UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2022
or
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)
Maryland43-1790877
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
909 Walnut Street,
Suite 200
Kansas City, Missouri
64106
Kansas City,Missouri64106
(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:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common shares, par value $0.01 per shareEPRNew York Stock Exchange
5.75% Series C cumulative convertible preferred shares, par value $0.01 per shareEPR PrCNew York Stock Exchange
9.00% Series E cumulative convertible preferred shares, par value $0.01 per shareEPR PrENew York Stock Exchange
5.75% Series G cumulative redeemable preferred shares, par value $0.01 per shareEPR PrGNew York Stock Exchange

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


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  x☒    No  o☐


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“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerx☒Accelerated filero☐
Non-accelerated filer
o (Do not check if a smaller reporting company)
☐		Smaller reporting companyo☐
Emerging growth companyo☐
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. o☐


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


At November 7, 2017,May 4, 2022, there were 73,666,045 common74,969,613 common shares outstanding.




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

Factors that could materially and adversely affect us include, but are not limited to, the factors listed below:
Our previously completed transaction•Risks associated with CNL Lifestyle Properties, Inc. presents certain risks to our business, financial condition, resultsCOVID-19, or the future outbreak of operations and cash flows;any additional variants of COVID-19 or other highly infectious or contagious diseases;
•Global economic uncertainty and disruptions in financial markets;
•The impact of inflation on our customers and our results of operations;
•Reduction in discretionary spending by consumers;
Adverse changes in our credit ratings;
Fluctuations in interest rates;
The duration 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 cancelled;
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;
Risks relating to our tenants' exercise of purchase options or borrowers' exercise of prepayment options related to our education properties;
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;
•Adverse changes in our credit ratings;
•Fluctuations in interest rates;
•Defaults in the performance of lease terms by our tenants;
•Defaults by our customers and counterparties on their obligations owed to us;
•A borrower's bankruptcy or default;
•Our ability to renew maturing leases on terms comparable to prior leases and/or our ability to locate substitute lessees for these properties on economically favorable terms;
•Risks of operating in the experiential real estate industry;
•Our ability to compete effectively;
•Risks associated with three tenants representing a substantial portion of our lease revenues;
•The ability of our build-to-suit tenants to achieve sufficient operating results within expected time-frames and therefore have capacity to pay their agreed upon rent;
•Risks associated with our dependence on third-party managers to operate certain of our properties;
•Risks associated with our level of indebtedness;
•Risks associated with use of leverage to acquire properties;
•Financing arrangements that require lump-sum payments;
•Our ability to raise capital;
•The concentration and lack of diversification of our investment portfolio;
•Our continued qualification as a real estate investment trust for U.S. federal income tax purposes;purposes and related tax matters;
•The ability of our subsidiaries to satisfy their obligations;
•Financing arrangements that expose us to funding or purchaseand completion risks;

i

•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 consolidated financial statements;
•Fluctuations in the value of real estate income and investments;
•Risks relating to real estate ownership, leasing and development, including local conditions such as an
i

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


Our forward-looking statements represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Many of the factors that will determine these items are beyond our ability to control or predict. For further discussion of these factors see Item 1A - "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 20162021 filed with the Securities and Exchange Commission ("SEC") on March 1, 2017, as supplemented by Part II, Item 1A- "Risk Factors" in this Quarterly Report on Form 10-Q.February 23, 2022.


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





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

iii


PART I - FINANCIAL INFORMATION
Item 1.Financial Statements

EPR PROPERTIES
Consolidated Balance Sheets
(Dollars in thousands except share data)
 September 30, 2017 December 31, 2016
 (unaudited)  
Assets   
Rental properties, net of accumulated depreciation of $711,384 and $635,535 at September 30, 2017 and December 31, 2016, respectively$4,535,994
 $3,595,762
Land held for development33,674
 22,530
Property under development284,211
 297,110
Mortgage notes and related accrued interest receivable972,371
 613,978
Investment in a direct financing lease, net57,698
 102,698
Investment in joint ventures5,616
 5,972
Cash and cash equivalents11,412
 19,335
Restricted cash24,323
 9,744
Accounts receivable, net99,213
 98,939
Other assets108,498
 98,954
Total assets$6,133,010
 $4,865,022
Liabilities and Equity   
Liabilities:   
Accounts payable and accrued liabilities$140,582
 $119,758
Common dividends payable25,046
 20,367
Preferred dividends payable5,951
 5,951
Unearned rents and interest85,198
 47,420
Debt2,987,925
 2,485,625
Total liabilities3,244,702
 2,679,121
Equity:   
Common Shares, $.01 par value; 100,000,000 shares authorized; and 76,397,669 and 66,263,487 shares issued at September 30, 2017 and December 31, 2016, respectively764
 663
Preferred Shares, $.01 par value; 25,000,000 shares authorized:   
5,399,050 Series C convertible shares issued at September 30, 2017 and December 31, 2016; liquidation preference of $134,976,25054
 54
3,449,165 and 3,450,000 Series E convertible shares issued at September 30, 2017 and December 31, 2016, respectively; liquidation preference of $86,229,12534
 35
5,000,000 Series F shares issued at September 30, 2017 and December 31, 2016; liquidation preference of $125,000,00050
 50
Additional paid-in-capital3,420,867
 2,677,046
Treasury shares at cost: 2,732,736 and 2,616,406 common shares at September 30, 2017 and December 31, 2016, respectively(121,539) (113,172)
Accumulated other comprehensive income10,919
 7,734
Distributions in excess of net income(422,841) (386,509)
Total equity$2,888,308
 $2,185,901
Total liabilities and equity$6,133,010
 $4,865,022
EPR PROPERTIES
Consolidated Balance Sheets
(Dollars in thousands except share data)
 March 31, 2022December 31, 2021
(unaudited)
Assets
Real estate investments, net of accumulated depreciation of $1,206,317 and $1,167,734 at March 31, 2022 and December 31, 2021, respectively$4,738,887 $4,713,091 
Land held for development20,168 20,168 
Property under development10,885 42,362 
Operating lease right-of-use assets177,174 180,808 
Mortgage notes and related accrued interest receivable370,021 370,159 
Investment in joint ventures36,564 36,670 
Cash and cash equivalents323,761 288,822 
Restricted cash2,956 1,079 
Accounts receivable60,704 78,073 
Other assets76,950 69,918 
Total assets$5,818,070 $5,801,150 
Liabilities and Equity
Liabilities:
Accounts payable and accrued liabilities$92,999 $73,462 
Operating lease liabilities215,112 218,795 
Common dividends payable20,946 18,896 
Preferred dividends payable6,033 6,034 
Unearned rents and interest76,013 61,559 
Debt2,805,853 2,804,365 
Total liabilities3,216,956 3,183,111 
Equity:
Common Shares, $0.01 par value; 100,000,000 shares authorized; and 82,485,670 and 82,225,061 shares issued at March 31, 2022 and December 31, 2021, respectively825 822 
Preferred Shares, $0.01 par value; 25,000,000 shares authorized:
5,392,916 Series C convertible shares issued at March 31, 2022 and December 31, 2021; liquidation preference of $134,822,90054 54 
3,447,381 Series E convertible shares issued at March 31, 2022 and December 31, 2021; liquidation preference of $86,184,52534 34 
6,000,000 Series G shares issued at March 31, 2022 and December 31, 2021; liquidation preference of $150,000,00060 60 
Additional paid-in-capital3,886,240 3,876,817 
Treasury shares at cost: 7,517,572 and 7,416,746 common shares at March 31, 2022 and December 31, 2021, respectively(269,608)(264,817)
Accumulated other comprehensive income10,471 9,955 
Distributions in excess of net income(1,026,962)(1,004,886)
Total equity$2,601,114 $2,618,039 
Total liabilities and equity$5,818,070 $5,801,150 
See accompanying notes to consolidated financial statements.

1
EPR PROPERTIES
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands except per share data)
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Rental revenue$122,827
 $102,282
 $349,333
 $292,115
Tenant reimbursements3,734
 3,821
 11,424
 11,577
Other income522
 2,476
 2,518
 5,812
Mortgage and other financing income24,314
 17,031
 65,016
 52,907
Total revenue151,397
 125,610
 428,291
 362,411
Property operating expense6,340
 5,626
 18,762
 16,687
Other expense—
 —
 —
 5
General and administrative expense12,070
 9,091
 33,787
 27,309
Costs associated with loan refinancing or payoff1,477
 14
 1,491
 905
Gain on early extinguishment of debt—
 —
 (977) —
Interest expense, net34,194
 24,265
 97,853
 70,310
Transaction costs113
 2,947
 388
 4,881
Impairment charges—
 —
 10,195
 —
Depreciation and amortization34,694
 27,601
 95,919
 79,222
Income before equity in income from joint ventures and other items62,509
 56,066
 170,873
 163,092
Equity in income from joint ventures35
 203
 86
 501
Gain on sale of real estate997
 1,615
 28,462
 3,885
Income before income taxes63,541
 57,884
 199,421
 167,478
Income tax expense(587) (358) (2,016) (637)
Net income62,954
 57,526
 197,405
 166,841
Preferred dividend requirements(5,951) (5,951) (17,855) (17,855)
Net income available to common shareholders of EPR Properties$57,003
 $51,575
 $179,550
 $148,986
Per share data attributable to EPR Properties common shareholders:       
Basic earnings per share data:       
Net income available to common shareholders$0.77
 $0.81
 $2.55
 $2.35
Diluted earnings per share data:       
Net income available to common shareholders$0.77
 $0.81
 $2.55
 $2.35
Shares used for computation (in thousands):       
Basic73,663
 63,627
 70,320
 63,296
Diluted73,724
 63,747
 70,385
 63,393

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

2
EPR PROPERTIES
Consolidated Statements of Comprehensive Income
(Unaudited)
(Dollars in thousands)
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Net income$62,954
 $57,526
 $197,405
 $166,841
Other comprehensive income (loss):       
Foreign currency translation adjustment7,317
 (2,802) 13,539
 9,340
Change in net unrealized (loss) gain on derivatives(6,096) 4,015
 (10,354) (10,264)
Comprehensive income$64,175
 $58,739
 $200,590
 $165,917


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

3

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


4

EPR PROPERTIES
Consolidated Statements of Changes in Equity
Nine Months Ended September 30, 2017
(Unaudited)
(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
 Total
 Shares Par Shares Par  
Balance at December 31, 201666,263,487
 $663
 13,849,050
 $139
 $2,677,046
 $(113,172) $7,734
 $(386,509) $2,185,901
Restricted share units issued to Trustees19,030
 —
 —
 —
 —
 —
 —
 —
 —
Issuance of nonvested shares, net295,754
 3
 —
 —
 5,585
 (90) —
 —
 5,498
Purchase of common shares for vesting—
 —
 —
 —
 —
 (6,729) —
 —
 (6,729)
Amortization of nonvested shares and restricted share units—
 —
 —
 —
 10,038
 —
 —
 —
 10,038
Share option expense—
 —
 —
 —
 528
 —
 —
 —
 528
Foreign currency translation adjustment—
 —
 —
 —
 —
 —
 13,539
 —
 13,539
Change in unrealized gain (loss) on derivatives—
 —
 —
 —
 —
 —
 (10,354) —
 (10,354)
Net income—
 —
 —
 —
 —
 —
 —
 197,405
 197,405
Issuances of common shares939,472
 9
 —
 —
 68,739
 —
 —
 —
 68,748
Issuances of common shares for acquisition8,851,264
 89
 —
 —
 657,384
 —
 —
 —
 657,473
Conversion of Series E Convertible Preferred shares to common shares381
 —
 (835) (1) —
 —
 —
 —
 (1)
Stock option exercises, net28,281
 —
 —
 —
 1,547
 (1,548) —
 —
 (1)
Dividends to common and preferred shareholders—
 —
 —
 —
 —
 —
 —
 (233,737) (233,737)
Balance at September 30, 201776,397,669
 $764
 13,848,215
 $138
 $3,420,867
 $(121,539) $10,919
 $(422,841) $2,888,308
EPR PROPERTIES

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

5
EPR PROPERTIES
Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
 Nine Months Ended September 30,
 2017 2016
Operating activities:   
Net income$197,405
 $166,841
Adjustments to reconcile net income to net cash provided by operating activities:   
Gain from early extinguishment of debt(977) —
Impairment charges10,195
 —
Gain on sale of real estate(28,462) (3,885)
Gain on insurance recovery(606) (3,837)
Deferred income tax expense (benefit)911
 (664)
Costs associated with loan refinancing or payoff1,491
 905
Equity in income from joint ventures(86) (501)
Distributions from joint ventures442
 511
Depreciation and amortization95,919
 79,222
Amortization of deferred financing costs4,579
 3,522
Amortization of above and below market leases, net and tenant improvements(41) 138
Share-based compensation expense to management and Trustees10,566
 8,282
Increase in restricted cash(744) (1,463)
Decrease (increase) in mortgage notes accrued interest receivable875
 (188)
Decrease (increase) in accounts receivable, net10,220
 (19,066)
Increase in direct financing lease receivable(1,003) (2,503)
Increase in other assets(2,225) (5,193)
Decrease in accounts payable and accrued liabilities(13,969) (5,260)
Increase (decrease) in unearned rents and interest15,818
 (1,088)
Net cash provided by operating activities300,308
 215,773
Investing activities:   
Acquisition of and investments in rental properties and other assets(354,277) (177,362)
Proceeds from sale of real estate136,467
 20,651
Investment in mortgage notes receivable(130,076) (80,786)
Proceeds from mortgage note receivable paydown16,608
 63,876
Investment in promissory notes receivable(1,868) (66)
Proceeds from promissory note receivable paydown1,599
 —
Proceeds from sale of infrastructure related to issuance of revenue bonds—
 43,462
Proceeds from insurance recovery579
 3,036
Proceeds from sale of investment in a direct financing lease, net—
 825
Additions to properties under development(304,084) (288,887)
Net cash used by investing activities(635,052) (415,251)
Financing activities:   
Proceeds from debt facilities and senior unsecured notes1,175,000
 854,360
Principal payments on debt(667,091) (587,109)
Deferred financing fees paid(14,207) (3,047)
Costs associated with loan refinancing or payoff (cash portion)(7) (482)
Net proceeds from issuance of common shares68,552
 142,452
Impact of stock option exercises, net—
 (717)
Purchase of common shares for treasury for vesting(6,729) (4,211)
Dividends paid to shareholders(228,861) (198,678)
Net cash provided by financing activities326,657
 202,568
Effect of exchange rate changes on cash164
 (62)
Net (decrease) increase in cash and cash equivalents(7,923) 3,028
Cash and cash equivalents at beginning of the period19,335
 4,283
Cash and cash equivalents at end of the period$11,412
 $7,311
Supplemental information continued on next page.   


EPR PROPERTIES
Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
Continued from previous page.
 Nine Months Ended September 30,
 2017 2016
Supplemental schedule of non-cash activity:   
Transfer of property under development to rental properties$301,612
 $364,234
Issuance of nonvested shares and restricted share units at fair value, including nonvested shares issued for payment of bonuses$23,893
 $19,626
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
 $—
Supplemental disclosure of cash flow information:   
Cash paid during the period for interest$103,702
 $83,307
Cash paid during the period for income taxes$1,253
 $1,380
Interest cost capitalized$7,833
 $7,983
Decrease in accrued capital expenditures$7,137
 $5,621
See accompanying notes to consolidated financial statements.



EPR PROPERTIES
Notes to Consolidated Financial Statements (Unaudited)



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 diversified Experiential net lease REIT specializing in select market segments primarily related to Entertainment, Educationenduring experiential properties. The Company's underwriting is centered on key industry and Recreation.property cash flow criteria, as well as the credit metrics of the Company's tenants and customers. The Company’s properties are located in the United States and Canada.


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


Basis of Presentation
The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. In addition, operating results for the ninethree month period ended September 30, 2017March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.2022. Amounts as of December 31, 2021 have been derived from the audited Consolidated Financial Statements as of that date and should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (SEC) on February 23, 2022.


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


The consolidated balance sheetCompany’s variable interests in VIEs currently are in the form of equity ownership and loans provided by the Company to a VIE or other partner. The Company examines specific criteria and uses its judgment when determining if the Company is the primary beneficiary of a VIE. The primary beneficiary generally is defined as the party with the controlling financial interest. Consideration of various factors include, but are not limited to, the Company’s ability to direct the activities that most significantly impact the entity’s economic performance and its obligation to absorb losses from or right to receive benefits of the VIE that could potentially be significant to the VIE. As of March 31, 2022 and December 31, 2016 has been derived2021, the Company does not have any investments in consolidated VIEs.

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

6

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

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

•The Company continued to recognize revenue on a cash basis for certain tenants including American-Multi Cinema, Inc. (AMC) and Regal Cinemas (Regal), a subsidiary of Cineworld Group.
•As of March 31, 2022, the Company has deferred amounts due from tenants of approximately $17.4 million that are booked as receivables. Additionally, the Company has amounts due from tenants that were not booked as receivables because the full amounts were not deemed probable of collection as a result of the COVID-19 pandemic. The amounts not booked as receivables remain obligations of the tenants and will be recognized as revenue when received. During the three months ended March 31, 2022, the Company collected $1.6 million in deferred rent from cash basis tenants and from tenants for which the Company's Annual Report on Form 10-Kdeferred payments were not previously recognized as revenue. In addition, during the three months ended March 31, 2022, the Company collected $10.2 million of deferred rent and interest from accrual basis tenants and borrowers that reduced related accounts and interest receivable. The repayment terms for the year ended December 31, 2016 filed with the Securities and Exchange Commission (SEC) on March 1, 2017.all of these deferments vary by tenant.


OperatingReportable Segments
The Company has four2 reportable operating segments: Entertainment,Experiential and Education. The Experiential segment includes the following property types: theatres, eat & play (including 7 theatres located in entertainment districts), attractions, ski, experiential lodging, gaming, cultural and fitness & wellness. The Education Recreationsegment includes the following property types: early childhood education centers and Other.private schools. See Note 1415 for financial information related to these operatingreportable segments.


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, and 3three years to 25 years for furniture, fixtures and equipment.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. Expenditures for ordinary maintenancelife and repairsleasehold interests are charged to operations in the period incurred. Significant renovations and improvements that improve or extenddepreciated over the useful life of the asset are capitalized and depreciated over their estimated useful life.underlying ground lease.


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.


7

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

probable the assets will be sold within one year. On occasion, the Company will receive unsolicited offers from third parties to buy individual Company properties. Under these circumstances, the Company will classify the properties as held for sale when a sales contract is executed with no contingencies and the prospective buyer has funds at risk to ensure performance.


Accounting forReal Estate Acquisitions
Upon acquisition of real estate properties, the Company evaluates the acquisition to determine if it is a business combination or an asset acquisition. In January 2017,If 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 guidanceacquisition is determined to assist entities with evaluating whether acquisitions should be accounted for as business combinations oran asset acquisitions. The standard is effective for annual reporting periods beginning after 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,acquisition, the Company expects that fewer of its real estate acquisitions will be accounted for as business combinations.

Costs incurred for asset acquisitions and development properties, including transaction costs, are capitalized. For asset acquisitions, the Company allocatesrecords the purchase price and other related costs incurred to the acquired tangible assets and identified intangible assets and liabilities on a relative fair value basis. In addition, costs incurred for asset acquisitions, including transaction costs, are capitalized.

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

For real estate acquisitions (asset acquisitions or business combinations), the fair value (or relative fair value in an asset acquisition) of the tangible assets acquired based onis determined by valuing the property using recent independent appraisals or methods similar to those used by independent appraisersappraisers. Land is valued using the sales comparison approach which uses available market data from recent comparable land sales as an input to estimate the fair value. Site improvements and management judgment. Acquisition-related costs in connection with business combinationstenant improvements are expensedvalued using the cost approach which uses replacement cost data obtained from industry recognized guides less depreciation as incurred. Costs relatedan input to such transactions,estimate the fair value. The building is valued either using the cost approach described above or a combination of the cost and the income approach. The income approach uses market leasing assumptions to estimate the fair value of the property as well as costs associated with terminated transactions,if vacant. The cost and income approaches are included in the accompanying consolidated statements of income as transaction costs.reconciled to arrive at an estimated building fair value.


Deferred Financing Costs
Deferred financing costs are amortized over the terms of the related debt obligations or mortgage note receivable as applicable. Deferred financingfinancing costs of $34.0$35.4 million and $29.3$36.9 million as of September 30, 2017March 31, 2022 and December 31, 2016,2021, respectively, are shown as a reduction of debt. The deferred financing costs of $8.2 million and $8.7 million as of March 31, 2022 and December 31, 2021, respectively, related to the unsecured revolving credit facility are included in other assets."Other assets" in the accompanying consolidated balance sheets.


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

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

payments, these deferments generally do not release customers from the obligation to pay the deferred amounts in the future. Deferred rent amounts are reflected in the Company's financial statements as accounts receivable balanceif collection is comprised primarily of rents and operating cost recoveries due from tenants as well as accrued rental rate increasesdetermined 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 liferemaining term of the existing leases. lease against rental revenue. In limited cases, customers may be entitled to the abatement of rent during governmentally imposed prohibitions on business operations which is recognized in the period to which the abatement relates, or the Company may provide rent concessions to tenants. In cases where the Company provides concessions to tenants to which they are not otherwise entitled, those amounts will be recognized in the period in which the concession is granted unless the changes are accounted for as lease modifications.

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

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

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

The Company regularly evaluates the adequacycollectibility of its allowance for doubtful accounts.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’sCompany'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,When the collectibility of lease receivables or future lease payments are no longer probable, the Company estimatesrecords a direct write-off of the expected recovery through bankruptcy claimsreceivable to rental revenue and increasesrecognizes future rental revenue on a cash basis.

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

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


Revenue Recognition
9
Rents that are fixed and determinable are recognized on a straight-line basis over the minimum term of the leases. Base rent escalation on leases that are dependent upon increases in the Consumer Price Index (CPI) is recognized when known. In addition, most of the Company's tenants are subject to additional 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. Rental revenue included percentage rents of $4.7 million and $2.7 million for the nine months ended September 30, 2017 and 2016, respectively. Mortgage and other financing income included participating interest income of $0.7 million and $0.9 million for the nine months ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2016, mortgage and other financing income included a $3.6 million prepayment fee related to a mortgage note that was paid fully in advance of its maturity date.


Direct financing lease income is recognized on the effective interest method to produce a level yield on funds not yet recovered. Estimated unguaranteed residual values at the date of lease inception represent management's initial estimates of fair value of the leased assets at the expiration of the lease, not to exceed original cost. Significant assumptions used

in estimating residual values include estimated net 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.

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

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

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

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

In the event the Company has a past due mortgage note or note receivable and the Company defers certain loan origination and commitment fees, net of certain origination costs, and amortizes them over the term of the related loan. Interest income on performing loans is accrued as earned. The Company evaluates the collectability of both interest and principal of each of its loans to determine whetherdetermines it is impaired. A loan is considered to be impaired when,collateral dependent, the Company measures expected credit losses based 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’scollateral. As of March 31, 2022, the Company does not have any mortgage notes or notes receivable with past due principal balances.

Mortgage and Other Financing Income
Certain of the Company's borrowers are subject to additional interest based on certain thresholds defined in the underlying collateral, less costs to sell, if the loan is collateral dependent. For impaired loans,mortgage agreements (participating interest). Participating interest income is recognized on a cash basis, unlessat the Company determines based ontime when specific parameters have been met as provided by the loan to estimated fair value ratiomortgage agreement. There was no participating interest income for the loan should be on the cost recovery method,three months ended March 31, 2022 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.2021.


Concentrations of Risk
On December 21, 2016, American Multi-Cinema, Inc. (AMC) announced that it closed its acquisition of Carmike Cinemas Inc. (Carmike). AMC, was the lessee ofTopgolf USA (Topgolf) and Regal represented a substantialsignificant portion (34%) of the megaplex theatre rental properties held by the Company at September 30, 2017. For the nine months ended September 30, 2017, approximately $85.7 million or 20.0% of the Company's total revenues were derived from rental payments by AMC. Forrevenue for the ninethree months ended September 30, 2016, approximately $65.3 million or 18.0%March 31, 2022 and 2021. The Company began recognizing revenue on a cash basis for AMC at the end of the first quarter of 2020 and for Regal at the end of the third quarter of 2020 and cash payments were reduced due to the impact of the COVID-19 pandemic. The following is a summary of the Company's total revenues wererevenue derived from rental payments by AMC and approximately $16.9 million or 4.7% of the Company's total revenues were derived from rentalinterest payments by Carmike. 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)Topgolf and its consolidated financial information is publicly available at www.sec.gov.Regal (dollars in thousands):

Three Months Ended March 31,
20222021
Total Revenue% of Company's Total RevenueTotal Revenue% of Company's Total Revenue
AMC$23,422 14.9 %$23,835 21.3 %
Topgolf22,383 14.2 %20,486 18.3 %
Regal21,255 13.5 %625 0.6 %

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Share-Based Compensation
Share-based compensation to employees of the Company is granted pursuant to the Company's Annual Incentive Program and Long-Term Incentive Plan and share-based compensation to non-employee Trustees of the Company is granted pursuant to the Company's Trustee compensation program. 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 nonvestednon-vested share grants issued to employees, and amortization of share units issued to non-employee Trustees for payment of their annual retainers. Share-based compensation is included in general"General and administrative expenseexpense" in the accompanying consolidated statements of income totaled $10.6 million(loss) and $8.3 million for the nine months ended September 30, 2017 and 2016, respectively.comprehensive income.


Share Options
Share options are granted to employees pursuant to the Long-Term Incentive Plan. The fair value of share options granted is estimated at the date of grant using the Black-Scholes option pricing model. Share options granted to employees vest over a period of four years and share option expense for these options is recognized on a straight-line basis over the vesting period. Expense recognized related to share options and included in general"General and administrative expenseexpense" in the accompanying consolidated statements of income was $528 thousand(loss) and $684comprehensive income was $4 thousand for both the ninethree months ended September 30, 2017March 31, 2022 and 2016, respectively.2021.


Nonvested Shares Issued to Employees
The Company grants nonvested shares to employees pursuant to both the Annual Incentive Program and the Long-Term Incentive Plan. The Company amortizes the expense related to the nonvested shares awarded to employees under the Long-Term Incentive Plan and the premium awarded under the nonvested share alternative of the Annual Incentive Program on a straight-line basis over the future vesting period (three(three years or four years). Expense recognized related to nonvested shares and included in general"General and administrative expenseexpense" in the accompanying consolidated statements of income (loss) and comprehensive incomewas $9.1$2.0 million and $6.8 $2.2 million for the ninethree months ended September 30, 2017March 31, 2022 and 2016,2021, respectively.


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

Restricted Share Units Issued to Non-Employee Trustees
The Company issues restricted share units to non-employee Trustees for payment of their annual retainers under the Company's Trustee compensation program. The fair value of the share units granted was based on the share price at the date of grant. The share units vest upon the earlier of the day preceding the next annual meeting of shareholders or a change of control. The settlement date for the shares is selected by the non-employee Trustee, and ranges from one year from the grant date to upon termination of service. This expense is amortized by the Company on a straight-line basis over the year of service by the non-employee Trustees. Total expense recognized related to shares issued to non-employee Trustees was $936 thousand and $813 thousandincluded in "General and administrative expense" in the accompanying consolidated statements of income (loss) and comprehensive income was $0.6 million for both the ninethree months ended September 30, 2017March 31, 2022 and 2016, respectively.2021.


Derivative Instruments
The Company has acquired certainuses derivative instruments to reduce exposure to fluctuations in foreign currency exchange rates and variable interest rates. The Company has established policies 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.


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
11

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 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.ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the year ended December 31, 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. On March 5, 2021, the Financial Conduct Authority ("FCA") announced that the USD LIBOR will no longer be published after June 30, 2023. At March 31, 2022, the Company had 10 agreements (including debt, derivative, mortgage note and lease agreements) that are indexed to LIBOR, of which 3 mature prior to June 30, 2023. The Company is monitoring and evaluating the related risks with transitioning these contracts to a replacement index.

In February 2017,March 2022, 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 for the Company beginning with the first quarter of 2018. The standards permit the use of either the full retrospective method or the modified retrospective method. The Company anticipates it will use the modified retrospective method for transition under both standards, in which case the cumulative effect of applying the standards, if any, would be recognized at the date of initial application.
The Company has reviewed its revenue streams and determined 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 sales of real estate which have historically been in all-cash transactions with no contingencies and no future involvement in the operations. Accordingly, the Company does not anticipate a significant change to the timing of revenue recognition upon adoption of this new revenue standard.
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 is expected to impact the Company’s consolidated financial statements 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. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. 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 developing an implementation plan based on the results of the assessment. The Company currently believes substantially all of its leases will continue to be classified as operating leases under the new standard. Subsequent to the adoption of the new standard, common area maintenance provided in lease contracts will be accounted for as a non-lease component within the scope of the new revenue standard. As a result, the Company will be required to recognize revenues associated with leases separately from revenues associated with common area maintenance. The Company is continuing to evaluate whether the variable payment provisions in the new lease standard or the allocation and recognition provisions of the new revenue standard will affect the timing of recognition of lease and non-lease revenue.
In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which amends ASC Topic 326, 2022-02, Financial Instruments - Credit Losses. Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures. The ASU changeseliminates the methodologyaccounting guidance for measuring credit losses ontroubled debt restructurings (TDR) by creditors that have adopted the CECL model and enhances disclosure requirements for loan modifications made with borrowers experiencing financial instruments and timingdifficulty. In addition, the amendments require disclosure of when such losses are recorded.current period gross write-offs by year of origination for financing receivables. ASU No. 2016-132022-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019.2022. The Company expects to adopt the guidance beginning January 1, 2023 and is currently evaluating the impact that the ASU 2022-02 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.
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities. The ASU better aligns a company's financial reporting for hedging activities with the economic objectives of those activities. ASU No. 2017-12 is effective for fiscal years beginning after December 15, 2018 with early adoption allowed using a modified retrospective transition approach. This adoption method would require the Company to recognize the cumulative effect of initially applying the ASU as an adjustment to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings as of the beginning of the fiscal year that the Company adopts the update. The Company is currently reviewing the ASU to assess the potential impact on its consolidated financial statements and related disclosures but does not anticipate that this ASU will have a material impact.
3. Rental PropertiesReal Estate Investments


The following table summarizes the carrying amounts of rental propertiesreal estate investments as of September 30, 2017March 31, 2022 and December 31, 20162021 (in thousands):
March 31, 2022December 31, 2021
Buildings and improvements$4,580,400 $4,523,052 
Furniture, fixtures & equipment108,454 108,907 
Land1,229,363 1,222,149 
Leasehold interests26,987 26,717 
5,945,204 5,880,825 
Accumulated depreciation(1,206,317)(1,167,734)
Total$4,738,887 $4,713,091 
 September 30, 2017 December 31, 2016
Buildings and improvements$4,037,328
 $3,272,865
Furniture, fixtures & equipment86,831
 40,684
Land1,097,445
 917,748
Leasehold interests25,774
 —
 5,247,378
 4,231,297
Accumulated depreciation(711,384) (635,535)
Total$4,535,994
 $3,595,762
Depreciation expense on rental properties real estate investments was $93.2$38.8 million and $76.3$38.9 million for the ninethree months ended September 30, 2017March 31, 2022 and 2016,2021, respectively.


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4. InvestmentsImpairment Charges

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


5. Investments

The Company's investment spending during the ninethree months ended September 30, 2017March 31, 2022 totaled $1.5 billion, $24.4 million, and included the acquisition of 1 fitness and included investments in each of its four operating segments.

Entertainment investment spending during the nine months ended September 30, 2017 totaled $264.9wellness property for approximately $19.9 million, includingas well as spending on build-to-suit experiential development and redevelopment projects.

6. Investment in Mortgage Notes and Notes Receivable

The Company measures expected credit losses on its mortgage notes and notes receivable on an individual basis over the related contractual term as its financial instruments do not have similar risk characteristics. The Company has not experienced historical losses on its mortgage note portfolio; therefore, the Company uses a forward-looking commercial real estate loss forecasting tool to estimate its expected credit losses. The loss forecasting tool is comprised of megaplex theatres, entertainment retail centersa probability of default model and family entertainment centers,a loss given default model that utilizes the Company’s loan specific inputs as well as $154.1 million in acquisitions of six megaplex theatres.

Education investment spending during the nine months ended September 30, 2017 totaled $238.7 million, including spendingselected forward-looking macroeconomic variables and mean loss rates. Based on build-to-suit development and redevelopment of public charter schools, early education centers and private schools,certain inputs, such as origination year, balance, interest rate as well as $38.3 million in acquisitionscollateral value and borrower operating income, the model produces life of seven early education centersloan expected losses on a loan by loan basis. As of March 31, 2022, the Company did not anticipate any prepayments; therefore, the contractual term of its mortgage notes was used for the calculation of the expected credit losses. The Company updates the model inputs at each reporting period to reflect, if applicable, any newly originated loans, changes to loan specific information on existing loans and two public charter schools and an investment of $95.5 millioncurrent macroeconomic conditions.

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Investment in mortgage notes, receivable.

Recreation investment spending during the nine months ended September 30, 2017 totaled $951.6 million, including the transaction with CNL Lifestyle Properties Inc. (CNL Lifestyle)related accrued interest receivable, at March 31, 2022 and funds affiliated with Och-Ziff Real Estate (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 areas, $51.9 million in acquisitions of five other recreation facilities, and an investment of $10.7 million in a mortgage note secured by one other recreation facility.

On April 6, 2017, the Company completed a transaction with CNL Lifestyle and OZRE. The Company 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, the Company 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, the Company 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.

The secured debt 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%. The Company received a $3.0 million origination fee upon closing that will be recognized using the effective interest method.
The Company assumed long-term, triple-net leases on the Northstar California Resort and threeDecember 31, 2021 consists of the attractions properties and entered into new long-term, triple-net lease agreements on the remaining attractions properties at closing. Additionally, the Company assumed ground lease agreements on nine of the properties.
The Company’s aggregate investment in this transaction was $730.8 million and was funded 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 followsfollowing (in thousands):
Outstanding principal amount of mortgageCarrying amount as ofUnfunded commitments
DescriptionYear of OriginationInterest RateMaturity DateMarch 31, 2022December 31, 2021March 31, 2022
Attraction property Powells Point, North Carolina20197.75 %6/30/202528,864 28,695 28,243 — 
Fitness & wellness property Omaha, Nebraska20177.85 %1/3/202710,905 10,952 10,940 — 
Fitness & wellness property Merriam, Kansas20197.55 %7/31/20299,090 9,171 9,159 — 
Ski property Girdwood, Alaska20198.20 %12/31/202945,599 45,623 45,877 11,401 
Fitness & wellness property Omaha, Nebraska20167.85 %6/30/203010,539 10,602 10,615 379 
Experiential lodging property Nashville, Tennessee20197.01 %9/30/203171,223 71,277 70,896 — 
Eat & play property Austin, Texas201211.31 %6/1/203310,629 10,629 10,874 — 
Ski property West Dover and Wilmington, Vermont200711.96 %12/1/203451,050 51,049 51,047 — 
Four ski properties Ohio and Pennsylvania200711.07 %12/1/203437,562 37,538 37,519 — 
Ski property Chesterland, Ohio201211.55 %12/1/20344,550 4,529 4,516 — 
Ski property Hunter, New York20168.88 %1/5/203621,000 21,000 21,000 — 
Eat & play property Midvale, Utah201510.25 %5/31/203617,505 17,505 17,639 — 
Eat & play property West Chester, Ohio20159.75 %8/1/203618,068 18,066 18,198 — 
Fitness & wellness property Fort Collins, Colorado20187.85 %1/31/203810,292 10,048 10,277 — 
Early childhood education center Lake Mary, Florida20197.98 %5/9/20394,200 4,337 4,329 — 
Eat & play property Eugene, Oregon20198.13 %6/17/203914,700 15,018 14,996 — 
Early childhood education center Lithia, Florida20178.58 %10/31/20393,959 3,982 4,034 — 
$369,735 $370,021 $370,159 $11,780 
  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


Other investment spending during the nine months ended September 30, 2017 totaled $1.0Investment in notes receivable, including related accrued interest receivable, was $7.2 million and was related$7.3 million at March 31, 2022 and December 31, 2021, respectively, and is included in "Other assets" in the accompanying consolidated balance sheets.

During the year ended December 31, 2020, the Company entered into an amended and restated loan and security agreement with 1 of its notes receivable borrowers in response to the Adelaar casino and resort projectimpacts of the COVID-19 pandemic. Although the borrower was not in Sullivan County, New York.

Duringdefault, nor had the nine months ended September 30, 2017,borrower declared bankruptcy, the Company completed the sale of four entertainment properties for net proceeds totaling $72.3 million. In connection withdetermined these sales, the Company recognizedmodifications resulted in a gain on sale of $19.4 million.

During the nine months ended September 30, 2017, pursuant to tenant purchase options, the Company completed the sale of five public charter schools located in Colorado, Arizona and Utah for net proceeds totaling $44.8 million. In connection with these sales, the Company recognized a gain on sale of $7.2 million. Additionally, the Company completed the sale of two other education facilities for net proceeds of $9.8 million. In connection with these sales, the Company recognized a gain on sale of $1.9 million.

During the nine months ended September 30, 2017, the Company received a partial prepayment of $4.0 million on one mortgageTDR. At March 31, 2022, this note receivable thatis considered collateral-dependent and expected credit losses are based on the fair value of the underlying collateral at the reporting date. The note is secured by the observation deckworking capital and non-real estate assets of the John Hancock buildingborrower. The Company assessed the fair value of the collateral as of March 31, 2022 and the note remains fully reserved with an allowance for credit loss totaling $8.6 million, which represents the outstanding principal balance of the note as of March 31, 2022. Income for this borrower is recognized on a cash basis.

At March 31, 2022, the Company's investment in Chicago, Illinois. In connection withthis note receivable was a variable interest investment and the partial prepaymentunderlying entity is a VIE. The Company is not the primary beneficiary of this note,VIE because the Company received a prepayment feedoes not individually have the power to direct the activities that are most significant to the entity and accordingly, this investment is not consolidated. The Company's maximum exposure to loss associated with this VIE is limited to the Company's outstanding note receivable in the amount of $800 thousand,$8.6 million, which is being recognized overfully reserved in the term ofallowance for credit losses at March 31, 2022.
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The following summarizes the remaining note usingactivity within the effective interest method.allowance for credit losses related to mortgage notes, unfunded commitments and notes receivable for the three months ended March 31, 2022 (in thousands):


Mortgage notes receivableUnfunded commitments - mortgage notes receivableNotes receivableUnfunded commitments - notes receivableTotal
Allowance for credit losses at December 31, 2021$2,124 $76 $8,686 $— $10,886 
Credit loss (benefit) expense(323)(13)30 — (306)
Charge-offs— — — — — 
Recoveries— — — — — 
Allowance for credit losses at March 31, 2022$1,801 $63 $8,716 $— $10,580 
5.
7. Accounts Receivable Net

The following table summarizes the carrying amounts of accounts receivable net as of September 30, 2017March 31, 2022 and December 31, 20162021 (in thousands):
March 31, 2022December 31, 2021
Receivable from tenants$19,731 $37,417 
Receivable from non-tenants2,102 2,237 
Straight-line rent receivable38,871 38,419 
Total$60,704 $78,073 
 September 30,
2017		 December 31,
2016
Receivable from tenants$15,977
 $7,564
Receivable from non-tenants128
 497
Receivable from insurance proceeds27
 1,967
Receivable from Sullivan County Infrastructure Revenue Bonds10,808
 22,164
Straight-line rent receivable73,657
 67,618
Allowance for doubtful accounts(1,384) (871)
Total$99,213
 $98,939


The above total includesAs of March 31, 2022, receivable from tenants includes payments of approximately $5.4approximately $17.4 million that were deferred due to the COVID-19 pandemic and straight-line rent receivabledetermined to be collectible. Additionally, the Company has amounts due from tenants that were not booked as receivables because the full amounts were not deemed probable of approximately $9.0 million from onecollection as a result of the Company's early educationCOVID-19 pandemic. While deferments for this and future periods delay rent payments, these deferments do not release tenants at September 30, 2017. This tenant has been negatively impacted by challenges brought on by its rapid expansionfrom the obligation to pay the deferred amounts in the future.

8. Capital Markets and ramp up to stabilization. The Company is negotiating a restructuring which has been complicated by the impact of recent extreme weather events and the tenant having multiple landlords. However, the Company believes it has made significant progress in these negotiations. The receivable from tenant and straight-line rent receivable balances at September 30, 2017 have been recorded at levels that approximate the estimate of the final restructured reduced rent amounts which are expected to be made effective as of the beginning of 2017. In October 2017, the Company terminated nine leases with the tenant, seven of which have completed construction and two of which are unimproved land. There were only $64 thousand outstanding receivables related to these properties and such amounts were fully reserved at September 30, 2017. The tenant continues to operate these properties (other than the two unimproved properties) as a holdover tenant. The Company will continue to consider whether these and other properties should be leased to other operators based on results of the restructuring process.Dividends

6. Investment in a Direct Financing Lease

The Company’s investment in a direct financing lease relates to the Company’s master lease of six public charter school properties as of September 30, 2017 and 12 public charter school properties as of December 31, 2016, with affiliates of Imagine Schools, Inc. (Imagine). Investment in a direct financing lease, net represents estimated unguaranteed residual values of leased assets and net unpaid rentals, less related deferred income. The following table summarizes the carrying amounts of investment in a direct financing lease, net as of September 30, 2017 and December 31, 2016 (in thousands):
 September 30, 2017 December 31, 2016
Total minimum lease payments receivable$113,956
 $215,753
Estimated unguaranteed residual value of leased assets47,000
 85,247
Less deferred income (1)
(103,258) (198,302)
Less allowance for lease losses—
 —
Investment in a direct financing lease, net$57,698
 $102,698
    
(1) Deferred income is net of $0.8 million and $1.3 million of initial direct costs at September 30, 2017 and December 31, 2016, respectively.

During the three months ended September 30, 2017,March 31, 2022, the Company entered into revised lease terms with Imagine which reduced the rental payments and term on six properties. As a result of the revised lease terms, these six properties were classified as operating leases duringdeclared cash dividends totaling $0.775 per common share. Additionally, during the three months ended September 30, 2017. Due to lease negotiations duringMarch 31, 2022, the three months ended June 30, 2017, management evaluated whether it could recover its investment in these leases taking into account the revised lease terms and independent appraisals prepared asBoard declared cash dividends of June 30, 2017, and determined  the

carrying value of the investment in the direct financing leases exceeded the expected lease payments to be received and residual values for these six leases. Accordingly, the Company recorded an impairment charge of $9.6 million during the nine months ended September 30, 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. The Company determined that no allowance for losses was necessary at December 31, 2016.

Additionally, during the nine months ended September 30, 2017, the Company performed its annual review of the estimated unguaranteed residual value$0.359375 per share 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 nine months ended September 30, 2017.

The Company’s direct financing lease has expiration dates ranging from approximately 15 to 18 years. Future minimum rentals receivable on this direct financing lease at September 30, 2017 are as follows (in thousands):
 Amount
Year: 
2017$1,545
20186,301
20196,490
20206,685
20216,885
Thereafter86,050
Total$113,956

7. Debt and Capital Markets

During the nine months ended September 30, 2017, the Company prepaid in full nine mortgage notes payable totaling $73.0 million that were secured by nine theatre properties. In addition, the Company prepaid in full a mortgage note payable of $87.0 million that was secured by 11 theatre properties. In connection with this note payoff, the Company recorded a gain on early extinguishment of debt of $1.0 million for the nine months ended September 30, 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, 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 and are unsecured and guaranteed by certain of the Company's subsidiaries. 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 times5.75% Series C cumulative convertible preferred shares and (iv) the maintenance at all times of the Company's total unencumbered assets such that they are not less than 150%5.75% Series G cumulative redeemable preferred shares and cash dividends of $0.5625 per share on the Company’s outstanding unsecured debt.Company's 9.00% Series E cumulative convertible preferred shares.


On August 30, 2017, the Company refinanced its 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,January 14, 2022, the Company amended its unsecured consolidated creditthe note purchase agreement which governsgoverning 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 three months ended September 30, 2017 and are included in costs associated with loan refinancing. At September 30, 2017, the Company had $170.0 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 the Company's 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 three months ended September 30, 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 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.

In connection with the amendment 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 and term loan facility were released. 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, 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 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(Note Purchase Agreement) to, among other things: (i) amendsamend certain financial and other covenants and provisions in the existing Note Purchase Agreement to conform generally to the changes beneficial to the Company in the corresponding covenants and provisions contained in the amended unsecured consolidated credit agreement;Company's Third Amended, Restated and Consolidated Credit Agreement, dated October 6, 2021, and (ii) provides the investors thereunderamend certain additional guarantyfinancial and lien rights,other covenants and provisions in the event that certain subsequent events occur; (iii) expandsexisting Note Purchase Agreement to reflect the scopeprior termination of the “most favored lender” covenant containedCovenant Relief Period (as defined in the existing Note Purchase Agreement;Agreement) and (iv) imposes restrictions on debtremoval of related provisions.

9. Unconsolidated Real Estate Joint Ventures

As of March 31, 2022 and December 31, 2021, the Company had a 65% investment interest in 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
15

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

The joint venture that holds the real property has a secured mortgage loan of $85.0 million at March 31, 2022, that was due April 1, 2022 but the joint venture has temporarily extended the maturity date to July 1, 2022. The note can be incurred byextended for 2 additional 1-year periods from the original maturity date upon the satisfaction of certain subsidiariesconditions. 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 Company.

Subsequent to September 30, 2017, the Company entered into threematurity date. The joint venture has an interest rate swap agreements on its unsecured term loan. See Note 9 for further details.

Duringcap agreement to limit the nine months ended September 30, 2017, the Company issued an aggregate of 928,219 common shares under the direct share purchase component of its Dividend Reinvestment and Direct Share Purchase Plan (DSPP) for total net proceeds of $67.9 million. These proceeds were used to pay down avariable portion of the Company's unsecured revolving credit facility.interest rate (LIBOR) on this note to 3.0% from March 28, 2019 to April 1, 2023.


DuringThe Company recognized gains of $1.2 million and losses of $1.5 million during the ninethree months ended September 30, 2017,March 31, 2022 and 2021, respectively, and received no distributions during the Company issued 8,851,264 common sharesthree months ended March 31, 2022 and 2021 related to the equity investments in connection withthese joint ventures.

As of March 31, 2022 and December 31, 2021, the transactions with CNL Lifestyle and OZRE. See Note 4 for further information.

8. Variable Interest Entities


The Company’sCompany's investments in these joint ventures were considered to be variable interest in VIEs currentlyinvestments and the underlying entities are in the form of equity ownership and loans provided by the Company to a VIE or other partner.VIEs. The Company examines specific criteria and uses its judgment when determining if the Company is not the primary beneficiary of a VIE. Factors considered in determining whetherthe VIEs because 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 VIEs
As of September 30, 2017, the Company had invested approximately $18.5 million in one real estate project which is a VIE. This entity does not individually have any other significant assets or liabilities at September 30, 2017the power to direct the activities that are most important to the joint ventures and was established to facilitate the development of a theatre project.

Unconsolidated VIE
At September 30, 2017, the Company's recorded investment in two unconsolidated VIEs totaled $178.4 million.accordingly, these investments are not consolidated. The Company's maximum exposure to loss associated withat March 31, 2022, is its investment in the joint ventures in the amount of $27.1 million.

As of March 31, 2022 and December 31, 2021, the Company had a 95% investment interest in 2 unconsolidated real estate joint ventures related to experiential lodging located in Warrens, Wisconsin. The Company's investments in these VIEs is limitedjoint ventures were considered to be variable interest investments, however, the Company's outstanding mortgage notes and related accrued interest receivable of $178.4 million. These mortgage notes are secured by three recreation properties and one public charter school. While theseunderlying entities are VIEs,not VIEs. The Company's partner, TJO Warrens, LLC and its affiliates, owns the remaining 5% interest in the joint ventures. There are 2 separate joint ventures, one that holds the investment in the real estate of the experiential lodging property and the other that holds lodging operations, which are facilitated by a management agreement. The Company's investment in the operating entity is held in a TRS. The Company accounts for its investment in these joint ventures under the equity method of accounting because control over major decisions is shared. As of March 31, 2022 and December 31, 2021, the Company had equity investments of $8.8 million and $10.1 million, respectively, in these joint ventures.

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

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

In addition, as of both March 31, 2022 and December 31, 2021, the Company had equity investments of $0.7 million in unconsolidated joint ventures for 3 theatre projects located in China. The Company recognized losses of $10 thousand during the three months ended March 31, 2022 and income of $55 thousand during the three months ended March 31, 2021, and received distributions of $90 thousand from its investment in these VIEs that most significantly impactjoint ventures for the VIEs' economic performance is not held bythree months ended March 31, 2021. No distributions were received during the Company.three months ended March 31, 2022.


9.10. Derivative Instruments


All derivatives are recognized at fair value in the consolidated balance sheets within the line items "Other assets" and "Accounts payable and accrued liabilities" as applicable. The Company's derivatives are subject to a master netting arrangement and the Company has elected not to offset its derivative
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position for purposes of balance sheet presentation and disclosure. The Company had derivative assets of $0.6 million at March 31, 2022 and no derivative assets at December 31, 2021. The Company had derivative liabilities of $0.2$7.6 million and $2.5$4.9 million recorded in “Accounts payable and accrued liabilities” and derivative assets of $23.3 million and $35.9 million recorded in “Other assets” in the consolidated balance sheet at September 30, 2017March 31, 2022 and December 31, 2016,2021, respectively. The Company hadhas not posted or received collateral with its derivative counterparties as of September 30, 2017March 31, 2022 or December 31, 2016.2021. See Note 1011 for disclosures relating to the fair value of the derivative instruments as of September 30, 2017 and December 31, 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 basedLIBOR-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’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 these objectives, 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 September 30, 2017,At March 31, 2022, the Company had two1 interest rate swap agreements to fix theagreement designated as a cash flow hedge of interest rate at 2.64% on $300.0 millionrisk related to its variable rate secured bonds totaling $25.0 million. The interest rate swap agreement outstanding as of the unsecured term loan facility from July 6, 2017 to April 5, 2019.March 31, 2022 is summarized below:

Fixed rateNotional Amount (in millions)IndexMaturity
1.3925%$25.0 USD LIBORSeptember 30, 2024

The effective portion of changeschange 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. Duringearnings within the nine months ended September 30, 2017 and 2016, such derivatives were used to hedgesame income statement line item as the variable cash flows associated with existing variable-rate debt. The

ineffective portionearnings effect of the change in fair value of the derivatives is recognized directly in earnings. No hedge ineffectiveness on cash flow hedges was recognized during the nine months ended September 30, 2017 and 2016.hedged transaction.


Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. As of September 30, 2017,March 31, 2022, the Company estimates that during the twelve months ending September 30, 2018, $0.2ending March 31, 2023, $0.1 million of gains will be reclassified from AOCI to interest expense.other income.

Subsequent to September 30, 2017, on October 31, 2017, the Company entered into three interest rate swap agreements to fix the interest rate at 3.15% on an additional $50.0 million of its unsecured term loan facility from November 6, 2017 to April 4, 2019 and on $350.0 million of the unsecured term loan facility from April 5, 2019 to February 7, 2022.


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 four4 Canadian properties. The Company uses cross currencycross-currency swaps and foreign currency forwards to mitigate its exposure to fluctuations in the USD-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 of the Canadian properties as their impact on the Company's cash flow when settled should move in the opposite direction of the exchange rates used to translate revenues and expenses of these properties.flows.


As of September 30, 2017, theThe Company hadentered into 3 USD-CAD cross-currency swaps that were effective July 1, 2020 with a fixed original notional value of $100.0 million CAD and $98.1$76.6 million USD. The net effect of these swaps is to lock in an exchange rate of $1.05$1.31 CAD per USD on approximately $13.5$7.2 million of annual CAD denominated cash flows on the properties through June 2018. Additionally, on August 30, 2017,2022.

On April 12, 2022, the Company entered into a3 USD-CAD cross-currency swapswaps that will be effective July 1, 20182022 with a total fixed original notional value of $100.0$150.0 million CAD and $79.5$118.7 million USD. The net effect of these swaps is to lock in an exchange rate of 1.26$1.27 CAD per USD on approximately $13.5$10.8 million of annual CAD denominated cash flows through September 2024.

17

Additionally, on April 29, 2022, the propertiesCompany entered into 2 additional cross-currency swaps effective May 1, 2022 with a total fixed notional value of $200.0 million CAD and $156.0 million USD. The net effect of these swaps is to lock in exchange rate of $1.29 CAD per USD on approximately $4.5 million of additional annual CAD denominated cash flows through June 2020.October 1, 2024.


The effective portion of changeschange 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. The ineffective portionearnings within the same income statement line item as the earnings effect of the change in fair value of the derivative, as well as amounts excluded from the assessment of hedge effectiveness, is recognized directly in earnings. No hedge ineffectiveness on foreign currency derivatives was recognized for the nine months ended September 30, 2017 and 2016.hedged transaction. As of September 30, 2017,March 31, 2022, the Company estimates that during the twelve months ending September 30, 2018, $1.5March 31, 2023, $0.1 million of gains willlosses 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 March 31, 2022, the USD-CADCompany had the following cross-currency swaps designated as net investment hedges:
Fixed rateNotional Amount (in millions, CAD)Maturity
$1.32 CAD per USD$100.0 July 1, 2023
$1.32 CAD per USD100.0 July 1, 2023
Total$200.0 

The cross-currency swaps also have a monthly settlement feature locked in at an exchange rate for delivery of a specified amount$1.32 CAD per USD on $4.5 million of foreign currency on a specified date. The currency forward agreements are typicallyCAD annual cash settled in USD for their fair value at or close to their settlement date. In order to hedgeflows, the net effect of which is an excluded component from the effectiveness testing of this hedge.

On April 29, 2022, the Company de-designated these CAD to USD cross-currency swaps in conjunction with entering into new agreements, effectively terminating the cross-currency swap agreements. These contracts were previously designated as net investment hedges. The Company paid $3.8 million in fourconnection with the settlement of the Canadian properties, on June 13, 2013,CAD to USD cross-currency swap agreements.

On April 29, 2022, the Company entered into a2 forward contractcontracts with a fixed notional value of $100.0$200.0 million CAD and $94.3$156.0 million USD with a July 2018 settlement.settlement date of October 1, 2024. The exchange rate of this forward contract is approximately $1.06$1.28 CAD per USD. Additionally, on February 28, 2014, the Company entered into a forward contract with a fixed notional value of $100.0 million CAD and $88.1 million USD with a July 2018 settlement date. The exchange rate 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 centers 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.


For qualifying foreign currency derivatives designated as net investment hedges, the effective portion of changeschange in the fair value of the derivatives are reported in AOCI as part of the cumulative translation adjustment. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. No hedge ineffectiveness on net investment

hedges was recognized for the nine months ended September 30, 2017 and 2016. 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.

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Below is a summary of the effect of derivative instruments on the consolidated statements of changes in equity and income for the three and nine months ended September 30, 2017March 31, 2022 and 2016.2021.

Effect of Derivative Instruments on the Consolidated Statements of Changes in Equity and Comprehensive Income for the Three Months Ended March 31, 2022 and 2021 (Dollars in thousands)
 Three Months Ended March 31,
Description20222021
Cash Flow Hedges
Interest Rate Swaps
Amount of Gain Recognized in AOCI on Derivative$825 $259 
Amount of Expense Reclassified from AOCI into Earnings (1)(76)(2,033)
Cross-Currency Swaps
Amount of Loss Recognized in AOCI on Derivative(26)(93)
Amount of Expense Reclassified from AOCI into Earnings (2)(54)(49)
Net Investment Hedges
Cross-Currency Swaps
Amount of Loss Recognized in AOCI on Derivative(3,019)(1,786)
Amount of Income Recognized in Earnings (2) (3)99 102 
Total
Amount of Loss Recognized in AOCI on Derivatives$(2,220)$(1,620)
Amount of Expense Reclassified from AOCI into Earnings(130)(2,082)
Amount of Income Recognized in Earnings99 102 
Interest expense, net in accompanying consolidated statements of income (loss) and comprehensive income$33,260 $39,194 
Other income in accompanying consolidated statements of income (loss) and comprehensive income$9,305 $678 
Effect of Derivative Instruments on the Consolidated Statements of Changes in Equity and Income for the Three and Nine Months Ended September 30, 2017 and 2016
(Dollars in thousands)
 Three Months Ended September 30, Nine Months Ended September 30,
Description2017 2016 2017 2016
Interest Rate Swaps       
Amount of Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)$110
 $1,327
 $317
 $(5,299)
Amount of Expense Reclassified from AOCI into Earnings (Effective Portion) (1)(263) (1,317) (2,247) (3,970)
Cross Currency Swaps       
Amount of (Loss) Gain Recognized in AOCI on Derivative (Effective Portion)(532) 279
 (907) (1,159)
Amount of Income Reclassified from AOCI into Earnings (Effective Portion) (2)520
 643
 1,879
 1,957
Currency Forward Agreements       
Amount of (Loss) Gain Recognized in AOCI on Derivative (Effective Portion)(5,417) 1,735
 (10,132) (5,819)
Amount of Income Reclassified from AOCI into Earnings (Effective Portion)—
 —
 —
 —
Total       
Amount of (Loss) Gain Recognized in AOCI on Derivative (Effective Portion)$(5,839) $3,341
 $(10,722) $(12,277)
Amount of Income (Expense) Reclassified from AOCI into Earnings (Effective Portion)257
 (674) (368) (2,013)
(1) Included in "Interest expense, net" in the accompanying consolidated statements of income (loss) and comprehensive income for the three months ended March 31, 2022 and 2021.
(1)Included in "Interest expense, net" in the accompanying consolidated statements of income for the three and nine months ended September 30, 2017 and 2016.
(2)Included in "Other income" in the accompanying consolidated statements of income for the three and nine months ended September 30, 2017 and 2016.

(2) Included in "Other income" in the accompanying consolidated statements of income (loss) and comprehensive income for the three months ended March 31, 2022 and 2021.
(3) Amounts represent derivative gains excluded from the effectiveness testing.

Credit-risk-related Contingent Features
The Company has agreementsan agreement with each of its interest rate derivative counterpartiescounterparty that containcontains a provision where if the Company defaults on any of its obligations for borrowed money or credit in an amount exceeding $25.0$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 September 30, 2017,March 31, 2022, the fair value of the Company’sCompany's derivatives in a liability position related to these agreements was $0.2was $7.6 million. If thethe 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, after considering the rightvalue of offset,$7.1 million. As of March 31, 2022, the Company would have no obligation.had not posted any collateral related to these agreements and was not in breach of any provisions in these agreements.


10.11. Fair Value Disclosures


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



As a basis for considering market participant assumptions in fair value measurements, the FASB’s Fair Value Measurement guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified
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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-currencycross 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 Measurementfair value measurement guidance, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.


Although the Company determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives also use Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by itself and its counterparties. As of September 30, 2017,March 31, 2022, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives and therefore, classified its derivatives as Level 2 within the fair value reporting hierarchy.


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The table below presents the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2017March 31, 2022 and December 31, 20162021 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
Assets and Liabilities Measured at Fair Value on a Recurring Basis at
September 30, 2017 and December 31, 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)
 
Assets (Liabilities) Balance at
end of period
September 30, 2017       
Cross-Currency Swaps*$—
 $1,372
 $—
 $1,372
Currency Forward Agreements*$—
 $21,650
 $—
 $21,650
Interest Rate Swap Agreements*$—
 $83
 $—
 $83
December 31, 2016:       
Cross-Currency Swaps*$—
 $4,158
 $—
 $4,158
Currency Forward Agreements*$—
 $31,782
 $—
 $31,782
Interest Rate Swap Agreements**$—
 $(2,482) $—
 $(2,482)
March 31, 2022 and December 31, 2021
*Included(Dollars in "Other assets" in the accompanying consolidated balance sheets.thousands)
**
DescriptionQuoted Prices in
Active Markets
for Identical
Assets (Level I)		Significant
Other
Observable
Inputs (Level 2)		Significant
Unobservable
Inputs (Level 3)		Balance at
end of period
March 31, 2022
Cross-Currency Swaps (1)$— $(7,618)$— $(7,618)
Interest Rate Swap Agreements (2)— 639 — 639 
December 31, 2021
Cross-Currency Swaps (1)$— $(4,626)$— $(4,626)
Interest Rate Swap Agreements (1)— (262)— (262)
(1) Included in "Accounts payable and accrued liabilities" in the accompanying consolidated balance sheets.

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

Non-recurring fair value measurements
The table below presents the Company's assets measured at fair value on a non-recurring basis during the nine months ended September 30, 2017as of March 31, 2022, aggregated by the level in the fair value hierarchy within which those measurements fall.

are classified.
Assets Measured at Fair Value on a Non-Recurring Basis During the Nine Months Ended September 30, 2017at March 31, 2022 and December 31, 2021
(Dollars in thousands)
DescriptionQuoted Prices in
Active Markets
for Identical
Assets (Level I)		Significant
Other
Observable
Inputs (Level 2)		Significant
Unobservable
Inputs (Level 3)		Balance at
end of period
March 31, 2022
Real estate investments, net$— $4,700 $— $4,700 
Other assets (1)— — — — 
December 31, 2021
Real estate investments, net$— $6,956 $— $6,956 
Other assets (1)— — — — 
(1) Includes collateral dependent notes receivable, which are presented within "Other assets" in the accompanying consolidated balance sheets.
DescriptionQuoted Prices in
Active Markets
for Identical
Assets (Level I)		 Significant
Other
Observable
Inputs (Level 2)		 Significant
Unobservable
Inputs (Level 3)		 Balance at
end of period
        
Investment in a direct financing lease, net$—
 $—
 $35,807
 $35,807


As discussed further in Note 6,4, during the ninethree months ended September 30, 2017,March 31, 2022, the Company recorded an impairment charge of $4.4 million related to real estate investments, net on 1 of its properties. Additionally, during the year ended December 31, 2021, the Company recorded impairment charges totaling $10.2charges of $2.7 million relatedrelated to real estate investments, net on 2 of its investment in a direct financing lease, net.properties. Management estimated the fair values of this investmentthese investments taking into account various factors including independent appraisals, input from an outside brokerpurchase offers, shortened hold periods and current market conditions. The Company determined, based on the inputs, that itsthe valuation of the investment wasthese properties with purchase offers were classified within Level 32 of the fair value hierarchy as many of the assumptions are not observable. During the three months ended September 30, 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, net during the three months ended September 30, 2017.measured at fair value.

Fair Value of Financial Instruments
The following methods and assumptions were used by the Company to estimate the fair value of each class of financial instruments at September 30, 2017March 31, 2022 and December 31, 2016:2021:


Mortgage notes receivable and related accrued interest receivable:
The fair value of the Company’s mortgage notes and related accrued interest receivable is estimated by discounting the future cash flows of each instrument using current market rates. At September 30, 2017,March 31, 2022, the Company had a carrying value of $370.0 million in fixed rate mortgage notes receivable outstanding, including
21

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

At December 31, 2021, the Company had a carrying value of $972.4$370.2 million in fixed rate mortgage notes receivable outstanding, including related accrued interest, with a weighted average interest rate of approximately 8.40%9.04%. The fixed rate mortgage notes bear interest at rates of 7.00%7.01% to 11.31%11.96%. Discounting the future cash flows for fixed rate mortgage notes receivable using rates of 7.00%7.50% to 12.00%9.25%, management estimates the fair value of the fixed rate mortgage notes receivable to be approximately $1.0 billion$400.1 million with an estimated weighted average market rate of 8.53% at September 30, 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 $648.5 million with an estimated weighted average market rate of 8.48%8.05% at December 31, 2016.2021.

Investment in a direct financing lease, net:
At September 30, 2017, the Company had an investment in a direct financing lease with a carrying value of $57.7 million, and with a weighted average effective interest rate of 11.98%. At September 30, 2017, the investment in a direct financing lease bears interest at effective rates of 11.90% to 12.38%. The carrying value of the $57.7 million investment in a direct financing lease approximated the fair market value at September 30, 2017.

At December 31, 2016, the Company had an investment in a direct financing lease 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 a direct financing lease bears interest at effective interest rates of 11.79% to 12.38%. The carrying value of the investment in a direct financing lease 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 is estimated by discounting the future cash flows of each instrument using current market rates. At September 30, 2017,March 31, 2022, the Company had a carrying value of $25.0 million in variable rate debt outstanding with an average interest rate of approximately 0.55%. The carrying value of the variable rate debt outstanding approximated the fair value at March 31, 2022.

At December 31, 2021, the Company had a carrying value of $595.0$25.0 million in variable rate debt outstanding with a weighted average interest rate of approximately 2.42%0.15%. The carrying value of the variable rate debt outstanding approximated the fair market value at September 30, 2017.

At December 31, 2016, the Company had a carrying value of $375.0 million in variable rate debt outstanding with a weighted average interest rate of approximately 3.23%. The carrying value of the variable rate debt outstanding approximated the fair market value at December 31, 2016.2021.


At September 30, 2017both March 31, 2022 and December 31, 2016, $300.02021, the $25.0 million of variable rate debt outstanding, under the Company's unsecured term loan facilitydiscussed above, had been effectively converted to a fixed rate through April 5, 2019 by interest rate swap agreements. See Note 10 for additional information related to the Company's interest rate swap agreements.


At September 30, 2017,March 31, 2022, the Company had a carrying value of $2.43$2.82 billion in fixed rate long-term debt outstanding with a weighted average interest rate of approximately 5.15%4.34%. Discounting the future cash flows for fixed rate debt using September 30, 2017March 31, 2022 market rates of 2.89%4.21% to 4.92%, management estimates the fair value of the fixed rate debt to be approximately $2.75 billion with an estimated weighted average market rate of 4.69% at March 31, 2022.

At December 31, 2021, the Company had a carrying value of $2.82 billion in fixed rate long-term debt outstanding with an average weighted interest rate of approximately 4.34%. Discounting the future cash flows for fixed rate debt using December 31, 2021 market rates of 2.25% to 4.56%, management estimates the fair value of the fixed rate debt to be approximately $2.54$2.93 billion with an estimated weighted average market rate of 3.96% at September 30, 2017.

At December 31, 2016, the Company had a carrying value of $2.14 billion in fixed rate long-term 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%3.43% at December 31, 2016.2021.



11.
22

12. Earnings Per Share


The following table summarizes the Company’s computation of basic and diluted earnings per share (EPS) for the three and nine months ended September 30, 2017March 31, 2022 and 20162021 (amounts in thousands except per share information):
 Three Months Ended March 31, 2022
 Income
(numerator)		Shares
(denominator)		Per Share
Amount
Basic EPS:
Net income$42,192 
Less: preferred dividend requirements(6,033)
Net income available to common shareholders$36,159 74,843 $0.48 
Diluted EPS:
Net income available to common shareholders$36,159 74,843 
Effect of dilutive securities:
Share options and performance shares— 204 
Net income available to common shareholders$36,159 75,047 $0.48 
 Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
 
Income
(numerator)
 
Shares
(denominator)
 
Per Share
Amount
 Income
(numerator)		 Shares
(denominator)		 Per Share
Amount
Basic EPS:           
Income from continuing operations$62,954
     $197,405
    
Less: preferred dividend requirements(5,951)     (17,855)    
Net income available to common shareholders$57,003
 73,663
 $0.77
 $179,550
 70,320
 $2.55
Diluted EPS:           
Net income available to common shareholders$57,003
 73,663
   $179,550
 70,320
  
Effect of dilutive securities:           
Share options—
 61
   —
 65
  
Net income available to common shareholders$57,003
 73,724
 $0.77
 $179,550
 70,385
 $2.55


 Three Months Ended March 31, 2021
 Income
(numerator)		Shares
(denominator)		Per Share
Amount
Basic EPS:
Net income$3,380 
Less: preferred dividend requirements(6,034)
Net loss available to common shareholders$(2,654)74,627 $(0.04)
Diluted EPS:
Net loss available to common shareholders$(2,654)74,627 
Effect of dilutive securities:
Share options and performance shares— — 
Net loss available to common shareholders$(2,654)74,627 $(0.04)

 Three Months Ended September 30, 2016 Nine Months Ended September 30, 2016
 Income
(numerator)		 Shares
(denominator)		 Per Share
Amount		 Income
(numerator)		 Shares
(denominator)		 Per Share
Amount
Basic EPS:           
Income from continuing operations$57,526
     $166,841
    
Less: preferred dividend requirements(5,951)     (17,855)    
Net income available to common shareholders$51,575
 63,627
 $0.81
 $148,986
 63,296
 $2.35
Diluted EPS:           
Net income available to common shareholders$51,575
 63,627
   $148,986
 63,296
  
Effect of dilutive securities:           
Share options—
 120
   —
 97
  
Net income available to common shareholders$51,575
 63,747
 $0.81
 $148,986
 63,393
 $2.35
The effect of the potential common shares from the conversion of the Company’s convertible preferred shares and from the exercise of share options are included in diluted earnings per share if the effect is dilutive. Potential common shares from the performance shares are included in diluted earnings per share upon the satisfaction of certain performance and market conditions. These conditions are evaluated at each reporting period and if the conditions have been satisfied during the reporting period, the number of contingently issuable shares are included in the computation of diluted earnings per share.


The additional 2.1 millionfollowing shares have an anti-dilutive effect and 2.0are therefore excluded from the calculation of diluted earnings per share:
•The additional 2.2 million common shares that would result from the conversion of the Company’s 5.75% Series C cumulative convertible preferred shares and the corresponding add-back of the preferred dividends declared on those shares for both the three months ended March 31, 2022 and 2021.
•The additional 1.61.7 million common shares that would result from the conversion of the Company’s 9.0% Series E cumulative convertible preferred shares and the corresponding add-back of the preferred dividends declared on those shares are not included in the calculation of diluted earnings per share for both the three and nine months ended September 30, 2017March 31, 2022 and 2016, respectively, because the effect is anti-dilutive.2021.

The dilutive effect of potential common shares from the exercise of share options is included in diluted earnings per share for the three and nine months ended September 30, 2017 and 2016. However,•Outstanding options to purchase 789 thousand shares of common shares at per share prices ranging from $61.79$44.44 to $76.63 were outstanding for the three months ended September 30, 2017, but were not included in the computation of diluted earnings per share because they were anti-dilutive. For the three months ended September 30, 2016, there were no anti-dilutive options. OptionsMarch 31, 2022.
•Outstanding options to purchase 5114 thousand and 84 thousand shares of common shares respectively at per share prices ranging from $61.79$44.44 to $76.63 and $61.79 were outstanding for the ninethree months ended September 30, 2017March 31, 2021.
23

•The effect of 102 thousand contingently issuable performance shares granted during 2021 for the three months ended March 31, 2021.
•The effect of 56 thousand contingently issuable performance shares granted during 2020 for the three months ended March 31, 2022 and 2016, respectively, but were not included in the computation of diluted earnings per share because they were anti-dilutive.2021.



12.
13. Equity Incentive PlanPlans


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 1,950,0003,950,000 common shares, options to purchase common shares and restricted share units, subject to adjustment in the event of certain capital events, may be granted. Additionally, the 2020 Long Term Incentive Plan (2020 LTIP) is a sub-plan under the Company's 2016 Equity Incentive Plan. Under the 2020 LTIP, the Company awards performance shares and restricted shares to the Company's executive officers. At September 30, 2017,March 31, 2022, there were 1,633,001were 2,022,200 shares available for grant under the 2016 Equity Incentive Plan.


Share Options

Share options granted under the 2007 Equity Incentive Plan and the 2016 Equity Incentive Plan 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, and for employees typically become exercisable at a rate of 25% per year over a four-year period.years. The Company generally issues new common shares upon option exercise. A summary of the Company’s share option activity and related information is as follows:
 Number of
options		Option price
per share		Weighted avg.
exercise price
Outstanding at December 31, 2021108,671 $44.44 — $76.63 $56.79 
Exercised(9,799)44.62 — 47.15 46.30 
Outstanding at March 31, 202298,872 $44.44 — $76.63 $57.83 
 
Number of
options
 
Option price
per share
 
Weighted avg.
exercise price
Outstanding at December 31, 2016285,986
 $19.02
 —
 $61.79
 $51.93
Exercised(28,281) 46.86
 —
 61.79
 54.72
Granted2,215
 76.63
 —
 76.63
 76.63
Forfeited/Expired(1,342) 51.64
 —
 61.79
 59.52
Outstanding at September 30, 2017258,578
 $19.02
 —
 $76.63
 $51.80

The weighted average fair value of options granted was $7.91 $20.34 during the ninethree months ended September 30, 2017. ThereMarch 31, 2021. No options were no options granted during the ninethree months ended September 30, 2016.March 31, 2022. The intrinsic value of stockshare options exercised was $0.5 million and $3.4 million$38 thousand for the ninethree months ended September 30, 2017 and 2016, respectively. Additionally, the Company repurchased 21,260 shares into treasury shares in conjunction with the stockMarch 31, 2022. No options were exercised during the ninethree months ended September 30, 2017 with a total value of $1.5 million. At September 30, 2017, stock-option expense to be recognized in future periods was $0.5 million.March 31, 2021.


The expense related to share options included in the determination of net income for the nine months ended September 30, 2017 and 2016 was $0.5 million and $0.7 million, respectively. The following assumptions were used in applying the Black-Scholes option pricing model at the grant dates for the nine months ended September 30, 2017: risk-free interest rate of 2.1%, dividend yield of 5.4%, volatility factors in the expected market price of the Company’s common shares of 22.0%, 0.74% expected forfeiture rate and an expected life of approximately six years. The Company uses historical data to estimate 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.

The following table summarizes outstanding options at September 30, 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
 1.6
    
20.00 - 29.99 —
 —
    
30.00 - 39.99 1,428
 2.3
    
40.00 - 49.99 86,863
 4.3
    
50.00 - 59.99 75,939
 6.1
    
60.00 - 69.99 81,036
 7.4
    
70.00 - 76.63 2,215
 9.4
    
  258,578
 5.7
 $51.80
 $4,654


The following table summarizesand exercisable options at September 30, 2017:March 31, 2022:
Options outstandingOptions exercisable
Exercise price rangeOptions outstandingWeighted avg. life remainingWeighted avg. exercise priceAggregate intrinsic value (in thousands)Options exercisableWeighted avg. life remainingWeighted avg. exercise priceAggregate intrinsic value (in thousands)
$44.44 - 49.9911,510 5.110,132 2.0
50.00 - 59.9931,008 2.331,008 2.3
60.00 - 69.9952,198 4.350,754 3.6
70.00 - 76.634,156 5.83,671 5.7
98,872 3.8$57.83 $176 95,565 3.1$57.77 $162 
Exercise price range 
Options
outstanding
 
Weighted avg.
life  remaining
 
Weighted avg.
exercise price
 
Aggregate  intrinsic
value (in thousands)
$ 19.02 - 19.99 11,097
 1.6
    
20.00 - 29.99 —
 —
    
30.00 - 39.99 1,428
 2.3
    
40.00 - 49.99 86,863
 4.3
    
50.00 - 59.99 51,276
 6.0
    
60.00 - 69.99 38,375
 7.4
    
70.00 - 76.63 —
 —
    
  189,039
 5.2
 $49.28
 $3,868


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, 2021478,554 $56.57 
Granted243,286 46.65 
Vested(215,096)59.97 
Forfeited(2,176)46.98 
Outstanding at March 31, 2022504,568 $50.38 1.37
24

 
Number  of
shares
 
Weighted avg.
grant  date
fair value
 
Weighted avg.
life remaining
Outstanding at December 31, 2016534,317
 $59.22
  
Granted295,754
 76.53
  
Vested(208,822) 57.43
  
Forfeited(1,342) 66.88
  
Outstanding at September 30, 2017619,907
 $68.07
 1.21
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. The fair value of the nonvested shares that vested was $15.0$10.2 million and $9.2and $6.5 million for the ninethree months ended September 30, 2017March 31, 2022 and 2016,2021, respectively. At September 30, 2017,March 31, 2022, unamortized share-based compensation expense related to nonvested shares was $24.2$15.4 million.


Nonvested Performance Shares
A summary of the Company's nonvested performance share activity and related information is as follows:
Target Number of
Performance Shares
Outstanding at December 31, 2021158,776 
Granted98,610 
Outstanding at March 31, 2022257,386 

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

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

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

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

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

25

Restricted Share Units
A summary of the Company’s restricted share unit activity and related information is as follows:
Number of
shares		Weighted avg.
grant date
fair value		Weighted avg.
life remaining
Outstanding at December 31, 202143,306 $49.15 
Granted2,794 46.61 
Vested— — 
Outstanding at March 31, 202246,100 $49.15 0.17
 
Number  of
shares
 
Weighted avg.
grant date
fair value
 
Weighted avg.
life remaining
Outstanding at December 31, 201615,805
 $70.93
  
Granted19,030
 70.91
  
Vested(15,805) 70.93
  
Outstanding at September 30, 201719,030
 $70.91
 0.58


The holders of restricted share units receive dividend equivalents from 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. At September 30, 2017,March 31, 2022, unamortized share-based compensation expense related to restrictedrestricted share units was $0.8$0.4 million.



13.
14. Operating Leases

The Company’s real estate investments are leased under operating leases. In addition to its lessor arrangements on its real estate investments, as of both March 31, 2022 and December 31, 2021, the Company was lessee in 51 operating ground leases. The Company's tenants, who are generally sub-tenants under these ground leases, are responsible for paying the rent under these ground leases. As of March 31, 2022, rental revenue from several of the Company's tenants, who are also sub-tenants under the ground leases, is being recognized on a cash basis. In most cases, the ground lease sub-tenants have continued to pay the rent under these ground leases. In addition, 2 of these properties do not currently have sub-tenants. In the event the tenant fails to pay the ground lease rent or if the property does not have sub-tenants, the Company is primarily responsible for the payment, assuming the Company does not sell or re-tenant the property. The Company is also the lessee in an operating lease of its executive office.

The following table summarizes rental revenue, including sublease arrangements and lease costs, for the three months ended March 31, 2022 and 2021 (in thousands):
Three Months Ended March 31,
Classification20222021
Operating leasesRental revenue$133,828 $97,672 
Sublease income - operating ground leasesRental revenue5,775 4,942 
Lease costs
Operating ground lease costProperty operating expense$5,969 $5,413 
Operating office lease costGeneral and administrative expense226 226 

15. Segment Information

The Company groups its investments into 2 reportable operating segments: Experiential and Education.

The financial information summarized below is presented by reportable operating segment (in thousands):
Balance Sheet Data:
As of March 31, 2022
ExperientialEducationCorporate/UnallocatedConsolidated
Total Assets$4,983,264 $500,369 $334,437 $5,818,070 
As of December 31, 2021
ExperientialEducationCorporate/UnallocatedConsolidated
Total Assets$4,995,241 $505,086 $300,823 $5,801,150 

26

Operating Data:
Three Months Ended March 31, 2022
ExperientialEducationCorporate/UnallocatedConsolidated
Rental revenue$129,025 $10,578 $— $139,603 
Other income9,210 — 95 9,305 
Mortgage and other financing income8,334 230 — 8,564 
Total revenue146,569 10,808 95 157,472 
Property operating expense13,693 (7)253 13,939 
Other expense8,097 — — 8,097 
Total investment expenses21,790 (7)253 22,036 
Net operating income - before unallocated items124,779 10,815 (158)135,436 
Reconciliation to Consolidated Statements of Income (Loss) and Comprehensive Income:
General and administrative expense(13,224)
Interest expense, net(33,260)
Transaction costs(2,247)
Credit loss benefit306 
Impairment charges(4,351)
Depreciation and amortization(40,044)
Equity in loss from joint ventures(106)
Income tax expense(318)
Net income42,192 
Preferred dividend requirements(6,033)
Net income available to common shareholders of EPR Properties$36,159 
Operating Data:
Three Months Ended March 31, 2021
ExperientialEducationCorporate/UnallocatedConsolidated
Rental revenue$93,276 $9,338 $— $102,614 
Other income329 — 349 678 
Mortgage and other financing income8,141 332 — 8,473 
Total revenue101,746 9,670 349 111,765 
Property operating expense14,992 82 239 15,313 
Other expense2,552 — — 2,552 
Total investment expenses17,544 82 239 17,865 
Net operating income - before unallocated items84,202 9,588 110 93,900 
Reconciliation to Consolidated Statements of Income (Loss) and Comprehensive Income:
General and administrative expense(11,336)
Costs associated with loan refinancing or payoff(241)
Interest expense, net(39,194)
Transaction costs(548)
Credit loss benefit2,762 
Depreciation and amortization(40,326)
Equity in loss from joint ventures(1,431)
Gain on sale of real estate201 
Income tax expense(407)
Net income3,380 
Preferred dividend requirements(6,034)
Net loss available to common shareholders of EPR Properties$(2,654)


27

16. Other Commitments and Contingencies


As of September 30, 2017,March 31, 2022, the Company had 15 development projects with commitments to fund an aggregate of approximately $202.4 million of commitments to fund development projects including 34 entertainment development projects for which it had commitments to fund approximately $97.0 million, nine education development projects for which it had commitments to fund approximately $40.9 million, and six recreation development projects for which it had commitments to fund approximately $64.5$105.2 million. Development costs are advanced by the Company in periodic draws. If the Company determines that construction is not being completed in accordance with the terms of the development agreement, it can discontinue funding construction draws. The Company has agreed to lease the properties to the operators at pre-determined rates upon completion of construction.

Additionally as of September 30, 2017, the Company had a commitment to fund approximately $155.0 million over the next three years, of which $22.3 million had been funded, to complete an indoor waterpark hotel and adventure park at the Adelaar casino and resort project in Sullivan County, New York. The Company is also responsible for the construction of the casino and resort project 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. The Company 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 nine months ended September 30, 2017. The Company expects to receive an additional $21.0 million of reimbursements over the balance of the construction period. Construction of infrastructure improvements is currently expected to be completed in 2018.


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 the occurrence of events outside of its direct control. As of September 30, 2017,March 31, 2022, the Company had eight2 mortgage notes receivable with commitments totaling approximately $25.7$11.8 million. If commitments are funded in the future, interest will be charged at rates consistent with the existing investments.


The Company has provided guarantees of the payment of certain economic development revenue bonds totaling $24.9 million related to two theatres in Louisiana for which the Company earns a fee at annual rates of 2.88% to 4.00% over the 30-year terms of the related bonds. The Company recorded $10.4 million as a deferred asset included in other assets and $10.4 million included in other liabilities in the accompanying consolidated balance sheet as of September 30, 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 itsthe Company's development projects and related infrastructure, certain public agencies require posting of surety bonds to guarantee that the Company's obligations are satisfied. These bonds expire upon the completion of the improvements or infrastructure. As of September 30, 2017,March 31, 2022, the Company had six4 surety bonds outstanding totaling $24.3$33.3 million.


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 the Company acquired the Adelaar resort property (the Cappelli Group), commenced litigation against the Company beginning in 2011 regarding matters relating to the acquisition of that property and the Company's relationship with the 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 by 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. 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 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.

14. Segment Information

The Company groups investments into four reportable operating segments: Entertainment, Education, Recreation and Other. The financial information summarized below is presented by reportable operating segment:
Balance Sheet Data:
  As of September 30, 2017
  EntertainmentEducationRecreationOtherCorporate/UnallocatedConsolidated
Total Assets $2,343,778
$1,489,459
$2,057,172
$193,766
$48,835
$6,133,010
        
  As of December 31, 2016
  EntertainmentEducationRecreationOtherCorporate/UnallocatedConsolidated
Total Assets $2,168,669
$1,308,288
$1,120,498
$202,394
$65,173
$4,865,022


Operating Data:       
  Three Months Ended September 30, 2017
  EntertainmentEducationRecreationOtherCorporate/UnallocatedConsolidated
Rental revenue $66,888
$21,478
$32,171
$2,290
$—
$122,827
Tenant reimbursements 3,733
1
—
—
—
3,734
Other income 2
—
—
—
520
522
Mortgage and other financing income 1,151
9,023
14,140
—
—
24,314
Total revenue 71,774
30,502
46,311
2,290
520
151,397
        
Property operating expense 5,680
119
29
327
185
6,340
Total investment expenses 5,680
119
29
327
185
6,340
Net operating income - before unallocated items 66,094
30,383
46,282
1,963
335
145,057
        
Reconciliation to Consolidated Statements of Income:    
General and administrative expense    (12,070)
Costs associated with loan refinancing or payoff   (1,477)
Interest expense, net      (34,194)
Transaction costs      (113)
Depreciation and amortization   (34,694)
Equity in income from joint ventures    35
Gain on sale of real estate   997
Income tax expense   (587)
Net income   62,954
Preferred dividend requirements   (5,951)
Net income available to common shareholders of EPR Properties$57,003


Operating Data:       
  Three Months Ended September 30, 2016
  EntertainmentEducationRecreationOtherCorporate/UnallocatedConsolidated
Rental revenue $64,134
$19,900
$15,958
$2,290
$—
$102,282
Tenant reimbursements 3,816
5
—
—
—
3,821
Other income 8
—
1,825
—
643
2,476
Mortgage and other financing income 1,294
7,319
8,384
34
—
17,031
Total revenue 69,252
27,224
26,167
2,324
643
125,610
        
Property operating expense 5,228
—
—
233
165
5,626
Total investment expenses 5,228
—
—
233
165
5,626
Net operating income - before unallocated items 64,024
27,224
26,167
2,091
478
119,984
        
Reconciliation to Consolidated Statements of Income:    
General and administrative expense    (9,091)
Costs associated with loan refinancing or payoff   (14)
Interest expense, net      (24,265)
Transaction costs      (2,947)
Depreciation and amortization    (27,601)
Equity in income from joint ventures   203
Gain on sale of real estate   1,615
Income tax expense      (358)
Net income   57,526
Preferred dividend requirements  (5,951)
Net income available to common shareholders of EPR Properties$51,575


Operating Data:       
  Nine Months Ended September 30, 2017
  EntertainmentEducationRecreationOtherCorporate/UnallocatedConsolidated
Rental revenue $197,441
$66,168
$78,854
$6,870
$—
$349,333
Tenant reimbursements 11,423
1
—
—
—
11,424
Other income 614
1
—
—
1,903
2,518
Mortgage and other financing income 3,426
26,440
35,150
—
—
65,016
Total revenue 212,904
92,610
114,004
6,870
1,903
428,291
        
Property operating expense 17,060
151
86
1,020
445
18,762
Total investment expenses 17,060
151
86
1,020
445
18,762
Net operating income - before unallocated items 195,844
92,459
113,918
5,850
1,458
409,529
        
Reconciliation to Consolidated Statements of Income:    
General and administrative expense    (33,787)
Costs associated with loan refinancing or payoff   (1,491)
Gain on early extinguishment of debt   977
Interest expense, net      (97,853)
Transaction costs      (388)
Impairment charges   (10,195)
Depreciation and amortization    (95,919)
Equity in income from joint ventures   86
Gain on sale of real estate    28,462
Income tax expense      (2,016)
Net income   197,405
Preferred dividend requirements    (17,855)
Net income available to common shareholders of EPR Properties$179,550



Operating Data:       
  Nine Months Ended September 30, 2016
  EntertainmentEducationRecreationOtherCorporate/UnallocatedConsolidated
Rental revenue $185,530
$54,797
$45,443
$6,345
$—
$292,115
Tenant reimbursements 11,570
7
—
—
—
11,577
Other income 222
—
3,635
—
1,955
5,812
Mortgage and other financing income 4,927
25,228
22,650
102
—
52,907
Total revenue 202,249
80,032
71,728
6,447
1,955
362,411
        
Property operating expense 15,815
—
8
419
445
16,687
Other expense —
—
—
5
—
5
Total investment expenses 15,815
—
8
424
445
16,692
Net operating income - before unallocated items 186,434
80,032
71,720
6,023
1,510
345,719
        
Reconciliation to Consolidated Statements of Income:    
General and administrative expense    (27,309)
Costs associated with loan refinancing or payoff   (905)
Interest expense, net      (70,310)
Transaction costs      (4,881)
Depreciation and amortization    (79,222)
Equity in income from joint ventures   501
Gain on sale of real estate    3,885
Income tax expense      (637)
Net income   166,841
Preferred dividend requirements    (17,855)
Net income available to common shareholders of EPR Properties$148,986









15. Condensed Consolidating Financial Statements

A portion of the Company's subsidiaries have guaranteed the Company’s indebtedness under the Company's unsecured credit facilities and existing senior unsecured notes. The guarantees are joint and several, full and unconditional and subject to customary release provisions. The following summarizes the Company’s condensed consolidating information as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016 (in thousands):
Condensed Consolidating Balance Sheet
As of September 30, 2017
 
EPR Properties 
(Issuer)
 
Wholly  Owned
Subsidiary
Guarantors
 
Non-
Guarantor
Subsidiaries
 
Consolidated
Elimination
 Consolidated
Assets         
Rental properties, net$—
 $3,640,225
 $895,769
 $—
 $4,535,994
Land held for development—
 12,402
 21,272
 —
 33,674
Property under development—
 236,916
 47,295
 —
 284,211
Mortgage notes and related accrued interest receivable—
 963,738
 8,633
 —
 972,371
Investment in a direct financing lease, net—
 57,698
 —
 —
 57,698
Investment in joint ventures—
 —
 5,616
 —
 5,616
Cash and cash equivalents8,788
 1,472
 1,152
 —
 11,412
Restricted cash395
 23,599
 329
 —
 24,323
Accounts receivable, net675
 89,230
 9,308
 —
 99,213
Intercompany notes receivable—
 179,589
 —
 (179,589) —
Investments in subsidiaries5,892,529
 —
 —
 (5,892,529) —
Other assets26,485
 32,417
 49,596
 —
 108,498
Total assets$5,928,872
 $5,237,286
 $1,038,970
 $(6,072,118) $6,133,010
Liabilities and Equity         
Liabilities:         
Accounts payable and accrued liabilities$58,308
 $65,910
 $16,364
 $—
 $140,582
Dividends payable30,997
 —
 —
 —
 30,997
Unearned rents and interest—
 69,615
 15,583
 —
 85,198
Intercompany notes payable—
 —
 179,589
 (179,589) —
Debt2,951,259
 —
 36,666
 —
 2,987,925
Total liabilities3,040,564
 135,525
 248,202
 (179,589) 3,244,702
Total equity2,888,308
 5,101,761
 790,768
 (5,892,529) 2,888,308
Total liabilities and equity$5,928,872
 $5,237,286
 $1,038,970
 $(6,072,118) $6,133,010

Condensed Consolidating Balance Sheet
As of December 31, 2016
 
EPR
Properties 
(Issuer)
 
Wholly  Owned
Subsidiary
Guarantors
 
Non-
Guarantor
Subsidiaries
 
Consolidated
Elimination
 Consolidated
Assets         
Rental properties, net$—
 $3,164,622
 $431,140
 $—
 $3,595,762
Land held for development—
 1,258
 21,272
 —
 22,530
Property under development1,010
 247,239
 48,861
 —
 297,110
Mortgage notes and related accrued interest receivable—
 612,141
 1,837
 —
 613,978
Investment in a direct financing lease, net—
 102,698
 —
 —
 102,698
Investment in joint ventures—
 —
 5,972
 —
 5,972
Cash and cash equivalents16,586
 1,157
 1,592
 —
 19,335
Restricted cash365
 8,352
 1,027
 —
 9,744
Accounts receivable, net556
 89,145
 9,238
 —
 98,939
Intercompany notes receivable—
 179,589
 —
 (179,589) —
Investments in subsidiaries4,521,095
 —
 —
 (4,521,095) —
Other assets21,768
 23,068
 54,118
 —
 98,954
Total assets$4,561,380
 $4,429,269
 $575,057
 $(4,700,684) $4,865,022
Liabilities and Equity         
Liabilities:         
Accounts payable and accrued liabilities$63,431
 $52,061
 $4,266
 $—
 $119,758
Dividends payable26,318
 —
 —
 —
 26,318
Unearned rents and interest—
 46,647
 773
 —
 47,420
Intercompany notes payable—
 —
 179,589
 (179,589) —
Debt2,285,730
 —
 199,895
 —
 2,485,625
Total liabilities2,375,479
 98,708
 384,523
 (179,589) 2,679,121
Total equity2,185,901
 4,330,561
 190,534
 (4,521,095) 2,185,901
Total liabilities and equity$4,561,380
 $4,429,269
 $575,057
 $(4,700,684) $4,865,022



Condensed Consolidating Statement of Income
Three Months Ended September 30, 2017
 
EPR Properties 
(Issuer)
 
Wholly  Owned
Subsidiary
Guarantors
 
Non-
Guarantor
Subsidiaries
 
Consolidated
Elimination
 Consolidated
Rental revenue$—
 $97,398
 $25,429
 $—
 $122,827
Tenant reimbursements—
 1,274
 2,460
 —
 3,734
Other income—
 1
 521
 —
 522
Mortgage and other financing income232
 23,960
 122
 —
 24,314
Intercompany fee income732
 —
 —
 (732) —
Interest income on intercompany notes receivable—
 2,580
 —
 (2,580) —
Total revenue964
 125,213
 28,532
 (3,312) 151,397
Equity in subsidiaries’ earnings100,527
 —
 —
 (100,527) —
Property operating expense—
 3,434
 2,906
 —
 6,340
Intercompany fee expense—
 —
 732
 (732) —
General and administrative expense—
 9,830
 2,240
 —
 12,070
Costs associated with loan refinancing or payoff1,474
 —
 3
 —
 1,477
Interest expense, net36,364
 (2,368) 198
 —
 34,194
Interest expense on intercompany notes payable—
 —
 2,580
 (2,580) —
Transaction costs113
 —
 —
 —
 113
Depreciation and amortization232
 26,633
 7,829
 —
 34,694
Income before equity in income from joint ventures and other items63,308
 87,684
 12,044
 (100,527) 62,509
Equity in income from joint ventures—
 —
 35
 —
 35
Gain on sale of real estate—
 997
 —
 —
 997
Income before income taxes63,308
 88,681
 12,079
 (100,527) 63,541
Income tax expense(354) —
 (233) —
 (587)
Net income62,954
 88,681
 11,846
 (100,527) 62,954
Preferred dividend requirements(5,951) —
 —
 —
 (5,951)
Net income available to common shareholders of EPR Properties$57,003
 $88,681
 $11,846
 $(100,527) $57,003
Comprehensive income$64,175
 $88,681
 $12,694
 $(101,375) $64,175

Condensed Consolidating Statement of Income
Three Months Ended September 30, 2016
 
EPR
Properties 
(Issuer)
 
Wholly  Owned
Subsidiary
Guarantors
 
Non-
Guarantor
Subsidiaries
 
Consolidated
Elimination
 Consolidated
Rental revenue$—
 $89,178
 $13,104
 $—
 $102,282
Tenant reimbursements—
 1,338
 2,483
 —
 3,821
Other income—
 1,829
 647
 —
 2,476
Mortgage and other financing income286
 16,692
 53
 —
 17,031
Intercompany fee income677
 —
 —
 (677) —
Interest income on intercompany notes receivable—
 2,460
 —
 (2,460) —
Total revenue963
 111,497
 16,287
 (3,137) 125,610
Equity in subsidiaries’ earnings84,755
 —
 —
 (84,755) —
Property operating expense—
 2,916
 2,710
 —
 5,626
Intercompany fee expense—
 —
 677
 (677) —
General and administrative expense—
 7,927
 1,164
 —
 9,091
Costs associated with loan refinancing or payoff—
 14
 —
 —
 14
Interest expense, net24,414
 (2,395) 2,246
 —
 24,265
Interest expense on intercompany notes payable—
 —
 2,460
 (2,460) —
Transaction costs2,947
 —
 —
 —
 2,947
Depreciation and amortization449
 23,768
 3,384
 —
 27,601
Income before equity in income from joint ventures and other items57,908
 79,267
 3,646
 (84,755) 56,066
Equity in income from joint ventures—
 —
 203
 —
 203
Gain on sale of real estate—
 1,615
 —
 —
 1,615
Income before income taxes57,908
 80,882
 3,849
 (84,755) 57,884
Income tax (expense) benefit(382) —
 24
 —
 (358)
Income from continuing operations57,526
 80,882
 3,873
 (84,755) 57,526
Net income57,526
 80,882
 3,873
 (84,755) 57,526
Preferred dividend requirements(5,951) —
 —
 —
 (5,951)
Net income available to common shareholders of EPR Properties$51,575
 $80,882
 $3,873
 $(84,755) $51,575
Comprehensive income$58,739
 $80,882
 $2,440
 $(83,322) $58,739














Condensed Consolidating Statement of Income
Nine Months Ended September 30, 2017
 
EPR Properties 
(Issuer)
 
Wholly  Owned
Subsidiary
Guarantors
 
Non-
Guarantor
Subsidiaries
 
Consolidated
Elimination
 Consolidated
Rental revenue$—
 $285,977
 $63,356
 $—
 $349,333
Tenant reimbursements—
 3,955
 7,469
 —
 11,424
Other income—
 614
 1,904
 —
 2,518
Mortgage and other financing income696
 64,103
 217
 —
 65,016
Intercompany fee income2,094
 —
 —
 (2,094) —
Interest income on intercompany notes receivable—
 7,435
 —
 (7,435) —
Total revenue2,790
 362,084
 72,946
 (9,529) 428,291
Equity in subsidiaries’ earnings300,631
 —
 —
 (300,631) —
Property operating expense—
 9,756
 9,006
 —
 18,762
Intercompany fee expense—
 —
 2,094
 (2,094) —
General and administrative expense—
 28,112
 5,675
 —
 33,787
Costs associated with loan refinancing or payoff1,474
 —
 17
 —
 1,491
Gain on early extinguishment of debt—
 —
 (977) —
 (977)
Interest expense, net102,424
 (7,482) 2,911
 —
 97,853
Interest expense on intercompany notes payable—
 —
 7,435
 (7,435) —
Transaction costs388
 —
 —
 —
 388
Impairment charges—
 10,195
 —
 —
 10,195
Depreciation and amortization662
 76,594
 18,663
 —
 95,919
Income before equity in income from joint ventures and other items198,473
 244,909
 28,122
 (300,631) 170,873
Equity in income from joint ventures—
 —
 86
 —
 86
Gain on sale of real estate—
 27,344
 1,118
 —
 28,462
Income before income taxes198,473
 272,253
 29,326
 (300,631) 199,421
Income tax expense(1,068) —
 (948) —
 (2,016)
Net income197,405
 272,253
 28,378
 (300,631) 197,405
Preferred dividend requirements(17,855) —
 —
 —
 (17,855)
Net income available to common shareholders of EPR Properties$179,550
 $272,253
 $28,378
 $(300,631) $179,550
Comprehensive income$200,590
 $272,253
 $28,998
 $(301,251) $200,590












Condensed Consolidating Statement of Income
Nine Months Ended September 30, 2016
 
EPR Properties 
(Issuer)
 
Wholly  Owned
Subsidiary
Guarantors
 
Non-
Guarantor
Subsidiaries
 
Consolidated
Elimination
 Consolidated
Rental revenue$—
 $251,900
 $40,215
 $—
 $292,115
Tenant reimbursements—
 4,059
 7,518
 —
 11,577
Other income—
 3,648
 2,164
 —
 5,812
Mortgage and other financing income710
 48,370
 3,827
 —
 52,907
Intercompany fee income2,018
 —
 —
 (2,018) —
Interest income on intercompany notes receivable—
 7,297
 —
 (7,297) —
Total revenue2,728
 315,274
 53,724
 (9,315) 362,411
Equity in subsidiaries’ earnings240,420
 —
 —
 (240,420) —
Property operating expense—
 8,135
 8,552
 —
 16,687
Intercompany fee expense—
 —
 2,018
 (2,018) —
Other expense—
 —
 5
 —
 5
General and administrative expense—
 23,318
 3,991
 —
 27,309
Costs associated with loan refinancing or payoff—
 353
 552
 —
 905
Interest expense, net69,042
 (5,596) 6,864
 —
 70,310
Interest expense on intercompany notes payable—
 —
 7,297
 (7,297) —
Transaction costs4,778
 —
 103
 —
 4,881
Depreciation and amortization1,338
 67,516
 10,368
 —
 79,222
Income before equity in income from joint ventures and other items167,990
 221,548
 13,974
 (240,420) 163,092
Equity in income from joint ventures—
 —
 501
 —
 501
Gain on sale of real estate—
 3,885
 —
 —
 3,885
Income before income taxes167,990
 225,433
 14,475
 (240,420) 167,478
Income tax (expense) benefit(1,149) —
 512
 —
 (637)
Net income166,841
 225,433
 14,987
 (240,420) 166,841
Preferred dividend requirements(17,855) —
 —
 —
 (17,855)
Net income available to common shareholders of EPR Properties$148,986
 $225,433
 $14,987
 $(240,420) $148,986
Comprehensive income$165,917
 $225,433
 $15,391
 $(240,824) $165,917



Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 30, 2017
 
EPR
Properties 
(Issuer)
 
Wholly  Owned
Subsidiary
Guarantors
 
Non-Guarantor
Subsidiaries
 Consolidated
Intercompany fee income (expense)$2,094
 $—
 $(2,094) $—
Interest income (expense) on intercompany receivable/payable—
 7,435
 (7,435) —
Net cash (used) provided by other operating activities(95,174) 332,846
 62,636
 300,308
Net cash (used) provided by operating activities(93,080) 340,281
 53,107
 300,308
Investing activities:      
Acquisition of rental properties and other assets(1,012) (297,658) (55,607) (354,277)
Proceeds from sale of real estate203
 107,022
 29,242
 136,467
Investment in mortgage notes receivable—
 (123,060) (7,016) (130,076)
Proceeds from mortgage note receivable paydown—
 16,608
 —
 16,608
Investment in promissory notes receivable—
 (1,868) —
 (1,868)
Proceeds from promissory notes receivable paydown—
 1,599
 —
 1,599
Proceeds from insurance recovery—
 579
 —
 579
Additions to property under development(725) (289,810) (13,549) (304,084)
Advances to subsidiaries, net(402,145) 246,622
 155,523
 —
Net cash (used) provided by investing activities(403,679) (339,966) 108,593
 (635,052)
Financing activities:       
Proceeds from debt facilities and senior unsecured notes1,175,000
 —
 —
 1,175,000
Principal payments on debt(505,000) —
 (162,091) (667,091)
Deferred financing fees paid(14,001) —
 (206) (14,207)
Costs associated with loan refinancing or payoff (cash portion)—
 —
 (7) (7)
Net proceeds from issuance of common shares68,552
 —
 —
 68,552
Purchase of common shares for treasury for vesting(6,729) —
 —
 (6,729)
Dividends paid to shareholders(228,861) —
 —
 (228,861)
Net cash provided (used) by financing activities488,961
 —
 (162,304) 326,657
Effect of exchange rate changes on cash—
 —
 164
 164
Net (decrease) increase in cash and cash equivalents(7,798) 315
 (440) (7,923)
Cash and cash equivalents at beginning of the period16,586
 1,157
 1,592
 19,335
Cash and cash equivalents at end of the period$8,788
 $1,472
 $1,152
 $11,412






Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 30, 2016
 
EPR
Properties 
(Issuer)
 
Wholly  Owned
Subsidiary
Guarantors
 
Non-Guarantor
Subsidiaries
 Consolidated
Intercompany fee income (expense)$2,018
 $—
 $(2,018) $—
Interest income (expense) on intercompany receivable/payable—
 7,297
 (7,297) —
Net cash (used) provided by other operating activities(74,550) 254,721
 35,602
 215,773
Net cash (used) provided by operating activities(72,532) 262,018
 26,287
 215,773
Investing activities:      
Acquisition of rental properties and other assets(180) (175,075) (2,107) (177,362)
Proceeds from sale of real estate—
 19,175
 1,476
 20,651
Investment in mortgage note receivable—
 (80,786) —
 (80,786)
Proceeds from mortgage note receivable paydown—
 44,556
 19,320
 63,876
Investment in promissory notes receivable—
 (66) —
 (66)
Proceeds from sale of infrastructure related to issuance of revenue bonds—
 43,462
 —
 43,462
Proceeds from insurance recovery—
 2,635
 401
 3,036
Proceeds from sale of investments in a direct financing lease, net—
 825
 —
 825
Additions to property under development(181) (282,554) (6,152) (288,887)
Investment in (repayment of) intercompany notes payable—
 (2,063) 2,063
 —
Advances to subsidiaries, net(203,471) 231,048
 (27,577) —
Net cash used by investing activities(203,832) (198,843) (12,576) (415,251)
Financing activities:       
Proceeds from debt facilities840,000
 —
 14,360
 854,360
Principal payments on debt(496,000) (63,727) (27,382) (587,109)
Deferred financing fees paid(3,020) —
 (27) (3,047)
Costs associated with loan refinancing or payoff (cash portion)—
 —
 (482) (482)
Net proceeds from issuance of common shares142,452
 —
 —
 142,452
Impact of stock option exercises, net(717) —
 —
 (717)
Purchase of common shares for treasury for vesting(4,211) —
 —
 (4,211)
Dividends paid to shareholders(198,678) —
 —
 (198,678)
Net cash provided (used) by financing activities279,826
 (63,727) (13,531) 202,568
Effect of exchange rate changes on cash—
 —
 (62) (62)
Net increase (decrease) in cash and cash equivalents3,462
 (552) 118
 3,028
Cash and cash equivalents at beginning of the period1,089
 1,289
 1,905
 4,283
Cash and cash equivalents at end of the period$4,551
 $737
 $2,023
 $7,311

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


The following discussion should be read in conjunction with the Consolidated Financial Statementsconsolidated financial statements and Notesnotes thereto included in this Quarterly Report on Form 10-Q of EPR Properties (the “Company”, “EPR”, “we” or “us”). The forward-looking statements included in this discussion and elsewhere in this Quarterly Report on Form 10-Q involve risks and uncertainties, including anticipated financial performance, anticipated liquidity and capital resources, business prospects, industry trends, shareholder returns, performance of leases by tenants, performance on loans to customers and other matters, which reflect management's best judgment based on factors currently known. See “Cautionary Statement Concerning Forward-Looking Statements” which is incorporated herein by reference. Actual results and experience could differ materially from the anticipated results and other expectations expressed in our forward-looking statements as a result of a number of factors, including but not limited to those discussed in Part II, Item 1A - "Risk Factors" in this Quarterly Report on Form 10-Q and Item 1A - “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 20162021 filed with the SEC on March 1, 2017.February 23, 2022.


Overview


Business

Our principal business objective is to enhance shareholder value by achieving predictable and increasing Funds From Operations As Adjusted ("FFO"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.

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


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


28

Historically, our primary challenges have been locating suitable properties, negotiating favorable lease or financing terms (on new or existing properties), and managing our portfolio as we have continued to grow. We believe our management’s knowledge and industry relationships have facilitated opportunities for us to acquire, finance and lease properties. Our business is subject to a number of risks and uncertainties, including those described in Part II, Item 1A - "Risk Factors" in this Quarterly Report on Form 10-Q and Item 1A - “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 20162021 filed with the SEC on March 1, 2017.February 23, 2022.


We group our investments into four reportable operating segments: Entertainment, Education, Recreation and Other. As of September 30, 2017,March 31, 2022, our total assets were approximately $6.1approximately $5.8 billion (after accumulated depreciation of approximately $0.7$1.2 billion) which included investments in each of our four operating segments with properties located in 4344 states the District of Columbia and Ontario, Canada.

Our Entertainment segment included investments in 147 megaplex theatre properties, seven entertainment retail centers (which include seven additional megaplex theatre properties) and nine family entertainment centers. Our portfolio of owned entertainment properties consisted of 12.8 million square feet and was 99% leased, including megaplex theatres that were 100% leased.
Our Education segment included investments in 69 public charter school properties, 15 private schools and 63 early education centers. Our portfolio of owned education properties consisted of 4.3 million square feet and was 98% leased.
Our Recreation segment included investments in 26 ski areas, 20 attractions, 28 golf entertainment complexes and seven other recreation facilities. Our portfolio of owned recreation properties was 100% leased.

Our Other segment consisted primarily of land under ground lease, property under development and land held for development related to the Adelaar casino and resort project in Sullivan County, New York.

The combined owned portfolio consisted of 20.0 million square feet and was 99% leased. As of September 30, 2017, we had a total of approximately $284.2 million invested in property under development.

Our total investments (a non-GAAP financial measure) were approximately $6.7$6.5 billion at September 30, 2017. We define total investments as the sum of the carrying values of rental properties and rental properties held for sale (before accumulated depreciation), land held for development, property under development, mortgage notes receivable (including related accrued interest receivable), investment in a direct financing lease, net, investment in joint ventures, intangible assets, gross (before accumulated amortization and included in other assets) and notes receivable and related accrued interest receivable (included in other assets). Total investments is a non-GAAP financial measure.March 31, 2022. See "Non-GAAP Financial Measures" for the calculation of total investments and reconciliation of total investments to "Total assets" in the consolidated balance sheet at September 30, 2017March 31, 2022 and December 31, 2016.
Of2021. We group our investments into two reportable segments, Experiential and Education. As of March 31, 2022, our Experiential investments comprised $5.9 billion, or 91%, and our Education investments comprised $0.6 billion, or 9%, of our total investmentsinvestments.

As of $6.7 billion at September 30, 2017, $2.9 billionMarch 31, 2022, our Experiential segment (excluding property under development and undeveloped land inventory) consisted of the following property types (owned or 43% related tofinanced):
•175 theatre properties;
•57 eat & play properties (including seven theatres located in entertainment districts);
•18 attraction properties;
•11 ski properties;
•eight experiential lodging properties;
•one gaming property;
•three cultural properties; and
•eight fitness & wellness properties.

As of March 31, 2022, our Entertainment segment, $1.5 billion or 22% related toowned Experiential real estate portfolio consisted of approximately 19.4 million square feet, which was 96.0% leased and included $10.9 million in property under development and $20.2 million in undeveloped land inventory.

As of March 31, 2022, our Education segment $2.1 billionconsisted of the following property types (owned or 32% relatedfinanced):
•65 early childhood education center properties; and
•nine private school properties.

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

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

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

As of March 31, 2022, we had no properties closed due to COVID-19 restrictions. The continuing impact of the COVID-19 pandemic on our business will depend on several factors, including, but not limited to, the scope,
29

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

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

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

•We continued to recognize revenue on a cash basis for certain tenants including American-Multi Cinema, Inc. ("AMC") and $179.0Regal Cinemas ("Regal"), a subsidiary of Cineworld Group.
•As of March 31, 2022, we have deferred amounts due from tenants of approximately $17.4 million that are booked as receivables. Additionally, we have amounts due from tenants that were not booked as receivables because the full amounts were not deemed probable of collection as a result of the COVID-19 pandemic. The amounts not booked as receivables remain obligations of the tenants and will be recognized as revenue when any such amounts are received. During the three months ended March 31, 2022, we collected $1.6 million in deferred rent from cash basis tenants and from tenants for which the deferred payments were not previously recognized as revenue. In addition, during the three months ended March 31, 2022, we collected $10.2 million of deferred rent and interest from accrual basis tenants and borrowers that reduced related accounts and interest receivable. The repayment terms for all of these deferments vary by tenant.

While deferments for this and future periods delay rent or 3%mortgage payments, these deferments generally do not release customers from the obligation to pay the deferred amounts in the future. Deferred rent amounts are reflected in our financial statements as accounts receivable if collection is determined to be probable or will be recognized when received as variable lease payments if collection is determined to not be probable, while deferred mortgage payments are reflected as mortgage notes and related accrued interest receivable, less any allowance for credit loss. Certain agreements with tenants where remaining lease terms are extended, or other changes are made that do not qualify for the treatment in the Financial Accounting Standards Board ("FASB") Staff Q&A on Topic 842 and Topic 840: Accounting for Lease Concessions Related to our Other segment.the Effects of the COVID-19 Pandemic, are treated as lease modifications. In these circumstances upon an executed lease modification, if the tenant is not being recognized on a cash basis, the contractual rent reflected in accounts receivable and the straight-line rent receivable will be amortized over the remaining term of the lease against rental revenue. In limited cases, tenants may be entitled to the abatement of rent during governmentally imposed prohibitions on business operations which is recognized in the period to which it relates, or we may provide rent concessions to tenants. In cases where we provide concessions to tenants to which they are not otherwise entitled, those amounts are recognized in the period in which the concession is granted unless the changes are accounted for as lease modifications.


Operating Results

Our total revenue, net income (loss) available to common shareholders per diluted share and Funds From Operations As Adjusted ("FFOAA") per diluted share (a non-GAAP financial measure) are detailed below for the three and nine months ended September 30, 2017March 31, 2022 and 20162021 (in millions, except per share information):
30

 Three Months Ended September 30,  Nine Months Ended September 30, 
 20172016Increase 20172016Increase
Total revenue (1)$151.4
$125.6
21 % $428.3
$362.4
18%
Net income available to common shareholders per diluted share (2)0.77
0.81
-5 % 2.55
2.35
9%
FFOAA per diluted share (3)1.26
1.23
2 % 3.73
3.56
5%
Three Months Ended March 31,
20222021Change
Total revenue$157.5 $111.8 41 %
Net income (loss) available to common shareholders per diluted share0.48 (0.04)1,300 %
FFOAA per diluted share1.10 0.48 129 %


(1) Total revenueThe major factors impacting our results for the three and nine months ended September 30, 2017 versusMarch 31, 2022, as compared to the three and nine months ended September 30, 2016 was favorably impacted by theMarch 31, 2021 were as follows:
•The increase in rental revenue due to an increase in contractual rental payments from cash basis tenants and from tenants which were previously receiving abatements;
•The effect of investment spending, 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 three and nine months ended September 30, 2017 versus the three and nine months ended September 30, 2016 was unfavorably impacted by property acquisitions as well as dispositions and note payoffs that occurred in 20172022 and 2016,2021;
•The change in other income and other expenses primarily due to the government-required closure of the Kartrite Resort and Indoor Waterpark in Sullivan County, New York due to the COVID-19 pandemic in mid-March of 2020 and the re-opening of this property in July of 2021;
•The decrease in interest expense due to the repayment of our unsecured term loan facility and revolving credit facility as well as lower gains related to insurance claims. Total revenue forexiting the nine months ended September 30, 2016 was favorably impacted by a $3.6 million prepayment feecovenant relief period in July of 2021 which caused higher interest rates on certain debt;
•A decrease in equity in loss from the early payoff of a mortgage note secured by a public charter school property.joint ventures; and

(2) Net income available to common shareholders per diluted share for the three and nine months ended September 30, 2017 versus the three and nine months ended September 30, 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 three and nine months ended September 30, 2017 versus the three and nine months ended September 30, 2016 was favorably impacted by lower transaction costs. Net income available to common shareholders per diluted share for the three and nine months ended September 30, 2017 versus the three and nine months ended September 30, 2016 was unfavorably impacted by increases•The increase in interest expense, costs associated with loan refinancing or payoff,impairment charges, general and administrative expense bad debt expense and 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 nine months ended September 30, 2017 versus the nine months ended September 30, 2016 was favorably impacted by higher gains on sale of real estate and a gain on early extinguishment of debt recognized in 2017. Net

income available to common shareholders per diluted share for the nine months ended September 30, 2017 versus the nine months ended September 30, 2016 was unfavorably impactedtransaction costs offset by a $10.2 million impairment charge recognizeddecrease in 2017 and an increase in income tax expense.credit loss benefit.


(3) FFOAA per diluted share forFor further detail on items impacting our operating results, see the three and nine months ended September 30, 2017 versus the three and nine months ended September 30, 2016 was favorably impacted by the effectsection 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 termination fees recognized with the exercise of tenant purchase options. FFOAA per diluted share for the three and nine months ended September 30, 2017 versus the three and nine months ended September 30, 2016 was unfavorably impacted by increases in interest expense, general and administrative expense, bad debt expense and 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. FFOAA per diluted share for the nine months ended September 30, 2016 was favorably impacted by a $3.6 million prepayment fee from the early payoff of a mortgage note secured by a public charter school property.

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


Critical Accounting Policies and Estimates


The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related notes. In preparing these financial statements, management has made its best estimates and assumptions that affect the reported assets and liabilities.liabilities and the reported amounts of revenues and expenses during the reporting period. The most significant assumptions and estimates relate to consolidation, revenue recognition, depreciable lives of the real estate, the valuation of real estate, accounting for real estate acquisitions, estimating reserves for uncollectibleassessing the collectibility of receivables and the accounting forcredit loss related to mortgage and other notes receivable, all of which are described as our critical accounting policies in our Annual Report on Form 10-K for the year ended December 31, 2016.receivable. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates. A summary of critical accounting policies is included in our Annual Report on Form 10-K for the year ended December 31, 2021. For the ninethree months ended September 30, 2017,March 31, 2022, there were no changes to critical accounting policies except as noted below.policies.


Accounting for 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 application of the guidance permitted. We have elected to early adopt ASU 2017-01as of January 1, 2017. As a result, we expect that fewer of our real estate acquisitions will be accounted for as business combinations.

Costs incurred for asset acquisitions and development properties, including transaction costs, are capitalized. For asset acquisitions, we allocate the purchase price and other related costs incurred to the real estate assets acquired based on recent independent appraisals or methods similar to those used by independent appraisers and management judgment. Acquisition-related costs in connection with 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 income as transaction costs.


Recent Developments


Debt FinancingInvestment Spending

During the nine months ended September 30, 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 nine months ended September 30, 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 offOur investment spending during the three months ended September 30, 2017 and are included in costs associated with loan refinancing. At September 30, 2017, the we had $170.0 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 three months ended September 30, 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.

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 4.500% Senior Notes due 2027, 4.750% Senior Notes due 2026, 4.500% Senior Notes due 2025, 5.250% Senior Notes due 2023, 5.750% Senior Notes dueMarch 31, 2022 and 7.750% 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.

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 our unsecured term loan facility from November 6, 2017 to April 4, 2019 and on $350.0 million of the unsecured term loan facility from April 5, 2019 to February 7, 2022.

Issuance of Common Shares

During the nine months ended September 30, 2017, we issued an aggregate of 928,219 common shares under the direct share purchase component of our Dividend Reinvestment and Direct Share Purchase Plan ("DSPP") for total net proceeds of $67.9 million. These proceeds were used to pay down a portion of our unsecured revolving credit facility.

During the nine months ended September 30, 2017, we also issued 8,851,264 common shares in connection with our transaction with CNL Lifestyle and OZRE.

Investment Spending

Our investment spending during the nine months ended September 30, 2017 totaled $1.5 billion, and included investments in each of our four operating segments.

Entertainment investment spending during the nine months ended September 30, 2017 totaled $264.9 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.

Education investment spending during the nine months ended September 30, 2017 totaled $238.7 million, including spending on build-to-suit development and redevelopment of public charter schools, early education centers and private schools, as well as $38.3 million in acquisitions of seven early education centers and two public charter schools and an investment of $95.5 million in mortgage notes receivable.

Recreation investment spending during the nine months ended September 30, 2017 totaled $951.6 million, 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 areas, $51.9 million in acquisitions of five other recreation facilities, and an investment of $10.7 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 $6.82021 totaled $24.4 million and one waterpark for approximately $2.5 million. No gain or loss was recognized on these sales. See Note 4 for further information.


Other investment spending during the nine months ended September 30, 2017 totaled $1.0$52.1 million, respectively, and was related to the Adelaar casino and resort project in Sullivan County, New York.

The following table details our investment spending by category during the nine months ended September 30, 2017 and 2016is detailed below (in thousands):
31

Nine Months Ended September 30, 2017
Operating Segment Total Investment Spending New Development Re-development Asset Acquisition  Mortgage Notes or Notes Receivable
Entertainment $264,889
 $48,180
 $55,549
 $154,144
 $7,016
Education 238,667
 104,842
 —
 38,293
 95,532
Recreation 951,574
 146,530
 585
 531,638
 272,821
Other 1,002
 1,002
 —
 —
 —
Total Investment Spending $1,456,132
 $300,554
 $56,134
 $724,075
 $375,369
           
Nine Months Ended September 30, 2016
Operating Segment Total Investment Spending New Development Re-development Asset Acquisition Mortgage Notes or Notes Receivable
Entertainment $198,228
 $24,512
 $25,710
 $126,006
 $22,000
Education 187,305
 167,747
 —
 8,379
 11,179
Recreation 140,017
 90,505
 1,836
 —
 47,676
Other 1,313
 1,313
 —
 —
 —
Total Investment Spending $526,863
 $284,077
 $27,546
 $134,385
 $80,855
Three Months Ended March 31, 2022
Operating SegmentTotal Investment SpendingNew DevelopmentRe-developmentAsset Acquisition Mortgage Notes or Notes ReceivableInvestment in Joint Ventures
Experiential:
Theatres$45 $5 $40 $— $— $— 
Eat & Play2,899 2,793 106 — — — 
Attractions300 — 300 — — — 
Experiential Lodging1,256 309 299 — — 648 
Cultural5 — 5 — — — 
Fitness & Wellness19,858 — — 19,858 — — 
Total Experiential24,363 3,107 750 19,858 — 648 
Education:
Total Education— — — — — — 
Total Investment Spending$24,363 $3,107 $750 $19,858 $— $648 
Three Months Ended March 31, 2021
Operating SegmentTotal Investment SpendingNew DevelopmentRe-developmentAsset Acquisition Mortgage Notes or Notes ReceivableInvestment in Joint Ventures
Experiential:
Theatres$2,440 $2,382 $58 $— $— $— 
Eat & Play30,847 4,061 111 26,675 — — 
Attractions14 — 14 — — — 
Ski1,013 — — — 1,013 — 
Experiential Lodging11,993 6,680 3,688 — — 1,625 
Cultural4,383 — 4 — 4,379 — 
Fitness & Wellness1,423 — — — 1,423 — 
Total Experiential52,113 13,123 3,875 26,675 6,815 1,625 
Education:
Total Education— — — — — — 
Total Investment Spending$52,113 $13,123 $3,875 $26,675 $6,815 $1,625 

The above amounts include $110 thousand and $129 thousand in capitalized payroll, $7.8$0.2 million and $8.0$0.6 million in capitalized interest for the three months ended March 31, 2022 and $3.2 million2021, respectively, and $1.2 million$51 thousand and $25 thousand in capitalized other general and administrative direct project costs for the ninethree months ended September 30, 2017March 31, 2022 and 2016,2021, respectively. Excluded from the table above is approximately $3.7$1.4 million and $3.1$0.8 million of maintenance capital expenditures for the nine months ended September 30, 2017 and 2016, respectively. In addition, excluded from the table above is $17.1 million of infrastructureother spending for the Adelaar casino and resort project for the ninethree months ended September 30, 2016.March 31, 2022 and 2021, respectively.


Property DispositionsImpairment charges

During the nine months ended September 30, 2017, we completed the sale of four entertainment properties for net proceeds totaling $72.3 million. In connection with these sales, we recognized a gain on sale of $19.4 million.

During the nine months ended September 30, 2017, pursuant to tenant purchase options, we completed the sale of five public charter schools located in Colorado, Arizona and Utah for net proceeds totaling $44.8 million. In connection with these sales, we recognized a gain on sale of $7.2 million. Additionally, we completed the sale of two other education facilities for net proceeds of $9.8 million. In connection with these sales, we recognized a gain on sale of $1.9 million.

Mortgage Notes Receivable

During the nine months ended September 30, 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. In connection with the partial prepayment of this note, we received a prepayment fee of $800.0 thousand, which is being recognized over the term of the remaining note using the effective interest method.

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 help in this process and part of their feedback included the need for additional lease term on these assets. During the three months ended September 30, 2017,March 31, 2022, we entered into revised lease terms with Imagine which reduced rental paymentsreceived an offer to purchase a recently vacated property. As a result, we reassessed the expected holding period of the property and determined that the lease term on six properties. In exchange for loweringestimated cash flows were not sufficient to recover the existing annual cash payments by approximately $0.5 million and reducingcarrying value of 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.property. Accordingly, we recordedrecognized an impairment charge of $9.6$4.4 million duringon the nine months ended September 30, 2017, which included an allowance for lease lossreal estate investment of $7.3 million and an impairment charge of $2.3 million related to the estimated unguaranteed residual value.this property.


Additionally, during the nine months ended September 30, 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 nine months ended September 30, 2017.
32

Early Childhood Education Tenant Update


As previously disclosed, the cash flow of one of our early childhood education tenants has been negatively impacted by challenges brought on by its rapid expansion and related ramp up to stabilization. We are currently negotiating a restructuring which has been complicated by the impact of recent extreme weather events and the tenant having multiple landlords. However, we believe we have made significant progress. We have accrued rent for this tenant during 2017 at levels that approximate our estimate of the final restructured reduced rent amounts which are expected to be made effective as of the beginning of 2017. Accrued rent and property taxes, less rent payments received, resulted in accounts receivable of approximately $5.4 million at September 30, 2017. Additionally, we have accrued straight-line rent receivable related to this tenant of approximately $9.0 million at September 30, 2017. In October 2017, we terminated nine leases with the tenant, seven of which have completed construction and two of which are unimproved land. There were only $64 thousand outstanding receivables related to these properties and such amounts were fully reserved at September 30, 2017. The tenant continues to operate these properties (other than the two unimproved properties) as a holdover tenant. We will continue to consider whether these and other properties should be leased to other operators based on results of the restructuring process.
Results of Operations


Three months ended September 30, 2017March 31, 2022 compared to three months ended September 30, 2016

Rental revenue was $122.8 million for the three months ended September 30, 2017 compared to $102.3 million forMarch 31, 2021

Analysis of Revenue

The following table summarizes our total revenue (dollars in thousands):
Three Months Ended March 31,
20222021Change
Minimum rent (1)$130,275 $94,190 $36,085 
Percentage rent (2)3,443 2,030 1,413 
Straight-line rent595 1,289 (694)
Tenant reimbursements5,001 4,822 179 
Other rental revenue289 283 6 
Total Rental Revenue$139,603 $102,614 $36,989 
Other income (3)9,305 678 8,627 
Mortgage and other financing income8,564 8,473 91 
Total revenue$157,472 $111,765 $45,707 

(1) For the three months ended September 30, 2016. ThisMarch 31, 2022 compared to the three months ended March 31, 2021, the increase in minimum rent resulted primarily from $23.5an increase of $35.1 million ofrelated to rental revenue on existing properties including improved collections of rent being recognized on a cash basis and from tenants which were previously receiving abatements, as well as scheduled rent increases. In addition, there was an increase in minimum rent of $2.5 million related to property acquisitions and developments completed in 20172022 and 2016, including our transaction with CNL Lifestyle which closed on April 6, 2017,2021. This was partially offset by a decrease of $3.0 million in rental revenue due primarily toof $1.5 million from property dispositions. Percentage rents of $2.2 million and $1.7 million were recognized during the three months ended September 30, 2017 and 2016, respectively. Straight-line rents of $2.4 million and $4.6 million were recognized during the three months ended September 30, 2017 and 2016, respectively.


During the three months ended September 30, 2017, we renewed 19March 31, 2022, there were no significant lease agreementsrenewals on approximately 1.6 million square feet and funded or agreed to fund an average of $22.58 per square footexisting properties.

(2) The increase in tenant improvements. We experienced an increase of approximately 16.43% in rental rates and paid no leasing commissions with respect to these lease renewals.

Other income was $0.5 millionpercentage rent (amounts above base rent) for the three months ended September 30, 2017March 31, 2022 compared to $2.5 million for the three months ended September 30, 2016. The $2.0 million decreaseMarch 31, 2021 was due primarily to higher percentage rent recognized from our gaming and golf entertainment tenants as well as one cultural tenant. This increase was partially offset by less percentage rent recognized from one early childhood education center tenant due to a gain from an insurance claim recognized during the three months ended September 30, 2016.restructured lease having higher base rents in 2022.


Mortgage and(3) The increase in other financing income for the three months ended September 30, 2017 was $24.3 millionMarch 31, 2022 compared to $17.0 millionthe three months ended March 31, 2021 related primarily to an increase in operating income as a result of the re-opening of the Kartrite Resort, which was previously closed due to the COVID-19 pandemic. Additionally, during the three months ended March 31, 2022 the increase in other income was the result of increased operating income from two theatre properties and a gain on insurance recovery.

33

Analysis of Expenses and Other Line Items

The following table summarizes our expenses and other line items (dollars in thousands):
Three Months Ended March 31,
20222021Change
Property operating expense$13,939 $15,313 $(1,374)
Other expense (1)8,097 2,552 5,545 
General and administrative expense (2)13,224 11,336 1,888 
Costs associated with loan refinancing or payoff— 241 (241)
Interest expense, net (3)33,260 39,194 (5,934)
Transaction costs (4)2,247 548 1,699 
Credit loss benefit (5)(306)(2,762)2,456 
Impairment charges (6)4,351 — 4,351 
Depreciation and amortization40,044 40,326 (282)
Equity in loss from joint ventures (7)(106)(1,431)1,325 
Gain on sale of real estate— 201 (201)
Income tax expense(318)(407)89 
Preferred dividend requirements(6,033)(6,034)1 
(1) The increase in other expense for the three months ended September 30, 2016. The $7.3 millionMarch 31, 2022 compared to the three months ended March 31, 2021 related primarily to an increase in operating expenses as a result of the re-opening of the Kartrite Resort, which was primarilypreviously closed due to additional real estate lending activities during 2017 and 2016, including our investmentthe COVID-19 pandemic as well as increases in a mortgage note receivable with OZRE secured by 14 ski properties which closed on April 6, 2017. This increase was partially offset by the sale of nine public charter school properties that were accounted for as direct financing leases during 2016.
Our property operating expenses totaled $6.3 millionfrom two theatre properties.
(2) The increase in general and administrative expense for the three months ended September 30, 2017 compared to $5.6 million for the three months ended September 30, 2016. These property operating expenses arise from the operations of our retail centers and other specialty properties. The $0.7 million increase resulted primarily from an increase in bad debt expense, as well as higher property operating expenses at our multi-tenant properties.
Our general and administrative expense totaled $12.1 million for the three months ended September 30, 2017 compared to $9.1 million for the three months ended September 30, 2016. The increase of $3.0 million primarilyMarch 31, 2022 related to an increase in payroll and benefitsbenefit costs including share based compensation, as well as an increaseprofessional fees and travel expenses.
(3) The decrease in professional fees.
Costs associated with loan refinancing or payoffinterest expense, net for the three months ended September 30, 2017 was $1.5 million and were relatedMarch 31, 2022 compared to the amendment to our unsecured revolving credit facility and term loan. Costs associated with loan refinancing or payoff for the three months ended September 30, 2016 was $14 thousand and related to fees associated with the repayment of secured fixed rate mortgage notes payable.
Our net interest expense increased by $9.9 million to $34.2 million for the three months ended September 30, 2017March 31, 2021, resulted primarily from $24.3 million for the three months ended September 30, 2016. This increase resulted from an increasea decrease in average borrowings used to finance our real estate acquisitions and fund our mortgage notes receivable.

Transaction costs totaled $0.1 million for the three months ended September 30, 2017 compared to $2.9 million for the three months ended September 30, 2016. The decrease of $2.8 million was due to a decrease in potential and terminated transactions as well as our early adoption of ASU 2017-01.

Depreciation and amortization expense totaled $34.7 million for the three months ended September 30, 2017 compared to $27.6 million for the three months ended September 30, 2016. The $7.1 million increase resulted primarily from 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 $1.0 million for the three months ended September 30, 2017 and related to the exercise of a tenant purchase option on a public charter school property. Gain on sale of real estate was $1.6 million for the three months ended September 30, 2016 and related to the exercise of a tenant purchase option on one of our public charter school properties and the sale of a parcel of land adjacent to one of our megaplex theatres.

Nine Months Ended September 30, 2017 compared to nine months ended September 30, 2016

Rental revenue was $349.3 million for the nine months ended September 30, 2017 compared to $292.1 million for the nine months ended September 30, 2016. This increase resulted primarily from $58.4 million of rental revenue related to property acquisitions and developments completed in 2017 and 2016, including our transaction with CNL Lifestyle which closed on April 6, 2017, partially offset by a decrease of $1.2 million in rental revenue due primarily to property dispositions. Percentage rents of $4.7 million and $2.7 million were recognized during the nine months ended September 30, 2017 and 2016, respectively. Straight-line rents of $11.4 million and $10.9 million were recognized during the nine months ended September 30, 2017 and 2016, respectively.


During the nine months ended September 30, 2017, we renewed 26 lease agreements on approximately 2.2 million square feet and funded or agreed to fund an average of $27.20 per square foot in tenant improvements. We experienced an increase of approximately 15.23% in rental rates and paid no leasing commissions with respect to these lease renewals.
Other income was $2.5 million for the nine months ended September 30, 2017 compared to $5.8 million for the nine months ended September 30, 2016. The $3.3 million decrease was primarily due to a higher gain from an insurance claim recognized during the nine months ended September 30, 2016.

Mortgage and other financing income for the nine months ended September 30, 2017 was $65.0 million compared to $52.9 million for the nine months ended September 30, 2016. The $12.1 million increase 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 $3.6 million prepayment fee we received in conjunction with the full prepayment of one mortgage note receivable during the nine months ended September 30, 2016, as well as the sale of nine public charter school properties that were accounted for as direct financing leases during 2016.
Our property operating expenses totaled $18.8 million for the nine months ended September 30, 2017 compared to $16.7 million for the nine months ended September 30, 2016. These property operating expenses arise from the operations of our retail centers and other specialty properties. The $2.1 million increase resulted primarily from an increase in bad debt expense, as well as higher property operating expenses at our multi-tenant properties.
Our general and administrative expense totaled $33.8 million for the nine months ended September 30, 2017 compared to $27.3 million for the nine months ended September 30, 2016. The increase of $6.5 million primarily related to an increase in payroll and benefits costs, including share based compensation, as well as an increase in professional fees.
Costs associated with loan refinancing or payoff for the nine months ended September 30, 2017 was $1.5 million and related to the amendment to our unsecured revolving credit facility and term loan and the prepayment of secured fixed rate mortgage notes payable. Costs associated with loan refinancing or payoff for the nine months ended September 30, 2016 was $0.9 million and related to fees associated with the repayment of secured fixed rate mortgage notes payable and the write off of prepaid mortgage fees in conjunction with our borrowers' prepayment of two mortgage notes receivable.
Gain on early extinguishment of debt for the nine months ended September 30, 2017 was $1.0 million and related 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 nine months ended September 30, 2016.
Our net interest expense increased by $27.6 million to $97.9 million for the nine months ended September 30, 2017 from $70.3 million for the nine months ended September 30, 2016. This increase resulted from an increase in average borrowings as well as an increase in the weighted average interest rate used to finance our real estate acquisitions and fund our mortgage notes receivable.on outstanding debt.


Transaction(4) The increase in transaction costs totaled $0.4 million for the ninethree months ended September 30, 2017March 31, 2022 compared to $4.9 million for the ninethree months ended September 30, 2016. The decrease of $4.5 millionMarch 31, 2021 was due to an increase in costs related to terminated transactions.

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

(6) Impairment charges recognized during the three months ended March 31, 2022 related to one recently vacated property that we intend to sell and we determined that the cash flows were not sufficient to recover the carrying value.
(7) The decrease in potential and terminated transactions as well as our early adoption of ASU 2017-01.

Impairment charges for the nine months ended September 30, 2017 totaled $10.2 million andequity in loss from joint ventures related primarily to six charter schoolmore income recognized at two experiential lodging properties previously includedlocated in our investment in a direct financing lease. There were no impairment charges for the nine months ended September 30, 2016. See Note 6 for further information.

Depreciation and amortization expense totaled $95.9 million for the nine months ended September 30, 2017 compared to $79.2 million for the nine months ended September 30, 2016. The $16.7 million increase resulted primarily from acquisitions and developments completed in 2017 and 2016, including our transaction with CNL Lifestyle which closed on April 6, 2017.St. Petersburg, Florida. This increase was partially offset by property dispositions.


Gain on sale of real estate was $28.5 million for the nine months ended September 30, 2017 and related to the sale of four entertainment properties, the exercise of five tenant purchase options on public charter school properties and the sale of two other education properties. Gain on sale of real estate was $3.9 million for the nine months ended September 30, 2016 and related to the exercise of two tenant purchase options on public charter school properties and the sale of a parcel of land adjacent to a megaplex theatre.

Income tax expense was $2.0 million for the nine months ended September 30, 2017 compared to $0.6 million for the nine months ended September 30, 2016 and related primarily to Canadian income taxes onlosses recognized at our Canadian trust and Federal income taxes on our taxable REIT subsidiaries, as well as state income taxes and withholding tax for distributions related to our unconsolidated joint venture projectedexperiential lodging property located in China. The $1.4 million increaseWarrens, Wisconsin which was acquired in expense related primarily to the reversalAugust of a valuation allowance associated with the taxable REIT subsidiaries, deferred tax assets recorded in the nine months ended September 30, 2016, as well as higher deferred tax expense in 2017 related to our Canadian trust.2021.


Liquidity and Capital Resources


Cash and cash equivalentsequivalents were $11.4$323.8 million at September 30, 2017.March 31, 2022. In addition, we had restricted cash of $24.3$3.0 million at September 30, 2017.March 31, 2022. Of the restricted cash at September 30, 2017, $20.6March 31, 2022, $1.9 million related to cash held for our borrowers’ debt service reserves for mortgage notes receivable or tenants' off-season rent reserves and $3.6$1.1 million related to escrow deposits required for property management agreements or held for potential acquisitions and redevelopments. The remaining $0.1 million was required in connection with our debt outstanding and related to debt service, payment of real estate taxes and capital improvements.


34

Mortgage Debt, Senior Notes and Unsecured Revolving Credit Term Loan Facility and Equity Issuances

At September 30, 2017,March 31, 2022, we had total debt outstandingoutstanding of $3.0$2.8 billion, of which 99% was unsecured.unsecured.


At September 30, 2017,March 31, 2022, we had outstanding $2.1outstanding $2.5 billion in aggregateaggregate principal amount of unsecured senior notes (excluding the private placement notes discussed below) ranging in interest rates from 4.50%3.60% to 7.75%4.95%. The notes contain various covenants, including: (i) a limitation on incurrence of any debt whichthat 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.


On September 27, 2017,At March 31, 2022, we amended and restatedhad no outstanding balance under our $1.0 billion unsecured revolving credit and term loan facilities. We also amended our private placement notes. See "Recent Developments" for further discussion.
At September 30, 2017, we had $170.0 million outstanding under ourfacility. Our unsecured revolving credit facility is governed by the terms of a Third Amended, Restated and Consolidated Credit Agreement, dated as of October 6, 2021 (the "Third Consolidated Credit Agreement"). The facility will mature on October 6, 2025. We have two options to extend the maturity date of the facility by an additional six months each (for a total of 12 months), subject to paying additional fees and the absence of any default. The facility provides for an initial maximum principal amount of borrowing availability of $1.0 billion with $830.0 millionan "accordion" feature under which we may increase the total maximum principal amount available by $1.0 billion, to a total of availability and with$2.0 billion, subject to lender consent. The unsecured revolving credit facility bears interest at a floating rate of LIBOR plus 100 basis points,1.20% (based on our unsecured debt ratings and with a LIBOR floor of zero), which was 2.24%1.66% at September 30, 2017.March 31, 2022. Additionally, the facility fee on the revolving credit facility is 0.25%.


At September 30, 2017, the unsecured term loan facility had a balance of $400.0 million with interest at a floating rate of LIBOR plus 110 basis points, which was 2.34% at September 30, 2017, and $300.0 million of this LIBOR-based debt has been fixed with interest rate swaps at a blended rate of 2.64% through April 5, 2019. The loan matures on February 27, 2023.

On OctoberMarch 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 the unsecured term loan facility from November 6, 2017 to April 4, 2019 and on $350.0 million of the unsecured facility from April 5, 2019 to February 27, 2022.



At September 30, 2017,2022, we had outstanding $340.0$316.2 million of senior unsecured notes that were issued in a private placement transaction. The private placement notes were issued in two tranches with $148.0 million bearing interest at 4.35% and due August 22, 2024, and $192.0 million bearing interest at 4.56% and due August 22, 2026. At March 31, 2022, the interest rates for the private placement notes were 4.35% and 4.56% for the Series A notes due 2024 and the Series B notes due 2026, respectively.

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

Our unsecured revolving credit facilitiesfacility and the private placement notes contain financial covenants or restrictions that limit our levels of consolidated debt, secured debt, investment levelsinvestments outside certain categories, stock repurchases and dividend distributions;distributions and require us to maintain a minimum consolidated tangible net worth and meet certain coverage levels for fixed charges and debt service. Additionally, these debt instruments contain cross-default provisions if we default under other indebtedness exceeding certain amounts. Those cross-default thresholds vary from $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 all financial and other covenants under our debt instruments at September 30, 2017.March 31, 2022.

Our principal investing activities are acquiring, developing and financing entertainment, educationExperiential and recreationEducation 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.acquisitions or 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 September 30, 2017.
35


During the nine months ended September 30, 2017, we issued an aggregate of 928,219 common shares under the direct share purchase component of our DSPP for total net proceeds of $67.9 million. These proceeds were used to pay down a portion of our unsecured revolving credit facility.

During the nine months ended September 30, 2017, we issued 8,851,264 common shares in connection with the transactions with CNL Lifestyle and OZRE. See Note 4 for further information.

Liquidity Requirements

Short-term liquidity requirements consist primarily of normal recurring corporate operating expenses, debt service requirements and distributions to shareholders. We meethave historically met these requirements primarily through cash provided by operating activities. Net cash provided by operating activities was $300.3 million and $215.8 million for the nine months ended September 30, 2017 and 2016, respectively. Net cash used by investing activities was $635.1 million and $415.3 million for the nine months ended September 30, 2017 and 2016, respectively. Net cash provided by financing activities was $326.7 million and $202.6 million for the nine months ended September 30, 2017 and 2016, respectively. We anticipate thatThe table below summarizes our cash on hand, cash from operations, funds availableflows (dollars in thousands):
Three Months Ended March 31,
20222021
Net cash provided by operating activities$128,087 $78,306 
Net cash used by investing activities(25,035)(29,894)
Net cash used by financing activities(66,293)(532,435)

As previously disclosed, we have agreed to rent and mortgage payment deferral arrangements with most of our customers as a result of the COVID-19 pandemic. Under these deferral arrangements, our customers are required to resume rent and mortgage payments at negotiated times, and begin repaying deferred amount under negotiated schedules. In addition, the continuing impact of the COVID-19 pandemic may result in further extensions or adjustments for our unsecured revolving credit facility and proceeds from asset dispositions will provide adequate liquidity to meet our financial commitments including to fund our operations, make interest and principal payments on our debt, and allow distributions to our shareholders and avoid corporate level federal income or excise tax in accordance with REIT Internal Revenue Code requirements.


customers, which we cannot predict at this time.
Commitments

As of September 30, 2017, weMarch 31, 2022, we had 15 development projects with commitments to fund an aggregate of approximately $202.4 million of commitments to fund development projects including 34 entertainment development projects for which we had commitments to fund approximately $97.0 million, nine education development projects for which we had commitments to fund approximately $40.9 million and six recreation development projects for which we had commitments to fund approximately $64.5$105.2 million, of which approximately $65.9$47.4 million is expected to be funded in 2017 and the remainder is expected to be funded in 2018.2022. Development costs are advanced by us in periodic draws. If we determine that construction is not being completed in accordance with the terms of the development agreement, we can discontinue funding construction draws. We have agreed to lease the properties to the operators at pre-determined rates upon completion of construction.


Additionally, as of September 30, 2017, we had a commitment to fund approximately $155.0 million over the next three years, of which $22.3 million had been funded, to complete an indoor waterpark hotel and adventure park at the Adelaar casino and resort project in Sullivan County, New York. We are also responsible for the construction of the casino and resort project 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 nine months ended September 30, 2017. We expect to receive an additional $21.0 million of reimbursements over the balance of the construction period. Construction of infrastructure improvements is currently 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 occurrence of events outside of itsour direct control. As of September 30, 2017, weMarch 31, 2022, we had eighttwo mortgage notes receivable with commitments totaling approximately $25.7 million.$11.8 million of which approximately $5.1 million is expected to be funded in 2022. If commitments are funded in the future, interest will be charged at rates consistent with the existing investments.


We have provided guarantees of the payment of certain economic development revenue bonds totaling $24.9 million related to two theatres in Louisiana for which we earn a fee at annual rates of 2.88% to 4.00% over the 30-year terms of the related bonds. We have recorded $10.4 million as a deferred asset included in other assets and $10.4 million included in other liabilities in the accompanying consolidated balance sheet as of September 30, 2017 related to these guarantees. No amounts have been accrued as a loss contingency related to these guarantees 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 our obligations are satisfied. These bonds expire upon the completion of the improvements or infrastructure.infrastructure. As of September 30, 2017,March 31, 2022, we had sixfour surety bonds outstanding totaling $24.3$33.3 million.


Liquidity AnalysisAnalysis

In analyzing our liquidity, we expectWe currently anticipate that our cash provided by operating activities will meet our normal recurring operating expenses, recurring debt service requirements and distributions to shareholders.

We have no debt balloon payments coming due for the remainder of 2017. Our sources of liquidity as of September 30, 2017 to pay the above 2017 commitments include the remaining amounton hand, cash from operations, funds available under our unsecured revolving credit facility as well as unrestricted cash on handand proceeds from asset dispositions will provide adequate liquidity to meet our financial commitments, including to fund our operations, make recurring debt service payments, and allow distributions to our shareholders and avoid corporate level federal income or excise tax in accordance with REIT Internal Revenue Code requirements.

Long-term liquidity requirements consist primarily of $11.4 million. Accordingly, while there can bematurities of debt. We have no assurance, we expect that our sources of cash will exceed our existing commitments over the remainder of 2017.

scheduled debt payments due until 2024. We alsocurrently believe that we will be able to repay, extend, refinance or otherwise settle our debt maturities for 2018 and thereafter 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 continuing economic uncertainty caused by the COVID-19 pandemic.


Our primary use of cash after paying operating expenses, debt service, distributions to shareholders and funding existing commitments is in growing our investment portfolio through the acquisition, development and financing of additional properties. We expect to finance these investments with borrowings under our unsecured revolving credit facility as well as debt and equity financing alternatives or proceeds from asset dispositions. The availability and
36

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



Capital Structure

We believe that our shareholders are best served by a conservative capital structure. Therefore, we seek to maintain a conservative debt level on our balance sheet as measured primarily by our net debt to adjusted EBITDAEBITDAre 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 slightly above this range at 5.66x as of September 30, 2017 (see "Non-GAAP financial measures" for calculation). Because adjusted EBITDA as defined does not include the annualization of adjustments for projects put in service or acquired 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 5.1x a ratio adjusted for these items, which was within the range at September 30, 2017. The level of this additional ratio, along with the timing and size ofnd our equity and debt offerings as well as dispositions, may cause us to temporarily operate outside our stated range for the net debt to adjusted EBITDAgross assets ratio was 38% as of 4.6x to 5.6x.

Our net debtMarch 31, 2022 (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 September 30, 2017. Our net debt as a percentage of our total market capitalization at September 30, 2017 was 35%calculation). We calculate our total market capitalization of $8.5 billion by aggregating the following at September 30, 2017:


Common shares outstanding of 73,664,933 multiplied by the last reported sales price of our common shares on the NYSE of $69.74 per share, or $5.1 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 F redeemable preferred shares of $125.0 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 fromFrom Operations (AFFO)

The National Association of Real Estate Investment Trusts (“NAREIT”) developed FFO as a relative non-GAAP financial measure of performance of an equity REIT in order to recognize that income-producing real estate historically has not depreciated on the basis determined under GAAP. Pursuant to the definition of FFO by the Board of Governors of NAREIT, we calculate FFO as net income available(loss) 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, termination fees associated with tenants' exercises of public charter school buy-out options, impairment of direct financingoperating lease (allowance for leaseright-of-use assets and credit loss portion)(benefit) 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 and below market leases, net;net and tenant allowances; and subtracting maintenance capital expenditures (including second generation tenant improvements and leasing commissions), straight-lined rental revenue (removing the impact of straight-line ground sublease expense), and the non-cash portion of mortgage and other financing income.


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


The following table summarizes our FFO, FFOAA and AFFO including per share amounts for FFO and FFOAA, for the three and nine months ended September 30, 2017March 31, 2022 and 20162021 and reconciles such measures to net income (loss) available to common shareholders, the most directly comparable GAAP measure (unaudited, in thousands, except per share information):


37

Three Months Ended March 31,
20222021
FFO:FFO:
Net income (loss) available to common shareholders of EPR PropertiesNet income (loss) available to common shareholders of EPR Properties$36,159 $(2,654)
Gain on sale of real estateGain on sale of real estate— (201)
Impairment of real estate investments, netImpairment of real estate investments, net4,351 — 
Real estate depreciation and amortizationReal estate depreciation and amortization39,827 40,109 
Allocated share of joint venture depreciationAllocated share of joint venture depreciation1,487 354 
FFO available to common shareholders of EPR PropertiesFFO available to common shareholders of EPR Properties$81,824 $37,608 
FFO available to common shareholders of EPR PropertiesFFO available to common shareholders of EPR Properties$81,824 $37,608 
Add: Preferred dividends for Series C preferred sharesAdd: Preferred dividends for Series C preferred shares1,938 — 
Add: Preferred dividends for Series E preferred sharesAdd: Preferred dividends for Series E preferred shares1,939 — 
Diluted FFO available to common shareholders of EPR PropertiesDiluted FFO available to common shareholders of EPR Properties$85,701 $37,608 
FFOAA:FFOAA:
FFO available to common shareholders of EPR PropertiesFFO available to common shareholders of EPR Properties$81,824 $37,608 
Costs associated with loan refinancing or payoffCosts associated with loan refinancing or payoff— 241 
Transaction costsTransaction costs2,247 548 
Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
FFO:       
Net income available to common shareholders of EPR Properties$57,003
 $51,575
 $179,550
 $148,986
Gain on sale of real estate (excluding land sale)(997) (549) (28,462) (2,819)
Real estate depreciation and amortization34,457
 27,147
 95,243
 77,870
Allocated share of joint venture depreciation55
 56
 163
 174
Impairment of direct financing lease - residual value portion (1)—
 —
 2,897
 —
FFO available to common shareholders of EPR Properties$90,518
 $78,229
 $249,391
 $224,211
FFO available to common shareholders of EPR Properties$90,518
 $78,229
 $249,391
 $224,211
Add: Preferred dividends for Series C preferred shares1,941
 1,941
 5,823
 5,823
Diluted FFO available to common shareholders of EPR Properties$92,459
 $80,170
 $255,214
 $230,034
FFOAA:       
FFO available to common shareholders of EPR Properties$90,518
 $78,229
 $249,391
 $224,211
Costs associated with loan refinancing or payoff1,477
 14
 1,491
 905
Credit loss benefitCredit loss benefit(306)(2,762)
Gain on insurance recovery (included in other income)—
 (1,825) (606) (3,837)Gain on insurance recovery (included in other income)(552)(30)
Termination fee included in gain on sale954
 549
 6,774
 2,819
Gain on early extinguishment of debt—
 —
 (977) —
Transaction costs113
 2,947
 388
 4,881
Gain on sale of land—
 (1,066) —
 (1,066)
Deferred income tax expense (benefit)227
 (44) 911
 (664)
Impairment of direct financing lease - allowance for lease loss portion (1)—
 —
 7,298
 —
FFOAA available to common shareholders of EPR Properties$93,289
 $78,804
 $264,670
 $227,249
FFOAA available to common shareholders of EPR Properties$83,213 $35,605 
FFOAA available to common shareholders of EPR Properties$93,289
 $78,804
 $264,670
 $227,249
FFOAA available to common shareholders of EPR Properties$83,213 $35,605 
Add: Preferred dividends for Series C preferred shares1,941
 1,941
 5,823
 5,823
Add: Preferred dividends for Series C preferred shares1,938 — 
Add: Preferred dividends for Series E preferred sharesAdd: Preferred dividends for Series E preferred shares1,939 — 
Diluted FFOAA available to common shareholders of EPR Properties$95,230
 $80,745
 $270,493
 $233,072
Diluted FFOAA available to common shareholders of EPR Properties$87,090 $35,605 
AFFO:       AFFO:
FFOAA available to common shareholders of EPR Properties$93,289
 $78,804
 $264,670
 $227,249
FFOAA available to common shareholders of EPR Properties$83,213 $35,605 
Non-real estate depreciation and amortization237
 454
 676
 1,352
Non-real estate depreciation and amortization217 217 
Deferred financing fees amortization1,598
 1,187
 4,579
 3,522
Deferred financing fees amortization2,071 1,547 
Share-based compensation expense to management and Trustees3,605
 2,778
 10,566
 8,282
Maintenance capital expenditures (2)(1,125) (805) (4,316) (3,805)
Share-based compensation expense to management and trusteesShare-based compensation expense to management and trustees4,245 3,784 
Amortization of above and below market leases, net and tenant allowancesAmortization of above and below market leases, net and tenant allowances(87)(96)
Maintenance capital expenditures (1)Maintenance capital expenditures (1)(1,351)(756)
Straight-lined rental revenue(2,357) (4,597) (11,417) (10,950)Straight-lined rental revenue(595)(1,288)
Straight-lined ground sublease expenseStraight-lined ground sublease expense248 84 
Non-cash portion of mortgage and other financing income(905) (962) (2,361) (2,907)Non-cash portion of mortgage and other financing income(116)(171)
Amortization of above and below market leases, net and tenant improvements(55) 42
 (41) 138
AFFO available to common shareholders of EPR Properties$94,287
 $76,901
 $262,356
 $222,881
AFFO available to common shareholders of EPR Properties$87,845 $38,926 
AFFO available to common shareholders of EPR Properties$94,287
 $76,901
 $262,356
 $222,881
AFFO available to common shareholders of EPR Properties$87,845 $38,926 
Add: Preferred dividends for Series C preferred shares1,941
 —
 5,823
 —
Add: Preferred dividends for Series C preferred shares1,938 — 
Add: Preferred dividends for Series E preferred sharesAdd: Preferred dividends for Series E preferred shares1,939 — 
Diluted AFFO available to common shareholders of EPR Properties$96,228
 $76,901
 $268,179
 $222,881
Diluted AFFO available to common shareholders of EPR Properties$91,722 $38,926 
FFO per common share:FFO per common share:
BasicBasic$1.09 $0.50 
DilutedDiluted1.09 0.50 
FFOAA per common share:FFOAA per common share:
BasicBasic$1.11 $0.48 
DilutedDiluted1.10 0.48 
Shares used for computation (in thousands):Shares used for computation (in thousands):
BasicBasic74,843 74,627 
DilutedDiluted75,047 74,669 
38

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
        
FFO per common share:       
Basic$1.23
 $1.23
 $3.55
 $3.54
Diluted1.22
 1.22
 3.52
 3.52
FFOAA per common share:       
Basic$1.27
 $1.24
 $3.76
 $3.59
Diluted1.26
 1.23
 3.73
 3.56
Shares used for computation (in thousands):       
Basic73,663
 63,627
 70,320
 63,296
Diluted73,724
 63,747
 70,385
 63,393
        
Weighted average shares outstanding-diluted EPS73,724
 63,747
 70,385
 63,393
Effect of dilutive Series C preferred shares2,072
 2,036
 2,063
 2,029
Adjusted weighted average shares outstanding-diluted75,796
 65,783
 72,448
 65,422
        
Other financial information:       
Dividends per common share$1.02
 $0.96
 $3.06
 $2.88
        
(1)Impairment charges recognized during the nine months ended September 30, 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 for further information.
(2)Includes maintenance capital expenditures and certain second generation tenant improvements and leasing commissions.

 Three Months Ended March 31,
 20222021
Weighted average shares outstanding-diluted EPS75,047 74,669 
Effect of dilutive Series C preferred shares2,241 — 
Effect of dilutive Series E preferred shares1,664 — 
Adjusted weighted average shares outstanding-diluted Series C and Series E78,952 74,669 
Other financial information:
Dividends per common share$0.7750 $— 
(1) Includes maintenance capital expenditures and certain second-generation tenant improvements and leasing commissions.

The effect of the conversion of our convertible preferred shares is calculated using the if-converted method and the conversion which results in the most dilution is included in the computation of per share amounts. The additional common shares that would result from the conversion of the 5.75% Series C cumulative convertible preferred shares and the 9.00% Series E cumulative convertible preferred shares for the three months ended March 31, 2021, and the corresponding add-back of the preferred dividends declared on those shares are not included in the calculation of diluted FFO, FFOAA and AFFO per share because the effect is anti-dilutive. The conversion of the 5.75% Series C cumulative convertible preferred shares and the 9.00% Series E cumulative convertible preferred shares would be dilutive to FFO, FFOAA and FFOAAAFFO per share for the three and nine months ended September 30, 2017 and 2016.March 31, 2022. Therefore, the additional 2.1 million and 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, FFOAA and diluted FFOAAAFFO per share for the three and nine months ended September 30, 2017 and 2016, respectively. The effect of the conversion of our 9.0% Series E cumulative convertible preferred shares do not result in more dilution to per share results and are therefore not included in the calculation of diluted per share data for the three and nine months ended September 30, 2017 and 2016.share.


Net Debt

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


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

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

EBITDAre
NAREIT developed EBITDAre as a relative non-GAAP financial measure of REITs, independent of a company's capital structure, to provide a uniform basis to measure the enterprise value of a company. Pursuant to the definition of EBITDAre by the Board of Governors of NAREIT, we calculate EBITDAre as net income (loss), computed in accordance with GAAP, excluding interest expense (net), income tax (benefit) expense, depreciation and amortization, gains and losses from disposition of real estate, impairment losses on real estate, costs associated with loan refinancing or payoff and adjustments for unconsolidated partnerships, joint ventures and other affiliates.
39


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, the effect of non-cash impairment

charges, retirement severance expense, the provision for loan losses andcredit loss (benefit) 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.


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 EBITDAEBITDAre Ratio

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


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


March 31,
20222021
Net Debt:
Debt$2,805,853 $3,171,193 
Deferred financing costs, net35,376 35,036 
Cash and cash equivalents(323,761)(538,077)
Net Debt$2,517,468 $2,668,152 
Gross Assets:
Total Assets$5,818,070 $6,208,102 
Accumulated depreciation1,206,317 1,101,727 
Cash and cash equivalents(323,761)(538,077)
Gross Assets$6,700,626 $6,771,752 
Net Debt to Gross Assets Ratio38 %39 %
40

 September 30,
 2017 2016
Net Debt:   
Debt$2,987,925
 $2,248,576
Deferred financing costs, net33,951
 18,885
Cash and cash equivalents(11,412) (7,311)
Net Debt$3,010,464
 $2,260,150
    
 Three Months Ended September 30,
 2017 2016
Adjusted EBITDA:   
Net income available to common shareholders of EPR Properties$57,003
 $51,575
Costs associated with loan refinancing or payoff1,477
 14
Interest expense, net34,194
 24,265
Transaction costs113
 2,947
Depreciation and amortization34,694
 27,601
Equity in income from joint ventures(35) (203)
Gain on sale of real estate(997) (1,615)
Income tax expense587
 358
Preferred dividend requirements5,951
 5,951
Gain on insurance recovery (1)—
 (1,825)
Adjusted EBITDA (for the quarter)$132,987
 $109,068
    
Adjusted EBITDA (2)$531,948
 $436,272
    
Net Debt/Adjusted EBITDA Ratio5.66
 5.18
    
(1) Included in other income in the accompanying consolidated statements of income. Other income includes the following:
 Three Months Ended September 30,
 2017 2016
Income from settlement of foreign currency swap contracts$520
 $643
Gain on insurance recovery—
 1,825
Fee income1
 —
Miscellaneous income1
 8
Other income$522
 $2,476
    
Three Months Ended March 31,
20222021
EBITDAre and Adjusted EBITDAre:
Net income$42,192 $3,380 
Interest expense, net33,260 39,194 
Income tax expense318 407 
Depreciation and amortization40,044 40,326 
Gain on sale of real estate— (201)
Impairment of real estate investments, net4,351 — 
Costs associated with loan refinancing or payoff— 241 
Allocated share of joint venture depreciation1,487 354 
Allocated share of joint venture interest expense1,121 789 
EBITDAre$122,773 $84,490 
Gain on insurance recovery (1)(552)(30)
Transaction costs2,247 548 
Credit loss benefit(306)(2,762)
Adjusted EBITDAre (for the quarter)$124,162 $82,246 
Adjusted EBITDAre (2)$496,648 Footnote 3
Net Debt/Adjusted EBITDAre Ratio5.1 Footnote 3
(1) Included in "Other income" in the consolidated statements of (loss) income and comprehensive income for the quarter. Other income includes the following:
Three Months Ended March 31,
20222021
Income from settlement of foreign currency swap contracts$45 $52 
Gain on insurance recovery552 30 
Operating income from operated properties8,648 295 
Miscellaneous income60 301 
Other income$9,305 $678 
(2) Adjusted EBITDA for the quarter is multiplied by four to calculate an annual amount.
(3) Not presented as ratio is not meaningful given the disruption caused by COVID-19 and the associated accounting for tenant rent deferrals and other lease modifications.
(2) Adjusted EBITDA for the quarter is multiplied by four to calculate an annual amount.

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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 accruedaccrued interest receivable), investment in a direct financing lease, 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):


September 30, 2017 December 31, 2016March 31, 2022December 31, 2021
Total Investments:   Total Investments:
Rental properties, net of accumulated depreciation$4,535,994
 $3,595,762
Add back accumulated depreciation on rental properties711,384
 635,535
Real estate investments, net of accumulated depreciationReal estate investments, net of accumulated depreciation$4,738,887 $4,713,091 
Add back accumulated depreciation on real estate investmentsAdd back accumulated depreciation on real estate investments1,206,317 1,167,734 
Land held for development33,674
 22,530
Land held for development20,168 20,168 
Property under development284,211
 297,110
Property under development10,885 42,362 
Mortgage notes and related accrued interest receivable972,371
 613,978
Mortgage notes and related accrued interest receivable370,021 370,159 
Investment in a direct financing lease, net57,698
 102,698
Investment in joint ventures5,616
 5,972
Investment in joint ventures36,564 36,670 
Intangible assets, gross(1)
45,848
 28,787
Intangible assets, gross (1)60,109 57,962 
Notes receivable and related accrued interest receivable, net(1)
5,213
 4,765
Notes receivable and related accrued interest receivable, net (1)7,222 7,254 
Total investments$6,652,009
 $5,307,137
Total investments$6,450,173 $6,415,400 
   
Total investments$6,652,009
 $5,307,137
Total investments$6,450,173 $6,415,400 
Operating lease right-of-use assetsOperating lease right-of-use assets177,174 180,808 
Cash and cash equivalents11,412
 19,335
Cash and cash equivalents323,761 288,822 
Restricted cash24,323
 9,744
Restricted cash2,956 1,079 
Account receivable, net99,213
 98,939
Less: accumulated depreciation on rental properties(711,384) (635,535)
Less: accumulated amortization on intangible assets(16,318) (14,008)
Accounts receivableAccounts receivable60,704 78,073 
Less: accumulated depreciation on real estate investmentsLess: accumulated depreciation on real estate investments(1,206,317)(1,167,734)
Less: accumulated amortization on intangible assets (1)Less: accumulated amortization on intangible assets (1)(20,976)(20,163)
Prepaid expenses and other current assets(1)73,755
 79,410
30,595 24,865 
Total assets$6,133,010
 $4,865,022
Total assets$5,818,070 $5,801,150 
   
(1) Included in other assets in the accompanying consolidated balance sheet. Other assets includes the following:
(1) Included in "Other assets" in the accompanying consolidated balance sheet. Other assets include the following:(1) Included in "Other assets" in the accompanying consolidated balance sheet. Other assets include the following:
   
September 30, 2017 December 31, 2016March 31, 2022December 31, 2021
Intangible assets, gross$45,848
 $28,787
Intangible assets, gross$60,109 $57,962 
Less: accumulated amortization on intangible assets(16,318) (14,008)Less: accumulated amortization on intangible assets(20,976)(20,163)
Notes receivable and related accrued interest receivable, net5,213
 4,765
Notes receivable and related accrued interest receivable, net7,222 7,254 
Prepaid expenses and other current assets73,755
 79,410
Prepaid expenses and other current assets30,595 24,865 
Total other assets$108,498
 $98,954
Total other assets$76,950 $69,918 
            





Impact of Recently Issued Accounting Standards


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


Item 3.Quantitative and Qualitative Disclosures About Market Risk


We are exposed to market risks, primarily relating to potential losses due to changes in interest rates and foreign currency exchange rates. We seek to mitigate the effects of fluctuations in interest rates by matching the term of new investments with new long-term fixed rate borrowings whenever possible. As of September 30, 2017,March 31, 2022, we had a $1.0 billion unsecured revolving credit facilityfacility with a $170.0 millionno outstanding balance and $25.0 million in bonds, all of which bear interest at a floating rate.balance. We also had a $400.0$25.0 million unsecured term loan facilitybond that bears interestinterest at a floating rate and $300.0 million of this LIBOR-based debtbut has been fixed with interest rate swaps at a blended rate of 2.64% through April 5, 2019. As discussed in Note 7 to the consolidated financial statements in this Quarterly Report on Form 10-Q, these facilities were amended and restated on September 27, 2017.

On October 31, 2017, we entered into threean interest rate swap agreementsagreement.

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As of March 31, 2022, we had a 65% investment interest in two unconsolidated real estate joint ventures related to fixtwo experiential lodging properties located in St. Petersburg Beach, Florida. At March 31, 2022, the joint venture had a secured mortgage loan with an outstanding balance of $85.0 million. The mortgage loan bears interest at an annual rate equal to the greater of 6.00% or LIBOR plus 3.75%. The joint venture has an interest rate cap agreement to limit the variable portion of the interest rate at 3.15%(LIBOR) on an additional $50.0 million of the unsecured term loan facilitythis note to 3.0% from November 6, 2017March 28, 2019 to April 4, 2019 and on $350.0 million of the unsecured term loan facility from April 5, 2019 to February 7, 2022.1, 2023.

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

We are exposed to foreign currency risk against our functional currency, the U.S. dollar, on our four Canadian properties and the rents received from tenants of the properties are payable in CAD. 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 original notional value of $100.0$200.0 million CADCAD. These investments became effective on July 1, 2018, mature on July 1, 2023 and $98.1 million U.S.are designated as net investment hedges of our Canadian net investments. The net effect of this swaphedge is to lock in an exchange rate of $1.05$1.32 CAD per U.S. dollar on approximately $13.5$200.0 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. These foreign currency derivatives should hedge a significant portion of our expected CAD denominated FFO of these four Canadian properties through June 2018 as their impact on our reported FFO when settled should moveforeign net investments. The cross-currency swaps also have a monthly settlement feature locked in the opposite direction 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 lock inat an exchange rate of 1.26$1.32 CAD per U.S. dollarUSD on approximately $13.5$4.5 million of annual CAD denominatedannual cash flows, on the properties through June 2020.net effect of which is an excluded component from the effectiveness testing of this hedge. On April 29, 2022, we de-designated these CAD to USD cross-currency swaps in conjunction with entering into new agreements, effectively terminating the cross-currency swap agreements. These contracts were previously designated as net investment hedges. We paid $3.8 million in connection with the settlement of the CAD to USD cross-currency swap agreements.

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

In order to also hedge our net investment on the four Canadian properties, we entered into a forward contractthree USD-CAD cross-currency swaps that were effective July 1, 2020 with a total fixed notional amount 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 another forward contract with a fixedoriginal notional value of $100.0 million CAD and $88.1$76.6 million U.S. with a July 2018 settlement date.USD. The net effect of these swaps is to lock in an exchange rate of this forward contract is approximately $1.13$1.31 CAD per U.S. dollar. These forward contracts should hedge a significant portion of ourUSD on approximately $7.2 million annual CAD denominated cash flows through June 2022.

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

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

For foreign currency derivatives designated as net investment in these four centers through July 2018 ashedges, the impact on accumulated other comprehensive income from marking the derivative to market should movechange in the opposite directionfair value of the derivatives are reported in 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 910 to the consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information on our derivative financial instruments and hedging activities.


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Item 4.Controls and Procedures


Evaluation of disclosures controls and procedures
As of September 30, 2017,March 31, 2022, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and

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

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

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


PART II - OTHER INFORMATION


Item 1. Legal Proceedings
Prior proposed casino
We 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 Adelaar 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.lawsuits will not, in the aggregate, have a material adverse effect on our consolidated financial position or results of operations.


Item 1A. Risk Factors


Other than the risk factor discussed below, there wereThere have been no material changes during the quarter fromto the risk factors associated with our business previously discusseddisclosed in Item 1A - "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 20162021 filed with the SEC on March 1, 2017.February 23, 2022.


The Company's build-to-suit education tenants may not achieve sufficient enrollment within expected timeframes and therefore may not be able to pay their agreed upon rent, which could adversely affect the Company's financial results.
44

A significant portion of the Company's 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, and the Company may provide them with lease terms that are more favorable to the tenant during this timeframe. Tenants that fail to achieve sufficient enrollment within expected timeframes may be unable to pay their rent pursuant to the agreed upon lease terms or at all. If the Company is required to restructure lease terms or take other action with respect to the applicable property, its financial results may be impacted by lower lease revenues, recording an impairment loss, writing off rental amounts or otherwise.


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


ThereIssuer Purchases of Equity Securities
PeriodTotal Number of Shares PurchasedAverage Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 through January 31, 2022 common shares88,819 (1)$47.49 — $— 
February 1 through February 28, 2022 common shares699 (1)46.11 — — 
March 1 through March 31, 2022 common shares— — — — 
Total89,518 $47.48 — $— 
(1) The repurchases of equity securities during January and February 2022 were no reportable events duringcompleted in conjunction with the quarter ended September 30, 2017.vesting of employee nonvested shares. These repurchases were not made pursuant to a publicly announced plan or program.


Item 3. Defaults Upon Senior Securities


There were no reportable events during the quarter ended September 30, 2017.March 31, 2022.


Item 4. Mine Safety Disclosures


Not applicable.


Item 5. Other Information


There were no reportable events during the quarter ended September 30, 2017.March 31, 2022.

45


Item 6. Exhibits

Second Amended, Restated and Consolidated Credit Agreement, dated as of September 27, 2017, 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 as Exhibit 10.1.
10.2
FirstFourth Amendment dated as of September 27, 2017, to Note Purchase Agreement, dated as of August 1, 2016,January 14, 2022, by and among the Company and the institutional investors party thereto,purchasers named therein, which is attached as Exhibit 10.24.11.5 to the Company's Form 8-K (Commission File No. 001-13561)10-K filed on September 27, 2017,February 23, 2022, is hereby incorporated by reference as Exhibit 10.2.4.1.
Computation of Ratio of Earnings to Fixed Charges is attached hereto as Exhibit 12.1.
12.2*
Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends is attached hereto as Exhibit 12.2.
31.1*
Certification of Gregory K. Silvers pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, is attached hereto as Exhibit 31.1.
Certification of Mark A. Peterson pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, is attached hereto as Exhibit 31.2.
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is attached hereto as Exhibit 32.1.
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is attached hereto as Exhibit 32.2.
101.INS*XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*Inline XBRL Taxonomy Extension Schema
101.CAL*Inline XBRL Extension Calculation Linkbase
101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB*Inline XBRL Taxonomy Extension Label Linkbase
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase
104*Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)


* Filed herewith.

** Furnished herewith.


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SIGNATURES


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



EPR Properties
Dated:November 8, 2017May 5, 2022By /s//s/ Gregory K. Silvers
Gregory K. Silvers, President and Chief Executive

Officer (Principal Executive Officer)
Dated:November 8, 2017May 5, 2022By /s//s/ Tonya L. Mater
Tonya L. Mater, Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)



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