PART I - FINANCIAL INFORMATION

Item 1.Financial Statements

EPR PROPERTIES

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 development 33,674
22,530
Property under development 284,211
297,110
Mortgage notes and related accrued interest receivable 972,371
613,978
Investment in a direct financing lease, net 57,698
102,698
Investment in joint ventures 5,616
5,972
Cash and cash equivalents 11,412
19,335
Restricted cash 24,323
9,744
Accounts receivable, net 99,213
98,939
Other assets 108,498
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 payable 25,046
20,367
Preferred dividends payable 5,951
5,951
Unearned rents and interest 85,198
47,420
Debt 2,987,925
2,485,625
Total liabilities 3,244,702
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, respectively 764
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 $134,976,250 54
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 $86,229,125 34
35
5,000,000 Series F shares issued at September 30, 2017 and December 31, 2016; liquidation preference of $125,000,000 50
50
Additional paid-in-capital 3,420,867
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 income 10,919
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
Consolidated Balance Sheets

(Dollars in thousands except share data)


	June 30, 2023		December 31, 2022
	(unaudited)
Assets
Real estate investments, net of accumulated depreciation of $1,369,790 and $1,302,640 at June 30, 2023 and December 31, 2022, respectively	$	4,659,678	$	4,714,136
Land held for development	20,168		20,168
Property under development	80,650		76,029
Operating lease right-of-use assets	192,325		200,985
Mortgage notes and related accrued interest receivable, net	466,459		457,268

Investment in joint ventures	53,763		52,964
Cash and cash equivalents	99,711		107,934
Restricted cash	2,623		2,577


Accounts receivable	53,305		53,587

Other assets	74,882		73,053
Total assets	$	5,703,564	$	5,758,701
Liabilities and Equity
Liabilities:
Accounts payable and accrued liabilities	$	74,493	$	80,087
Operating lease liabilities	233,126		241,407
Common dividends payable	22,289		21,405
Preferred dividends payable	6,032		6,033
Unearned rents and interest	71,746		63,939
Debt	2,813,007		2,810,111
Total liabilities	3,220,693		3,222,982
Equity:
Common Shares, $0.01 par value; 125,000,000 and 100,000,000 shares authorized at June 30, 2023 and December 31, 2022, respectively; and 82,953,453 and 82,545,501 shares issued at June 30, 2023 and December 31, 2022, respectively	829		825
Preferred Shares, $0.01 par value; 25,000,000 shares authorized:
5,392,916 Series C convertible shares issued at June 30, 2023 and December 31, 2022; liquidation preference of $134,822,900	54		54
3,445,980 and 3,447,381 Series E convertible shares issued at June 30, 2023 and December 31, 2022, respectively; liquidation preference of $86,149,500	34		34
6,000,000 Series G shares issued at June 30, 2023 and December 31, 2022; liquidation preference of $150,000,000	60		60
Additional paid-in-capital	3,915,273		3,899,732
Treasury shares at cost: 7,630,877 and 7,520,227 common shares at June 30, 2023 and December 31, 2022, respectively	(274,001)		(269,751)
Accumulated other comprehensive income	3,610		1,897
Distributions in excess of net income	(1,162,988)		(1,097,132)


Total equity	$	2,482,871	$	2,535,719
Total liabilities and equity	$	5,703,564	$	5,758,701

See accompanying notes to consolidated financial statements.

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 reimbursements 3,734
3,821
11,424
11,577
Other income 522
2,476
2,518
5,812
Mortgage and other financing income 24,314
17,031
65,016
52,907
Total revenue 151,397
125,610
428,291
362,411
Property operating expense 6,340
5,626
18,762
16,687
Other expense —
—
—
5
General and administrative expense 12,070
9,091
33,787
27,309
Costs associated with loan refinancing or payoff 1,477
14
1,491
905
Gain on early extinguishment of debt —
—
(977 ) —
Interest expense, net 34,194
24,265
97,853
70,310
Transaction costs 113
2,947
388
4,881
Impairment charges —
—
10,195
—
Depreciation and amortization 34,694
27,601
95,919
79,222
Income before equity in income from joint ventures and other items 62,509
56,066
170,873
163,092
Equity in income from joint ventures 35
203
86
501
Gain on sale of real estate 997
1,615
28,462
3,885
Income before income taxes 63,541
57,884
199,421
167,478
Income tax expense (587 ) (358 ) (2,016 ) (637 )
Net income 62,954
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):
Basic 73,663
63,627
70,320
63,296
Diluted 73,724
63,747
70,385
63,393

EPR PROPERTIES

Consolidated Statements of Income and Comprehensive Income

(Unaudited)

(Dollars in thousands except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Rental revenue	$	151,870	$	142,875	$	303,461	$	282,478
Other income	10,124		9,961		19,457		19,266
Mortgage and other financing income	10,913		7,610		21,385		16,174
Total revenue	172,907		160,446		344,303		317,918
Property operating expense	13,972		13,592		28,127		27,531
Other expense	9,161		8,872		18,111		16,969
General and administrative expense	15,248		12,691		29,213		25,915
Severance expense	547		—		547		—

Transaction costs	36		1,145		306		3,392
Credit loss (benefit) expense	(275)		9,512		312		9,206
Impairment charges	43,785		—		43,785		4,351
Depreciation and amortization	43,705		40,766		84,909		80,810
Total operating expenses	126,179		86,578		205,310		168,174
Loss on sale of real estate	(575)		—		(1,135)		—

Income from operations	46,153		73,868		137,858		149,744


Interest expense, net	31,591		33,289		63,313		66,549
Equity in loss (income) from joint ventures	615		(1,421)		2,600		(1,315)
Impairment charges on joint ventures	—		647		—		647
Income before income taxes	13,947		41,353		71,945		83,863
Income tax expense	347		444		688		762









Net income	13,600		40,909		71,257		83,101
Preferred dividend requirements	6,040		6,033		12,073		12,066

Net income available to common shareholders of EPR Properties	$	7,560	$	34,876	$	59,184	$	71,035

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


Basic	$	0.10	$	0.47	$	0.79	$	0.95




Diluted	$	0.10	$	0.46	$	0.78	$	0.95
Shares used for computation (in thousands):
Basic	75,297		74,986		75,191		74,915
Diluted	75,715		75,234		75,571		75,142

Other comprehensive income:
Net income	$	13,600	$	40,909	$	71,257	$	83,101
Foreign currency translation adjustment	6,393		(4,924)		6,623		(2,318)
Unrealized (loss) gain on derivatives, net	(4,606)		5,128		(4,910)		3,038
Comprehensive income attributable to EPR Properties	$	15,387	$	41,113	$	72,970	$	83,821

See accompanying notes to consolidated financial statements.

EPR PROPERTIES

Consolidated Statements of Changes in Equity

(Unaudited)

(Dollars in thousands except per share data)


	EPR Properties Shareholders’ Equity
	Common Stock			Preferred Stock			Additional paid-in capital		Treasury shares		Accumulated other comprehensive income		Distributions in excess of net income		Total
	Shares	Par		Shares	Par
Balance at December 31, 2021	82,225,061	$	822	14,840,297	$	148	$	3,876,817	$	(264,817)	$	9,955	$	(1,004,886)	$	2,618,039
Restricted share units issued to Trustees	2,794	—		—	—		—		—		—		—		—
Issuance of nonvested shares and performance shares, net of cancellations	243,286	3		—	—		4,496		(83)		—		—		4,416
Purchase of common shares for vesting	—	—		—	—		—		(4,250)		—		—		(4,250)
Share-based compensation expense	—	—		—	—		4,245		—		—		—		4,245

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

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

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




Stock option exercises, net	9,799	—		—	—		454		(458)		—		—		(4)
Dividend equivalents accrued on performance shares	—	—		—	—		—		—		—		(136)		(136)
Dividends to common shareholders ($0.7750 per share)	—	—		—	—		—		—		—		(58,099)		(58,099)
Dividends to Series C preferred shareholders ($0.359375 per share)	—	—		—	—		—		—		—		(1,938)		(1,938)
Dividends to Series E preferred shareholders ($0.5625 per share)	—	—		—	—		—		—		—		(1,939)		(1,939)
Dividends to Series G preferred shareholders ($0.359375 per share)	—	—		—	—		—		—		—		(2,156)		(2,156)

Balance at March 31, 2022	82,485,670	$	825	14,840,297	$	148	$	3,886,240	$	(269,608)	$	10,471	$	(1,026,962)	$	2,601,114

Restricted share units issued to Trustees	38,605	—		—	—		—		—		—		—		—


Share-based compensation expense	—	—		—	—		4,169		—		—		—		4,169

Foreign currency translation adjustment	—	—		—	—		—		—		(4,924)		—		(4,924)

Change in unrealized gain on derivatives, net	—	—		—	—		—		—		5,128		—		5,128

Net income	—	—		—	—		—		—		—		40,909		40,909
Issuances of common shares	5,587	—		—	—		275		—		—		—		275






Dividend equivalents accrued on performance shares	—	—		—	—		—		—		—		(188)		(188)
Dividends to common shareholders ($0.825 per share)	—	—		—	—		—		—		—		(61,873)		(61,873)
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 June 30, 2022	82,529,862	$	825	14,840,297	$	148	$	3,890,684	$	(269,608)	$	10,675	$	(1,054,147)	$	2,578,577

Continued on next page.

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 adjustment 7,317
(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 Shareholders’ Equity
	Common Stock			Preferred Stock			Additional paid-in capital		Treasury shares		Accumulated other comprehensive income		Distributions in excess of net income		Total
	Shares	Par		Shares	Par
Continued from previous page.
Balance at December 31, 2022	82,545,501	$	825	14,840,297	$	148	$	3,899,732	$	(269,751)	$	1,897	$	(1,097,132)	$	2,535,719
Restricted share units issued to Trustees	1,449	—		—	—		—		—		—		—		—
Issuance of nonvested shares and performance shares, net of cancellations	352,090	4		—	—		5,956		(588)		—		—		5,372
Purchase of common shares for vesting	—	—		—	—		—		(3,565)		—		—		(3,565)
Share-based compensation expense	—	—		—	—		4,322		—		—		—		4,322

Foreign currency translation adjustment	—	—		—	—		—		—		230		—		230

Change in unrealized loss on derivatives, net	—	—		—	—		—		—		(304)		—		(304)

Net income	—	—		—	—		—		—		—		57,657		57,657
Issuances of common shares	5,557	—		—	—		225		—		—		—		225


Conversion of Series E Convertible Preferred shares to common shares	632	—		(1,311)	—		—		—		—		—		—


Dividend equivalents accrued on performance shares	—	—		—	—		—		—		—		(353)		(353)
Dividends to common shareholders ($0.825 per share)	—	—		—	—		—		—		—		(62,109)		(62,109)
Dividends to Series C preferred shareholders ($0.359375 per share)	—	—		—	—		—		—		—		(1,938)		(1,938)
Dividends to Series E preferred shareholders ($0.5625 per share)	—	—		—	—		—		—		—		(1,938)		(1,938)
Dividends to Series G preferred shareholders ($0.359375 per share)	—	—		—	—		—		—		—		(2,156)		(2,156)
Balance at March 31, 2023	82,905,229	$	829	14,838,986	$	148	$	3,910,235	$	(273,904)	$	1,823	$	(1,107,969)	$	2,531,162

Restricted share units issued to Trustees	42,048	—		—	—		—		—		—		—		—

Purchase of common shares for vesting	—	—		—	—		—		(97)		—		—		(97)
Share-based compensation expense	—	—		—	—		4,477		—		—		—		4,477
Share-based compensation included in severance expense	—	—		—	—		304		—		—		—		304
Foreign currency translation adjustment	—	—		—	—		—		—		6,393		—		6,393

Change in unrealized gain on derivatives, net		—		—	—		—		—		(4,606)		—		(4,606)

Net income	—	—		—	—		—		—		—		13,600		13,600
Issuances of common shares	6,134	—		—	—		257		—		—		—		257



Conversion of Series E Convertible Preferred shares to common shares	42	—		(90)	—		—		—		—		—		—


Dividend equivalents accrued on performance shares	—	—		—	—		—		—		—		(450)		(450)
Dividend to captive REIT preferred shareholders	—	—		—	—		—		—		—		(8)		(8)
Dividends to common shareholders ($0.825 per share)	—	—		—	—		—		—		—		(62,129)		(62,129)
Dividends to Series C preferred shareholders ($0.359375 per share)	—	—		—	—		—		—		—		(1,938)		(1,938)
Dividends to Series E preferred shareholders ($0.5625 per share)	—	—		—	—		—		—		—		(1,938)		(1,938)
Dividends to Series G preferred shareholders ($0.359375 per share)	—	—		—	—		—		—		—		(2,156)		(2,156)
Balance at June 30, 2023	82,953,453	$	829	14,838,896	$	148	$	3,915,273	$	(274,001)	$	3,610	$	(1,162,988)	$	2,482,871

See accompanying notes to consolidated financial statements.

EPR PROPERTIES

Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)


	Six Months Ended June 30,
	2023		2022
Operating activities:
Net income	$	71,257	$	83,101
Adjustments to reconcile net income to net cash provided by operating activities:

Impairment charges	43,785		4,351
Impairment charges on joint ventures	—		647


Loss on sale of real estate	1,135		—
Gain on insurance recovery	—		(552)
Deferred income tax benefit	(182)		—


Equity in loss (income) from joint ventures	2,600		(1,315)
Distributions from joint ventures	—		780
Credit loss expense	312		9,206
Depreciation and amortization	84,909		80,810
Amortization of deferred financing costs	4,279		4,161
Amortization of above/below market leases and tenant allowances, net	(274)		(176)
Share-based compensation expense to management and Trustees	8,799		8,414
Share-based compensation expense included in severance expense	304		—
Change in assets and liabilities:
Operating lease assets and liabilities	460		(100)
Mortgage notes accrued interest receivable	(917)		350
Accounts receivable	249		22,168

Other assets	(6,181)		(3,902)
Accounts payable and accrued liabilities	5,466		2,955
Unearned rents and interest	4,887		6,152


Net cash provided by operating activities	220,888		217,050
Investing activities:
Acquisition of and investments in real estate and other assets	(47,115)		(169,656)
Proceeds from sale of real estate	8,373		80
Investment in unconsolidated joint ventures	(3,399)		(17,843)
Distributions from joint venture related to refinancing	—		6,695
Settlement of derivative	—		(3,830)
Investment in mortgage notes receivable	(6,040)		(11,305)
Proceeds from mortgage notes receivable paydowns	268		272
Investment in notes receivable	(3,025)		—
Proceeds from note receivable paydowns	353		189

Proceeds from insurance recovery, net	—		1,071


Additions to properties under development	(38,886)		(9,393)



Net cash used by investing activities	(89,471)		(203,720)
Financing activities:


Deferred financing fees paid	(279)		(328)

Net proceeds from issuance of common shares	311		359

Impact of stock option exercises, net	—		(4)

Purchase of common shares for treasury for vesting	(3,662)		(4,250)


Dividends paid to shareholders	(136,057)		(129,968)


Net cash used by financing activities	(139,687)		(134,191)
Effect of exchange rate changes on cash	93		503
Net change in cash and cash equivalents and restricted cash	(8,177)		(120,358)
Cash and cash equivalents and restricted cash at beginning of the period	110,511		289,901
Cash and cash equivalents and restricted cash at end of the period	$	102,334	$	169,543
Supplemental information continued on next page.

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, 2016 66,263,487
$ 663
13,849,050
$ 139
$ 2,677,046
$ (113,172 ) $ 7,734
$ (386,509 ) $ 2,185,901
Restricted share units issued to Trustees 19,030
—
—
—
—
—
—
—
—
Issuance of nonvested shares, net 295,754
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 shares 939,472
9
—
—
68,739
—
—
—
68,748
Issuances of common shares for acquisition 8,851,264
89
—
—
657,384
—
—
—
657,473
Conversion of Series E Convertible Preferred shares to common shares 381
—
(835 ) (1 ) —
—
—
—
(1 )
Stock option exercises, net 28,281
—
—
—
1,547
(1,548 ) —
—
(1 )
Dividends to common and preferred shareholders —
—
—
—
—
—
—
(233,737 ) (233,737 )
Balance at September 30, 2017 76,397,669
$ 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
	Six Months Ended June 30,
	2023		2022
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents at beginning of the period	$	107,934	$	288,822
Restricted cash at beginning of the period	2,577		1,079
Cash and cash equivalents and restricted cash at beginning of the period	$	110,511	$	289,901

Cash and cash equivalents at end of the period	$	99,711	$	168,266
Restricted cash at end of the period	2,623		1,277
Cash and cash equivalents and restricted cash at end of the period	$	102,334	$	169,543

Supplemental schedule of non-cash activity:
Transfer of property under development to real estate investments	$	29,366	$	38,119

Transfer of real estate investments to mortgage note	$	1,321	$	—

Issuance of nonvested shares and restricted share units at fair value, including nonvested shares issued for payment of bonuses	$	25,805	$	21,751






Operating lease right-of-use asset and related operating lease liability recorded for new ground lease	$	—	$	29,022







Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	63,417	$	63,551
Cash paid during the period for income taxes	$	964	$	657
Interest cost capitalized	$	1,629	$	271
Change in accrued capital expenditures	$	(5,639)	$	(217)

See accompanying notes to consolidated financial statements.

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 charges 10,195
—
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 payoff 1,491
905
Equity in income from joint ventures (86 ) (501 )
Distributions from joint ventures 442
511
Depreciation and amortization 95,919
79,222
Amortization of deferred financing costs 4,579
3,522
Amortization of above and below market leases, net and tenant improvements (41 ) 138
Share-based compensation expense to management and Trustees 10,566
8,282
Increase in restricted cash (744 ) (1,463 )
Decrease (increase) in mortgage notes accrued interest receivable 875
(188 )
Decrease (increase) in accounts receivable, net 10,220
(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 interest 15,818
(1,088 )
Net cash provided by operating activities 300,308
215,773
Investing activities:
Acquisition of and investments in rental properties and other assets (354,277 ) (177,362 )
Proceeds from sale of real estate 136,467
20,651
Investment in mortgage notes receivable (130,076 ) (80,786 )
Proceeds from mortgage note receivable paydown 16,608
63,876
Investment in promissory notes receivable (1,868 ) (66 )
Proceeds from promissory note receivable paydown 1,599
—
Proceeds from sale of infrastructure related to issuance of revenue bonds —
43,462
Proceeds from insurance recovery 579
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 notes 1,175,000
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 shares 68,552
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 activities 326,657
202,568
Effect of exchange rate changes on cash 164
(62 )
Net (decrease) increase in cash and cash equivalents (7,923 ) 3,028
Cash and cash equivalents at beginning of the period 19,335
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 ~~specialty~~Maryland 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. The~~November 18, 1997. Since that time, the Company ~~develops, owns, leases and finances properties~~has been a leading diversified Experiential net lease REIT specializing in select ~~market segments primarily related to Entertainment, Education~~enduring 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 (U.S.) and Canada.

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

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. In addition, operating results for the ~~nine~~six month period ended ~~September~~June 30, ~~2017~~2023 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~2023. Amounts as of December 31, 2022 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, 2022 filed with the Securities and Exchange Commission (SEC) on February 23, 2023.

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 sheet~~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 June 30, 2023 and December 31, ~~2016 has been derived~~2022, the Company does not have any investments in consolidated VIEs.

Regal Update

On September 7, 2022, Cineworld Group, plc, Regal Entertainment Group and the Company's other Regal theatre tenants (collectively, Regal) filed for protection under Chapter 11 of the U.S. Bankruptcy Code (the Code). Prior to such filing date and continuing throughout the Chapter 11 bankruptcy cases, Regal leased 57 theatres from the ~~audited consolidated balance sheet at that date~~Company pursuant to two master leases and 28 single property leases (the Regal Leases). As a result of the filing, Regal did not pay its rent or monthly deferral payment for September 2022 but subsequently paid portions of this amount, totaling approximately $4.0 million, pursuant to an order of the bankruptcy court issued during the Chapter 11 bankruptcy cases. Regal resumed monthly rent and deferral payments for all Regal Leases commencing in October 2022 and has continued making these payments through July 2023.

On June 27, 2023, the Company entered into a comprehensive restructuring agreement with Regal, evidenced by an Omnibus Lease Amendment Agreement (Omnibus Agreement), anchored by a new master lease (Master Lease) for

41 of the 57 properties previously leased to Regal (Master Lease Properties). On June 28, 2023, Regal’s Plan of Reorganization (the Plan) was confirmed by the bankruptcy court. The Plan became effective on July 31, 2023 (the Effective Date) and Regal emerged from the Chapter 11 bankruptcy cases.

Pursuant to the Omnibus Agreement, the Master Lease and certain related agreements became effective upon the Effective Date. Material terms of the Omnibus Agreement, the Master Lease and related agreements include:

•Beginning on August 1, 2023, the total annual fixed rent for the Master Lease Properties (Annual Base Rent) will be $65.0 million, escalating by 10% every five years. The Master Lease is a triple-net lease, and therefore, Annual Base Rent does not include ~~all~~taxes, insurance, utilities, common area maintenance and ground lease rent, for which Regal will be responsible for paying separately. Due to Regal's expected significantly improved credit profile, continuing box office recovery and Regal's payment history, among other factors, the Company will recognize revenue related to the Master Lease on an accrual basis beginning on the Effective Date.

•Pursuant to the Master Lease, Regal will also pay annual percentage rent (Annual Percentage Rent) of 15% of annual gross sales exceeding $220.0 million and up to $270.0 million, and 12.5% of annual gross sales exceeding $270.0 million. These threshold amounts will increase every five years commensurate with escalations in Annual Base Rent.

•The Master Lease Properties have been divided into three tranches within the Master Lease, with the initial term of each tranche expiring annually on the 11th, 13th and 15th anniversaries from the Effective Date. Each tranche has three five-year renewal options. The average lease term for the Master Lease Properties as of the Effective Date will be increased by four years to 13 years.

•The Company has agreed to reimburse Regal for 50% of certain revenue-enhancing premises renovations to the Master Lease Properties, up to a maximum reimbursement of $32.5 million, provided that (a) Regal is not in default, (b) the maximum amount the Company will be required to reimburse in any calendar year will not exceed $10.0 million, and (c) reimbursable expenses have prior approval of the ~~information~~Company and ~~footnotes required by U.S. GAAP for complete financial statements. For further information, refer~~relate to a project mobilized and physically commenced during the first five years of the Master Lease term.

•On the Effective Date, Regal surrendered to the ~~consolidated financial statements and footnotes thereto~~Company the remaining 16 properties not included in the ~~Company's Annual Report on Form 10-K for~~Master Lease (Surrendered Properties), together with all furniture, fixtures and equipment located at the ~~year ended December 31, 2016 filed with the Securities and Exchange Commission (SEC) on March 1, 2017.~~

~~Operating Segments~~

Surrendered Properties. The Company has entered into management agreements whereby Cinemark will manage four ~~reportable operating segments: Entertainment, Education, Recreation~~ of the Surrendered Properties and ~~Other. See Note 14 for financial information~~Phoenix Theatres will manage one of the Surrendered Properties. The Company plans to sell the remaining 11 Surrendered Properties and deploy the proceeds to acquire non-theatre experiential properties. In conjunction with taking back the Surrendered Properties, the Company recorded a non-cash impairment charge on eight of these properties during the three months ended June 30, 2023 of $42.4 million based on recently appraised values.

•As of July 31, 2023, Regal owed approximately $76.3 million of undiscounted deferred rent (the Deferred Rent Balance), of which the Deferred Rent Balance related to ~~these operating segments.~~

~~Rental~~the Master Lease Properties

~~Rental properties are carried at cost less accumulated depreciation. Costs incurred for~~ was approximately $56.8 million (Master Lease Deferred Rent Balance) and the ~~acquisition~~Deferred Rent Balance related to the Surrendered Properties was approximately $19.5 million (Surrendered Property Deferred Rent Balance). Of the Master Lease Deferred Rent Balance, approximately $50.1 million will be held in abeyance and ~~development~~will be forgiven in its entirety if Regal has no uncured events of default prior to the 15th anniversary of the ~~properties are capitalized. Depreciation is computed using~~Effective Date, and the ~~straight-line method over the estimated useful lives~~remaining portion of the ~~assets,~~Master Lease Deferred Rent Balance will be waived and forgiven. If Regal has an uncured event of default at any time prior to the 15th anniversary of the Effective Date, the Master Lease Deferred Rent Balance held in abeyance will become due. The Surrendered Property Deferred Rent Balance will be included in the Company’s claims for rejection damages in the Chapter 11 bankruptcy cases, which ~~generally are estimated~~will be treated as general unsecured claims for which no material recovery is expected. The deferred rent was not previously recognized as accounts receivable by the Company because payments from Regal were recognized on a cash-basis prior to ~~be 30~~the Effective Date of the Master Lease. The deferred rent related to 40 ~~years for buildings~~the Master Lease Properties will not be

recognized on the balance sheet because it is a contingent receivable only due in the event of a default and 3 to 25 ~~years for~~payment is not deemed probable.

•Regal has provided the Company with a first lien security interest in all furniture, fixtures and equipment. Tenant improvements, including allowances, are depreciated over the shorter of the base term of the lease or the estimated useful life. Expenditures for ordinary maintenance and repairs are charged to operations in the period incurred. Significant renovations and improvements that improve or extend the useful life of the asset are capitalized and depreciated over their estimated useful life.

Management reviews a property for impairment whenever events or changes in circumstances indicate that the carrying value of a property may not be recoverable. The review of recoverability is based on an estimate of undiscounted future cash flows expected to result from its use and eventual disposition. If impairment exists due to the inability to recover the carrying value of the property, an impairment loss is recorded to the extent that the carrying value of the property exceeds its estimated fair value.

~~The Company evaluates the held-for-sale classification of its real estate as of the end of each quarter. Assets that are classified as held for sale are recorded~~equipment located at the ~~lower~~Master Lease Properties. A parent entity of ~~their carrying amount~~Regal has provided a guaranty of Regal’s obligations under the Master Lease.

•On or ~~fair value less costs to sell. Assets are generally classified as held for sale once management has initiated an active program to market them for sale and it is~~

~~probable~~about the ~~assets will be sold within one year. On occasion,~~Effective Date, Regal paid the Company ~~will receive unsolicited offers from third parties to buy individual Company properties. Under these circumstances,~~approximately $3.0 million representing the ~~Company will classify~~unpaid portion of post-petition September stub rent for all properties, and approximately $1.3 million representing the ~~properties as held~~ unpaid pre-petition September rent for ~~sale when a sales contract is executed with no contingencies and~~ the ~~prospective buyer has funds at risk to ensure performance.~~Master Lease Properties.

~~Accounting for 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, the FASB issued Accounting Standards Update (ASU) No. 2017-01, Business Combinations (Topic 805): ~~Clarifying the Definition of a Business~~. The update clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether acquisitions should be accounted for as business combinations or asset acquisitions. The standard is effective for annual reporting periods beginning after 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. 2017-01~~as of January 1, 2017. As a result, 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 allocates 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.

Deferred Financing Costs

Deferred financing costs are amortized over the terms of the related debt obligations, ~~or mortgage note receivable~~ as applicable. Deferred ~~financing~~financing costs of ~~$34.0~~$28.2 million and ~~$29.3~~$31.1 million as of ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016,~~2022, respectively, are shown as a reduction of debt. The deferred financing costs related to the unsecured revolving credit facility of $5.3 million and $6.4 million as of June 30, 2023 and December 31, 2022, respectively, are included in ~~other assets.~~"Other assets" in the accompanying consolidated balance sheets.

~~Allowance~~Rental 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 receivable~~rent escalations throughout the lease terms. Rents that are fixed are recognized on a straight-line basis over the lease term. Base rent escalations that include a variable component are recognized upon the occurrence of the specified event as defined in the Company's lease agreements. Many of the Company's leasing arrangements include options to extend the lease, which are not included in the minimum lease terms unless the option is ~~reduced by~~reasonably certain to be exercised. Straight-line rental revenue is subject to an ~~allowance~~evaluation for ~~amounts where collection~~collectibility, and the Company records a direct write-off against rental revenue if collectibility of these future rents is not probable. ~~The Company’s accounts receivable balance is comprised primarily~~During the six months ended June 30, 2023, the Company recognized straight-line write-offs totaling $0.6 million. There were no straight-line write-offs for the six months ended June 30, 2022. For the six months ended June 30, 2023 and 2022, the Company recognized $3.3 million and $2.3 million, respectively, of ~~rents and operating cost recoveries due from tenants as well as accrued~~straight-line rental ~~rate increases to be received over the life~~revenue, net of write-offs.

Most of the ~~existing leases.~~ 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 six months ended June 30, 2023 and 2022, the Company recognized $1.1 million in tenant reimbursements for both periods 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 six months ended June 30, 2023 and 2022, the amounts due for non-lease components included in rental revenue totaled $9.2 million for both periods.

In addition, most of the Company's tenants are subject to additional rents (above base rents) if gross revenues of the properties exceed certain thresholds defined in the lease agreements (percentage rents). Percentage rents are recognized at the time when specific triggering events occur as provided by the lease agreement. Rental revenue included percentage rents of $3.9 million and $4.0 million for the six months ended June 30, 2023 and 2022, respectively.

The Company regularly evaluates the ~~adequacy~~collectibility 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’s~~

Company's tenants, historical trends of the tenant, ~~and/or other debtor,~~ current economic conditions and changes in customer payment terms. ~~Additionally, with respect to tenants in bankruptcy,~~When the collectibility of lease receivables or future lease payments are no longer probable, the Company ~~estimates the expected recovery through bankruptcy claims and increases the allowance for amounts deemed uncollectible. These estimates have~~records a direct ~~impact on~~write-off of the ~~Company's net income.~~

~~Revenue Recognition~~

~~Rents that are fixed~~receivable to rental revenue and ~~determinable are recognized~~recognizes future rental revenue 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.cash basis.

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 ~~Company defers certain loan origination and commitment fees, net~~amortization or accretion of ~~certain origination costs, and amortizes them over the term of the related loan. Interest income on performing loans is accrued as earned.~~ premiums or discounts (if any).

The Company ~~evaluates~~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 ~~collectability~~Company will record any necessary write-offs as a reversal of ~~both~~interest income. There were no accrued interest write-offs for the six months ended June 30, 2023. During the six months ended June 30, 2022, the Company wrote off approximately $1.5 million of accrued interest and ~~principal~~fees receivables against interest income related to one mortgage note receivable and two notes receivable. As of ~~each of its loans to determine whether it~~June 30, 2023, the Company believes that all outstanding accrued interest is ~~impaired. A loan is considered to be impaired when, based on current information and events,~~collectible.

In the event the Company has a past due mortgage note or note receivable that the Company determines ~~that it~~ is ~~probable that it will be unable to collect all amounts due according to~~collateral-dependent, 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 theCompany measures expected ~~future cash flows at the loan’s effective interest rate or to~~credit losses based on the fair value of the ~~Company’s interest in the underlying collateral, less costs to sell, if the loan is collateral dependent. For impaired loans, interest income is recognized on a cash basis, unless~~collateral. As of June 30, 2023, the Company ~~determines based on~~does not have any mortgage notes or notes receivable with past due principal balances. See Note 6 for further discussion of mortgage notes and notes receivable for which the ~~loan~~Company elected to ~~estimated fair value ratio~~apply the loan should be on the cost recovery method, and any cash payments received would then be reflected as a reduction of principal. Interest income recognition is recommenced if and when the impaired loan becomes contractually current and performance is demonstrated to be resumed.collateral-dependent practical expedient.

Concentrations of Risk

~~On December 21, 2016, American Multi-Cinema,~~Regal, American-Multi Cinema, Inc. (AMC) ~~announced that it closed its acquisition of Carmike Cinemas Inc. (Carmike). AMC was the lessee of~~and Topgolf USA (Topgolf) represented a ~~substantial~~significant 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. For~~revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2016, approximately $65.3 million or 18.0%~~2023 and 2022. The following is a summary of the Company's total ~~revenues were~~revenue derived from rental ~~payments by AMC and approximately $16.9 million~~ or ~~4.7% of the Company's total revenues were derived from rental~~interest 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):


	Six Months Ended June 30,
	2023				2022
	Total Revenue		% of Company's Total Revenue		Total Revenue		% of Company's Total Revenue
Regal	$	56,101	16.3	%	$	45,919	14.4	%
AMC	47,590		13.8	%	47,588		15.0	%
Topgolf	47,353		13.8	%	45,423		14.3	%

~~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 nonvested share grants issued to employees, and amortization of share units issued to non-employee Trustees for payment of their annual retainers. Share-based compensation included in general and administrative expense in the accompanying consolidated statements of income totaled $10.6 million and $8.3 million for the nine months ended September 30, 2017 and 2016, respectively.

~~Share Options~~

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

~~Nonvested Shares Issued to Employees~~

The Company grants nonvested shares to employees pursuant to both the Annual Incentive Program and the Long-Term Incentive Plan. The Company amortizes the expense related to the nonvested shares awarded to employees under the Long-Term Incentive Plan and the premium awarded under the nonvested share alternative of the Annual Incentive Program on a straight-line basis over the future vesting period (~~three~~ or ~~four~~ years). Expense recognized related to nonvested shares and included in general and administrative expense in the accompanying consolidated statements of income was $9.1 million and $6.8 million for the nine months ended September 30, 2017 and 2016, 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 thousand for the nine months ended September 30, 2017 and 2016, respectively.

~~Derivative Instruments~~

The Company has acquired certain 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 changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate 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. 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.

~~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 recognition~~contains 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. In ~~February 2017,~~December 2022, the FASB issued ASU No. ~~2017-05,~~ ~~Other Income: Gains and Losses from~~2022-06, Deferral of the ~~Derecognition~~Sunset Date of ~~Nonfinancial Assets, which amends ASC~~ Topic ~~610-20.~~848. The guidance in ASU ~~No. 2017-05 provides guidance on how entities recognize sales, including partial sales, of nonfinancial assets (and in-substance nonfinancial assets)~~2022-06 deferred the sunset date 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.

December 31, 2024. The Company has ~~reviewed its revenue streams and determined the~~transitioned existing contracts to a replacement index. These ASUs are not anticipated to have any 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~~impact 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’sCompany'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, Financial Instruments - Credit Losses. The ASU changes the methodology for measuring credit losses on financial instruments and timing of when such losses are recorded. ASU No. 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. The Company is currently evaluating the impact that the ASU will have on its consolidated financial statements and related disclosures.

~~In August 2016, the FASB issued ASU No. 2016-15,~~ ~~Classification of Certain Cash Receipts and Cash Payments, which amends ASC Topic 230,~~ ~~Statement of Cash Flows~~. The ASU clarifies the treatment of several cash flow issues with the objective of reducing diversity in practice. ASU No. 2016-15 is effective for fiscal years beginning after December 15, 2017. The Company has determined that the adoption of ASU 2016-15 will not impact its financial position or results of operations and there are no known changes in presentation as a result of adopting this standard.

~~In November 2016, the FASB issued ASU No. 2016-18,~~ ~~Statement of Cash Flows~~, which amends ASC Topic 230, Statement of Cash Flows. The ASU requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Entities will also be required to reconcile such total to amounts on the balance sheet and disclose the nature of the

restrictions. ASU No. 2016-18 is effective for fiscal years beginning after December 15, 2017. The Company has determined that the adoption of this ASU will result in the Company including restricted cash and cash and cash equivalents on its Consolidated Statement of Cash Flows.

~~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 Properties~~Real Estate Investments

The following table summarizes the carrying amounts of ~~rental properties~~real estate investments as of ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016~~2022 (in thousands):


	June 30, 2023		December 31, 2022
Buildings and improvements	$	4,645,441	$	4,637,801
Furniture, fixtures & equipment	115,452		115,677
Land	1,240,122		1,236,358
Leasehold interests	28,453		26,940
	6,029,468		6,016,776
Accumulated depreciation	(1,369,790)		(1,302,640)
Total	$	4,659,678	$	4,714,136

September 30, 2017 December 31, 2016
Buildings and improvements $ 4,037,328
$ 3,272,865
Furniture, fixtures & equipment 86,831
40,684
Land 1,097,445
917,748
Leasehold interests 25,774
—
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~~$80.5 million and ~~$76.3~~$78.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016,~~2022, respectively.

4. Impairment Charges

The Company reviews its properties for changes in circumstances that indicate that the carrying value of a property may not be recoverable based on an estimate of undiscounted future cash flows. During the six months ended June 30, 2023, the Company reassessed the holding period of the Regal Surrendered Properties not included in the Master Lease and one early childhood education center property subject to a lease termination triggered by a casualty event. The Company determined that the estimated cash flows for eight Regal Surrendered Properties and the early childhood education center property were not sufficient to recover the carrying values and estimated the fair value of the real estate investments of these properties using independent appraisals. During the six months ended June 30, 2023, the Company reduced the carrying value of the real estate investments, net to $27.2 million and recognized impairment charges of $43.8 million on real estate investments, which is the amount that the carrying values of the assets exceeded the estimated fair values.

5. Investments and Dispositions

The Company's investment spending during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 totaled ~~$1.5 billion,~~$98.7 million, and included ~~investments~~the acquisition of a fitness and wellness property for approximately $46.7 million and spending on build-to-suit experiential development and redevelopment projects.

During the six months ended June 30, 2023, the Company completed the sales of one vacant eat & play property, one early childhood education center and a land parcel for net proceeds of $8.4 million and recognized a net loss on sale totaling $1.1 million. Additionally, during the six months ended June 30, 2023, the Company, as lessee, terminated one ground lease that held one theatre property.

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 because its financial instruments do not have similar risk characteristics. The Company uses a forward-looking commercial real estate loss forecasting tool to estimate its current expected credit losses (CECL) for each of its ~~four~~ ~~operating segments.~~mortgage notes and notes receivable on a loan-by-loan basis. As of June 30, 2023, the Company did not anticipate any prepayments; therefore, the contractual terms of its mortgage notes and notes receivable were used for the calculation of the expected credit losses. The Company updates the model inputs at each reporting period to reflect, if applicable, any newly originated loans, changes to loan specific information on existing loans and current macroeconomic conditions. The CECL allowance is a valuation account that is deducted from the related mortgage note or note receivable. Effective January 1, 2023, the Company adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures.

~~Entertainment investment spending during~~

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

During the six months ended ~~September~~June 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~~2023, 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 Properties Inc. (CNL Lifestyle) 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 inCompany amended a mortgage note receivable and note receivable secured by an eat & play investment with one ~~other recreation facility.~~

~~On April 6, 2017,~~borrower. The modified loan agreement consolidated all of the ~~Company completed a transaction~~borrower's obligations into one mortgage note agreement, including 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 financingrespect to ~~OZRE for its purchase of 14 CNL Lifestyle ski properties valued at $374.5 million. Subsequent~~land which was previously ground leased 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~~borrower. The maturity date of this mortgage note receivable was ~~recognized on these sales.~~

~~The secured debt financing with OZRE has an initial term of five years with three 2.5 year options~~modified 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 three 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~~August 31, 2024 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.~~June 17, 2039. In connection with the adoption of ASU No. 2017-01 on January 1, 2017, this transaction was determined to be an asset acquisition. As such, transaction costs related to this asset acquisition incurred in 2017 have been capitalized.

~~The aggregate investment of $730.8 million in this transaction was recorded as follows (in thousands):~~

April 6, 2017
Rental properties, net $ 481,006
Mortgage notes and related accrued interest receivable 251,038
Tradenames (included in other assets) 6,355
Below market leases (included in accounts payable and accrued liabilities) (7,611 )
Total investment $ 730,788

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

~~During the nine months ended September 30, 2017,~~modification, the Company ~~completed~~forgave approximately $7.8 million of principal, which was fully reserved at December 31, 2022, and reduced the ~~sale~~allowance for credit loss at March 31, 2023. The balance of ~~four entertainment properties for net proceeds totaling $72.3 million. In connection with these sales, the Company recognized 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~~this mortgage note receivable ~~that is secured by~~at June 30, 2023 was $10.8 million.

Although foreclosure was not deemed probable and the ~~observation deck~~principal balance of the ~~John Hancock building~~mortgage note receivable was not past due at June 30, 2023, based on the borrower's declining financial condition, the Company determined that the borrower continues to experience financial difficulty. The repayments are expected to be provided substantially through the sale or operation of the collateral, therefore, the Company elected to apply the collateral-dependent practical expedient. Expected credit losses are based on the fair value of the underlying collateral at the reporting date. The Company will continue to monitor and re-assess the borrower’s financial status at each reporting period and will continue to apply the practical expedient until the borrower is no longer experiencing financial difficulties or the repayment of the outstanding principal and interest is no longer in ~~Chicago, Illinois. In connection~~question. Income from this borrower is recognized on a cash basis. The Company received interest payments totaling $0.4 million from this borrower for both the six months ended June 30, 2023 and 2022. During the six months ended June 30, 2023, the borrower made all contractual interest payments according to the terms of the modified agreement.

Investment in notes receivable, including related accrued interest receivable, was $4.3 million and $2.9 million at June 30, 2023 and December 31, 2022, respectively, and is included in "Other assets" in the accompanying consolidated balance sheets.

At June 30, 2023, two of the Company's notes receivable are considered collateral-dependent and expected credit losses are based on the fair value of the underlying collateral at the reporting date. The Company assessed the fair value of the collateral as of June 30, 2023 on these notes and the notes remain fully reserved with an allowance for credit loss totaling $8.4 million and $1.9 million, respectively, which represents the ~~partial prepayment~~outstanding principal balance of the notes as of June 30, 2023. Income from these borrowers is recognized on a cash basis. The Company received interest payments totaling $0.4 million from one of these borrowers for both the six months ended June 30, 2023 and 2022.

At June 30, 2023, the Company's investment in one of the notes receivable was a variable interest investment and the underlying entity is a VIE. The Company is not the primary beneficiary of this ~~note,~~VIE because the Company ~~received a prepayment fee~~does not individually have the power to direct the activities that are most significant to the entity and, accordingly, this investment is not consolidated. The Company's maximum exposure to loss associated with this VIE is limited to the Company's outstanding note receivable in the amount of ~~$800 thousand,~~$8.4 million, which is ~~being recognized over~~fully reserved in the ~~term of~~allowance for credit losses at June 30, 2023.

The following summarizes the ~~remaining note using~~activity within the ~~effective interest method.~~allowance for credit losses related to mortgage notes, unfunded commitments and notes receivable for the six months ended June 30, 2023 (in thousands):


	Mortgage notes receivable		Unfunded commitments - mortgage notes receivable		Notes receivable		Unfunded commitments - notes receivable		Total
Allowance for credit losses at December 31, 2022	$	8,999	$	751	$	11,952	$	—	$	21,702
Credit loss expense (benefit)	1,319		253		(1,260)		—		312
Charge-offs	(7,771)		—		(394)		—		(8,165)
Recoveries	—		—		—		—		—
Allowance for credit losses at June 30, 2023	$	2,547	$	1,004	$	10,298	$	—	$	13,849

7. Accounts Receivable ~~Net~~

The following table summarizes the carrying amounts of accounts receivable ~~net~~ as of ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016~~2022 (in thousands):


	June 30, 2023		December 31, 2022
Receivable from tenants	$	4,554	$	7,595
Receivable from non-tenants	707		1,006



Straight-line rent receivable	48,044		44,986

Total	$	53,305	$	53,587

September 30,
2017 December 31,
2016
Receivable from tenants $ 15,977
$ 7,564
Receivable from non-tenants 128
497
Receivable from insurance proceeds 27
1,967
Receivable from Sullivan County Infrastructure Revenue Bonds 10,808
22,164
Straight-line rent receivable 73,657
67,618
Allowance for doubtful accounts (1,384 ) (871 )
Total $ 99,213
$ 98,939

The ~~above total includes~~COVID-19 pandemic severely impacted experiential real estate properties because such properties involve congregate social activity and discretionary spending. As a result, the Company continued to recognize revenue on a cash basis for certain tenants, including AMC and Regal, during the six months ended June 30, 2023.

As of June 30, 2023, receivable from tenants includes payments of ~~approximately $5.4~~approximately $1.0 million that were deferred due to the COVID-19 pandemic and straight-line rent receivable of approximately $9.0 million from one of the Company's early education tenants at September 30, 2017. This tenant has been negatively impacted by challenges brought on by its rapid expansion and ramp updetermined 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,~~be collectible. Additionally, the Company ~~believes it~~ has ~~made significant progress in these negotiations. The receivable~~amounts due from ~~tenant and straight-line rent receivable balances at September 30, 2017 have been recorded at levels~~tenants that ~~approximate~~were not booked as receivables because 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 suchfull amounts were ~~fully reserved at September 30, 2017. The tenant continues to operate these properties (other than the two unimproved properties)~~not deemed probable of collection 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.~~

~~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 assets 47,000
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, 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,~~COVID-19 pandemic. While deferments for this and future periods delay rent payments, these ~~six properties were classified as operating leases during~~deferments do not release tenants from the obligation to pay the deferred amounts in the future.

8. Capital Markets and Dividends

During the three ~~months ended September 30, 2017. Due to lease negotiations during the three~~and six months ended June 30, ~~2017, management evaluated whether it could recover its investment in these leases taking into account~~2023, the ~~revised lease terms~~Company declared cash dividends totaling $0.825 and ~~independent appraisals prepared as of~~$1.65 per common share, respectively. Additionally, during the three and six months ended June 30, ~~2017,~~2023, the Board declared cash dividends of $0.359375 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~~$0.71875 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
2018 6,301
2019 6,490
2020 6,685
2021 6,885
Thereafter 86,050
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 and $1.125 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,~~February 17, 2023, the Company amended its ~~unsecured consolidated credit agreement~~Third Consolidated Credit Agreement, which governs its unsecured revolving credit facility, to modify the interest rate from LIBOR to SOFR. The facility bears interest at a floating rate of SOFR plus 1.30% (with a SOFR floor of zero), which was 6.40% at June 30, 2023, and ~~its unsecured term loan facility.~~has a facility fee of 0.25%.

9. Unconsolidated Real Estate Joint Ventures

The ~~amendments~~following table summarizes the Company's investments in unconsolidated joint ventures as of June 30, 2023 and December 31, 2022 (in thousands):


					Investment as of				Income (Loss) for the Six Months Ended
Property Type	Location	Ownership Interest			June 30, 2023		December 31, 2022		June 30, 2023		June 30, 2022
Experiential lodging	St. Pete Beach, FL	65	%	(1)	$	19,517	$	18,712	$	806	$	2,837
Experiential lodging	Warrens, WI	95	%	(2)	9,076		10,865		(1,789)		(1,654)
Experiential lodging	Breaux Bridge, LA	85	%	(3)	19,138		17,080		(1,342)		193
Experiential lodging	Harrisville, PA	62	%	(4)	6,032		6,307		(275)		—
Theatres	China	various			—		—		—		(61)
					$	53,763	$	52,964	$	(2,600)	$	1,315

(1) The Company has equity investments in two unconsolidated real estate joint ventures, one that holds the investment in the real estate of the experiential lodging properties and the other that holds the lodging operations, which are facilitated by a management agreement. The joint venture that holds the real property has a secured mortgage loan of $105.0 million at June 30, 2023. The maturity date of this mortgage loan is May 18, 2025. The note can be extended for two additional one-year periods from the original maturity date upon the satisfaction of certain conditions. The mortgage loan bears interest at SOFR plus 3.65%, with monthly interest payments required. The joint venture has an interest rate cap agreement to limit the ~~unsecured revolving~~variable portion of the ~~credit facility, among~~interest rate (SOFR) on this note to 3.5% from May 19, 2022 to June 1, 2024.

(2) The Company has equity investments in two unconsolidated real estate joint ventures, one that holds the investment in the real estate of the experiential lodging property and the other ~~things, (i) increase~~that holds the ~~initial maximum available amount from $650.0~~lodging operations, which are facilitated by a management agreement. The joint venture that holds the real property has a secured mortgage loan of $22.9 million at June 30, 2023 that provides for additional draws of approximately $1.6 million to ~~$1.0 billion, (ii) extend the~~fund renovations. The maturity date of this mortgage loan is September 15, 2031. The loan bears interest at an annual fixed rate of 4.00% with monthly interest payments required. Additionally, the Company has guaranteed the completion of the renovations in the amount of approximately $14.2 million, with $3.1 million remaining to fund at June 30, 2023.

(3) The Company has equity investments in two unconsolidated real estate joint ventures, one that holds the investment in the real estate of the experiential lodging property and the other that holds the lodging operations, which are facilitated by a management agreement. The joint venture that holds the real estate property has a secured senior mortgage loan of $38.5 million at June 30, 2023. The maturity date of this mortgage loan is March 8, 2034. The mortgage loan bears interest at an annual fixed rate of 3.85% through April 7, 2025 and increases to 4.25% from April ~~24, 2019, to~~

~~February 27, 2022 (with~~8, 2025 through maturity. Monthly interest payments are required. Additionally, the Company ~~having the right to extend the~~provided a subordinated 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~~joint venture for $11.3 million with a maturity date of March 8, 2034. The mortgage loan bears interest at ~~closing was LIBOR~~an annual fixed rate of 7.25% through the sixth anniversary and increases to SOFR plus ~~1.00% and 0.20%~~7.20% with a cap of 8.00%, ~~versus LIBOR plus 1.25% and 0.25%~~through maturity.

(4) The Company has a 92% equity investment in two separate unconsolidated real estate joint ventures, that through subsequent joint ventures (described below), ~~respectively, under~~hold the ~~previous terms. In connection with~~investments in 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 portionreal estate of the ~~facility.~~

experiential lodging property and the lodging operations, which are facilitated by a management agreement. The ~~amendments~~Company's investments in these two unconsolidated real estate joint ventures were considered 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, 2023be variable interest investments 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~~investment in the ~~previous terms. In connection with~~joint venture that holds 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~~lodging operations 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 among other things: (i) amends certain financial and other covenants and provisions in the Note Purchase Agreement to conform generally to the corresponding covenants and provisions contained in the amended unsecured consolidated credit agreement; (ii) provides the investors thereunder certain additional guaranty and lien rights, in the event that certain subsequent events occur; (iii) expands the scope of the “most favored lender” covenant contained in the Note Purchase Agreement; and (iv) imposes restrictions on debt that can be incurred by certain subsidiaries of the Company.

~~Subsequent to September 30, 2017, the Company entered into three interest rate swap agreements on its unsecured term loan. See Note 9 for further details.~~

During 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 a portion of the Company's unsecured revolving credit facility.

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

~~8. Variable Interest Entities~~

~~The Company’s variable interest in VIEs currently are in the form of equity ownership and loans provided by the Company to a VIE or other partner.~~VIE. 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 whether~~the VIE 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, 2017 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. The Company's maximum exposure to loss associated with these VIEs is limited to the Company's outstanding mortgage notes and related accrued interest receivable of $178.4 million. These mortgage notes are secured by three recreation properties and one public charter school. While these entities are VIEs, the Company has determined that the power to direct the activities ~~of these VIEs~~ that are most ~~significantly impact~~important to the ~~VIEs' economic performance~~joint venture and, accordingly, this investment is not ~~held~~consolidated. Additionally, the

Company's maximum exposure to loss at June 30, 2023, other than the guarantee described below, is its investment in the joint venture that holds the lodging operations of $0.7 million.

The Company's investments in the two unconsolidated real estate joint ventures (representing 92% of each joint venture's equity) have a 67% equity interest in two separate consolidated joint ventures, one that holds the investments in the real estate of the experiential lodging property and the other that holds the lodging operations, which are facilitated by a management agreement. The consolidated joint venture that holds the ~~Company.~~real estate property has a secured senior mortgage loan commitment of up to $22.5 million at June 30, 2023 in order to fund renovations, with $3.2 million outstanding at June 30, 2023. The maturity date of this mortgage loan is November 1, 2029. The mortgage loan bears interest at an annual fixed rate of 6.38% with monthly interest payments required. The Company has guaranteed $10.0 million in principal on the secured mortgage loan, and, upon completion of construction and achieving a specified debt service coverage ratio, the principal guarantee will be reduced to $5.0 million. The guarantee will be removed completely upon achievement of specified debt service coverage for three consecutive calculation periods. Additionally, the Company has guaranteed the completion of the renovations in the amount of approximately $13.9 million, with $11.9 million remaining to fund at June 30, 2023.

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 position for purposes of balance sheet presentation and disclosure. The ~~Company~~Company had ~~derivative liabilities of $0.2 million and $2.5 million recorded in “Accounts payable and accrued liabilities” and~~ derivative assets of ~~$23.3~~$6.7 million and ~~$35.9~~$11.4 million ~~recorded in “Other assets” in the consolidated balance sheet~~ at ~~September~~June 30, ~~2017~~2023 and December 31, 2022, respectively. The Company had no derivative liabilities at June 30, 2023 and December 31, ~~2016, respectively.~~2022. The Company ~~had~~has not posted or received collateral with its derivative counterparties as of ~~September~~June 30, ~~2017~~2023 or December 31, ~~2016.~~2022. 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 based~~SOFR-based borrowings. The Company manages this risk by following established risk management policies and procedures including the use of derivatives. The Company’s objective in using derivatives is to add stability to reported earnings and to manage its exposure to foreign exchange and interest rate movements or other identified risks. To accomplish this objective, the Company primarily uses interest rate swaps, cross-currency swaps and foreign currency forwards.

Cash Flow Hedges of Interest Rate Risk

The Company’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 payments~~recording net interest expense that is fixed over the life of the agreements without exchange of the underlying notional amount.

~~As of September~~At June 30, ~~2017,~~2023, the Company had ~~two~~one interest rate swap ~~agreements to fix the~~agreement designated as a cash flow hedge of interest rate ~~at 2.64% on $300.0 million~~risk. The interest rate swap agreement outstanding as of ~~the unsecured term loan facility from July 6, 2017 to April 5, 2019.~~June 30, 2023 is summarized below:

Fixed rate

Notional Amount (in millions)

Index

Maturity

2.5325%

25.0

USD SOFR

September 30, 2026

The ~~effective portion of changes~~change in the fair value of interest rate derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (AOCI) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects ~~earnings. During~~earnings within the ~~nine months ended September 30, 2017 and 2016, such derivatives were used to hedge~~same income statement line item as the ~~variable cash flows associated with existing variable-rate debt. The~~

~~ineffective portion~~earnings 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~~June 30, ~~2017~~,2023, the Company estimates that during the twelve months ~~ending September~~ending June 30, ~~2018, $0.2~~2024, $1.1 million of gains will be reclassified from AOCI to interest expense.

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 ~~four~~six Canadian properties. The Company uses ~~cross currency~~cross-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 derivatives~~cash 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~~June 30, ~~2017~~,2023, the Company had ~~USD-CAD~~the following cross-currency ~~swaps with a fixed original notional value of $100.0 million CAD and $98.1 million USD.~~ swaps:


Fixed rate	Notional Amount (in millions, CAD)		Annual Cash Flow (in millions, CAD)		Maturity
$1.26 CAD per USD	$	150.0	$	10.8	October 1, 2024
$1.28 CAD per USD	200.0		4.5		October 1, 2024
$1.30 CAD per USD	90.0		8.1		December 1, 2024
	$	440.0	$	23.4

The net effect of these swaps is to lock in an exchange rate of $1.05 CAD per USD on approximately $13.5 million of annual CAD denominated cash flows on the properties through June 2018. Additionally, on August 30, 2017, the Company 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 USD. The net effect of these swaps is to lock in an exchange rate of 1.26 CAD per USD on approximately $13.5 million of annual CAD denominated cash flows on the properties through June 2020.

~~The effective portion of changes~~change in the fair value of foreign currency derivatives designated and that qualify as cash flow hedges of foreign exchange risk is recorded in AOCI and ~~subsequently~~ reclassified into earnings in the period that the hedged forecasted transaction affects ~~earnings. The ineffective portion~~earnings 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~~June 30, ~~2017~~,2023, the Company estimates that during the twelve months ending ~~September~~June 30, ~~2018, $1.5~~2024, $0.5 million of gains will be reclassified from AOCI to other income.

Net Investment Hedges

~~As discussed above, the~~The Company is exposed to fluctuations in ~~foreign~~the USD-CAD exchange ~~rates~~rate on its ~~four Canadian properties.~~net investments in Canada. As such, the Company uses currency forward agreements to ~~hedge~~manage its exposure to changes in foreign exchange ~~rates. Currency forward agreements involve fixing~~rates on certain of its foreign net investments. As of June 30, 2023, the ~~USD-CAD exchange rate for delivery of a specified amount of~~Company had the following foreign currency ~~on a specified date. The currency forward agreements are typically cash settled in USD for their fair value at or close to their settlement date. In order to hedge the~~forwards designated as net investment in ~~four~~ ~~of the Canadian properties, on June 13, 2013, the Company entered into a forward contract with a fixed notional value of~~ ~~$100.0 million~~ ~~CAD and~~ ~~$94.3 million~~ ~~USD with a~~ ~~July 2018~~ ~~settlement. The exchange rate of this forward contract is approximately~~ ~~$1.06~~ ~~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.~~hedges:

Fixed rate

Notional Amount (in millions, CAD)

Maturity

$1.28 CAD per USD

200.0

October 1, 2024

$1.30 CAD per USD

90.0

December 2, 2024

Total

290.0

For qualifying foreign currency derivatives designated as net investment hedges, the ~~effective portion of changes~~change 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.

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~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016.~~

2022.

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,
Description 2017 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 )
Effect of Derivative Instruments on the Consolidated Statements of Changes in Equity and Comprehensive Income for the Three and Six Ended June 30, 2023 and 2022 (Dollars in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
Description	2023		2022		2023		2022
Cash Flow Hedges
Interest Rate Swaps
Amount of Gain Recognized in AOCI on Derivative	$	516	$	225	$	218	$	1,050
Amount of Income (Expense) Reclassified from AOCI into Earnings (1)	159		(37)		285		(113)
Cross-Currency Swaps
Amount of (Loss) Gain Recognized in AOCI on Derivative	(460)		199		(456)		173
Amount of Income (Expense) Reclassified from AOCI into Earnings (2)	216		(45)		441		(99)
Net Investment Hedges
Cross-Currency Swaps
Amount of Gain Recognized in AOCI on Derivative	—		3,684		—		665
Amount of Income Recognized in Earnings (2) (3)	—		71		—		170
Currency Forward Agreements
Amount of (Loss) Gain Recognized in AOCI on Derivative	(4,287)		938		(3,946)		938

Total
Amount of (Loss) Gain Recognized in AOCI on Derivatives	$	(4,231)	$	5,046	$	(4,184)	$	2,826
Amount of Income (Expense) Reclassified from AOCI into Earnings	375		(82)		726		(212)
Amount of Income Recognized in Earnings	—		71		—		170

Interest expense, net in accompanying consolidated statements of income and comprehensive income	$	31,591	$	33,289	$	63,313	$	66,549
Other income in accompanying consolidated statements of income and comprehensive income	$	10,124	$	9,961	$	19,457	$	19,266


~~(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.~~

(1) Included in "Interest expense, net" in the accompanying consolidated statements of income and comprehensive income for the three and six months ended June 30, 2023 and 2022.

(2) Included in "Other income" in the accompanying consolidated statements of income and comprehensive income for the three and six months ended June 30, 2023 and 2022.

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

Credit-risk-related Contingent Features

The Company has ~~agreements~~an agreement with ~~each of~~ its interest rate derivative ~~counterparties~~counterparty that ~~contain~~contains 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.~~agreements.

As of ~~September~~June 30, ~~2017~~,2023, the ~~fair value of the Company’s derivatives~~Company had no derivatives in a liability position related to these derivative agreements ~~was $0.2 million. If~~. As of June 30, 2023, the Company ~~breached~~had not posted any collateral related to these agreements and was not in breach of ~~the contractual~~any provisions ofin these ~~derivative contracts, it would be required to settle its obligations under the agreements at their termination value, after considering the right of offset, the Company would have no obligation.~~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 within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). Level 1 inputs use quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

Derivative Financial Instruments

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

~~Although the~~ Company determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives also use Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by itself and its counterparties. As of ~~September~~June 30, ~~2017~~,2023, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives and therefore, classified its derivatives as Level 2 within the fair value reporting hierarchy.

The table below presents the Company’s financial assets and liabilities measured at fair value on a recurring basis as of ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016~~2022 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 )
June 30, 2023 and December 31, 2022

*(Dollars in thousands)


Description	Quoted Prices in Active Markets for Identical Assets (Level I)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at end of period
June 30, 2023

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

Currency Forward Agreements (1)	—		4,741		—		4,741
Interest Rate Swap Agreements (1)	—		1,359		—		1,359
December 31, 2022
Cross-Currency Swaps (1)	$	—	$	1,523	$	—	$	1,523

Currency Forward Agreements (1)	—		8,686		—		8,686
Interest Rate Swap Agreements (1)	—		1,240		—		1,240

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

**Included in "Accounts payable and accrued liabilities" in the accompanying consolidated balance sheets.

Non-recurring fair value measurements

The table below presents the Company's assets measured at fair value on a non-recurring basis ~~during the nine months ended September~~as of June 30, ~~2017~~2023 and December 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~~at June 30, ~~2017~~2023 andDecember 31, 2022

(Dollars in thousands)


Description	Quoted Prices in Active Markets for Identical Assets (Level I)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at end of period
June 30, 2023
Real estate investments, net (1)	$	—	$	—	$	27,190	$	27,190



December 31, 2022
Real estate investments, net	$	—	$	4,700	$	33,670	$	38,370
Operating lease right-of-use asset	—		—		7,006		7,006
Mortgage notes and related accrued interest receivable, net	—		—		7,780		7,780
Investment in joint ventures	—		—		—		—
Other assets (2)	—		—		1,316		1,316

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

Investment in a direct financing lease, net $ —
$ —
$ 35,807
$ 35,807

(1) As further discussed ~~further~~ in Note 6,4, during the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2023, the Company recorded an impairment ~~charges totaling $10.2~~charge of $43.8 million related to ~~its investment in a direct financing lease, net.~~real estate investments, net, on nine properties. Management estimated the fair values of ~~this investment~~these investments taking into account various factors including independent appraisals, ~~input from an outside broker~~shortened hold periods and ~~current~~ market conditions. The ~~Company determined, based on~~significant inputs and assumptions used in the ~~inputs, that its valuation of the investment was~~real estate appraisals included market rents ranging from $4.50 per square foot to $20 per square foot, discount rates ranging from 9.50% to 11.50% and terminal capitalization rates ranging from 8.50% to 10.25%. These measurements were classified within Level 3 of the fair value hierarchy asbecause many of the assumptions ~~are~~were not observable. ~~During~~

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

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~~June 30, ~~2017~~2023 and December 31, ~~2016:~~2022:

Mortgage notes receivable and related accrued interest ~~receivable:~~receivable, net:

The fair value of the Company’s mortgage notes and related accrued interest receivable, net, is estimated by discounting the future cash flows of each instrument using current market rates. At ~~September~~June 30, ~~2017,~~2023, the Company had a carrying value of ~~$972.4~~$466.5 million in ~~fixed rate~~fixed-rate mortgage notes receivable outstanding, including related accrued interest and allowance for credit losses, with a weighted average interest rate of approximately ~~8.40%~~8.91%. The ~~fixed rate~~fixed-rate mortgage notes bear interest at rates of ~~7.00%~~6.99% to ~~11.31%~~12.32%. Discounting the future cash flows for ~~fixed rate~~fixed-rate mortgage notes receivable using rates of 7.00% to ~~12.00%~~10.00%, management estimates the fair value of the ~~fixed rate~~fixed-rate mortgage notes receivable to be approximately ~~$1.0 billion~~$510.5 million with an estimated weighted average market rate of ~~8.53%~~7.66% at ~~September~~June 30, ~~2017~~.2023.

At December 31, ~~2016,~~2022, the Company had a carrying value of ~~$614.0~~$457.3 million in ~~fixed rate~~fixed-rate mortgage notes receivable outstanding, including related accrued interest and allowance for credit losses, with a weighted average interest rate of approximately ~~8.77%~~8.92%. The ~~fixed rate~~fixed-rate mortgage notes bear interest at rates of ~~7.00%~~6.99% to ~~11.31%~~12.14%. Discounting the future cash flows for ~~fixed rate~~fixed-rate mortgage notes receivable using rates of ~~7.00%~~7.15% to ~~12.00%~~10.00%, management estimates the fair value of the ~~fixed rate~~fixed-rate mortgage notes receivable to be ~~$648.5~~$500.0 million with an estimated weighted average market rate of ~~8.48%~~7.70% at December 31, ~~2016.~~2022.

~~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~~June 30, ~~2017~~,2023, the Company had a carrying value of $25.0 million in variable-rate debt outstanding with an average interest rate of approximately 5.23%. The carrying value of the variable-rate debt outstanding approximated the fair value at June 30, 2023.

At December 31, 2022, the Company had a carrying value of ~~$595.0~~$25.0 million in ~~variable rate~~variable-rate debt outstanding with a weighted average interest rate of approximately ~~2.42%~~4.43%. The carrying value of the ~~variable rate~~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.~~2022.

At ~~September~~both June 30, ~~2017~~2023 and December 31, ~~2016, $300.0~~2022, the $25.0 million of ~~variable rate~~variable-rate debt outstanding, ~~under the Company's unsecured term loan facility~~discussed above, had been effectively converted to a fixed rate ~~through April 5, 2019~~ by an interest rate swap ~~agreements.~~agreement. See Note 10 for additional information related to the Company's interest rate swap agreement.

At ~~September~~June 30, ~~2017~~,2023, the Company had a carrying value of ~~$2.43~~$2.82 billion in ~~fixed rate~~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~~fixed-rate debt using ~~September~~June 30, ~~2017~~2023 market rates of ~~2.89%~~7.24% to ~~4.56%~~8.28%, management estimates the fair value of the fixed rate debt to be approximately ~~$2.54~~$2.45 billion with an estimated weighted average market rate of ~~3.96%~~7.77% at ~~September~~June 30, ~~2017~~.2023.

At December 31, ~~2016,~~2022, the Company had a carrying value of ~~$2.14~~$2.82 billion in ~~fixed rate~~fixed-rate long-term debt outstanding with an average weighted interest rate of approximately ~~5.27%~~4.34%. Discounting the future cash flows for ~~fixed rate~~fixed-rate debt using December 31, ~~2016~~2022 market rates of ~~2.97%~~7.42% to ~~4.75%~~8.35%, management estimates the fair value of the fixed rate debt to be approximately ~~$2.21~~$2.39 billion with an estimated weighted average market rate of ~~4.26%~~7.94% at December 31, ~~2016.~~2022.

~~11.~~

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~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 (amounts in thousands except per share information):


	Three Months Ended June 30, 2023					Six Months Ended June 30, 2023
	Income (numerator)		Shares (denominator)	Per Share Amount		Income (numerator)		Shares (denominator)	Per Share Amount
Basic EPS:
Net income	$	13,600				$	71,257
Less: preferred dividend requirements	(6,040)					(12,073)



Net income available to common shareholders	$	7,560	75,297	$	0.10	$	59,184	75,191	$	0.79
Diluted EPS:
Net income available to common shareholders	$	7,560	75,297			$	59,184	75,191
Effect of dilutive securities:
Performance shares	—		418			—		380


Net income available to common shareholders	$	7,560	75,715	$	0.10	$	59,184	75,571	$	0.78


	Three Months Ended September 30, 2017						Nine Months Ended September 30, 2017							Three Months Ended June 30, 2022					Six Months Ended June 30, 2022
	Income (numerator)			Shares (denominator)	Per Share Amount		Income (numerator)			Shares (denominator)	Per Share Amount			Income (numerator)		Shares (denominator)	Per Share Amount		Income (numerator)		Shares (denominator)	Per Share Amount
Basic EPS:													Basic EPS:
Income from continuing operations	$	62,954					$	197,405
Net income													Net income	$	40,909				$	83,101
Less: preferred dividend requirements	(5,951		)				(17,855		)				Less: preferred dividend requirements	(6,033)					(12,066)

Net income available to common shareholders	$	57,003		73,663	$	0.77	$	179,550		70,320	$	2.55	Net income available to common shareholders	$	34,876	74,986	$	0.47	$	71,035	74,915	$	0.95
Diluted EPS:													Diluted EPS:
Net income available to common shareholders	$	57,003		73,663			$	179,550		70,320			Net income available to common shareholders	$	34,876	74,986			$	71,035	74,915
Effect of dilutive securities:													Effect of dilutive securities:
Share options	—			61			—			65
Share options and performance shares													Share options and performance shares	—		248			—		227

Net income available to common shareholders	$	57,003		73,724	$	0.77	$	179,550		70,385	$	2.55	Net income available to common shareholders	$	34,876	75,234	$	0.46	$	71,035	75,142	$	0.95

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.

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 following shares have been excluded from the calculation of diluted earnings per share, either because they are anti-dilutive or, in the case of contingently issuable performance shares, are not probable of issuance:

•The additional ~~2.1~~2.3 million and ~~2.0~~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 the three and six months ended June 30, 2023 and 2022, respectively.

•The additional ~~1.6~~1.7 million common shares that would result from the conversion of the Company’s 9.0% Series E cumulative convertible preferred shares and the corresponding add-back of the preferred dividends declared on those shares ~~are not included in the calculation of diluted earnings per share~~ for both the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016, respectively, because the effect is anti-dilutive.~~2022.

~~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 783 thousand ~~shares of~~and 89 thousand common shares at per share prices ranging from ~~$61.79~~$44.44 to $76.63 ~~were outstanding~~ for the three and six months ended ~~September~~June 30, ~~2017, but were not included in the computation~~2023 and 2022, respectively.

•The effect of ~~diluted earnings per share because they were anti-dilutive. For~~56 thousand contingently issuable performance shares granted during 2020 for the three and six months ended ~~September~~June 30, 2016, there were no anti-dilutive options. Options to purchase 5 thousand and 84 thousand shares of common shares, respectively at per share prices ranging from $61.79 to $76.63 and $61.79 were outstanding for the nine months ended September 30, 2017 and 2016, respectively, but were not included in the computation of diluted earnings per share because they were anti-dilutive.2022.

~~12.~~

13. Equity Incentive ~~Plan~~Plans

All grants of common shares and options to purchase common shares were issued under the Company's 2007 Equity Incentive Plan prior to May 12, 2016 and under the 2016 Equity Incentive Plan on and after May 12, 2016. Under the 2016 Equity Incentive Plan, an aggregate of ~~1,950,000~~3,950,000 common shares, options to purchase common shares and restricted share units, subject to adjustment in the event of certain capital events, may be granted. Additionally, the 2020 Long Term Incentive Plan (2020 LTIP) is a sub-plan under the Company's 2016 Equity Incentive Plan. Under the 2020 LTIP, the Company awards performance shares and restricted shares to the Company's executive officers. At ~~September~~June 30, ~~2017,~~2023, there ~~were 1,633,001~~were 1,490,224 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. 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, 2016 285,986
$ 19.02
—
$ 61.79
$ 51.93
Exercised (28,281 ) 46.86
—
61.79
54.72
Granted 2,215
76.63
—
76.63
76.63
Forfeited/Expired (1,342 ) 51.64
—
61.79
59.52
Outstanding at September 30, 2017 258,578
$ 19.02
—
$ 76.63
$ 51.80

The weighted average fair value of options granted was $7.91 during the nine months ended September 30, 2017. There were no options granted during the nine months ended September 30, 2016. The intrinsic value of stock options exercised was $0.5 million and $3.4 million for the nine months ended September 30, 2017 and 2016, respectively. Additionally, the Company repurchased 21,260 shares into treasury shares in conjunction with the stock options exercised during the nine 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.

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 summarizes exercisable 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 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, 2022	503,912	$	50.38
Granted	352,090	42.23
Vested	(228,102)	54.10
Forfeited	(13,809)	45.20
Outstanding at June 30, 2023	614,091	$	44.44	1.40

Number of
shares

Weighted avg.
grant date
fair value

Weighted avg.
life remaining
Outstanding at December 31, 2016 534,317
$ 59.22

Granted 295,754
76.53

Vested (208,822 ) 57.43

Forfeited (1,342 ) 66.88

Outstanding at September 30, 2017 619,907
$ 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~~$8.6 million and ~~$9.2~~$10.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016,~~2022, respectively. Expense recognized related to nonvested shares and included in "General and administrative expense" in the accompanying consolidated statements of income and comprehensive income was $3.8 million and $3.9 million for the six months ended June 30, 2023 and 2022, respectively. Expense related to nonvested shares and included in severance expense in the accompanying consolidated statements of income and comprehensive income was $0.3 million for the six months ended June 30, 2023. There was no expense related to nonvested shares included in severance expense for the six months ended June 30, 2022. At ~~September~~June 30, ~~2017,~~2023, unamortized share-based compensation expense related to nonvested shares was ~~$24.2~~$14.3 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, 2022			257,386
Granted			111,593
Vested (1)			(56,338)
Forfeited			—
Outstanding at June 30, 2023			312,641

(1) The performance conditions for the performance shares granted during the year ended December 31, 2020 were not achieved resulting in no pay-out.

The number of common shares issuable upon settlement of the performance shares granted during the six months ended June 30, 2023, 2022 and 2021 will be based upon the Company's achievement level relative to the following performance measures at December 31, 2025, 2024 and 2023, 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 $5.9 million and $6.0 million for the six months ended June 30, 2023 and 2022, respectively. The estimated fair value is amortized to expense over the three-year performance periods, which end on December 31, 2025, 2024 and 2023 for performance shares granted in 2023, 2022 and 2021, 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 six months ended June 30, 2023: risk-free interest rate of 4.4%, volatility factors in the expected market price of the Company's common shares of 52% and an expected life of approximately three years.

The performance shares based on growth in AFFO per share have a performance condition. The probability of achieving the performance condition is assessed at each reporting period. If it is deemed probable that the performance condition will be met, compensation cost will be recognized based on the closing price per share of the Company's common stock on the date of the grant multiplied by the number of awards expected to be earned. If it is deemed that it is not probable that the performance condition will be met, the Company will discontinue the recognition of compensation cost and any compensation cost previously recorded will be reversed. At June 30, 2023, achievement of the performance condition was deemed probable for the performance shares granted during the six months ended June 30, 2023, 2022 and 2021 with an expected payout percentage of 100%, 200% and 200%, respectively, which resulted in a grant date fair value of approximately $1.2 million, $2.3 million and $2.3 million, respectively.

Expense recognized related to performance shares and included in "General and administrative expense" in the accompanying consolidated statements of income and comprehensive income was $4.0 million and $3.3 million for the six months ended June 30, 2023 and 2022, respectively. At June 30, 2023, unamortized share-based compensation expense related to nonvested performance shares was $11.5 million.

The performance shares accrue dividend equivalents which are paid only if common shares are issued upon settlement of the performance shares. During the six months ended June 30, 2023 and 2022, the Company accrued dividend equivalents expected to be paid on earned awards of $803 thousand and $324 thousand, respectively.

Restricted Share Units

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


	Number of shares	Weighted avg. grant date fair value		Weighted avg. life remaining
Outstanding at December 31, 2022	38,605	$	50.77
Granted	43,497	41.67
Vested	(40,054)	50.44
Outstanding at June 30, 2023	42,048	$	41.67	0.92

Number of
shares

Weighted avg.
grant date
fair value

Weighted avg.
life remaining
Outstanding at December 31, 2016 15,805
$ 70.93

Granted 19,030
70.91

Vested (15,805 ) 70.93

Outstanding at September 30, 2017 19,030
$ 70.91
0.58

The holders of restricted share units receive dividend equivalents from the date of grant. ~~The share units vest upon~~Total expense recognized related to shares issued to non-employee Trustees and included in "General and administrative expense" in the ~~earlier~~accompanying consolidated statements of income and comprehensive income was $1.0 million and $1.2 million forthe ~~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,~~six months ended June 30, 2023 and ~~ranges from one year from the grant date to upon termination of service.~~2022, respectively. At ~~September~~June 30, ~~2017,~~2023, unamortized share-based compensation expense related to ~~restricted~~restricted share units was ~~$0.8~~$1.6 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 June 30, 2023 and December 31, 2022, the Company was lessee in 51 and 52 operating ground leases, respectively. 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 June 30, 2023, 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, however, two of these properties do not currently have sub-tenants. In the event the tenant fails to pay the ground lease rent or if the property does not have sub-tenants, the Company is primarily responsible for the payment, assuming the Company does not sell or re-tenant the property. The Company is also the lessee in an operating lease of its executive office.

The following table summarizes rental revenue, including sublease arrangements and lease costs, for the three and six months ended June 30, 2023 and 2022 (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,
	Classification	2023		2022		2023		2022
Operating leases	Rental revenue	$	145,531	$	136,918	$	290,766	$	270,746
Sublease income - operating ground leases	Rental revenue	6,339		5,957		12,695		11,732

Lease costs
Operating ground lease cost	Property operating expense	$	6,563	$	6,136	$	13,163	$	12,105
Operating office lease cost	General and administrative expense	224		226		448		452

15. Segment Information

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

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


Balance Sheet Data:
	As of June 30, 2023
	Experiential		Education		Corporate/Unallocated		Consolidated
Total Assets	$	5,140,804	$	460,126	$	102,634	$	5,703,564

	As of December 31, 2022
	Experiential		Education		Corporate/Unallocated		Consolidated
Total Assets	$	5,164,710	$	473,580	$	120,411	$	5,758,701


Operating Data:
	Three Months Ended June 30, 2023
	Experiential		Education		Corporate/Unallocated		Consolidated
Rental revenue	$	142,421	$	9,449	$	—	$	151,870
Other income	9,825		—		299		10,124
Mortgage and other financing income	10,694		219		—		10,913
Total revenue	162,940		9,668		299		172,907

Property operating expense	13,744		—		228		13,972
Other expense	9,161		—		—		9,161
Total investment expenses	22,905		—		228		23,133
Net operating income - before unallocated items	140,035		9,668		71		149,774

Reconciliation to Consolidated Statements of Income and Comprehensive Income:
General and administrative expense							(15,248)
Severance expense							(547)



Transaction costs							(36)
Credit loss benefit							275
Impairment charges							(43,785)
Depreciation and amortization							(43,705)
Loss on sale of real estate							(575)
Interest expense, net							(31,591)
Equity in loss from joint ventures							(615)


Income tax expense							(347)




Net income							13,600

Preferred dividend requirements							(6,040)
Net income available to common shareholders of EPR Properties							$	7,560


Operating Data:
	Three Months Ended June 30, 2022
	Experiential		Education		Corporate/Unallocated		Consolidated
Rental revenue	$	133,009	$	9,866	$	—	$	142,875
Other income	7,685		—		2,276		9,961
Mortgage and other financing income	7,382		228		—		7,610
Total revenue	148,076		10,094		2,276		160,446

Property operating expense	13,358		—		234		13,592
Other expense	8,872		—		—		8,872
Total investment expenses	22,230		—		234		22,464
Net operating income - before unallocated items	125,846		10,094		2,042		137,982

Reconciliation to Consolidated Statements of Income and Comprehensive Income:
General and administrative expense							(12,691)



Transaction costs							(1,145)
Credit loss expense							(9,512)

Depreciation and amortization							(40,766)


Interest expense, net							(33,289)
Equity in income from joint ventures							1,421
Impairment charges on joint ventures							(647)

Income tax expense							(444)



Net income							40,909
Preferred dividend requirements							(6,033)
Net income available to common shareholders of EPR Properties							$	34,876


Operating Data:
	Six Months Ended June 30, 2023
	Experiential		Education		Corporate/Unallocated		Consolidated
Rental revenue	$	284,121	$	19,340	$	—	$	303,461
Other income	18,933		1		523		19,457
Mortgage and other financing income	20,943		442		—		21,385
Total revenue	323,997		19,783		523		344,303

Property operating expense	27,921		—		206		28,127
Other expense	18,111		—		—		18,111
Total investment expenses	46,032		—		206		46,238
Net operating income - before unallocated items	277,965		19,783		317		298,065

Reconciliation to Consolidated Statements of Income and Comprehensive Income:
General and administrative expense							(29,213)
Severance expense							(547)


Transaction costs							(306)
Credit loss expense							(312)
Impairment charges							(43,785)
Depreciation and amortization							(84,909)
Loss on sale of real estate							(1,135)

Interest expense, net							(63,313)
Equity in loss from joint ventures							(2,600)


Income tax expense							(688)



Net income							71,257
Preferred dividend requirements							(12,073)
Net income available to common shareholders of EPR Properties							$	59,184


Operating Data:
	Six Months Ended June 30, 2022
	Experiential		Education		Corporate/Unallocated		Consolidated
Rental revenue	$	262,034	$	20,444	$	—	$	282,478
Other income	16,895		—		2,371		19,266
Mortgage and other financing income	15,716		458		—		16,174
Total revenue	294,645		20,902		2,371		317,918

Property operating expense	27,051		(7)		487		27,531
Other expense	16,969		—		—		16,969
Total investment expenses	44,020		(7)		487		44,500
Net operating income - before unallocated items	250,625		20,909		1,884		273,418

Reconciliation to Consolidated Statements of Income and Comprehensive Income:
General and administrative expense							(25,915)



Transaction costs							(3,392)
Credit loss expense							(9,206)
Impairment charges							(4,351)
Depreciation and amortization							(80,810)


Interest expense, net							(66,549)
Equity in income from joint ventures							1,315
Impairment charges on joint ventures							(647)

Income tax expense							(762)



Net income							83,101
Preferred dividend requirements							(12,066)
Net income available to common shareholders of EPR Properties							$	71,035

16. Other Commitments and Contingencies

As of ~~September~~June 30, ~~2017,~~2023, the Company had 16 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$178.3 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 ~~note~~notes 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~~June 30, ~~2017,~~2023, the Company had ~~eight~~four mortgage notes ~~receivable~~ with commitments totaling approximately ~~$25.7~~$85.0 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 ~~its~~the Company's development projects and related infrastructure, certain public agencies require posting of surety bonds to guarantee that the Company's obligations are satisfied. These bonds expire upon the completion of the improvements or infrastructure. As of ~~September~~June 30, ~~2017,~~2023, the Company had ~~six~~two surety bonds outstanding totaling ~~$24.3~~$2.6 million.

~~Prior proposed casino and resort developers Concord Associates, L.P., Concord Resort,~~

17. Subsequent Events

On July 17, 2023, Santikos Theaters, 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(Santikos) announced its 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.VSS-Southern Theatres (Southern). The Company ~~moved~~currently has investments at 10 Southern properties located in six states and expects to ~~dismiss~~continue to hold these investments with no structural changes to existing lease terms. If 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~~transaction had been consummated at 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 that2023, Santikos would 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
Entertainment Education Recreation Other Corporate/Unallocated Consolidated
Total Assets $ 2,343,778
$ 1,489,459
$ 2,057,172
$ 193,766
$ 48,835
$ 6,133,010

As of December 31, 2016
Entertainment Education Recreation Other Corporate/Unallocated Consolidated
Total Assets $ 2,168,669
$ 1,308,288
$ 1,120,498
$ 202,394
$ 65,173
$ 4,865,022

Operating Data:
Three Months Ended September 30, 2017
Entertainment Education Recreation Other Corporate/Unallocated Consolidated
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
Entertainment Education Recreation Other Corporate/Unallocated Consolidated
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
Entertainment Education Recreation Other Corporate/Unallocated Consolidated
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
Entertainment Education Recreation Other Corporate/Unallocated Consolidated
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~~one of the Company's ~~subsidiaries have guaranteed~~top 10 customers by revenue during the ~~Company’s indebtedness under~~second quarter of 2023. Due to the ~~Company's unsecured credit facilities and existing senior unsecured notes. The guarantees are joint and several,~~sale, Southern paid their deferred rent receivable of $11.6 million in full, ~~and unconditional and subject to customary release provisions. The following summarizes~~which was not previously recognized by the ~~Company’s condensed consolidating information~~Company. This amount will be recognized as rental revenue in the third quarter of ~~September 30, 2017~~ ~~and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016 (in thousands):~~2023.

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 equivalents 8,788
1,472
1,152
—
11,412
Restricted cash 395
23,599
329
—
24,323
Accounts receivable, net 675
89,230
9,308
—
99,213
Intercompany notes receivable —
179,589
—
(179,589 ) —
Investments in subsidiaries 5,892,529
—
—
(5,892,529 ) —
Other assets 26,485
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 payable 30,997
—
—
—
30,997
Unearned rents and interest —
69,615
15,583
—
85,198
Intercompany notes payable —
—
179,589
(179,589 ) —
Debt 2,951,259
—
36,666
—
2,987,925
Total liabilities 3,040,564
135,525
248,202
(179,589 ) 3,244,702
Total equity 2,888,308
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 development 1,010
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 equivalents 16,586
1,157
1,592
—
19,335
Restricted cash 365
8,352
1,027
—
9,744
Accounts receivable, net 556
89,145
9,238
—
98,939
Intercompany notes receivable —
179,589
—
(179,589 ) —
Investments in subsidiaries 4,521,095
—
—
(4,521,095 ) —
Other assets 21,768
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 payable 26,318
—
—
—
26,318
Unearned rents and interest —
46,647
773
—
47,420
Intercompany notes payable —
—
179,589
(179,589 ) —
Debt 2,285,730
—
199,895
—
2,485,625
Total liabilities 2,375,479
98,708
384,523
(179,589 ) 2,679,121
Total equity 2,185,901
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 income 232
23,960
122
—
24,314
Intercompany fee income 732
—
—
(732 ) —
Interest income on intercompany notes receivable —
2,580
—
(2,580 ) —
Total revenue 964
125,213
28,532
(3,312 ) 151,397
Equity in subsidiaries’ earnings 100,527
—
—
(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 payoff 1,474
—
3
—
1,477
Interest expense, net 36,364
(2,368 ) 198
—
34,194
Interest expense on intercompany notes payable —
—
2,580
(2,580 ) —
Transaction costs 113
—
—
—
113
Depreciation and amortization 232
26,633
7,829
—
34,694
Income before equity in income from joint ventures and other items 63,308
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 taxes 63,308
88,681
12,079
(100,527 ) 63,541
Income tax expense (354 ) —
(233 ) —
(587 )
Net income 62,954
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 income 286
16,692
53
—
17,031
Intercompany fee income 677
—
—
(677 ) —
Interest income on intercompany notes receivable —
2,460
—
(2,460 ) —
Total revenue 963
111,497
16,287
(3,137 ) 125,610
Equity in subsidiaries’ earnings 84,755
—
—
(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, net 24,414
(2,395 ) 2,246
—
24,265
Interest expense on intercompany notes payable —
—
2,460
(2,460 ) —
Transaction costs 2,947
—
—
—
2,947
Depreciation and amortization 449
23,768
3,384
—
27,601
Income before equity in income from joint ventures and other items 57,908
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 taxes 57,908
80,882
3,849
(84,755 ) 57,884
Income tax (expense) benefit (382 ) —
24
—
(358 )
Income from continuing operations 57,526
80,882
3,873
(84,755 ) 57,526
Net income 57,526
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 income 696
64,103
217
—
65,016
Intercompany fee income 2,094
—
—
(2,094 ) —
Interest income on intercompany notes receivable —
7,435
—
(7,435 ) —
Total revenue 2,790
362,084
72,946
(9,529 ) 428,291
Equity in subsidiaries’ earnings 300,631
—
—
(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 payoff 1,474
—
17
—
1,491
Gain on early extinguishment of debt —
—
(977 ) —
(977 )
Interest expense, net 102,424
(7,482 ) 2,911
—
97,853
Interest expense on intercompany notes payable —
—
7,435
(7,435 ) —
Transaction costs 388
—
—
—
388
Impairment charges —
10,195
—
—
10,195
Depreciation and amortization 662
76,594
18,663
—
95,919
Income before equity in income from joint ventures and other items 198,473
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 taxes 198,473
272,253
29,326
(300,631 ) 199,421
Income tax expense (1,068 ) —
(948 ) —
(2,016 )
Net income 197,405
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 income 710
48,370
3,827
—
52,907
Intercompany fee income 2,018
—
—
(2,018 ) —
Interest income on intercompany notes receivable —
7,297
—
(7,297 ) —
Total revenue 2,728
315,274
53,724
(9,315 ) 362,411
Equity in subsidiaries’ earnings 240,420
—
—
(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, net 69,042
(5,596 ) 6,864
—
70,310
Interest expense on intercompany notes payable —
—
7,297
(7,297 ) —
Transaction costs 4,778
—
103
—
4,881
Depreciation and amortization 1,338
67,516
10,368
—
79,222
Income before equity in income from joint ventures and other items 167,990
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 taxes 167,990
225,433
14,475
(240,420 ) 167,478
Income tax (expense) benefit (1,149 ) —
512
—
(637 )
Net income 166,841
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 estate 203
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 notes 1,175,000
—
—
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 shares 68,552
—
—
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 activities 488,961
—
(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 period 16,586
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 facilities 840,000
—
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 shares 142,452
—
—
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 activities 279,826
(63,727 ) (13,531 ) 202,568
Effect of exchange rate changes on cash —
—
(62 ) (62 )
Net increase (decrease) in cash and cash equivalents 3,462
(552 ) 118
3,028
Cash and cash equivalents at beginning of the period 1,089
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 Statements~~consolidated financial statements and ~~Notes~~notes thereto included in this Quarterly Report on Form 10-Q of EPR Properties (the “Company”, “EPR”, “we” or “us”). The forward-looking statements included in this discussion and elsewhere in this Quarterly Report on Form 10-Q involve risks and uncertainties, including anticipated financial performance, anticipated liquidity and capital resources, business prospects, industry trends, shareholder returns, performance of leases by tenants, performance on loans to customers and other matters, which reflect management's best judgment based on factors currently known. See “Cautionary Statement Concerning Forward-Looking Statements” which is incorporated herein by reference. Actual results and experience could differ materially from the anticipated results and other expectations expressed in our forward-looking statements as a result of a number of factors, including but not limited to those discussed in ~~Part II,~~Item 1A - "Risk Factors" in our 2022 Annual Report, as supplemented by 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, 2016 filed with the SEC on March 1, 2017.~~10-Q.

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 in~~the Experiential sector which ~~we maintain a~~benefit from our depth of knowledge and relationships, and which we believe offer sustained performance throughout ~~all~~most economic cycles.

Our investment portfolio includes ownership of and long-term mortgages on ~~entertainment, education~~Experiential and ~~recreation~~Education properties. Substantially all of our owned single-tenant properties are leased pursuant to long-term, ~~triple net~~triple-net leases, under which the tenants typically pay all operating expenses of the property. Tenants at our owned multi-tenant properties

are typically required to pay common area maintenance charges to reimburse us for their pro-rata portion of these costs. We also own certain experiential lodging assets structured using traditional REIT lodging structures.

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

Historically, our primary challenges ~~have~~had 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. More recently, and as further discussed below, the challenging economic environment and a theatre tenant's bankruptcy have increased our cost of capital, which has negatively impacted our ability to make investments in the near-term. Our business is subject to a number of risks and uncertainties, including those described in ~~Part II,~~Item 1A - “Risk Factors” in our 2022 Annual Report, as supplemented by 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, 2016 filed with the SEC on March 1, 2017.~~10-Q.

~~We group our investments into four reportable operating segments: Entertainment, Education, Recreation and Other.~~ As of ~~September~~June 30, ~~2017,~~2023, our total assets were approximately ~~$6.1~~$5.7 billion (after accumulated depreciation of approximately ~~$0.7~~$1.4 billion) ~~which included investments in each of our four operating segments~~ with properties located in 4344 states, ~~the District of Columbia~~Ontario and ~~Ontario,~~Quebec, 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 billion at ~~September~~June 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.2023. See "Non-GAAP Financial Measures" for the ~~calculation of total investments and~~ reconciliation of ~~total investments to~~ "Total assets" in the consolidated balance sheet to total investments at ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016.~~

Of2022. We group our investments into two reportable segments, Experiential and Education. As of June 30, 2023, our Experiential investments comprised $6.2 billion, or 92%, and our Education investments comprised $0.5 billion, or 8%, of our total ~~investments~~investments.

As of ~~$6.7 billion at September~~June 30, ~~2017, $2.9 billion~~2023, our Experiential segment consisted of the following property types (owned or ~~43% related to~~financed):

•171 theatre properties;

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

•24 attraction properties;

•11 ski properties;

•seven experiential lodging properties;

•16 fitness & wellness properties;

•one gaming property; and

•three cultural properties.

As of June 30, 2023, our ~~Entertainment segment, $1.5 billion or 22% related to~~owned Experiential real estate portfolio consisted of approximately 20.1 million square feet, which was 98% leased and included $80.7 million in property under development and $20.2 million in undeveloped land inventory.

As of June 30, 2023, our Education segment ~~$2.1 billion~~consisted of the following property types (owned or ~~32%~~financed):

•64 early childhood education center properties; and

•nine private school properties.

As of June 30, 2023, our owned Education real estate portfolio consisted of approximately 1.4 million square feet, which was 93% leased.

The combined owned portfolio consisted of 21.5 million square feet and was 97% leased.

Update on Impact of COVID-19 Pandemic

The COVID-19 pandemic severely impacted experiential real estate properties because such properties involve congregate social activity and discretionary spending. Our non-theatre properties have demonstrated strong recovery from the impacts of the pandemic. However, our theatre customers were more severely impacted by the COVID-19 pandemic and have seen a slower recovery than our non-theatre customers due primarily to changes in the timing of film releases, production delays and experimentation with streaming. As a result, we continue to recognize revenue on a cash basis for certain tenants. We began recognizing revenue on a cash basis for American-Multi Cinema, Inc. ("AMC") at the end of the first quarter of 2020 and for our Regal Cinemas tenants, subsidiaries of Cineworld Group, plc, at the end of the third quarter of 2020. With the emergence of Regal Cinemas from bankruptcy (discussed below), we began recognizing revenue on an accrual basis for the Regal Cinemas tenants. Although the box office continues to recover post-pandemic, the recent writers and actors strikes, if prolonged, could delay the production and supply of motion pictures thereby negatively affecting this recovery in future periods. Going forward, we intend to increase the diversity of our experiential property types, thereby significantly reducing our exposure to theatres. We expect that to occur as we strictly limit new investments in theatres, grow other target experiential property types and pursue opportunistic dispositions of theatre property types.

As of June 30, 2023, we had deferred amounts due from tenants of approximately $1.0 million that were booked as receivables. Additionally, as of June 30, 2023, we had amounts due from customers that were not booked as receivables totaling approximately $102.8 million 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 customers and will be recognized as revenue when any such amounts are received. See discussion below regarding expected changes to Regal Cinema's deferred amounts not booked as a receivable based on our comprehensive restructuring agreement with them which became effective upon their emergence from bankruptcy. During the three and six months ended June 30, 2023 and 2022, we collected $7.3 million, $13.8 million, $4.7 million and $6.3 million, respectively, in deferred rent from cash basis customers and from customers for which the deferred payments were not previously recognized as revenue. In addition, during the three and six months ended June 30, 2023 and 2022, we collected $0.5 million, $1.1 million, $4.9 million and $15.2 million, respectively, of deferred rent from accrual basis customers that reduced related accounts and interest receivable. The repayment terms for all of these deferments vary by customer.

Regal Update

On September 7, 2022, Cineworld Group, plc, Regal Entertainment Group and the Company's other Regal theatre tenants (collectively, “Regal”) filed for protection under Chapter 11 of the U.S. Bankruptcy Code (the “Code”). Prior to such filing date and continuing throughout the Chapter 11 bankruptcy cases, Regal leased 57 theatres from us pursuant to two master leases and 28 single property leases (the “Regal Leases”). As a result of the filing, Regal did not pay its rent or monthly deferral payment for September 2022 but subsequently paid portions of this amount pursuant to an order of the bankruptcy court. Regal resumed monthly rent and deferral payments for all Regal Leases commencing in October 2022 and has continued making these payments through July 2023.

On June 27, 2023, we entered into a comprehensive restructuring agreement with Regal, evidenced by an Omnibus Lease Amendment Agreement (“Omnibus Agreement”), anchored by a new master lease (“Master Lease”) for 41 of the 57 properties previously leased to Regal (“Master Lease Properties”). On June 28, 2023, Regal’s Plan of Reorganization (the “Plan”) was confirmed by the bankruptcy court. The Plan became effective on July 31, 2023 (the "Effective Date") and Regal emerged from the Chapter 11 bankruptcy cases.

•Beginning on August 1, 2023, the total annual fixed rent for the Master Lease Properties (“Annual Base Rent”) will be $65.0 million, escalating by 10% every five years. The Master Lease is a triple-net lease, and therefore, Annual Base Rent does not include taxes, insurance, utilities, common area maintenance and ground lease rent, for which Regal will be responsible for paying separately. Due to Regal's expected significantly improved credit profile, continuing box office recovery and Regal's payment history, among

other factors, we will recognize revenue related to the Master Lease on an accrual basis beginning on the Effective Date.

•Pursuant to the Master Lease, Regal will also pay annual percentage rent (“Annual Percentage Rent”) of 15% of annual gross sales exceeding $220.0 million and up to $270.0 million, and 12.5% of annual gross sales exceeding $270.0 million. These threshold amounts will increase every five years commensurate with escalations in Annual Base Rent.

•We have agreed to reimburse Regal for 50% of certain revenue-enhancing premises renovations to the Master Lease Properties, up to a maximum reimbursement of $32.5 million, provided that (a) Regal is not in default, (b) the maximum amount we will be required to reimburse in any calendar year will not exceed $10.0 million, and (c) reimbursable expenses must receive our ~~Recreation segment~~prior approval and ~~$179.0~~relate to a project mobilized and physically commenced during the first five years of the Master Lease term.

•Regal surrendered to the Company the remaining 16 properties not included in the Master Lease (“Surrendered Properties”), together with all furniture, fixtures and equipment located at the Surrendered Properties. We have entered into management agreements whereby Cinemark will manage four of the Surrendered Properties and Phoenix Theatres will manage one of the Surrendered Properties. We plan to sell the remaining 11 Surrendered Properties and deploy the proceeds to acquire non-theatre experiential properties. In conjunction with taking back the Surrendered Properties, we recorded a non-cash impairment charge during the three months ended June 30, 2023 of $42.4 million ~~or 3%~~based on recently appraised values.

•As of July 31, 2023, Regal owed approximately $76.3 million of undiscounted deferred rent (the “Deferred Rent Balance”), of which the Deferred Rent Balance related to the Master Lease Properties was approximately $56.8 million (“Master Lease Deferred Rent Balance”) and the Deferred Rent Balance related to the Surrendered Properties was approximately $19.5 million (“Surrendered Property Deferred Rent Balance”). Of the Master Lease Deferred Rent Balance, approximately $50.1 million will be held in abeyance and will be forgiven in its entirety if Regal has no uncured events of default prior to the 15th anniversary of the Effective Date, and the remaining portion of the Master Lease Deferred Rent Balance will be waived and forgiven. If at any time prior to that date Regal has an uncured event of default, the Master Lease Deferred Rent Balance held in abeyance will become due. The Surrendered Property Deferred Rent Balance will be included in our ~~Other segment.~~claims for rejection damages in the Chapter 11 bankruptcy cases, which will be treated as general unsecured claims for which no material recovery is expected. The deferred rent was not previously recognized as accounts receivable because payments from Regal were recognized on a cash-basis prior to the Effective Date of the Master Lease. The deferred rent related to the Master Lease Properties will not be recognized on the balance sheet because it is a contingent receivable only due in the event of a default and payment is not deemed probable.

•Regal has provided us with a first lien security interest in all furniture, fixtures and equipment located at the Master Lease Properties. A parent entity of Regal has provided a guaranty of Regal’s obligations under the Master Lease.

•On or about the Effective Date, Regal paid us approximately $3.0 million representing the unpaid portion of post-petition September stub rent for all properties, and approximately $1.3 million representing the unpaid pre-petition September rent for the Master Lease Properties.

Challenging Economic Environment

REITS are generally experiencing heightened risks and uncertainties resulting from current challenging economic conditions, including significant volatility and negative pressure in financial and capital markets, increasing cost of

capital, high inflation and other risks and uncertainties associated with a recessionary environment. Our business has been more acutely affected by these risks and uncertainties because of Regal's bankruptcy, as discussed above. Although we intend to continue making future investments, we expect that our levels of investment spending will be reduced in the near term due to elevated costs of capital, and that these investments will be funded primarily from cash on hand, cash from operations, disposition proceeds and borrowing availability under our unsecured revolving credit facility, subject to maintaining our leverage levels consistent with past practice. As a result, we intend to continue to be more selective in making future investments and acquisitions until such time as economic conditions improve and our cost of capital improves.

Operating Results

Our total revenue, net income 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~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 (in millions, except per share information):


	Three Months Ended June 30,						Six Months Ended June 30,
	2023		2022		Change		2023		2022		Change
Total revenue	$	172.9	$	160.4	8	%	$	344.3	$	317.9	8	%
Net income available to common shareholders per diluted share	$	0.10	$	0.46	(78)	%	$	0.78	$	0.95	(18)	%
FFOAA per diluted share	$	1.28	$	1.17	9	%	$	2.53	$	2.27	11	%

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 Increase 2017 2016 Increase
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 %

~~(1) Total revenue~~The major factors impacting our results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017 versus~~2023, as compared to the three and ~~nine~~six months ended ~~September~~June 30, ~~2016 was favorably impacted by the~~2022 were as follows:

•The increase in rental revenue due to an increase in contractual rental payments from cash basis tenants;

•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 ~~2017~~2023 and 2016, as well as lower gains related to insurance claims. Total revenue 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.2022;

(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 decrease in interest expense ~~costs associated with loan refinancing or payoff,~~due to an increase in capitalized interest and interest income on short-term investments; and

•The increase in 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 gainsloss on ~~sale~~sales 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 impacted~~loss from joint ventures offset by a ~~$10.2 million impairment charge recognized~~decrease in ~~2017~~transaction costs and ~~an increase in income tax~~credit loss expense.

~~(3) 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 favorably impacted by the effect~~For further detail on items impacting our operating results, see section below titled "Results of investment spending in 2017 and 2016, including our transaction with CNL Lifestyle and OZRE which closed on April 6, 2017, and 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 uncollectible~~assessing the collectibility of receivables and the ~~accounting for~~credit 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 and estimates is included in our 2022 Annual Report. For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2023, 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 2017-01~~as of January 1, 2017. As a result, we expect that fewer of our real estate acquisitions will be accounted for as business combinations.~~

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 Financing~~

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 off 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 due 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~~six months ended ~~September~~June 30, ~~2017 totaled $1.5 billion,~~2023 and ~~included investments in each of our four operating segments.~~

~~Entertainment investment spending during the nine months ended September 30, 2017 totaled $264.9~~2022 totaled $98.7 million ~~including spending on build-to-suit development~~ and ~~redevelopment of megaplex theatres, entertainment retail centers~~$239.2 million, respectively, 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 $6.8 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 million, 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 2016~~is detailed below (in thousands):


Six Months Ended June 30, 2023
Operating Segment	Total Investment Spending		New Development		Re-development		Asset Acquisition		Mortgage Notes or Notes Receivable		Investment in Joint Ventures
Experiential:

Eat & Play	$	19,134	$	18,607	$	527	$	—	$	—	$	—
Attractions	6,570		—		3,552		—		3,018		—
Ski	3,022		—		—		—		3,022		—
Experiential Lodging	8,936		—		—		—		—		8,936
Fitness & Wellness	58,060		11,055		210		43,770		3,025		—

Cultural	2,962		—		2,962		—		—		—
Total Experiential	98,684		29,662		7,251		43,770		9,065		8,936

Education:


Total Education	—		—		—		—		—		—

Total Investment Spending	$	98,684	$	29,662	$	7,251	$	43,770	$	9,065	$	8,936

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


Six Months Ended June 30, 2022
Operating Segment	Total Investment Spending		New Development		Re-development		Asset Acquisition		Mortgage Notes or Notes Receivable		Investment in Joint Ventures
Experiential:
Theatres	$	218	$	5	$	213	$	—	$	—	$	—
Eat & Play	8,626		8,494		132		—		—		—
Attractions	144,311		—		1,546		142,765		—		—

Experiential Lodging	65,880		3,359		—		—		11,305		51,216
Fitness & Wellness	20,181		—		323		19,858		—		—

Cultural	19		—		19		—		—		—
Total Experiential	239,235		11,858		2,233		162,623		11,305		51,216

Education:



Total Education	—		—		—		—		—		—

Total Investment Spending	$	239,235	$	11,858	$	2,233	$	162,623	$	11,305	$	51,216

The above amounts include ~~$110 thousand and $129 thousand in capitalized payroll, $7.8~~$1.6 million and ~~$8.0~~$0.3 million in capitalized interest for the six months ended June 30, 2023 and ~~$3.2 million~~2022, respectively, and ~~$1.2~~$0.1 million in capitalized other general and administrative direct project costs for both the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016, respectively.~~2022. Excluded from the table above is approximately ~~$3.7~~$5.5 million and ~~$3.1~~$1.5 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 infrastructure~~other spending for the ~~Adelaar casino and resort project for the nine~~six months ended ~~September~~June 30, ~~2016.~~2023 and 2022, respectively.

~~Property~~ Dispositions

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2023, we completed the ~~sale~~sales of ~~four entertainment properties~~one vacant eat & play property, one early childhood education center and a land parcel for net proceeds ~~totaling $72.3~~of $8.4 million. In connection with these sales, we recognized a ~~gain~~net loss on sale of ~~$19.4~~$1.1 million. Additionally, during the six months ended June 30, 2023, we, as lessee, terminated one ground lease that held one theatre property.

Impairment Charges

During the ~~nine~~six months ended ~~September~~June 30, ~~2017, pursuant~~2023, we reassessed the holding period of the Regal Surrendered Properties not included in the Master Lease and one early childhood education center property subject to ~~tenant purchase options,~~a lease termination triggered by a casualty event. We determined that the estimated cash flows for eight Regal Surrendered Properties and the early childhood education center property were not sufficient to recover the carrying values and estimated the fair value of the real estate investments of these properties using independent appraisals. Accordingly, we ~~completed~~recognized impairment charges totaling $43.8 million for the six months ended June 30, 2023.

Theatre Tenant Update

On July 17, 2023, Santikos Theaters, LLC ("Santikos") announced its acquisition of VSS-Southern Theatres ("Southern"). We currently have investments at 10 Southern properties located in six states. We expect to continue to hold these investments with no structural changes to existing lease terms. If the transaction had been consummated at June 30, 2023, Santikos would have been one of our top 10 customers by revenue during the second quarter of 2023. Due to the sale, Southern paid their deferred rent receivable of ~~five public charter schools located~~$11.6 million in ~~Colorado, Arizona~~full, which was not previously recognized. This amount will be recognized as rental revenue in the third quarter of 2023.

Results of Operations

Three 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~~six months ended ~~September~~June 30, ~~2017, we received a partial prepayment~~2023 compared to the three and six months ended June 30, 2022

Analysis of ~~$4.0 million on one mortgage note receivable that is secured by the observation deck of the John Hancock building~~Revenue

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


	Three Months Ended June 30,						Six Months Ended June 30,
	2023		2022		Change		2023		2022		Change
Minimum rent (1)	$	143,352	$	134,917	$	8,435	$	285,204	$	265,192	$	20,012
Percentage rent (2)	2,125		519		1,606		3,936		3,962		(26)
Straight-line rent	1,149		1,733		(584)		3,254		2,328		926
Tenant reimbursements	4,815		5,348		(533)		10,250		10,349		(99)
Other rental revenue	429		358		71		817		647		170
Total Rental Revenue	$	151,870	$	142,875	$	8,995	$	303,461	$	282,478	$	20,983

Other income	10,124		9,961		163		19,457		19,266		191
Mortgage and other financing income (3)	10,913		7,610		3,303		21,385		16,174		5,211
Total revenue	$	172,907	$	160,446	$	12,461	$	344,303	$	317,918	$	26,385

~~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(1) For the three months ended ~~September~~June 30, 2017, we entered into revised lease terms with Imagine which reduced rental payments and the lease term on six properties. In exchange for lowering the existing annual cash payments by approximately $0.5 million and reducing the remaining lease term to 10 years, Imagine agreed that upon the sale of these properties, they would enter into new 20-year leases with the buyer(s). While we believe the restructure will aid in the disposition of these assets, the changes resulted in the lease structure no longer being classified as a direct financing lease. Accordingly, we recorded an impairment charge of $9.6 million during the nine months ended September 30, 2017, which included an allowance for lease loss of $7.3 million and an impairment charge of $2.3 million related to the estimated unguaranteed residual value.

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.

~~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, 2017~~2023 compared to ~~three months ended September 30, 2016~~

~~Rental revenue was $122.8 million for~~ the three months ended ~~September~~June 30, ~~2017 compared to $102.3 million for~~2022, the ~~three months ended September 30, 2016. This~~ increase in minimum rent resulted primarily from ~~$23.5~~an increase of $4.2 million ofrelated to rental revenue on existing properties, including improved collections of rent being recognized on a cash basis. In addition, there was an increase in minimum rent of $4.2 million related to property acquisitions and developments completed in ~~2017~~2023 and ~~2016,~~2022.

For the six months ended June 30, 2023 compared to the six months ended June 30, 2022, the increase in minimum rent resulted primarily from an increase of $11.9 million related to rental revenue on existing properties, including ~~our transaction with CNL Lifestyle which closed~~improved collections of rent being recognized on ~~April 6, 2017,~~a cash basis. In addition, there was an increase in minimum rent of $8.5 million related to property acquisitions and developments completed in 2023 and 2022. This was partially offset by a decrease ~~of $3.0 million~~ in rental revenue ~~due primarily to~~of $0.4 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 and six months ended ~~September~~June 30, ~~2017, we renewed 19~~2023, there were no significant lease ~~agreements~~renewals on ~~approximately 1.6 million square feet and funded or agreed to fund an average of $22.58 per square foot~~existing 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 million~~percentage rent for the three months ended ~~September~~June 30, ~~2017~~2023 compared to ~~$2.5 million for~~ the three months ended ~~September~~June 30, ~~2016.~~2022 was due primarily to higher percentage rent recognized from one ski property in 2023.

(3) The ~~$2.0 million decrease was primarily due to a gain from an insurance claim recognized during the three months ended September 30, 2016.~~

~~Mortgage~~increase in mortgage and other financing income ~~for~~during the three and six months ended ~~September~~June 30, ~~2017 was $24.3 million~~2023 compared to ~~$17.0 million for~~ the three and six months ended ~~September~~June 30, ~~2016. The $7.3 million increase was primarily due~~2022 related to income from additional ~~real estate lending activities during 2017 and 2016, including our investment in a~~investments on an existing 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 million 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~~interest on new mortgage notes funded in 2023 and 2022. In addition, during the three and six months ended June 30, 2022, $1.5 million of accrued interest and fees receivable was written off against interest income related to one mortgage note receivable and two notes receivable.

Analysis of Expenses and Other Line Items

The following table summarizes our expenses ~~at our multi-tenant properties.~~and other line items (dollars in thousands):

~~Our~~


	Three Months Ended June 30,						Six Months Ended June 30,
	2023		2022		Change		2023		2022		Change
Property operating expense	$	13,972	$	13,592	$	380	$	28,127	$	27,531	$	596
Other expense	9,161		8,872		289		18,111		16,969		1,142
General and administrative expense (1)	15,248		12,691		2,557		29,213		25,915		3,298
Severance expense	547		—		547		547		—		547

Transaction costs (2)	36		1,145		(1,109)		306		3,392		(3,086)
Credit loss (benefit) expense (3)	(275)		9,512		(9,787)		312		9,206		(8,894)
Impairment charges (4)	43,785		—		43,785		43,785		4,351		39,434
Depreciation and amortization (5)	43,705		40,766		2,939		84,909		80,810		4,099
Loss on sale of real estate	(575)		—		(575)		(1,135)		—		(1,135)

Interest expense, net (6)	31,591		33,289		(1,698)		63,313		66,549		(3,236)
Equity in loss (income) from joint ventures (7)	615		(1,421)		2,036		2,600		(1,315)		3,915
Impairment charges on joint ventures	—		647		(647)		—		647		(647)
Income tax expense	347		444		(97)		688		762		(74)


Preferred dividend requirements	6,040		6,033		7		12,073		12,066		7

(1) The increase in general and administrative expense ~~totaled $12.1 million~~ for the three and six months ended ~~September~~June 30, ~~2017~~2023 compared to ~~$9.1 million for~~ the three and six months ended ~~September~~June 30, ~~2016. The increase of $3.0 million~~2022 related primarily ~~related~~ to an increase in payroll and ~~benefits~~benefit costs, ~~including share based compensation,~~ as well as an increase in professional ~~fees.~~

~~Costs associated with loan refinancing or payoff for the three months ended September 30, 2017 was $1.5 million and were~~fees, including those related to the ~~amendment to our unsecured revolving credit facility and term loan. Costs associated~~comprehensive restructuring agreement with ~~loan refinancing or payoff for~~Regal.

(2) The decrease in transaction costs during the three and six months ended ~~September~~June 30, ~~2016 was $14 thousand and related~~2023 compared 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 and six months ended ~~September~~June 30, 2017 from $24.3 million for the three months ended September 30, 2016. This increase resulted from an increase 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~~2022 was due to a decrease in ~~potential~~costs related to equity method investments and fewer terminated ~~transactions as well as our early adoption~~transactions.

(3) The change in credit loss (benefit) expense for the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022 was due primarily to a credit loss expense of ~~ASU 2017-01.~~

~~Depreciation~~$6.8 million related to one mortgage note receivable and ~~amortization expense totaled $34.7~~$3.1 million ~~for~~related to two notes receivable recorded during the three months ended ~~September~~June 30, ~~2017 compared~~2022.

(4) Impairment charges recognized during the three and six months ended June 30, 2023 primarily related to ~~$27.6 million~~eight Regal Surrendered Properties not included in the Master Lease that we determined did not have sufficient cash flows to recover the carrying values. Impairment charges recognized during the six months ended June 30, 2022 related to a vacant property that we determined did not have sufficient cash flows to recover the carrying value. This property was sold during the year ended December 31, 2022.

(5) The increase in depreciation and amortization expense for the three and six months ended ~~September~~June 30, ~~2016. The $7.1 million increase~~2023 compared to the three and three and six months ended June 30, 2022 resulted primarily from acquisitions and developments completed in ~~2017~~2023 and ~~2016, including our transaction with CNL Lifestyle which closed on April 6, 2017.~~2022. This ~~increase~~ was partially offset by property ~~dispositions.~~dispositions that occurred during 2023 and 2022.

~~Gain on sale of real estate was $1.0 million~~(6) The decrease in interest expense, net, for the three and six months ended ~~September~~June 30, ~~2017 and related~~2023 compared 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 and six months ended ~~September~~June 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 increase2022, resulted primarily from an increase in ~~bad debt expense,~~interest income recognized on short term investments and an increase in capitalized interest.

(7) The increase in equity in loss from joint ventures for the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022 related primarily to government incentives received at our experiential lodging properties located in St. Petersburg, Florida during the three and six months ended June 30, 2022, as well as higher ~~property operating expenses~~interest expense at ~~our multi-tenant properties.~~

~~Our general and administrative expense totaled $33.8 million~~these joint ventures for the ~~nine~~three and six months ended ~~September~~June 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.2023.

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.

Transaction costs totaled $0.4 million for the nine months ended September 30, 2017 compared to $4.9 million for the nine months ended September 30, 2016. The decrease of $4.5 million was due to a 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 and related to six charter school properties previously included 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. 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 on 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 projected located in China. The $1.4 million increase in expense related primarily to the reversal 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.

Liquidity and Capital Resources

Cash and cash equivalents were ~~$11.4~~$99.7 million at ~~September~~June 30, ~~2017.~~2023. As of June 30, 2023, we had no uninsured deposits. In addition, we had restricted cash of ~~$24.3~~$2.6 million at ~~September~~June 30, ~~2017. Of the restricted cash at September 30, 2017, $20.6 million~~2023, which related ~~to cash held for our borrowers’ debt service reserves for mortgage notes receivable or tenants' off-season rent reserves and $3.6 million related~~primarily to escrow deposits required for property management and debt 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.~~

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

At ~~September~~June 30, ~~2017,~~2023, we had total debt ~~outstanding~~outstanding of ~~$3.0~~$2.8 billion, of which 99% was unsecured.

At ~~September~~June 30, ~~2017~~,2023, we had ~~outstanding $2.1~~outstanding $2.5 billion in ~~aggregate~~aggregate 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 ~~which~~that would cause the ratio of our debt to adjusted total assets to exceed 60%; (ii) a limitation on incurrence of any secured debt ~~which~~that would cause the ratio of secured debt to adjusted total assets to exceed 40%; (iii) a limitation on incurrence of any debt ~~which~~that would cause our debt service coverage ratio to be less than 1.5 times; and (iv) the maintenance at all times of our total unencumbered assets such that they are not less than 150% of our outstanding unsecured debt. Interest payments on our unsecured senior notes are due semiannually.

~~On September 27, 2017,~~At June 30, 2023, we ~~amended and restated~~had 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 our~~facility. Our unsecured revolving credit facility is governed by the terms of a Third Amended, Restated and Consolidated Credit Agreement, dated as of October 6, 2021 (the "Third Consolidated Credit Agreement"). The facility will mature on October 6, 2025. We have two options to extend the maturity date of the facility by an additional six months each (for a total of 12 months), subject to paying additional fees and the absence of any default. The facility provides for an initial maximum principal amount of borrowing availability of $1.0 billion with ~~$830.0 million~~an "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~~SOFR plus ~~100 basis points,~~1.30% (based on our unsecured debt ratings and with a SOFR floor of zero), which was ~~2.24%~~6.40% at ~~September~~June 30, ~~2017.~~2023. Additionally, the facility fee on the revolving credit facility is 0.25%.

At ~~September~~June 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 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 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,~~2023, 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 June 30, 2023, 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.

Our unsecured revolving credit ~~facilities~~facility and the private placement notes contain financial covenants or restrictions that limit our levels of consolidated debt, secured debt, ~~investment levels~~investments 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~~June 30, ~~2017.~~2023.

Our principal investing activities are acquiring, developing and financing ~~entertainment, education and recreation~~Experiential 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 isand cash from operations are 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 property~~real estate investments and mortgage financing portfolios will depend in part on our continued ability to access funds through additional borrowings and securities offerings and, to a lesser extent, our ability to assume debt in connection with property acquisitions. We may also fund investments with the proceeds from asset dispositions.

~~Certain of~~ As discussed above, we intend to fund our ~~other long-term debt agreements contain customary restrictive covenants related to financial~~investments in the near term primarily from cash from operations and ~~operating performance as well as certain cross-default provisions. We were in compliance with all financial covenants at~~ ~~September 30, 2017~~.

~~During the nine months ended September 30, 2017, we issued an aggregate of 928,219 common shares~~borrowing availability 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.~~facility, subject to maintaining our leverage levels consistent with past practice, due to our current elevated cost of capital.

~~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 ~~meet~~have 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 thatactivities. The table below summarizes our cash on hand, cash from operations, funds available under our unsecured revolving credit facility and proceeds from asset dispositions will provide adequate liquidity to meet our financial commitments including to fund our operations, make interest and principal payments on our debt, and allow distributions to our shareholders and avoid corporate level federal income or excise taxflows (dollars in ~~accordance with REIT Internal Revenue Code requirements.~~thousands):


	Six Months Ended June 30,
	2023		2022
Net cash provided by operating activities	$	220,888	$	217,050
Net cash used by investing activities	(89,471)		(203,720)
Net cash used by financing activities	(139,687)		(134,191)

Commitments

As of ~~September~~June 30, ~~2017,~~2023, we had 16 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$178.3 million, of which approximately ~~$65.9~~$70.7 million is expected to be funded in ~~2017 and the remainder is expected to be funded in 2018.~~2023. Development costs are advanced by us in periodic draws. If we determine that ~~construction~~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 ~~note~~notes 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 ~~its~~our direct control. As of ~~September~~June 30, ~~2017,~~2023, we had ~~eight~~four mortgage notes ~~receivable~~ with commitments totaling approximately ~~$25.7 million.~~$85.0 million, of which $34.3 million is expected to be funded in 2023. 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~~June 30, ~~2017,~~2023, we had ~~six~~two surety bonds outstanding totaling ~~$24.3~~$2.6 million.

Liquidity ~~Analysis~~Analysis

~~In analyzing our liquidity, we expect~~We 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 amount~~on hand, cash from operations, funds available under our unsecured revolving credit facility ~~as well as unrestricted cash on hand~~and proceeds from asset dispositions will provide adequate liquidity to meet our financial commitments, including the amounts needed 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 be~~debt maturities. 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 in 2023 and $136.6 million due in 2024. We ~~also~~currently 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 impact of the challenging economic environment and our elevated cost of capital.

Our primary use of cash after paying operating expenses, debt service, distributions to shareholders and funding existing commitments is in growing our investment portfolio through the acquisition, development and financing of additional properties. We expect to finance these investments with borrowings under our unsecured revolving credit facility as well as debt and equity financing alternatives or proceeds from asset dispositions. ~~The availability and terms of any such financing or sales will depend upon market and other conditions.~~ If we borrow the maximum amount available under our unsecured revolving credit facility, there can be no assurance that we will be able to obtain additional or substitute investment financing. We may also assume mortgage debt in connection with property acquisitions. The availability and terms of any such financing or sales will depend upon market and other conditions.

The challenging economic environment and Regal's prior bankruptcy have increased our cost of capital, which has negatively impacted our ability to make investments in the near-term. As a result, we intend to continue to be more selective in making investments and acquisitions, utilizing excess cash flow and borrowings under our line of credit until such time as economic conditions improve and our cost of capital returns to acceptable levels.

Capital Structure

We believe that our shareholders are best served by a conservative capital structure. Therefore, we seek to maintain a conservative debt level on our balance sheet as measured primarily by our net debt to adjusted ~~EBITDA~~EBITDAre ratio (see "Non-GAAP Financial Measures" for definitions). We also seek to maintain conservative interest, fixed charge, debt service coverage and net debt to gross asset ~~ratios.~~

~~We expect~~ratios. As of June 30, 2023, our debt to ~~maintain~~total assets ratio was 49%, our net debt to adjusted ~~EBITDA~~EBITDAre ratio ~~between 4.6x to 5.6x. Our~~was 5.0x and our net debt to ~~adjusted EBITDA~~gross assets 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 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 of 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 EBITDA ratio of 4.6x to 5.6x.

~~Our net debt~~39% (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 ~~from~~From Operations (AFFO)

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

In addition to FFO, we present FFOAA and AFFO. FFOAA is presented by adding to FFO severance expense, transaction costs, ~~(gain)~~credit loss (benefit) expense, costs 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,~~and impairment of ~~direct financing~~operating lease ~~(allowance for lease loss portion) and provision for loan losses~~right-of-use assets and subtracting ~~gain on early extinguishment of debt, gain (loss) on~~ sale ~~of land,~~participation income, 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 ~~measure~~measures to GAAP net income ~~available~~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~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 and reconciles such measures to net income available to common shareholders, the most directly comparable GAAP measure (unaudited, in thousands, except per share information):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
FFO:
Net income available to common shareholders of EPR Properties	$	7,560	$	34,876	$	59,184	$	71,035
Loss on sale of real estate	575		—		1,135		—

Impairment of real estate investments, net	43,785		—		43,785		4,351

Real estate depreciation and amortization	43,494		40,563		84,494		80,390
Allocated share of joint venture depreciation	2,162		1,996		4,217		3,483
Impairment charges on joint ventures	—		647		—		647
FFO available to common shareholders of EPR Properties	$	97,576	$	78,082	$	192,815	$	159,906

FFO available to common shareholders of EPR Properties	$	97,576	$	78,082	$	192,815	$	159,906
Add: Preferred dividends for Series C preferred shares	1,938		1,938		3,876		3,876
Add: Preferred dividends for Series E preferred shares	1,938		1,939		3,876		3,878
Diluted FFO available to common shareholders of EPR Properties	$	101,452	$	81,959	$	200,567	$	167,660

FFOAA:
FFO available to common shareholders of EPR Properties	$	97,576	$	78,082	$	192,815	$	159,906

Severance expense	547		—		547		—
Transaction costs	36		1,145		306		3,392




Credit loss (benefit) expense	(275)		9,512		312		9,206


Gain on insurance recovery (included in other income)	—		—		—		(552)
Deferred income tax benefit	(92)		—		(182)		—

FFOAA available to common shareholders of EPR Properties	$	97,792	$	88,739	$	193,798	$	171,952

FFOAA available to common shareholders of EPR Properties	$	97,792	$	88,739	$	193,798	$	171,952
Add: Preferred dividends for Series C preferred shares	1,938		1,938		3,876		3,876
Add: Preferred dividends for Series E preferred shares	1,938		1,939		3,876		3,878
Diluted FFOAA available to common shareholders of EPR Properties	$	101,668	$	92,616	$	201,550	$	179,706

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 amortization 34,457
27,147
95,243
77,870
Allocated share of joint venture depreciation 55
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 shares 1,941
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 payoff 1,477
14
1,491
905
Gain on insurance recovery (included in other income) —
(1,825 ) (606 ) (3,837 )
Termination fee included in gain on sale 954
549
6,774
2,819
Gain on early extinguishment of debt —
—
(977 ) —
Transaction costs 113
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 $ 93,289
$ 78,804
$ 264,670
$ 227,249
Add: Preferred dividends for Series C preferred shares 1,941
1,941
5,823
5,823
Diluted FFOAA available to common shareholders of EPR Properties $ 95,230
$ 80,745
$ 270,493
$ 233,072
AFFO:
FFOAA available to common shareholders of EPR Properties $ 93,289
$ 78,804
$ 264,670
$ 227,249
Non-real estate depreciation and amortization 237
454
676
1,352
Deferred financing fees amortization 1,598
1,187
4,579
3,522
Share-based compensation expense to management and Trustees 3,605
2,778
10,566
8,282
Maintenance capital expenditures (2) (1,125 ) (805 ) (4,316 ) (3,805 )
Straight-lined rental revenue (2,357 ) (4,597 ) (11,417 ) (10,950 )
Non-cash portion of mortgage and other financing income (905 ) (962 ) (2,361 ) (2,907 )
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 $ 94,287
$ 76,901
$ 262,356
$ 222,881
Add: Preferred dividends for Series C preferred shares 1,941
—
5,823
—
Diluted AFFO available to common shareholders of EPR Properties $ 96,228
$ 76,901
$ 268,179
$ 222,881


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
AFFO:
FFOAA available to common shareholders of EPR Properties	$	97,792	$	88,739	$	193,798	$	171,952
Non-real estate depreciation and amortization	211		203		415		420
Deferred financing fees amortization	2,150		2,090		4,279		4,161
Share-based compensation expense to management and trustees	4,477		4,169		8,799		8,414
Amortization of above and below market leases, net and tenant allowances	(185)		(89)		(274)		(176)
Maintenance capital expenditures (1)	(3,455)		(134)		(5,631)		(1,485)
Straight-lined rental revenue	(1,149)		(1,733)		(3,254)		(2,328)
Straight-lined ground sublease expense	401		261		966		509
Non-cash portion of mortgage and other financing income	(141)		(118)		(263)		(234)
AFFO available to common shareholders of EPR Properties	$	100,101	$	93,388	$	198,835	$	181,233

AFFO available to common shareholders of EPR Properties	$	100,101	$	93,388	$	198,835	$	181,233
Add: Preferred dividends for Series C preferred shares	1,938		1,938		3,876		3,876
Add: Preferred dividends for Series E preferred shares	1,938		1,939		3,876		3,878
Diluted AFFO available to common shareholders of EPR Properties	$	103,977	$	97,265	$	206,587	$	188,987

FFO per common share:
Basic	$	1.30	$	1.04	$	2.56	$	2.13
Diluted	1.27		1.04		2.52		2.12
FFOAA per common share:
Basic	$	1.30	$	1.18	$	2.58	$	2.30
Diluted	1.28		1.17		2.53		2.27
Shares used for computation (in thousands):
Basic	75,297		74,986		75,191		74,915
Diluted	75,715		75,234		75,571		75,142

Weighted average shares outstanding-diluted EPS	75,715		75,234		75,571		75,142
Effect of dilutive Series C preferred shares	2,279		2,245		2,276		2,243

Effect of dilutive Series E preferred shares	1,663		1,664		1,663		1,664
Adjusted weighted average shares outstanding-diluted Series C and Series E	79,657		79,143		79,510		79,049

Other financial information:
Dividends per common share	$	0.825	$	0.825	$	1.650	$	1.600

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

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
Diluted 1.22
1.22
3.52
3.52
FFOAA per common share:
Basic $ 1.27
$ 1.24
$ 3.76
$ 3.59
Diluted 1.26
1.23
3.73
3.56
Shares used for computation (in thousands):
Basic 73,663
63,627
70,320
63,296
Diluted 73,724
63,747
70,385
63,393

Weighted average shares outstanding-diluted EPS 73,724
63,747
70,385
63,393
Effect of dilutive Series C preferred shares 2,072
2,036
2,063
2,029
Adjusted weighted average shares outstanding-diluted 75,796
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.~~

The effect of the conversion of our convertible preferred shares is calculated using the if-converted method and the conversion which results in the most dilution is included in the computation of per share amounts. The conversion of the 5.75% Series C cumulative convertible preferred shares and the 9.00% Series E cumulative convertible preferred shares would be dilutive to FFO, FFOAA and ~~FFOAA~~AFFO per share for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016.~~June 30, 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 FFOAA~~AFFO 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, computed in accordance with GAAP, excluding interest expense (net), income tax (benefit) expense, depreciation and amortization, gains and losses from disposition of real estate, impairment losses on real estate, costs associated with loan refinancing or payoff and adjustments for unconsolidated partnerships, joint ventures and other affiliates.

Management provides EBITDAre herein because it believes this information is useful to investors as a supplemental performance measure because 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 ~~EBITDA~~EBITDAre

Management uses Adjusted ~~EBITDA~~EBITDAre in its analysis of the performance of the business and operations of the Company. Management believes Adjusted ~~EBITDA~~EBITDAre is useful to investors because it excludes various items that management believes are not indicative of operating performance, and ~~that~~because it is an informative measure to use in computing various financial ratios to evaluate the Company. We define Adjusted ~~EBITDA~~EBITDAre as ~~net~~EBITDAre (defined above) for the quarter excluding sale participation income, available to common shareholders 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 and~~ transaction costs, credit loss (benefit), expense, 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 ~~EBITDA~~EBITDAre may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. Adjusted ~~EBITDA~~EBITDAre is not a measure of performance under GAAP, does not represent cash generated from operations as defined by GAAP and is not indicative of cash available to fund all cash needs, including distributions. This measure should not be considered as an alternative to net income ~~for~~or any other GAAP measure as a measurement of the ~~purpose~~results of ~~evaluating the Company's performance~~our operations or to cash flows or liquidity as ~~a measure of liquidity.~~defined by GAAP.

Net Debt to Adjusted ~~EBITDA~~EBITDAre Ratio

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

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


	June 30,
	2023			2022
Net Debt:
Debt	$	2,813,007		$	2,807,080
Deferred financing costs, net	28,222			34,149
Cash and cash equivalents	(99,711)			(168,266)
Net Debt	$	2,741,518		$	2,672,963

Gross Assets:
Total Assets	$	5,703,564		$	5,793,442
Accumulated depreciation	1,369,790			1,243,240
Cash and cash equivalents	(99,711)			(168,266)
Gross Assets	$	6,973,643		$	6,868,416

Debt to Total Assets Ratio	49		%	48		%
Net Debt to Gross Assets Ratio	39		%	39		%

	Three Months Ended June 30,
	2023			2022
EBITDAre and Adjusted EBITDAre:
Net income	$	13,600		$	40,909
Interest expense, net	31,591			33,289
Income tax expense	347			444
Depreciation and amortization	43,705			40,766
Loss on sale of real estate	575			—

Impairment of real estate investments, net	43,785			—

Impairment charges on joint ventures	—			647


Allocated share of joint venture depreciation	2,162			1,996
Allocated share of joint venture interest expense	2,172			1,276

EBITDAre	$	137,937		$	119,327



Severance expense	547			—
Transaction costs	36			1,145

Credit loss (benefit) expense	(275)			9,512




Adjusted EBITDAre (for the quarter)	$	138,245		$	129,984

Adjusted EBITDAre (annualized) (1)	$	552,980		$	519,936

Net Debt/Adjusted EBITDAre Ratio	5.0			5.1























(1) Adjusted EBITDA for the quarter is multiplied by four to calculate an annual amount.

September 30,
2017 2016
Net Debt:
Debt $ 2,987,925
$ 2,248,576
Deferred financing costs, net 33,951
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 payoff 1,477
14
Interest expense, net 34,194
24,265
Transaction costs 113
2,947
Depreciation and amortization 34,694
27,601
Equity in income from joint ventures (35 ) (203 )
Gain on sale of real estate (997 ) (1,615 )
Income tax expense 587
358
Preferred dividend requirements 5,951
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 Ratio 5.66
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 income 1
—
Miscellaneous income 1
8
Other income $ 522
$ 2,476

~~(2) Adjusted EBITDA for the quarter is multiplied by four to calculate an annual amount.~~

Total Investments

Total investments is a non-GAAP financial measure defined as the sum of the carrying values of ~~rental properties~~real estate investments (before accumulated depreciation), land held for development, property under development, mortgage notes receivable ~~(including~~and related accrued interest ~~receivable), investment in a direct financing lease,~~receivable, 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) to total investments is included in the following table (unaudited, in thousands):


								June 30, 2023		December 31, 2022
	September 30, 2017			December 31, 2016
Total assets							Total assets	$	5,703,564	$	5,758,701
Operating lease right-of-use assets							Operating lease right-of-use assets	(192,325)		(200,985)
Cash and cash equivalents							Cash and cash equivalents	(99,711)		(107,934)
Restricted cash							Restricted cash	(2,623)		(2,577)
Accounts receivable							Accounts receivable	(53,305)		(53,587)
Add: accumulated depreciation on real estate investments							Add: accumulated depreciation on real estate investments	1,369,790		1,302,640
Add: accumulated amortization on intangible assets (1)							Add: accumulated amortization on intangible assets (1)	27,173		23,487
Prepaid expenses and other current assets (1)							Prepaid expenses and other current assets (1)	(33,625)		(33,559)
Total investments							Total investments	$	6,718,938	$	6,686,186

Total Investments:							Total Investments:
Rental properties, net of accumulated depreciation	$	4,535,994		$	3,595,762
Add back accumulated depreciation on rental properties	711,384			635,535
Real estate investments, net of accumulated depreciation							Real estate investments, net of accumulated depreciation	$	4,659,678	$	4,714,136
Add back accumulated depreciation on real estate investments							Add back accumulated depreciation on real estate investments	1,369,790		1,302,640
Land held for development	33,674			22,530			Land held for development	20,168		20,168
Property under development	284,211			297,110			Property under development	80,650		76,029
Mortgage notes and related accrued interest receivable	972,371			613,978
Investment in a direct financing lease, net	57,698			102,698
Mortgage notes and related accrued interest receivable, net							Mortgage notes and related accrued interest receivable, net	466,459		457,268

Investment in joint ventures	5,616			5,972			Investment in joint ventures	53,763		52,964
Intangible assets, gross⁽¹⁾	45,848			28,787			Intangible assets, gross (1)	64,156		60,109
Notes receivable and related accrued interest receivable, net⁽¹⁾	5,213			4,765			Notes receivable and related accrued interest receivable, net (1)	4,274		2,872
Total investments	$	6,652,009		$	5,307,137		Total investments	$	6,718,938	$	6,686,186

Total investments	$	6,652,009		$	5,307,137
Cash and cash equivalents	11,412			19,335
Restricted cash	24,323			9,744
Account receivable, net	99,213			98,939
Less: accumulated depreciation on rental properties	(711,384		)	(635,535		)
Less: accumulated amortization on intangible assets	(16,318		)	(14,008		)
Prepaid expenses and other current assets	73,755			79,410
Total assets	$	6,133,010		$	4,865,022

⁽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, 2016				June 30, 2023		December 31, 2022
Intangible assets, gross	$	45,848		$	28,787		Intangible assets, gross	$	64,156	$	60,109
Less: accumulated amortization on intangible assets	(16,318		)	(14,008		)	Less: accumulated amortization on intangible assets	(27,173)		(23,487)
Notes receivable and related accrued interest receivable, net	5,213			4,765			Notes receivable and related accrued interest receivable, net	4,274		2,872
Prepaid expenses and other current assets	73,755			79,410			Prepaid expenses and other current assets	33,625		33,559
Total other assets	$	108,498		$	98,954		Total other assets	$	74,882	$	73,053

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~~June 30, ~~2017,~~2023, we had a $1.0 billion unsecured revolving credit ~~facility~~facility with ~~a $170.0 million~~no 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 facility~~bond that bears ~~interest~~interest at a floating rate ~~and $300.0 million of this LIBOR-based debt~~but 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 three~~an interest rate swap ~~agreements~~agreement.

As of June 30, 2023, we had a 65% investment interest in two unconsolidated real estate joint ventures related to ~~fix~~two experiential lodging properties located in St. Petersburg Beach, Florida. At June 30, 2023, the joint ventures had a secured mortgage loan with an outstanding balance of $105.0 million. The mortgage loan bears interest at SOFR plus 3.65%, with monthly interest payments required. The joint venture has an interest rate cap agreement to limit the variable portion of the interest rate ~~at 3.15%~~(SOFR) on ~~an additional $50.0 million of the unsecured term loan facility~~this note to 3.5% from ~~November 6, 2017~~May 19, 2022 to ~~April 4, 2019 and on $350.0 million of the unsecured term loan facility from April 5, 2019 to February 7, 2022.~~June 1, 2024.

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~~six Canadian properties and the rents received from tenants of the properties are payable in CAD. ~~To mitigate~~In order to hedge our ~~foreign currency risk~~CAD denominated cash flows and our net investment in ~~future periods on these~~our six Canadian properties, we entered into ~~cross~~cross-currency swaps designated as cash flow hedges and foreign currency ~~swaps~~forwards designated as net investment hedges as further described below.

Cash Flow Hedges of Interest Rate Risk

In order to hedge our interest rate risk, we entered into an interest rate swap agreement on our variable rate secured bonds with a notional amount of $25.0 million. The interest rate cap agreement limits the variable portion of the interest rate (SOFR) on this bond to 2.5325% until September 30, 2026.

Cash Flow Hedges of Foreign Exchange Risk-Cross Currency Swaps

We entered into three USD-CAD cross-currency swaps that became effective July 1, 2022, mature on October 1, 2024, and have a total fixed original notional value of ~~$100.0~~$150.0 million CAD and ~~$98.1~~$118.7 million U.S. The net effect of this swap is to lock in an exchange rate of $1.05 CAD per U.S. dollar on approximately $13.5 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 move 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.USD. The net effect of these swaps is to lock in an exchange rate of ~~1.26~~$1.26 CAD per ~~U.S. dollar~~USD on approximately ~~$13.5~~$10.8 million annual CAD denominated cash flows.

We entered into two USD-CAD cross-currency swaps that became effective May 1, 2022, mature on October 1, 2024 and have 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 an exchange rate of $1.28 CAD per USD on approximately $4.5 million of annual CAD denominated cash ~~flows~~flows.

We entered into three USD-CAD cross-currency swaps that became effective June 1, 2022, mature on ~~the properties through June 2020.~~December 1, 2024 and have a total fixed notional value of $90.0 million CAD and $69.5 million USD. The net effect of these swaps is to lock in an exchange rate of $1.30 CAD per USD on approximately $8.1 million of annual CAD denominated cash flows.

~~In order to also hedge our net investment on the four Canadian properties, we~~

Net Investment Hedges - Foreign Currency Forwards

We entered into two forward contracts that became effective April 29, 2022 with a fixed notional value of $200.0 million CAD and $155.9 million USD with a settlement date of October 1, 2024. The exchange rate of these forward contracts is approximately $1.28 CAD per USD.

We entered into a forward contract that became effective June 14, 2022 with a fixed notional ~~amount~~value of ~~$100.0~~$90.0 million CAD and ~~$94.3~~$69.2 million ~~U.S.~~USD with a ~~July 2018~~ settlement ~~date.~~date of December 2, 2024. The exchange rate of this forward contract is approximately ~~$1.06~~$1.30 CAD per ~~U.S. dollar. Additionally,~~USD.

For foreign currency derivatives designated as net investment hedges, the ~~Company entered into another forward contract with a fixed notional~~change in the fair value of ~~$100.0 million CAD and $88.1 million U.S. with a July 2018 settlement date. The exchange rate~~the derivatives are reported in AOCI as part of ~~this forward contract is approximately $1.13 CAD per U.S. dollar. These forward contracts should hedge a significant portion~~the cumulative translation adjustment. Amounts are reclassified out of ~~our CAD denominated~~AOCI into earnings when the hedged net investment in these four centers through July 2018 as the impact on accumulated other comprehensive income from marking the derivative to market should move in the opposite direction of the translation adjustment on the net assets of our four Canadian properties.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.

Item 4.Controls and Procedures

Evaluation of disclosures controls and procedures

As of ~~September~~June 30, ~~2017,~~2023, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and

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

Limitations on the effectiveness of controls

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

Change in internal controls

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

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

~~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 affiliates~~lawsuits in the ~~Supreme Court~~ordinary 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 predicting~~business, the outcome of ~~litigation generally,~~which cannot be determined at this time. In the ~~Company does not have sufficient information to determine~~opinion of management, any liability we might incur upon the ~~amount or range~~resolution 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~~There are many risks and uncertainties that can affect our current or future business, operating results, financial performance or share price. The following discussion describes certain important factors that could adversely affect our current or future business, operating results, financial condition or share price, and supplements the ~~risk factor discussed below, there were no material changes during the quarter from the risk~~ factors ~~previously discussed in~~set forth under Item 1A - "Risk Factors" in our 2022 Annual ~~Report on Form 10-K for~~Report. This discussion includes a number of forward-looking statements. See "Cautionary Statement Concerning Forward-Looking Statements." The following risk factor replaces and supersedes the ~~year ended December 31, 2016 filed~~risk factor with the ~~SEC on March 1, 2017.~~same title set forth under Item 1A - "Risk Factors" in our 2022 Annual Report.

~~The Company's build-to-suit education tenants~~

Operating risks in the experiential real estate industry 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.~~ability of our customers to perform under their leases or mortgages.

~~A significant portion~~The ability of our customers to operate successfully in the ~~Company's education investments include investments in build-to-suit projects. When construction is completed for these projects, tenants may require some period~~experiential real estate industry and remain current on their obligations depends on a number 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 actionfactors, including, with respect to theatres, the ~~applicable property, its financial results~~availability and popularity of motion pictures, the performance of those pictures in tenants' markets, the allocation of popular pictures to tenants, the release window (the time that elapses from the date of a motion picture's theatrical release to the date it is available on other mediums) and the terms on which the motion pictures are licensed. In addition, motion picture production is highly dependent on labor that is subject to various collective bargaining agreements. The Writers Guild of America strike that began on May 2, 2023 has halted motion picture production and may delay or otherwise affect the supply of certain motion pictures. The Screen Actors Guild – American Federation of Television and Radio Artists strike that began on July 14, 2023 has also had a similar effect on the production and supply of motion pictures.Studios are party to collective bargaining agreements with a number of other labor unions, and failure to reach timely agreements or renewals of existing agreements may further affect the production and supply of motion pictures. Neither we nor our customers control the operations of studios or motion picture distributors. During the COVID-19 pandemic, motion picture distributors increasingly relied upon content streaming as a method of delivering products and continue to do so for certain film releases. There can be no assurances that motion picture distributors will continue to rely on theatres as the primary means of distributing first-run films and motion picture distributors have, and may in the future, consider alternative film delivery methods. In addition, in August 2020, a U.S. District Court granted the U.S. Department of Justice's request to terminate the Paramount Consent Decrees, which prohibit movie studios from owning theatres or utilizing "block booking," a practice whereby movie studios sell multiple films as a package to theatres, in addition to other restrictions. There can be no assurances as to the effects of this regulatory action or whether this regulatory action will materially adversely affect our theatre customers' operations and, in turn, their ability to perform under their leases.

Our other experiential customers are exposed to the risk of adverse economic conditions that can affect experiential activities. Eat & play, ski, attraction, experiential lodging, gaming, fitness & wellness and cultural properties are discretionary activities that can entail a relatively high cost of participation and may be adversely affected by an economic slowdown or recession. Economic conditions, including increasing interest rates and inflation, high unemployment and erosion of consumer confidence, may potentially have negative effects on our customers and on their results of operations. The reduced economic activity resulting from the COVID-19 pandemic severely impacted ~~by lower lease revenues, recording an impairment loss, writing off rental amounts~~our customers' businesses, financial condition and liquidity. The ultimate extent to which the COVID-19 pandemic, as well as generally weakening economic conditions, impacts the operations of our customers will depend on future developments, which, as discussed above, are highly uncertain and cannot be predicted with confidence. We cannot predict what impact these uncertainties may have on overall guest visitation, guest spending or ~~otherwise.~~other related trends and the ultimate impact it will have on our customers’ operations and, in turn, their ability to perform under their respective leases or mortgages.

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

~~There~~Issuer Purchases of Equity Securities


Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
April 1 through April 30, 2023 common shares	—		$	—	—	$	—
May 1 through May 31, 2023 common shares	2,326	(1)	41.97		—	—
June 1 through June 30, 2023 common shares	—		—		—	—

Total	2,326		$	41.97	—	$	—

(1) The repurchases of equity securities during May 2023 were ~~no reportable events during~~completed 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~~June 30, ~~2017~~.2023.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the three months ended June 30, 2023, no trustee or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K. There were no reportable events during the quarter ended ~~September~~June 30, ~~2017~~.2023 otherwise reportable under this Item 5.

Item 6. Exhibits



~~10.1~~3.1*		~~Second~~Composite of Amended and Restated ~~and Consolidated Credit Agreement, dated as~~Declaration of ~~September 27, 2017, among~~Trust of 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~~	~~First Amendment, dated as~~(inclusive of September 27, 2017, to Note Purchase Agreement, dated as of August 1, 2016, by and among the Company and the institutional investors party thereto, which is attached as Exhibit 10.2 to the Company's Form 8-K (Commission File No. 001-13561) filed on September 27, 2017, is hereby incorporated as Exhibit 10.2.
~~12.1~~*	~~Computation of Ratio of Earnings to Fixed Charges~~all amendments through May 26, 2023), is attached hereto as Exhibit ~~12.1.~~3.1.
~~12.2~~31.1*		~~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.
31.2*		Certification of Mark A. Peterson pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, is attached hereto as Exhibit 31.2.
32.1**		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is attached hereto as Exhibit 32.1.
32.2**		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is attached hereto as Exhibit 32.2.
101.INS*		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*		Inline XBRL Taxonomy Extension Schema
101.CAL*		Inline XBRL Extension Calculation Linkbase
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase
104*		Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

* Filed herewith.

** Furnished herewith.

SIGNATURES

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

EPR Properties

Dated:

~~November 8, 2017~~August 3, 2023

~~/s/~~/s/ Gregory K. Silvers

Gregory K. Silvers, Chairman, President and Chief Executive

Officer (Principal Executive Officer)

Dated:

~~November 8, 2017~~August 3, 2023

~~/s/~~/s/ Tonya L. Mater

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



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

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



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



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


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

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 reimbursements	3,734			3,821			11,424			11,577
Other income	522			2,476			2,518			5,812
Mortgage and other financing income	24,314			17,031			65,016			52,907
Total revenue	151,397			125,610			428,291			362,411
Property operating expense	6,340			5,626			18,762			16,687
Other expense	—			—			—			5
General and administrative expense	12,070			9,091			33,787			27,309
Costs associated with loan refinancing or payoff	1,477			14			1,491			905
Gain on early extinguishment of debt	—			—			(977		)	—
Interest expense, net	34,194			24,265			97,853			70,310
Transaction costs	113			2,947			388			4,881
Impairment charges	—			—			10,195			—
Depreciation and amortization	34,694			27,601			95,919			79,222
Income before equity in income from joint ventures and other items	62,509			56,066			170,873			163,092
Equity in income from joint ventures	35			203			86			501
Gain on sale of real estate	997			1,615			28,462			3,885
Income before income taxes	63,541			57,884			199,421			167,478
Income tax expense	(587		)	(358		)	(2,016		)	(637		)
Net income	62,954			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):
Basic	73,663			63,627			70,320			63,296
Diluted	73,724			63,747			70,385			63,393



	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



	September 30, 2017			December 31, 2016
Receivable from tenants	$	15,977		$	7,564
Receivable from non-tenants	128			497
Receivable from insurance proceeds	27			1,967
Receivable from Sullivan County Infrastructure Revenue Bonds	10,808			22,164
Straight-line rent receivable	73,657			67,618
Allowance for doubtful accounts	(1,384		)	(871		)
Total	$	99,213		$	98,939



	September 30, 2017			December 31, 2016
Total minimum lease payments receivable	$	113,956		$	215,753
Estimated unguaranteed residual value of leased assets	47,000			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



	Amount
Year:
2017	$	1,545
2018	6,301
2019	6,490
2020	6,685
2021	6,885
Thereafter	86,050
Total	$	113,956



	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



	Number of options		Option price per share					Weighted avg. exercise price
Outstanding at December 31, 2016	285,986		$	19.02	—	$	61.79	$	51.93
Exercised	(28,281	)	46.86		—	61.79		54.72
Granted	2,215		76.63		—	76.63		76.63
Forfeited/Expired	(1,342	)	51.64		—	61.79		59.52
Outstanding at September 30, 2017	258,578		$	19.02	—	$	76.63	$	51.80



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



	Number of shares		Weighted avg. grant date fair value		Weighted avg. life remaining
Outstanding at December 31, 2016	534,317		$	59.22
Granted	295,754		76.53
Vested	(208,822	)	57.43
Forfeited	(1,342	)	66.88
Outstanding at September 30, 2017	619,907		$	68.07	1.21



Balance Sheet Data:
	As of September 30, 2017
	Entertainment		Education		Recreation		Other		Corporate/Unallocated		Consolidated
Total Assets	$	2,343,778	$	1,489,459	$	2,057,172	$	193,766	$	48,835	$	6,133,010

	As of December 31, 2016
	Entertainment		Education		Recreation		Other		Corporate/Unallocated		Consolidated
Total Assets	$	2,168,669	$	1,308,288	$	1,120,498	$	202,394	$	65,173	$	4,865,022

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 equivalents	8,788		1,472		1,152		—			11,412
Restricted cash	395		23,599		329		—			24,323
Accounts receivable, net	675		89,230		9,308		—			99,213
Intercompany notes receivable	—		179,589		—		(179,589		)	—
Investments in subsidiaries	5,892,529		—		—		(5,892,529		)	—
Other assets	26,485		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 payable	30,997		—		—		—			30,997
Unearned rents and interest	—		69,615		15,583		—			85,198
Intercompany notes payable	—		—		179,589		(179,589		)	—
Debt	2,951,259		—		36,666		—			2,987,925
Total liabilities	3,040,564		135,525		248,202		(179,589		)	3,244,702
Total equity	2,888,308		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 development	1,010		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 equivalents	16,586		1,157		1,592		—			19,335
Restricted cash	365		8,352		1,027		—			9,744
Accounts receivable, net	556		89,145		9,238		—			98,939
Intercompany notes receivable	—		179,589		—		(179,589		)	—
Investments in subsidiaries	4,521,095		—		—		(4,521,095		)	—
Other assets	21,768		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 payable	26,318		—		—		—			26,318
Unearned rents and interest	—		46,647		773		—			47,420
Intercompany notes payable	—		—		179,589		(179,589		)	—
Debt	2,285,730		—		199,895		—			2,485,625
Total liabilities	2,375,479		98,708		384,523		(179,589		)	2,679,121
Total equity	2,185,901		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



	September 30,
	2017			2016
Net Debt:
Debt	$	2,987,925		$	2,248,576
Deferred financing costs, net	33,951			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 payoff	1,477			14
Interest expense, net	34,194			24,265
Transaction costs	113			2,947
Depreciation and amortization	34,694			27,601
Equity in income from joint ventures	(35		)	(203		)
Gain on sale of real estate	(997		)	(1,615		)
Income tax expense	587			358
Preferred dividend requirements	5,951			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 Ratio	5.66			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 income	1			—
Miscellaneous income	1			8
Other income	$	522		$	2,476