 225 | |
Interest Rate Swap Agreements** | $ | 0 | | | $ | (4,495) | | | $ | 0 | | | $ | (4,495) | |
*Included in "Other assets" in the accompanying consolidated balance sheet.
**Included in "Accounts payable and accrued liabilities" in the accompanying consolidated balance sheet.sheets.
Non-recurring fair value measurements
The table below presents the Company's assets measured at fair value on a non-recurring basis during the year ended December 31, 20172020 and 2019, aggregated by the level in the fair value hierarchy within which those measurements fall.
Assets Measured at Fair Value on a Non-Recurring Basis During the Year Ended
December 31, 20172020 and 2019
(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 measurement date |
2020: | | | | | | | |
Real estate investments, net | $ | — | | | $ | 29,684 | | | $ | 9,860 | | | $ | 39,544 | |
Operating lease right-of-use assets | — | | | — | | | 12,953 | | | 12,953 | |
Investment in joint ventures | — | | | — | | | 771 | | | 771 | |
Other assets (1) | — | | | 0 | | | 0 | | | 0 | |
2019: | | | | | | | |
Real estate investments, net | $ | — | | | $ | 6,160 | | | $ | 0 | | | $ | 6,160 | |
|
| | | | | | | | | | | | | | | |
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 |
| | | | | | | |
Investment in a direct financing lease, net | $ | — |
| | $ | — |
| | $ | 35,807 |
| | $ | 35,807 |
|
(1) Includes collateral dependent notes receivable, which are presented within other assets in the accompanying consolidated balance sheet.
As discussed further in Note 6,4, during the year ended December 31, 2017,2020, the Company recorded impairment charges of $85.7 million, of which $70.7 million related to real estate investments, net and $15.0 million related to operating lease right-of-use assets. Management estimated the fair value of these investments taking into account various factors including purchase offers, independent appraisals, shortened hold periods and current market conditions. The Company determined, based on the inputs, that its valuation of 6 of its properties with purchase offers were classified as Level 2 of the fair value hierarchy and were measured at fair value. NaN properties, 2 of which included operating lease right-of-use assets, were measured at fair value using independent appraisals which used discounted cash flow models. The significant inputs and assumptions used in the real estate appraisals included market rents which ranged from $9 per square foot to $28 per square foot, discount rates which ranged from 9.0% to 12.3% and a terminal capitalization rate of 8.75% for the property not under ground lease. Significant inputs and assumptions used in the right-of-use asset appraisals included market rates which ranged from $10 per square foot to
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
$16 per square foot and discount rates which ranged from 8.0% to 8.5%. These measurements were classified within Level 3 of the fair value hierarchy as many of the assumptions were not observable.
Additionally, as discussed further in Note 7, during the year ended December 31, 2020, the Company recorded impairment charges totaling $10.2of $3.2 million related to its investment in a direct financing lease, net.joint ventures. Management estimated the fair valuesvalue of this investmentthese investments, taking into account various factors including independent appraisals, input from an outside brokerimplied asset value changes based on discounted cash flow projections and current market conditions. The Company determined, based on the inputs, that its valuation of the investment in joint ventures was classified within Level 3 of the fair value hierarchy as many of the assumptions are not observable. During 2017, the Company entered into revised lease terms on these properties and as a result, these properties were classified as operating leases and moved to rental properties.
There were no non-recurring measurementsAs discussed further in Note 6, during the year ended December 31, 2016.2020, the Company recorded expected credit loss expense totaling $25.5 million related to notes receivable from one borrower to fully reserve the outstanding principal balance of $12.6 million and unfunded commitment to fund $12.9 million, as a result of recent changes in the borrower's financial status due to the impact of the COVID-19 pandemic. Management valued the loan based on the fair value of the underlying collateral which was based on review of the financial statements of the borrower, and was classified within Level 2 of the fair value hierarchy.
As discussed further in Note 4, during the year ended December 31, 2019, the Company recorded an impairment charge of $2.2 million related to real estate investments, net. Management estimated the fair value of this property taking into account various factors including various purchase offers, pending purchase agreements, the shortened holding period and current market conditions. The Company determined, based on the inputs, that its valuation of real estate investments, net was classified within Level 2 of the fair value hierarchy.
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 December 31, 20172020 and 2016:2019:
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 2016 and 2015
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 December 31, 20172020, the Company had a carrying value of $365.6 million in fixed rate mortgage notes receivable outstanding, including related accrued interest, with a weighted average interest rate of approximately 9.03%. The fixed rate mortgage notes bear interest at rates of 7.01% to 11.78%. Discounting the future cash flows for fixed rate mortgage notes receivable using rates of 7.50% to 10.00%, management estimates the fair value of the fixed rate mortgage notes receivable to be $394.0 million with an estimated weighted average market rate of 8.11% at December 31, 2020.
At December 31, 2019, the Company had a carrying value of $970.7$357.4 million in fixed rate mortgage notes receivable outstanding, including related accrued interest, with a weighted average interest rate of approximately 8.42%8.98%. The fixed rate mortgage notes bear interest at rates of 7.00%6.99% to 11.31%11.61%. Discounting the future cash flows for fixed rate mortgage notes receivable using rates of 7.00%6.99% to 11.50%9.25%, management estimates the fair value of the fixed rate mortgage notes receivable to be $992.6$395.6 million with an estimated weighted average market rate of 8.79% at December 31, 2017.
At December 31, 2016, the Company had a carrying value of $614.0 million in fixed rate mortgage notes receivable outstanding, including related accrued interest, with a weighted average interest rate of approximately 8.77%. The fixed rate mortgage notes bear interest at rates of 7.00% to 11.31%. Discounting the future cash flows for fixed rate mortgage notes receivable using rates of 7.00% to 12.00%, management estimates the fair value of the fixed rate mortgage notes receivable to be approximately $648.5 million with an estimated weighted average market rate of 8.48%7.76% at December 31, 2016.2019.
Investment in direct financing leases, net:
At December 31, 2017, the Company had investments in direct financing leases with a carrying value of $57.9 million, and with a weighted average effective interest rate of 11.98%. At December 31, 2017, the investment in direct financing leases bears interest at effective rates of 11.90% to 12.38%. The carrying value of the $57.9 million investment in direct financing leases approximated the fair market value at December 31, 2017.
At December 31, 2016, the Company had investments in direct financing leases with a carrying value of $102.7 million, and a weighted average effective interest rate of 12.00%. At December 31, 2016, the investment in direct financing leases bears interest at effective interest rates of 11.79% to 12.38%. The carrying value of the investment in direct financing leases approximated the fair market value at December 31, 2016.
Derivative instruments:
Derivative instruments are carried at their fair market value.
Debt instruments:
The fair value of the Company's debt as of December 31, 20172020 and 20162019 is estimated by discounting the future cash flows of each instrument using current market rates. At December 31, 2017,2020, the Company had a carrying value of $1.0 billion in variable rate debt outstanding with an average weighted interest rate of approximately 2.23%. The carrying value of the variable rate debt outstanding approximates the fair value at December 31, 2020.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
At December 31, 2019, the Company had a carrying value of $635.0$425.0 million in variable rate debt outstanding with an average weighted interest rate of approximately 2.58%2.75%. The carrying value of the variable rate debt outstanding approximates the fair market value at December 31, 2017.2019.
At December 31, 2016,2020 and 2019, $425.0 million, of the Company's variable rate debt, discussed above, had been effectively converted to a fixed rate by interest rate swap agreements. See Note 9 for additional information related to the Company's interest rate swap agreements.
At December 31, 2020, the Company had a carrying value of$375.0 million $2.72 billion in variablefixed rate long-term debt outstanding with an average weighted interest rate of approximately 3.23%. The carrying value of the variable rate debt outstanding approximates the fair market value at December 31, 2016.
As described in Note 9, at December 31, 2017, $350.0 million of variable rate debt outstanding under the Company's unsecured term loan facility had been effectively converted to a fixed rate through February 7, 2022 by interest rate swap agreements. At December 31, 2016, $300.0 million of variable rate debt outstanding under the Company's unsecured term loan facility had been effectively converted to a fixed rate through April 5, 2019 by interest rate swap agreements.
At December 31, 2017, the Company had a carrying value of $2.43 billion in fixed rate debt outstanding with an average weighted interest rate of approximately 5.15%4.70%. Discounting the future cash flows for fixed rate debt using December 31, 20172020 market rates of 2.49%4.09% to 5.81%, management estimates the fair value of the fixed rate debt to be approximately $2.69 billion with an estimated weighted average market rate of 4.70% at December 31, 2020.
At December 31, 2019, the Company had a carrying value of $2.72 billion in fixed rate long-term debt outstanding with an average weighted interest rate of approximately 4.54%. Discounting the future cash flows for fixed rate debt using December 31, 2019 market rates of 2.87% to 4.56%, management estimates the fair value of the fixed rate debt to be approximately $2.53$2.87 billion with an estimated weighted average market rate of 4.04% at December 31, 2017.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 2016 and 2015
At December 31, 2016, the Company had a carrying value of $2.14 billion in fixed rate debt outstanding with an average weighted interest rate of approximately 5.27%. Discounting the future cash flows for fixed rate debt using December 31, 2016 market rates of 2.97% to 4.75%, management estimates the fair value of the fixed rate debt to be approximately $2.21 billion with an estimated weighted average market rate of 4.26%3.51% at December 31, 2016.2019.
11. Common and Preferred Shares
On June 3, 2019, the Company filed a shelf registration statement with the SEC, which is effective for a term of 3 years. The securities covered by this registration statement include common shares, preferred shares, debt securities, depositary shares, warrants, and units. The Company may periodically offer one of more of these securities in amounts, prices and on terms to be announced when and if these securities are offered. The specifics of any future offerings along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering.
Additionally, on June 3, 2019, the Company filed a shelf registration statement with the SEC, which is effective for a term of 3 years, for its Dividend Reinvestment and Direct Share Purchase Plan (DSP Plan) which permits the issuance of up to 15,000,000 common shares.
Common Shares
The Company's Board of Trustees declared cash dividends totaling $4.08$1.515 and $3.84$4.500 per common share for the years ended December 31, 20172020 and 2016,2019, respectively. The monthly cash dividend to common shareholders was suspended following the common share dividend paid on May 15, 2020 to shareholders of record as of April 30, 2020.
Of the total distributions calculated for tax purposes, the amounts characterized as ordinary income, return of capital and long-term capital gain for cash distributions paid per common share for the years ended December 31, 20172020 and 20162019 are as follows:
| | | | | | | | | | | | |
| Cash Distributions Per Share | |
| 2020 | | 2019 | |
Taxable ordinary income (1) | $ | 0.8888 | | | $ | 2.7411 | | |
Return of capital | 0.5634 | | | 1.3966 | | |
Long-term capital gain (2) | 0.4378 | | | 0.3473 | | |
| | | | |
Totals | $ | 1.8900 | | | $ | 4.4850 | | |
|
| | | | | | | |
| Cash Distributions Per Share |
| 2017 | | 2016 |
Taxable ordinary income | $ | 3.5434 |
| | $ | 3.1659 |
|
Return of capital | 0.2762 |
| | 0.2489 |
|
Long-term capital gain (1) | 0.2404 |
| | 0.4077 |
|
Totals | $ | 4.0600 |
| | $ | 3.8225 |
|
(1) Amounts qualify in their entirety as 199A distributions.
(2) Of the long-term capital gain, $0.0972gain, $0.1439 and $0.1060 $0.3473 were unrecaptured section 1250 gains for the years ended December 31, 20172020 and 2016,2019, respectively.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
During the year ended December 31, 2016,2020, the Company issued an aggregate of 258,26336,176 common shares under the direct share purchase component of its Dividend Reinvestment and Direct Share PurchaseDSP Plan (DSPP) for total net proceeds of $16.9$1.1 million.
During the year ended December 31, 2017,2020, the Company's Board approved a share repurchase program pursuant to which the Company issued an aggregatemay repurchase up to $150.0 million of 1,382,730the Company's common shares under its DSPP for net proceeds of $98.2 million.
On January 21, 2016,shares. The share repurchase program was scheduled to expire on December 31, 2020; however, the Company issued 2,250,000 common sharessuspended the program on the effective date of the covenant modification agreements, June 29, 2020, as discussed in a registered public offering for total net proceeds, after the underwriting discount and offering expenses of approximately $125.0 million. The net proceeds from the public offering were used to pay down the Company's unsecured revolving credit facility.
Note 8. During the year ended December 31, 2017,2020, the Company issued 8,851,264repurchased 4,066,716 common shares in connection with its transaction with CNL Lifestyle and OZRE. See Note 3under the share repurchase program for further information.approximately $106.0 million. The repurchases were made under a Rule 10b5-1 trading plan.
Series C Convertible Preferred SharesShare Options
Share options are granted to employees pursuant to the Long-Term Incentive Plan. The Company has outstanding 5.4 million5.75% Series C cumulative convertible preferred shares (Series C preferred shares). The Company will pay cumulative dividends on the Series C preferred shares fromfair value of share options granted is estimated at the date of original issuancegrant 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 amountaccompanying consolidated statements of $1.4375 per(loss) income and comprehensive (loss) income was $12 thousand, $10 thousand and $0.3 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Nonvested Shares Issued to Employees
The Company grants nonvested shares to employees pursuant to both the Annual Incentive Program and the Long-Term Incentive Plan. The Company amortizes the expense related to the nonvested shares awarded to employees under the Long-Term Incentive Plan and the premium awarded under the nonvested share each year, which is equivalent to 5.75%alternative of the $25 liquidation preference per share. DividendsAnnual Incentive Program on a straight-line basis over the future vesting period (three years to four years). Expense recognized related to nonvested shares and included in general and administrative expense in the accompanying consolidated statements of (loss) income and comprehensive (loss) income was $10.6 million, $11.3 million and $13.5 million for the years ended December 31, 2020, 2019 and 2018, respectively. Expense related to nonvested shares and included in severance expense in the accompanying consolidated statements of (loss) income and comprehensive (loss) income was $1.0 million, $0.6 million and $3.2 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Nonvested Performance Shares Issued to Employees
During the year ended December 31, 2020, the Compensation and Human Capital Committee of the Company's Board of Trustees (Board) approved the 2020 Long Term Incentive Plan (the 2020 LTIP) as a sub-plan under the Company's 2016 Equity Incentive Plan. Under the 2020 LTIP, the Company awards performance shares and restricted shares to the Company's executive officers. The performance shares contain both a market condition and a performance condition. The Company amortizes the expense related to the performance shares over the future vesting period of three years. Expense recognized related to performance shares and included in general and administrative expense in the accompanying consolidated statements of (loss) income and comprehensive (loss) income was $1.0 million for the year ended December 31, 2020. Expense related to nonvested performance shares and included in severance expense in the accompanying consolidated statements of (loss) income and comprehensive (loss) income was $261 thousand for the year ended December 31, 2020.
Restricted Share Units Issued to Non-Employee Trustees
The Company issues restricted share units to non-employee Trustees for payment of their annual retainers under the Company's Trustee compensation program. The fair value of the share units granted was based on the Series C preferredshare 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 are payable quarterlyis 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 arrears. general and administrative expense in the accompanying consolidated statements of (loss) income and comprehensive (loss) income was $2.2 million, $1.9 million and $1.3 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Foreign Currency Translation
The Company does not haveaccounts for the rightoperations of its Canadian properties in Canadian dollars. The assets and liabilities related to redeem the Series C preferred shares except in limited circumstances to preserve the Company’s REIT status. The Series C preferred shares have no stated maturityCanadian properties and will not be subject to any sinking fund or mandatory redemption. As of December 31, 2017,mortgage note are translated into U.S. dollars using the Series C preferred shares are convertible,spot rates at the holder’s option, into the Company’s common sharesrespective balance sheet dates; revenues and expenses are translated at average exchange rates. Resulting translation adjustments are recorded as a conversion rateseparate component of 0.3857 common shares per Series C preferred share, which is equivalentcomprehensive income.
Derivative Instruments
The Company uses derivative instruments to a conversion price of $64.82 per common share. This conversion ratio may increase over time upon certain specified triggering events including if the Company’s common dividends per share exceeds a quarterly threshold of $0.6875.
reduce exposure to fluctuations in foreign currency exchange rates and variable interest rates.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 20162020, 2019 and 20152018
UponThe Company records all derivatives on the occurrencebalance sheet at fair value. The accounting for changes in the fair value of certain fundamental changes,derivatives depends on the intended use of the derivative, whether the Company will under certain circumstances increasehas elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the conversion rate byhedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a number of additional common shares or, in lieu thereof, may in certain circumstances elect to adjust the conversion rate upon the Series C preferred shares becoming convertible into shareshedge of the public acquiringexposure to changes in the fair value of an asset, liability, or surviving company.
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 at its option, cause the Series C preferred shares to be automatically convertedenter into that number of common sharesderivative contracts that are issuable atintended to economically hedge certain of its risk, even though hedge accounting does not apply or the then prevailing conversion rate.Company elects not to apply hedge accounting. If hedge accounting is not applied, realized and unrealized gains or losses are reported in earnings.
The Company's policy is to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.
Impact of Recently Issued Accounting Standards
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848). The ASU contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the year ended December 31, 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company may exercise its conversion right only if, at certain times,continues to evaluate the closing priceimpact of the Company’s common shares equals or exceeds 135%guidance and may apply other elections as applicable as additional changes in the market occur. The Company intends to amend agreements referencing the LIBOR-index to a replacement index and will apply the optional expedients offered in Topic 848.
3. Real Estate Investments
The following table summarizes the carrying amounts of the then prevailing conversion pricereal estate investments as of the Series C preferred shares.
Owners of the Series C preferred shares generally have no voting rights, except under certain dividend defaults. Upon conversion, the Company may choose to deliver the conversion value to the owners in cash, common shares, or a combination of cash and common shares.
The Board of Trustees declared cash dividends totaling $1.4375 per Series C preferred share for each of the years ended December 31, 20172020 and 2016, respectively. There were non-cash distributions associated with conversion adjustments of $0.4918 and $0.4394 per Series C preferred share2019 (in thousands):
| | | | | | | | | | | |
| 2020 | | 2019 |
Buildings and improvements | $ | 4,526,342 | | | $ | 4,747,101 | |
Furniture, fixtures & equipment | 118,334 | | | 123,239 | |
Land | 1,242,663 | | | 1,290,181 | |
Leasehold interests | 26,050 | | | 26,041 | |
| 5,913,389 | | | 6,186,562 | |
Accumulated depreciation | (1,062,087) | | | (989,254) | |
Total | $ | 4,851,302 | | | $ | 5,197,308 | |
Depreciation expense on real estate investments from continuing operations was $162.6 million, $153.2 million and $133.7 million for the years ended December 31, 20172020, 2019 and 2016,2018, respectively. The conversion adjustment provision entitles the shareholders of the Series C preferred shares, upon certain quarterly common share dividend thresholds being met, to receive additional common shares of the Company upon a conversion of the preferred shares into common shares. The increase in common shares to be received upon a conversion is a deemed distribution for federal income tax purposes.
For tax purposes, the amounts characterized as ordinary income, return of capitalAcquisitions and long-term capital gain for cash distributions paid and non-cash deemed distributions per Series C preferred share for the years ended December 31, 2017 and 2016 are as follows:Development
|
| | | | | | | |
| Cash Distributions per Share |
| 2017 | | 2016 |
Taxable ordinary income | $ | 1.3462 |
| | $ | 1.2735 |
|
Return of capital | — |
| | — |
|
Long-term capital gain (1) | 0.0913 |
| | 0.1640 |
|
Totals | $ | 1.4375 |
| | $ | 1.4375 |
|
(1) Of the long-term capital gain, $0.0352 and $0.0426 were unrecaptured section 1250 gains for the years ended December 31, 2017 and 2016, respectively.
|
| | | | | | | |
| Non-cash Distributions per Share |
| 2017 | | 2016 |
Taxable ordinary income | $ | 0.3527 |
| | $ | 0.2850 |
|
Return of capital | 0.1152 |
| | 0.1177 |
|
Long-term capital gain (2) | 0.0239 |
| | 0.0367 |
|
Totals | $ | 0.4918 |
| | $ | 0.4394 |
|
(2) Of the long-term capital gain, $0.0092 and $0.0095 were unrecaptured section 1250 gains forDuring the year ended December 31, 20172020, the Company completed the acquisition of real estate investments and 2016, respectively.lease related intangibles, as further discussed in Note 2, for Experiential properties totaling $22.1 million, that consisted of 2 theatre properties.
Series E Convertible Preferred Shares
The Company has outstanding 3.4 million 9.00% Series E cumulative convertible preferred shares (Series E preferred shares). The Company will pay cumulative dividends on the Series E preferred shares from the date of original issuance in the amount of $2.25 per share each year, which is equivalent to 9.00% of the $25 liquidation preference per share. Dividends on the Series E preferred shares are payable quarterly in arrears. The Company does not have the right to redeem the Series E preferred shares except in limited circumstances to preserve the Company’s REIT status. The Series
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 20162020, 2019 and 20152018
E preferred shares have no stated maturity and will not be subject to any sinking fund or mandatory redemption. As ofAdditionally, during the year ended December 31, 2017, the Series E preferred shares are convertible, at the holder’s option, into the Company’s common shares at a conversion rate of 0.4616 common shares per Series E preferred share, which is equivalent to a conversion price of $54.16 per common share. This conversion ratio may increase over time upon certain specified triggering events including if the Company’s common dividends per share exceeds a quarterly threshold of $0.84.
Upon the occurrence of certain fundamental changes,2020, the Company willhad investment spending on build-to-suit development and redevelopment for Experiential properties totaling $46.9 million.
During the year ended December 31, 2019, the Company completed the acquisition of real estate investments and lease related intangibles, for Experiential properties totaling $451.9 million, that consisted of 26 theatre properties for approximately $426.5 million, 1 eat & play property for $1.4 million and 2 cultural properties for $24.0 million. The Company completed the acquisition of real estate investments and lease related intangibles for Education properties totaling $5.9 million that consisted of the acquisition of 2 early childhood education centers.
Additionally, during the year ended December 31, 2019, the Company had investment spending on build-to-suit development and redevelopment for Experiential properties totaling $146.2 million and Education properties totaling $38.6 million.
During the year ended December 31, 2019, the Company completed the construction of the Kartrite Resort and Indoor Waterpark in Sullivan County, New York. The indoor waterpark resort is being operated under certain circumstances increase the conversion ratea traditional REIT lodging structure and facilitated by a numbermanagement agreement with an eligible independent contractor. The related operating revenue and expense are included in other income and other expense in the accompanying consolidated statements of additional common shares or, in lieu thereof, may in certain circumstances elect to adjust(loss) income and comprehensive (loss) income for the conversion rate uponyear ended December 31, 2019. Additionally, during the Series E preferred shares becoming convertible into sharesyear ended December 31, 2018, the Company completed the construction of the public acquiring or surviving company.
The Company may, at its option, causeResorts World Catskills common infrastructure. In June 2016, the Sullivan County Infrastructure Local Development Corporation issued $110.0 million of Series E preferred shares to be automatically converted into that number2016 Revenue Bonds which funded a substantial portion of common shares that are issuable at the then prevailing conversion rate. The Company may exercise its conversion right only if, at certain times, the closing price of the Company’s common shares equals or exceeds 150% of the then prevailing conversion price of the Series E preferred shares.
Owners of the Series E preferred shares generally have no voting rights, except under certain dividend defaults. Upon conversion, the Company may choose to deliver the conversion value to the owners in cash, common shares, or a combination of cash and common shares.
The Board of Trustees declared cash dividends totaling $2.25 per Series E preferred share forsuch construction costs. For the years ended December 31, 2018, 2017 and 2016. There were non-cash distributions associated with conversion adjustments2016, the Company received total reimbursements of $0.2619 and $0.2139 per Series E preferred share for$74.2 million of construction costs. During the yearsyear ended December 31, 2017 and 2016, respectively. The conversion adjustment provision entitles the shareholders of the Series E preferred shares, upon certain quarterly common share dividend thresholds being met, to receive additional common shares of2019, the Company uponreceived an additional reimbursement of $11.5 million.
Dispositions
On December 29, 2020, pursuant to a conversiontenant purchase option, the Company completed the sale of 6 private schools and 4 early childhood education centers for net proceeds of approximately $201.2 million and recognized a gain on sale of approximately $39.7 million. Additionally, during the preferred shares into common shares. The increase in common shares to be received upon a conversion is a deemed distribution for federal income tax purposes.
For tax purposes, the amounts characterized as ordinary income, return of capital and long-term capital gain for cash distributions paid and non-cash deemed distributions per Series E preferred share for the yearsyear ended December 31, 20172020, the Company completed the sale of 3 early education properties, 4 experiential properties and 2016 are as follows:2 land parcels for net proceeds totaling $26.6 million and recognized a combined gain on sale of $10.4 million.
|
| | | | | | | |
| Cash Distributions per Share |
| 2017 | | 2016 |
Taxable ordinary income | $ | 2.1070 |
| | $ | 1.9933 |
|
Return of capital | — |
| | — |
|
Long-term capital gain (1) | 0.1430 |
| | 0.2567 |
|
Totals | $ | 2.2500 |
| | $ | 2.2500 |
|
(1) OfDuring the long-term capital gain, $0.0551 and $0.0668 were unrecaptured section 1250 gains for the yearsyear ended December 31, 20172019, the Company completed the sale of all of its public charter school portfolio through the following transactions:
•On November 22, 2019, the Company sold 47 public charter school related assets, classified as real estate investments, mortgage notes receivable and 2016, respectively.investment in direct financing leases, for net proceeds of approximately $449.6 million. The Company recognized an impairment on this public charter school portfolio sale of $21.4 million that included the write-off of non-cash straight-line rent and effective interest receivables totaling $24.8 million. See Note 4 for additional information related to the impairment.
•The Company sold 10 public charter schools pursuant to tenant purchase options for net proceeds totaling $138.5 million and recognized a combined gain on sale of $30.0 million. |
| | | | | | | |
| Non-cash Distributions per Share |
| 2017 | | 2016 |
Taxable ordinary income | $ | 0.1428 |
| | $ | 0.0883 |
|
Return of capital | 0.1094 |
| | 0.1142 |
|
Long-term capital gain (2) | 0.0097 |
| | 0.0114 |
|
Totals | $ | 0.2619 |
| | $ | 0.2139 |
|
•The Company sold 7 public charter schools (not as result of exercise of tenant purchase options) for net proceeds totaling $44.4 million and recognized a combined gain on sale of $1.9 million.
•See Note 6 for details on repayments of mortgage notes receivable secured by public charter school properties during 2019.
(2) Of
Due to the long-term capital gain, $0.0037Company's disposition of its remaining public charter school portfolio in 2019, the operating results of all public charter schools sold during 2019 have been classified within discontinued operations in the accompanying consolidated statements of (loss) income and $0.0030 were unrecaptured section 1250 gainscomprehensive (loss) income for all periods presented. See Note 17 for further details on discontinued operations.
Additionally, during the yearsyear ended December 31, 20172019, the Company sold 1 attraction property, 1 early childhood education center property and 2016, respectively.
4 land parcels for net proceeds totaling $21.9 million and sold 1
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 20162020, 2019 and 20152018
attraction property and received an $11.0 million cash payment and provided seller mortgage financing of $27.4 million. The Company recognized a combined gain on these sales of $4.2 million. See Note 6 for additional information on the seller mortgage note receivable.
Series F Preferred Shares
4. Impairment Charges
The Company reviews its properties for changes in circumstances that indicate that the carrying value of a property may not be recoverable based on an estimate of undiscounted future cash flows. As a result of the COVID-19 pandemic, the Company experienced vacancies at some of its properties and at others the Company has negotiated lease modifications that included rent reductions. As part of this process, the Company reassessed the expected holding periods and expected future cash flows of such properties, and determined that the estimated cash flows were not sufficient to recover the carrying values of 9 properties. NaN of these 9 properties have operating ground lease arrangements with right-of-use assets. During the year ended December 31, 2020, the Company determined the estimated fair value of the real estate investments and right-of-use assets of these properties using independent appraisals and various purchase offers. The Company reduced the carrying value of the real estate investments, net to $39.5 million and the operating lease right-of-use assets to $13.0 million. The Company recognized impairment charges of $70.7 million on the real estate investments and $15.0 million on the right-of-use assets, which are the amounts that the carrying value of the assets exceeded the estimated fair value.
During the year ended December 31, 2020, the Company also recognized $3.2 million in other-than-temporary impairments related to its equity investments in joint ventures in 3 theatre projects located in China. See Note 7 for further details on these impairments.
On December 21, 2017,November 22, 2019, the Company completed the redemptionsale of substantially all of its public charter school portfolio, consisting of 47 public charter school related assets, for net proceeds of approximately $449.6 million. Prior to the sale, the Company revised its estimated undiscounted cash flows associated with this portfolio, considering a shorter expected hold period and determined that the estimated cash flows were not sufficient to recover the carrying value of this portfolio. The Company estimated the fair value of this portfolio by taking into account the purchase price in the executed sale agreement. The Company recognized an impairment on public charter school portfolio sale of $21.4 million that included the write-off of non-cash straight-line rent and effective interest receivables totaling $24.8 million. This impairment and the operating results of all 5.0of the public charter schools sold in 2019 have been classified within discontinued operations in the accompanying consolidated statements of (loss) income and comprehensive (loss) income. See Note 17 for further details on discontinued operations.
During the year ended December 31, 2019, the Company entered into an agreement to sell a theatre property for approximately $6.2 million. As a result, the Company revised its estimated undiscounted cash flow associated with this property, considering a shorter expected hold period and determined that the estimated cash flow was not sufficient to recover the carrying value of this property. The Company estimated the fair value of this property by taking into account the purchase price in the executed sale agreement. The Company recorded an impairment charge of approximately $2.2 million, of its outstanding 6.625% Series F cumulative redeemable preferred shares (Series F preferred shares). The shares were redeemed at a redemption price of $25.299045 per share. The pricewhich is the sumamount that the carrying value of the $25.00 per share liquidation preferenceasset exceeds the estimated fair value.
During the year ended December 31, 2018, the Company entered into an agreement with Children’s Learning Adventure USA (CLA) in which CLA relinquished control of 4 of the Company’s properties that were still under development as the Company no longer intended to develop these properties for CLA. As a result, the Company revised its estimated undiscounted cash flows for these 4 properties, considering shorter expected holding periods, and a dividend per sharedetermined that those estimated cash flows were not sufficient to recover the carrying values of $0.299045 which equalsthese 4 properties. During the quarterly dividend prorated upyear ended December 31, 2018, the Company determined the estimated fair value of these properties using Level 3 inputs, including independent appraisals of these properties, and reduced the carrying value of these assets to but not including$9.8 million, recording an impairment charge of $16.5 million. The charge was primarily related to the redemption date for a total aggregate redemption pricecost of approximately $126.5 million. In conjunction withimprovements specific to the redemption,development of CLA’s prototype.
During the year ended December 31, 2018, the Company recognized a $10.7 million impairment charge representingrelated to the original issuance costsCompany’s guarantees of the payment of 2 economic development revenue bonds secured by leasehold
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
interests and improvements at 2 theatres in Louisiana. In accordance with Topic 460, Guarantees, the Company recorded an asset and liability at the inception of the guarantees at fair value, which represented the Company's obligation to stand ready to perform under the terms of the guarantees. During the year ended December 31, 2018, the Company determined that were paida portion of its asset was no longer recoverable and recorded an impairment charge of $7.8 million.
A contingent future obligation is recognized in 2012accordance with the provisions of Topic 450, Accounting for Contingencies. In the case of the Company’s guarantees, the contingent future obligation is the future payment of the bonds by the Company. At the inception of the guarantees, the Company determined that its future payment of the bonds was not probable, therefore no contingent future obligation was recorded. For the year ended December 31, 2018, the Company determined that its future payment on a portion of the bond obligations was probable due to inadequate performance of the theatre properties and other redemption related expenses. The Series F preferred share redemption costs, which reduced net income availablefailure of the debtor under the bonds to common shareholdersperform. Accordingly, for the year ended December 31, 2017, were $4.52018, the Company recorded an incremental contingent liability of $2.9 million, which in addition to the $7.8 million discussed above, resulted in a total impairment charge recognized relating to the guarantees of $10.7 million.
5. Accounts Receivable
The Boardfollowing table summarizes the carrying amounts of Trusteesaccounts receivable as of December 31, 2020 and 2019 (in thousands):
| | | | | | | | | | | |
| 2020 | | 2019 |
Receivable from tenants | $ | 81,120 | | | $ | 11,373 | |
Receivable from non-tenants | 505 | | | 2,103 | |
| | | |
| | | |
| | | |
Straight-line rent receivable | 34,568 | | | 73,382 | |
| | | |
| | | |
Total | $ | 116,193 | | | $ | 86,858 | |
During the year ended December 31, 2020, the Company wrote-off receivables from tenants totaling $27.1 million and straight-line rent receivables totaling $38.0 million directly to rental revenue in the accompanying consolidated statements of (loss) income and comprehensive (loss) income upon determination that the collectibility of these receivables or future lease payments from these tenants was no longer probable. Additionally, the Company determined that future rental revenue related to these tenants will be recognized on a cash basis. The $38.0 million in write-offs of straight-line rent receivables were comprised of $26.5 million of straight-line rent receivable and $11.5 million of sub-lessor ground lease straight-line rent receivable.
As of December 31, 2020, receivable from tenants includes fixed rent payments of approximately $76.0 million that were deferred due to the COVID-19 pandemic and determined to be collectible. Additionally, the Company has amounts due from tenants that were not booked as receivables as the full amounts were not deemed probable of collection as a result of the COVID-19 pandemic. While deferments for this and future periods delay rent payments, these deferments do not release tenants from the obligation to pay the deferred amounts in the future. The repayment terms for these deferments vary by tenant and agreements.
6. Investment in Mortgage Notes and Notes Receivable
Effective January 1, 2020, the Company adopted Topic 326, which requires the Company to estimate and record credit losses for each of its mortgage notes and note receivable. The Company measures expected credit losses on its mortgage notes and notes receivable on an individual basis over the related contractual term as its financial instruments do not have similar risk characteristics. The Company has not experienced historical losses on its mortgage note portfolio; therefore, the Company uses a forward-looking commercial real estate loss forecasting tool to estimate its expected credit losses. The loss forecasting tool is comprised of a probability of default model and a loss given default model that utilizes the Company’s loan specific inputs as well as selected forward-looking macroeconomic variables and mean loss rates. Based on certain inputs, such as origination year, balance, interest rate as well as collateral value and borrower operating income, the model produces life of loan expected losses on a
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
loan-by-loan basis. As of December 31, 2020, the Company did not anticipate any prepayments therefore the contractual term of its mortgage notes was used for the calculation of the expected credit losses. The Company updates the model inputs at each reporting period to reflect, if applicable, any newly originated loans, changes to loan specific information on existing loans and current macroeconomic conditions.
During the year ended December 31, 2020, the Company increased its expected credit losses by $30.7 million from its implementation estimate of $2.2 million. This increase was primarily due to credit loss expense related to notes receivable from one borrower as described below as well as adjustments to current macroeconomic conditions resulting from the economic uncertainty and the rapidly changing environment surrounding the COVID-19 pandemic.
In response to the COVID-19 pandemic, the Company deferred interest payments for 7 borrowers. The deferrals require the borrower to pay the deferred interest in future periods. The Company assessed the deferrals and determined that the modifications did not result in troubled debt restructurings at December 31, 2020.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
Investment in mortgage notes, including related accrued interest receivable, at December 31, 2020 and 2019 consists of the following (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year of Origination | Interest Rate | Maturity Date | Periodic Payment Terms | Outstanding principal amount of mortgage | Carrying amount as of December 31, | Unfunded commitments |
Description | 2020 | 2019 (1) | December 31, 2020 |
Attraction property Powells Point, North Carolina | 2019 | 7.75 | % | 6/30/2025 | Interest only | $ | 28,007 | | $ | 27,045 | | $ | 27,423 | | $ | 0 | |
Fitness & wellness property Omaha, Nebraska | 2017 | 7.85 | % | 1/3/2027 | Interest only | 10,905 | | 11,225 | | 10,977 | | 0 | |
Fitness & wellness property Merriam, Kansas | 2019 | 7.55 | % | 7/31/2029 | Interest only | 9,095 | | 9,355 | | 5,985 | | 248 | |
Ski property Girdwood, Alaska | 2019 | 8.24 | % | 12/31/2029 | Interest only | 40,869 | | 40,680 | | 37,000 | | 16,131 | |
Fitness & wellness property Omaha, Nebraska | 2016 | 7.85 | % | 6/30/2030 | Interest only | 8,410 | | 8,630 | | 5,803 | | 2,508 | |
Experiential lodging property Nashville, Tennessee | 2019 | 7.01 | % | 9/30/2031 | Interest only | 71,223 | | 67,235 | | 70,396 | | 0 | |
Eat & play property Austin, Texas | 2012 | 11.31 | % | 6/1/2033 | Principal & Interest-fully amortizing | 11,361 | | 11,929 | | 11,582 | | 0 | |
Ski property West Dover and Wilmington, Vermont | 2007 | 11.78 | % | 12/1/2034 | Interest only | 51,050 | | 51,031 | | 51,050 | | 0 | |
Four ski properties Ohio and Pennsylvania | 2007 | 10.91 | % | 12/1/2034 | Interest only | 37,562 | | 37,413 | | 37,562 | | 0 | |
Ski property Chesterland, Ohio | 2012 | 11.38 | % | 12/1/2034 | Interest only | 4,550 | | 4,396 | | 4,550 | | 0 | |
Ski property Hunter, New York | 2016 | 8.57 | % | 1/5/2036 | Interest only | 21,000 | | 21,000 | | 21,000 | | 0 | |
Eat & play property Midvale, Utah | 2015 | 10.25 | % | 5/31/2036 | Interest only | 17,505 | | 18,289 | | 17,505 | | 0 | |
Eat & play property West Chester, Ohio | 2015 | 9.75 | % | 8/1/2036 | Interest only | 18,068 | | 18,830 | | 18,068 | | 0 | |
Private school property Mableton, Georgia | 2017 | 9.02 | % | 4/30/2037 | Interest only | 5,088 | | 5,278 | | 5,048 | | 0 | |
Fitness & wellness property Fort Collins, Colorado | 2018 | 7.85 | % | 1/31/2038 | Interest only | 10,292 | | 10,408 | | 10,360 | | 0 | |
Early childhood education center Lake Mary, Florida | 2019 | 7.87 | % | 5/9/2039 | Interest only | 4,200 | | 4,348 | | 4,258 | | 0 | |
Eat & play property Eugene, Oregon | 2019 | 8.13 | % | 6/17/2039 | Interest only | 14,700 | | 14,799 | | 14,800 | | 0 | |
Early childhood education center Lithia, Florida | 2017 | 8.25 | % | 10/31/2039 | Interest only | 3,959 | | 3,737 | | 4,024 | | 0 | |
| | | | | $ | 367,844 | | $ | 365,628 | | $ | 357,391 | | $ | 18,887 | |
(1) Balances as of December 31, 2019 are prior to the adoption of ASC Topic 326.
Investment in notes receivable, including related accrued interest receivable, was $7.3 million and $14.0 million at December 31, 2020 and 2019, respectively, and is included in Other assets in the accompanying consolidated balance sheets.
During the year ended December 31, 2020, the Company entered into an amended and restated loan and security agreement with 1 of its notes receivable borrowers in response to the impacts of the COVID-19 pandemic on the borrower. The restated note receivable consists of the previous note balance of $6.5 million and provides the borrower with a term loan for up to $13.0 million and a $6.0 million revolving line of credit. The restated note receivable has a maturity date of June 30, 2032 and the line of credit matures on December 31, 2022. Interest is deferred through June 30, 2022, at which time monthly principal and interest payments will be due over 10 years. Although the borrower is not in default, nor has the borrower declared bankruptcy, the Company determined these modifications resulted in a troubled debt restructuring (TDR) at December 31, 2020 due to the impacts of the
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
COVID-19 pandemic on the borrower's financial condition. These note receivables are considered collateral dependent and expected credit losses are based on the fair value of the underlying collateral at the reporting date. The notes are secured by the working capital and non-real estate assets of the borrower. The Company assessed the fair value of the collateral as of December 31, 2020 and recognized credit loss expense for the year ended December 31, 2020 consisting of the outstanding principal balance of $12.6 million and the $12.9 million unfunded commitment on the term loan and line of credit as of December 31, 2020. Income for this borrower will be recognized on a cash basis.
At December 31, 2020, the Company's investment in this note receivable was a variable interest and the underlying entity is a VIE. The Company is not the primary beneficiary of this VIE, as the Company does not individually have the power to direct the activities that are most significant to the entity and accordingly, this investment is not consolidated. The Company's maximum exposure to loss associated with this VIE is limited to the Company's outstanding note receivable of $12.6 million and the unfunded commitment of $12.9 million, both of which were fully reserved in the allowance for credit losses at December 31, 2020.
The following summarizes the activity within the allowance for credit losses related to mortgage notes, unfunded commitments and notes receivable for the year ended December 31, 2020 (in thousands):
| | | | | | | | | | | | | | | | | |
| Mortgage notes receivable | Unfunded commitments - mortgage notes | Notes receivable | Unfunded commitments - notes receivable | Total |
Allowance for credit losses at January 1, 2020 | $ | 2,000 | | $ | 114 | | $ | 49 | | $ | 0 | | $ | 2,163 | |
Credit loss expense | 5,000 | | 24 | | 12,805 | | 12,866 | | 30,695 | |
Charge-offs | 0 | | 0 | | 0 | | 0 | | 0 | |
Recoveries | 0 | | 0 | | 0 | | 0 | | 0 | |
Allowance for credit losses | $ | 7,000 | | $ | 138 | | $ | 12,854 | | $ | 12,866 | | $ | 32,858 | |
7. Unconsolidated Real Estate Joint Ventures
As of December 31, 2020 and 2019, the Company had a 65% investment interest in 2 unconsolidated real estate joint ventures related to 2 experiential lodging properties located in St. Petersburg Beach, Florida. The Company's partner, Gencom Acquisition, LLC and its affiliates, own the remaining 35% interest in the joint ventures. There are 2 separate joint ventures, one that holds the investment in the real estate of the experiential lodging properties and the other that holds lodging operations, which are facilitated by a management agreement with an eligible independent contractor. The Company's investment in the operating entity is held in a taxable REIT subsidiary (TRS). The Company accounts for its investment in these joint ventures under the equity method of accounting. As of December 31, 2020 and 2019, the Company had invested $27.4 million and $29.7 million, respectively, in these joint ventures.
The joint venture that holds the real property has a secured mortgage loan of $85.0 million at December 31, 2020, that is due April 1, 2022. The note can be extended for 2 additional 1 year periods upon the satisfaction of certain conditions. Additionally, the Company has guaranteed the completion of the renovations in the amount of approximately $32.7 million, with $23.9 million remaining to fund at December 31, 2020. The mortgage loan bears interest at an annual rate equal to the greater of 6.00% or LIBOR plus 3.75%. Interest is payable monthly beginning on May 1, 2019 until the stated maturity date of April 1, 2022, which can be extended to April 1, 2023. The joint venture has an interest rate cap agreement to limit the variable portion of the interest rate (LIBOR) on this note to 3.0% from March 28, 2019 to April 1, 2023. In response to the COVID-19 pandemic, on May 28, 2020, the joint venture was granted a three-month interest deferral, which is required to be paid on the maturity date of the loan and is not considered a troubled debt restructuring.
The Company recognized losses of $4.0 million and $140 thousand and income of $52 thousand during the years ended December 31, 2020, 2019 and 2018, respectively, and received 0 distributions during the years ended December 31, 2020, 2019 and 2018 related to the equity investment in these joint ventures.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
As of December 31, 2020 and 2019, the Company's investments in these joint ventures were considered to be variable interests and the underlying entities are VIEs. The Company is not the primary beneficiary of the VIEs as the Company does not individually have the power to direct the activities that are most significant to the joint ventures and accordingly these investments are not consolidated. The Company's maximum exposure to loss at December 31, 2020, is its investment in the joint ventures of $27.4 million as well as the Company's guarantee of the estimated costs to complete renovations of approximately $23.9 million.
In addition, as of December 31, 2020 and 2019, the Company had invested $0.8 million and $4.6 million, respectively, in unconsolidated joint ventures for 3 theatre projects located in China. During the year ended December 31, 2020, the Company recognized $3.2 million in other-than-temporary impairment charges on these equity investments. The Company determined the estimated fair value of these investments based primarily on discounted cash flow projections. The Company recognized losses of $559 thousand, $241 thousand and $74 thousand, during the years ended December 31, 2020, 2019 and 2018, respectively, and received distributions of $112 thousand and $567 thousand, from its investment in these joint ventures for the years ended December 31, 2019 and 2018, respectively. NaN distributions were received during the year ended December 31, 2020.
8. Debt
Debt at December 31, 2020 and 2019 consists of the following (in thousands):
| | | | | | | | | | | | | |
| | 2020 | | 2019 | |
| Unsecured revolving variable rate credit facility, LIBOR + 1.625% at December 31, 2020, due February 27, 2022 (1) | $ | 590,000 | | | $ | 0 | | |
| Unsecured term loan payable, LIBOR + 2.00% at December 31, 2020 with $350,000 fixed at 4.40% and $50,000 fixed at 4.60%, due February 27, 2023 (1) | 400,000 | | | 400,000 | | |
| Senior unsecured notes payable, 5.25%, due July 15, 2023 (2) | 275,000 | | | 275,000 | | |
| Senior unsecured notes payable, 5.60% at December 31, 2020, due August 22, 2024 (3) | 148,000 | | | 148,000 | | |
| Senior unsecured notes payable, 4.50%, due April 1, 2025 (2) | 300,000 | | | 300,000 | | |
| Senior unsecured notes payable, 5.81% at December 31, 2020, due August 22, 2026 (3) | 192,000 | | | 192,000 | | |
| Senior unsecured notes payable, 4.75%, due December 15, 2026 (2) | 450,000 | | | 450,000 | | |
| Senior unsecured notes payable, 4.50%, due June 1, 2027 (2) | 450,000 | | | 450,000 | | |
| Senior unsecured notes payable, 4.95%, due April 15, 2028 (2) | 400,000 | | | 400,000 | | |
| Senior unsecured notes payable, 3.75%, due August 15, 2029 (2) | 500,000 | | | 500,000 | | |
| Bonds payable, variable rate, fixed at 1.39% through September 30, 2024, due August 1, 2047 | 24,995 | | | 24,995 | | |
| Less: deferred financing costs, net | (35,552) | | | (37,165) | | |
| Total | $ | 3,694,443 | | | $ | 3,102,830 | | |
(1) At December 31, 2020, the Company had $590.0 million outstanding under its $1.0 billion unsecured revolving credit facility with interest at a floating rate of LIBOR plus 1.625% (with a LIBOR floor of 0.50%), which was 2.125% with a facility fee of 0.375%. Interest is payable monthly. Subsequent to December 31, 2020, the Company paid down $500.0 million on this credit facility.
The Company's unsecured term loan facility had a balance of $400.0 million with interest at a floating rate of LIBOR plus 2.00% (with a LIBOR floor of 0.50%), which was 2.5% on December 31, 2020. Interest is payable monthly. In addition, there is a $1.0 billion accordion feature on the combined unsecured revolving credit and term loan facility (the combined facility) that increases the maximum borrowing amount available under the combined facility, subject to lender approval, from $1.4 billion to $2.4 billion. If the Company exercises all or any portion of the accordion feature, the resulting increase in the combined facility may have a shorter or longer maturity date and different pricing terms. The combined facility contains financial covenants or restrictions that limit the Company's levels of consolidated debt, secured debt, investment levels outside certain categories and dividend distributions, and require the Company to maintain a minimum consolidated tangible net worth and meet certain coverage levels for
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
fixed charges and debt services. As discussed further below, certain of these covenants were modified or waived during 2020.
In light of the continuing financial and operational impacts of the COVID-19 pandemic on the Company and its tenants and borrowers, on June 29, 2020 and November 3, 2020, the Company amended its Consolidated Credit Agreement, which governs its unsecured revolving credit facility and its unsecured term loan facility. As described below, the amendments modified certain provisions and waived the Company's obligation to comply with certain covenants under this debt agreement through December 31, 2021. The Company can elect to terminate the Covenant Relief Period early, subject to certain conditions.
As described below, the loans subject to the modifications bear interest at higher rates during the Covenant Relief Period and will return to the original pre-waiver levels at the end of such period, subject to certain conditions. The rates during and after the Covenant Relief Period continue to be subject to change based on unsecured debt ratings, as defined in the agreement. The amendments also imposed the additional restrictions on the Company discussed below during the Covenant Relief Period. In addition, during the Covenant Relief Period, the amendments require the Company to cause certain of its key subsidiaries to guarantee the Company's obligations based on its unsecured debt ratings, and the Company will be required to pledge the equity interests of certain of those subsidiary guarantors upon the occurrence of certain events, however both of these requirements end when the Covenant Relief Period is over.
During the Covenant Relief Period, the initial interest rates for the revolving credit facility and term loan facility were set at LIBOR plus 1.375% and LIBOR plus 1.75%, respectively, (with a LIBOR floor of 0.50%) and the facility fee on the revolving credit facility was increased to 0.375%. On August 20, 2020, as a result of a downgrade of the Company's unsecured debt rating by Moody's to Baa3, the spreads on the revolving credit and term loan facilities each increased by 0.25%. During the fourth quarter of 2020, the Company's unsecured debt rating was downgraded to BB+ by both Fitch and Standard & Poor's. As a result of these downgrades, certain of the Company's key subsidiaries guarantee the Company's obligations under its bank credit facilities, private placement notes and other outstanding senior unsecured notes in accordance with existing agreements with the holders of such indebtedness. See Note 20 for the Company's supplemental guarantor financial information. If the Company's unsecured debt rating is further downgraded by Moody's, the interest rates on the revolving credit and term loan facilities would both increase by 0.35% during the Covenant Relief Period. After the Covenant Relief Period, the interest rates for the revolving credit and term loan facilities, based on the Company's current unsecured debt ratings, are scheduled to return to LIBOR plus 1.20% and LIBOR plus 1.35%, respectively, (with a LIBOR floor of 0) and the facility fee will be 0.25%, however these rates are subject to change based on the Company's unsecured debt ratings.
The amendments to the Company's revolving credit and term loan facilities permanently modified certain financial covenants and provided relief from compliance with certain financial covenants during the Covenant Relief Period, as follows: (i) a new minimum liquidity financial covenant of $500.0 million during the Covenant Relief Period was added; (ii) compliance with the total-debt-to-total-asset-value, the maximum-unsecured-debt-to-unencumbered-asset-value, the minimum unsecured interest coverage ratio and the minimum fixed charge ratio financial covenants was suspended for the period beginning June 29, 2020 and ending on the earlier to occur of December 31, 2021 or the earlier termination of the Covenant Relief Period; (iii) permanent amendments to the unsecured-debt-to-unencumbered-asset-value financial covenant were made to allow short-term indebtedness to be offset by unrestricted cash in the calculation and to allow unrestricted cash not otherwise offset against short-term indebtedness to be counted as an unencumbered asset; and (iv) permanent amendments to financial covenants were made to allow accrued deferred payments to be included as recurring property revenue in these calculations. The amendments also imposed additional restrictions on the Company and its subsidiaries during the Covenant Relief Period, including limitations on certain investments, incurrences of indebtedness, capital expenditures and payment of dividends or other distributions and stock repurchases, in each case subject to certain exceptions.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
In connection with the amendments, $0.1 million of fees paid to third parties were expensed and included in costs associated with loan refinancing in the accompanying consolidated statements of (loss) income and comprehensive (loss) income for the year ended December 31, 2020. In addition, the Company paid $5.1 million in fees to existing lenders that were capitalized in deferred financing costs and amortized as part of the effective yield. These fees consisted of $3.6 million related to the unsecured revolving credit facility and included in other assets and $1.5 million related to the term loan and shown as a reduction of debt.
As described under (3) below, on June 29, 2020 and December 24, 2020, the Company also amended its Note Purchase Agreement which governs its private placement notes. Under the most favored nations clause included in the Consolidated Credit Agreement, the additional or more restrictive covenants included in the private placement amendments are incorporated into the Consolidated Credit Agreement.
(2) These notes contain various covenants, including: (i) a limitation on incurrence of any debt that would cause the ratio of the Company’s debt to adjusted total assets to exceed 60%; (ii) a limitation on incurrence of any secured debt that would cause the ratio of the Company’s secured debt to adjusted total assets to exceed 40%; (iii) a limitation on incurrence of any debt that would cause the Company’s debt service coverage ratio to be less than 1.5 times; and (iv) the maintenance at all times of the Company's total unencumbered assets such that they are not less than 150% of the Company’s outstanding unsecured debt.
(3) In light of the continuing financial and operational impacts of the COVID-19 pandemic on the Company and its tenants and borrowers, on June 29, 2020 and December 24, 2020, the Company amended its Note Purchase Agreement, which governs its private placement notes. The amendments modified certain provisions and waived the Company's obligation to comply with certain covenants under these debt agreements through October 1, 2021. The Company can elect to extend such period through January 1, 2022 and may elect to terminate the Covenant Relief Period early, subject to certain conditions. These notes: (i) contain certain financial and other covenants that generally conform to the combined credit facility described above; (ii) provide investors thereunder certain additional guaranty and lien rights, in the event that certain events occur; (iii) contain certain "most favored lender" provisions; and (iv) impose restrictions on debt that can be incurred by certain subsidiaries of the Company. As discussed further below, certain of these covenants were modified or waived during 2020.
The amendments provided for an immediate 0.65% waiver premium to be paid on the private placement notes during the Covenant Relief Period. In addition, during the fourth quarter of 2020, as a result of downgrades of the Company's unsecured debt rating to BB+ by both Fitch and Standard and Poor's, the spreads on the private placement notes each increased by an additional 0.60%. As a result, the interest rates for the private placement notes were increased to 5.60% and 5.81% for the Series A notes due 2024 and the Series B notes due 2026, respectively. After the Covenant Relief Period, the interest rates for the private placement notes are scheduled to return to 4.35% and 4.56% for the Series A notes due 2024 and the Series B notes due 2026, respectively.
If the Company elects to extend the Covenant Relief Period until January 1, 2022, the Company must, or must cause certain of its subsidiaries to, grant mortgages on certain unencumbered properties to a collateral agent, on behalf of the holders of the private placement notes and the lenders under the Company's Consolidated Credit Agreement. If the Company provides such mortgages, they must remain in effect until the later of two consecutive fiscal quarters of demonstrated covenant compliance or June 30, 2022, however the additional 0.60% interest rate premium as a result of the downgrades in the Company's unsecured debt rating is removed while mortgages are outstanding. If the Company elects to extend the Covenant Relief Period until January 1, 2022 as described above, the Covenant Relief Period will automatically end on October 29, 2021 if the Company fails to provide such mortgages.
The amendments provide relief from compliance with the following financial covenants during the Covenant Relief Period: the total-debt-to-total-asset-value covenant; the maximum-unsecured-debt-to-unencumbered-asset-value covenant; the minimum unsecured interest coverage ratio; and the minimum fixed charge ratio. The amended Note Purchase Agreement modifies the maximum secured debt to total asset value covenant as follows: (i) neither the Company nor any of its subsidiaries may incur any secured debt during the period beginning on December 24, 2020 and ending on the last day of the Covenant Relief Period, subject to certain exceptions; and (ii) after the Covenant
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
Relief Period the ratio of secured debt to total asset value is reduced from 0.35 to 1.00 to 0.25 to 1.00 until the Company can demonstrate covenant compliance for at least two fiscal quarters.
The amendments impose certain restrictions on the Company during the Covenant Relief Period, including limitations on certain investments, incurrences of indebtedness, capital expenditures, payment of dividends or other distributions and stock repurchases, and maintenance of a minimum liquidity amount of $500.0 million, in each case subject to certain exceptions. The amendments include the following restrictions: (i) the limitation on investments and guarantees of certain indebtedness from October 1, 2020 to the end of the Covenant Relief Period was set at $175.0 million; and (ii) the limitation on capital expenditures from October 1, 2020 to the end of the Covenant Relief Period was set at $175.0 million. In addition, the amount of proceeds from assets sales that are exempt from the requirement to apply such proceeds to the prepayment of outstanding indebtedness under the Company's existing bank credit agreement and the private placement notes is $150.0 million, subject to certain exceptions relating to the sale of specified assets. In addition, the Company is prohibited from voluntarily prepaying its existing public senior notes during the Covenant Relief Period or its term loan debt under its bank facility during the Covenant Relief Period.
In connection with the amendments, $1.5 million of fees paid to third parties were expensed and included in costs associated with loan refinancing in the accompanying consolidated statements of (loss) income and comprehensive (loss) income for the year ended December 31, 2020. In addition, the Company paid $0.9 million in fees to existing lenders that were capitalized in deferred financing costs and amortized as part of the effective yield and shown as a reduction of debt.
Subsequent to year-end, the Company paid down principal of approximately $23.8 million on its private placement notes resulting from the sale of assets in accordance with the amendments.
Certain of the Company’s debt agreements contain customary restrictive covenants related to financial and operating performance as well as certain cross-default provisions. The Company was in compliance with all financial covenants under the Company's debt instruments at December 31, 2020.
Principal payments due on long-term debt obligations subsequent to December 31, 2020 (without consideration of any extensions) are as follows (in thousands):
| | | | | |
| Amount |
Year: | |
2021 | $ | 0 | |
2022 | 590,000 | |
2023 | 675,000 | |
2024 | 148,000 | |
2025 | 300,000 | |
Thereafter | 2,016,995 | |
Less: deferred financing costs, net | (35,552) | |
Total | $ | 3,694,443 | |
The Company capitalizes a portion of interest costs as a component of property under development. The following is a summary of interest expense, net from continuing operations for the years ended December 31, 2020, 2019 and 2018 (in thousands):
| | | | | | | | | | | | | | | | | |
| 2020 | | 2019 | | 2018 |
Interest on loans | $ | 152,058 | | | $ | 140,697 | | | $ | 137,570 | |
| | | | | |
Amortization of deferred financing costs | 6,606 | | | 6,192 | | | 5,797 | |
| | | | | |
Credit facility and letter of credit fees | 3,064 | | | 2,265 | | | 2,411 | |
Interest cost capitalized | (1,233) | | | (4,975) | | | (9,541) | |
Interest income | (2,820) | | | (2,177) | | | (367) | |
| | | | | |
Interest expense, net | $ | 157,675 | | | $ | 142,002 | | | $ | 135,870 | |
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
9. Derivative Instruments
All derivatives are recognized at fair value in the consolidated balance sheets within the line items "Other assets" and "Accounts payable and accrued liabilities" as applicable. The Company has elected not to offset its derivative position for purposes of balance sheet presentation and disclosure. The Company had derivative assets of $1.1 million at December 31, 2019 and had 0 derivative assets at December 31, 2020. The Company had derivative liabilities of $14.0 million and $4.5 million at December 31, 2020 and 2019, respectively. The Company has not posted or received collateral with its derivative counterparties as of December 31, 2020 and 2019. See Note 10 for disclosures relating to the fair value of the derivative instruments.
Risk Management Objective of Using Derivatives
The Company is exposed to certain risk arising from both its business operations and economic conditions including the effect of changes in foreign currency exchange rates on foreign currency transactions and interest rates on its LIBOR based borrowings. The Company manages this risk by following established risk management policies and procedures including the use of derivatives. The Company’s objective in using derivatives is to add stability to reported earnings and to manage its exposure to foreign exchange and interest rate movements or other identified risks. To accomplish this objective, the Company primarily uses interest rate swaps, cross-currency swaps and foreign currency forwards.
Cash Flow Hedges of Interest Rate Risk
The Company uses interest rate swaps as its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt or payment of variable-rate amounts from a counterparty which results in the Company recording net interest expense that is fixed over the life of the agreements without exchange of the underlying notional amount.
As of December 31, 2020, the Company had 4 interest rate swap agreements designated as cash flow hedges of interest rate risk related to its variable rate unsecured term loan facility totaling $400.0 million. Additionally, at December 31, 2020, the Company had an interest rate swap agreement designated as a cash flow hedge of interest rate risk related to its variable rate secured bonds totaling $25.0 million. Interest rate swap agreements outstanding at December 31, 2020 are summarized below:
| | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | | Notional Amount (in millions) | | Index | | Maturity |
4.3950% | (1) | | $ | 116.7 | | | USD LIBOR | | February 7, 2022 |
4.4075% | (1) | | 116.7 | | | USD LIBOR | | February 7, 2022 |
4.4080% | (1) | | 116.6 | | | USD LIBOR | | February 7, 2022 |
4.5950% | (1) | | 50.0 | | | USD LIBOR | | February 7, 2022 |
Total | | | $ | 400.0 | | | | | |
| | | | | | | |
1.3925% | | | 25.0 | | | USD LIBOR | | September 30, 2024 |
Total | | | $ | 25.0 | | | | | |
(1) As discussed in Note 8, on June 29, 2020 and November 3, 2020, the Company amended its Consolidated Credit Agreement. The above fixed rates increased by 0.90% during the Covenant Relief Period, and as a result of the Company's unsecured debt ratings being downgraded and a LIBOR floor of 0.50% being established. The rates are scheduled to return to previous levels as defined in the agreement at the end of this period, subject to the Company's unsecured debt ratings.
The change in the fair value of interest rate derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (AOCI) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings within the same income statement line item as the earnings effect of the hedged transaction.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. As of December 31, 2020, the Company estimates that during the twelve months ending December 31, 2020, $8.2 million will be reclassified from AOCI to interest expense.
Cash Flow Hedges of Foreign Exchange Risk
The Company is exposed to foreign currency exchange risk against its functional currency, USD, on CAD denominated cash flow from its 4 Canadian properties. The Company uses cross-currency swaps to mitigate its exposure to fluctuations in the USD-CAD exchange rate on cash inflows associated with these properties which should hedge a significant portion of the Company's expected CAD denominated cash flows.
During the year ended December 31, 2020, the Company entered into USD-CAD cross-currency swaps that were effective July 1, 2020 with a fixed original notional value of $100.0 million CAD and $76.6 million USD. The net effect of this swap is to lock in an exchange rate of $1.31 CAD per USD on approximately $7.2 million annual CAD denominated cash flows through June 2022.
The change in the fair value of foreign currency derivatives designated and that qualify as cash flow hedges of foreign exchange risk is recorded in AOCI and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings within the same income statement line item as the earnings effect of the hedged transaction. As of December 31, 2020, the Company estimates that during the twelve months ending December 31, 2020, $0.2 million of losses will be reclassified from AOCI to other expense.
Net Investment Hedges
The Company is exposed to fluctuations in the USD-CAD exchange rate on its net investments in Canada. As such, the Company uses either currency forward agreements or cross-currency swaps to manage its exposure to changes in foreign exchange rates on certain of its foreign net investments. As of December 31, 2020, the Company had the following cross-currency swaps designated as net investment hedges:
| | | | | | | | | | | | | | |
Fixed 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.
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.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
Below is a summary of the effect of derivative instruments on the consolidated statements of changes in equity and income for the years ended December 31, 2020, 2019 and 2018:
Effect of Derivative Instruments on the Consolidated Statements of Changes in Equity and Comprehensive (Loss) Income for the Years Ended December 31, 2020, 2019 and 2018
(Dollars in thousands)
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
Description | 2020 | | 2019 | | 2018 |
Cash Flow Hedges | | | | | |
Interest Rate Swaps | | | | | |
Amount of (Loss) Gain Recognized in AOCI on Derivative | $ | (11,612) | | | $ | (7,476) | | | $ | 3,172 | |
Amount of (Expense) Income Reclassified from AOCI into Earnings (1) | (6,159) | | | 1,138 | | | 1,324 | |
Cross Currency Swaps | | | | | |
Amount of Gain (Loss) Recognized in AOCI on Derivative | 5 | | | (450) | | | 1,689 | |
Amount of Income Reclassified from AOCI into Earnings (2) | 441 | | | 545 | | | 1,426 | |
Net Investment Hedges | | | | | |
Cross Currency Swaps | | | | | |
Amount of (Loss) Gain Recognized in AOCI on Derivative | (4,664) | | | (4,454) | | | 5,108 | |
Amount of Income Recognized in Earnings (2) (3) | 599 | | | 556 | | | 271 | |
Currency Forward Agreements | | | | | |
Amount of Gain Recognized in AOCI on Derivative | 0 | | | 0 | | | 8,560 | |
| | | | | |
Total | | | | | |
Amount of (Loss) Gain Recognized in AOCI on Derivative | $ | (16,271) | | | $ | (12,380) | | | $ | 18,529 | |
Amount of (Expense) Income Reclassified from AOCI into Earnings | (5,718) | | | 1,683 | | | 2,750 | |
Amount of Income Recognized in Earnings | 599 | | | 556 | | | 271 | |
| | | | | |
Interest expense, net in accompanying consolidated statements of (loss) income and comprehensive (loss) income | $ | 157,675 | | | $ | 142,002 | | | $ | 135,870 | |
Other income in accompanying consolidated statements of (loss) income and comprehensive (loss) income | $ | 9,139 | | | $ | 25,920 | | | $ | 2,076 | |
(1) Included in “Interest expense, net” in accompanying consolidated statements of (loss) income and comprehensive (loss) income.
(2) Included in "Other income" in the accompanying consolidated statements of (loss) income and comprehensive (loss) income.
(3) Amounts represent derivative gains excluded from the effectiveness testing.
Credit-risk-related Contingent Features
The Company has agreements with each of its interest rate derivative counterparties that contain a provision where if the Company defaults on any of its obligations for borrowed money or credit in an amount exceeding $50.0 million and such default is not waived or cured within a specified period of time, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its interest rate derivative obligations.
As of December 31, 2020, the fair value of the Company's derivatives in a liability position related to these agreements was $14.0 million. If the Company breached any of the contractual provisions of these derivative contracts, it would be required to settle its obligations under the agreements at their termination value of $14.8 million. As of December 31, 2020, the Company had not posted any collateral related to these agreements and was not in breach of any provisions in these agreements.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
10. Fair Value Disclosures
The Company has certain financial instruments that are required to be measured under the FASB’s Fair Value Measurement guidance. The Company currently does not have any non-financial assets and 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 has 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 December 31, 2020, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives and therefore, has classified its derivatives as Level 2 within the fair value reporting hierarchy.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
The table below presents the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2020 and 2019, 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 December 31, 2020 and 2019
(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 |
2020: | | | | | | | |
| | | | | | | |
Cross Currency Swaps** | $ | 0 | | | $ | (4,271) | | | $ | 0 | | | $ | (4,271) | |
| | | | | | | |
| | | | | | | |
Interest Rate Swap Agreements** | $ | 0 | | | $ | (9,723) | | | $ | 0 | | | $ | (9,723) | |
2019: | | | | | | | |
Cross Currency Swaps* | $ | 0 | | | $ | 828 | | | $ | 0 | | | $ | 828 | |
| | | | | | | |
| | | | | | | |
Interest Rate Swap Agreements* | $ | 0 | | | $ | 225 | | | $ | 0 | | | $ | 225 | |
Interest Rate Swap Agreements** | $ | 0 | | | $ | (4,495) | | | $ | 0 | | | $ | (4,495) | |
*Included in "Other assets" in the accompanying consolidated balance sheet.
** Included in "Accounts payable and accrued liabilities" 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 during the year ended December 31, 2020 and 2019, aggregated by the level in the fair value hierarchy within which those measurements fall.
Assets Measured at Fair Value on a Non-Recurring Basis During the Year Ended
December 31, 2020 and 2019
(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 measurement date |
2020: | | | | | | | |
Real estate investments, net | $ | — | | | $ | 29,684 | | | $ | 9,860 | | | $ | 39,544 | |
Operating lease right-of-use assets | — | | | — | | | 12,953 | | | 12,953 | |
Investment in joint ventures | — | | | — | | | 771 | | | 771 | |
Other assets (1) | — | | | 0 | | | 0 | | | 0 | |
2019: | | | | | | | |
Real estate investments, net | $ | — | | | $ | 6,160 | | | $ | 0 | | | $ | 6,160 | |
(1) Includes collateral dependent notes receivable, which are presented within other assets in the accompanying consolidated balance sheet.
As discussed further in Note 4, during the year ended December 31, 2020, the Company recorded impairment charges of $85.7 million, of which $70.7 million related to real estate investments, net and $15.0 million related to operating lease right-of-use assets. Management estimated the fair value of these investments taking into account various factors including purchase offers, independent appraisals, shortened hold periods and current market conditions. The Company determined, based on the inputs, that its valuation of 6 of its properties with purchase offers were classified as Level 2 of the fair value hierarchy and were measured at fair value. NaN properties, 2 of which included operating lease right-of-use assets, were measured at fair value using independent appraisals which used discounted cash flow models. The significant inputs and assumptions used in the real estate appraisals included market rents which ranged from $9 per square foot to $28 per square foot, discount rates which ranged from 9.0% to 12.3% and a terminal capitalization rate of 8.75% for the property not under ground lease. Significant inputs and assumptions used in the right-of-use asset appraisals included market rates which ranged from $10 per square foot to
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
$16 per square foot and discount rates which ranged from 8.0% to 8.5%. These measurements were classified within Level 3 of the fair value hierarchy as many of the assumptions were not observable.
Additionally, as discussed further in Note 7, during the year ended December 31, 2020, the Company recorded impairment charges of $3.2 million related to its investment in joint ventures. Management estimated the fair value of these investments, taking into account various factors including implied asset value changes based on discounted cash flow projections and current market conditions. The Company determined, based on the inputs, that its valuation of investment in joint ventures was classified within Level 3 of the fair value hierarchy as many of the assumptions are not observable.
As discussed further in Note 6, during the year ended December 31, 2020, the Company recorded expected credit loss expense totaling $25.5 million related to notes receivable from one borrower to fully reserve the outstanding principal balance of $12.6 million and unfunded commitment to fund $12.9 million, as a result of recent changes in the borrower's financial status due to the impact of the COVID-19 pandemic. Management valued the loan based on the fair value of the underlying collateral which was based on review of the financial statements of the borrower, and was classified within Level 2 of the fair value hierarchy.
As discussed further in Note 4, during the year ended December 31, 2019, the Company recorded an impairment charge of $2.2 million related to real estate investments, net. Management estimated the fair value of this property taking into account various factors including various purchase offers, pending purchase agreements, the shortened holding period and current market conditions. The Company determined, based on the inputs, that its valuation of real estate investments, net was classified within Level 2 of the fair value hierarchy.
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 December 31, 2020 and 2019:
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 December 31, 2020, the Company had a carrying value of $365.6 million in fixed rate mortgage notes receivable outstanding, including related accrued interest, with a weighted average interest rate of approximately 9.03%. The fixed rate mortgage notes bear interest at rates of 7.01% to 11.78%. Discounting the future cash flows for fixed rate mortgage notes receivable using rates of 7.50% to 10.00%, management estimates the fair value of the fixed rate mortgage notes receivable to be $394.0 million with an estimated weighted average market rate of 8.11% at December 31, 2020.
At December 31, 2019, the Company had a carrying value of $357.4 million in fixed rate mortgage notes receivable outstanding, including related accrued interest, with a weighted average interest rate of approximately 8.98%. The fixed rate mortgage notes bear interest at rates of 6.99% to 11.61%. Discounting the future cash flows for fixed rate mortgage notes receivable using rates of 6.99% to 9.25%, management estimates the fair value of the fixed rate mortgage notes receivable to be $395.6 million with an estimated weighted average market rate of 7.76% at December 31, 2019.
Derivative instruments:
Derivative instruments are carried at their fair value.
Debt instruments:
The fair value of the Company's debt as of December 31, 2020 and 2019 is estimated by discounting the future cash flows of each instrument using current market rates. At December 31, 2020, the Company had a carrying value of $1.0 billion in variable rate debt outstanding with an average weighted interest rate of approximately 2.23%. The carrying value of the variable rate debt outstanding approximates the fair value at December 31, 2020.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
At December 31, 2019, the Company had a carrying value of $425.0 million in variable rate debt outstanding with an average weighted interest rate of approximately 2.75%. The carrying value of the variable rate debt outstanding approximates the fair value at December 31, 2019.
At December 31, 2020 and 2019, $425.0 million, of the Company's variable rate debt, discussed above, had been effectively converted to a fixed rate by interest rate swap agreements. See Note 9 for additional information related to the Company's interest rate swap agreements.
At December 31, 2020, the Company had a carrying value of $2.72 billion in fixed rate long-term debt outstanding with an average weighted interest rate of approximately 4.70%. Discounting the future cash flows for fixed rate debt using December 31, 2020 market rates of 4.09% to 5.81%, management estimates the fair value of the fixed rate debt to be approximately $2.69 billion with an estimated weighted average market rate of 4.70% at December 31, 2020.
At December 31, 2019, the Company had a carrying value of $2.72 billion in fixed rate long-term debt outstanding with an average weighted interest rate of approximately 4.54%. Discounting the future cash flows for fixed rate debt using December 31, 2019 market rates of 2.87% to 4.56%, management estimates the fair value of the fixed rate debt to be approximately $2.87 billion with an estimated weighted average market rate of 3.51% at December 31, 2019.
11. Common and Preferred Shares
On June 3, 2019, the Company filed a shelf registration statement with the SEC, which is effective for a term of 3 years. The securities covered by this registration statement include common shares, preferred shares, debt securities, depositary shares, warrants, and units. The Company may periodically offer one of more of these securities in amounts, prices and on terms to be announced when and if these securities are offered. The specifics of any future offerings along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering.
Additionally, on June 3, 2019, the Company filed a shelf registration statement with the SEC, which is effective for a term of 3 years, for its Dividend Reinvestment and Direct Share Purchase Plan (DSP Plan) which permits the issuance of up to 15,000,000 common shares.
Common Shares
The Company's Board declared cash dividends totaling $1.54123$1.515 and $1.65625$4.500 per Series F preferredcommon share for the years ended December 31, 20172020 and 2016,2019, respectively. ForThe monthly cash dividend to common shareholders was suspended following the common share dividend paid on May 15, 2020 to shareholders of record as of April 30, 2020.
Of the total distributions calculated for tax purposes, the amounts characterized as ordinary income, return of capital and long-term capital gain for cash distributions paid per Series F preferredcommon share for the years ended December 31, 20172020 and 20162019 are as follows:
| | | | | | | | | | | | |
| Cash Distributions Per Share | |
| 2020 | | 2019 | |
Taxable ordinary income (1) | $ | 0.8888 | | | $ | 2.7411 | | |
Return of capital | 0.5634 | | | 1.3966 | | |
Long-term capital gain (2) | 0.4378 | | | 0.3473 | | |
| | | | |
Totals | $ | 1.8900 | | | $ | 4.4850 | | |
|
| | | | | | | |
| Cash Distributions per Share |
| 2017 | | 2016 |
Taxable ordinary income | $ | 1.8310 |
| | $ | 1.4673 |
|
Return of capital | — |
| | — |
|
Long-term capital gain (1) | 0.1243 |
| | 0.1889 |
|
Totals | $ | 1.9553 |
| | $ | 1.6562 |
|
(1) Amounts qualify in their entirety as 199A distributions.
(2) Of the long-term capital gain, $0.04792gain, $0.1439 and $0.04914 $0.3473 were unrecaptured section 1250 gains for the years ended December 31, 20172020 and 2016,2019, respectively.
Series G Preferred Shares
On November 30, 2017, the Company issued 6.0 million 5.75% Series G cumulative redeemable preferred shares (Series G preferred shares) in a registered public offering for net proceeds of approximately $144.5 million, after underwriting discounts and expenses. The Company will pay cumulative dividends on the Series G preferred shares from the date of original issuance in the amount of $1.4375 per share each year, which is equivalent to 5.75% of the $25.00 liquidation preference per share. Dividends on the Series G preferred shares are payable quarterly in arrears. The Company may not redeem the Series G preferred shares before November 30, 2022, except in limited circumstances to preserve the Company's REIT status. On or after November 30, 2022, the Company may, at its option, redeem the Series G preferred shares in whole at any time or in part from time to time by paying $25.00 per share, plus any accrued and unpaid dividends up to, but not including the date of redemption. The Series G preferred shares have no stated maturity and will not be subject to any sinking fund or mandatory redemption. The Series G preferred shares are not convertible into any of the Company's securities, except under certain circumstances in connection with a change of control. Owners of the Series G preferred shares generally have no voting rights except under certain dividend defaults.
The Board of Trustees declared cash dividends totaling $0.183681 per Series G preferred share for the year ended December 31, 2017 that were paid on January 15, 2018.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 20162020, 2019 and 20152018
12. Earnings Per Share
The following table summarizes the Company’s computation of basic and diluted earnings per share (EPS) for the years ended December 31, 2017, 2016 and 2015 (amounts in thousands except per share information):
|
| | | | | | | | | | |
| Year Ended December 31, 2017 |
| Income (numerator) | | Shares (denominator) | | Per Share Amount |
Basic EPS: | | | | | |
Income from continuing operations | $ | 262,968 |
| | | | |
Less: preferred dividend requirements and redemption costs | (28,750 | ) | | | | |
Net income available to common shareholders | $ | 234,218 |
| | 71,191 |
| | $ | 3.29 |
|
Diluted EPS: | | | | | |
Net income available to common shareholders | $ | 234,218 |
| | 71,191 |
| | |
Effect of dilutive securities: | | | | | |
Share options | — |
| | 63 |
| | |
Net income available to common shareholders | $ | 234,218 |
| | 71,254 |
| | $ | 3.29 |
|
|
| | | | | | | | | | |
| Year Ended December 31, 2016 |
| Income (numerator) | | Shares (denominator) | | Per Share Amount |
Basic EPS: | | | | | |
Income from continuing operations | $ | 224,982 |
| | | | |
Less: preferred dividend requirements | (23,806 | ) | | | | |
Net income available to common shareholders | $ | 201,176 |
| | 63,381 |
| | $ | 3.17 |
|
Diluted EPS: | | | | | |
Net income available to common shareholders | $ | 201,176 |
| | 63,381 |
| | |
Effect of dilutive securities: | | | | | |
Share options | — |
| | 93 |
| | |
Net income available to common shareholders | $ | 201,176 |
| | 63,474 |
| | $ | 3.17 |
|
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 2016 and 2015
|
| | | | | | | | | | |
| Year Ended December 31, 2015 |
| Income (numerator) | | Shares (denominator) | | Per Share Amount |
Basic EPS: | | | | | |
Income from continuing operations | $ | 194,333 |
| | | | |
Less: preferred dividend requirements | (23,806 | ) | | | | |
Income from continuing operations available to common shareholders | $ | 170,527 |
| | 58,138 |
| | $ | 2.93 |
|
Income from discontinued operations available to common shareholders | $ | 199 |
| | 58,138 |
| | $ | 0.01 |
|
Net income available to common shareholders | $ | 170,726 |
| | 58,138 |
| | $ | 2.94 |
|
Diluted EPS: | | | | | |
Income from continuing operations available to common shareholders | $ | 170,527 |
| | 58,138 |
| | |
Effect of dilutive securities: | | | | | |
Share options | — |
| | 190 |
| | |
Income from continuing operations available to common shareholders | $ | 170,527 |
| | 58,328 |
| | $ | 2.92 |
|
Income from discontinued operations available to common shareholders | $ | 199 |
| | 58,328 |
| | $ | 0.01 |
|
Net income available to common shareholders | $ | 170,726 |
| | 58,328 |
| | $ | 2.93 |
|
The additional 2.1 million common shares forDuring the year ended December 31, 2017 and 2.0 million2020, the Company issued an aggregate of 36,176 common shares under its DSP Plan for both years ended December 31, 2016 and 2015, that would result from the conversionnet proceeds of the Company’s 5.75% Series C cumulative convertible preferred shares are not included in the calculation of diluted earnings per share for the years ended December 31, 2017, 2016 and 2015, respectively, because the effect is anti-dilutive. The additional 1.6 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 are not included in the calculation of diluted earnings per share for the years ended December 31, 2017, 2016 and 2015, because the effect is anti-dilutive.$1.1 million.
The dilutive effect of potential common shares from the exercise of share options is included in diluted earnings per share for the years ended December 31, 2017, 2016 and 2015. However, options to purchase 7 thousand, 72 thousand and 236 thousand shares of common shares at per share prices ranging from $61.79 to $76.63, $61.79, and $51.64 to $65.50, were outstanding at the end of 2017, 2016 and 2015, respectively, but were not included in the computation of diluted earnings per share because they were anti-dilutive.
13. Chief Executive Officer Retirement
On February 24, 2015, the Company announced that David Brain, its then President and Chief Executive Officer, was retiring from the Company. In connection with his retirement, Mr. Brain and the Company entered into a Retirement Agreement pursuant to which he agreed to retire on March 31, 2015 in consideration for certain retirement severance benefits substantially equal to those benefits that would be payable to him under his employment agreement if he were terminated without cause. As a result, the Company recorded retirement severance expense (including share-based compensation costs) duringDuring the year ended December 31, 2015 of $18.6 million. Retirement severance expense includes2020, the Company's Board approved a cash payment of $11.8 million, $5.0 million forshare repurchase program pursuant to which the accelerated vesting of 113,900 nonvested shares, $1.4 million for the accelerated vesting of 101,640 share options and $0.4Company may repurchase up to $150.0 million of related taxes and other expenses.
14. Equity Incentive Plan
All grantsthe Company's common shares. The share repurchase program was scheduled to expire on December 31, 2020; however, the Company suspended the program on the effective date of the covenant modification agreements, June 29, 2020, as discussed in Note 8. During the year ended December 31, 2020, the Company repurchased 4,066,716 common shares and options to purchase common shares were issued under the Company's 2007 Equity Incentive Plan prior to May 12, 2016 andshare repurchase program for approximately $106.0 million. The repurchases were made under the 2016 Equity Incentive Plan on and after May 12, 2016. Under the 2016 Equity Incentive Plan, an aggregate of 1,950,000 common shares, options to purchase common shares and restricteda Rule 10b5-1 trading plan.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 2016 and 2015
share units, subject to adjustment in the event of certain capital events, may be granted. At December 31, 2017, there were 1,631,841 shares available for grant under the 2016 Equity Incentive Plan.
Share Options
Share options are granted to employees pursuant to the Long-Term Incentive Plan. The fair value of share options granted is estimated at the date of grant using the Black-Scholes option pricing model. Share options granted to employees vest over a period of four years and share option expense for these options is recognized on a straight-line basis over the vesting period. Expense recognized related to share options and included in general and administrative expense in the accompanying consolidated statements of (loss) income and comprehensive (loss) income was $12 thousand, $10 thousand and $0.3 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Nonvested Shares Issued to Employees
The Company grants nonvested shares to employees pursuant to both the Annual Incentive Program and the Long-Term Incentive Plan. The Company amortizes the expense related to the nonvested shares awarded to employees under the 2007 EquityLong-Term Incentive Plan and the 2016 Equity Incentive Plan have exercise prices equal topremium awarded under the fair market value of a commonnonvested share at the date of grant. The options may be granted for any reasonable term, not to exceed 10 years, and for employees typically become exercisable at a rate of 25% per year over a four-year period. The Company generally issues new common shares upon option exercise. A summaryalternative of the Company’s share option activityAnnual Incentive Program on a straight-line basis over the future vesting period (three years to four years). Expense recognized related to nonvested shares and related information is as follows:
|
| | | | | | | | | | | | | | | | | |
| Number of shares | | Option price per share | | Weighted avg. exercise price |
Outstanding at December 31, 2014 | 950,214 |
| | $ | 18.18 |
| | — |
| | $ | 65.50 |
| | $ | 42.48 |
|
Exercised | (476,400 | ) | | 18.18 |
| | — |
| | 61.53 |
| | 37.42 |
|
Granted | 121,546 |
| | 61.79 |
| | — |
| | 61.79 |
| | 61.79 |
|
Forfeited | (79,055 | ) | | 45.20 |
| | — |
| | 65.50 |
| | 63.88 |
|
Outstanding at December 31, 2015 | 516,305 |
| | $ | 19.02 |
| | — |
| | $ | 65.50 |
| | $ | 48.42 |
|
Exercised | (230,319 | ) | | 19.41 |
| | — |
| | 65.50 |
| | 44.05 |
|
Outstanding at December 31, 2016 | 285,986 |
| | $ | 19.02 |
| | — |
| | $ | 61.79 |
| | $ | 51.93 |
|
Exercised | (29,253 | ) | | 46.86 |
| | — |
| | 61.79 |
| | 54.54 |
|
Granted | 2,215 |
| | 76.63 |
| | — |
| | 76.63 |
| | 76.63 |
|
Forfeited/Expired | (1,342 | ) | | 51.64 |
| | — |
| | 61.79 |
| | 59.52 |
|
Outstanding at December 31, 2017 | 257,606 |
| | $ | 19.02 |
| | — |
| | $ | 76.63 |
| | $ | 51.81 |
|
The weighted average fair valueincluded in general and administrative expense in the accompanying consolidated statements of options granted(loss) income and comprehensive (loss) income was $7.91$10.6 million, $11.3 million and $16.35 during 2017 and 2015, respectively. There were no options granted during 2016. The intrinsic value of stock options exercised was $0.5$13.5 million $5.2 million, and $7.3 million duringfor the years ended December 31, 2017, 20162020, 2019 and 2015,2018, respectively. Additionally,Expense related to nonvested shares and included in severance expense in the Company repurchased 22,076 shares into treasury shares in conjunction withaccompanying consolidated statements of (loss) income and comprehensive (loss) income was $1.0 million, $0.6 million and $3.2 million for the stock options exercised duringyears ended December 31, 2020, 2019 and 2018, respectively.
Nonvested Performance Shares Issued to Employees
During the year ended December 31, 2017 with2020, the Compensation and Human Capital Committee of the Company's Board of Trustees (Board) approved the 2020 Long Term Incentive Plan (the 2020 LTIP) as a total value of $1.6 million.
sub-plan under the Company's 2016 Equity Incentive Plan. Under the 2020 LTIP, the Company awards performance shares and restricted shares to the Company's executive officers. The performance shares contain both a market condition and a performance condition. The Company amortizes the expense related to share optionsthe performance shares over the future vesting period of three years. Expense recognized related to performance shares and included in general and administrative expense in the determinationaccompanying consolidated statements of net(loss) income and comprehensive (loss) income was $1.0 million for the yearsyear ended December 31, 2017, 20162020. Expense related to nonvested performance shares and 2015 was $0.7 million, $0.9 million, and $2.5 million (including $1.4 million included in retirement severance expense in the accompanying consolidated statementstatements of income), respectively. The following assumptions were used in applying(loss) income and comprehensive (loss) income was $261 thousand for the Black-Scholes option pricing model at the grant dates: risk-free interest rate of 2.1% and 1.9% in 2017 and 2015, respectively, dividend yield of 5.4% and 5.9% in 2017 and 2015, respectively, volatility factors in the expected market price of the Company’s common shares of 22.0% and 48.0% in 2017 and 2015, respectively, 0.74% and 0.78% expected forfeiture rates for 2017 and 2015, and an expected life of approximately six years for 2017 and 2015. year ended December 31, 2020.
Restricted Share Units Issued to Non-Employee Trustees
The Company uses historical dataissues restricted share units to estimatenon-employee Trustees for payment of their annual retainers under the expected life of the option and the risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. Additionally, expected volatility is computed based on the average historical volatility of the Company’s publicly traded shares.
At December 31, 2017, stock-option expense to be recognized in future periods was as follows (in thousands):
|
| | | |
| Amount |
Year: | |
2018 | $ | 291 |
|
2019 | 4 |
|
2020 | 4 |
|
Total | $ | 299 |
|
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 2016 and 2015
The following table summarizes outstanding options at December 31, 2017:
|
| | | | | | | | | | | | | |
Exercise price range | Options outstanding | | Weighted avg. life remaining | | Weighted avg. exercise price | | Aggregate intrinsic value (in thousands) |
$ 19.02 - 19.99 | 11,097 |
| | 1.4 |
| | | | |
20.00 - 29.99 | — |
| | — |
| | | | |
30.00 - 39.99 | 1,428 |
| | 2.0 |
| | | | |
40.00 - 49.99 | 86,041 |
| | 4.1 |
| | | | |
50.00 - 59.99 | 75,939 |
| | 5.8 |
| | | | |
60.00 - 69.99 | 80,886 |
| | 7.1 |
| | | | |
70.00 - 76.63 | 2,215 |
| | 9.1 |
| | | | |
| 257,606 |
| | 5.5 |
| | $ | 51.81 |
| | $ | 3,541 |
|
The following table summarizes exercisable options at December 31, 2017:
|
| | | | | | | | | | | | | |
Exercise price range | Options outstanding | | Weighted avg. life remaining | | Weighted avg. exercise price | | Aggregate intrinsic value (in thousands) |
$ 19.02 - 19.99 | 11,097 |
| | 1.4 |
| | | | |
20.00 - 29.99 | — |
| | — |
| | | | |
30.00 - 39.99 | 1,428 |
| | 2.0 |
| | | | |
40.00 - 49.99 | 86,041 |
| | 4.1 |
| | | | |
50.00 - 59.99 | 51,276 |
| | 5.7 |
| | | | |
60.00 - 61.79 | 38,225 |
| | 7.1 |
| | | | |
70.00 - 76.63 | — |
| | — |
| | | | |
| 188,067 |
| | 5.0 |
| | $ | 49.28 |
| | $ | 3,044 |
|
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, 2016 | 534,317 |
| | $ | 59.22 |
| | |
Granted | 296,914 |
| | 76.49 |
| | |
Vested | (209,767 | ) | | 57.47 |
| | |
Forfeited | (1,342 | ) | | 66.88 |
| | |
Outstanding at December 31, 2017 | 620,122 |
| | $ | 68.07 |
| | 0.96 |
The holders of nonvested shares have voting rights and receive dividends from the date of grant. These shares vest ratably over a period of three to four years.Company's Trustee compensation program. The fair value of the nonvested shares that vested was $15.1 million, $9.2 million, and $17.1 million (including $6.7 million related to the vesting of shares for the Company's former Chief Executive Officer) for the years ended December 31, 2017, 2016 and 2015, respectively. At December 31, 2017, unamortized share-based compensation expense related to nonvested shares was $21.2 million and will be recognized in future periods as follows (in thousands):
|
| | | |
| Amount |
Year: | |
2018 | $ | 10,391 |
|
2019 | 7,337 |
|
2020 | 3,445 |
|
Total | $ | 21,173 |
|
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 2016 and 2015
Restricted Share Units
A summary of the Company’s restricted share unit activity and related information is as follows:
|
| | | | | | | | |
| Number of Shares | | Weighted Average Grant Date Fair Value | | Weighted Average Life Remaining |
Outstanding at December 31, 2016 | 15,805 |
| | $ | 70.93 |
| | |
Granted | 19,030 |
| | 70.91 |
| | |
Vested | (15,805 | ) | | 70.93 |
| | |
Outstanding at December 31, 2017 | 19,030 |
| | $ | 70.91 |
| | 0.33 |
The holders of restricted share units have voting rights and receive dividends fromgranted 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,Trustee, and ranges from one year from the grant date to upon termination of service. At December 31, 2017, unamortized share-based compensationThis 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 restricted share units was $450 thousand which will be recognizedshares issued to non-employee Trustees and included in 2018.
15. Operating Leases
Most of the Company’s rental properties are leased under operating leases with expiration dates ranging from 1 to 32 years. Future minimum rentals on non-cancelable tenant operating leases at December 31, 2017 are as follows (in thousands):
|
| | | |
| Amount |
Year: | |
2018 | $ | 474,608 |
|
2019 | 459,318 |
|
2020 | 446,051 |
|
2021 | 437,723 |
|
2022 | 422,306 |
|
Thereafter | 3,656,516 |
|
Total (1) | $ | 5,896,522 |
|
(1) Future minimum rentals excludes rental revenue from properties leased to CLA. Certain subsidiaries of CLA that are the Company's tenants have filed Chapter 11 petitions in bankruptcy seeking protections of the Bankruptcy Code. Due to the uncertain outcome of these petitions, the rental revenue related to these properties have been excluded from the table above.
The Company leases its executive office from an unrelated landlord. Rental expense totaled approximately $1.0 million, $681 thousand and $556 thousand for the years ended December 31, 2017, 2016 and 2015, respectively, and is included as a component of general and administrative expense in the accompanying consolidated statements of income. Future minimum lease payments under this lease at (loss) income and comprehensive (loss) income was $2.2 million, $1.9 million and $1.3 million for the years ended December 31, 20172020, 2019 and 2018, respectively.
Foreign Currency Translation
The Company accounts for the operations of its Canadian properties in Canadian dollars. The assets and liabilities related to the Company’s Canadian properties and mortgage note are translated into U.S. dollars using the spot rates at the respective balance sheet dates; revenues and expenses are translated at average exchange rates. Resulting translation adjustments are recorded as follows (in thousands):a separate component of comprehensive income.
Derivative Instruments
The Company uses derivative instruments to reduce exposure to fluctuations in foreign currency exchange rates and variable interest rates.
|
| | | |
| Amount |
Year: | |
2018 | $ | 856 |
|
2019 | 856 |
|
2020 | 856 |
|
2021 | 884 |
|
2022 | 967 |
|
Thereafter | 3,625 |
|
Total | $ | 8,044 |
|
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 20162020, 2019 and 20152018
16. Quarterly Financial Information (unaudited)
Summarized quarterly financial dataThe 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 years ended December 31, 2017matching 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 2016record 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 follows (in thousands, except per share data):
|
| | | | | | | | | | | | | | | |
| March 31 | | June 30 | | September 30 | | December 31 |
2017: | | | | | | | |
Total revenue | $ | 129,112 |
| | $ | 147,782 |
| | $ | 151,397 |
| | $ | 147,700 |
|
Net income attributable to EPR Properties | 53,916 |
| | 80,535 |
| | 62,954 |
| | 65,563 |
|
Net income available to common shareholders of EPR Properties | 47,964 |
| | 74,583 |
| | 57,003 |
| | 54,668 |
|
Basic net income per common share | 0.75 |
| | 1.02 |
| | 0.77 |
| | 0.74 |
|
Diluted net income per common share | 0.75 |
| | 1.02 |
| | 0.77 |
| | 0.74 |
|
|
| | | | | | | | | | | | | | | |
| March 31 | | June 30 | | September 30 | | December 31 |
2016: | | | | | | | |
Total revenue | $ | 118,768 |
| | $ | 118,033 |
| | $ | 125,610 |
| | $ | 130,831 |
|
Net income attributable to EPR Properties | 54,180 |
| | 55,135 |
| | 57,526 |
| | 58,141 |
|
Net income available to common shareholders of EPR Properties | 48,228 |
| | 49,183 |
| | 51,575 |
| | 52,190 |
|
Basic net income per common share | 0.77 |
| | 0.77 |
| | 0.81 |
| | 0.82 |
|
Diluted net income per common share | 0.77 |
| | 0.77 |
| | 0.81 |
| | 0.82 |
|
17. Discontinued Operations
Included in discontinued operations forreference rate reform activities occur. During the year ended December 31, 2015 were certain post-closing items2020, the Company elected to apply the hedge accounting expedients related to probability and the Toronto Dundas Square property. There were no discontinued operationsassessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur. The Company intends to amend agreements referencing the LIBOR-index to a replacement index and will apply the optional expedients offered in Topic 848.
3. Real Estate Investments
The following table summarizes the carrying amounts of real estate investments as of December 31, 2020 and 2019 (in thousands):
| | | | | | | | | | | |
| 2020 | | 2019 |
Buildings and improvements | $ | 4,526,342 | | | $ | 4,747,101 | |
Furniture, fixtures & equipment | 118,334 | | | 123,239 | |
Land | 1,242,663 | | | 1,290,181 | |
Leasehold interests | 26,050 | | | 26,041 | |
| 5,913,389 | | | 6,186,562 | |
Accumulated depreciation | (1,062,087) | | | (989,254) | |
Total | $ | 4,851,302 | | | $ | 5,197,308 | |
Depreciation expense on real estate investments from continuing operations was $162.6 million, $153.2 million and $133.7 million for the years ended December 31, 20172020, 2019 and 2016.2018, respectively.
The operating results relating to discontinued operations are as follows (in thousands):Acquisitions and Development
|
| | | |
| Year ended December 31, |
| 2015 |
Tenant reimbursements | $ | 68 |
|
Other income | 172 |
|
Total revenue | 240 |
|
Property operating expense | 12 |
|
Income before income taxes | 228 |
|
Income tax expense | 29 |
|
Net income | $ | 199 |
|
18. Other Commitments and Contingencies
As ofDuring the year ended December 31, 2017,2020, the Company had an aggregatecompleted the acquisition of approximately $168.7real estate investments and lease related intangibles, as further discussed in Note 2, for Experiential properties totaling $22.1 million, that consisted of commitments to fund development projects including 23 entertainment development projects for which it has commitments to fund approximately $61.5 million, seven education development projects for which it has commitments to fund approximately $41.5 million, and four recreation development projects for which it has commitments to fund approximately $65.7 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 agreements, it can discontinue2 theatre properties.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 20162020, 2019 and 20152018
funding construction draws. The Company has agreed to lease the properties to the operators at pre-determined rates upon completion of construction.
Additionally, as ofduring the year ended December 31, 2017,2020, the Company had a commitment to fundinvestment spending on build-to-suit development and redevelopment for Experiential properties totaling $46.9 million.
During the year ended December 31, 2019, the Company completed the acquisition of real estate investments and lease related intangibles, for Experiential properties totaling $451.9 million, that consisted of 26 theatre properties for approximately $155.0$426.5 million, over1 eat & play property for $1.4 million and 2 cultural properties for $24.0 million. The Company completed the next three years,acquisition of which $40.0real estate investments and lease related intangibles for Education properties totaling $5.9 million has been funded, to complete an indoor waterpark hotelthat consisted of the acquisition of 2 early childhood education centers.
Additionally, during the year ended December 31, 2019, the Company had investment spending on build-to-suit development and adventure park at its casinoredevelopment for Experiential properties totaling $146.2 million and resort projectEducation properties totaling $38.6 million.
During the year ended December 31, 2019, the Company completed the construction of the Kartrite Resort and Indoor Waterpark in Sullivan County, New York. The indoor waterpark resort is being operated under a traditional REIT lodging structure and facilitated by a management agreement with an eligible independent contractor. The related operating revenue and expense are included in other income and other expense in the accompanying consolidated statements of (loss) income and comprehensive (loss) income for the year ended December 31, 2019. Additionally, during the year ended December 31, 2018, the Company is also responsible forcompleted the construction of this project'sthe Resorts World Catskills common infrastructure. In June 2016, the Sullivan County Infrastructure Local Development Corporation issued $110.0 million of Series 2016 Revenue Bonds which is expected to fundfunded a substantial portion of such construction costs. TheFor the years ended December 31, 2018, 2017 and 2016, the Company received total reimbursements of $74.2 million of construction costs. During the year ended December 31, 2019, the Company received an initialadditional reimbursement of $43.4$11.5 million.
Dispositions
On December 29, 2020, pursuant to a tenant purchase option, the Company completed the sale of 6 private schools and 4 early childhood education centers for net proceeds of approximately $201.2 million and recognized a gain on sale of construction costsapproximately $39.7 million. Additionally, during the year ended December 31, 20162020, the Company completed the sale of 3 early education properties, 4 experiential properties and 2 land parcels for net proceeds totaling $26.6 million and recognized a combined gain on sale of $10.4 million.
During the year ended December 31, 2019, the Company completed the sale of all of its public charter school portfolio through the following transactions:
•On November 22, 2019, the Company sold 47 public charter school related assets, classified as real estate investments, mortgage notes receivable and investment in direct financing leases, for net proceeds of approximately $449.6 million. The Company recognized an impairment on this public charter school portfolio sale of $21.4 million that included the write-off of non-cash straight-line rent and effective interest receivables totaling $24.8 million. See Note 4 for additional $23.9information related to the impairment.
•The Company sold 10 public charter schools pursuant to tenant purchase options for net proceeds totaling $138.5 million and recognized a combined gain on sale of $30.0 million.
•The Company sold 7 public charter schools (not as result of exercise of tenant purchase options) for net proceeds totaling $44.4 million and recognized a combined gain on sale of $1.9 million.
•See Note 6 for details on repayments of mortgage notes receivable secured by public charter school properties during 2019.
Due to the Company's disposition of its remaining public charter school portfolio in 2019, the operating results of all public charter schools sold during 2019 have been classified within discontinued operations in the accompanying consolidated statements of (loss) income and comprehensive (loss) income for all periods presented. See Note 17 for further details on discontinued operations.
Additionally, during the year ended December 31, 2017.2019, the Company sold 1 attraction property, 1 early childhood education center property and 4 land parcels for net proceeds totaling $21.9 million and sold 1
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
attraction property and received an $11.0 million cash payment and provided seller mortgage financing of $27.4 million. The Company expectsrecognized a combined gain on these sales of $4.2 million. See Note 6 for additional information on the seller mortgage note receivable.
4. Impairment Charges
The Company reviews its properties for changes in circumstances that indicate that the carrying value of a property may not be recoverable based on an estimate of undiscounted future cash flows. As a result of the COVID-19 pandemic, the Company experienced vacancies at some of its properties and at others the Company has negotiated lease modifications that included rent reductions. As part of this process, the Company reassessed the expected holding periods and expected future cash flows of such properties, and determined that the estimated cash flows were not sufficient to recover the carrying values of 9 properties. NaN of these 9 properties have operating ground lease arrangements with right-of-use assets. During the year ended December 31, 2020, the Company determined the estimated fair value of the real estate investments and right-of-use assets of these properties using independent appraisals and various purchase offers. The Company reduced the carrying value of the real estate investments, net to $39.5 million and the operating lease right-of-use assets to $13.0 million. The Company recognized impairment charges of $70.7 million on the real estate investments and $15.0 million on the right-of-use assets, which are the amounts that the carrying value of the assets exceeded the estimated fair value.
During the year ended December 31, 2020, the Company also recognized $3.2 million in other-than-temporary impairments related to its equity investments in joint ventures in 3 theatre projects located in China. See Note 7 for further details on these impairments.
On November 22, 2019, the Company completed the sale of substantially all of its public charter school portfolio, consisting of 47 public charter school related assets, for net proceeds of approximately $449.6 million. Prior to the sale, the Company revised its estimated undiscounted cash flows associated with this portfolio, considering a shorter expected hold period and determined that the estimated cash flows were not sufficient to recover the carrying value of this portfolio. The Company estimated the fair value of this portfolio by taking into account the purchase price in the executed sale agreement. The Company recognized an impairment on public charter school portfolio sale of $21.4 million that included the write-off of non-cash straight-line rent and effective interest receivables totaling $24.8 million. This impairment and the operating results of all of the public charter schools sold in 2019 have been classified within discontinued operations in the accompanying consolidated statements of (loss) income and comprehensive (loss) income. See Note 17 for further details on discontinued operations.
During the year ended December 31, 2019, the Company entered into an agreement to sell a theatre property for approximately $6.2 million. As a result, the Company revised its estimated undiscounted cash flow associated with this property, considering a shorter expected hold period and determined that the estimated cash flow was not sufficient to recover the carrying value of this property. The Company estimated the fair value of this property by taking into account the purchase price in the executed sale agreement. The Company recorded an impairment charge of approximately $2.2 million, which is the amount that the carrying value of the asset exceeds the estimated fair value.
During the year ended December 31, 2018, the Company entered into an agreement with Children’s Learning Adventure USA (CLA) in which CLA relinquished control of 4 of the Company’s properties that were still under development as the Company no longer intended to develop these properties for CLA. As a result, the Company revised its estimated undiscounted cash flows for these 4 properties, considering shorter expected holding periods, and determined that those estimated cash flows were not sufficient to recover the carrying values of these 4 properties. During the year ended December 31, 2018, the Company determined the estimated fair value of these properties using Level 3 inputs, including independent appraisals of these properties, and reduced the carrying value of these assets to $9.8 million, recording an impairment charge of $16.5 million. The charge was primarily related to the cost of improvements specific to the development of CLA’s prototype.
During the year ended December 31, 2018, the Company recognized a $10.7 million impairment charge related to the Company’s guarantees of the payment of 2 economic development revenue bonds secured by leasehold
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
interests and improvements at 2 theatres in Louisiana. In accordance with Topic 460, Guarantees, the Company recorded an asset and liability at the inception of the guarantees at fair value, which represented the Company's obligation to stand ready to perform under the terms of the guarantees. During the year ended December 31, 2018, the Company determined that a portion of its asset was no longer recoverable and recorded an impairment charge of $7.8 million.
A contingent future obligation is recognized in accordance with the provisions of Topic 450, Accounting for Contingencies. In the case of the Company’s guarantees, the contingent future obligation is the future payment of the bonds by the Company. At the inception of the guarantees, the Company determined that its future payment of the bonds was not probable, therefore no contingent future obligation was recorded. For the year ended December 31, 2018, the Company determined that its future payment on a portion of the bond obligations was probable due to inadequate performance of the theatre properties and failure of the debtor under the bonds to perform. Accordingly, for the year ended December 31, 2018, the Company recorded an incremental contingent liability of $2.9 million, which in addition to the $7.8 million discussed above, resulted in a total impairment charge recognized relating to the guarantees of $10.7 million.
5. Accounts Receivable
The following table summarizes the carrying amounts of accounts receivable as of December 31, 2020 and 2019 (in thousands):
| | | | | | | | | | | |
| 2020 | | 2019 |
Receivable from tenants | $ | 81,120 | | | $ | 11,373 | |
Receivable from non-tenants | 505 | | | 2,103 | |
| | | |
| | | |
| | | |
Straight-line rent receivable | 34,568 | | | 73,382 | |
| | | |
| | | |
Total | $ | 116,193 | | | $ | 86,858 | |
During the year ended December 31, 2020, the Company wrote-off receivables from tenants totaling $27.1 million and straight-line rent receivables totaling $38.0 million directly to rental revenue in the accompanying consolidated statements of (loss) income and comprehensive (loss) income upon determination that the collectibility of these receivables or future lease payments from these tenants was no longer probable. Additionally, the Company determined that future rental revenue related to these tenants will be recognized on a cash basis. The $38.0 million in write-offs of straight-line rent receivables were comprised of $26.5 million of straight-line rent receivable and $11.5 million of sub-lessor ground lease straight-line rent receivable.
As of December 31, 2020, receivable from tenants includes fixed rent payments of approximately $76.0 million that were deferred due to the COVID-19 pandemic and determined to be collectible. Additionally, the Company has amounts due from tenants that were not booked as receivables as the full amounts were not deemed probable of collection as a result of the COVID-19 pandemic. While deferments for this and future periods delay rent payments, these deferments do not release tenants from the obligation to pay the deferred amounts in the future. The repayment terms for these deferments vary by tenant and agreements.
6. Investment in Mortgage Notes and Notes Receivable
Effective January 1, 2020, the Company adopted Topic 326, which requires the Company to estimate and record credit losses for each of its mortgage notes and note receivable. The Company measures expected credit losses on its mortgage notes and notes receivable on an individual basis over the related contractual term as its financial instruments do not have similar risk characteristics. The Company has not experienced historical losses on its mortgage note portfolio; therefore, the Company uses a forward-looking commercial real estate loss forecasting tool to estimate its expected credit losses. The loss forecasting tool is comprised of a probability of default model and a loss given default model that utilizes the Company’s loan specific inputs as well as selected forward-looking macroeconomic variables and mean loss rates. Based on certain inputs, such as origination year, balance, interest rate as well as collateral value and borrower operating income, the model produces life of loan expected losses on a
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
loan-by-loan basis. As of December 31, 2020, the Company did not anticipate any prepayments therefore the contractual term of its mortgage notes was used for the calculation of the expected credit losses. The Company updates the model inputs at each reporting period to reflect, if applicable, any newly originated loans, changes to loan specific information on existing loans and current macroeconomic conditions.
During the year ended December 31, 2020, the Company increased its expected credit losses by $30.7 million from its implementation estimate of $2.2 million. This increase was primarily due to credit loss expense related to notes receivable from one borrower as described below as well as adjustments to current macroeconomic conditions resulting from the economic uncertainty and the rapidly changing environment surrounding the COVID-19 pandemic.
In response to the COVID-19 pandemic, the Company deferred interest payments for 7 borrowers. The deferrals require the borrower to pay the deferred interest in future periods. The Company assessed the deferrals and determined that the modifications did not result in troubled debt restructurings at December 31, 2020.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
Investment in mortgage notes, including related accrued interest receivable, at December 31, 2020 and 2019 consists of the following (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year of Origination | Interest Rate | Maturity Date | Periodic Payment Terms | Outstanding principal amount of mortgage | Carrying amount as of December 31, | Unfunded commitments |
Description | 2020 | 2019 (1) | December 31, 2020 |
Attraction property Powells Point, North Carolina | 2019 | 7.75 | % | 6/30/2025 | Interest only | $ | 28,007 | | $ | 27,045 | | $ | 27,423 | | $ | 0 | |
Fitness & wellness property Omaha, Nebraska | 2017 | 7.85 | % | 1/3/2027 | Interest only | 10,905 | | 11,225 | | 10,977 | | 0 | |
Fitness & wellness property Merriam, Kansas | 2019 | 7.55 | % | 7/31/2029 | Interest only | 9,095 | | 9,355 | | 5,985 | | 248 | |
Ski property Girdwood, Alaska | 2019 | 8.24 | % | 12/31/2029 | Interest only | 40,869 | | 40,680 | | 37,000 | | 16,131 | |
Fitness & wellness property Omaha, Nebraska | 2016 | 7.85 | % | 6/30/2030 | Interest only | 8,410 | | 8,630 | | 5,803 | | 2,508 | |
Experiential lodging property Nashville, Tennessee | 2019 | 7.01 | % | 9/30/2031 | Interest only | 71,223 | | 67,235 | | 70,396 | | 0 | |
Eat & play property Austin, Texas | 2012 | 11.31 | % | 6/1/2033 | Principal & Interest-fully amortizing | 11,361 | | 11,929 | | 11,582 | | 0 | |
Ski property West Dover and Wilmington, Vermont | 2007 | 11.78 | % | 12/1/2034 | Interest only | 51,050 | | 51,031 | | 51,050 | | 0 | |
Four ski properties Ohio and Pennsylvania | 2007 | 10.91 | % | 12/1/2034 | Interest only | 37,562 | | 37,413 | | 37,562 | | 0 | |
Ski property Chesterland, Ohio | 2012 | 11.38 | % | 12/1/2034 | Interest only | 4,550 | | 4,396 | | 4,550 | | 0 | |
Ski property Hunter, New York | 2016 | 8.57 | % | 1/5/2036 | Interest only | 21,000 | | 21,000 | | 21,000 | | 0 | |
Eat & play property Midvale, Utah | 2015 | 10.25 | % | 5/31/2036 | Interest only | 17,505 | | 18,289 | | 17,505 | | 0 | |
Eat & play property West Chester, Ohio | 2015 | 9.75 | % | 8/1/2036 | Interest only | 18,068 | | 18,830 | | 18,068 | | 0 | |
Private school property Mableton, Georgia | 2017 | 9.02 | % | 4/30/2037 | Interest only | 5,088 | | 5,278 | | 5,048 | | 0 | |
Fitness & wellness property Fort Collins, Colorado | 2018 | 7.85 | % | 1/31/2038 | Interest only | 10,292 | | 10,408 | | 10,360 | | 0 | |
Early childhood education center Lake Mary, Florida | 2019 | 7.87 | % | 5/9/2039 | Interest only | 4,200 | | 4,348 | | 4,258 | | 0 | |
Eat & play property Eugene, Oregon | 2019 | 8.13 | % | 6/17/2039 | Interest only | 14,700 | | 14,799 | | 14,800 | | 0 | |
Early childhood education center Lithia, Florida | 2017 | 8.25 | % | 10/31/2039 | Interest only | 3,959 | | 3,737 | | 4,024 | | 0 | |
| | | | | $ | 367,844 | | $ | 365,628 | | $ | 357,391 | | $ | 18,887 | |
(1) Balances as of December 31, 2019 are prior to the adoption of ASC Topic 326.
Investment in notes receivable, including related accrued interest receivable, was $7.3 million and $14.0 million at December 31, 2020 and 2019, respectively, and is included in Other assets in the accompanying consolidated balance sheets.
During the year ended December 31, 2020, the Company entered into an amended and restated loan and security agreement with 1 of its notes receivable borrowers in response to the impacts of the COVID-19 pandemic on the borrower. The restated note receivable consists of the previous note balance of $6.5 million and provides the borrower with a term loan for up to $13.0 million and a $6.0 million revolving line of credit. The restated note receivable has a maturity date of June 30, 2032 and the line of credit matures on December 31, 2022. Interest is deferred through June 30, 2022, at which time monthly principal and interest payments will be due over 10 years. Although the borrower is not in default, nor has the borrower declared bankruptcy, the Company determined these modifications resulted in a troubled debt restructuring (TDR) at December 31, 2020 due to the impacts of the
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
COVID-19 pandemic on the borrower's financial condition. These note receivables are considered collateral dependent and expected credit losses are based on the fair value of the underlying collateral at the reporting date. The notes are secured by the working capital and non-real estate assets of the borrower. The Company assessed the fair value of the collateral as of December 31, 2020 and recognized credit loss expense for the year ended December 31, 2020 consisting of the outstanding principal balance of $12.6 million and the $12.9 million unfunded commitment on the term loan and line of credit as of December 31, 2020. Income for this borrower will be recognized on a cash basis.
At December 31, 2020, the Company's investment in this note receivable was a variable interest and the underlying entity is a VIE. The Company is not the primary beneficiary of this VIE, as the Company does not individually have the power to direct the activities that are most significant to the entity and accordingly, this investment is not consolidated. The Company's maximum exposure to loss associated with this VIE is limited to the Company's outstanding note receivable of $12.6 million and the unfunded commitment of $12.9 million, both of which were fully reserved in the allowance for credit losses at December 31, 2020.
The following summarizes the activity within the allowance for credit losses related to mortgage notes, unfunded commitments and notes receivable for the year ended December 31, 2020 (in thousands):
| | | | | | | | | | | | | | | | | |
| Mortgage notes receivable | Unfunded commitments - mortgage notes | Notes receivable | Unfunded commitments - notes receivable | Total |
Allowance for credit losses at January 1, 2020 | $ | 2,000 | | $ | 114 | | $ | 49 | | $ | 0 | | $ | 2,163 | |
Credit loss expense | 5,000 | | 24 | | 12,805 | | 12,866 | | 30,695 | |
Charge-offs | 0 | | 0 | | 0 | | 0 | | 0 | |
Recoveries | 0 | | 0 | | 0 | | 0 | | 0 | |
Allowance for credit losses | $ | 7,000 | | $ | 138 | | $ | 12,854 | | $ | 12,866 | | $ | 32,858 | |
7. Unconsolidated Real Estate Joint Ventures
As of December 31, 2020 and 2019, the Company had a 65% investment interest in 2 unconsolidated real estate joint ventures related to 2 experiential lodging properties located in St. Petersburg Beach, Florida. The Company's partner, Gencom Acquisition, LLC and its affiliates, own the remaining 35% interest in the joint ventures. There are 2 separate joint ventures, one that holds the investment in the real estate of the experiential lodging properties and the other that holds lodging operations, which are facilitated by a management agreement with an eligible independent contractor. The Company's investment in the operating entity is held in a taxable REIT subsidiary (TRS). The Company accounts for its investment in these joint ventures under the equity method of accounting. As of December 31, 2020 and 2019, the Company had invested $27.4 million and $29.7 million, respectively, in these joint ventures.
The joint venture that holds the real property has a secured mortgage loan of $85.0 million at December 31, 2020, that is due April 1, 2022. The note can be extended for 2 additional 1 year periods upon the satisfaction of certain conditions. Additionally, the Company has guaranteed the completion of the renovations in the amount of approximately $32.7 million, with $23.9 million remaining to fund at December 31, 2020. The mortgage loan bears interest at an annual rate equal to the greater of 6.00% or LIBOR plus 3.75%. Interest is payable monthly beginning on May 1, 2019 until the stated maturity date of April 1, 2022, which can be extended to April 1, 2023. The joint venture has an interest rate cap agreement to limit the variable portion of the interest rate (LIBOR) on this note to 3.0% from March 28, 2019 to April 1, 2023. In response to the COVID-19 pandemic, on May 28, 2020, the joint venture was granted a three-month interest deferral, which is required to be paid on the maturity date of the loan and is not considered a troubled debt restructuring.
The Company recognized losses of $4.0 million and $140 thousand and income of $52 thousand during the years ended December 31, 2020, 2019 and 2018, respectively, and received 0 distributions during the years ended December 31, 2020, 2019 and 2018 related to the equity investment in these joint ventures.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
As of December 31, 2020 and 2019, the Company's investments in these joint ventures were considered to be variable interests and the underlying entities are VIEs. The Company is not the primary beneficiary of the VIEs as the Company does not individually have the power to direct the activities that are most significant to the joint ventures and accordingly these investments are not consolidated. The Company's maximum exposure to loss at December 31, 2020, is its investment in the joint ventures of $27.4 million as well as the Company's guarantee of the estimated costs to complete renovations of approximately $23.9 million.
In addition, as of December 31, 2020 and 2019, the Company had invested $0.8 million and $4.6 million, respectively, in unconsolidated joint ventures for 3 theatre projects located in China. During the year ended December 31, 2020, the Company recognized $3.2 million in other-than-temporary impairment charges on these equity investments. The Company determined the estimated fair value of these investments based primarily on discounted cash flow projections. The Company recognized losses of $559 thousand, $241 thousand and $74 thousand, during the years ended December 31, 2020, 2019 and 2018, respectively, and received distributions of $112 thousand and $567 thousand, from its investment in these joint ventures for the years ended December 31, 2019 and 2018, respectively. NaN distributions were received during the year ended December 31, 2020.
8. Debt
Debt at December 31, 2020 and 2019 consists of the following (in thousands):
| | | | | | | | | | | | | |
| | 2020 | | 2019 | |
| Unsecured revolving variable rate credit facility, LIBOR + 1.625% at December 31, 2020, due February 27, 2022 (1) | $ | 590,000 | | | $ | 0 | | |
| Unsecured term loan payable, LIBOR + 2.00% at December 31, 2020 with $350,000 fixed at 4.40% and $50,000 fixed at 4.60%, due February 27, 2023 (1) | 400,000 | | | 400,000 | | |
| Senior unsecured notes payable, 5.25%, due July 15, 2023 (2) | 275,000 | | | 275,000 | | |
| Senior unsecured notes payable, 5.60% at December 31, 2020, due August 22, 2024 (3) | 148,000 | | | 148,000 | | |
| Senior unsecured notes payable, 4.50%, due April 1, 2025 (2) | 300,000 | | | 300,000 | | |
| Senior unsecured notes payable, 5.81% at December 31, 2020, due August 22, 2026 (3) | 192,000 | | | 192,000 | | |
| Senior unsecured notes payable, 4.75%, due December 15, 2026 (2) | 450,000 | | | 450,000 | | |
| Senior unsecured notes payable, 4.50%, due June 1, 2027 (2) | 450,000 | | | 450,000 | | |
| Senior unsecured notes payable, 4.95%, due April 15, 2028 (2) | 400,000 | | | 400,000 | | |
| Senior unsecured notes payable, 3.75%, due August 15, 2029 (2) | 500,000 | | | 500,000 | | |
| Bonds payable, variable rate, fixed at 1.39% through September 30, 2024, due August 1, 2047 | 24,995 | | | 24,995 | | |
| Less: deferred financing costs, net | (35,552) | | | (37,165) | | |
| Total | $ | 3,694,443 | | | $ | 3,102,830 | | |
(1) At December 31, 2020, the Company had $590.0 million outstanding under its $1.0 billion unsecured revolving credit facility with interest at a floating rate of LIBOR plus 1.625% (with a LIBOR floor of 0.50%), which was 2.125% with a facility fee of 0.375%. Interest is payable monthly. Subsequent to December 31, 2020, the Company paid down $500.0 million on this credit facility.
The Company's unsecured term loan facility had a balance of $400.0 million with interest at a floating rate of LIBOR plus 2.00% (with a LIBOR floor of 0.50%), which was 2.5% on December 31, 2020. Interest is payable monthly. In addition, there is a $1.0 billion accordion feature on the combined unsecured revolving credit and term loan facility (the combined facility) that increases the maximum borrowing amount available under the combined facility, subject to lender approval, from $1.4 billion to $2.4 billion. If the Company exercises all or any portion of the accordion feature, the resulting increase in the combined facility may have a shorter or longer maturity date and different pricing terms. The combined facility contains financial covenants or restrictions that limit the Company's levels of consolidated debt, secured debt, investment levels outside certain categories and dividend distributions, and require the Company to maintain a minimum consolidated tangible net worth and meet certain coverage levels for
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
fixed charges and debt services. As discussed further below, certain of these covenants were modified or waived during 2020.
In light of the continuing financial and operational impacts of the COVID-19 pandemic on the Company and its tenants and borrowers, on June 29, 2020 and November 3, 2020, the Company amended its Consolidated Credit Agreement, which governs its unsecured revolving credit facility and its unsecured term loan facility. As described below, the amendments modified certain provisions and waived the Company's obligation to comply with certain covenants under this debt agreement through December 31, 2021. The Company can elect to terminate the Covenant Relief Period early, subject to certain conditions.
As described below, the loans subject to the modifications bear interest at higher rates during the Covenant Relief Period and will return to the original pre-waiver levels at the end of such period, subject to certain conditions. The rates during and after the Covenant Relief Period continue to be subject to change based on unsecured debt ratings, as defined in the agreement. The amendments also imposed the additional restrictions on the Company discussed below during the Covenant Relief Period. In addition, during the Covenant Relief Period, the amendments require the Company to cause certain of its key subsidiaries to guarantee the Company's obligations based on its unsecured debt ratings, and the Company will be required to pledge the equity interests of certain of those subsidiary guarantors upon the occurrence of certain events, however both of these requirements end when the Covenant Relief Period is over.
During the Covenant Relief Period, the initial interest rates for the revolving credit facility and term loan facility were set at LIBOR plus 1.375% and LIBOR plus 1.75%, respectively, (with a LIBOR floor of 0.50%) and the facility fee on the revolving credit facility was increased to 0.375%. On August 20, 2020, as a result of a downgrade of the Company's unsecured debt rating by Moody's to Baa3, the spreads on the revolving credit and term loan facilities each increased by 0.25%. During the fourth quarter of 2020, the Company's unsecured debt rating was downgraded to BB+ by both Fitch and Standard & Poor's. As a result of these downgrades, certain of the Company's key subsidiaries guarantee the Company's obligations under its bank credit facilities, private placement notes and other outstanding senior unsecured notes in accordance with existing agreements with the holders of such indebtedness. See Note 20 for the Company's supplemental guarantor financial information. If the Company's unsecured debt rating is further downgraded by Moody's, the interest rates on the revolving credit and term loan facilities would both increase by 0.35% during the Covenant Relief Period. After the Covenant Relief Period, the interest rates for the revolving credit and term loan facilities, based on the Company's current unsecured debt ratings, are scheduled to return to LIBOR plus 1.20% and LIBOR plus 1.35%, respectively, (with a LIBOR floor of 0) and the facility fee will be 0.25%, however these rates are subject to change based on the Company's unsecured debt ratings.
The amendments to the Company's revolving credit and term loan facilities permanently modified certain financial covenants and provided relief from compliance with certain financial covenants during the Covenant Relief Period, as follows: (i) a new minimum liquidity financial covenant of $500.0 million during the Covenant Relief Period was added; (ii) compliance with the total-debt-to-total-asset-value, the maximum-unsecured-debt-to-unencumbered-asset-value, the minimum unsecured interest coverage ratio and the minimum fixed charge ratio financial covenants was suspended for the period beginning June 29, 2020 and ending on the earlier to occur of December 31, 2021 or the earlier termination of the Covenant Relief Period; (iii) permanent amendments to the unsecured-debt-to-unencumbered-asset-value financial covenant were made to allow short-term indebtedness to be offset by unrestricted cash in the calculation and to allow unrestricted cash not otherwise offset against short-term indebtedness to be counted as an unencumbered asset; and (iv) permanent amendments to financial covenants were made to allow accrued deferred payments to be included as recurring property revenue in these calculations. The amendments also imposed additional restrictions on the Company and its subsidiaries during the Covenant Relief Period, including limitations on certain investments, incurrences of indebtedness, capital expenditures and payment of dividends or other distributions and stock repurchases, in each case subject to certain exceptions.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
In connection with the amendments, $0.1 million of fees paid to third parties were expensed and included in costs associated with loan refinancing in the accompanying consolidated statements of (loss) income and comprehensive (loss) income for the year ended December 31, 2020. In addition, the Company paid $5.1 million in fees to existing lenders that were capitalized in deferred financing costs and amortized as part of the effective yield. These fees consisted of $3.6 million related to the unsecured revolving credit facility and included in other assets and $1.5 million related to the term loan and shown as a reduction of debt.
As described under (3) below, on June 29, 2020 and December 24, 2020, the Company also amended its Note Purchase Agreement which governs its private placement notes. Under the most favored nations clause included in the Consolidated Credit Agreement, the additional or more restrictive covenants included in the private placement amendments are incorporated into the Consolidated Credit Agreement.
(2) These notes contain various covenants, including: (i) a limitation on incurrence of any debt that would cause the ratio of the Company’s debt to adjusted total assets to exceed 60%; (ii) a limitation on incurrence of any secured debt that would cause the ratio of the Company’s secured debt to adjusted total assets to exceed 40%; (iii) a limitation on incurrence of any debt that would cause the Company’s debt service coverage ratio to be less than 1.5 times; and (iv) the maintenance at all times of the Company's total unencumbered assets such that they are not less than 150% of the Company’s outstanding unsecured debt.
(3) In light of the continuing financial and operational impacts of the COVID-19 pandemic on the Company and its tenants and borrowers, on June 29, 2020 and December 24, 2020, the Company amended its Note Purchase Agreement, which governs its private placement notes. The amendments modified certain provisions and waived the Company's obligation to comply with certain covenants under these debt agreements through October 1, 2021. The Company can elect to extend such period through January 1, 2022 and may elect to terminate the Covenant Relief Period early, subject to certain conditions. These notes: (i) contain certain financial and other covenants that generally conform to the combined credit facility described above; (ii) provide investors thereunder certain additional guaranty and lien rights, in the event that certain events occur; (iii) contain certain "most favored lender" provisions; and (iv) impose restrictions on debt that can be incurred by certain subsidiaries of the Company. As discussed further below, certain of these covenants were modified or waived during 2020.
The amendments provided for an immediate 0.65% waiver premium to be paid on the private placement notes during the Covenant Relief Period. In addition, during the fourth quarter of 2020, as a result of downgrades of the Company's unsecured debt rating to BB+ by both Fitch and Standard and Poor's, the spreads on the private placement notes each increased by an additional 0.60%. As a result, the interest rates for the private placement notes were increased to 5.60% and 5.81% for the Series A notes due 2024 and the Series B notes due 2026, respectively. After the Covenant Relief Period, the interest rates for the private placement notes are scheduled to return to 4.35% and 4.56% for the Series A notes due 2024 and the Series B notes due 2026, respectively.
If the Company elects to extend the Covenant Relief Period until January 1, 2022, the Company must, or must cause certain of its subsidiaries to, grant mortgages on certain unencumbered properties to a collateral agent, on behalf of the holders of the private placement notes and the lenders under the Company's Consolidated Credit Agreement. If the Company provides such mortgages, they must remain in effect until the later of two consecutive fiscal quarters of demonstrated covenant compliance or June 30, 2022, however the additional 0.60% interest rate premium as a result of the downgrades in the Company's unsecured debt rating is removed while mortgages are outstanding. If the Company elects to extend the Covenant Relief Period until January 1, 2022 as described above, the Covenant Relief Period will automatically end on October 29, 2021 if the Company fails to provide such mortgages.
The amendments provide relief from compliance with the following financial covenants during the Covenant Relief Period: the total-debt-to-total-asset-value covenant; the maximum-unsecured-debt-to-unencumbered-asset-value covenant; the minimum unsecured interest coverage ratio; and the minimum fixed charge ratio. The amended Note Purchase Agreement modifies the maximum secured debt to total asset value covenant as follows: (i) neither the Company nor any of its subsidiaries may incur any secured debt during the period beginning on December 24, 2020 and ending on the last day of the Covenant Relief Period, subject to certain exceptions; and (ii) after the Covenant
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
Relief Period the ratio of secured debt to total asset value is reduced from 0.35 to 1.00 to 0.25 to 1.00 until the Company can demonstrate covenant compliance for at least two fiscal quarters.
The amendments impose certain restrictions on the Company during the Covenant Relief Period, including limitations on certain investments, incurrences of indebtedness, capital expenditures, payment of dividends or other distributions and stock repurchases, and maintenance of a minimum liquidity amount of $500.0 million, in each case subject to certain exceptions. The amendments include the following restrictions: (i) the limitation on investments and guarantees of certain indebtedness from October 1, 2020 to the end of the Covenant Relief Period was set at $175.0 million; and (ii) the limitation on capital expenditures from October 1, 2020 to the end of the Covenant Relief Period was set at $175.0 million. In addition, the amount of proceeds from assets sales that are exempt from the requirement to apply such proceeds to the prepayment of outstanding indebtedness under the Company's existing bank credit agreement and the private placement notes is $150.0 million, subject to certain exceptions relating to the sale of specified assets. In addition, the Company is prohibited from voluntarily prepaying its existing public senior notes during the Covenant Relief Period or its term loan debt under its bank facility during the Covenant Relief Period.
In connection with the amendments, $1.5 million of fees paid to third parties were expensed and included in costs associated with loan refinancing in the accompanying consolidated statements of (loss) income and comprehensive (loss) income for the year ended December 31, 2020. In addition, the Company paid $0.9 million in fees to existing lenders that were capitalized in deferred financing costs and amortized as part of the effective yield and shown as a reduction of debt.
Subsequent to year-end, the Company paid down principal of approximately $23.8 million on its private placement notes resulting from the sale of assets in accordance with the amendments.
Certain of the Company’s debt agreements contain customary restrictive covenants related to financial and operating performance as well as certain cross-default provisions. The Company was in compliance with all financial covenants under the Company's debt instruments at December 31, 2020.
Principal payments due on long-term debt obligations subsequent to December 31, 2020 (without consideration of any extensions) are as follows (in thousands):
| | | | | |
| Amount |
Year: | |
2021 | $ | 0 | |
2022 | 590,000 | |
2023 | 675,000 | |
2024 | 148,000 | |
2025 | 300,000 | |
Thereafter | 2,016,995 | |
Less: deferred financing costs, net | (35,552) | |
Total | $ | 3,694,443 | |
The Company capitalizes a portion of interest costs as a component of property under development. The following is a summary of interest expense, net from continuing operations for the years ended December 31, 2020, 2019 and 2018 (in thousands):
| | | | | | | | | | | | | | | | | |
| 2020 | | 2019 | | 2018 |
Interest on loans | $ | 152,058 | | | $ | 140,697 | | | $ | 137,570 | |
| | | | | |
Amortization of deferred financing costs | 6,606 | | | 6,192 | | | 5,797 | |
| | | | | |
Credit facility and letter of credit fees | 3,064 | | | 2,265 | | | 2,411 | |
Interest cost capitalized | (1,233) | | | (4,975) | | | (9,541) | |
Interest income | (2,820) | | | (2,177) | | | (367) | |
| | | | | |
Interest expense, net | $ | 157,675 | | | $ | 142,002 | | | $ | 135,870 | |
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
9. Derivative Instruments
All derivatives are recognized at fair value in the consolidated balance sheets within the line items "Other assets" and "Accounts payable and accrued liabilities" as applicable. The Company has elected not to offset its derivative position for purposes of balance sheet presentation and disclosure. The Company had derivative assets of $1.1 million at December 31, 2019 and had 0 derivative assets at December 31, 2020. The Company had derivative liabilities of $14.0 million and $4.5 million at December 31, 2020 and 2019, respectively. The Company has not posted or received collateral with its derivative counterparties as of December 31, 2020 and 2019. See Note 10 for disclosures relating to the fair value of the derivative instruments.
Risk Management Objective of Using Derivatives
The Company is exposed to certain risk arising from both its business operations and economic conditions including the effect of changes in foreign currency exchange rates on foreign currency transactions and interest rates on its LIBOR based borrowings. The Company manages this risk by following established risk management policies and procedures including the use of derivatives. The Company’s objective in using derivatives is to add stability to reported earnings and to manage its exposure to foreign exchange and interest rate movements or other identified risks. To accomplish this objective, the Company primarily uses interest rate swaps, cross-currency swaps and foreign currency forwards.
Cash Flow Hedges of Interest Rate Risk
The Company uses interest rate swaps as its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt or payment of variable-rate amounts from a counterparty which results in the Company recording net interest expense that is fixed over the life of the agreements without exchange of the underlying notional amount.
As of December 31, 2020, the Company had 4 interest rate swap agreements designated as cash flow hedges of interest rate risk related to its variable rate unsecured term loan facility totaling $400.0 million. Additionally, at December 31, 2020, the Company had an interest rate swap agreement designated as a cash flow hedge of interest rate risk related to its variable rate secured bonds totaling $25.0 million. Interest rate swap agreements outstanding at December 31, 2020 are summarized below:
| | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | | Notional Amount (in millions) | | Index | | Maturity |
4.3950% | (1) | | $ | 116.7 | | | USD LIBOR | | February 7, 2022 |
4.4075% | (1) | | 116.7 | | | USD LIBOR | | February 7, 2022 |
4.4080% | (1) | | 116.6 | | | USD LIBOR | | February 7, 2022 |
4.5950% | (1) | | 50.0 | | | USD LIBOR | | February 7, 2022 |
Total | | | $ | 400.0 | | | | | |
| | | | | | | |
1.3925% | | | 25.0 | | | USD LIBOR | | September 30, 2024 |
Total | | | $ | 25.0 | | | | | |
(1) As discussed in Note 8, on June 29, 2020 and November 3, 2020, the Company amended its Consolidated Credit Agreement. The above fixed rates increased by 0.90% during the Covenant Relief Period, and as a result of the Company's unsecured debt ratings being downgraded and a LIBOR floor of 0.50% being established. The rates are scheduled to return to previous levels as defined in the agreement at the end of this period, subject to the Company's unsecured debt ratings.
The change in the fair value of interest rate derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (AOCI) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings within the same income statement line item as the earnings effect of the hedged transaction.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. As of December 31, 2020, the Company estimates that during the twelve months ending December 31, 2020, $8.2 million will be reclassified from AOCI to interest expense.
Cash Flow Hedges of Foreign Exchange Risk
The Company is exposed to foreign currency exchange risk against its functional currency, USD, on CAD denominated cash flow from its 4 Canadian properties. The Company uses cross-currency swaps to mitigate its exposure to fluctuations in the USD-CAD exchange rate on cash inflows associated with these properties which should hedge a significant portion of the Company's expected CAD denominated cash flows.
During the year ended December 31, 2020, the Company entered into USD-CAD cross-currency swaps that were effective July 1, 2020 with a fixed original notional value of $100.0 million CAD and $76.6 million USD. The net effect of this swap is to lock in an exchange rate of $1.31 CAD per USD on approximately $7.2 million annual CAD denominated cash flows through June 2022.
The change in the fair value of foreign currency derivatives designated and that qualify as cash flow hedges of foreign exchange risk is recorded in AOCI and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings within the same income statement line item as the earnings effect of the hedged transaction. As of December 31, 2020, the Company estimates that during the twelve months ending December 31, 2020, $0.2 million of losses will be reclassified from AOCI to other expense.
Net Investment Hedges
The Company is exposed to fluctuations in the USD-CAD exchange rate on its net investments in Canada. As such, the Company uses either currency forward agreements or cross-currency swaps to manage its exposure to changes in foreign exchange rates on certain of its foreign net investments. As of December 31, 2020, the Company had the following cross-currency swaps designated as net investment hedges:
| | | | | | | | | | | | | | |
Fixed 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.
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.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
Below is a summary of the effect of derivative instruments on the consolidated statements of changes in equity and income for the years ended December 31, 2020, 2019 and 2018:
Effect of Derivative Instruments on the Consolidated Statements of Changes in Equity and Comprehensive (Loss) Income for the Years Ended December 31, 2020, 2019 and 2018
(Dollars in thousands)
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
Description | 2020 | | 2019 | | 2018 |
Cash Flow Hedges | | | | | |
Interest Rate Swaps | | | | | |
Amount of (Loss) Gain Recognized in AOCI on Derivative | $ | (11,612) | | | $ | (7,476) | | | $ | 3,172 | |
Amount of (Expense) Income Reclassified from AOCI into Earnings (1) | (6,159) | | | 1,138 | | | 1,324 | |
Cross Currency Swaps | | | | | |
Amount of Gain (Loss) Recognized in AOCI on Derivative | 5 | | | (450) | | | 1,689 | |
Amount of Income Reclassified from AOCI into Earnings (2) | 441 | | | 545 | | | 1,426 | |
Net Investment Hedges | | | | | |
Cross Currency Swaps | | | | | |
Amount of (Loss) Gain Recognized in AOCI on Derivative | (4,664) | | | (4,454) | | | 5,108 | |
Amount of Income Recognized in Earnings (2) (3) | 599 | | | 556 | | | 271 | |
Currency Forward Agreements | | | | | |
Amount of Gain Recognized in AOCI on Derivative | 0 | | | 0 | | | 8,560 | |
| | | | | |
Total | | | | | |
Amount of (Loss) Gain Recognized in AOCI on Derivative | $ | (16,271) | | | $ | (12,380) | | | $ | 18,529 | |
Amount of (Expense) Income Reclassified from AOCI into Earnings | (5,718) | | | 1,683 | | | 2,750 | |
Amount of Income Recognized in Earnings | 599 | | | 556 | | | 271 | |
| | | | | |
Interest expense, net in accompanying consolidated statements of (loss) income and comprehensive (loss) income | $ | 157,675 | | | $ | 142,002 | | | $ | 135,870 | |
Other income in accompanying consolidated statements of (loss) income and comprehensive (loss) income | $ | 9,139 | | | $ | 25,920 | | | $ | 2,076 | |
(1) Included in “Interest expense, net” in accompanying consolidated statements of (loss) income and comprehensive (loss) income.
(2) Included in "Other income" in the accompanying consolidated statements of (loss) income and comprehensive (loss) income.
(3) Amounts represent derivative gains excluded from the effectiveness testing.
Credit-risk-related Contingent Features
The Company has agreements with each of its interest rate derivative counterparties that contain a provision where if the Company defaults on any of its obligations for borrowed money or credit in an amount exceeding $50.0 million and such default is not waived or cured within a specified period of time, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its interest rate derivative obligations.
As of December 31, 2020, the fair value of the Company's derivatives in a liability position related to these agreements was $14.0 million. If the Company breached any of the contractual provisions of these derivative contracts, it would be required to settle its obligations under the agreements at their termination value of $14.8 million. As of December 31, 2020, the Company had not posted any collateral related to these agreements and was not in breach of any provisions in these agreements.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
10. Fair Value Disclosures
The Company has certain financial instruments that are required to be measured under the FASB’s Fair Value Measurement guidance. The Company currently does not have any non-financial assets and 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 has 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 December 31, 2020, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives and therefore, has classified its derivatives as Level 2 within the fair value reporting hierarchy.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
The table below presents the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2020 and 2019, 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 December 31, 2020 and 2019
(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 |
2020: | | | | | | | |
| | | | | | | |
Cross Currency Swaps** | $ | 0 | | | $ | (4,271) | | | $ | 0 | | | $ | (4,271) | |
| | | | | | | |
| | | | | | | |
Interest Rate Swap Agreements** | $ | 0 | | | $ | (9,723) | | | $ | 0 | | | $ | (9,723) | |
2019: | | | | | | | |
Cross Currency Swaps* | $ | 0 | | | $ | 828 | | | $ | 0 | | | $ | 828 | |
| | | | | | | |
| | | | | | | |
Interest Rate Swap Agreements* | $ | 0 | | | $ | 225 | | | $ | 0 | | | $ | 225 | |
Interest Rate Swap Agreements** | $ | 0 | | | $ | (4,495) | | | $ | 0 | | | $ | (4,495) | |
*Included in "Other assets" in the accompanying consolidated balance sheet.
** Included in "Accounts payable and accrued liabilities" 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 during the year ended December 31, 2020 and 2019, aggregated by the level in the fair value hierarchy within which those measurements fall.
Assets Measured at Fair Value on a Non-Recurring Basis During the Year Ended
December 31, 2020 and 2019
(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 measurement date |
2020: | | | | | | | |
Real estate investments, net | $ | — | | | $ | 29,684 | | | $ | 9,860 | | | $ | 39,544 | |
Operating lease right-of-use assets | — | | | — | | | 12,953 | | | 12,953 | |
Investment in joint ventures | — | | | — | | | 771 | | | 771 | |
Other assets (1) | — | | | 0 | | | 0 | | | 0 | |
2019: | | | | | | | |
Real estate investments, net | $ | — | | | $ | 6,160 | | | $ | 0 | | | $ | 6,160 | |
(1) Includes collateral dependent notes receivable, which are presented within other assets in the accompanying consolidated balance sheet.
As discussed further in Note 4, during the year ended December 31, 2020, the Company recorded impairment charges of $85.7 million, of which $70.7 million related to real estate investments, net and $15.0 million related to operating lease right-of-use assets. Management estimated the fair value of these investments taking into account various factors including purchase offers, independent appraisals, shortened hold periods and current market conditions. The Company determined, based on the inputs, that its valuation of 6 of its properties with purchase offers were classified as Level 2 of the fair value hierarchy and were measured at fair value. NaN properties, 2 of which included operating lease right-of-use assets, were measured at fair value using independent appraisals which used discounted cash flow models. The significant inputs and assumptions used in the real estate appraisals included market rents which ranged from $9 per square foot to $28 per square foot, discount rates which ranged from 9.0% to 12.3% and a terminal capitalization rate of 8.75% for the property not under ground lease. Significant inputs and assumptions used in the right-of-use asset appraisals included market rates which ranged from $10 per square foot to
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
$16 per square foot and discount rates which ranged from 8.0% to 8.5%. These measurements were classified within Level 3 of the fair value hierarchy as many of the assumptions were not observable.
Additionally, as discussed further in Note 7, during the year ended December 31, 2020, the Company recorded impairment charges of $3.2 million related to its investment in joint ventures. Management estimated the fair value of these investments, taking into account various factors including implied asset value changes based on discounted cash flow projections and current market conditions. The Company determined, based on the inputs, that its valuation of investment in joint ventures was classified within Level 3 of the fair value hierarchy as many of the assumptions are not observable.
As discussed further in Note 6, during the year ended December 31, 2020, the Company recorded expected credit loss expense totaling $25.5 million related to notes receivable from one borrower to fully reserve the outstanding principal balance of $12.6 million and unfunded commitment to fund $12.9 million, as a result of recent changes in the borrower's financial status due to the impact of the COVID-19 pandemic. Management valued the loan based on the fair value of the underlying collateral which was based on review of the financial statements of the borrower, and was classified within Level 2 of the fair value hierarchy.
As discussed further in Note 4, during the year ended December 31, 2019, the Company recorded an impairment charge of $2.2 million related to real estate investments, net. Management estimated the fair value of this property taking into account various factors including various purchase offers, pending purchase agreements, the shortened holding period and current market conditions. The Company determined, based on the inputs, that its valuation of real estate investments, net was classified within Level 2 of the fair value hierarchy.
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 December 31, 2020 and 2019:
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 December 31, 2020, the Company had a carrying value of $365.6 million in fixed rate mortgage notes receivable outstanding, including related accrued interest, with a weighted average interest rate of approximately 9.03%. The fixed rate mortgage notes bear interest at rates of 7.01% to 11.78%. Discounting the future cash flows for fixed rate mortgage notes receivable using rates of 7.50% to 10.00%, management estimates the fair value of the fixed rate mortgage notes receivable to be $394.0 million with an estimated weighted average market rate of 8.11% at December 31, 2020.
At December 31, 2019, the Company had a carrying value of $357.4 million in fixed rate mortgage notes receivable outstanding, including related accrued interest, with a weighted average interest rate of approximately 8.98%. The fixed rate mortgage notes bear interest at rates of 6.99% to 11.61%. Discounting the future cash flows for fixed rate mortgage notes receivable using rates of 6.99% to 9.25%, management estimates the fair value of the fixed rate mortgage notes receivable to be $395.6 million with an estimated weighted average market rate of 7.76% at December 31, 2019.
Derivative instruments:
Derivative instruments are carried at their fair value.
Debt instruments:
The fair value of the Company's debt as of December 31, 2020 and 2019 is estimated by discounting the future cash flows of each instrument using current market rates. At December 31, 2020, the Company had a carrying value of $1.0 billion in variable rate debt outstanding with an average weighted interest rate of approximately 2.23%. The carrying value of the variable rate debt outstanding approximates the fair value at December 31, 2020.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
At December 31, 2019, the Company had a carrying value of $425.0 million in variable rate debt outstanding with an average weighted interest rate of approximately 2.75%. The carrying value of the variable rate debt outstanding approximates the fair value at December 31, 2019.
At December 31, 2020 and 2019, $425.0 million, of the Company's variable rate debt, discussed above, had been effectively converted to a fixed rate by interest rate swap agreements. See Note 9 for additional information related to the Company's interest rate swap agreements.
At December 31, 2020, the Company had a carrying value of $2.72 billion in fixed rate long-term debt outstanding with an average weighted interest rate of approximately 4.70%. Discounting the future cash flows for fixed rate debt using December 31, 2020 market rates of 4.09% to 5.81%, management estimates the fair value of the fixed rate debt to be approximately $2.69 billion with an estimated weighted average market rate of 4.70% at December 31, 2020.
At December 31, 2019, the Company had a carrying value of $2.72 billion in fixed rate long-term debt outstanding with an average weighted interest rate of approximately 4.54%. Discounting the future cash flows for fixed rate debt using December 31, 2019 market rates of 2.87% to 4.56%, management estimates the fair value of the fixed rate debt to be approximately $2.87 billion with an estimated weighted average market rate of 3.51% at December 31, 2019.
11. Common and Preferred Shares
On June 3, 2019, the Company filed a shelf registration statement with the SEC, which is effective for a term of 3 years. The securities covered by this registration statement include common shares, preferred shares, debt securities, depositary shares, warrants, and units. The Company may periodically offer one of more of these securities in amounts, prices and on terms to be announced when and if these securities are offered. The specifics of any future offerings along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering.
Additionally, on June 3, 2019, the Company filed a shelf registration statement with the SEC, which is effective for a term of 3 years, for its Dividend Reinvestment and Direct Share Purchase Plan (DSP Plan) which permits the issuance of up to 15,000,000 common shares.
Common Shares
The Company's Board declared cash dividends totaling $1.515 and $4.500 per common share for the years ended December 31, 2020 and 2019, respectively. The monthly cash dividend to common shareholders was suspended following the common share dividend paid on May 15, 2020 to shareholders of record as of April 30, 2020.
Of the total distributions calculated for tax purposes, the amounts characterized as ordinary income, return of capital and long-term capital gain for cash distributions paid per common share for the years ended December 31, 2020 and 2019 are as follows:
| | | | | | | | | | | | |
| Cash Distributions Per Share | |
| 2020 | | 2019 | |
Taxable ordinary income (1) | $ | 0.8888 | | | $ | 2.7411 | | |
Return of capital | 0.5634 | | | 1.3966 | | |
Long-term capital gain (2) | 0.4378 | | | 0.3473 | | |
| | | | |
Totals | $ | 1.8900 | | | $ | 4.4850 | | |
(1) Amounts qualify in their entirety as 199A distributions.
(2) Of the long-term capital gain, $0.1439 and $0.3473 were unrecaptured section 1250 gains for the years ended December 31, 2020 and 2019, respectively.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
During the year ended December 31, 2020, the Company issued an aggregate of 36,176 common shares under its DSP Plan for net proceeds of $1.1 million.
During the year ended December 31, 2020, the Company's Board approved a share repurchase program pursuant to which the Company may repurchase up to $150.0 million of the Company's common shares. The share repurchase program was scheduled to expire on December 31, 2020; however, the Company suspended the program on the effective date of the covenant modification agreements, June 29, 2020, as discussed in Note 8. During the year ended December 31, 2020, the Company repurchased 4,066,716 common shares under the share repurchase program for approximately $106.0 million. The repurchases were made under a Rule 10b5-1 trading plan.
Series C Convertible Preferred Shares
The Company has outstanding 5.4 million 5.75% Series C cumulative convertible preferred shares (Series C preferred shares). The Company will pay cumulative dividends on the Series C preferred shares from the date of original issuance in the amount of $1.4375 per share each year, which is equivalent to 5.75% of the $25 liquidation preference per share. Dividends on the Series C preferred shares are payable quarterly in arrears. The Company does not have the right to redeem the Series C preferred shares except in limited circumstances to preserve the Company’s REIT status. The Series C preferred shares have no stated maturity and will not be subject to any sinking fund or mandatory redemption. As of December 31, 2020, the Series C preferred shares are convertible, at the holder’s option, into the Company’s common shares at a conversion rate of 0.4137 common shares per Series C preferred share, which is equivalent to a conversion price of $60.43 per common share. This conversion ratio may increase over time upon certain specified triggering events including if the Company’s common dividends per share exceeds a quarterly threshold of $0.6875.
Upon the occurrence of certain fundamental changes, the Company will under certain circumstances increase the conversion rate by a number of additional common shares or, in lieu thereof, may in certain circumstances elect to adjust the conversion rate upon the Series C preferred shares becoming convertible into shares of the public acquiring or surviving company.
The Company may, at its option, cause the Series C preferred shares to be automatically converted into that number of common shares that are issuable at the then prevailing conversion rate. The Company may exercise its conversion right only if, at certain times, the closing price of the Company’s common shares equals or exceeds 135% of the then prevailing conversion price of the Series C preferred shares.
Owners of the Series C preferred shares generally have no voting rights, except under certain dividend defaults. Upon conversion, the Company may choose to deliver the conversion value to the owners in cash, common shares, or a combination of cash and common shares.
The Company's Board declared cash dividends totaling $1.4375 per Series C preferred share for each of the years ended December 31, 2020 and 2019. There were non-cash distributions associated with conversion adjustments of $0.2131 and $0.6822 per Series C preferred share for the years ended December 31, 2020 and 2019, respectively. The conversion adjustment provision entitles the shareholders of the Series C preferred shares, upon certain quarterly common share dividend thresholds being met, to receive additional common shares of the Company upon a conversion of the preferred shares into common shares. The increase in common shares to be received upon a conversion is a deemed distribution for federal income tax purposes.
For tax purposes, the amounts characterized as ordinary income, return of capital and long-term capital gain for cash distributions paid and non-cash deemed distributions per Series C preferred share for the years ended December 31, 2020 and 2019 are as follows:
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
| | | | | | | | | | | | |
| Cash Distributions per Share | |
| 2020 | | 2019 | |
Taxable ordinary income (1) | $ | 0.9631 | | | $ | 1.2758 | | |
Return of capital | 0 | | | 0 | | |
Long-term capital gain (2) | 0.4744 | | | 0.1617 | | |
| | | | |
Totals | $ | 1.4375 | | | $ | 1.4375 | | |
(1) Amounts qualify in their entirety as 199A distributions.
(2) Of the long-term capital gain, $0.1559 and $0.1617 were unrecaptured section 1250 gains for the years ended December 31, 2020 and 2019, respectively.
| | | | | | | | | | | | |
| Non-cash Distributions per Share | |
| 2020 | | 2019 | |
Taxable ordinary income (3) | $ | 0.0958 | | | $ | 0.1050 | | |
Return of capital | 0.0701 | | | 0.5639 | | |
Long-term capital gain (4) | 0.0472 | | | 0.0133 | | |
| | | | |
Totals | $ | 0.2131 | | | $ | 0.6822 | | |
(3) Amounts qualify in their entirety as 199A distributions.
(4) Of the long-term capital gain, $0.0155 and $0.0133 were unrecaptured section 1250 gains for the years ended December 31, 2020 and 2019, respectively.
Series E Convertible Preferred Shares
The Company has outstanding 3.4 million 9.00% Series E cumulative convertible preferred shares (Series E preferred shares). The Company will pay cumulative dividends on the Series E preferred shares from the date of original issuance in the amount of $2.25 per share each year, which is equivalent to 9.00% of the $25 liquidation preference per share. Dividends on the Series E preferred shares are payable quarterly in arrears. The Company does not have the right to redeem the Series E preferred shares except in limited circumstances to preserve the Company’s REIT status. The Series E preferred shares have no stated maturity and will not be subject to any sinking fund or mandatory redemption. As of December 31, 2020, the Series E preferred shares are convertible, at the holder’s option, into the Company’s common shares at a conversion rate of 0.4826 common shares per Series E preferred share, which is equivalent to a conversion price of $51.80 per common share. This conversion ratio may increase over time upon certain specified triggering events including if the Company’s common dividends per share exceeds a quarterly threshold of $0.84.
Upon the occurrence of certain fundamental changes, the Company will under certain circumstances increase the conversion rate by a number of additional common shares or, in lieu thereof, may in certain circumstances elect to adjust the conversion rate upon the Series E preferred shares becoming convertible into shares of the public acquiring or surviving company.
The Company may, at its option, cause the Series E preferred shares to be automatically converted into that number of common shares that are issuable at the then prevailing conversion rate. The Company may exercise its conversion right only if, at certain times, the closing price of the Company’s common shares equals or exceeds 150% of the then prevailing conversion price of the Series E preferred shares.
Owners of the Series E preferred shares generally have no voting rights, except under certain dividend defaults. Upon conversion, the Company may choose to deliver the conversion value to the owners in cash, common shares, or a combination of cash and common shares.
The Company's Board declared cash dividends totaling $2.25 per Series E preferred share for each of the years ended December 31, 2020 and 2019. There were non-cash distributions associated with conversion adjustments of $0.1695 and $0.6024 per Series E preferred share for the years ended December 31, 2020 and 2019, respectively. The conversion adjustment provision entitles the shareholders of the Series E preferred shares, upon certain quarterly common share dividend thresholds being met, to receive additional common shares of the Company upon a conversion of the preferred shares into common shares. The increase in common shares to be received upon a conversion is a deemed distribution for federal income tax purposes.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
For tax purposes, the amounts characterized as ordinary income, return of capital and long-term capital gain for cash distributions paid and non-cash deemed distributions per Series E preferred share for the years ended December 31, 2020 and 2019 are as follows:
| | | | | | | | | | | | |
| Cash Distributions per Share | |
| 2020 | | 2019 | |
Taxable ordinary income (1) | $ | 1.5075 | | | $ | 1.9970 | | |
Return of capital | 0 | | | 0 | | |
Long-term capital gain (2) | 0.7425 | | | 0.2530 | | |
| | | | |
Totals | $ | 2.2500 | | | $ | 2.2500 | | |
(1) Amounts qualify in their entirety as 199A distributions.
(2) Of the long-term capital gain, $0.2441 and $0.2530 were unrecaptured section 1250 gains for the years ended December 31, 2020 and 2019, respectively.
| | | | | | | | | | | | |
| Non-cash Distributions per Share | |
| 2020 | | 2019 | |
Taxable ordinary income (3) | $ | 0.0176 | | | $ | 0 | | |
Return of capital | 0.1432 | | | 0.6024 | | |
Long-term capital gain (4) | 0.0087 | | | 0 | | |
| | | | |
Totals | $ | 0.1695 | | | $ | 0.6024 | | |
(3) Amounts qualify in their entirety as 199A distributions.
(4) Of the long-term capital gain, $0.0610 was unrecaptured section 1250 gains for the year ended December 31, 2020. There were 0 unrecaptured section 1250 gains for the year ended December 31, 2019.
Series G Preferred Shares
The Company has outstanding 6.0 million 5.75% Series G cumulative redeemable preferred shares (Series G preferred shares). The Company will pay cumulative dividends on the Series G preferred shares from the date of original issuance in the amount of $1.4375 per share each year, which is equivalent to 5.75% of the $25.00 liquidation preference per share. Dividends on the Series G preferred shares are payable quarterly in arrears. The Company may not redeem the Series G preferred shares before November 30, 2022, except in limited circumstances to preserve the Company's REIT status. On or after November 30, 2022, the Company may, at its option, redeem the Series G preferred shares in whole at any time or in part from time to time by paying $25.00 per share, plus any accrued and unpaid dividends up to, but not including the date of redemption. The Series G preferred shares have no stated maturity and will not be subject to any sinking fund or mandatory redemption. The Series G preferred shares are not convertible into any of the Company's securities, except under certain circumstances in connection with a change of control. Owners of the Series G preferred shares generally have no voting rights except under certain dividend defaults.
The Company's Board declared cash dividends totaling $1.4375 per Series G preferred share for each of the years ended December 31, 2020 and 2019. For tax purposes, the amounts characterized as ordinary income, return of capital and long-term capital gain for cash distributions paid per Series G preferred share for the years ended December 31, 2020 and 2019 are as follows:
| | | | | | | | | | | | | | | | |
| Cash Distributions per Share | |
| 2020 | | 2019 | | | |
Taxable ordinary income (1) | $ | 0.9631 | | | $ | 1.2758 | | | | |
Return of capital | 0 | | | 0 | | | | |
Long-term capital gain (2) | 0.4744 | | | 0.1617 | | | | |
| | | | | | |
Totals | $ | 1.4375 | | | $ | 1.4375 | | | | |
(1) Amounts qualify in their entirety as 199A distributions.
(2) Of the long-term capital gain, $0.1559 and $0.1617 were unrecaptured section 1250 gains for the years ended December 31, 2020 and 2019, respectively.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
12. Earnings Per Share
The following table summarizes the Company’s computation of basic and diluted earnings per share (EPS) for the years ended December 31, 2020, 2019 and 2018 (amounts in thousands except per share information):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2020 |
| Income (numerator) | | Shares (denominator) | | Per Share Amount |
Basic EPS: | | | | | |
Net loss | $ | (131,728) | | | | | |
Less: preferred dividend requirements | (24,136) | | | | | |
| | | | | |
| | | | | |
| | | | | |
Net loss available to common shareholders | $ | (155,864) | | | 75,994 | | | $ | (2.05) | |
Diluted EPS: | | | | | |
Net loss available to common shareholders | $ | (155,864) | | | 75,994 | | | |
Effect of dilutive securities: | | | | | |
Share options | — | | | 0 | | | |
| | | | | |
| | | | | |
Net loss available to common shareholders | $ | (155,864) | | | 75,994 | | | $ | (2.05) | |
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2019 |
| Income (numerator) | | Shares (denominator) | | Per Share Amount |
Basic EPS: | | | | | |
Income from continuing operations | $ | 154,556 | | | | | |
Less: preferred dividend requirements | (24,136) | | | | | |
| | | | | |
Income from continuing operations available to common shareholders | $ | 130,420 | | | 76,746 | | | $ | 1.70 | |
| | | | | |
| | | | | |
Income from discontinued operations available to common shareholders | $ | 47,687 | | | 76,746 | | | $ | 0.62 | |
Net income available to common shareholders | $ | 178,107 | | | 76,746 | | | $ | 2.32 | |
Diluted EPS: | | | | | |
Income from continuing operations available to common shareholders | $ | 130,420 | | | 76,746 | | | |
Effect of dilutive securities: | | | | | |
Share options | — | | | 36 | | | |
Income from continuing operations available to common shareholders | $ | 130,420 | | | 76,782 | | | $ | 1.70 | |
Income from discontinued operations available to common shareholders | $ | 47,687 | | | 76,782 | | | $ | 0.62 | |
Net income available to common shareholders | $ | 178,107 | | | 76,782 | | | $ | 2.32 | |
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2018 |
| Income (numerator) | | Shares (denominator) | | Per Share Amount |
Basic EPS: | | | | | |
Income from continuing operations | $ | 221,947 | | | | | |
Less: preferred dividend requirements and redemption costs | (24,142) | | | | | |
| | | | | |
Income from continuing operations available to common shareholders | $ | 197,805 | | | 74,292 | | | $ | 2.66 | |
Income from discontinued operations available to common shareholders | $ | 45,036 | | | 74,292 | | | $ | 0.61 | |
| | | | | |
Net income available to common shareholders | $ | 242,841 | | | 74,292 | | | $ | 3.27 | |
Diluted EPS: | | | | | |
Income from continuing operations available to common shareholders | $ | 197,805 | | | 74,292 | | | |
Effect of dilutive securities: | | | | | |
Share options | — | | | 45 | | | |
Income from continuing operations available to common shareholders | $ | 197,805 | | | 74,337 | | | $ | 2.66 | |
Income from discontinued operations available to common shareholders | $ | 45,036 | | | 74,337 | | | $ | 0.61 | |
Net income available to common shareholders | $ | 242,841 | | | 74,337 | | | $ | 3.27 | |
The additional 2.2 million common shares for both December 31, 2020 and 2019 and 2.1 million common shares for December 31, 2018 that would result from the conversion of the Company’s 5.75% Series C cumulative convertible preferred shares and the additional 1.7 million common shares for December 31, 2020 and 1.6 million common shares for both December 31, 2019 and 2018 that would result from the conversion of the Company’s 9.0% Series E
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
cumulative convertible preferred shares and the corresponding add-back of the preferred dividends declared on those shares are not included in the calculation of diluted earnings per share because the effect is anti-dilutive.
The dilutive effect of potential common shares from the exercise of share options is included in diluted earnings per share for the years ended December 31, 2019 and 2018. The dilutive effect of potential common shares from the exercise of share options is excluded from diluted earnings per share for the year ended December 31, 2020 because the effect is anti-dilutive due to the net loss available to common shareholders. Options to purchase 117 thousand, 4 thousand and 26 thousand of common shares were outstanding at the end of 2020, 2019 and 2018, respectively, at per share prices ranging from $44.62 to $76.63 for 2020, $73.84 to $76.63 for 2019 and per share prices ranging from $61.79 to $76.63 for 2018, but were not included in the computation of diluted earnings per share because they were anti-dilutive.
The dilutive effect of the potential common shares from the performance shares is 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. During the year ended December 31, 2020, the Company determined the performance and market conditions were not met, therefore, NaN of the 56 thousand contingently issuable performance shares were included in the computation of diluted earnings per share.
13. Severance Expense
On December 31, 2020, the Company's Senior Vice President - Asset Management, Michael L. Hirons, retired from the Company. Mr. Hirons' retirement was a "Qualifying Termination" under the Company's Employee Severance and Retirement Vesting Plan. For the year ended December 31, 2020, severance expense totaled $2.9 million and included cash payments totaling $1.6 million, and accelerated vesting of nonvested shares and performance shares totaling $1.3 million.
During the year ended December 31, 2019, the Company recorded severance expense related to various employees totaling $2.4 million. For the year ended December 31, 2019, severance expense included cash payments totaling $1.8 million, and accelerated vesting of nonvested shares totaling $0.6 million.
On April 5, 2018, the Company and Mr. Earnest, its then Senior Vice President and Chief Investment Officer, entered into an additional $21.0Amended and Restated Employment Agreement, effective March 31, 2018, to reflect the changes in connection with Mr. Earnest's transition to Executive Advisor of the Company. As the Company determined that such services were no longer needed, on December 27, 2018, the Company gave notice that the agreement was going to be terminated pursuant to the provisions of the Amended and Restated Employment Agreement. As a result, during the year ended December 31, 2018, the Company recorded severance expense related to Mr. Earnest, as well as another employee terminated under a similar such agreement, totaling $5.9 million. For the year ended December 31, 2018, severance expense includes cash payments totaling $2.6 million, accelerated vesting of nonvested shares totaling $3.2 million and $0.1 million of reimbursementsrelated taxes and other expenses.
14. Equity Incentive Plan
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 1,950,000 common shares, options to purchase common shares and restricted share units, subject to adjustment in the event of certain capital events, may be granted. During the year ended December 31, 2020, the Compensation and Human Capital Committee of the Board approved the 2020 Long Term Incentive Plan (2020 LTIP) as a sub-plan under the Company's 2016 Equity Incentive Plan. Under the 2020 LTIP, the Company awards performance shares and restricted shares to the Company's executive officers. At December 31, 2020, there were 746,828 shares available for grant under the 2016 Equity Incentive Plan.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
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 shares | | Option price per share | | Weighted avg. exercise price |
Outstanding at December 31, 2017 | 257,606 | | | $ | 19.02 | | | — | | | $ | 76.63 | | | $ | 51.81 | |
Exercised | (25,721) | | | 45.20 | | | — | | | 61.79 | | | 50.68 | |
Granted | 3,835 | | | 56.94 | | | — | | | 56.94 | | | 56.94 | |
Forfeited/Expired | (845) | | | 51.64 | | | — | | | 61.79 | | | 61.12 | |
Outstanding at December 31, 2018 | 234,875 | | | $ | 19.02 | | | — | | | $ | 76.63 | | | $ | 51.98 | |
Exercised | (118,786) | | | 19.02 | | | — | | | 61.79 | | | 48.71 | |
Granted | 1,941 | | | 73.84 | | | — | | | 73.84 | | | 73.84 | |
| | | | | | | | | |
Outstanding at December 31, 2019 | 118,030 | | | $ | 44.62 | | | — | | | $ | 76.63 | | | $ | 55.63 | |
Exercised | (1,410) | | | 44.98 | | | — | | | 44.98 | | | 44.98 | |
Granted | 2,890 | | | 69.19 | | | — | | | 69.19 | | | 69.19 | |
Forfeited/Expired | (2,820) | | | 44.98 | | | — | | | 44.98 | | | 44.98 | |
Outstanding at December 31, 2020 | 116,690 | | | $ | 44.62 | | | — | | | $ | 76.63 | | | $ | 56.36 | |
The weighted average fair value of options granted was $3.73, $4.64 and $3.03 during 2020, 2019 and 2018, respectively. The intrinsic value of stock options exercised was $22 thousand, $2.8 million, and $0.4 million during the years ended December 31, 2020, 2019 and 2018, respectively. Additionally, the Company repurchased 1,043 shares in conjunction with the stock options exercised during the year ended December 31, 2020 with a total value of $63 thousand.
The following table summarizes outstanding and exercisable options at December 31, 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Options outstanding | | Options exercisable |
Exercise price range | | Options outstanding | Weighted avg. life remaining | Weighted avg. exercise price | Aggregate intrinsic value (in thousands) | | Options outstanding | Weighted avg. life remaining | Weighted avg. exercise price | Aggregate intrinsic value (in thousands) |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
44.62 - 49.99 | | 27,215 | | 1.3 | | | | 27,215 | | 1.3 | | |
50.00 - 59.99 | | 31,710 | | 3.5 | | | | 29,793 | | 3.3 | | |
60.00 - 69.99 | | 53,609 | | 5.5 | | | | 50,719 | | 4.1 | | |
70.00 - 76.63 | | 4,156 | | 7.1 | | | | 2,148 | | 6.6 | | |
| | 116,690 | | 4.0 | $ | 56.36 | | $ | 0 | | | 109,875 | | 3.3 | $ | 55.67 | | $ | 0 | |
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, 2019 | 509,338 | | | $ | 67.88 | | | |
Granted | 211,549 | | | 69.09 | | | |
Vested | (269,716) | | | 67.84 | | | |
Forfeited | (5,769) | | | 67.95 | | | |
Outstanding at December 31, 2020 | 445,402 | | | $ | 68.47 | | | 0.82 |
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
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 $17.4 million, $22.7 million, and $16.0 million for the years ended December 31, 2020, 2019 and 2018, respectively. At December 31, 2020, unamortized share-based compensation expense related to nonvested shares was $11.8 million and will be recognized in future periods as follows (in thousands):
| | | | | |
| Amount |
Year: | |
2021 | $ | 6,783 | |
2022 | 3,811 | |
2023 | 1,248 | |
Total | $ | 11,842 | |
Nonvested Performance Shares
A summary of the Company's nonvested performance share activity and related information is as follows:
| | | | | |
| Number of Performance Shares |
Outstanding at December 31, 2019 | 0 | |
Granted | 61,615 | |
Vested | (5,277) | |
Forfeited | 0 | |
Outstanding at December 31, 2020 | 56,338 | |
The number of common shares issuable upon settlement of the performance shares granted during the year ended December 31, 2020 will be based upon the Company's achievement level relative to the following performance measures at December 31, 2022: 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 Average Annual Growth in AFFO per share over the balancethree-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 $3.0 million. The estimated fair value is amortized to expense over the three-year vesting period, which ends on December 31, 2022. The following assumptions were used in the Monte Carlo simulation for computing the grant date fair value of the constructionperformance shares with a market condition: risk-free interest rate of 1.4%, volatility factors in the expected market price of the Company's common shares of 18% and an expected life of three years. At December 31, 2020, unamortized share-based compensation expense related to nonvested performance shares was $1.8 million.
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. As future costs are incurred, theyIf it is deemed probable that the performance condition will be classified in accounts receivable until reimbursement is received. Constructionmet, compensation cost will be recognized based on the closing price per share of infrastructure improvements isthe Company's common shares 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 December 31, 2020, achievement of the performance condition for the performance shares granted during the year ended December 31, 2020 was deemed not probable.
The performance shares accrue dividend equivalents which are paid only if common shares are issued upon settlement of the performance shares. During the year ended December 31, 2020, the Company accrued dividend equivalents expected to be paid on earned awards of $50 thousand. In connection with the retirement of the Company's Senior Vice President - Asset Management, Michael L. Hirons, $14 thousand in dividend equivalents were paid resulting in $36 thousand of accrued dividend equivalents expected to be paid on earned awards at December 31, 2020.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
Restricted Share Units
A summary of the Company’s restricted share unit activity and related information is as follows:
| | | | | | | | | | | | | | | | | |
| Number of Shares | | Weighted Average Grant Date Fair Value | | Weighted Average Life Remaining |
Outstanding at December 31, 2019 | 26,236 | | | $ | 77.54 | | | |
Granted | 74,767 | | | 31.57 | | | |
Vested | (26,236) | | | 77.54 | | | |
Outstanding at December 31, 2020 | 74,767 | | | $ | 31.57 | | | 0.42 |
The holders of restricted share units receive dividend equivalents from the date of grant. At December 31, 2020, unamortized share-based compensation expense related to restricted share units was $983 thousand which will be recognized in 2021.
15. Operating Leases
The Company’s real estate investments are leased under operating leases with remaining terms ranging from one year to 29 years. The Company adopted Topic 842 on January 1, 2019 and elected to not reassess its prior conclusions about lease classification. Accordingly, these arrangements continue to be classified as operating leases.
The following table summarizes the future minimum rentals on the Company's lessor and sub-lessor arrangements at December 31, 2020 and 2019 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | | | December 31, 2019 |
| Operating leases | Sub-lessor operating ground leases | | | | Operating leases | Sub-lessor operating ground leases | |
| Amount (1) (2) | Amount (1) (2) | Total | | | Amount (2) | Amount (2) | Total |
Year: | | | | | Year: | | | |
2021 | $ | 461,473 | | $ | 20,440 | | $ | 481,913 | | | 2020 | $ | 525,809 | | $ | 23,468 | | $ | 549,277 | |
2022 | 477,454 | | 20,743 | | 498,197 | | | 2021 | 518,590 | | 23,863 | | 542,453 | |
2023 | 474,504 | | 20,022 | | 494,526 | | | 2022 | 504,119 | | 23,291 | | 527,410 | |
2024 | 471,149 | | 19,521 | | 490,670 | | | 2023 | 474,889 | | 22,609 | | 497,498 | |
2025 | 464,850 | | 19,636 | | 484,486 | | | 2024 | 453,043 | | 22,196 | | 475,239 | |
Thereafter | 3,939,241 | | 182,206 | | 4,121,447 | | | Thereafter | 3,707,326 | | 226,150 | | 3,933,476 | |
Total | $ | 6,288,671 | | $ | 282,568 | | $ | 6,571,239 | | | Total | $ | 6,183,776 | | $ | 341,577 | | $ | 6,525,353 | |
(1) Amounts presented above are based on contractual obligations and exclude the impact of COVID-19 deferred rent payments. As of December 31, 2020, receivables from tenants included fixed rent payments of approximately $76.0 million that were deferred due to the COVID-19 pandemic and determined to be collectible. The Company is currently scheduled to collect approximately $24.3 million in 2021, $31.6 million in 2022, $19.0 million in 2023 and $1.1 million in 2024.
(2) Included in rental revenue.
In addition to its lessor arrangements on its real estate investments, as of December 31, 2020 and 2019, the Company was lessee in 53 and 58 operating ground leases, respectively, as well as lessee in an operating lease of its executive office. 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 December 31, 2020, 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, 2 of these properties are vacant. In the event the tenant fails to pay the ground lease rent or if the property is vacant, the Company is primarily responsible for the payment, assuming the Company does not sell or re-tenant the property. As of December 31, 2020, the ground lease arrangements have remaining terms ranging from one year to 46 years. Most of these leases include one or more options to renew. The Company assesses these options using a threshold of reasonably certain, which also includes an assessment of the term of the Company's tenants' leases. For leases where renewal is reasonably certain, those option periods are included within the lease term and also the measurement of
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
the operating lease right-of-use asset and liability. The ground lease arrangements do not contain any residual value guarantees or any material restrictions. As of December 31, 2020, the Company does not have any leases that have not commenced but that create significant rights and obligations.
The Company determines whether an arrangement is or includes a lease at contract inception. Operating lease right-of-use assets and liabilities are recognized at commencement date and initially measured based on the present value of lease payments over the defined lease term. As the Company's leases do not provide an implicit rate, the Company used its incremental borrowing rate in determining the present value of lease payments. The incremental borrowing rate was adjusted for collateral based on the information available at adoption or the commencement date. Inputs to the calculation of the Company's incremental borrowing rate include its senior notes and their option adjusted credit spreads over comparable U.S. Treasury rates, adjusted to a collateralized basis by estimating the credit spread improvement that would result from an upgrade of one ratings classification.
The following table summarizes the future minimum lease payments under the ground lease obligations and the office lease at December 31, 2020 and 2019, excluding contingent rent due under leases where the ground lease payment, or a portion thereof, is based on the level of the tenant's sales (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | | | December 31, 2019 |
| Ground Leases (1) | Office lease (2) | | | Ground Leases (1) | Office lease (2) |
Year: | | | | Year: | | |
2021 | $ | 22,520 | | $ | 884 | | | 2020 | $ | 24,085 | | $ | 856 | |
2022 | 22,058 | | 967 | | | 2021 | 24,529 | | 884 | |
2023 | 21,340 | | 967 | | | 2022 | 23,961 | | 967 | |
2024 | 20,840 | | 967 | | | 2023 | 23,283 | | 967 | |
2025 | 20,936 | | 967 | | | 2024 | 22,871 | | 967 | |
Thereafter | 203,467 | | 724 | | | Thereafter | 243,411 | | 1,691 | |
Total lease payments | $ | 311,161 | | $ | 5,476 | | | | $ | 362,140 | | $ | 6,332 | |
Less: imputed interest | 113,730 | | 684 | | | | 131,901 | | 921 | |
Present value of lease liabilities | $ | 197,431 | | $ | 4,792 | | | | $ | 230,239 | | $ | 5,411 | |
(1) Included in property operating expense.
(2) Included in general and administrative expense.
The following table summarizes the carrying amounts of the operating lease right-of-use assets and liabilities as of December 31, 2020 (in thousands):
| | | | | | | | | | | | | | | | | |
| | | | As of December 31, |
| | Classification | | December 31, 2020 | December 31, 2019 |
Assets: | | | | | |
Operating ground lease assets | | Operating lease right-of-use assets | | $ | 159,245 | | $ | 205,997 | |
Office lease asset | | Operating lease right-of-use assets | | 4,521 | | 5,190 | |
Total operating lease right-of-use assets | | | | $ | 163,766 | | $ | 211,187 | |
| | | | | |
Sub-lessor straight-line rent receivable | | Accounts receivable | | 12,433 | | 24,569 | |
Total leased assets | | | | $ | 176,199 | | $ | 235,756 | |
| | | | | |
Liabilities: | | | | | |
Operating ground lease liabilities | | Operating lease liabilities | | $ | 197,431 | | $ | 230,239 | |
Office lease liability | | Operating lease liabilities | | 4,792 | | 5,411 | |
Total lease liabilities | | | | $ | 202,223 | | $ | 235,650 | |
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
The following table summarizes rental revenue, including sublease arrangements and lease costs, including impairment charges on operating lease right-of-use assets for the years ended December 31, 2020 and 2019 (in thousands):
| | | | | | | | | | | | | | | | | | | |
| | | | | | Year ended December 31, |
| | Classification | | | | 2020 | 2019 |
Rental revenue | | | | | | | |
Operating leases (1) | | Rental revenue | | | | $ | 361,393 | | $ | 569,530 | |
Sublease income - operating ground leases (2) | | Rental revenue | | | | $ | 10,783 | | $ | 23,492 | |
Lease costs | | | | | | | |
Operating ground lease cost | | Property operating expense | | | | $ | 24,386 | | $ | 24,656 | |
Operating office lease cost | | General and administrative expense | | | | $ | 905 | | $ | 909 | |
Operating lease right-of-use asset impairment charges (3) | | Impairment charges | | | | $ | 15,009 | | $ | 0 | |
(1) During the year ended December 31, 2020, the Company wrote-off straight-line rent receivables totaling $26.5 million, to straight-line rental revenue classified in rental revenue in the accompanying consolidated statements of (loss) income and comprehensive (loss) income. Additionally, during the year ended December 31, 2020, the Company wrote-off lease receivables from tenants totaling $25.7 million, to minimum rent, tenant reimbursements and percentage rent classified in rental revenue in the accompanying consolidated statements of (loss) income and comprehensive (loss) income related to tenants being recognized on a cash basis.
(2) During the year ended December 31, 2020, the Company wrote-off sub-lessor ground lease straight-line rent receivables totaling $11.5 million, to straight-line rental revenue classified in rental revenue in the accompanying consolidated statements of (loss) income and comprehensive (loss) income. Additionally, during the year ended December 31, 2020, the Company wrote-off sub-lessor ground lease receivables from tenants totaling $1.4 million to minimum rent classified in rental revenue in the accompanying consolidated statements of (loss) income and comprehensive (loss) income related to tenants being recognized on a cash basis.
(3) During the year ended December 31, 2020, the Company recognized impairment charges of $15.0 million related to the operating lease right-of-use assets at 2 of its properties. See Note 4 for the details on these impairments.
The following table summarizes the weighted-average remaining lease term and the weighted-average discount rate as of December 31, 2020:
| | | | | | | | | | | |
| | As of December 31, |
| | 2020 | 2019 |
Weighted-average remaining lease term in years | | | |
Operating ground leases | | 15.8 | 16.0 |
Operating office lease | | 5.8 | 6.8 |
| | | |
Weighted-average discount rate | | | |
Operating ground leases | | 4.97 | % | 4.96 | % |
Operating office lease | | 4.62 | % | 4.62 | % |
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
16. Quarterly Financial Information (unaudited)
Summarized quarterly financial data for the years ended December 31, 2020 and 2019 are as follows (in thousands, except per share data):
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31 | | June 30 | | September 30 | | December 31 |
2020: | | | | | | | |
Total revenue | $ | 151,012 | | | $ | 106,360 | | | $ | 63,877 | | | $ | 93,412 | |
Net income (loss) | 37,118 | | | (62,965) | | | (85,904) | | | (19,977) | |
Net income (loss) available to common shareholders of EPR Properties | 31,084 | | | (68,999) | | | (91,938) | | | (26,011) | |
Basic net income (loss) per common share | 0.40 | | | (0.90) | | | (1.23) | | | (0.35) | |
Diluted net income (loss) per common share | 0.40 | | | (0.90) | | | (1.23) | | | (0.35) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31 | | June 30 | | September 30 | | December 31 |
2019: | | | | | | | |
Total revenue | $ | 150,527 | | | $ | 161,740 | | | $ | 169,356 | | | $ | 170,346 | |
Net income | 65,349 | | | 66,594 | | | 34,003 | | | 36,297 | |
Net income available to common shareholders of EPR Properties | 59,315 | | | 60,560 | | | 27,969 | | | 30,263 | |
Basic net income per common share | 0.79 | | | 0.80 | | | 0.36 | | | 0.39 | |
Diluted net income per common share | 0.79 | | | 0.79 | | | 0.36 | | | 0.39 | |
During the year ended December 31, 2019, the Company completed the sale of its public charter school portfolio. Accordingly, the historical financial results of public charter school investments disposed of by the Company in 2019 are reflected in the Company's consolidated statements of (loss) income and comprehensive (loss) income as discontinued operations for all periods presented. See Note 17 for further details on discontinued operations.
17. Discontinued Operations
During the year ended December 31, 2019, the Company completed the sale of its public charter school portfolio with the largest disposition occurring on November 22, 2019 consisting of 47 public charter school related assets, for net proceeds of approximately $449.6 million. See Note 3 for additional information related to the sale and Note 4 for additional information related to the impairment recognized related to this sale. The Company determined the dispositions of the remaining public charter school portfolio in 2019 represented a strategic shift that had a major effect on the Company's operations and financial results. Therefore, all public charter school investments disposed of by the Company during the year ended December 31, 2019 qualified as discontinued operations. Accordingly, the historical financial results of these public charter school investments are reflected in the Company's consolidated financial statements as discontinued operations for all periods presented.
The operating results relating to discontinued operations are as follows (in thousands):
| | | | | | | | | | | |
| Year Ended December 31, |
| 2019 | | 2018 |
Rental revenue | $ | 36,289 | | | $ | 47,277 | |
| | | |
| | | |
Mortgage and other financing income | 14,284 | | | 13,533 | |
Total revenue | 50,573 | | | 60,810 | |
Property operating expense | 573 | | | 1,102 | |
| | | |
| | | |
| | | |
| | | |
Costs associated with loan refinancing or payoff | 181 | | | 0 | |
| | | |
Interest expense, net | (351) | | | (363) | |
| | | |
| | | |
Depreciation and amortization | 12,929 | | | 15,035 | |
Income from discontinued operations before other items | 37,241 | | | 45,036 | |
| | | |
| | | |
Impairment on public charter school portfolio sale | (21,433) | | | 0 | |
Gain on sale of real estate | 31,879 | | | 0 | |
Income from discontinued operations | $ | 47,687 | | | $ | 45,036 | |
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
The cash flow information relating to discontinued operations are as follows (in thousands):
| | | | | | | | | | | |
| Year Ended December 31, |
| 2019 | | 2018 |
Depreciation and amortization | $ | 12,929 | | | $ | 15,035 | |
Acquisition of and investments in real estate and other assets | (6,968) | | | (5,956) | |
Proceeds from sale of real estate | 182,934 | | | 0 | |
Proceeds from sale of public charter school portfolio | 449,555 | | | 0 | |
Investment in mortgage notes receivable | (5,115) | | | (17,933) | |
Proceeds from mortgage notes receivable paydowns | 28,662 | | | 3,355 | |
Additions to properties under development | (22,981) | | | (31,036) | |
| | | |
Non-cash activity: | | | |
Transfer of property under development to real estate investments | $ | 28,099 | | | $ | 24,900 | |
Conversion or reclassification of mortgage notes receivable to real estate investments | 0 | | | 12,013 | |
| | | |
Interest cost capitalized | 351 | | | 363 | |
18. Other Commitments and Contingencies
As of December 31, 2020, the Company had 17 development projects with commitments to fund an aggregate of approximately $118.3 million. Development costs are advanced by the Company in periodic draws. If the Company determines that construction is not being completed in 2018.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 notenotes 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 thethe occurrence of events outside of its direct control. As of December 31, 2017,2020, the Company had six3 mortgage notes and 1 note receivable with commitments totaling approximately $22.7$31.8 million. If commitmentscommitments are funded in the future, interest
will be charged at rates consistent with the existing investments.
The Company guarantees the payment of certain economic development revenue bonds that are related to two theatres in Louisiana. During the year ended December 31, 2017, these bonds were re-issued and the maturity date of these bonds was extended to December 22, 2047. At December 31, 2017, the Company's guarantees of the payment of these bonds totaled $24.7 million. The Company earns a fee at an annual rate of 4.00% over the 30 year terms of the related bonds. The Company has recorded $13.4 million as a deferred asset included in other assets and $13.4 million included in other liabilities in the accompanying consolidated balance sheet as of December 31, 2017 related to these guarantees. No amounts have been accrued as a loss contingency related to these guarantees because payment by the Company is not probable.
In connection with construction of its 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 December 31, 2017,2020, the CompanyCompany had six2 surety bonds outstanding totaling $22.8$31.6 million.
Resort Project in Sullivan County, New York
Prior proposed casino19. Segment Information
The Company groups its investments into 2 reportable segments: Experiential and resort developers Concord Associates, L.P., Concord Resort, LLC and Concord Kiamesha LLC, which are affiliates of Louis Cappelli and from whom the Company acquired the Resorts World Catskills resort property (the Cappelli Group), commenced litigation against the Company beginning in 2011 regarding matters relatingEducation. Due to the acquisition of that property andCompany's change to 2 reportable segments during the Company's relationship withyear ended December 31, 2019, certain reclassifications have been made to the Empire Resorts, Inc. and certain of its subsidiaries. This litigation involves three separate cases filed in state and federal court. Two of2018 presentation to conform to the cases, a state and the federal case, are closed and resulted in no liability by the Company.current presentation.
The remaining case was filed on October 20, 2011financial information summarized below is presented by the Cappelli Group against the Company and two of its affiliates in the Supreme Court of the State of New York, County of Westchester (the Westchester Action), asserting a claim for breach of contract and the implied covenant of good faith, and seeking damages of at least $800 million,based on allegations that the Company had breached an agreement (the Casino Development Agreement), dated June 18, 2010. The Company moved to dismiss the complaint in the Westchester Action based on a decision issued by the Sullivan County Supreme Court (one of the two closed cases discussed above) on June 30, 2014, as affirmed by the Appellate Division, Third Department (the Sullivan Action). On January 26, 2016, the Westchester County Supreme Court denied the Company's motion to dismiss but ordered the Cappelli Group to amend its pleading and remove all claims and allegations previously determined by the Sullivan Action. On February 18, 2016, the Cappelli Group filed an amended complaint asserting a single cause of action for breach of the covenant of good faith and fair dealing based upon allegations the Company had interfered with plaintiffs’ ability to obtain financing which complied with the Casino Development Agreement. On March 23, 2016, the Company filed a motion to dismiss the Cappelli Group’s revisedreportable segment (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance Sheet Data: |
| | As of December 31, 2020 |
| | Experiential | | Education | | Corporate/Unallocated | | Consolidated |
Total Assets | | $ | 5,133,486 | | | $ | 529,755 | | | $ | 1,040,944 | | | $ | 6,704,185 | |
| | | | | | | | |
| | As of December 31, 2019 |
| | Experiential | | Education | | Corporate/Unallocated | | Consolidated |
Total Assets | | $ | 5,307,295 | | | $ | 730,165 | | | $ | 540,051 | | | $ | 6,577,511 | |
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 20162020, 2019 and 20152018
| | | | | | | | | | | | | | | | | |
Operating Data: | | | | | |
| | For the Year Ended December 31, 2020 |
| | Experiential | Education | Corporate/Unallocated | Consolidated |
Rental revenue | | $ | 311,130 | | $ | 61,046 | | $ | 0 | | $ | 372,176 | |
Other income | | 8,085 | | 13 | | 1,041 | | 9,139 | |
Mortgage and other financing income | | 32,017 | | 1,329 | | 0 | | 33,346 | |
Total revenue | | 351,232 | | 62,388 | | 1,041 | | 414,661 | |
| | | | | |
Property operating expense | | 55,500 | | 2,283 | | 804 | | 58,587 | |
Other expense | | 16,513 | | 0 | | (39) | | 16,474 | |
Total investment expenses | | 72,013 | | 2,283 | | 765 | | 75,061 | |
Net operating income - before unallocated items | | 279,219 | | 60,105 | | 276 | | 339,600 | |
| | | | | |
Reconciliation to Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income: |
General and administrative expense | | | (42,596) | |
Severance expense | | | (2,868) | |
| | | |
Costs associated with loan refinancing or payoff | | | (1,632) | |
| | |
Interest expense, net | | | | | (157,675) | |
Transaction costs | | | | | (5,436) | |
Credit loss expense | | | | | (30,695) | |
Impairment charges | | | | | (85,657) | |
Depreciation and amortization | | | (170,333) | |
Equity in loss from joint ventures | | | (4,552) | |
Impairment charges on joint ventures | | | | | (3,247) | |
Gain on sale of real estate | | | 50,119 | |
| | | |
| | | |
| | | |
Income tax expense | | | (16,756) | |
| | | |
| | | |
| | | |
| | | |
| | | |
Net loss | | | (131,728) | |
| | | | | |
Preferred dividend requirements | | (24,136) | |
| | |
Net loss available to common shareholders of EPR Properties | | $ | (155,864) | |
amended complaint. On January 5, 2017, the Westchester County Supreme Court denied the Company’s second motion to dismiss. Discovery is ongoing.
The Company has not determined that losses related to the remaining Westchester Action are probable. In light of the inherent difficulty of predicting the outcome of litigation generally, the Company does not have sufficient information to determine the amount or range of reasonably possible loss with respect to these matters. The Company’s assessments are based on estimates and assumptions that have been deemed reasonable by management, but that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause the Company to change those estimates and assumptions. The Company intends to vigorously defend the claims asserted against the Company and certain of its subsidiaries by the Cappelli Group and its affiliates, for which the Company believes it has meritorious defenses, but there can be no assurances as to the outcome of the claims and related litigation.
Early Childhood Education Tenant
During 2017, Children’s Learning Adventure USA, LLC (CLA Parent) and its subsidiaries (CLA) stopped making rent payments. As a result, the Company sent CLA notices of lease termination on October 12, 2017 for the following CLA properties: (i) Broomfield, Colorado, (ii) Ashburn, Virginia, (iii) West Chester, Ohio, (iv) Chanhassen, Minnesota, (v) Ellisville, Missouri, (vi) Farm Road-Las Vegas, Nevada, (vii) Fishers, Indiana, (viii) Tredyffrin, Pennsylvania, and (ix) Westerville, Ohio.
On December 18, 2017, ten subsidiaries of CLA Parent filed separate voluntary petitions for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code with the United States Bankruptcy Court for the District of Arizona (Jointly Administered under Case No. 2:17-bk-14851-BMW). The debtors in those cases include CLA Properties SPE, LLC, CLA Maple Grove, LLC, CLA Carmel, LLC, CLA West Chester, LLC, CLA One Loudoun, LLC, LLC, CLA Fishers, LLC, CLA Chanhassen, LLC, CLA Ellisville, LLC, CLA Farm, LLC, and CLA Westerville, LLC (collectively, the CLA Debtors). CLA Parent has not filed a petition for bankruptcy. The CLA Debtors include each of the Company's tenants to 24 out of our 25 CLA properties, including 21 operating properties, two partially completed properties and one unimproved land parcel. The only CLA tenant unaffected by the bankruptcy is CLA King of Prussia, LLC, which is the CLA tenant entity for an unimproved land parcel located in Tredyffrin, Pennsylvania.
CLA continues to negotiate a restructuring with third parties. The Company will continue to consider whether all or a portion of the Company's properties should be leased to other operators based on results of the restructuring process. Absent an acceptable restructuring, the Company's intention is to vigorously pursue the process of regaining possession of the properties with the goal of securing leases with one or more new tenants. On January 8, 2018, the Company filed with the Court motions seeking rent for the post-petition period beginning on December 18, 2017. The hearing for these motions has been scheduled for March 14, 2018. On January 8, 2018, the Company also filed with the Court motions seeking relief from the automatic stay seeking the right to terminate the remaining leases and evict the CLA Debtors from the properties. There can be no assurance as to the outcome or timing of such proceedings.
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 20162020, 2019 and 20152018
19. Segment Information
The Company groups its investments into four reportable operating segments: Entertainment, Education, Recreation and Other. The financial information summarized below is presented by reportable operating segment: | | | | | | | | | | | | | | | | | |
| | For the Year Ended December 31, 2019 |
| | Experiential | Education | Corporate/Unallocated | Consolidated |
Rental revenue | | $ | 525,085 | | $ | 67,937 | | $ | 0 | | $ | 593,022 | |
Other income | | 24,818 | | 0 | | 1,102 | | 25,920 | |
Mortgage and other financing income | | 31,594 | | 1,433 | | 0 | | 33,027 | |
Total revenue | | 581,497 | | 69,370 | | 1,102 | | 651,969 | |
| | | | | |
Property operating expense | | 56,369 | | 3,481 | | 889 | | 60,739 | |
Other expense | | 29,222 | | 0 | | 445 | | 29,667 | |
Total investment expenses | | 85,591 | | 3,481 | | 1,334 | | 90,406 | |
Net operating income - before unallocated items | | 495,906 | | 65,889 | | (232) | | 561,563 | |
| | | | | |
Reconciliation to Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income: |
General and administrative expense | | | (46,371) | |
Severance expense | | | (2,364) | |
| | |
Costs associated with loan refinancing or payoff | | (38,269) | |
| | |
Interest expense, net | | | | | (142,002) | |
Transaction costs | | | | | (23,789) | |
Impairment charges | | | | | (2,206) | |
| | | | | |
Depreciation and amortization | | | (158,834) | |
Equity in loss from joint ventures | | | (381) | |
Gain on sale of real estate | | | 4,174 | |
| | | |
Income tax benefit | | | 3,035 | |
Discontinued operations: | | | | | |
Income from discontinued operations before other items | | | 37,241 | |
Impairment on public charter school portfolio sale | | | (21,433) | |
Gain on sale of real estate from discontinued operations | | | 31,879 | |
| | | |
Net income | | | 202,243 | |
| | | | | |
Preferred dividend requirements | | (24,136) | |
| | | |
Net income available to common shareholders of EPR Properties | | $ | 178,107 | |
|
| | | | | | | | | | | | | | | | | | | |
Balance Sheet Data: |
| | As of December 31, 2017 |
| | Entertainment | Education | Recreation | Other | Corporate/Unallocated | Consolidated |
Total Assets | | $ | 2,380,129 |
| $ | 1,429,992 |
| $ | 2,102,041 |
| $ | 199,052 |
| $ | 80,279 |
| $ | 6,191,493 |
|
| | | | | | | |
| | As of December 31, 2016 |
| | Entertainment | Education | Recreation | Other | Corporate/Unallocated | Consolidated |
Total Assets | | $ | 2,168,669 |
| $ | 1,308,288 |
| $ | 1,120,498 |
| $ | 202,394 |
| $ | 65,173 |
| $ | 4,865,022 |
|
|
| | | | | | | | | | | | | | | | | | | |
Operating Data: | | | | | | | |
| | For the Year Ended December 31, 2017 |
| | Entertainment | Education | Recreation | Other | Corporate/Unallocated | Consolidated |
Rental revenue | | $ | 267,729 |
| $ | 78,994 |
| $ | 112,763 |
| $ | 9,162 |
| $ | — |
| $ | 468,648 |
|
Tenant reimbursements | | 15,518 |
| 37 |
| — |
| — |
| — |
| 15,555 |
|
Other income | | 614 |
| 1 |
| — |
| — |
| 2,480 |
| 3,095 |
|
Mortgage and other financing income | | 4,407 |
| 35,546 |
| 48,740 |
| — |
| — |
| 88,693 |
|
Total revenue | | 288,268 |
| 114,578 |
| 161,503 |
| 9,162 |
| 2,480 |
| 575,991 |
|
| | | | | | | |
Property operating expense | | 23,175 |
| 6,314 |
| 117 |
| 1,407 |
| 640 |
| 31,653 |
|
Other expense | | — |
| — |
| — |
| — |
| 242 |
| 242 |
|
Total investment expenses | | 23,175 |
| 6,314 |
| 117 |
| 1,407 |
| 882 |
| 31,895 |
|
Net operating income - before unallocated items | | 265,093 |
| 108,264 |
| 161,386 |
| 7,755 |
| 1,598 |
| 544,096 |
|
| | | | | | | |
Reconciliation to Consolidated Statements of Income: | | | | |
General and administrative expense | | | | | (43,383 | ) |
Costs associated with loan refinancing or payoff | | | | (1,549 | ) |
Gain on early extinguishment of debt | | | 977 |
|
Interest expense, net | | | | | | | (133,124 | ) |
Transaction costs | | | | | | | (523 | ) |
Impairment charges | | | | | | | (10,195 | ) |
Depreciation and amortization | | | | (132,946 | ) |
Equity in income from joint ventures | | | | | 72 |
|
Gain on sale of real estate | | | | 41,942 |
|
Income tax expense | | | | (2,399 | ) |
Net income attributable to EPR Properties | | | | 262,968 |
|
Preferred dividend requirements | | | (24,293 | ) |
Preferred share redemption costs | (4,457 | ) |
Net income available to common shareholders of EPR Properties | $ | 234,218 |
|
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 20162020, 2019 and 20152018
| | | | | | | | | | | | | | | | | |
| | For the Year Ended December 31, 2018 |
| | Experiential | Education | Corporate/Unallocated | Consolidated |
Rental revenue | | $ | 453,721 | | $ | 55,365 | | $ | 0 | | $ | 509,086 | |
| | | | | |
Other income | | 332 | | 0 | | 1,744 | | 2,076 | |
Mortgage and other financing income | | 117,171 | | 11,588 | | 0 | | 128,759 | |
Total revenue | | 571,224 | | 66,953 | | 1,744 | | 639,921 | |
| | | | | |
Property operating expense | | 26,168 | | 2,831 | | 655 | | 29,654 | |
Other expense | | 0 | | 0 | | 443 | | 443 | |
Total investment expenses | | 26,168 | | 2,831 | | 1,098 | | 30,097 | |
Net operating income - before unallocated items | | 545,056 | | 64,122 | | 646 | | 609,824 | |
| | | | | |
Reconciliation to Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income: |
General and administrative expense | | | (48,889) | |
Severance expense | | (5,938) | |
Litigation settlement expense | | | | | (2,090) | |
Costs associated with loan refinancing or payoff | | (31,958) | |
| | | | | |
Interest expense, net | | | | | (135,870) | |
Transaction costs | | | | | (3,698) | |
Impairment charges | | | | | (27,283) | |
Depreciation and amortization | | | (138,395) | |
Equity in loss from joint ventures | | | (22) | |
Gain on sale of real estate | | | 3,037 | |
Gain on sale of investment in a direct financing lease | | 5,514 | |
Income tax expense | | | (2,285) | |
Discontinued operations: | | | |
Income from discontinued operations before other items | | | 45,036 | |
| | | |
Net income | | | 266,983 | |
Preferred dividend requirements | | | (24,142) | |
| | |
Net income available to common shareholders of EPR Properties | | $ | 242,841 | |
20. Supplemental Guarantor Financial Information
As of December 31, 2020, the Company had outstanding $2.4 billion in aggregate principal amount of unsecured senior notes (excluding the Company's private placement notes), which were registered under the Securities Act of 1933, as amended (the Registered Notes). All of the Registered Notes were issued by the Company and are guaranteed on a joint and several basis by all of the Company's domestic subsidiaries that guarantee the Company's indebtedness under its combined unsecured revolving credit facility and term loan facility and private placement notes (the Guarantor Subsidiaries). See Note 8 for additional information regarding the terms of the Registered Notes. The Company owns, directly or indirectly, 100% of the Guarantor Subsidiaries. The guarantees are senior unsecured obligations of each Guarantor Subsidiary, have equal rank with all existing and future senior debt of each such Guarantor Subsidiary, and are senior to all subordinated debt of such Guarantor Subsidiary. The guarantees are effectively subordinated to any secured debt of each such Guarantor Subsidiary to the extent of the assets securing such debt. Each guarantee is limited so that it does not constitute a fraudulent conveyance under applicable law, which may reduce the Guarantor Subsidiaries' obligations under the guarantees. The guarantees are subject to customary release provisions, including a release upon a sale or other disposition of all the capital stock or all or substantially all of the assets of a Guarantor Subsidiary, the designation of a Guarantor Subsidiary as an unrestricted subsidiary in accordance with the applicable indenture governing the Registered Notes or the release of a Guarantor Subsidiary's guarantee under the Company's combined unsecured revolving credit facility and term loan facility (or replacement thereof), private placement notes and the other then outstanding Registered Notes.
|
| | | | | | | | | | | | | | | | | | | |
| | For the Year Ended December 31, 2016 |
| | Entertainment | Education | Recreation | Other | Corporate/Unallocated | Consolidated |
Rental revenue | | $ | 250,659 |
| $ | 77,768 |
| $ | 62,527 |
| $ | 8,635 |
| $ | — |
| $ | 399,589 |
|
Tenant reimbursements | | 15,588 |
| 7 |
| — |
| — |
| — |
| 15,595 |
|
Other income | | 249 |
| 1,648 |
| 4,482 |
| — |
| 2,660 |
| 9,039 |
|
Mortgage and other financing income | | 6,187 |
| 32,539 |
| 30,190 |
| 103 |
| — |
| 69,019 |
|
Total revenue | | 272,683 |
| 111,962 |
| 97,199 |
| 8,738 |
| 2,660 |
| 493,242 |
|
| | | | | | | |
Property operating expense | | 21,303 |
| — |
| 8 |
| 662 |
| 629 |
| 22,602 |
|
Other expense | | — |
| — |
| — |
| 5 |
| — |
| 5 |
|
Total investment expenses | | 21,303 |
| — |
| 8 |
| 667 |
| 629 |
| 22,607 |
|
Net operating income - before unallocated items | | 251,380 |
| 111,962 |
| 97,191 |
| 8,071 |
| 2,031 |
| 470,635 |
|
| | | | | | | |
Reconciliation to Consolidated Statements of Income: | | | | |
General and administrative expense | | | | | (37,543 | ) |
Costs associated with loan refinancing or payoff | | (905 | ) |
Interest expense, net | | | | | | | (97,144 | ) |
Transaction costs | | | | | | | (7,869 | ) |
Depreciation and amortization | | | | | (107,573 | ) |
Equity in income from joint ventures | | | | 619 |
|
Gain on sale of real estate | | | | 5,315 |
|
Income tax expense | | | | (553 | ) |
Net income attributable to EPR Properties | | | | 224,982 |
|
Preferred dividend requirements | | | (23,806 | ) |
Net income available to common shareholders of EPR Properties | $ | 201,176 |
|
EPR PROPERTIES
Notes to Consolidated Financial Statements
December 31, 2017, 20162020, 2019 and 20152018
The following tables present summarized financial information for the Company and Guarantor Subsidiaries on a combined basis after transactions and balances within the combined entities have been eliminated and excludes investments in and equity earnings in the Company's subsidiaries that do not guarantee the Registered Notes (the Non-Guarantor Subsidiaries).
Summarized Financial Information:
| | | | | | | | |
Summarized Balance Sheet |
As of December 31, 2020 |
(Dollars in thousands) |
| | |
Real estate investments, net of accumulated depreciation of $979,269 | | $ | 4,666,835 | |
Total assets | | 6,488,007 | |
Total liabilities | | 4,038,101 | |
Excluded from total assets in the table above is $173.7 million of intercompany notes receivable due to the Company and the Guarantor Subsidiaries from the Non-Guarantor Subsidiaries as of December 31, 2020.
| | | | | | | | |
Summarized Statement of Loss |
Year Ended December 31, 2020 |
(Dollars in thousands) |
| | |
Total revenue | | $ | 382,799 | |
| | |
| | |
| | |
Loss from continuing operations | | (93,257) | |
Net loss | | (93,257) | |
Net loss available to common shareholders of EPR Properties | | (117,393) | |
Excluded from total revenue in the table above is $2.9 million in intercompany fee income and $9.3 million in intercompany interest income due to the Company and the Guarantor Subsidiaries from the Non-Guarantor Subsidiaries for the year ended December 31, 2020.
|
| | | | | | | | | | | | | | | | | | | |
| | For the Year Ended December 31, 2015 |
| | Entertainment | Education | Recreation | Other | Corporate/Unallocated | Consolidated |
Rental revenue | | $ | 238,896 |
| $ | 51,439 |
| $ | 40,551 |
| $ | — |
| $ | — |
| $ | 330,886 |
|
Tenant reimbursements | | 16,343 |
| — |
| — |
| (23 | ) | — |
| 16,320 |
|
Other income | | 512 |
| — |
| — |
| 119 |
| 2,998 |
| 3,629 |
|
Mortgage and other financing income | | 7,127 |
| 30,622 |
| 32,080 |
| 353 |
| — |
| 70,182 |
|
Total revenue | | 262,878 |
| 82,061 |
| 72,631 |
| 449 |
| 2,998 |
| 421,017 |
|
| | | | | | | |
Property operating expense | | 23,120 |
| — |
| — |
| 313 |
| — |
| 23,433 |
|
Other expense | |
|
| — |
| — |
| 648 |
| — |
| 648 |
|
Total investment expenses | | 23,120 |
| — |
| — |
| 961 |
| — |
| 24,081 |
|
Net operating income - before unallocated items | | 239,758 |
| 82,061 |
| 72,631 |
| (512 | ) | 2,998 |
| 396,936 |
|
| | | | | | | |
Reconciliation to Consolidated Statements of Income: | | | | |
General and administrative expense | | | | | (31,021 | ) |
Retirement severance expense | | (18,578 | ) |
Costs associated with loan refinancing or payoff | | (270 | ) |
Interest expense, net | | | | | | | (79,915 | ) |
Transaction costs | | | | | | | (7,518 | ) |
Depreciation and amortization | | | | | (89,617 | ) |
Equity in income from joint ventures | | | | | 969 |
|
Gain on sale of real estate | | | | | 23,829 |
|
Income tax expense | | | | (482 | ) |
Discontinued operations: | | | | |
Income from discontinued operations | | | | 199 |
|
Net income attributable to EPR Properties | | | | 194,532 |
|
Preferred dividend requirements | | | | | (23,806 | ) |
Net income available to common shareholders of EPR Properties | | | $ | 170,726 |
|
|
| |
EPR Properties |
Schedule II - Valuation and Qualifying Accounts |
December 31, 20172020 |
(Dollars in thousands) |
| | Description | Balance at December 31, 2016 | | Additions During 2017 | | Deductions During 2017 | | Balance at December 31, 2017 | Description | Balance at December 31, 2019 | | Additions During 2020 | | Deductions During 2020 | | Balance at December 31, 2020 |
Reserve for Doubtful Accounts | $ | 871,000 |
| | $ | 7,256,000 |
| | $ | (642,000 | ) | | $ | 7,485,000 |
| Reserve for Doubtful Accounts | $ | 407 | | | $ | 0 | | | $ | (344) | | | $ | 63 | |
Allowance for Loan Losses | — |
| | — |
| | — |
| | — |
| |
Allowance for Credit Losses | | Allowance for Credit Losses | 0 | | | 32,858 | | | 0 | | | 32,858 | |
See accompanying report of independent registered public accounting firm.
| | |
EPR Properties |
EPR Properties |
Schedule II - Valuation and Qualifying Accounts |
December 31, 20162019 |
(Dollars in thousands) |
| | Description | Balance at December 31, 2015 | | Additions During 2016 | | Deductions During 2016 | | Balance at December 31, 2016 | Description | Balance at December 31, 2018 | | Additions During 2019 | | Deductions During 2019 | | Balance at December 31, 2019 |
Reserve for Doubtful Accounts | $ | 3,210,000 |
| | $ | — |
| | $ | (2,339,000 | ) | | $ | 871,000 |
| Reserve for Doubtful Accounts | $ | 2,899 | | | $ | 633 | | | $ | (3,125) | | | $ | 407 | |
Allowance for Loan Losses | — |
| | — |
| | — |
| | — |
| |
Allowance for Credit Losses | | Allowance for Credit Losses | 0 | | | 0 | | | 0 | | | 0 | |
See accompanying report of independent registered public accounting firm.
| | |
EPR Properties |
EPR Properties |
Schedule II - Valuation and Qualifying Accounts |
December 31, 20152018 |
(Dollars in thousands) |
| | Description | Balance at December 31, 2014 | | Additions During 2015 | | Deductions During 2015 | | Balance at December 31, 2015 | Description | Balance at December 31, 2017 | | Additions During 2018 | | Deductions During 2018 | | Balance at December 31, 2018 |
Reserve for Doubtful Accounts | $ | 1,554,000 |
| | $ | 1,829,000 |
| | $ | (173,000 | ) | | $ | 3,210,000 |
| Reserve for Doubtful Accounts | $ | 7,485 | | | $ | 2,851 | | | $ | (7,437) | | | $ | 2,899 | |
Allowance for Loan Losses | 3,777,000 |
| | — |
| | (3,777,000 | ) | | — |
| |
Allowance for Credit Losses | | Allowance for Credit Losses | 0 | | | 0 | | | 0 | | | 0 | |
See accompanying report of independent registered public accounting firm.
EPR Properties Schedule III - Real Estate and Accumulated Depreciation December 31, 2017 (Dollars in thousands) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Initial cost | | Additions (Dispositions) (Impairments) Subsequent to acquisition | | Gross Amount at December 31, 2017 | | | | | | |
Location | | Debt | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Total | | Accumulated depreciation | | Date acquired | | Depreciation life |
Megaplex Theatres | | | | | | | | | | | | | | | | | | | | |
Omaha, NE | | — |
| | 5,215 |
| | 16,700 |
| | 59 |
| | 5,215 |
| | 16,759 |
| | 21,974 |
| | (8,379 | ) | | 11/97 | | 40 years |
Sugar Land, TX | | — |
| | — |
| | 19,100 |
| | 67 |
| | — |
| | 19,167 |
| | 19,167 |
| | (9,584 | ) | | 11/97 | | 40 years |
San Antonio, TX | | — |
| | 3,006 |
| | 13,662 |
| | 8,455 |
| | 3,006 |
| | 22,117 |
| | 25,123 |
| | (7,669 | ) | | 11/97 | | 40 years |
Columbus, OH | | — |
| | — |
| | 12,685 |
| | — |
| | — |
| | 12,685 |
| | 12,685 |
| | (6,184 | ) | | 11/97 | | 40 years |
San Diego, CA | | — |
| | — |
| | 16,028 |
| | — |
| | — |
| | 16,028 |
| | 16,028 |
| | (7,814 | ) | | 11/97 | | 40 years |
Ontario, CA | | — |
| | 5,521 |
| | 19,449 |
| | 7,130 |
| | 5,521 |
| | 26,579 |
| | 32,100 |
| | (9,539 | ) | | 11/97 | | 40 years |
Houston, TX | | — |
| | 6,023 |
| | 20,037 |
| | — |
| | 6,023 |
| | 20,037 |
| | 26,060 |
| | (9,768 | ) | | 11/97 | | 40 years |
Creve Coeur, MO | | — |
| | 4,985 |
| | 12,601 |
| | 4,075 |
| | 4,985 |
| | 16,676 |
| | 21,661 |
| | (6,877 | ) | | 11/97 | | 40 years |
Leawood, KS | | — |
| | 3,714 |
| | 12,086 |
| | 4,110 |
| | 3,714 |
| | 16,196 |
| | 19,910 |
| | (6,386 | ) | | 11/97 | | 40 years |
Houston, TX | | — |
| | 4,304 |
| | 21,496 |
| | 76 |
| | 4,304 |
| | 21,572 |
| | 25,876 |
| | (10,741 | ) | | 02/98 | | 40 years |
South Barrington, IL | | — |
| | 6,577 |
| | 27,723 |
| | 4,618 |
| | 6,577 |
| | 32,341 |
| | 38,918 |
| | (14,098 | ) | | 03/98 | | 40 years |
Mesquite, TX | | — |
| | 2,912 |
| | 20,288 |
| | 4,885 |
| | 2,912 |
| | 25,173 |
| | 28,085 |
| | (10,703 | ) | | 04/98 | | 40 years |
Hampton, VA | | — |
| | 3,822 |
| | 24,678 |
| | 4,510 |
| | 3,822 |
| | 29,188 |
| | 33,010 |
| | (12,403 | ) | | 06/98 | | 40 years |
Pompano Beach, FL | | — |
| | 6,771 |
| | 9,899 |
| | 3,845 |
| | 6,771 |
| | 13,744 |
| | 20,515 |
| | (7,480 | ) | | 08/98 | | 24 years |
Raleigh, NC | | — |
| | 2,919 |
| | 5,559 |
| | 3,492 |
| | 2,919 |
| | 9,051 |
| | 11,970 |
| | (3,091 | ) | | 08/98 | | 40 years |
Davie, FL | | — |
| | 2,000 |
| | 13,000 |
| | 11,512 |
| | 2,000 |
| | 24,512 |
| | 26,512 |
| | (10,129 | ) | | 11/98 | | 40 years |
Aliso Viejo, CA | | — |
| | 8,000 |
| | 14,000 |
| | — |
| | 8,000 |
| | 14,000 |
| | 22,000 |
| | (6,650 | ) | | 12/98 | | 40 years |
Boise, ID | | — |
| | — |
| | 16,003 |
| | — |
| | — |
| | 16,003 |
| | 16,003 |
| | (7,601 | ) | | 12/98 | | 40 years |
Woodridge, IL | | — |
| | 9,926 |
| | 8,968 |
| | — |
| | 9,926 |
| | 8,968 |
| | 18,894 |
| | (8,968 | ) | | 06/99 | | 18 years |
Cary, NC | | — |
| | 3,352 |
| | 11,653 |
| | 3,091 |
| | 3,352 |
| | 14,744 |
| | 18,096 |
| | (5,421 | ) | | 12/99 | | 40 years |
Tampa, FL | | — |
| | 6,000 |
| | 12,809 |
| | 1,452 |
| | 6,000 |
| | 14,261 |
| | 20,261 |
| | (6,924 | ) | | 06/99 | | 40 years |
Metairie, LA | | — |
| | — |
| | 11,740 |
| | — |
| | — |
| | 11,740 |
| | 11,740 |
| | (4,647 | ) | | 03/02 | | 40 years |
Harahan, LA | | — |
| | 5,264 |
| | 14,820 |
| | — |
| | 5,264 |
| | 14,820 |
| | 20,084 |
| | (5,866 | ) | | 03/02 | | 40 years |
Hammond, LA | | — |
| | 2,404 |
| | 6,780 |
| | (565 | ) | | 1,839 |
| | 6,780 |
| | 8,619 |
| | (2,684 | ) | | 03/02 | | 40 years |
Houma, LA | | — |
| | 2,404 |
| | 6,780 |
| | — |
| | 2,404 |
| | 6,780 |
| | 9,184 |
| | (2,684 | ) | | 03/02 | | 40 years |
Harvey, LA | | — |
| | 4,378 |
| | 12,330 |
| | (112 | ) | | 4,266 |
| | 12,330 |
| | 16,596 |
| | (4,881 | ) | | 03/02 | | 40 years |
Greenville, SC | | — |
| | 1,660 |
| | 7,570 |
| | 206 |
| | 1,660 |
| | 7,776 |
| | 9,436 |
| | (2,996 | ) | | 06/02 | | 40 years |
Sterling Heights, MI | | — |
| | 5,975 |
| | 17,956 |
| | 3,400 |
| | 5,975 |
| | 21,356 |
| | 27,331 |
| | (9,971 | ) | | 06/02 | | 40 years |
Olathe, KS | | — |
| | 4,000 |
| | 15,935 |
| | 3,525 |
| | 4,000 |
| | 19,460 |
| | 23,460 |
| | (7,275 | ) | | 06/02 | | 40 years |
Livonia, MI | | — |
| | 4,500 |
| | 17,525 |
| | — |
| | 4,500 |
| | 17,525 |
| | 22,025 |
| | (6,754 | ) | | 08/02 | | 40 years |
Alexandria, VA | | — |
| | — |
| | 22,035 |
| | — |
| | — |
| | 22,035 |
| | 22,035 |
| | (8,401 | ) | | 10/02 | | 40 years |
Little Rock, AR | | — |
| | 3,858 |
| | 7,990 |
| | — |
| | 3,858 |
| | 7,990 |
| | 11,848 |
| | (3,013 | ) | | 12/02 | | 40 years |
Macon, GA | | — |
| | 1,982 |
| | 5,056 |
| | — |
| | 1,982 |
| | 5,056 |
| | 7,038 |
| | (1,864 | ) | | 03/03 | | 40 years |
Lawrence, KS | | — |
| | 1,500 |
| | 3,526 |
| | 2,017 |
| | 1,500 |
| | 5,543 |
| | 7,043 |
| | (1,380 | ) | | 06/03 | | 40 years |
Columbia, SC | | — |
| | 1,000 |
| | 10,534 |
| | (2,447 | ) | | 1,000 |
| | 8,087 |
| | 9,087 |
| | (2,916 | ) | | 11/03 | | 40 years |
Hialeah, FL | | — |
| | 7,985 |
| | — |
| | — |
| | 7,985 |
| | — |
| | 7,985 |
| | — |
| | 12/03 | | n/a |
Phoenix, AZ | | — |
| | 4,276 |
| | 15,934 |
| | 3,518 |
| | 4,276 |
| | 19,452 |
| | 23,728 |
| | (5,586 | ) | | 03/04 | | 40 years |
Hamilton, NJ | | — |
| | 4,869 |
| | 18,143 |
| | — |
| | 4,869 |
| | 18,143 |
| | 23,012 |
| | (6,236 | ) | | 03/04 | | 40 years |
Mesa, AZ | | — |
| | 4,446 |
| | 16,565 |
| | 3,263 |
| | 4,446 |
| | 19,828 |
| | 24,274 |
| | (5,842 | ) | | 03/04 | | 40 years |
Peoria, IL | | — |
| | 2,948 |
| | 11,177 |
| | — |
| | 2,948 |
| | 11,177 |
| | 14,125 |
| | (3,749 | ) | | 07/04 | | 40 years |
Lafayette, LA | | — |
| | — |
| | 10,318 |
| | — |
| | — |
| | 10,318 |
| | 10,318 |
| | (3,477 | ) | | 07/04 | | 40 years |
Hurst, TX | | — |
| | 5,000 |
| | 11,729 |
| | 1,015 |
| | 5,000 |
| | 12,744 |
| | 17,744 |
| | (4,180 | ) | | 11/04 | | 40 years |
Melbourne, FL | | — |
| | 3,817 |
| | 8,830 |
| | 320 |
| | 3,817 |
| | 9,150 |
| | 12,967 |
| | (2,974 | ) | | 12/04 | | 40 years |
D'Iberville, MS | | — |
| | 2,001 |
| | 8,043 |
| | 3,612 |
| | 808 |
| | 12,848 |
| | 13,656 |
| | (3,376 | ) | | 12/04 | | 40 years |
EPR Properties
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2020
(Dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Initial cost | | Additions (Dispositions) (Impairments) Subsequent to acquisition | | Gross Amount at December 31, 2020 | | | | | | |
| | | Location | | Debt | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Total | | Accumulated depreciation | | Date acquired | | Depreciation life |
| | | Theatres | | | | | | | | | | | | | | | | | | | | |
| | | Omaha, NE | | $ | 0 | | | $ | 5,215 | | | $ | 16,700 | | | $ | (17,967) | | | $ | 1,705 | | | $ | 2,243 | | | $ | 3,948 | | | $ | 0 | | | 11/97 | | 40 years |
| | | Sugar Land, TX | | 0 | | | 0 | | | 19,100 | | | 4,152 | | | 0 | | | 23,252 | | | 23,252 | | | (11,301) | | | 11/97 | | 40 years |
| | | San Antonio, TX | | 0 | | | 3,006 | | | 13,662 | | | 8,455 | | | 3,006 | | | 22,117 | | | 25,123 | | | (9,905) | | | 11/97 | | 40 years |
| | | Columbus, OH | | 0 | | | 0 | | | 12,685 | | | 573 | | | 0 | | | 13,258 | | | 13,258 | | | (7,144) | | | 11/97 | | 40 years |
| | | San Diego, CA | | 0 | | | 0 | | | 16,028 | | | 0 | | | 0 | | | 16,028 | | | 16,028 | | | (9,016) | | | 11/97 | | 40 years |
| | | Ontario, CA | | 0 | | | 5,521 | | | 19,449 | | | 7,130 | | | 5,521 | | | 26,579 | | | 32,100 | | | (12,033) | | | 11/97 | | 40 years |
| | | Houston, TX | | 0 | | | 6,023 | | | 20,037 | | | 0 | | | 6,023 | | | 20,037 | | | 26,060 | | | (11,271) | | | 11/97 | | 40 years |
| | | Creve Coeur, MO | | 0 | | | 4,985 | | | 12,601 | | | (10,818) | | | 1,736 | | | 5,033 | | | 6,769 | | | 0 | | | 11/97 | | 33 years |
| | | Leawood, KS | | 0 | | | 3,714 | | | 12,086 | | | 4,110 | | | 3,714 | | | 16,196 | | | 19,910 | | | (7,602) | | | 11/97 | | 40 years |
| | | Dallas, TX | | 0 | | | 3,060 | | | 15,281 | | | (7,890) | | | 1,765 | | | 8,686 | | | 10,451 | | | 0 | | | 11/97 | | 40 years |
| | | Houston, TX | | 0 | | | 4,304 | | | 21,496 | | | 76 | | | 4,304 | | | 21,572 | | | 25,876 | | | (12,359) | | | 02/98 | | 40 years |
| | | South Barrington, IL | | 0 | | | 6,577 | | | 27,723 | | | 4,618 | | | 6,577 | | | 32,341 | | | 38,918 | | | (16,755) | | | 03/98 | | 40 years |
| | | Mesquite, TX | | 0 | | | 2,912 | | | 20,288 | | | 4,885 | | | 2,912 | | | 25,173 | | | 28,085 | | | (12,838) | | | 04/98 | | 40 years |
| | | Hampton, VA | | 0 | | | 3,822 | | | 24,678 | | | 4,510 | | | 3,822 | | | 29,188 | | | 33,010 | | | (14,855) | | | 06/98 | | 40 years |
| | | Pompano Beach, FL | | 0 | | | 6,771 | | | 9,899 | | | 10,984 | | | 6,771 | | | 20,883 | | | 27,654 | | | (13,689) | | | 08/98 | | 24 years |
| | | Raleigh, NC | | 0 | | | 2,919 | | | 5,559 | | | 3,492 | | | 2,919 | | | 9,051 | | | 11,970 | | | (3,956) | | | 08/98 | | 40 years |
| | | Davie, FL | | 0 | | | 2,000 | | | 13,000 | | | 11,512 | | | 2,000 | | | 24,512 | | | 26,512 | | | (12,167) | | | 11/98 | | 40 years |
| | | Aliso Viejo, CA | | 0 | | | 8,000 | | | 14,000 | | | 0 | | | 8,000 | | | 14,000 | | | 22,000 | | | (7,700) | | | 12/98 | | 40 years |
| | | Boise, ID | | 0 | | | 0 | | | 16,003 | | | 400 | | | 0 | | | 16,403 | | | 16,403 | | | (8,806) | | | 12/98 | | 40 years |
| | | Cary, NC | | 0 | | | 3,352 | | | 11,653 | | | 3,091 | | | 3,352 | | | 14,744 | | | 18,096 | | | (6,690) | | | 12/99 | | 40 years |
| | | Tampa, FL | | 0 | | | 6,000 | | | 12,809 | | | 1,452 | | | 6,000 | | | 14,261 | | | 20,261 | | | (8,204) | | | 06/99 | | 40 years |
| | | Metairie, LA | | 0 | | | 0 | | | 11,740 | | | 3,049 | | | 0 | | | 14,789 | | | 14,789 | | | (5,877) | | | 03/02 | | 40 years |
| | | Harahan, LA | | 0 | | | 5,264 | | | 14,820 | | | 0 | | | 5,264 | | | 14,820 | | | 20,084 | | | (6,978) | | | 03/02 | | 40 years |
| | | Hammond, LA | | 0 | | | 2,404 | | | 6,780 | | | 1,607 | | | 1,839 | | | 8,952 | | | 10,791 | | | (3,369) | | | 03/02 | | 40 years |
| | | Houma, LA | | 0 | | | 2,404 | | | 6,780 | | | 0 | | | 2,404 | | | 6,780 | | | 9,184 | | | (3,192) | | | 03/02 | | 40 years |
| | | Harvey, LA | | 0 | | | 4,378 | | | 12,330 | | | 3,735 | | | 4,266 | | | 16,177 | | | 20,443 | | | (6,246) | | | 03/02 | | 40 years |
| | | Greenville, SC | | 0 | | | 1,660 | | | 7,570 | | | 473 | | | 1,660 | | | 8,043 | | | 9,703 | | | (3,610) | | | 06/02 | | 40 years |
| | | Sterling Heights, MI | | 0 | | | 5,975 | | | 17,956 | | | 3,400 | | | 5,975 | | | 21,356 | | | 27,331 | | | (11,705) | | | 06/02 | | 40 years |
| | | Olathe, KS | | 0 | | | 4,000 | | | 15,935 | | | 2,558 | | | 3,042 | | | 19,451 | | | 22,493 | | | (9,133) | | | 06/02 | | 40 years |
| | | Livonia, MI | | 0 | | | 4,500 | | | 17,525 | | | 0 | | | 4,500 | | | 17,525 | | | 22,025 | | | (8,069) | | | 08/02 | | 40 years |
| | | Alexandria, VA | | 0 | | | 0 | | | 22,035 | | | 0 | | | 0 | | | 22,035 | | | 22,035 | | | (10,053) | | | 10/02 | | 40 years |
| | | Little Rock, AR | | 0 | | | 3,858 | | | 7,990 | | | 0 | | | 3,858 | | | 7,990 | | | 11,848 | | | (3,612) | | | 12/02 | | 40 years |
| | | Macon, GA | | 0 | | | 1,982 | | | 5,056 | | | 0 | | | 1,982 | | | 5,056 | | | 7,038 | | | (2,244) | | | 03/03 | | 40 years |
| | | Southfield, MI | | 0 | | | 8,000 | | | 20,518 | | | 4,092 | | | 5,794 | | | 26,816 | | | 32,610 | | | (26,817) | | | 05/03 | | 15 years |
| | | Lawrence, KS | | 0 | | | 1,500 | | | 3,526 | | | 2,017 | | | 1,500 | | | 5,543 | | | 7,043 | | | (1,871) | | | 06/03 | | 40 years |
| | | Columbia, SC | | 0 | | | 1,000 | | | 10,534 | | | 339 | | | 1,000 | | | 10,873 | | | 11,873 | | | (3,776) | | | 11/03 | | 40 years |
| | | Hialeah, FL | | 0 | | | 7,985 | | | 0 | | | 0 | | | 7,985 | | | 0 | | | 7,985 | | | 0 | | | 12/03 | | n/a |
| | | Phoenix, AZ | | 0 | | | 4,276 | | | 15,934 | | | 3,518 | | | 4,276 | | | 19,452 | | | 23,728 | | | (7,170) | | | 03/04 | | 40 years |
| | | Hamilton, NJ | | 0 | | | 4,869 | | | 18,143 | | | 93 | | | 4,869 | | | 18,236 | | | 23,105 | | | (7,597) | | | 03/04 | | 40 years |
| | | Mesa, AZ | | 0 | | | 4,446 | | | 16,565 | | | 3,263 | | | 4,446 | | | 19,828 | | | 24,274 | | | (7,441) | | | 03/04 | | 40 years |
| | | Peoria, IL | | 0 | | | 2,948 | | | 11,177 | | | 0 | | | 2,948 | | | 11,177 | | | 14,125 | | | (4,587) | | | 07/04 | | 40 years |
| | | Lafayette, LA | | 0 | | | 0 | | | 10,318 | | | 0 | | | 0 | | | 10,318 | | | 10,318 | | | (4,251) | | | 07/04 | | 40 years |
| | | Hurst, TX | | 0 | | | 5,000 | | | 11,729 | | | 1,015 | | | 5,000 | | | 12,744 | | | 17,744 | | | (5,138) | | | 11/04 | | 40 years |
EPR Properties Schedule III - Real Estate and Accumulated Depreciation December 31, 2017 (Dollars in thousands) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Initial cost | | Additions (Dispositions) (Impairments) Subsequent to acquisition | | Gross Amount at December 31, 2017 | | | | | | |
Location | | Debt | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Total | | Accumulated depreciation | | Date acquired | | Depreciation life |
Wilmington, NC | | — |
| | 1,650 |
| | 7,047 |
| | 3,033 |
| | 1,650 |
| | 10,080 |
| | 11,730 |
| | (2,312 | ) | | 02/05 | | 40 years |
Chattanooga, TN | | — |
| | 2,799 |
| | 11,467 |
| | — |
| | 2,799 |
| | 11,467 |
| | 14,266 |
| | (3,679 | ) | | 03/05 | | 40 years |
Conroe, TX | | — |
| | 1,836 |
| | 8,230 |
| | — |
| | 1,836 |
| | 8,230 |
| | 10,066 |
| | (2,571 | ) | | 06/05 | | 40 years |
Indianapolis, IN | | — |
| | 1,481 |
| | 4,565 |
| | 2,375 |
| | 1,481 |
| | 6,940 |
| | 8,421 |
| | (1,517 | ) | | 06/05 | | 40 years |
Hattiesurg, MS | | — |
| | 1,978 |
| | 7,733 |
| | 4,720 |
| | 1,978 |
| | 12,453 |
| | 14,431 |
| | (3,104 | ) | | 09/05 | | 40 years |
Arroyo Grande, CA | | — |
| | 2,641 |
| | 3,810 |
| | — |
| | 2,641 |
| | 3,810 |
| | 6,451 |
| | (1,151 | ) | | 12/05 | | 40 years |
Auburn, CA | | — |
| | 2,178 |
| | 6,185 |
| | — |
| | 2,178 |
| | 6,185 |
| | 8,363 |
| | (1,868 | ) | | 12/05 | | 40 years |
Fresno, CA | | — |
| | 7,600 |
| | 11,613 |
| | 2,894 |
| | 7,600 |
| | 14,507 |
| | 22,107 |
| | (4,167 | ) | | 12/05 | | 40 years |
Modesto, CA | | — |
| | 2,542 |
| | 3,910 |
| | 1,889 |
| | 2,542 |
| | 5,799 |
| | 8,341 |
| | (1,236 | ) | | 12/05 | | 40 years |
Columbia, MD | | — |
| | — |
| | 12,204 |
| | — |
| | — |
| | 12,204 |
| | 12,204 |
| | (3,585 | ) | | 03/06 | | 40 years |
Garland, TX | | 11,684 |
| | 8,028 |
| | 14,825 |
| | — |
| | 8,028 |
| | 14,825 |
| | 22,853 |
| | (4,355 | ) | | 03/06 | | 40 years |
Garner, NC | | — |
| | 1,305 |
| | 6,899 |
| | — |
| | 1,305 |
| | 6,899 |
| | 8,204 |
| | (2,012 | ) | | 04/06 | | 40 years |
Winston Salem, NC | | — |
| | — |
| | 12,153 |
| | 4,188 |
| | — |
| | 16,341 |
| | 16,341 |
| | (4,105 | ) | | 07/06 | | 40 years |
Huntsville, AL | | — |
| | 3,508 |
| | 14,802 |
| | — |
| | 3,508 |
| | 14,802 |
| | 18,310 |
| | (4,194 | ) | | 08/06 | | 40 years |
Kalamazoo, MI | | — |
| | 5,125 |
| | 12,216 |
| | 5,950 |
| | 5,125 |
| | 18,166 |
| | 23,291 |
| | (8,073 | ) | | 11/06 | | 17 years |
Pensacola, FL | | — |
| | 5,316 |
| | 15,099 |
| | — |
| | 5,316 |
| | 15,099 |
| | 20,415 |
| | (4,152 | ) | | 12/06 | | 40 years |
Slidell, LA | | 10,635 |
| | — |
| | 11,499 |
| | — |
| | — |
| | 11,499 |
| | 11,499 |
| | (3,162 | ) | | 12/06 | | 40 years |
Panama City Beach, FL | | — |
| | 6,486 |
| | 11,156 |
| | — |
| | 6,486 |
| | 11,156 |
| | 17,642 |
| | (2,952 | ) | | 05/07 | | 40 years |
Kalispell, MT | | — |
| | 2,505 |
| | 7,323 |
| | — |
| | 2,505 |
| | 7,323 |
| | 9,828 |
| | (1,892 | ) | | 08/07 | | 40 years |
Greensboro, NC | | — |
| | — |
| | 12,606 |
| | 914 |
| | — |
| | 13,520 |
| | 13,520 |
| | (3,391 | ) | | 11/07 | | 40 years |
Glendora, CA | | — |
| | — |
| | 10,588 |
| | — |
| | — |
| | 10,588 |
| | 10,588 |
| | (2,426 | ) | | 10/08 | | 40 years |
Ypsilanti, MI | | — |
| | 4,716 |
| | 227 |
| | 2,817 |
| | 4,716 |
| | 3,044 |
| | 7,760 |
| | (48 | ) | | 12/09 | | 40 years |
Manchester, CT | | — |
| | 3,628 |
| | 11,474 |
| | — |
| | 3,628 |
| | 11,474 |
| | 15,102 |
| | (2,295 | ) | | 12/09 | | 40 years |
Centreville, VA | | — |
| | 3,628 |
| | 1,769 |
| | — |
| | 3,628 |
| | 1,769 |
| | 5,397 |
| | (354 | ) | | 12/09 | | 40 years |
Davenport, IA | | — |
| | 3,599 |
| | 6,068 |
| | 2,265 |
| | 3,564 |
| | 8,368 |
| | 11,932 |
| | (1,220 | ) | | 12/09 | | 40 years |
Fairfax, VA | | — |
| | 2,630 |
| | 11,791 |
| | 2,000 |
| | 2,630 |
| | 13,791 |
| | 16,421 |
| | (2,364 | ) | | 12/09 | | 40 years |
Flint, MI | | — |
| | 1,270 |
| | 1,723 |
| | — |
| | 1,270 |
| | 1,723 |
| | 2,993 |
| | (345 | ) | | 12/09 | | 40 years |
Hazlet, NJ | | — |
| | 3,719 |
| | 4,716 |
| | — |
| | 3,719 |
| | 4,716 |
| | 8,435 |
| | (943 | ) | | 12/09 | | 40 years |
Huber Heights, OH | | — |
| | 970 |
| | 3,891 |
| | — |
| | 970 |
| | 3,891 |
| | 4,861 |
| | (778 | ) | | 12/09 | | 40 years |
North Haven, CT | | — |
| | 5,442 |
| | 1,061 |
| | 2,000 |
| | 3,458 |
| | 5,045 |
| | 8,503 |
| | (1,263 | ) | | 12/09 | | 40 years |
Okolona, KY | | — |
| | 5,379 |
| | 3,311 |
| | — |
| | 5,379 |
| | 3,311 |
| | 8,690 |
| | (662 | ) | | 12/09 | | 40 years |
Voorhees, NJ | | — |
| | 1,723 |
| | 9,614 |
| | — |
| | 1,723 |
| | 9,614 |
| | 11,337 |
| | (1,923 | ) | | 12/09 | | 40 years |
Louisville, KY | | — |
| | 4,979 |
| | 6,567 |
| | — |
| | 4,979 |
| | 6,567 |
| | 11,546 |
| | (1,313 | ) | | 12/09 | | 40 years |
Beaver Creek, OH | | — |
| | 1,578 |
| | 6,630 |
| | — |
| | 1,578 |
| | 6,630 |
| | 8,208 |
| | (1,326 | ) | | 12/09 | | 40 years |
West Springfield, MA | | — |
| | 2,540 |
| | 3,755 |
| | — |
| | 2,540 |
| | 3,755 |
| | 6,295 |
| | (751 | ) | | 12/09 | | 40 years |
Cincinnati, OH | | — |
| | 1,361 |
| | 1,741 |
| | — |
| | 635 |
| | 2,467 |
| | 3,102 |
| | (391 | ) | | 12/09 | | 40 years |
Pasadena, TX | | — |
| | 2,951 |
| | 10,684 |
| | — |
| | 2,951 |
| | 10,684 |
| | 13,635 |
| | (2,003 | ) | | 06/10 | | 40 years |
Plano, TX | | — |
| | 1,052 |
| | 1,968 |
| | — |
| | 1,052 |
| | 1,968 |
| | 3,020 |
| | (369 | ) | | 06/10 | | 40 years |
McKinney, TX | | — |
| | 1,917 |
| | 3,319 |
| | — |
| | 1,917 |
| | 3,319 |
| | 5,236 |
| | (622 | ) | | 06/10 | | 40 years |
Mishawaka, IN | | — |
| | 2,399 |
| | 5,454 |
| | 1,383 |
| | 2,399 |
| | 6,837 |
| | 9,236 |
| | (1,090 | ) | | 06/10 | | 40 years |
Grand Prairie, TX | | — |
| | 1,873 |
| | 3,245 |
| | 2,104 |
| | 1,873 |
| | 5,349 |
| | 7,222 |
| | (763 | ) | | 06/10 | | 40 years |
Redding, CA | | — |
| | 2,044 |
| | 4,500 |
| | — |
| | 2,044 |
| | 4,500 |
| | 6,544 |
| | (844 | ) | | 06/10 | | 40 years |
Pueblo, CO | | — |
| | 2,238 |
| | 5,162 |
| | — |
| | 2,238 |
| | 5,162 |
| | 7,400 |
| | (968 | ) | | 06/10 | | 40 years |
Beaumont, TX | | — |
| | 1,065 |
| | 11,669 |
| | 1,644 |
| | 1,065 |
| | 13,313 |
| | 14,378 |
| | (2,205 | ) | | 06/10 | | 40 years |
Pflugerville, TX | | — |
| | 4,356 |
| | 11,533 |
| | 2,056 |
| | 4,356 |
| | 13,589 |
| | 17,945 |
| | (2,173 | ) | | 06/10 | | 40 years |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Initial cost | | Additions (Dispositions) (Impairments) Subsequent to acquisition | | Gross Amount at December 31, 2020 | | | | | | |
| | | Location | | Debt | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Total | | Accumulated depreciation | | Date acquired | | Depreciation life |
| | | Melbourne, FL | | 0 | | | 3,817 | | | 8,830 | | | 320 | | | 3,817 | | | 9,150 | | | 12,967 | | | (3,660) | | | 12/04 | | 40 years |
| | | D'Iberville, MS | | 0 | | | 2,001 | | | 8,043 | | | 3,612 | | | 808 | | | 12,848 | | | 13,656 | | | (4,418) | | | 12/04 | | 40 years |
| | | Wilmington, NC | | 0 | | | 1,650 | | | 7,047 | | | 3,033 | | | 1,650 | | | 10,080 | | | 11,730 | | | (3,172) | | | 02/05 | | 40 years |
| | | Chattanooga, TN | | 0 | | | 2,799 | | | 11,467 | | | 0 | | | 2,799 | | | 11,467 | | | 14,266 | | | (4,539) | | | 03/05 | | 40 years |
| | | Conroe, TX | | 0 | | | 1,836 | | | 8,230 | | | 2,304 | | | 1,836 | | | 10,534 | | | 12,370 | | | (3,314) | | | 06/05 | | 40 years |
| | | Indianapolis, IN | | 0 | | | 1,481 | | | 4,565 | | | 2,375 | | | 1,481 | | | 6,940 | | | 8,421 | | | (2,109) | | | 06/05 | | 40 years |
| | | Hattiesburg, MS | | 0 | | | 1,978 | | | 7,733 | | | 4,720 | | | 1,978 | | | 12,453 | | | 14,431 | | | (4,107) | | | 09/05 | | 40 years |
| | | Arroyo Grande, CA | | 0 | | | 2,641 | | | 3,810 | | | 0 | | | 2,641 | | | 3,810 | | | 6,451 | | | (1,437) | | | 12/05 | | 40 years |
| | | Auburn, CA | | 0 | | | 2,178 | | | 6,185 | | | (65) | | | 2,113 | | | 6,185 | | | 8,298 | | | (2,332) | | | 12/05 | | 40 years |
| | | Fresno, CA | | 0 | | | 7,600 | | | 11,613 | | | 2,894 | | | 7,600 | | | 14,507 | | | 22,107 | | | (6,113) | | | 12/05 | | 40 years |
| | | Modesto, CA | | 0 | | | 2,542 | | | 3,910 | | | 1,889 | | | 2,542 | | | 5,799 | | | 8,341 | | | (1,726) | | | 12/05 | | 40 years |
| | | Columbia, MD | | 0 | | | 0 | | | 12,204 | | | 0 | | | 0 | | | 12,204 | | | 12,204 | | | (4,500) | | | 03/06 | | 40 years |
| | | Garland, TX | | 0 | | | 8,028 | | | 14,825 | | | 0 | | | 8,028 | | | 14,825 | | | 22,853 | | | (5,467) | | | 03/06 | | 40 years |
| | | Garner, NC | | 0 | | | 1,305 | | | 6,899 | | | 0 | | | 1,305 | | | 6,899 | | | 8,204 | | | (2,530) | | | 04/06 | | 40 years |
| | | Winston Salem, NC | | 0 | | | 0 | | | 12,153 | | | 4,188 | | | 0 | | | 16,341 | | | 16,341 | | | (5,393) | | | 07/06 | | 40 years |
| | | Huntsville, AL | | 0 | | | 3,508 | | | 14,802 | | | 0 | | | 3,508 | | | 14,802 | | | 18,310 | | | (5,304) | | | 08/06 | | 40 years |
| | | Kalamazoo, MI | | 0 | | | 5,125 | | | 12,216 | | | (15,931) | | | 370 | | | 1,040 | | | 1,410 | | | 0 | | | 11/06 | | 17 years |
| | | Pensacola, FL | | 0 | | | 5,316 | | | 15,099 | | | 0 | | | 5,316 | | | 15,099 | | | 20,415 | | | (5,285) | | | 12/06 | | 40 years |
| | | Slidell, LA | | 10,635 | | | 0 | | | 11,499 | | | 0 | | | 0 | | | 11,499 | | | 11,499 | | | (4,025) | | | 12/06 | | 40 years |
| | | Panama City Beach, FL | | 0 | | | 6,486 | | | 11,156 | | | 2,704 | | | 6,486 | | | 13,860 | | | 20,346 | | | (3,918) | | | 05/07 | | 40 years |
| | | Kalispell, MT | | 0 | | | 2,505 | | | 7,323 | | | 0 | | | 2,505 | | | 7,323 | | | 9,828 | | | (2,441) | | | 08/07 | | 40 years |
| | | Greensboro, NC | | 0 | | | 0 | | | 12,606 | | | 914 | | | 0 | | | 13,520 | | | 13,520 | | | (6,270) | | | 11/07 | | 40 years |
| | | Glendora, CA | | 0 | | | 0 | | | 10,588 | | | 0 | | | 0 | | | 10,588 | | | 10,588 | | | (3,220) | | | 10/08 | | 40 years |
| | | Ypsilanti, MI | | 0 | | | 4,716 | | | 227 | | | 2,817 | | | 4,716 | | | 3,044 | | | 7,760 | | | (345) | | | 12/09 | | 40 years |
| | | Manchester, CT | | 0 | | | 3,628 | | | 11,474 | | | 2,315 | | | 3,628 | | | 13,789 | | | 17,417 | | | (3,299) | | | 12/09 | | 40 years |
| | | Centreville, VA | | 0 | | | 3,628 | | | 1,769 | | | 0 | | | 3,628 | | | 1,769 | | | 5,397 | | | (486) | | | 12/09 | | 40 years |
| | | Davenport, IA | | 0 | | | 3,599 | | | 6,068 | | | 2,265 | | | 3,564 | | | 8,368 | | | 11,932 | | | (1,897) | | | 12/09 | | 40 years |
| | | Fairfax, VA | | 0 | | | 2,630 | | | 11,791 | | | 2,000 | | | 2,630 | | | 13,791 | | | 16,421 | | | (3,441) | | | 12/09 | | 40 years |
| | | Flint, MI | | 0 | | | 1,270 | | | 1,723 | | | 0 | | | 1,270 | | | 1,723 | | | 2,993 | | | (474) | | | 12/09 | | 40 years |
| | | Hazlet, NJ | | 0 | | | 3,719 | | | 4,716 | | | 0 | | | 3,719 | | | 4,716 | | | 8,435 | | | (1,297) | | | 12/09 | | 40 years |
| | | Huber Heights, OH | | 0 | | | 970 | | | 3,891 | | | 0 | | | 970 | | | 3,891 | | | 4,861 | | | (1,070) | | | 12/09 | | 40 years |
| | | North Haven, CT | | 0 | | | 5,442 | | | 1,061 | | | 2,000 | | | 3,458 | | | 5,045 | | | 8,503 | | | (1,565) | | | 12/09 | | 40 years |
| | | Okolona, KY | | 0 | | | 5,379 | | | 3,311 | | | 2,000 | | | 5,379 | | | 5,311 | | | 10,690 | | | (1,034) | | | 12/09 | | 40 years |
| | | Voorhees, NJ | | 0 | | | 1,723 | | | 9,614 | | | 0 | | | 1,723 | | | 9,614 | | | 11,337 | | | (2,644) | | | 12/09 | | 40 years |
| | | Louisville, KY | | 0 | | | 4,979 | | | 6,567 | | | (1,046) | | | 3,933 | | | 6,567 | | | 10,500 | | | (1,806) | | | 12/09 | | 40 years |
| | | Beaver Creek, OH | | 0 | | | 1,578 | | | 6,630 | | | 1,700 | | | 1,578 | | | 8,330 | | | 9,908 | | | (1,941) | | | 12/09 | | 40 years |
| | | West Springfield, MA | | 0 | | | 2,540 | | | 3,755 | | | 2,650 | | | 2,540 | | | 6,405 | | | 8,945 | | | (1,197) | | | 12/09 | | 40 years |
| | | Cincinnati, OH | | 0 | | | 1,361 | | | 1,741 | | | 0 | | | 635 | | | 2,467 | | | 3,102 | | | (586) | | | 12/09 | | 40 years |
| | | Pasadena, TX | | 0 | | | 2,951 | | | 10,684 | | | 1,759 | | | 2,951 | | | 12,443 | | | 15,394 | | | (2,922) | | | 06/10 | | 40 years |
| | | Plano, TX | | 0 | | | 1,052 | | | 1,968 | | | 0 | | | 1,052 | | | 1,968 | | | 3,020 | | | (517) | | | 06/10 | | 40 years |
| | | McKinney, TX | | 0 | | | 1,917 | | | 3,319 | | | 0 | | | 1,917 | | | 3,319 | | | 5,236 | | | (871) | | | 06/10 | | 40 years |
| | | Mishawaka, IN | | 0 | | | 2,399 | | | 5,454 | | | 1,383 | | | 2,399 | | | 6,837 | | | 9,236 | | | (1,621) | | | 06/10 | | 40 years |
| | | Grand Prairie, TX | | 0 | | | 1,873 | | | 3,245 | | | 2,104 | | | 1,873 | | | 5,349 | | | 7,222 | | | (1,187) | | | 06/10 | | 40 years |
| | | Redding, CA | | 0 | | | 2,044 | | | 4,500 | | | 1,177 | | | 2,044 | | | 5,677 | | | 7,721 | | | (1,256) | | | 06/10 | | 40 years |
| | | Pueblo, CO | | 0 | | | 2,238 | | | 5,162 | | | 1,265 | | | 2,238 | | | 6,427 | | | 8,665 | | | (1,438) | | | 06/10 | | 40 years |
| | | Beaumont, TX | | 0 | | | 1,065 | | | 11,669 | | | 1,644 | | | 1,065 | | | 13,313 | | | 14,378 | | | (3,230) | | | 06/10 | | 40 years |
| | | Pflugerville, TX | | 0 | | | 4,356 | | | 11,533 | | | 2,056 | | | 4,356 | | | 13,589 | | | 17,945 | | | (3,227) | | | 06/10 | | 40 years |
| | | Houston, TX | | 0 | | | 4,109 | | | 9,739 | | | 2,617 | | | 4,109 | | | 12,356 | | | 16,465 | | | (2,683) | | | 06/10 | | 40 years |
| | | El Paso, TX | | 0 | | | 4,598 | | | 13,207 | | | 2,296 | | | 4,598 | | | 15,503 | | | 20,101 | | | (3,652) | | | 06/10 | | 40 years |
| | | Colorado Springs, CO | | 0 | | | 4,134 | | | 11,220 | | | 1,427 | | | 2,938 | | | 13,843 | | | 16,781 | | | (3,218) | | | 06/10 | | 40 years |
| | | Hooksett, NH | | 0 | | | 2,639 | | | 11,605 | | | 1,254 | | | 2,639 | | | 12,859 | | | 15,498 | | | (2,925) | | | 03/11 | | 40 years |
EPR Properties Schedule III - Real Estate and Accumulated Depreciation December 31, 2017 (Dollars in thousands) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Initial cost | | Additions (Dispositions) (Impairments) Subsequent to acquisition | | Gross Amount at December 31, 2017 | | | | | | |
Location | | Debt | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Total | | Accumulated depreciation | | Date acquired | | Depreciation life |
Houston, TX | | — |
| | 4,109 |
| | 9,739 |
| | — |
| | 4,109 |
| | 9,739 |
| | 13,848 |
| | (1,826 | ) | | 06/10 | | 40 years |
El Paso, TX | | — |
| | 4,598 |
| | 13,207 |
| | — |
| | 4,598 |
| | 13,207 |
| | 17,805 |
| | (2,476 | ) | | 06/10 | | 40 years |
Colorado Springs, CO | | — |
| | 4,134 |
| | 11,220 |
| | 1,427 |
| | 2,938 |
| | 13,843 |
| | 16,781 |
| | (2,137 | ) | | 06/10 | | 40 years |
Virginia Beach, VA | | — |
| | — |
| | 1,736 |
| | — |
| | — |
| | 1,736 |
| | 1,736 |
| | (1,283 | ) | | 12/10 | | 40 years |
Hooksett, NH | | — |
| | 2,639 |
| | 11,605 |
| | — |
| | 2,639 |
| | 11,605 |
| | 14,244 |
| | (1,983 | ) | | 03/11 | | 40 years |
Saco, ME | | — |
| | 1,508 |
| | 3,826 |
| | — |
| | 1,508 |
| | 3,826 |
| | 5,334 |
| | (654 | ) | | 03/11 | | 40 years |
Merrimack, NH | | — |
| | 3,160 |
| | 5,642 |
| | — |
| | 3,160 |
| | 5,642 |
| | 8,802 |
| | (964 | ) | | 03/11 | | 40 years |
Westbrook, ME | | — |
| | 2,273 |
| | 7,119 |
| | — |
| | 2,273 |
| | 7,119 |
| | 9,392 |
| | (1,216 | ) | | 03/11 | | 40 years |
Twin Falls, ID | | — |
| | — |
| | 4,783 |
| | — |
| | — |
| | 4,783 |
| | 4,783 |
| | (668 | ) | | 04/11 | | 40 years |
Dallas, TX | | — |
| | — |
| | 12,146 |
| | 750 |
| | — |
| | 12,896 |
| | 12,896 |
| | (1,669 | ) | | 03/12 | | 40 years |
Albuquerque, NM | | — |
| | — |
| | 13,733 |
| | — |
| | — |
| | 13,733 |
| | 13,733 |
| | (1,402 | ) | | 06/12 | | 40 years |
Southern Pines, NC | | — |
| | 1,709 |
| | 4,747 |
| | 12 |
| | 1,709 |
| | 4,759 |
| | 6,468 |
| | (653 | ) | | 06/12 | | 40 years |
Austin, TX | | — |
| | 2,608 |
| | 6,373 |
| | — |
| | 2,608 |
| | 6,373 |
| | 8,981 |
| | (704 | ) | | 09/12 | | 40 years |
Champaign, IL | | — |
| | — |
| | 9,381 |
| | 125 |
| | — |
| | 9,506 |
| | 9,506 |
| | (970 | ) | | 09/12 | | 40 years |
Gainesville, VA | | — |
| | — |
| | 10,846 |
| | — |
| | — |
| | 10,846 |
| | 10,846 |
| | (1,107 | ) | | 02/13 | | 40 years |
Lafayette, LA | | 14,360 |
| | — |
| | 12,728 |
| | — |
| | — |
| | 12,728 |
| | 12,728 |
| | (1,352 | ) | | 08/13 | | 40 years |
New Iberia, LA | | — |
| | — |
| | 1,630 |
| | — |
| | — |
| | 1,630 |
| | 1,630 |
| | (173 | ) | | 08/13 | | 40 years |
Tuscaloosa, AL | | — |
| | — |
| | 11,287 |
| | — |
| | 1,815 |
| | 9,472 |
| | 11,287 |
| | (1,007 | ) | | 09/13 | | 40 years |
Tampa, FL | | — |
| | 1,700 |
| | 23,483 |
| | 3,769 |
| | 1,700 |
| | 27,252 |
| | 28,952 |
| | (3,516 | ) | | 10/13 | | 40 years |
Warrenville, IL | | — |
| | 14,000 |
| | 17,318 |
| | — |
| | 14,000 |
| | 17,318 |
| | 31,318 |
| | (2,909 | ) | | 10/13 | | 40 years |
San Francisco, CA | | — |
| | 2,077 |
| | 12,914 |
| | — |
| | 2,077 |
| | 12,914 |
| | 14,991 |
| | (646 | ) | | 08/13 | | 40 years |
Opelika, AL | | — |
| | 1,314 |
| | 8,951 |
| | — |
| | 1,314 |
| | 8,951 |
| | 10,265 |
| | (783 | ) | | 11/12 | | 40 years |
Bedford, IN | | — |
| | 349 |
| | 1,594 |
| | — |
| | 349 |
| | 1,594 |
| | 1,943 |
| | (168 | ) | | 04/14 | | 40 years |
Seymour, IN | | — |
| | 1,028 |
| | 2,291 |
| | — |
| | 1,028 |
| | 2,291 |
| | 3,319 |
| | (226 | ) | | 04/14 | | 40 years |
Wilder, KY | | — |
| | 983 |
| | 11,233 |
| | 2,004 |
| | 983 |
| | 13,237 |
| | 14,220 |
| | (1,143 | ) | | 04/14 | | 40 years |
Bowling Green, KY | | — |
| | 1,241 |
| | 10,222 |
| | — |
| | 1,241 |
| | 10,222 |
| | 11,463 |
| | (998 | ) | | 04/14 | | 40 years |
New Albany, IN | | — |
| | 2,461 |
| | 14,807 |
| | — |
| | 2,461 |
| | 14,807 |
| | 17,268 |
| | (1,416 | ) | | 04/14 | | 40 years |
Clarksville, TN | | — |
| | 3,764 |
| | 16,769 |
| | — |
| | 3,764 |
| | 16,769 |
| | 20,533 |
| | (1,609 | ) | | 04/14 | | 40 years |
Williamsport, PA | | — |
| | 2,243 |
| | 6,684 |
| | — |
| | 2,243 |
| | 6,684 |
| | 8,927 |
| | (674 | ) | | 04/14 | | 40 years |
Noblesville, IN | | — |
| | 886 |
| | 7,453 |
| | 2,019 |
| | 886 |
| | 9,472 |
| | 10,358 |
| | (747 | ) | | 04/14 | | 40 years |
Moline, IL | | — |
| | 1,963 |
| | 10,183 |
| | — |
| | 1,963 |
| | 10,183 |
| | 12,146 |
| | (986 | ) | | 04/14 | | 40 years |
O'Fallon, MO | | — |
| | 1,046 |
| | 7,342 |
| | — |
| | 1,046 |
| | 7,342 |
| | 8,388 |
| | (707 | ) | | 04/14 | | 40 years |
McDonough, GA | | — |
| | 2,235 |
| | 16,842 |
| | — |
| | 2,235 |
| | 16,842 |
| | 19,077 |
| | (1,625 | ) | | 04/14 | | 40 years |
Sterling Heights, MI | | — |
| | 10,849 |
| | — |
| | 80 |
| | 10,919 |
| | 10 |
| | 10,929 |
| | (1 | ) | | 12/14 | | 15 years |
Virginia Beach, VA | | — |
| | 2,544 |
| | 6,478 |
| | — |
| | 2,544 |
| | 6,478 |
| | 9,022 |
| | (459 | ) | | 02/15 | | 40 years |
Yulee, FL | | — |
| | 1,036 |
| | 6,934 |
| | — |
| | 1,036 |
| | 6,934 |
| | 7,970 |
| | (491 | ) | | 02/15 | | 40 years |
Jacksonville, FL | | — |
| | 5,080 |
| | 22,064 |
| | — |
| | 5,080 |
| | 22,064 |
| | 27,144 |
| | (2,269 | ) | | 05/15 | | 25 years |
Denham Springs, LA | | — |
| | — |
| | 5,093 |
| | 4,224 |
| | — |
| | 9,317 |
| | 9,317 |
| | (295 | ) | | 05/15 | | 40 years |
Crystal Lake, IL | | — |
| | 2,980 |
| | 13,521 |
| | 568 |
| | 2,980 |
| | 14,089 |
| | 17,069 |
| | (1,393 | ) | | 07/15 | | 25 years |
Laredo, TX | | — |
| | 1,353 |
| | 7,886 |
| | — |
| | 1,353 |
| | 7,886 |
| | 9,239 |
| | (394 | ) | | 12/15 | | 40 years |
Corpus, Christi, TX | | — |
| | 1,286 |
| | 8,252 |
| | — |
| | 1,286 |
| | 8,252 |
| | 9,538 |
| | (189 | ) | | 12/15 | | 40 years |
Delmont, PA | | — |
| | 673 |
| | 621 |
| | — |
| | 673 |
| | 621 |
| | 1,294 |
| | (44 | ) | | 06/16 | | 25 years |
Kennewick, WA | | — |
| | 2,484 |
| | 4,901 |
| | — |
| | 2,484 |
| | 4,901 |
| | 7,385 |
| | (330 | ) | | 06/16 | | 25 years |
Franklin, TN | | — |
| | 10,158 |
| | 17,549 |
| | 9,018 |
| | 10,158 |
| | 26,567 |
| | 36,725 |
| | (1,208 | ) | | 06/16 | | 25 years |
Mobile, AL | | — |
| | 2,116 |
| | 16,657 |
| | — |
| | 2,116 |
| | 16,657 |
| | 18,773 |
| | (1,062 | ) | | 06/16 | | 25 years |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Initial cost | | Additions (Dispositions) (Impairments) Subsequent to acquisition | | Gross Amount at December 31, 2020 | | | | | | |
| | | Location | | Debt | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Total | | Accumulated depreciation | | Date acquired | | Depreciation life |
| | | Saco, ME | | 0 | | | 1,508 | | | 3,826 | | | 1,124 | | | 1,508 | | | 4,950 | | | 6,458 | | | (1,005) | | | 03/11 | | 40 years |
| | | Merrimack, NH | | 0 | | | 3,160 | | | 5,642 | | | 0 | | | 3,160 | | | 5,642 | | | 8,802 | | | (1,387) | | | 03/11 | | 40 years |
| | | Westbrook, ME | | 0 | | | 2,273 | | | 7,119 | | | 0 | | | 2,273 | | | 7,119 | | | 9,392 | | | (1,750) | | | 03/11 | | 40 years |
| | | Twin Falls, ID | | 0 | | | 0 | | | 4,783 | | | 0 | | | 0 | | | 4,783 | | | 4,783 | | | (1,026) | | | 04/11 | | 40 years |
| | | Dallas, TX | | 0 | | | 0 | | | 12,146 | | | (11,086) | | | 0 | | | 1,060 | | | 1,060 | | | (24) | | | 03/12 | | 30 years |
| | | Albuquerque, NM | | 0 | | | 0 | | | 13,733 | | | 0 | | | 0 | | | 13,733 | | | 13,733 | | | (2,432) | | | 06/12 | | 40 years |
| | | Southern Pines, NC | | 0 | | | 1,709 | | | 4,747 | | | 3,705 | | | 1,709 | | | 8,452 | | | 10,161 | | | (1,126) | | | 06/12 | | 40 years |
| | | Austin, TX | | 0 | | | 2,608 | | | 6,373 | | | 0 | | | 2,608 | | | 6,373 | | | 8,981 | | | (1,182) | | | 09/12 | | 40 years |
| | | Champaign, IL | | 0 | | | 0 | | | 9,381 | | | 125 | | | 0 | | | 9,506 | | | 9,506 | | | (1,683) | | | 09/12 | | 40 years |
| | | Gainesville, VA | | 0 | | | 0 | | | 10,846 | | | 0 | | | 0 | | | 10,846 | | | 10,846 | | | (1,921) | | | 02/13 | | 40 years |
| | | Lafayette, LA | | 14,360 | | | 0 | | | 12,728 | | | 0 | | | 0 | | | 12,728 | | | 12,728 | | | (2,307) | | | 08/13 | | 40 years |
| | | New Iberia, LA | | 0 | | | 0 | | | 1,630 | | | 0 | | | 0 | | | 1,630 | | | 1,630 | | | (296) | | | 08/13 | | 40 years |
| | | Tuscaloosa, AL | | 0 | | | 0 | | | 11,287 | | | 0 | | | 1,815 | | | 9,472 | | | 11,287 | | | (1,717) | | | 09/13 | | 40 years |
| | | Tampa, FL | | 0 | | | 1,700 | | | 23,483 | | | 3,648 | | | 1,579 | | | 27,252 | | | 28,831 | | | (6,358) | | | 10/13 | | 40 years |
| | | Warrenville, IL | | 0 | | | 14,000 | | | 17,318 | | | (5,417) | | | 8,270 | | | 17,631 | | | 25,901 | | | (4,095) | | | 10/13 | | 40 years |
| | | San Francisco, CA | | 0 | | | 2,077 | | | 12,914 | | | 0 | | | 2,077 | | | 12,914 | | | 14,991 | | | (1,614) | | | 08/13 | | 40 years |
| | | Opelika, AL | | 0 | | | 1,314 | | | 8,951 | | | 0 | | | 1,314 | | | 8,951 | | | 10,265 | | | (1,455) | | | 11/12 | | 40 years |
| | | Bedford, IN | | 0 | | | 349 | | | 1,594 | | | 0 | | | 349 | | | 1,594 | | | 1,943 | | | (305) | | | 04/14 | | 40 years |
| | | Seymour, IN | | 0 | | | 1,028 | | | 2,291 | | | 0 | | | 1,028 | | | 2,291 | | | 3,319 | | | (411) | | | 04/14 | | 40 years |
| | | Wilder, KY | | 0 | | | 983 | | | 11,233 | | | 2,004 | | | 983 | | | 13,237 | | | 14,220 | | | (2,185) | | | 04/14 | | 40 years |
| | | Bowling Green, KY | | 0 | | | 1,241 | | | 10,222 | | | 0 | | | 1,241 | | | 10,222 | | | 11,463 | | | (1,814) | | | 04/14 | | 40 years |
| | | New Albany, IN | | 0 | | | 2,461 | | | 14,807 | | | 0 | | | 2,461 | | | 14,807 | | | 17,268 | | | (2,575) | | | 04/14 | | 40 years |
| | | Clarksville, TN | | 0 | | | 3,764 | | | 16,769 | | | 4,706 | | | 3,764 | | | 21,475 | | | 25,239 | | | (3,265) | | | 04/14 | | 40 years |
| | | Williamsport, PA | | 0 | | | 2,243 | | | 6,684 | | | 0 | | | 2,243 | | | 6,684 | | | 8,927 | | | (1,225) | | | 04/14 | | 40 years |
| | | Noblesville, IN | | 0 | | | 886 | | | 7,453 | | | 2,019 | | | 886 | | | 9,472 | | | 10,358 | | | (1,505) | | | 04/14 | | 40 years |
| | | Moline, IL | | 0 | | | 1,963 | | | 10,183 | | | 0 | | | 1,963 | | | 10,183 | | | 12,146 | | | (1,793) | | | 04/14 | | 40 years |
| | | O'Fallon, MO | | 0 | | | 1,046 | | | 7,342 | | | 0 | | | 1,046 | | | 7,342 | | | 8,388 | | | (1,285) | | | 04/14 | | 40 years |
| | | McDonough, GA | | 0 | | | 2,235 | | | 16,842 | | | 0 | | | 2,235 | | | 16,842 | | | 19,077 | | | (2,955) | | | 04/14 | | 40 years |
| | | Sterling Heights, MI | | 0 | | | 10,849 | | | 0 | | | (404) | | | 10,257 | | | 188 | | | 10,445 | | | (74) | | | 12/14 | | 15 years |
| | | Virginia Beach, VA | | 0 | | | 2,544 | | | 6,478 | | | 0 | | | 2,544 | | | 6,478 | | | 9,022 | | | (945) | | | 02/15 | | 40 years |
| | | Yulee, FL | | 0 | | | 1,036 | | | 6,934 | | | 0 | | | 1,036 | | | 6,934 | | | 7,970 | | | (1,011) | | | 02/15 | | 40 years |
| | | Jacksonville, FL | | 0 | | | 5,080 | | | 22,064 | | | 0 | | | 5,080 | | | 22,064 | | | 27,144 | | | (4,919) | | | 05/15 | | 25 years |
| | | Denham Springs, LA | | 0 | | | 0 | | | 5,093 | | | 4,162 | | | 0 | | | 9,255 | | | 9,255 | | | (1,016) | | | 05/15 | | 40 years |
| | | Crystal Lake, IL | | 0 | | | 2,980 | | | 13,521 | | | 568 | | | 2,980 | | | 14,089 | | | 17,069 | | | (3,129) | | | 07/15 | | 25 years |
| | | Laredo, TX | | 0 | | | 1,353 | | | 7,886 | | | 0 | | | 1,353 | | | 7,886 | | | 9,239 | | | (986) | | | 12/15 | | 40 years |
| | | Corpus, Christi, TX | | 0 | | | 1,286 | | | 8,252 | | | 0 | | | 1,286 | | | 8,252 | | | 9,538 | | | (808) | | | 12/15 | | 40 years |
| | | Kennewick, WA | | 0 | | | 2,484 | | | 4,901 | | | 0 | | | 2,484 | | | 4,901 | | | 7,385 | | | (991) | | | 06/16 | | 25 years |
| | | Franklin, TN | | 0 | | | 10,158 | | | 17,549 | | | 9,018 | | | 10,158 | | | 26,567 | | | 36,725 | | | (4,662) | | | 06/16 | | 25 years |
| | | Mobile, AL | | 0 | | | 2,116 | | | 16,657 | | | 0 | | | 2,116 | | | 16,657 | | | 18,773 | | | (3,186) | | | 06/16 | | 25 years |
| | | El Paso, TX | | 0 | | | 2,957 | | | 10,961 | | | 3,905 | | | 2,957 | | | 14,866 | | | 17,823 | | | (2,536) | | | 06/16 | | 25 years |
| | | Edinburg, TX | | 0 | | | 1,982 | | | 16,964 | | | 5,680 | | | 1,982 | | | 22,644 | | | 24,626 | | | (3,919) | | | 06/16 | | 25 years |
| | | Hendersonville, TN | | 0 | | | 2,784 | | | 8,034 | | | 4,160 | | | 2,784 | | | 12,194 | | | 14,978 | | | (1,565) | | | 07/16 | | 30 years |
| | | Houston, TX | | 0 | | | 965 | | | 10,002 | | | 0 | | | 965 | | | 10,002 | | | 10,967 | | | (1,000) | | | 10/16 | | 40 years |
| | | Detroit, MI | | 0 | | | 4,299 | | | 13,810 | | | 0 | | | 4,299 | | | 13,810 | | | 18,109 | | | (1,918) | | | 11/16 | | 30 years |
| | | Fort Worth, TX | | 0 | | | 0 | | | 11,385 | | | 0 | | | 0 | | | 11,385 | | | 11,385 | | | (735) | | | 02/17 | | 40 years |
| | | Fort Wayne, IN | | 0 | | | 1,926 | | | 11,054 | | | 0 | | | 1,926 | | | 11,054 | | | 12,980 | | | (1,597) | | | 05/17 | | 27 years |
| | | Wichita, KS | | 0 | | | 267 | | | 7,535 | | | 0 | | | 267 | | | 7,535 | | | 7,802 | | | (1,174) | | | 05/17 | | 23 years |
| | | Wichita, KS | | 0 | | | 3,132 | | | 23,270 | | | 0 | | | 3,132 | | | 23,270 | | | 26,402 | | | (3,798) | | | 05/17 | | 23 years |
| | | Richmond, TX | | 0 | | | 7,251 | | | 36,534 | | | (27) | | | 7,251 | | | 36,507 | | | 43,758 | | | (3,402) | | | 08/17 | | 40 years |
| | | Tomball, TX | | 0 | | | 3,416 | | | 26,918 | | | 0 | | | 3,416 | | | 26,918 | | | 30,334 | | | (2,445) | | | 08/17 | | 40 years |
| | | Cleveland, OH | | 0 | | | 2,671 | | | 17,526 | | | 0 | | | 2,671 | | | 17,526 | | | 20,197 | | | (2,622) | | | 08/17 | | 25 years |
EPR Properties Schedule III - Real Estate and Accumulated Depreciation December 31, 2017 (Dollars in thousands) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Initial cost | | Additions (Dispositions) (Impairments) Subsequent to acquisition | | Gross Amount at December 31, 2017 | | | | | | |
Location | | Debt | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Total | | Accumulated depreciation | | Date acquired | | Depreciation life |
El Paso, TX | | — |
| | 2,957 |
| | 10,961 |
| | — |
| | 2,957 |
| | 10,961 |
| | 13,918 |
| | (721 | ) | | 06/16 | | 25 years |
Edinburg, TX | | — |
| | 1,982 |
| | 16,964 |
| | 5,680 |
| | 1,982 |
| | 22,644 |
| | 24,626 |
| | (1,088 | ) | | 06/16 | | 25 years |
Hendersonville, TN | | — |
| | 2,784 |
| | 8,034 |
| | — |
| | 2,784 |
| | 8,034 |
| | 10,818 |
| | (379 | ) | | 07/16 | | 30 years |
Houston, TX | | — |
| | 965 |
| | 10,002 |
| | — |
| | 965 |
| | 10,002 |
| | 10,967 |
| | — |
| | 10/16 | | 40 years |
Detroit, MI | | — |
| | 4,299 |
| | 13,810 |
| | — |
| | 4,299 |
| | 13,810 |
| | 18,109 |
| | (537 | ) | | 11/16 | | 30 years |
Fort Wayne, IN | | — |
| | 1,926 |
| | 11,054 |
| | — |
| | 1,926 |
| | 11,054 |
| | 12,980 |
| | (273 | ) | | 05/17 | | 27 years |
Wichita, KS | | — |
| | 267 |
| | 7,535 |
| | — |
| | 267 |
| | 7,535 |
| | 7,802 |
| | (191 | ) | | 05/17 | | 23 years |
Wichita, KS | | — |
| | 3,132 |
| | 23,270 |
| | — |
| | 3,132 |
| | 23,270 |
| | 26,402 |
| | (590 | ) | | 05/17 | | 23 years |
Richmond, TX | | — |
| | 7,251 |
| | 36,534 |
| | — |
| | 7,251 |
| | 36,534 |
| | 43,785 |
| | (340 | ) | | 08/17 | | 40 years |
Tomball, TX | | — |
| | 3,416 |
| | 26,918 |
| | — |
| | 3,416 |
| | 26,918 |
| | 30,334 |
| | (245 | ) | | 08/17 | | 40 years |
Cleveland, OH | | — |
| | 2,671 |
| | 17,526 |
| | — |
| | 2,671 |
| | 17,526 |
| | 20,197 |
| | (320 | ) | | 08/17 | | 25 years |
| | | | | | | | | | | | | | | | | | | | |
ERC's/Retail | | | | | | | | | | | | | | | | | | | | |
Dallas, TX | | — |
| | 3,060 |
| | 15,281 |
| | 18,862 |
| | 3,060 |
| | 34,143 |
| | 37,203 |
| | (15,646 | ) | | 11/97 | | 40 years |
Westminster, CO | | — |
| | 6,205 |
| | 12,600 |
| | 11,447 |
| | 6,205 |
| | 24,047 |
| | 30,252 |
| | (17,630 | ) | | 12/01 | | 40 years |
Westminster, CO | | — |
| | 5,850 |
| | 17,314 |
| | — |
| | 5,850 |
| | 17,314 |
| | 23,164 |
| | (6,962 | ) | | 06/99 | | 40 years |
Houston, TX | | — |
| | 3,653 |
| | 1,365 |
| | (1,531 | ) | | 3,408 |
| | 79 |
| | 3,487 |
| | (8 | ) | | 05/00 | | 40 years |
Southfield, MI | | — |
| | 8,000 |
| | 20,518 |
| | 6,298 |
| | 8,000 |
| | 26,816 |
| | 34,816 |
| | (26,321 | ) | | 05/03 | | 15 years |
New Rochelle, NY | | — |
| | 6,100 |
| | 97,696 |
| | 9,423 |
| | 6,100 |
| | 107,119 |
| | 113,219 |
| | (38,426 | ) | | 10/03 | | 40 years |
Kanata, ON | | — |
| | 10,044 |
| | 36,630 |
| | 29,324 |
| | 10,044 |
| | 65,954 |
| | 75,998 |
| | (21,678 | ) | | 03/04 | | 40 years |
Mississagua, ON | | — |
| | 9,221 |
| | 17,593 |
| | 21,635 |
| | 12,125 |
| | 36,324 |
| | 48,449 |
| | (9,969 | ) | | 03/04 | | 40 years |
Oakville, ON | | — |
| | 10,044 |
| | 23,646 |
| | 5,109 |
| | 10,044 |
| | 28,755 |
| | 38,799 |
| | (10,854 | ) | | 03/04 | | 40 years |
Whitby, ON | | — |
| | 10,202 |
| | 21,960 |
| | 24,126 |
| | 13,105 |
| | 43,183 |
| | 56,288 |
| | (14,386 | ) | | 03/04 | | 40 years |
Warrenville, IL | | — |
| | 3,919 |
| | 900 |
| | (339 | ) | | 1,983 |
| | 2,497 |
| | 4,480 |
| | (816 | ) | | 07/04 | | 25 years |
Burbank, CA | | — |
| | 16,584 |
| | 35,016 |
| | 8,167 |
| | 16,584 |
| | 43,183 |
| | 59,767 |
| | (12,815 | ) | | 03/05 | | 40 years |
Cleveland, OH | | — |
| | 2,389 |
| | 3,546 |
| | — |
| | 2,389 |
| | 3,546 |
| | 5,935 |
| | (78 | ) | | 08/17 | | 25 years |
| | | | | | | | | | | | | | | | | | | | |
Other Entertainment | | | | | | | | | | | | | | | | | | | | |
Northbrook, IL | | — |
| | — |
| | 7,025 |
| | 586 |
| | — |
| | 7,611 |
| | 7,611 |
| | (1,153 | ) | | 07/11 | | 40 years |
Oakbrook, IL | | — |
| | — |
| | 8,068 |
| | 536 |
| | — |
| | 8,604 |
| | 8,604 |
| | (1,082 | ) | | 03/12 | | 40 years |
Jacksonville, FL | | — |
| | 4,510 |
| | 5,061 |
| | 4,670 |
| | 4,510 |
| | 9,731 |
| | 14,241 |
| | (1,714 | ) | | 02/12 | | 30 years |
Indianapolis, IN | | — |
| | 4,298 |
| | 6,320 |
| | 5,454 |
| | 4,377 |
| | 11,695 |
| | 16,072 |
| | (1,349 | ) | | 02/12 | | 40 years |
Warrenville, IL | | — |
| | — |
| | 6,469 |
| | 2,216 |
| | — |
| | 8,685 |
| | 8,685 |
| | (1,086 | ) | | 10/13 | | 40 years |
Schaumburg, IL | | — |
| | 598 |
| | 5,372 |
| | — |
| | 598 |
| | 5,372 |
| | 5,970 |
| | (358 | ) | | 04/15 | | 30 years |
Marietta, GA | | — |
| | 3,116 |
| | 11,872 |
| | — |
| | 3,116 |
| | 11,872 |
| | 14,988 |
| | (881 | ) | | 02/16 | | 35 years |
Orlando, FL | | — |
| | 9,382 |
| | 16,225 |
| | 58 |
| | 9,382 |
| | 16,283 |
| | 25,665 |
| | (101 | ) | | 05/16 | | 40 years |
Stapleton, CO | | — |
| | 1,062 |
| | 6,329 |
| | — |
| | 1,062 |
| | 6,329 |
| | 7,391 |
| | (16 | ) | | 05/16 | | 40 years |
Dallas, TX | | — |
| | 3,318 |
| | 7,835 |
| | — |
| | 3,318 |
| | 7,835 |
| | 11,153 |
| | (43 | ) | | 12/16 | | 40 years |
| | | | | | | | | | | | | | | | | | | | |
Public Charter Schools | | | | | | | | | | | | | | | | | | | | |
Columbus, OH | | — |
| | 700 |
| | 3,790 |
| | — |
| | 700 |
| | 3,790 |
| | 4,490 |
| | (60 | ) | | 09/07 | | 40 years |
Groveport, OH | | — |
| | 600 |
| | 12,250 |
| | — |
| | 600 |
| | 12,250 |
| | 12,850 |
| | (194 | ) | | 10/07 | | 40 years |
Cleveland, OH | | — |
| | 640 |
| | 5,613 |
| | — |
| | 640 |
| | 5,613 |
| | 6,253 |
| | (468 | ) | | 10/04 | | 30 years |
Baton Rouge, LA | | — |
| | 996 |
| | 5,638 |
| | — |
| | 996 |
| | 5,638 |
| | 6,634 |
| | (926 | ) | | 03/11 | | 40 years |
Goodyear, AZ | | — |
| | 766 |
| | 6,517 |
| | — |
| | 766 |
| | 6,517 |
| | 7,283 |
| | (1,161 | ) | | 04/11 | | 30 years |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Initial cost | | Additions (Dispositions) (Impairments) Subsequent to acquisition | | Gross Amount at December 31, 2020 | | | | | | |
| | | Location | | Debt | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Total | | Accumulated depreciation | | Date acquired | | Depreciation life |
| | | Little Rock, AR | | 0 | | | 1,789 | | | 10,780 | | | 0 | | | 1,789 | | | 10,780 | | | 12,569 | | | (900) | | | 01/18 | | 40 years |
| | | Conway, AR | | 0 | | | 1,316 | | | 5,553 | | | 0 | | | 1,316 | | | 5,553 | | | 6,869 | | | (573) | | | 03/18 | | 30 years |
| | | Lynbrook, NY | | 0 | | | 1,753 | | | 28,400 | | | 0 | | | 1,753 | | | 28,400 | | | 30,153 | | | (1,816) | | | 06/18 | | 40 years |
| | | Long Island, NY | | 0 | | | 0 | | | 12,479 | | | 267 | | | 0 | | | 12,746 | | | 12,746 | | | (1,144) | | | 12/18 | | 25 years |
| | | Brandywine, MD | | 0 | | | 5,251 | | | 10,520 | | | 0 | | | 5,251 | | | 10,520 | | | 15,771 | | | (636) | | | 03/19 | | 34 years |
| | | Cincinnati, OH | | 0 | | | 2,831 | | | 11,430 | | | 0 | | | 2,831 | | | 11,430 | | | 14,261 | | | (657) | | | 03/19 | | 35 years |
| | | Louisville, KY | | 0 | | | 3,726 | | | 27,312 | | | 0 | | | 3,726 | | | 27,312 | | | 31,038 | | | (1,319) | | | 03/19 | | 40 years |
| | | Riverview, FL | | 0 | | | 2,339 | | | 15,901 | | | 0 | | | 2,339 | | | 15,901 | | | 18,240 | | | (843) | | | 03/19 | | 37 years |
| | | Savoy, IL | | 0 | | | 1,938 | | | 10,554 | | | 184 | | | 1,938 | | | 10,738 | | | 12,676 | | | (888) | | | 06/19 | | 25 years |
| | | Dublin, CA | | 0 | | | 15,662 | | | 25,496 | | | 0 | | | 15,662 | | | 25,496 | | | 41,158 | | | (1,576) | | | 06/19 | | 30 years |
| | | Ontario, CA | | 0 | | | 8,019 | | | 15,708 | | | 0 | | | 8,019 | | | 15,708 | | | 23,727 | | | (1,156) | | | 06/19 | | 24 years |
| | | Columbia, SC | | 0 | | | 7,009 | | | 17,318 | | | 0 | | | 7,009 | | | 17,318 | | | 24,327 | | | (764) | | | 06/19 | | 40 years |
| | | Columbia, MD | | 0 | | | 12,642 | | | 14,152 | | | 0 | | | 12,642 | | | 14,152 | | | 26,794 | | | (822) | | | 06/19 | | 34 years |
| | | Charlotte, NC | | 0 | | | 4,257 | | | 15,121 | | | 0 | | | 4,257 | | | 15,121 | | | 19,378 | | | (784) | | | 06/19 | | 35 years |
| | | Foothill Ranch, CA | | 0 | | | 7,653 | | | 14,090 | | | 0 | | | 7,653 | | | 14,090 | | | 21,743 | | | (1,074) | | | 06/19 | | 29 years |
| | | Wilsonville, OR | | 0 | | | 2,742 | | | 1,301 | | | 0 | | | 2,742 | | | 1,301 | | | 4,043 | | | (233) | | | 06/19 | | 23 years |
| | | Raleigh, NC | | 0 | | | 5,376 | | | 12,516 | | | 0 | | | 5,376 | | | 12,516 | | | 17,892 | | | (811) | | | 06/19 | | 30 years |
| | | Gastonia, NC | | 0 | | | 4,039 | | | 9,199 | | | 0 | | | 4,039 | | | 9,199 | | | 13,238 | | | (607) | | | 06/19 | | 30 years |
| | | Abingdon, MD | | 0 | | | 4,613 | | | 6,171 | | | 0 | | | 4,613 | | | 6,171 | | | 10,784 | | | (599) | | | 06/19 | | 24 years |
| | | Midland, TX | | 0 | | | 2,495 | | | 12,965 | | | 0 | | | 2,495 | | | 12,965 | | | 15,460 | | | (697) | | | 06/19 | | 35 years |
| | | Port Richey, FL | | 0 | | | 1,564 | | | 7,103 | | | 0 | | | 1,564 | | | 7,103 | | | 8,667 | | | (599) | | | 06/19 | | 26 years |
| | | Hillsboro, OR | | 0 | | | 3,392 | | | 5,697 | | | 0 | | | 3,392 | | | 5,697 | | | 9,089 | | | (607) | | | 06/19 | | 23 years |
| | | Woodway, TX | | 0 | | | 2,376 | | | 7,309 | | | 0 | | | 2,376 | | | 7,309 | | | 9,685 | | | (648) | | | 06/19 | | 24 years |
| | | San Jacinto, CA | | 0 | | | 1,960 | | | 5,073 | | | 0 | | | 1,960 | | | 5,073 | | | 7,033 | | | (461) | | | 06/19 | | 23 years |
| | | Albany, OR | | 0 | | | 2,049 | | | 3,920 | | | 0 | | | 2,049 | | | 3,920 | | | 5,969 | | | (293) | | | 06/19 | | 30 years |
| | | Lake City, FL | | 0 | | | 1,257 | | | 4,756 | | | 0 | | | 1,257 | | | 4,756 | | | 6,013 | | | (364) | | | 06/19 | | 27 years |
| | | Anderson, SC | | 0 | | | 1,554 | | | 3,948 | | | 0 | | | 1,554 | | | 3,948 | | | 5,502 | | | (362) | | | 06/19 | | 24 years |
| | | New Hartford, NY | | 0 | | | 946 | | | 11,985 | | | 0 | | | 946 | | | 11,985 | | | 12,931 | | | (542) | | | 10/19 | | 31 years |
| | | Columbus, OH | | 0 | | | 5,211 | | | 14,179 | | | 571 | | | 5,211 | | | 14,750 | | | 19,961 | | | (680) | | | 10/19 | | 38 years |
| | | Kenner, LA | | 0 | | | 5,299 | | | 14,000 | | | 0 | | | 5,299 | | | 14,000 | | | 19,299 | | | (1,279) | | | 10/19 | | 34 years |
| | | Marana, AZ | | 0 | | | 2,384 | | | 5,438 | | | 0 | | | 2,384 | | | 5,438 | | | 7,822 | | | (309) | | | 12/19 | | 28 years |
| | | Bluffton, SC | | 0 | | | 1,912 | | | 3,053 | | | 110 | | | 1,912 | | | 3,163 | | | 5,075 | | | (155) | | | 03/20 | | 25 years |
| | | Cherry Hill, NJ | | 0 | | | 5,038 | | | 9,206 | | | 0 | | | 5,038 | | | 9,206 | | | 14,244 | | | (554) | | | 03/20 | | 25 years |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Eat & Play | | | | | | | | | | | | | | | | | | | | |
| | | Westminster, CO | | 0 | | | 6,205 | | | 12,600 | | | 21,139 | | | 4,998 | | | 34,946 | | | 39,944 | | | (20,119) | | | 12/01 | | 40 years |
| | | Westminster, CO | | 0 | | | 5,850 | | | 17,314 | | | 4,257 | | | 5,850 | | | 21,571 | | | 27,421 | | | (8,751) | | | 06/99 | | 40 years |
| | | Houston, TX | | 0 | | | 3,653 | | | 1,365 | | | (1,531) | | | 3,408 | | | 79 | | | 3,487 | | | (24) | | | 05/00 | | 40 years |
| | | New Rochelle, NY | | 0 | | | 6,100 | | | 97,696 | | | 11,796 | | | 6,100 | | | 109,492 | | | 115,592 | | | (47,894) | | | 10/03 | | 40 years |
| | | Kanata, ON | | 0 | | | 10,044 | | | 36,630 | | | 33,206 | | | 9,896 | | | 69,984 | | | 79,880 | | | (27,311) | | | 03/04 | | 40 years |
| | | Mississagua, ON | | 0 | | | 9,221 | | | 17,593 | | | 23,765 | | | 11,947 | | | 38,632 | | | 50,579 | | | (13,286) | | | 03/04 | | 40 years |
| | | Oakville, ON | | 0 | | | 10,044 | | | 23,646 | | | 10,576 | | | 9,896 | | | 34,370 | | | 44,266 | | | (14,113) | | | 03/04 | | 40 years |
| | | Whitby, ON | | 0 | | | 10,202 | | | 21,960 | | | 29,075 | | | 12,913 | | | 48,324 | | | 61,237 | | | (18,262) | | | 03/04 | | 40 years |
| | | Burbank, CA | | 0 | | | 16,584 | | | 35,016 | | | 12,618 | | | 16,584 | | | 47,634 | | | 64,218 | | | (16,659) | | | 03/05 | | 40 years |
| | | Northbrook, IL | | 0 | | | 0 | | | 7,025 | | | 586 | | | 0 | | | 7,611 | | | 7,611 | | | (1,730) | | | 07/11 | | 40 years |
| | | Allen, TX | | 0 | | | 0 | | | 10,007 | | | 1,151 | | | 0 | | | 11,158 | | | 11,158 | | | (3,329) | | | 02/12 | | 29 years |
| | | Dallas, TX | | 0 | | | 0 | | | 10,007 | | | 1,771 | | | 0 | | | 11,778 | | | 11,778 | | | (3,378) | | | 02/12 | | 30 years |
| | | Oakbrook, IL | | 0 | | | 0 | | | 8,068 | | | 536 | | | 0 | | | 8,604 | | | 8,604 | | | (1,731) | | | 03/12 | | 40 years |
| | | Jacksonville, FL | | 0 | | | 4,510 | | | 5,061 | | | 4,748 | | | 4,510 | | | 9,809 | | | 14,319 | | | (3,136) | | | 02/12 | | 30 years |
| | | Indianapolis, IN | | 0 | | | 4,298 | | | 6,320 | | | (4,754) | | | 1,813 | | | 4,051 | | | 5,864 | | | (716) | | | 02/12 | | 40 years |
| | | Houston, TX | | 0 | | | 0 | | | 12,403 | | | 394 | | | 0 | | | 12,797 | | | 12,797 | | | (2,700) | | | 09/12 | | 40 years |
EPR Properties Schedule III - Real Estate and Accumulated Depreciation December 31, 2017 (Dollars in thousands) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Initial cost | | Additions (Dispositions) (Impairments) Subsequent to acquisition | | Gross Amount at December 31, 2017 | | | | | | |
Location | | Debt | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Total | | Accumulated depreciation | | Date acquired | | Depreciation life |
Phoenix, AZ | | — |
| | 1,060 |
| | 8,140 |
| | — |
| | 1,060 |
| | 8,140 |
| | 9,200 |
| | (1,443 | ) | | 11/11 | | 40 years |
Buckeye, AZ | | — |
| | 914 |
| | 9,715 |
| | 14,461 |
| | 914 |
| | 24,176 |
| | 25,090 |
| | (2,541 | ) | | 04/12 | | 40 years |
Tarboro, NC | | — |
| | 350 |
| | 12,560 |
| | 3,037 |
| | 350 |
| | 15,597 |
| | 15,947 |
| | (2,020 | ) | | 07/12 | | 40 years |
Chester Upland, PA | | — |
| | 518 |
| | 5,900 |
| | — |
| | 518 |
| | 5,900 |
| | 6,418 |
| | (830 | ) | | 03/13 | | 30 years |
Hollywood, SC | | — |
| | 806 |
| | 5,776 |
| | 1,805 |
| | 806 |
| | 7,581 |
| | 8,387 |
| | (823 | ) | | 03/13 | | 40 years |
Camden, NJ | | — |
| | 548 |
| | 10,569 |
| | 7,271 |
| | 548 |
| | 17,840 |
| | 18,388 |
| | (2,440 | ) | | 04/13 | | 30 years |
Queen Creek, AZ | | — |
| | 2,612 |
| | — |
| | (1,845 | ) | | 767 |
| | — |
| | 767 |
| | — |
| | 04/13 | | n/a |
Chicago, IL | | — |
| | 509 |
| | 5,895 |
| | 4,619 |
| | 509 |
| | 10,514 |
| | 11,023 |
| | (947 | ) | | 05/13 | | 40 years |
Gilbert, AZ | | — |
| | 1,336 |
| | 6,593 |
| | — |
| | 1,336 |
| | 6,593 |
| | 7,929 |
| | (701 | ) | | 05/13 | | 40 years |
Vista, CA | | — |
| | 1,283 |
| | 3,354 |
| | 6,056 |
| | 1,283 |
| | 9,410 |
| | 10,693 |
| | (686 | ) | | 05/13 | | 40 years |
Columbus, OH | | — |
| | 600 |
| | 5,720 |
| | — |
| | 600 |
| | 5,720 |
| | 6,320 |
| | (91 | ) | | 05/13 | | 40 years |
Dayton, OH | | — |
| | 599 |
| | 5,068 |
| | — |
| | 599 |
| | 5,068 |
| | 5,667 |
| | (80 | ) | | 05/13 | | 40 years |
Chandler, AZ | | — |
| | 1,039 |
| | 9,590 |
| | — |
| | 1,039 |
| | 9,590 |
| | 10,629 |
| | (1,305 | ) | | 07/13 | | 40 years |
Salt Lake City, UT | | — |
| | 8,173 |
| | 10,982 |
| | 1,928 |
| | 8,173 |
| | 12,910 |
| | 21,083 |
| | (1,100 | ) | | 07/13 | | 40 years |
Palm Beach, FL | | — |
| | 3,323 |
| | 15,824 |
| | (81 | ) | | 3,323 |
| | 15,743 |
| | 19,066 |
| | (1,586 | ) | | 10/13 | | 30 years |
Columbus, OH | | — |
| | 840 |
| | 5,640 |
| | — |
| | 840 |
| | 5,640 |
| | 6,480 |
| | (90 | ) | | 11/13 | | 40 years |
Lancaster, CA | | — |
| | 2,109 |
| | 6,032 |
| | 166 |
| | 2,109 |
| | 6,198 |
| | 8,307 |
| | (640 | ) | | 12/13 | | 30 years |
Kernersville, NC | | — |
| | 1,362 |
| | 8,182 |
| | (244 | ) | | 1,362 |
| | 7,938 |
| | 9,300 |
| | (918 | ) | | 12/13 | | 40 years |
Fort Collins, CO | | — |
| | 618 |
| | 5,031 |
| | 5,134 |
| | 618 |
| | 10,165 |
| | 10,783 |
| | (953 | ) | | 02/14 | | 40 years |
Wilson, NC | | — |
| | 424 |
| | 5,342 |
| | 4,553 |
| | 449 |
| | 9,870 |
| | 10,319 |
| | (647 | ) | | 03/14 | | 30 years |
Baker, LA | | — |
| | 190 |
| | 6,563 |
| | 203 |
| | 190 |
| | 6,766 |
| | 6,956 |
| | (520 | ) | | 04/14 | | 40 years |
Charlotte, NC | | — |
| | 1,559 |
| | 1,477 |
| | 9,189 |
| | 1,559 |
| | 10,666 |
| | 12,225 |
| | (778 | ) | | 05/14 | | 30 years |
Chicago, IL | | — |
| | 1,544 |
| | 6,074 |
| | 4,239 |
| | 1,544 |
| | 10,313 |
| | 11,857 |
| | (756 | ) | | 05/14 | | 40 years |
Chandler, AZ | | — |
| | 1,530 |
| | 6,877 |
| | 144 |
| | 1,530 |
| | 7,021 |
| | 8,551 |
| | (436 | ) | | 08/14 | | 40 years |
Port Royal, SC | | — |
| | 387 |
| | 4,383 |
| | 1,259 |
| | 387 |
| | 5,642 |
| | 6,029 |
| | (320 | ) | | 09/14 | | 40 years |
Macon, GA | | — |
| | 401 |
| | 7,883 |
| | — |
| | 401 |
| | 7,883 |
| | 8,284 |
| | (1,168 | ) | | 02/15 | | 15 years |
Memphis, TN | | — |
| | 1,535 |
| | 4,089 |
| | 2,646 |
| | 1,535 |
| | 6,735 |
| | 8,270 |
| | (503 | ) | | 02/15 | | 30 years |
Parker, CO | | — |
| | 2,190 |
| | 6,815 |
| | 111 |
| | 2,190 |
| | 6,926 |
| | 9,116 |
| | (621 | ) | | 01/15 | | 40 years |
Rock Hill, SC | | — |
| | 2,046 |
| | 8,024 |
| | (27 | ) | | 2,046 |
| | 7,997 |
| | 10,043 |
| | (471 | ) | | 04/15 | | 30 years |
Palm Bay, FL | | — |
| | 782 |
| | 6,212 |
| | 2,049 |
| | 782 |
| | 8,261 |
| | 9,043 |
| | (596 | ) | | 03/15 | | 40 years |
East Point, GA | | — |
| | 553 |
| | 5,938 |
| | — |
| | 553 |
| | 5,938 |
| | 6,491 |
| | (343 | ) | | 05/15 | | 30 years |
Trenton, NJ | | — |
| | 1,351 |
| | 15,327 |
| | — |
| | 1,351 |
| | 15,327 |
| | 16,678 |
| | (414 | ) | | 08/15 | | 40 years |
Memphis, TN | | — |
| | 910 |
| | 7,927 |
| | (41 | ) | | 910 |
| | 7,886 |
| | 8,796 |
| | (246 | ) | | 09/15 | | 40 years |
Macon, GA | | — |
| | 351 |
| | 7,460 |
| | — |
| | 351 |
| | 7,460 |
| | 7,811 |
| | (470 | ) | | 11/15 | | 30 years |
Galloway, NJ | | — |
| | 575 |
| | 3,692 |
| | (816 | ) | | 575 |
| | 2,876 |
| | 3,451 |
| | (146 | ) | | 12/15 | | 30 years |
Bronx, NY | | — |
| | 1,232 |
| | 8,472 |
| | — |
| | 1,232 |
| | 8,472 |
| | 9,704 |
| | (300 | ) | | 01/16 | | 40 years |
Parker, CO | | — |
| | 1,248 |
| | 12,892 |
| | 356 |
| | 1,248 |
| | 13,248 |
| | 14,496 |
| | (439 | ) | | 04/16 | | 40 years |
Holland, OH | | — |
| | 549 |
| | 4,642 |
| | 25 |
| | 549 |
| | 4,667 |
| | 5,216 |
| | (156 | ) | | 04/16 | | 40 years |
Holly Springs, NC | | — |
| | 1,703 |
| | 10,240 |
| | — |
| | 1,703 |
| | 10,240 |
| | 11,943 |
| | (114 | ) | | 03/17 | | 30 years |
Chicoppe, MA | | — |
| | 1,489 |
| | 6,382 |
| | — |
| | 1,489 |
| | 6,382 |
| | 7,871 |
| | (124 | ) | | 05/17 | | 30 years |
Walnut Creek, CA | | — |
| | 4,917 |
| | 6,418 |
| | — |
| | 4,917 |
| | 6,418 |
| | 11,335 |
| | (132 | ) | | 07/17 | | 30 years |
| | | | | | | | | | | | | | | | | | | | |
Early Childhood Education | | | | | | | | | | | | | | | | | | | | |
Lake Pleasant, AZ | | — |
| | 986 |
| | 3,524 |
| | — |
| | 986 |
| | 3,524 |
| | 4,510 |
| | (577 | ) | | 03/13 | | 30 years |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Initial cost | | Additions (Dispositions) (Impairments) Subsequent to acquisition | | Gross Amount at December 31, 2020 | | | | | | |
| | | Location | | Debt | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Total | | Accumulated depreciation | | Date acquired | | Depreciation life |
| | | Colony, TX | | 0 | | | 4,004 | | | 13,665 | | | (240) | | | 4,004 | | | 13,425 | | | 17,429 | | | (2,349) | | | 12/12 | | 40 years |
| | | Alpharetta, GA | | 0 | | | 5,608 | | | 16,616 | | | 0 | | | 5,608 | | | 16,616 | | | 22,224 | | | (2,700) | | | 05/13 | | 40 years |
| | | Scottsdale, AZ | | 0 | | | 0 | | | 16,942 | | | 0 | | | 0 | | | 16,942 | | | 16,942 | | | (2,753) | | | 06/13 | | 40 years |
| | | Spring, TX | | 0 | | | 4,928 | | | 14,522 | | | 0 | | | 4,928 | | | 14,522 | | | 19,450 | | | (2,420) | | | 07/13 | | 40 years |
| | | Warrenville, IL | | 0 | | | 0 | | | 6,469 | | | 9,625 | | | 2,906 | | | 13,188 | | | 16,094 | | | (3,417) | | | 10/13 | | 40 years |
| | | San Antonio, TX | | 0 | | | 0 | | | 15,976 | | | 79 | | | 0 | | | 16,055 | | | 16,055 | | | (2,334) | | | 12/13 | | 40 years |
| | | Tampa, FL | | 0 | | | 0 | | | 15,726 | | | (67) | | | 0 | | | 15,659 | | | 15,659 | | | (2,453) | | | 02/14 | | 40 years |
| | | Gilbert, AZ | | 0 | | | 4,735 | | | 16,130 | | | (267) | | | 4,735 | | | 15,863 | | | 20,598 | | | (2,379) | | | 02/14 | | 40 years |
| | | Overland Park, KS | | 0 | | | 5,519 | | | 17,330 | | | 0 | | | 5,519 | | | 17,330 | | | 22,849 | | | (2,376) | | | 05/14 | | 40 years |
| | | Centennial, CO | | 0 | | | 3,013 | | | 19,106 | | | 403 | | | 3,013 | | | 19,509 | | | 22,522 | | | (2,596) | | | 06/14 | | 40 years |
| | | Atlanta, GA | | 0 | | | 8,143 | | | 17,289 | | | 0 | | | 8,143 | | | 17,289 | | | 25,432 | | | (2,341) | | | 06/14 | | 40 years |
| | | Ashburn VA | | 0 | | | 0 | | | 16,873 | | | 101 | | | 0 | | | 16,974 | | | 16,974 | | | (2,253) | | | 06/14 | | 40 years |
| | | Naperville, IL | | 0 | | | 8,824 | | | 20,279 | | | (665) | | | 8,824 | | | 19,614 | | | 28,438 | | | (2,615) | | | 08/14 | | 40 years |
| | | Oklahoma City, OK | | 0 | | | 3,086 | | | 16,421 | | | (252) | | | 3,086 | | | 16,169 | | | 19,255 | | | (2,223) | | | 09/14 | | 40 years |
| | | Webster, TX | | 0 | | | 5,631 | | | 17,732 | | | 927 | | | 5,338 | | | 18,952 | | | 24,290 | | | (2,428) | | | 11/14 | | 40 years |
| | | Virginia Beach, VA | | 0 | | | 6,948 | | | 18,715 | | | (304) | | | 6,348 | | | 19,011 | | | 25,359 | | | (2,373) | | | 12/14 | | 40 years |
| | | Edison, NJ | | 0 | | | 0 | | | 22,792 | | | 1,489 | | | 0 | | | 24,281 | | | 24,281 | | | (2,418) | | | 04/15 | | 40 years |
| | | Jacksonville, FL | | 0 | | | 6,732 | | | 21,823 | | | (1,201) | | | 6,732 | | | 20,622 | | | 27,354 | | | (2,177) | | | 09/15 | | 40 years |
| | | Roseville, CA | | 0 | | | 6,868 | | | 23,959 | | | (1,928) | | | 6,868 | | | 22,031 | | | 28,899 | | | (2,367) | | | 10/15 | | 30 years |
| | | Portland, OR | | 0 | | | 0 | | | 23,466 | | | (541) | | | 0 | | | 22,925 | | | 22,925 | | | (2,520) | | | 11/15 | | 40 years |
| | | Orlando, FL | | 0 | | | 8,586 | | | 22,493 | | | 1,120 | | | 8,586 | | | 23,613 | | | 32,199 | | | (2,030) | | | 01/16 | | 40 years |
| | | Marietta, GA | | 0 | | | 3,116 | | | 11,872 | | | 0 | | | 3,116 | | | 11,872 | | | 14,988 | | | (2,008) | | | 02/16 | | 35 years |
| | | Charlotte, NC | | 0 | | | 4,676 | | | 21,422 | | | (867) | | | 4,676 | | | 20,555 | | | 25,231 | | | (1,936) | | | 04/16 | | 40 years |
| | | Orlando, FL | | 0 | | | 9,382 | | | 16,225 | | | 58 | | | 9,382 | | | 16,283 | | | 25,665 | | | (1,323) | | | 05/16 | | 40 years |
| | | Stapleton, CO | | 0 | | | 1,062 | | | 6,329 | | | 0 | | | 1,062 | | | 6,329 | | | 7,391 | | | (602) | | | 05/16 | | 40 years |
| | | Fort Worth, TX | | 0 | | | 4,674 | | | 17,537 | | | 0 | | | 4,674 | | | 17,537 | | | 22,211 | | | (1,608) | | | 08/16 | | 40 years |
| | | Nashville, TN | | 0 | | | 0 | | | 26,685 | | | 136 | | | 0 | | | 26,821 | | | 26,821 | | | (2,295) | | | 12/16 | | 40 years |
| | | Dallas, TX | | 0 | | | 3,318 | | | 7,835 | | | 4 | | | 3,318 | | | 7,839 | | | 11,157 | | | (809) | | | 12/16 | | 40 years |
| | | San Antonio, TX | | 0 | | | 6,502 | | | 15,338 | | | (628) | | | 6,502 | | | 14,710 | | | 21,212 | | | (893) | | | 08/17 | | 40 years |
| | | Cleveland, OH | | 0 | | | 2,389 | | | 3,546 | | | 374 | | | 2,389 | | | 3,920 | | | 6,309 | | | (658) | | | 08/17 | | 25 years |
| | | Huntsville, AL | | 0 | | | 53 | | | 17,595 | | | (1,938) | | | 53 | | | 15,657 | | | 15,710 | | | (1,479) | | | 08/17 | | 40 years |
| | | El Paso, TX | | 0 | | | 2,688 | | | 17,373 | | | 0 | | | 2,688 | | | 17,373 | | | 20,061 | | | (1,655) | | | 02/18 | | 40 years |
| | | Pittsburgh, PA | | 0 | | | 7,897 | | | 21,812 | | | (1,039) | | | 7,897 | | | 20,773 | | | 28,670 | | | (1,379) | | | 07/18 | | 40 years |
| | | Philadelphia, PA | | 0 | | | 5,484 | | | 25,211 | | | 97 | | | 5,484 | | | 25,308 | | | 30,792 | | | (1,465) | | | 12/18 | | 40 years |
| | | Auburn Hills, MI | | 0 | | | 4,219 | | | 27,704 | | | (2,881) | | | 4,219 | | | 24,823 | | | 29,042 | | | (1,371) | | | 12/18 | | 40 years |
| | | Greenville, SC | | 0 | | | 6,272 | | | 18,240 | | | 0 | | | 6,272 | | | 18,240 | | | 24,512 | | | (1,096) | | | 06/18 | | 40 years |
| | | Thornton, CO | | 0 | | | 5,419 | | | 23,635 | | | 0 | | | 5,419 | | | 23,635 | | | 29,054 | | | (910) | | | 09/18 | | 40 years |
| | | Eugene, OR | | 0 | | | 1,321 | | | 0 | | | 0 | | | 1,321 | | | 0 | | | 1,321 | | | 0 | | | 06/19 | | n/a |
| | | Katy, TX | | 0 | | | 5,210 | | | 16,247 | | | 293 | | | 3,492 | | | 18,258 | | | 21,750 | | | (367) | | | 06/19 | | 40 years |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Ski | | | | | | | | | | | | | | | | | | | | |
| | | Bellfontaine, OH | | 0 | | | 5,108 | | | 5,994 | | | 8,327 | | | 5,251 | | | 14,178 | | | 19,429 | | | (4,900) | | | 11/05 | | 40 years |
| | | Tannersville, PA | | 0 | | | 34,940 | | | 34,629 | | | 4,377 | | | 34,940 | | | 39,006 | | | 73,946 | | | (17,215) | | | 09/13 | | 40 years |
| | | McHenry, MD | | 0 | | | 8,394 | | | 15,910 | | | 3,207 | | | 9,708 | | | 17,803 | | | 27,511 | | | (7,103) | | | 12/12 | | 40 years |
| | | Wintergreen, VA | | 0 | | | 5,739 | | | 16,126 | | | 1,927 | | | 5,739 | | | 18,053 | | | 23,792 | | | (5,186) | | | 02/15 | | 40 years |
| | | Northstar, CA | | 0 | | | 48,178 | | | 88,532 | | | 0 | | | 48,178 | | | 88,532 | | | 136,710 | | | (19,778) | | | 04/17 | | 40 years |
| | | Northstar, CA | | 0 | | | 7,827 | | | 18,112 | | | 0 | | | 7,827 | | | 18,112 | | | 25,939 | | | (1,938) | | | 04/17 | | 40 years |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Attractions | | | | | | | | | | | | | | | | | | | | |
| | | Denver, CO | | 0 | | | 753 | | | 6,218 | | | 0 | | | 753 | | | 6,218 | | | 6,971 | | | (812) | | | 02/17 | | 30 years |
| | | Fort Worth, TX | | 0 | | | 824 | | | 7,066 | | | 0 | | | 824 | | | 7,066 | | | 7,890 | | | (883) | | | 03/17 | | 30 years |
EPR Properties Schedule III - Real Estate and Accumulated Depreciation December 31, 2017 (Dollars in thousands) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Initial cost | | Additions (Dispositions) (Impairments) Subsequent to acquisition | | Gross Amount at December 31, 2017 | | | | | | |
Location | | Debt | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Total | | Accumulated depreciation | | Date acquired | | Depreciation life |
Goodyear, AZ | | — |
| | 1,308 |
| | 7,275 |
| | 11 |
| | 1,308 |
| | 7,286 |
| | 8,594 |
| | (1,046 | ) | | 06/13 | | 30 years |
Oklahoma City, OK | | — |
| | 1,149 |
| | 9,839 |
| | 385 |
| | 1,149 |
| | 10,224 |
| | 11,373 |
| | (1,196 | ) | | 08/13 | | 40 years |
Coppell, TX | | — |
| | 1,547 |
| | 10,168 |
| | (99 | ) | | 1,547 |
| | 10,069 |
| | 11,616 |
| | (1,069 | ) | | 09/13 | | 30 years |
Las Vegas, NV | | — |
| | 944 |
| | 9,191 |
| | — |
| | 944 |
| | 9,191 |
| | 10,135 |
| | (1,281 | ) | | 09/13 | | 30 years |
Las Vegas, NV | | — |
| | 985 |
| | 6,721 |
| | 145 |
| | 985 |
| | 6,866 |
| | 7,851 |
| | (925 | ) | | 09/13 | | 30 years |
Mesa, AZ | | — |
| | 762 |
| | 6,987 |
| | — |
| | 762 |
| | 6,987 |
| | 7,749 |
| | (1,194 | ) | | 01/14 | | 30 years |
Gilbert, AZ | | — |
| | 1,295 |
| | 9,192 |
| | — |
| | 1,295 |
| | 9,192 |
| | 10,487 |
| | (1,081 | ) | | 03/14 | | 30 years |
Cedar Park, TX | | — |
| | 1,520 |
| | 10,500 |
| | (430 | ) | | 1,278 |
| | 10,312 |
| | 11,590 |
| | (970 | ) | | 07/14 | | 30 years |
Thornton, CO | | — |
| | 1,384 |
| | 10,542 |
| | — |
| | 1,384 |
| | 10,542 |
| | 11,926 |
| | (778 | ) | | 07/14 | | 30 years |
Chicago, IL | | — |
| | 1,294 |
| | 4,375 |
| | 19 |
| | 1,294 |
| | 4,394 |
| | 5,688 |
| | (171 | ) | | 07/14 | | 30 years |
Centennial, CO | | — |
| | 1,249 |
| | 10,771 |
| | 467 |
| | 1,249 |
| | 11,238 |
| | 12,487 |
| | (998 | ) | | 08/14 | | 30 years |
McKinney, TX | | — |
| | 1,812 |
| | 12,419 |
| | 908 |
| | 1,812 |
| | 13,327 |
| | 15,139 |
| | (1,197 | ) | | 11/14 | | 30 years |
Parker, CO | | — |
| | 279 |
| | 1,017 |
| | — |
| | 279 |
| | 1,017 |
| | 1,296 |
| | (121 | ) | | 01/15 | | 30 years |
Lakewood, CO | | — |
| | 291 |
| | 823 |
| | 40 |
| | 291 |
| | 863 |
| | 1,154 |
| | (90 | ) | | 01/15 | | 30 years |
Castle Rock, CO | | — |
| | 250 |
| | 1,646 |
| | — |
| | 250 |
| | 1,646 |
| | 1,896 |
| | (172 | ) | | 01/15 | | 30 years |
Emeryville, CA | | — |
| | 1,814 |
| | 5,780 |
| | — |
| | 1,814 |
| | 5,780 |
| | 7,594 |
| | (353 | ) | | 03/15 | | 30 years |
Lafayette, CO | | — |
| | 293 |
| | 663 |
| | 47 |
| | 293 |
| | 710 |
| | 1,003 |
| | (87 | ) | | 04/15 | | 30 years |
Ashburn, VA | | — |
| | 2,289 |
| | 14,748 |
| | — |
| | 2,289 |
| | 14,748 |
| | 17,037 |
| | (606 | ) | | 06/15 | | 30 years |
West Chester, OH | | — |
| | 1,807 |
| | 12,913 |
| | — |
| | 1,807 |
| | 12,913 |
| | 14,720 |
| | (408 | ) | | 07/15 | | 30 years |
Ellisville, MO | | — |
| | 2,465 |
| | 15,063 |
| | — |
| | 2,465 |
| | 15,063 |
| | 17,528 |
| | (412 | ) | | 07/15 | | 30 years |
Chanhassen, MN | | — |
| | 2,603 |
| | 15,613 |
| | 434 |
| | 2,603 |
| | 16,047 |
| | 18,650 |
| | (490 | ) | | 08/15 | | 30 years |
Maple Grove, MN | | — |
| | 3,743 |
| | 14,927 |
| | 63 |
| | 3,743 |
| | 14,990 |
| | 18,733 |
| | (994 | ) | | 08/15 | | 30 years |
Carmel, IN | | — |
| | 1,567 |
| | 12,854 |
| | 199 |
| | 1,567 |
| | 13,053 |
| | 14,620 |
| | (613 | ) | | 09/15 | | 30 years |
Atlanta, GA | | — |
| | 956 |
| | 1,850 |
| | — |
| | 956 |
| | 1,850 |
| | 2,806 |
| | (139 | ) | | 10/15 | | 30 years |
Atlanta, GA | | — |
| | 1,262 |
| | 2,038 |
| | — |
| | 1,262 |
| | 2,038 |
| | 3,300 |
| | (153 | ) | | 10/15 | | 30 years |
Fishers, IN | | — |
| | 1,226 |
| | 13,144 |
| | — |
| | 1,226 |
| | 13,144 |
| | 14,370 |
| | (127 | ) | | 12/15 | | 30 years |
Westerville, OH | | — |
| | 2,988 |
| | 14,339 |
| | — |
| | 2,988 |
| | 14,339 |
| | 17,327 |
| | (258 | ) | | 04/16 | | 30 years |
Las Vegas, NV | | — |
| | 1,476 |
| | 14,422 |
| | — |
| | 1,476 |
| | 14,422 |
| | 15,898 |
| | (395 | ) | | 06/16 | | 30 years |
Louisville, KY | | — |
| | 377 |
| | 1,526 |
| | — |
| | 377 |
| | 1,526 |
| | 1,903 |
| | (72 | ) | | 08/16 | | 30 years |
Louisville, KY | | — |
| | 216 |
| | 1,006 |
| | — |
| | 216 |
| | 1,006 |
| | 1,222 |
| | (47 | ) | | 08/16 | | 30 years |
Cheshire, CT | | — |
| | 420 |
| | 3,650 |
| | — |
| | 420 |
| | 3,650 |
| | 4,070 |
| | (53 | ) | | 11/16 | | 30 years |
Edina, MN | | — |
| | 1,235 |
| | 5,493 |
| | — |
| | 1,235 |
| | 5,493 |
| | 6,728 |
| | (35 | ) | | 11/16 | | 30 years |
Eagan, MN | | — |
| | 783 |
| | 4,833 |
| | — |
| | 783 |
| | 4,833 |
| | 5,616 |
| | (86 | ) | | 11/16 | | 30 years |
Louisville, KY | | — |
| | 481 |
| | 2,050 |
| | — |
| | 481 |
| | 2,050 |
| | 2,531 |
| | (74 | ) | | 12/16 | | 30 years |
Bala Cynwyd, PA | | — |
| | 1,785 |
| | 3,759 |
| | — |
| | 1,785 |
| | 3,759 |
| | 5,544 |
| | (136 | ) | | 12/16 | | 30 years |
Kennesaw, GA | | — |
| | 690 |
| | 844 |
| | — |
| | 690 |
| | 844 |
| | 1,534 |
| | (28 | ) | | 01/17 | | 30 years |
New Berlin, WI | | — |
| | 368 |
| | 1,704 |
| | — |
| | 368 |
| | 1,704 |
| | 2,072 |
| | (52 | ) | | 02/17 | | 30 years |
Oak Creek, WI | | — |
| | 283 |
| | 1,690 |
| | — |
| | 283 |
| | 1,690 |
| | 1,973 |
| | (52 | ) | | 02/17 | | 30 years |
Minnetonka, MN | | — |
| | 911 |
| | 4,833 |
| | 336 |
| | 911 |
| | 5,169 |
| | 6,080 |
| | (40 | ) | | 03/17 | | 30 years |
Wallingford, CT | | — |
| | 637 |
| | 1,008 |
| | — |
| | 637 |
| | 1,008 |
| | 1,645 |
| | (25 | ) | | 03/17 | | 30 years |
Crowley, TX | | — |
| | 1,150 |
| | 2,862 |
| | — |
| | 1,150 |
| | 2,862 |
| | 4,012 |
| | (58 | ) | | 05/17 | | 30 years |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Initial cost | | Additions (Dispositions) (Impairments) Subsequent to acquisition | | Gross Amount at December 31, 2020 | | | | | | |
| | | Location | | Debt | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Total | | Accumulated depreciation | | Date acquired | | Depreciation life |
| | | Corfu, NY | | 0 | | | 5,112 | | | 43,637 | | | 2,500 | | | 5,112 | | | 46,137 | | | 51,249 | | | (8,183) | | | 04/17 | | 30 years |
| | | Oklahoma City, OK | | 0 | | | 7,976 | | | 17,624 | | | 0 | | | 7,976 | | | 17,624 | | | 25,600 | | | (2,747) | | | 04/17 | | 30 years |
| | | Hot Springs, AR | | 0 | | | 3,351 | | | 4,967 | | | 0 | | | 3,351 | | | 4,967 | | | 8,318 | | | (761) | | | 04/17 | | 30 years |
| | | Riviera Beach, FL | | 0 | | | 17,450 | | | 29,713 | | | 0 | | | 17,450 | | | 29,713 | | | 47,163 | | | (4,626) | | | 04/17 | | 30 years |
| | | Oklahoma City, OK | | 0 | | | 1,423 | | | 18,097 | | | 0 | | | 1,423 | | | 18,097 | | | 19,520 | | | (2,911) | | | 04/17 | | 30 years |
| | | Springs, TX | | 0 | | | 18,776 | | | 31,402 | | | 0 | | | 18,776 | | | 31,402 | | | 50,178 | | | (5,017) | | | 04/17 | | 30 years |
| | | Glendale, AZ | | 0 | | | 0 | | | 20,514 | | | 2,969 | | | 0 | | | 23,483 | | | 23,483 | | | (3,930) | | | 04/17 | | 30 years |
| | | Kapolei, HI | | 0 | | | 0 | | | 8,351 | | | 1,542 | | | 0 | | | 9,893 | | | 9,893 | | | (1,516) | | | 04/17 | | 30 years |
| | | Federal Way, WA | | 0 | | | 0 | | | 13,949 | | | (12,149) | | | 0 | | | 1,800 | | | 1,800 | | | (99) | | | 04/17 | | 12 years |
| | | Colony, TX | | 0 | | | 0 | | | 7,617 | | | (567) | | | 0 | | | 7,050 | | | 7,050 | | | (1,770) | | | 04/17 | | 30 years |
| | | Garland, TX | | 0 | | | 0 | | | 5,601 | | | 389 | | | 0 | | | 5,990 | | | 5,990 | | | (1,296) | | | 04/17 | | 30 years |
| | | Santa Monica, CA | | 0 | | | 0 | | | 13,874 | | | 15,717 | | | 0 | | | 29,591 | | | 29,591 | | | (5,058) | | | 04/17 | | 30 years |
| | | Concord, CA | | 0 | | | 0 | | | 9,808 | | | 5,787 | | | 0 | | | 15,595 | | | 15,595 | | | (2,498) | | | 04/17 | | 30 years |
| | | Tampa, FL | | 0 | | | 0 | | | 8,665 | | | 2,493 | | | 2,493 | | | 8,665 | | | 11,158 | | | (963) | | | 08/17 | | 30 years |
| | | Fort Lauderdale, FL | | 0 | | | 0 | | | 10,816 | | | 0 | | | 0 | | | 10,816 | | | 10,816 | | | (1,142) | | | 10/17 | | 30 years |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Experiential Lodging | | | | | | | | | | | | | | | | | | | | |
| | | Tannersville, PA | | 0 | | | 0 | | | 120,354 | | | 1,615 | | | 0 | | | 121,969 | | | 121,969 | | | (16,462) | | | 05/15 | | 40 years |
| | | Pagosa Springs, CO | | 0 | | | 9,791 | | | 15,635 | | | 0 | | | 9,791 | | | 15,635 | | | 25,426 | | | (1,903) | | | 06/18 | | 30 years |
| | | Kiamesha Lake, NY | | 0 | | | 34,897 | | | 228,462 | | | (5,430) | | | 34,897 | | | 223,032 | | | 257,929 | | | (18,777) | | | 07/10 | | 30 years |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Gaming | | | | | | | | | | | | | | | | | | | | |
| | | Kiamesha Lake, NY | | 0 | | | 155,658 | | | 0 | | | 19,524 | | | 156,785 | | | 18,397 | | | 175,182 | | | (933) | | | 07/10 | | n/a |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Cultural | | | | | | | | | | | | | | | | | | | | |
| | | St. Louis, MO | | 0 | | | 5,481 | | | 41,951 | | | 0 | | | 5,481 | | | 41,951 | | | 47,432 | | | (2,976) | | | 12/18 | | 40 years |
| | | Branson, MO | | 0 | | | 1,847 | | | 7,599 | | | 0 | | | 1,847 | | | 7,599 | | | 9,446 | | | (362) | | | 05/19 | | 40 years |
| | | Pigeon Forge, TN | | 0 | | | 4,849 | | | 9,668 | | | 0 | | | 4,849 | | | 9,668 | | | 14,517 | | | (466) | | | 05/19 | | 40 years |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Fitness & Wellness | | | | | | | | | | | | | | | | | | | | |
| | | Olathe, KS | | 0 | | | 2,417 | | | 16,878 | | | 0 | | | 2,417 | | | 16,878 | | | 19,295 | | | (2,110) | | | 03/17 | | 30 years |
| | | Roseville, CA | | 0 | | | 1,807 | | | 6,082 | | | 0 | | | 1,807 | | | 6,082 | | | 7,889 | | | (762) | | | 09/17 | | 30 years |
| | | Fort Collins, CO | | 0 | | | 2,043 | | | 5,769 | | | 0 | | | 2,043 | | | 5,769 | | | 7,812 | | | (646) | | | 01/18 | | 30 years |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Early Childhood Education Centers | | | | | | | | | | | | | | | | | | |
| | | Lake Pleasant, AZ | | 0 | | | 986 | | | 3,524 | | | 902 | | | 986 | | | 4,426 | | | 5,412 | | | (973) | | | 03/13 | | 30 years |
| | | Goodyear, AZ | | 0 | | | 1,308 | | | 7,275 | | | 222 | | | 1,308 | | | 7,497 | | | 8,805 | | | (1,869) | | | 06/13 | | 30 years |
| | | Oklahoma City, OK | | 0 | | | 1,149 | | | 9,839 | | | 979 | | | 1,149 | | | 10,818 | | | 11,967 | | | (2,284) | | | 08/13 | | 40 years |
| | | Coppell, TX | | 0 | | | 1,547 | | | 10,168 | | | 635 | | | 1,547 | | | 10,803 | | | 12,350 | | | (2,422) | | | 09/13 | | 30 years |
| | | Las Vegas, NV | | 0 | | | 944 | | | 9,191 | | | 373 | | | 944 | | | 9,564 | | | 10,508 | | | (2,250) | | | 09/13 | | 30 years |
| | | Las Vegas, NV | | 0 | | | 985 | | | 6,721 | | | 466 | | | 985 | | | 7,187 | | | 8,172 | | | (1,717) | | | 09/13 | | 30 years |
| | | Mesa, AZ | | 0 | | | 762 | | | 6,987 | | | 1,501 | | | 762 | | | 8,488 | | | 9,250 | | | (2,033) | | | 01/14 | | 30 years |
| | | Gilbert, AZ | | 0 | | | 1,295 | | | 9,192 | | | 316 | | | 1,295 | | | 9,508 | | | 10,803 | | | (2,052) | | | 03/14 | | 30 years |
| | | Cedar Park, TX | | 0 | | | 1,520 | | | 10,500 | | | 418 | | | 1,278 | | | 11,160 | | | 12,438 | | | (2,189) | | | 07/14 | | 30 years |
| | | Thornton, CO | | 0 | | | 1,384 | | | 10,542 | | | 339 | | | 1,370 | | | 10,895 | | | 12,265 | | | (2,041) | | | 07/14 | | 30 years |
| | | Chicago, IL | | 0 | | | 1,294 | | | 4,375 | | | 19 | | | 1,294 | | | 4,394 | | | 5,688 | | | (611) | | | 07/14 | | 30 years |
| | | Centennial, CO | | 0 | | | 1,249 | | | 10,771 | | | 707 | | | 1,249 | | | 11,478 | | | 12,727 | | | (2,249) | | | 08/14 | | 30 years |
| | | McKinney, TX | | 0 | | | 1,812 | | | 12,419 | | | 1,841 | | | 1,812 | | | 14,260 | | | 16,072 | | | (2,956) | | | 11/14 | | 30 years |
| | | Ashburn, VA | | 0 | | | 2,289 | | | 14,748 | | | 0 | | | 2,289 | | | 14,748 | | | 17,037 | | | (2,592) | | | 06/15 | | 30 years |
EPR Properties Schedule III - Real Estate and Accumulated Depreciation December 31, 2017 (Dollars in thousands) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Initial cost | | Additions (Dispositions) (Impairments) Subsequent to acquisition | | Gross Amount at December 31, 2017 | | | | | | |
Location | | Debt | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Total | | Accumulated depreciation | | Date acquired | | Depreciation life |
Fort Worth, TX | | — |
| | 1,927 |
| | 2,077 |
| | — |
| | 1,927 |
| | 2,077 |
| | 4,004 |
| | (44 | ) | | 05/17 | | 30 years |
Berlin, CT | | — |
| | 494 |
| | 2,958 |
| | — |
| | 494 |
| | 2,958 |
| | 3,452 |
| | (57 | ) | | 06/17 | | 30 years |
| | | | | | | | | | | | | | | | | | | | |
Private Schools | | | | | | | | | | | | | | | | | | | | |
San Jose, CA | | — |
| | 9,966 |
| | 25,535 |
| | 2,813 |
| | 9,966 |
| | 28,348 |
| | 38,314 |
| | (2,776 | ) | | 12/13 | | 40 years |
Brooklyn, NY | | — |
| | — |
| | 46,440 |
| | 3,318 |
| | — |
| | 49,758 |
| | 49,758 |
| | (3,677 | ) | | 12/13 | | 40 years |
Chicago, IL | | — |
| | 3,057 |
| | 46,784 |
| | — |
| | 3,057 |
| | 46,784 |
| | 49,841 |
| | (2,924 | ) | | 02/14 | | 40 years |
McLean, VA | | — |
| | 12,792 |
| | 43,472 |
| | 3,170 |
| | 12,792 |
| | 46,642 |
| | 59,434 |
| | (1,535 | ) | | 06/15 | | 40 years |
Mission Viejo, CA | | — |
| | 1,378 |
| | 3,687 |
| | — |
| | 1,378 |
| | 3,687 |
| | 5,065 |
| | (164 | ) | | 09/16 | | 30 years |
| | | | | | | | | |
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Ski Properties | | | | | | | | | | | | | | | | | | | | |
Bellfontaine, OH | | — |
| | 5,108 |
| | 5,994 |
| | 8,441 |
| | 5,251 |
| | 14,292 |
| | 19,543 |
| | (3,456 | ) | | 11/05 | | 40 years |
Tannersville, PA | | — |
| | 34,940 |
| | 34,629 |
| | 4,377 |
| | 34,940 |
| | 39,006 |
| | 73,946 |
| | (11,781 | ) | | 09/13 | | 40 years |
McHenry, MD | | — |
| | 8,394 |
| | 15,910 |
| | 3,207 |
| | 9,708 |
| | 17,803 |
| | 27,511 |
| | (5,607 | ) | | 12/12 | | 40 years |
Wintergreen, VA | | — |
| | 5,739 |
| | 16,126 |
| | 635 |
| | 5,739 |
| | 16,761 |
| | 22,500 |
| | (2,703 | ) | | 02/15 | | 40 years |
Northstar, CA | | — |
| | 48,178 |
| | 88,532 |
| | — |
| | 48,178 |
| | 88,532 |
| | 136,710 |
| | (4,768 | ) | | 04/17 | | 40 years |
Northstar, CA | | — |
| | 7,827 |
| | 18,112 |
| | — |
| | 7,827 |
| | 18,112 |
| | 25,939 |
| | (388 | ) | | 04/17 | | 40 years |
| | | | | | | | | | | | | | | | | | | | |
Waterparks | | | | | | | | | | | | | | | | | | | | |
Tannersville, PA | | — |
| | — |
| | 120,354 |
| | 1,615 |
| | — |
| | 121,969 |
| | 121,969 |
| | (7,310 | ) | | 05/15 | | 40 years |
Powells Point, NC | | — |
| | 5,284 |
| | 39,516 |
| | 81 |
| | 5,284 |
| | 39,597 |
| | 44,881 |
| | (527 | ) | | 10/16 | | 40 years |
Corfu, NY | | — |
| | 5,112 |
| | 43,637 |
| | — |
| | 5,112 |
| | 43,637 |
| | 48,749 |
| | (1,545 | ) | | 04/17 | | 30 years |
Oklahoma City, OK | | — |
| | 7,976 |
| | 17,624 |
| | — |
| | 7,976 |
| | 17,624 |
| | 25,600 |
| | (546 | ) | | 04/17 | | 30 years |
Hot Springs, AR | | — |
| | 3,351 |
| | 4,967 |
| | — |
| | 3,351 |
| | 4,967 |
| | 8,318 |
| | (153 | ) | | 04/17 | | 30 years |
Riviera Beach, FL | | — |
| | 17,450 |
| | 29,713 |
| | — |
| | 17,450 |
| | 29,713 |
| | 47,163 |
| | (925 | ) | | 04/17 | | 30 years |
Oklahoma City, OK | | — |
| | 1,423 |
| | 18,097 |
| | — |
| | 1,423 |
| | 18,097 |
| | 19,520 |
| | (580 | ) | | 04/17 | | 30 years |
Palm Springs, CA | | — |
| | 4,109 |
| | — |
| | — |
| | 4,109 |
| | — |
| | 4,109 |
| | — |
| | 04/17 | | n/a |
Springs, TX | | — |
| | 18,776 |
| | 31,402 |
| | — |
| | 18,776 |
| | 31,402 |
| | 50,178 |
| | (1,000 | ) | | 04/17 | | 30 years |
Glendale, AZ | | — |
| | — |
| | 20,514 |
| | 2,969 |
| | — |
| | 23,483 |
| | 23,483 |
| | (786 | ) | | 04/17 | | 30 years |
Kapolei, HI | | — |
| | — |
| | 8,351 |
| | 1,542 |
| | — |
| | 9,893 |
| | 9,893 |
| | (302 | ) | | 04/17 | | 30 years |
Federal Way, WA | | — |
| | — |
| | 13,949 |
| | (63 | ) | | — |
| | 13,886 |
| | 13,886 |
| | (463 | ) | | 04/17 | | 30 years |
Colony, TX | | — |
| | — |
| | 7,617 |
| | (567 | ) | | — |
| | 7,050 |
| | 7,050 |
| | (229 | ) | | 04/17 | | 30 years |
Garland, TX | | — |
| | — |
| | 5,601 |
| | 389 |
| | — |
| | 5,990 |
| | 5,990 |
| | (194 | ) | | 04/17 | | 30 years |
Santa Monica, CA | | — |
| | — |
| | 13,874 |
| | 15,717 |
| | — |
| | 29,591 |
| | 29,591 |
| | (1,028 | ) | | 04/17 | | 30 years |
Concord, CA | | — |
| | — |
| | 9,808 |
| | 5,787 |
| | — |
| | 15,595 |
| | 15,595 |
| | (498 | ) | | 04/17 | | 30 years |
| | | | | | | | | | | | | | | | | | | | |
Golf Entertainment Complexes | | | | | | | | | | | | | | | | | | | | |
Colony, TX | | — |
| | 4,004 |
| | 13,665 |
| | (240 | ) | | 4,004 |
| | 13,425 |
| | 17,429 |
| | (1,343 | ) | | 12/12 | | 40 years |
Allen, TX | | — |
| | — |
| | 10,007 |
| | 1,151 |
| | — |
| | 11,158 |
| | 11,158 |
| | (2,164 | ) | | 02/12 | | 29 years |
Dallas, TX | | — |
| | — |
| | 10,007 |
| | 1,771 |
| | — |
| | 11,778 |
| | 11,778 |
| | (2,178 | ) | | 02/12 | | 30 years |
Houston, TX | | — |
| | — |
| | 12,403 |
| | 394 |
| | — |
| | 12,797 |
| | 12,797 |
| | (1,675 | ) | | 09/12 | | 40 years |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Initial cost | | Additions (Dispositions) (Impairments) Subsequent to acquisition | | Gross Amount at December 31, 2020 | | | | | | |
| | | Location | | Debt | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Total | | Accumulated depreciation | | Date acquired | | Depreciation life |
| | | West Chester, OH | | 0 | | | 1,807 | | | 12,913 | | | 455 | | | 1,807 | | | 13,368 | | | 15,175 | | | (2,087) | | | 07/15 | | 30 years |
| | | Ellisville, MO | | 0 | | | 2,465 | | | 15,063 | | | 0 | | | 2,465 | | | 15,063 | | | 17,528 | | | (2,060) | | | 07/15 | | 30 years |
| | | Chanhassen, MN | | 0 | | | 2,603 | | | 15,613 | | | 523 | | | 2,603 | | | 16,136 | | | 18,739 | | | (2,360) | | | 08/15 | | 30 years |
| | | Maple Grove, MN | | 0 | | | 3,743 | | | 14,927 | | | 561 | | | 3,743 | | | 15,488 | | | 19,231 | | | (2,976) | | | 08/15 | | 30 years |
| | | Carmel, IN | | 0 | | | 1,567 | | | 12,854 | | | 366 | | | 1,561 | | | 13,226 | | | 14,787 | | | (2,153) | | | 09/15 | | 30 years |
| | | Fishers, IN | | 0 | | | 1,226 | | | 13,144 | | | 832 | | | 1,226 | | | 13,976 | | | 15,202 | | | (1,714) | | | 12/15 | | 30 years |
| | | Westerville, OH | | 0 | | | 2,988 | | | 14,339 | | | 362 | | | 2,988 | | | 14,701 | | | 17,689 | | | (2,134) | | | 04/16 | | 30 years |
| | | Las Vegas, NV | | 0 | | | 1,476 | | | 14,422 | | | (1,287) | | | 1,476 | | | 13,135 | | | 14,611 | | | (1,998) | | | 06/16 | | 30 years |
| | | Louisville, KY | | 0 | | | 377 | | | 1,526 | | | 0 | | | 377 | | | 1,526 | | | 1,903 | | | (225) | | | 08/16 | | 30 years |
| | | Louisville, KY | | 0 | | | 216 | | | 1,006 | | | 0 | | | 216 | | | 1,006 | | | 1,222 | | | (148) | | | 08/16 | | 30 years |
| | | Cheshire, CT | | 0 | | | 420 | | | 3,650 | | | 0 | | | 420 | | | 3,650 | | | 4,070 | | | (477) | | | 11/16 | | 30 years |
| | | Edina, MN | | 0 | | | 1,235 | | | 5,493 | | | (323) | | | 1,235 | | | 5,170 | | | 6,405 | | | (597) | | | 11/16 | | 30 years |
| | | Eagan, MN | | 0 | | | 783 | | | 4,833 | | | (286) | | | 783 | | | 4,547 | | | 5,330 | | | (609) | | | 11/16 | | 30 years |
| | | Louisville, KY | | 0 | | | 481 | | | 2,050 | | | 0 | | | 481 | | | 2,050 | | | 2,531 | | | (279) | | | 12/16 | | 30 years |
| | | Bala Cynwyd, PA | | 0 | | | 1,785 | | | 3,759 | | | 0 | | | 1,785 | | | 3,759 | | | 5,544 | | | (512) | | | 12/16 | | 30 years |
| | | Schaumburg, IL | | 0 | | | 642 | | | 4,962 | | | 0 | | | 642 | | | 4,962 | | | 5,604 | | | (492) | | | 12/16 | | 30 years |
| | | Kennesaw, GA | | 0 | | | 690 | | | 844 | | | 0 | | | 690 | | | 844 | | | 1,534 | | | (113) | | | 01/17 | | 30 years |
| | | Charlotte, NC | | 0 | | | 1,200 | | | 2,557 | | | 0 | | | 1,200 | | | 2,557 | | | 3,757 | | | (233) | | | 01/17 | | 35 years |
| | | Charlotte, NC | | 0 | | | 2,501 | | | 2,079 | | | 0 | | | 2,501 | | | 2,079 | | | 4,580 | | | (190) | | | 01/17 | | 35 years |
| | | Richardson, TX | | 0 | | | 474 | | | 2,046 | | | 0 | | | 474 | | | 2,046 | | | 2,520 | | | (195) | | | 01/17 | | 35 years |
| | | Frisco, TX | | 0 | | | 999 | | | 3,064 | | | 0 | | | 999 | | | 3,064 | | | 4,063 | | | (286) | | | 01/17 | | 35 years |
| | | Allen, TX | | 0 | | | 910 | | | 3,719 | | | 0 | | | 910 | | | 3,719 | | | 4,629 | | | (355) | | | 01/17 | | 35 years |
| | | Southlake, TX | | 0 | | | 920 | | | 2,766 | | | 0 | | | 920 | | | 2,766 | | | 3,686 | | | (263) | | | 01/17 | | 35 years |
| | | Lewis Center, OH | | 0 | | | 410 | | | 4,285 | | | 0 | | | 410 | | | 4,285 | | | 4,695 | | | (379) | | | 01/17 | | 35 years |
| | | Dublin, OH | | 0 | | | 581 | | | 4,223 | | | 0 | | | 581 | | | 4,223 | | | 4,804 | | | (372) | | | 01/17 | | 35 years |
| | | Plano, TX | | 0 | | | 400 | | | 2,647 | | | 0 | | | 400 | | | 2,647 | | | 3,047 | | | (258) | | | 01/17 | | 35 years |
| | | Carrollton, TX | | 0 | | | 329 | | | 1,389 | | | 0 | | | 329 | | | 1,389 | | | 1,718 | | | (139) | | | 01/17 | | 35 years |
| | | Davenport, FL | | 0 | | | 3,000 | | | 5,877 | | | 0 | | | 3,000 | | | 5,877 | | | 8,877 | | | (538) | | | 01/17 | | 35 years |
| | | Tallahassee, FL | | 0 | | | 952 | | | 3,205 | | | 0 | | | 952 | | | 3,205 | | | 4,157 | | | (312) | | | 01/17 | | 35 years |
| | | Sunrise, FL | | 0 | | | 1,400 | | | 1,856 | | | 0 | | | 1,400 | | | 1,856 | | | 3,256 | | | (175) | | | 01/17 | | 35 years |
| | | Chaska, MN | | 0 | | | 328 | | | 6,140 | | | 0 | | | 328 | | | 6,140 | | | 6,468 | | | (539) | | | 01/17 | | 35 years |
| | | Loretto, MN | | 0 | | | 286 | | | 3,511 | | | 0 | | | 286 | | | 3,511 | | | 3,797 | | | (319) | | | 01/17 | | 35 years |
| | | Minneapolis, MN | | 0 | | | 920 | | | 3,700 | | | 0 | | | 920 | | | 3,700 | | | 4,620 | | | (326) | | | 01/17 | | 35 years |
| | | Wayzata, MN | | 0 | | | 810 | | | 1,962 | | | 0 | | | 810 | | | 1,962 | | | 2,772 | | | (181) | | | 01/17 | | 35 years |
| | | Plymouth, MN | | 0 | | | 1,563 | | | 4,905 | | | 0 | | | 1,563 | | | 4,905 | | | 6,468 | | | (452) | | | 01/17 | | 35 years |
| | | Maple Grove, MN | | 0 | | | 951 | | | 3,291 | | | 0 | | | 951 | | | 3,291 | | | 4,242 | | | (298) | | | 01/17 | | 35 years |
| | | Chula Vista, CA | | 0 | | | 210 | | | 2,186 | | | 0 | | | 210 | | | 2,186 | | | 2,396 | | | (216) | | | 01/17 | | 35 years |
| | | Lincolnshire, IL | | 0 | | | 1,006 | | | 4,799 | | | 0 | | | 1,006 | | | 4,799 | | | 5,805 | | | (522) | | | 02/17 | | 30 years |
| | | New Berlin, WI | | 0 | | | 368 | | | 1,704 | | | 0 | | | 368 | | | 1,704 | | | 2,072 | | | (222) | | | 02/17 | | 30 years |
| | | Oak Creek, WI | | 0 | | | 283 | | | 1,690 | | | 0 | | | 283 | | | 1,690 | | | 1,973 | | | (221) | | | 02/17 | | 30 years |
| | | Minnetonka, MN | | 0 | | | 911 | | | 4,833 | | | 659 | | | 931 | | | 5,472 | | | 6,403 | | | (689) | | | 03/17 | | 30 years |
| | | Berlin, CT | | 0 | | | 494 | | | 2,958 | | | 0 | | | 494 | | | 2,958 | | | 3,452 | | | (353) | | | 06/17 | | 30 years |
| | | Portland, OR | | 0 | | | 2,604 | | | 585 | | | 0 | | | 2,604 | | | 585 | | | 3,189 | | | (58) | | | 01/18 | | 35 years |
| | | Orlando, FL | | 0 | | | 955 | | | 4,273 | | | 0 | | | 955 | | | 4,273 | | | 5,228 | | | (374) | | | 02/18 | | 35 years |
| | | McKinney, TX | | 0 | | | 1,233 | | | 4,447 | | | 0 | | | 1,233 | | | 4,447 | | | 5,680 | | | (221) | | | 02/18 | | 30 years |
| | | Fort Mill, SC | | 0 | | | 629 | | | 3,957 | | | 0 | | | 629 | | | 3,957 | | | 4,586 | | | (280) | | | 09/18 | | 35 years |
| | | Indian Land, SC | | 0 | | | 907 | | | 3,784 | | | 0 | | | 907 | | | 3,784 | | | 4,691 | | | (285) | | | 09/18 | | 35 years |
EPR Properties Schedule III - Real Estate and Accumulated Depreciation December 31, 2017 (Dollars in thousands) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Initial cost | | Additions (Dispositions) (Impairments) Subsequent to acquisition | | Gross Amount at December 31, 2017 | | | | | | |
Location | | Debt | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Total | | Accumulated depreciation | | Date acquired | | Depreciation life |
Alpharetta, GA | | — |
| | 5,608 |
| | 16,616 |
| | — |
| | 5,608 |
| | 16,616 |
| | 22,224 |
| | (1,454 | ) | | 05/13 | | 40 years |
Scottsdale, AZ | | — |
| | — |
| | 16,942 |
| | — |
| | — |
| | 16,942 |
| | 16,942 |
| | (1,482 | ) | | 06/13 | | 40 years |
Spring, TX | | — |
| | 4,928 |
| | 14,522 |
| | — |
| | 4,928 |
| | 14,522 |
| | 19,450 |
| | (1,331 | ) | | 07/13 | | 40 years |
San Antonio, TX | | — |
| | — |
| | 15,976 |
| | — |
| | — |
| | 15,976 |
| | 15,976 |
| | (1,132 | ) | | 12/13 | | 40 years |
Tampa, FL | | — |
| | — |
| | 15,726 |
| | (67 | ) | | — |
| | 15,659 |
| | 15,659 |
| | (1,254 | ) | | 02/14 | | 40 years |
Gilbert, AZ | | — |
| | 4,735 |
| | 16,130 |
| | (267 | ) | | 4,735 |
| | 15,863 |
| | 20,598 |
| | (1,190 | ) | | 02/14 | | 40 years |
Overland Park, KS | | — |
| | 5,519 |
| | 17,330 |
| | — |
| | 5,519 |
| | 17,330 |
| | 22,849 |
| | (1,075 | ) | | 05/14 | | 40 years |
Centennial, CO | | — |
| | 3,013 |
| | 19,106 |
| | 403 |
| | 3,013 |
| | 19,509 |
| | 22,522 |
| | (1,132 | ) | | 06/14 | | 40 years |
Atlanta, GA | | — |
| | 8,143 |
| | 17,289 |
| | — |
| | 8,143 |
| | 17,289 |
| | 25,432 |
| | (1,045 | ) | | 06/14 | | 40 years |
Ashburn VA | | — |
| | — |
| | 16,873 |
| | — |
| | — |
| | 16,873 |
| | 16,873 |
| | (984 | ) | | 06/14 | | 40 years |
Naperville, IL | | — |
| | 8,824 |
| | 20,279 |
| | (665 | ) | | 8,824 |
| | 19,614 |
| | 28,438 |
| | (1,144 | ) | | 08/14 | | 40 years |
Oklahoma City, OK | | — |
| | 3,086 |
| | 16,421 |
| | (252 | ) | | 3,086 |
| | 16,169 |
| | 19,255 |
| | (1,011 | ) | | 09/14 | | 40 years |
Webster, TX | | — |
| | 5,631 |
| | 17,732 |
| | 1,220 |
| | 5,631 |
| | 18,952 |
| | 24,583 |
| | (1,005 | ) | | 11/14 | | 40 years |
Virginia Beach, VA | | — |
| | 6,948 |
| | 18,715 |
| | 296 |
| | 6,948 |
| | 19,011 |
| | 25,959 |
| | (947 | ) | | 12/14 | | 40 years |
Edison, NJ | | — |
| | — |
| | 22,792 |
| | 1,422 |
| | — |
| | 24,214 |
| | 24,214 |
| | (600 | ) | | 04/15 | | 40 years |
Jacksonville, FL | | — |
| | 6,732 |
| | 21,823 |
| | (1,201 | ) | | 6,732 |
| | 20,622 |
| | 27,354 |
| | (629 | ) | | 09/15 | | 40 years |
Roseville, CA | | — |
| | 6,868 |
| | 23,959 |
| | (1,928 | ) | | 6,868 |
| | 22,031 |
| | 28,899 |
| | (712 | ) | | 10/15 | | 30 years |
Portland, OR | | — |
| | — |
| | 23,466 |
| | (541 | ) | | — |
| | 22,925 |
| | 22,925 |
| | (799 | ) | | 11/15 | | 40 years |
Orlando, FL | | — |
| | 8,586 |
| | 22,493 |
| | — |
| | 8,586 |
| | 22,493 |
| | 31,079 |
| | (141 | ) | | 01/16 | | 40 years |
Charlotte, NC | | — |
| | 4,676 |
| | 21,422 |
| | — |
| | 4,676 |
| | 21,422 |
| | 26,098 |
| | (312 | ) | | 04/16 | | 40 years |
Fort Worth, TX | | — |
| | 4,674 |
| | 17,537 |
| | — |
| | 4,674 |
| | 17,537 |
| | 22,211 |
| | (292 | ) | | 08/16 | | 40 years |
Nashville, TN | | — |
| | — |
| | 26,685 |
| | — |
| | — |
| | 26,685 |
| | 26,685 |
| | (222 | ) | | 12/16 | | 40 years |
Huntsville, AL | | — |
| | 53 |
| | 17,595 |
| | — |
| | 53 |
| | 17,595 |
| | 17,648 |
| | (84 | ) | | 08/17 | | 40 years |
| | | | | | | | | | | | | | | | | | | | |
Other Recreation | | | | | | | | | | | | | | | | | | | | |
Denver, CO | | — |
| | 753 |
| | 6,218 |
| | — |
| | 753 |
| | 6,218 |
| | 6,971 |
| | (190 | ) | | 02/17 | | 30 years |
Olathe, KS | | — |
| | 2,417 |
| | 16,878 |
| | — |
| | 2,417 |
| | 16,878 |
| | 19,295 |
| | (422 | ) | | 03/17 | | 30 years |
Fort Worth, TX | | — |
| | 824 |
| | 7,066 |
| | — |
| | 824 |
| | 7,066 |
| | 7,890 |
| | (177 | ) | | 03/17 | | 30 years |
Tampa, FL | | — |
| | — |
| | 8,665 |
| | — |
| | — |
| | 8,665 |
| | 8,665 |
| | (96 | ) | | 08/17 | | 30 years |
Rosville, CA | | — |
| | 1,807 |
| | 6,082 |
| | — |
| | 1,807 |
| | 6,082 |
| | 7,889 |
| | (59 | ) | | 09/17 | | 30 years |
Fort Lauderdale, FL | | — |
| | — |
| | 10,816 |
| | — |
| | — |
| | 10,816 |
| | 10,816 |
| | (59 | ) | | 10/17 | | 30 years |
| | | | | | | | | |
| |
| |
| |
| | | | |
Other | | | | | | | | | | | | | | | | | | | | |
Kiamesha Lake, NY | | — |
| | 155,658 |
| | — |
| | 1,075 |
| | 156,733 |
| | — |
| | 156,733 |
| | — |
| | 07/10 | | n/a |
| | | | | | | | | | | | | | | | | | | | |
Property under development | | — |
| | 257,629 |
| | — |
| | — |
| | 257,629 |
| | — |
| | 257,629 |
| | — |
| | n/a | | n/a |
Land held for development | | — |
| | 33,692 |
| | — |
| | — |
| | 33,692 |
| | — |
| | 33,692 |
| | — |
| | n/a | | n/a |
Senior unsecured notes payable and term loan | | 3,025,000 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | n/a | | n/a |
Less: deferred financing costs, net | | (32,852 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | | | |
Total | | $ | 3,028,827 |
| | $ | 1,399,877 |
| | $ | 3,815,207 |
| | $ | 421,802 |
| | $ | 1,400,126 |
| | $ | 4,236,760 |
| | $ | 5,636,886 |
| | $ | (741,334 | ) | | | | |
| | | | | | | | | |
|
| | | |
|
| | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Initial cost | | Additions (Dispositions) (Impairments) Subsequent to acquisition | | Gross Amount at December 31, 2020 | | | | | | |
| | | Location | | Debt | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Land | | Buildings, Equipment, Leasehold Interests & Improvements | | Total | | Accumulated depreciation | | Date acquired | | Depreciation life |
| | | Sicklerville, NJ | | 0 | | | 694 | | | 1,876 | | | 0 | | | 694 | | | 1,876 | | | 2,570 | | | (135) | | | 06/19 | | 30 years |
| | | Pennington, NJ | | 0 | | | 1,018 | | | 2,284 | | | 0 | | | 1,018 | | | 2,284 | | | 3,302 | | | (229) | | | 08/19 | | 24 years |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Private Schools | | | | | | | | | | | | | | | | | | | | |
| | | Chicago, IL | | 0 | | | 3,057 | | | 46,784 | | | 0 | | | 3,057 | | | 46,784 | | | 49,841 | | | (6,433) | | | 02/14 | | 40 years |
| | | Cumming, GA | | 0 | | | 500 | | | 6,892 | | | 0 | | | 500 | | | 6,892 | | | 7,392 | | | (685) | | | 01/17 | | 35 years |
| | | Cumming, GA | | 0 | | | 325 | | | 4,898 | | | 0 | | | 325 | | | 4,898 | | | 5,223 | | | (501) | | | 01/17 | | 35 years |
| | | Henderson, NV | | 0 | | | 1,400 | | | 6,914 | | | 0 | | | 1,400 | | | 6,914 | | | 8,314 | | | (670) | | | 01/17 | | 35 years |
| | | Atlanta, GA | | 0 | | | 2,001 | | | 5,989 | | | 0 | | | 2,001 | | | 5,989 | | | 7,990 | | | (525) | | | 01/17 | | 35 years |
| | | Pearland, TX | | 0 | | | 2,360 | | | 9,292 | | | 0 | | | 2,360 | | | 9,292 | | | 11,652 | | | (864) | | | 01/17 | | 35 years |
| | | Pearland, TX | | 0 | | | 372 | | | 2,568 | | | 0 | | | 372 | | | 2,568 | | | 2,940 | | | (235) | | | 01/17 | | 35 years |
| | | Palm Harbor, FL | | 0 | | | 1,490 | | | 1,400 | | | 0 | | | 1,490 | | | 1,400 | | | 2,890 | | | (136) | | | 01/17 | | 35 years |
| | | Mason, OH | | 0 | | | 975 | | | 11,243 | | | 0 | | | 975 | | | 11,243 | | | 12,218 | | | (985) | | | 01/17 | | 35 years |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Property under development | | 0 | | | 57,630 | | | 0 | | | 0 | | | 57,630 | | | 0 | | | 57,630 | | | 0 | | | n/a | | n/a |
| | | Land held for development | | 0 | | | 23,225 | | | 0 | | | 0 | | | 23,225 | | | 0 | | | 23,225 | | | 0 | | | n/a | | n/a |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Senior unsecured notes payable and term loan | | 3,705,000 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | n/a | | n/a |
| | | Less: deferred financing costs, net | | (35,552) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | |
| | | Total | | $ | 3,694,443 | | | $ | 1,344,707 | | | $ | 4,295,921 | | | $ | 353,615 | | | $ | 1,323,518 | | | $ | 4,670,726 | | | $ | 5,994,244 | | | $ | (1,062,087) | | | | | |
EPR Properties Schedule III - Real Estate and Accumulated Depreciation (continued) Reconciliation (Dollars in thousands) December 31, 2017 |
| | | |
| |
Real Estate: | |
Reconciliation: | |
Balance at beginning of the year | $ | 4,550,937 |
|
Acquisition and development of rental properties during the year | 1,257,263 |
|
Disposition of rental properties during the year | (171,314 | ) |
Balance at close of year | $ | 5,636,886 |
|
Accumulated Depreciation | |
Reconciliation: | |
Balance at beginning of the year | $ | 635,535 |
|
Depreciation during the year | 132,578 |
|
Disposition of rental properties during the year | (26,779 | ) |
Balance at close of year | $ | 741,334 |
|
EPR Properties
Schedule III - Real Estate and Accumulated Depreciation (continued)
Reconciliation
(Dollars in thousands)
December 31, 2020
| | | | | |
Real Estate Investments: | |
Reconciliation: | |
Balance at beginning of the year | $ | 6,251,398 | |
Acquisition and development of real estate investments during the year | 74,710 | |
Disposition of real estate investments during the year | (193,258) | |
Impairment of real estate investments during the year | (138,606) | |
| |
Balance at close of year | $ | 5,994,244 | |
Accumulated Depreciation: | |
Reconciliation: | |
Balance at beginning of the year | $ | 989,254 | |
Depreciation during the year | 164,256 | |
Disposition of real estate investments during the year | (23,465) | |
Impairment of real estate investments during the year | (67,958) | |
Balance at close of year | $ | 1,062,087 | |
See accompanying report of independent registered public accounting firm.
Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A.Controls and Procedures
Evaluation of disclosures controls and procedures
As of the end of the period covered by this report,December 31, 2020, 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 as of the end of the period covered by this report our disclosure controls and procedures were effective to ensureprovide 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 errorserror 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
Effective January 1, 2020, we adopted ASC 326, Financial Instruments - Credit Losses. Except for the enhancements to the Company's internal control over financial reporting in relation to our upcoming adoption of the new revenue recognitionthis standard, discussed below, 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 fourth 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.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control–Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2017.2020. KPMG LLP, the independent registered public accounting firm that audited the consolidated financial statements included in this Annual Report on Form 10-K, has issued a report on the effectiveness of our internal control over financial reporting, which is included in Item 8.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements, errors or fraud. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of or compliance with the policies or procedures may deteriorate.
During 2017, we made enhancements to the Company’s internal control over financial reporting in relation to our upcoming adoption of the new revenue recognition standard effective in the first quarter of 2018. We implemented or modified internal controls to address the monitoring of the adoption process, the evaluation analysis used in determining in-scope transactions and related disclosures required for the new standard.
Item 9B. Other Information
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The Company’s definitive Proxy Statement for its Annual Meeting of Shareholders to be held on June 1, 2018 (theon May 28, 2021 (the “Proxy Statement”), contains under the captions “Election of Trustees”, “Company Governance”, and “Executive Officers”, and “Section 16(a) Beneficial Ownership Reporting Compliance” the information required by Item 10 of this Annual Report on Form 10-K, which information is incorporated herein by this reference.
We have adopted a Code of Business Conduct and Ethics that applies to our Chief Executive Officer, Chief Financial Officer, and all other officers, employees and trustees. The Code of Business Conduct and Ethics may be viewed on our website at www.eprkc.com. Changes to and waivers granted with respect to the Code of Business Conduct and Ethics required to be disclosed pursuant to applicable rules and regulations will be posted on our website.
Item 11.Executive Compensation
The Proxy Statement contains under the captions “Election of Trustees”, “Executive Compensation”, and “Compensation Committee Report”, the information required by Item 11 of this Annual Report on Form 10-K, which information is incorporated herein by this reference.
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The Proxy Statement contains under the captions “Share Ownership” and “Equity Compensation Plan Information” the information required by Item 12 of this Annual Report on Form 10-K, which information is incorporated herein by this reference.
Item 13.Certain Relationships and Related Transactions, and Director Independence
The Proxy Statement contains under the captioncaptions “Transactions Between the Company and Trustees, Officers or their Affiliates”Affiliates,” “Election of Trustees” and “Additional Information Concerning the Board of Trustees” the information required by Item 13 of this Annual Report on Form 10-K, which information is incorporated herein by this reference.
Item 14.Principal Accounting Fees and Services
The Proxy Statement contains under the caption “Ratification of Appointment of Independent Registered Public Accounting Firm” the information required by Item 14 of this Annual Report on Form 10-K, which information is incorporated herein by this reference.
PART IV
Item 15.Exhibits and Financial Statement Schedules
(1) Financial Statements: See Part II, Item 8 hereof
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 20172020 and 20162019
Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income for the years ended December 31, 2017, 20162020, 2019 and 20152018
Consolidated Statements of Comprehensive Income for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Changes in Equity for the years ended December 31, 2017, 20162020, 2019 and 20152018
Consolidated Statements of Cash Flows for the years ended December 31, 2017, 20162020, 2019 and 20152018
Notes to Consolidated Financial Statements
| |
(2) | Financial Statement Schedules: See Part II, Item 8 hereof(2)Financial Statement Schedules: See Part II, Item 8 hereof |
Schedule II – Valuation and Qualifying Accounts
Schedule III – Real Estate and Accumulated Depreciation
(3)Exhibits
The Company has incorporated by reference certain exhibits as specified below pursuant to Rule 12b-32 under the Exchange Act.
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Exhibit No. | | Description |
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| | Purchase and Sale Agreement, dated November 2, 2016, by and among the Company, CNL Lifestyle Properties, Inc., CLP Partners LP, Ski Resort Holdings LLC and the other Sellers named therein, which is attached as Exhibit 2.1 to the Company's Form 8-K (Commission File No. 001-13561) filed on November 3, 2016, is hereby incorporated by reference as Exhibit 2.1 |
| | |
| | Composite of Amended and Restated Declaration of Trust of the Company as amended (inclusive of all amendments through May 12, 2016)June 1, 2020), which is attached as Exhibit 3.1 to the Company’sCompany's Form 10-Q (Commission File No. 001-13561) filed on August 4, 2016,6, 2020, is hereby incorporated by reference as Exhibit 3.1 |
| |
| | Articles Supplementary designating the powers, preferences and rights of the 5.750% Series C Cumulative Convertible Preferred Shares, which is attached as Exhibit 3.2 to the Company's Form 8-K (Commission File No. 001-13561) filed on December 21, 2006, is hereby incorporated by reference as Exhibit 3.2 |
| |
| | Articles Supplementary designating powers, preferences and rights of the 9.000% Series E Cumulative Convertible Preferred Shares, which is attached as Exhibit 3.1 to the Company's Form 8-K (Commission File No. 001-13561) filed on April 2, 2008, is hereby incorporated by reference as Exhibit 3.3 |
| |
| | Articles Supplementary designating the powers, preferences and rights of the 5.750% Series G Cumulative Redeemable Preferred Shares, which is attached as Exhibit 3.1 to the Company's Form 8-K (Commission File No. 001-13561) filed on November 30, 2017, is hereby incorporated by reference as Exhibit 3.4 |
| |
| | Amended and Restated Bylaws of the Company (inclusive of all amendments through March 20, 2017)May 30, 2019), which is attached as Exhibit 3.2 to the Company's Form 8-K (Commission File No. 001-13561) filed on March 21, 2017,May 30, 2019, is hereby incorporated by reference as Exhibit 3.5 |
| |
| | Form of share certificate for common shares of beneficial interest of the Company, which is attached as Exhibit 4.3 to the Company's Registration Statement on Form S-3ASR (Registration No. 333-35281), filed on June 3, 2013, is hereby incorporated by reference as Exhibit 4.1 |
| |
| | Form of 5.750% Series C Cumulative Convertible Preferred Shares Certificate, which is attached as Exhibit 4.1 to the Company's Form 8-K (Commission File No. 001-13561) filed on December 21, 2006, is hereby incorporated by reference as Exhibit 4.2 |
| |
| | Form of 9.000% Series E Cumulative Convertible Preferred Shares, which is attached as Exhibit 4.1 to the Company's Form 8-K (Commission File No. 001-13561) filed on April 2, 2008, is hereby incorporated by reference as Exhibit 4.3 |
| |
| | Form of 5.750% Series G Cumulative Redeemable Preferred Shares Certificate, which is attached as Exhibit 4.1 to the Company's Form 8-K (Commission File No. 001-13561) filed on November 30, 2017, is hereby incorporated by reference as Exhibit 4.4 |
| |
| | Indenture, dated June 30, 2010, by and among the Company, certain of its subsidiaries, and UMB Bank, n.a., as trustee (including the form of 5.750% Senior Notes due 2022 included as Exhibit A thereto), which is attached as Exhibit 4.1 to the Company's Form 8-K (Commission File No. 001-13561) filed on July 1, 2010, is hereby incorporated by reference as Exhibit 4.5 |
| |
| | Indenture, dated June 18, 2013, by and among the Company, certain of its subsidiaries, and U.S. Bank National Association, as trustee (including the form of 5.250% Senior Notes due 2023 included as Exhibit A thereto), which is attached as Exhibit 4.1 to the Company's Form 8-K (Commission File No. 001-13561) filed on June 18, 2013, is hereby incorporated by reference as Exhibit 4.64.5 |
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| | |
| | Indenture, dated March 16, 2015, by and among the Company, certain of its subsidiaries, and UMB Bank, n.a., as trustee (including the form of 4.500% Senior Notes due 2025 included as Exhibit A thereto), which is attached as Exhibit 4.1 to the Company's Form 8-K (Commission File No. 001-13561) filed on March 16, 2015, is hereby incorporated by reference as Exhibit 4.74.6 |
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| | Indenture, dated December 14, 2016, by and among the Company, certain of its subsidiaries, and UMB Bank, n.a., as trustee (including the form of 4.750% Senior Notes due 2026 included as Exhibit A thereto), which is attached as Exhibit 4.1 to the Company's Form 8-K (Commission File No. 001-13561) filed on December 14, 2016, is hereby incorporated by reference as Exhibit 4.84.7 |
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| | Indenture, dated May 23, 2017, by and among the Company, certain of its subsidiaries, and UMB Bank, n.a., as trustee (including the form of 4.500% Senior Notes due 2027 included as Exhibit A thereto), which is attached as Exhibit 4.1 to the Company's Form 8-K (Commission File No. 001-13561) filed on May 23, 2017, is hereby incorporated by reference as Exhibit 4.94.8 |
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| Indenture, dated April 16, 2018, by and between the Company and UMB Bank, n.a., as trustee (including the form of 4.950% Senior Notes due 2028 included as Exhibit A thereto), which is attached as Exhibit 4.1 to the Company's Form 8-K (Commission File No. 001-13561) filed on April 16, 2018, is hereby incorporated by reference as Exhibit 4.9 |
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| | | | | |
| Indenture, dated August 15, 2019, between the Company and UMB Bank, n.a., as trustee (including the form of 3.750% Senior Note due 2029 included as Exhibit A thereto), which is attached as Exhibit 4.1 to the Company's Form 8-K (Commission File No. 001-13561) filed on August 15, 2019, is hereby incorporated by reference as Exhibit 4.10 |
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| Note Purchase Agreement, dated August 1, 2016, by and among the Company and the purchasers named therein, which is attached as Exhibit 4.1 to the Company's Form 8-K (Commission File No. 001-13561) filed on August 3, 2016, is hereby incorporated by reference as Exhibit 4.104.11.1 |
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| | First Amendment to Note Purchase Agreement, dated September 27, 2017, by and among the Company and the purchasers named therein, which is attached as Exhibit 10.2 to the Company's Form 8-K (Commission File No. 001-13561) filed on September 27, 2017, is hereby incorporated as Exhibit 4.114.11.2 |
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| Second Amendment to Note Purchase Agreement, dated June 29, 2020, by and among the Company and the purchasers named therein, which is attached as Exhibit 10.2 to the Company's Form 10-Q (Commission File No. 001-13561) filed on August 6, 2020, is hereby incorporated by reference as Exhibit 4.11.3 |
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| Third Amendment to Note Purchase Agreement, dated December 24, 2020, by and among the Company and the purchasers named therein is attached hereto as Exhibit 4.11.4 |
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| Description of Securities Registered under Section 12 of the Exchange Act is attached hereto as Exhibit 4.12 |
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| Second Amended, Restated and Consolidated Credit Agreement, dated September 27, 2017, by and among the Company, as borrower, KeyBank National Association, as administrative agent, and the other agents and lenders party thereto, which is attached as Exhibit 10.1 to the Company's Form 8-K (Commission File No. 001-13561) filed on September 27, 2017, is hereby incorporated by reference as Exhibit 10.110.1.1 |
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| Amendment No. 1 to Second Amended, Restated and Consolidated Credit Agreement, dated as of June 29, 2020, by and among the Company, as borrower, KeyBank National Association, as administrative agent, and the other agents and lenders party thereto, which is attached as Exhibit 10.1 to the Company's Form 10-Q (Commission File No. 001-13561) filed on August 6, 2020, is hereby incorporated by reference as Exhibit 10.1.2 |
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| Amendment No. 2 to the Second Amended, Restated and Consolidated Credit Agreement, dated as of November 3, 2020, by and among the Company, as borrower, KeyBank National Association, as administrative agent, and the other agents and lenders party thereto is attached hereto as Exhibit 10.1.3 |
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| | Form of Indemnification Agreement entered into between the Company and each of its trustees and officers, which is attached as Exhibit 10.2 to the Company's Form 8-K (Commission File No. 001-13561) filed on May 14, 2007, is hereby incorporated by reference as Exhibit 10.2 |
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| | Deferred Compensation Plan for Non-Employee Trustees, which is attached as Exhibit 10.10 to Amendment No. 2, filed on November 5, 1997, to the Company's Registration Statement on Form S-11 (Registration No. 333-35281), is hereby incorporated by reference as Exhibit 10.3 |
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| | 2007 Equity Incentive Plan, as amended, which is attached as Exhibit 10.1 to the Company's Form 8-K (Commission File No. 001-13561) filed on May 15, 2013, is hereby incorporated by reference as Exhibit 10.4 |
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| | Form of 2007 Equity Incentive Plan Nonqualified Share Option Agreement for Employee Trustees, which is attached as Exhibit 10.2 to the Company's Registration Statement on Form S-8 (Registration No. 333-142831) filed on May 11, 2007, is hereby incorporated by reference as Exhibit 10.5 |
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| | Form of 2007 Equity Incentive Plan Nonqualified Share Option Agreement for Non-Employee Trustees, which is attached as Exhibit 10.3 to the Company's Registration Statement on Form S-8 (Registration No. 333-142831) filed on May 11, 2007, is hereby incorporated by reference as Exhibit 10.6 |
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| | Form of 2007 Equity Incentive Plan Restricted Shares Agreement for Employees, which is attached as Exhibit 10.4 to the Company's Registration Statement on Form S-8 (Registration No. 333-142831) filed on May 11, 2007, is hereby incorporated by reference as Exhibit 10.7 |
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| | Form of 2007 Equity Incentive Plan Restricted Shares Agreement for Non-Employee Trustees, which is attached as Exhibit 10.3 to the Company's Form 8-K (Commission File No. 001-13561) filed on May 20, 2009, is hereby incorporated by reference as Exhibit 10.8 |
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| | EPR Properties 2016 Equity Incentive Plan, which is attached as Exhibit 10.1 to the Company's Form 8-K (Commission File No. 001-13561) filed on May 12, 2016, is hereby incorporated by reference as Exhibit 10.9 |
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| | Form of 2016 Equity Incentive Plan Incentive and Nonqualified Share Option Award Agreement for Employees, which is attached as Exhibit 10.2 to the Company's Form 8-K (Commission File No. 001-13561) filed on May 12, 2016, is hereby incorporated by reference as Exhibit 10.10 |
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| | Form of 2016 Equity Incentive Plan Restricted Shares Award Agreement for Employees, which is attached as Exhibit 10.3 to the Company's Form 8-K (Commission File No. 001-13561) filed on May 12, 2016, is hereby incorporated by reference as Exhibit 10.11 |
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| | Form of 2016 Equity Incentive Plan Restricted Share Unit Award Agreement for Non-Employee Trustees, which is attached as Exhibit 10.4 to the Company's Form 8-K (Commission File No. 001-13561) filed on May 12, 2016, is hereby incorporated by reference as Exhibit 10.12 |
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| | Annual Performance-Based Incentive Plan, which is attached as Exhibit 10.1 to the Company's 8-K (Commission File No. 001-13561) filed on June 2, 2017, is hereby incorporated by reference as Exhibit 10.13 |
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| EPR Properties Employee Severance Plan (as amended June 1, 2018), which is attached as Exhibit 10.1 to the Company's Form 10-Q (Commission File No. 001-13561) filed on July 31, 2018, is hereby incorporated by reference as Exhibit 10.14 |
| Employment Agreement, dated May 13, 2015, |
| EPR Properties Employee Severance and Retirement Vesting Plan (effective July 31, 2020), which is attached as Exhibit 10.15 to the Company's Form 10-K (Commission File No. 001-13561) filed on February 25, 2020, is hereby incorporated by and between the Company and Gregory K. Silvers,reference as Exhibit 10.15 |
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| 2020 Long Term Incentive Plan, which is attached as Exhibit 10.1 to the Company's Form 8-K (Commission File No. 001-13561) filed on May 18, 2015,February 26, 2020 is hereby incorporated by reference as Exhibit 10.1410.16 |
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| | EmploymentForm of Performance Shares Awards Agreement dated May 13, 2015, by and betweenunder the Company and Mark A. Peterson,2020 Long Term Incentive Plan, which is attached as Exhibit 10.2 to the Company's Form 8-K (Commission File No. 001-13561) filed on May 18, 2015,February 26, 2020, is hereby incorporated by reference as Exhibit 10.1510.17 |
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| | EmploymentForm of Restricted Shares Award Agreement dated May 13, 2015, by and betweenunder the Company and Morgan G. Earnest II,2020 Long Term Incentive Plan, which is attached as Exhibit 10.3 to the Company's Form 8-K (Commission File No. 001-13561) filed on May 18, 2015,February 26, 2020, is hereby incorporated by reference as Exhibit 10.1610.18 |
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| | EmploymentRelease Agreement, dated May 13, 2015, by and between the Company and Craig L. Evans, which is attached as Exhibit 10.4 to the Company's Form 8-K (Commission File No. 001-13561) filed on May 18, 2015, is hereby incorporated by reference as Exhibit 10.17 |
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| | Employment Agreement, dated May 13, 2015,of December 31, 2020, by and between the Company and Michael L. Hirons which is attached as Exhibit 10.6 to the Company's Form 8-K (Commission File No. 001-13561) filed on May 18, 2015, is hereby incorporated by reference as Exhibit 10.19 |
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| | Joint Buyers Agreement, dated November 2, 2016, by and between the Company and Ski Resort Holdings LLC, which is attached as Exhibit 10.1 to the Company's Form 8-K (Commission File No. 001-13561) filed on November 3, 2016, is hereby incorporated by reference as Exhibit 10.20 |
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| | Computation of Ratio of Earnings to Fixed Charges is attached hereto as Exhibit 12.110.19 |
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| | Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends is attached hereto as Exhibit 12.2 |
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| | The list of the Company's Subsidiaries is attached hereto as Exhibit 21 |
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| The list of issuers and guarantor subsidiaries is attached hereto as Exhibit 22 |
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| | Consent of KPMG LLP is attached hereto as Exhibit 23 |
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| | Certification of Gregory K. Silvers pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 is attached hereto as Exhibit 31.1 |
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| | Certification of Mark A. Peterson pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 is attached hereto as Exhibit 31.2 |
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| | Certification by 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 |
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| | Certification by Chief Financial Officer pursuant to 18 USCU.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is attached hereto as Exhibit 32.2 |
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* Management contracts or compensatory plans |
PLEASE NOTE: Pursuant to the rules and regulations of the Securities and Exchange Commission, we have filed or incorporated by reference the agreements referenced above as exhibits to this Annual Report on Form 10-K. The agreements have been filed to provide investors with information regarding their respective terms. The agreements are not intended to provide any other factual information about the Company or its business or operations. In particular, the assertions embodied in any representations, warranties and covenants contained in the agreements may be subject to qualifications with respect to knowledge and materiality different from those applicable to investors and may be qualified by information in confidential disclosure schedules not included with the exhibits. These disclosure schedules may contain information that modifies, qualifies and creates exceptions to the representations, warranties and covenants set forth in the agreements. Moreover, certain representations, warranties and covenants in the agreements may have been used for the purpose of allocating risk between the parties, rather than establishing matters as facts. In addition, information concerning the subject matter of the representations, warranties and covenants may have changed after the date of the respective agreement, which subsequent information may or may not be fully reflected in the Company's public disclosures. Accordingly, investors should not rely on the representations, warranties and covenants in the agreements as characterizations of the actual state of facts about the Company or its business or operations on the date hereof.
Item 16.Form 10-K Summary
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
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| | EPR Properties |
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Dated: | February 28, 201825, 2021 | By | | /s/ Gregory K. Silvers |
| | | | Gregory K. Silvers, President and Chief Executive Officer (Principal Executive Officer)
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
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Signature and Title | | Date |
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/s/ Robert J. Druten | | February 28, 201825, 2021 |
Robert J. Druten, Chairman of the Board | | |
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/s/ Gregory K. Silvers | | February 28, 201825, 2021 |
Gregory K. Silvers, President, Chief Executive Officer (Principal (Principal Executive Officer) and Trustee
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/s/ Mark A. Peterson | | February 28, 201825, 2021 |
Mark A. Peterson, Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) | | |
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/s/ Tonya L. Mater | | February 28, 201825, 2021 |
Tonya L. Mater, Senior Vice President and Chief Accounting Officer (Principal Accounting Officer) | | |
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/s/ Thomas M. Bloch | | February 28, 201825, 2021 |
Thomas M. Bloch, Trustee | | |
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/s/ Barrett Brady | | February 28, 201825, 2021 |
Barrett Brady, Trustee | | |
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/s/ Peter C. Brown | | February 28, 201825, 2021 |
Peter C. Brown, Trustee | | |
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/s//s/ James B. Connor | | February 25, 2021 |
James B. Connor, Trustee | | |
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/s/ Jack A. Newman, Jr. | | February 28, 201825, 2021 |
Jack A. Newman, Jr., Trustee | | |
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/s//s/ Virginia E. Shanks | | February 25, 2021 |
Virginia E. Shanks, Trustee | | |
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/s/ Robin P. Sterneck | | February 28, 201825, 2021 |
Robin P. Sterneck, Trustee | | |