EPR PROPERTIES (Form: 10-Q, Received: 08/03/2023 15:04:06)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended June 30, 2023


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

For the transition period from to

Commission file number: 001-13561

EPR PROPERTIES

(Exact name of registrant as specified in its charter)


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

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


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

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

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common shares, par value $0.01 per share

EPR

New York Stock Exchange

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

EPR PrC

New York Stock Exchange

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

EPR PrE

New York Stock Exchange

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

EPR PrG

New York Stock Exchange

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

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

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

At August 2, 2023, there were 75,324,367 common shares outstanding.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

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

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

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

•Global economic uncertainty, disruptions in financial markets, and generally weakening economic conditions;

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

•Reduction in discretionary spending by consumers;

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

•Adverse changes in our credit ratings;

•Rising interest rates;

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

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

•A borrower's bankruptcy or default;

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

•Risks of operating in the experiential real estate industry (including the impact of labor strikes on the production or supply of motion pictures to our theatre tenants);

•Our ability to compete effectively;

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

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

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

•Risks associated with our level of indebtedness;

•Risks associated with use of leverage to acquire properties;

•Financing arrangements that require lump-sum payments;

•Our ability to raise capital;

•The concentration of our investment portfolio;

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

•The ability of our subsidiaries to satisfy their obligations;

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

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

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

•Risks associated with the gaming industry;

•Risks associated with gaming and other regulatory authorities;

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

•Risks associated with security breaches and other disruptions;

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

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

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

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

•Risks involved in joint ventures;

•Risks in leasing multi-tenant properties;

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

•Risks of environmental liability;

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

•Risks with owning assets in foreign countries;

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

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

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

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

•Fluctuations in the market prices for our shares;

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

•Policy changes obtained without the approval of our shareholders;

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

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

•Risks associated with changes in foreign exchange rates; and

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

Our forward-looking statements represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Many of the factors that will determine these items are beyond our ability to control or predict. For further discussion of these factors, see Item 1A - "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2022 (the "2022 Annual Report") filed with the Securities and Exchange Commission ("SEC") on February 23, 2023, as supplemented by Item 1A - "Risk Factors" in this Quarterly Report on Form 10-Q.

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

TABLE OF CONTENTS

Page

PART I

Item 1.

Financial Statements

Item 2.

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

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

PART II

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sale of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

Other Information

Item 6.

Exhibits

iii

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

EPR PROPERTIES

Consolidated Balance Sheets

(Dollars in thousands except share data)


	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 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 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 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

Notes to Consolidated Financial Statements (Unaudited)

1. Organization

Description of Business

EPR Properties (the Company) was formed on August 22, 1997 as a Maryland real estate investment trust (REIT), and an initial public offering of the Company's common shares of beneficial interest (common shares) was completed on November 18, 1997. Since that time, the Company has been a leading diversified Experiential net lease REIT specializing in select enduring experiential properties. The Company's underwriting is centered on key industry and property cash flow criteria, as well as the credit metrics of the Company's tenants and customers. The Company’s properties are located in the United States (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 six month period ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 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 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, 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 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 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 Company and 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 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. The Company has entered into management agreements whereby Cinemark will manage four of the Surrendered Properties and 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 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 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 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 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 the Company 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 the Company 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.

Deferred Financing Costs

Deferred financing costs are amortized over the terms of the related debt obligations, as applicable. Deferred financing costs of $28.2 million and $31.1 million as of June 30, 2023 and December 31, 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" in the accompanying consolidated balance sheets.

Rental Revenue

The Company leases real estate to its tenants under leases classified as operating leases. The Company's leases generally provide for rent escalations throughout the lease terms. Rents that are fixed are recognized on a straight-line basis over the lease term. Base rent escalations that include a variable component are recognized upon the occurrence of the specified event as defined in the Company's lease agreements. Many of the Company's leasing arrangements include options to extend the lease, which are not included in the minimum lease terms unless the option is reasonably certain to be exercised. Straight-line rental revenue is subject to an evaluation for collectibility, and the Company records a direct write-off against rental revenue if collectibility of these future rents is not probable. 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 straight-line rental revenue, net of write-offs.

Most of the Company’s lease contracts are triple-net leases, which require the tenants to make payments to third parties for lessor costs (such as property taxes and insurance) associated with the properties. In accordance with Topic 842, the Company does not include these lessee payments to third parties in rental revenue or property operating expenses. In certain situations, the Company pays these lessor costs directly to third parties and the tenants reimburse the Company. In accordance with Topic 842, these payments are presented on a gross basis in rental revenue and property operating expense. During the 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 collectibility of its receivables on a lease-by-lease basis. The evaluation primarily consists of reviewing past due account balances and considering such factors as the credit quality of the

Company's tenants, historical trends of the tenant, current economic conditions and changes in customer payment terms. When the collectibility of lease receivables or future lease payments are no longer probable, the Company records a direct write-off of the receivable to rental revenue and recognizes future rental revenue on a cash basis.

Mortgage Notes and Other Notes Receivable

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

The Company made an accounting policy election to not measure an allowance for credit losses for accrued interest receivables related to its mortgage notes and notes receivable. Accordingly, if accrued interest receivable is deemed to be uncollectible, the Company will record any necessary write-offs as a reversal of interest income. There were no accrued interest write-offs for the 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 fees receivables against interest income related to one mortgage note receivable and two notes receivable. As of June 30, 2023, the Company believes that all outstanding accrued interest is collectible.

In the event the Company has a past due mortgage note or note receivable that the Company determines is collateral-dependent, the Company measures expected credit losses based on the fair value of the collateral. As of June 30, 2023, the Company 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 Company elected to apply the collateral-dependent practical expedient.

Concentrations of Risk

Regal, American-Multi Cinema, Inc. (AMC) and Topgolf USA (Topgolf) represented a significant portion of the Company's total revenue for the six months ended June 30, 2023 and 2022. The following is a summary of the Company's total revenue derived from rental or interest payments from AMC, Topgolf and Regal (dollars in thousands):


	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	%

Impact of Recently Issued Accounting Standards

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848). The ASU contains practical expedients for reference rate reform - related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the year ended December 31, 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. On March 5, 2021, the Financial Conduct Authority (FCA) announced that the USD LIBOR will no longer be published after June 30, 2023. In December 2022, the FASB issued ASU No. 2022-06, Deferral of the Sunset Date of Topic 848. The guidance in ASU 2022-06 deferred the sunset date to December 31, 2024. The Company has transitioned existing contracts to a replacement index. These ASUs are not anticipated to have any significant impact on the Company's consolidated financial statements.

3. Real Estate Investments

The following table summarizes the carrying amounts of real estate investments as of June 30, 2023 and December 31, 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

Depreciation expense on real estate investments was $80.5 million and $78.4 million for the six months ended June 30, 2023 and 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 six months ended June 30, 2023 totaled $98.7 million, and included 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 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.

Certain of the 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 June 30, 2023, the Company amended a mortgage note receivable and note receivable secured by an eat & play investment with one borrower. The modified loan agreement consolidated all of the borrower's obligations into one mortgage note agreement, including with respect to land which was previously ground leased to the borrower. The maturity date of this mortgage note receivable was modified to be August 31, 2024 and was previously June 17, 2039. In connection with the modification, the Company forgave approximately $7.8 million of principal, which was fully reserved at December 31, 2022, and reduced the allowance for credit loss at March 31, 2023. The balance of this mortgage note receivable at June 30, 2023 was $10.8 million.

Although foreclosure was not deemed probable and the principal balance of the 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 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 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 VIE because the Company does not individually have the power to direct the activities that are most significant to the entity and, accordingly, this investment is not consolidated. The Company's maximum exposure to loss associated with this VIE is limited to the Company's outstanding note receivable in the amount of $8.4 million, which is fully reserved in the allowance for credit losses at June 30, 2023.

The following summarizes the activity within the 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

The following table summarizes the carrying amounts of accounts receivable as of June 30, 2023 and December 31, 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

The 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 $1.0 million that were deferred due to the COVID-19 pandemic and determined to be collectible. Additionally, the Company has amounts due from tenants that were not booked as receivables because the full amounts were not deemed probable of collection as a result of the COVID-19 pandemic. While deferments for this and future periods delay rent payments, these deferments do not release tenants from the obligation to pay the deferred amounts in the future.

8. Capital Markets and Dividends

During the three and six months ended June 30, 2023, the Company declared cash dividends totaling $0.825 and $1.65 per common share, respectively. Additionally, during the three and six months ended June 30, 2023, the Board declared cash dividends of $0.359375 and $0.71875 per share on each of the Company's 5.75% Series C cumulative convertible preferred shares and the Company's 5.75% Series G cumulative redeemable preferred shares, and cash dividends of $0.5625 and $1.125 per share on the Company's 9.00% Series E cumulative convertible preferred shares.

On February 17, 2023, the Company amended its 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 has a facility fee of 0.25%.

9. Unconsolidated Real Estate Joint Ventures

The 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 variable portion of the 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 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 $22.9 million at June 30, 2023 that provides for additional draws of approximately $1.6 million to fund renovations. The maturity date of this mortgage loan is September 15, 2031. The loan bears interest at an annual fixed rate of 4.00% with monthly interest payments required. Additionally, the Company has guaranteed the completion of the renovations in the amount of approximately $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 8, 2025 through maturity. Monthly interest payments are required. Additionally, the Company provided a subordinated loan to the joint venture for $11.3 million with a maturity date of March 8, 2034. The mortgage loan bears interest at an annual fixed rate of 7.25% through the sixth anniversary and increases to SOFR plus 7.20% with a cap of 8.00%, 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), hold the investments in the real estate of the experiential lodging property and the lodging operations, which are facilitated by a management agreement. The Company's investments in these two unconsolidated real estate joint ventures were considered to be variable interest investments and the Company's investment in the joint venture that holds the lodging operations is a VIE. The Company is not the primary beneficiary of the VIE because the Company does not individually have the power to direct the activities that are most important to the joint venture and, accordingly, this investment is not 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 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.

10. Derivative Instruments

All derivatives are recognized at fair value in the consolidated balance sheets within the line items "Other assets" and "Accounts payable and accrued liabilities" as applicable. The Company has elected not to offset its derivative position for purposes of balance sheet presentation and disclosure. The Company had derivative assets of $6.7 million and $11.4 million at June 30, 2023 and December 31, 2022, respectively. The Company had no derivative liabilities at June 30, 2023 and December 31, 2022. The Company has not posted or received collateral with its derivative counterparties as of June 30, 2023 or December 31, 2022. See Note 11 for disclosures relating to the fair value of the derivative instruments.

Risk Management Objective of Using Derivatives

The Company is exposed to certain risk arising from both its business operations and economic conditions, including the effect of changes in foreign currency exchange rates on foreign currency transactions and interest rates on its 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 uses interest rate swaps as its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt or payment of variable-rate amounts from a counterparty, which results in the Company recording net interest expense that is fixed over the life of the agreements without exchange of the underlying notional amount.

At June 30, 2023, the Company had one interest rate swap agreement designated as a cash flow hedge of interest rate risk. The interest rate swap agreement outstanding as of June 30, 2023 is summarized below:

Fixed rate

Notional Amount (in millions)

Index

Maturity

2.5325%

25.0

USD SOFR

September 30, 2026

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

Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. As of June 30, 2023, the Company estimates that during the twelve months ending June 30, 2024, $1.1 million of gains will be reclassified from AOCI to interest expense.

Cash Flow Hedges of Foreign Exchange Risk

The Company is exposed to foreign currency exchange risk against its functional currency, USD, on CAD denominated cash flow from its six Canadian properties. The Company uses cross-currency swaps to mitigate its exposure to fluctuations in the USD-CAD exchange rate on cash inflows associated with these properties which should hedge a significant portion of the Company's expected CAD denominated cash flows. As of June 30, 2023, the Company had the following cross-currency 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 change in the fair value of foreign currency derivatives designated and that qualify as cash flow hedges of foreign exchange risk is recorded in AOCI and reclassified into earnings in the period that the hedged forecasted transaction affects earnings within the same income statement line item as the earnings effect of the hedged transaction. As of June 30, 2023, the Company estimates that during the twelve months ending June 30, 2024, $0.5 million of gains will be reclassified from AOCI to other income.

Net Investment Hedges

The Company is exposed to fluctuations in the USD-CAD exchange rate on its net investments in Canada. As such, the Company uses currency forward agreements to manage its exposure to changes in foreign exchange rates on certain of its foreign net investments. As of June 30, 2023, the Company had the following foreign currency forwards designated as net investment 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 change in the fair value of the derivatives are reported in AOCI as part of the cumulative translation adjustment. Amounts are reclassified out of AOCI into earnings when the hedged net investment is either sold or substantially liquidated. Gains and losses on the derivative representing hedge components excluded from the assessment of effectiveness are recognized over the life of the hedge on a systematic and rational basis, as documented at hedge inception in accordance with the Company's accounting policy election. The earnings recognition of excluded components are presented in other income.

Below is a summary of the effect of derivative instruments on the consolidated statements of changes in equity and income for the three and six months ended June 30, 2023 and 2022.

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

As of June 30, 2023, the Company had no derivatives in a liability position related to these derivative agreements. As of June 30, 2023, the Company had not posted any collateral related to these agreements and was not in breach of any provisions in these agreements.

11. Fair Value Disclosures

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

Derivative Financial Instruments

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 June 30, 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 June 30, 2023 and December 31, 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

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.

Non-recurring fair value measurements

The table below presents the Company's assets measured at fair value on a non-recurring basis as of June 30, 2023 and December 31, 2022, aggregated by the level in the fair value hierarchy within which those measurements are classified.

Assets Measured at Fair Value on a Non-Recurring Basis at 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
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

(1) As further discussed in Note 4, during the six months ended June 30, 2023, the Company recorded an impairment charge of $43.8 million related to real estate investments, net, on nine properties. Management estimated the fair values of these investments taking into account various factors including independent appraisals, shortened hold periods and market conditions. The significant inputs and assumptions used in the 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 because many of the assumptions were not observable.

(2) Includes collateral-dependent notes receivable, which are presented within "Other assets" in the 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 June 30, 2023 and December 31, 2022:

Mortgage notes receivable and related accrued interest 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 June 30, 2023, the Company had a carrying value of $466.5 million in fixed-rate mortgage notes receivable outstanding, including related accrued interest and allowance for credit losses, with a weighted average interest rate of approximately 8.91%. The fixed-rate mortgage notes bear interest at rates of 6.99% to 12.32%. Discounting the future cash flows for fixed-rate mortgage notes receivable using rates of 7.00% to 10.00%, management estimates the fair value of the fixed-rate mortgage notes receivable to be approximately $510.5 million with an estimated weighted average market rate of 7.66% at June 30, 2023.

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

Derivative instruments:

Derivative instruments are carried at their fair value.

Debt instruments:

The fair value of the Company's debt is estimated by discounting the future cash flows of each instrument using current market rates. At June 30, 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 $25.0 million in variable-rate debt outstanding with a weighted average interest rate of approximately 4.43%. The carrying value of the variable-rate debt outstanding approximated the fair value at December 31, 2022.

At both June 30, 2023 and December 31, 2022, the $25.0 million of variable-rate debt outstanding, discussed above, had been effectively converted to a fixed rate by an interest rate swap agreement. See Note 10 for additional information related to the Company's interest rate swap agreement.

At June 30, 2023, the Company had a carrying value of $2.82 billion in fixed-rate long-term debt outstanding with a weighted average interest rate of approximately 4.34%. Discounting the future cash flows for fixed-rate debt using June 30, 2023 market rates of 7.24% to 8.28%, management estimates the fair value of the fixed rate debt to be approximately $2.45 billion with an estimated weighted average market rate of 7.77% at June 30, 2023.

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

12. Earnings Per Share

The following table summarizes the Company’s computation of basic and diluted earnings per share (EPS) for the three and six months ended June 30, 2023 and 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 June 30, 2022					Six Months Ended June 30, 2022
	Income (numerator)		Shares (denominator)	Per Share Amount		Income (numerator)		Shares (denominator)	Per Share Amount
Basic EPS:
Net income	$	40,909				$	83,101
Less: preferred dividend requirements	(6,033)					(12,066)



Net income available to common shareholders	$	34,876	74,986	$	0.47	$	71,035	74,915	$	0.95
Diluted EPS:
Net income available to common shareholders	$	34,876	74,986			$	71,035	74,915
Effect of dilutive securities:
Share options and performance shares	—		248			—		227


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.

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 2.3 million and 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 1.7 million common shares that would result from the conversion of the Company’s 9.0% Series E cumulative convertible preferred shares and the corresponding add-back of the preferred dividends declared on those shares for both the three and six months ended June 30, 2023 and 2022.

•Outstanding options to purchase 83 thousand and 89 thousand common shares at per share prices ranging from $44.44 to $76.63 for the three and six months ended June 30, 2023 and 2022, respectively.

•The effect of 56 thousand contingently issuable performance shares granted during 2020 for the three and six months ended June 30, 2022.

13. Equity Incentive Plans

All grants of common shares and options to purchase common shares were issued under the Company's 2007 Equity Incentive Plan prior to May 12, 2016 and under the 2016 Equity Incentive Plan on and after May 12, 2016. Under the 2016 Equity Incentive Plan, an aggregate of 3,950,000 common shares, options to purchase common shares and restricted share units, subject to adjustment in the event of certain capital events, may be granted. Additionally, the 2020 Long Term Incentive Plan (2020 LTIP) is a sub-plan under the Company's 2016 Equity Incentive Plan. Under the 2020 LTIP, the Company awards performance shares and restricted shares to the Company's executive officers. At June 30, 2023, there were 1,490,224 shares available for grant under the 2016 Equity Incentive Plan.

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

The holders of nonvested shares have voting rights and receive dividends from the date of grant. The fair value of the nonvested shares that vested was $8.6 million and $10.2 million for the six months ended June 30, 2023 and 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 June 30, 2023, unamortized share-based compensation expense related to nonvested shares was $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

The holders of restricted share units receive dividend equivalents from the date of grant. Total expense recognized related to shares issued to non-employee Trustees and included in "General and administrative expense" in the accompanying consolidated statements of income and comprehensive income was $1.0 million and $1.2 million for the six months ended June 30, 2023 and 2022, respectively. At June 30, 2023, unamortized share-based compensation expense related to restricted share units was $1.6 million.

14. Operating Leases

The Company’s real estate investments are leased under operating leases. In addition to its lessor arrangements on its real estate investments, as of 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 June 30, 2023, the Company had 16 development projects with commitments to fund an aggregate of approximately $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.

The Company has certain commitments related to its mortgage 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 June 30, 2023, the Company had four mortgage notes with commitments totaling approximately $85.0 million. If commitments are funded in the future, interest will be charged at rates consistent with the existing investments.

In connection with construction of the Company's development projects and related infrastructure, certain public agencies require posting of surety bonds to guarantee that the Company's obligations are satisfied. These bonds expire upon the completion of the improvements or infrastructure. As of June 30, 2023, the Company had two surety bonds outstanding totaling $2.6 million.

17. Subsequent Events

On July 17, 2023, Santikos Theaters, LLC (Santikos) announced its acquisition of VSS-Southern Theatres (Southern). The Company currently has investments at 10 Southern properties located in six states and expects 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 the Company's top 10 customers by revenue during the second quarter of 2023. Due to the sale, Southern paid their deferred rent receivable of $11.6 million in full, which was not previously recognized by the Company. This amount will be recognized as rental revenue in the third quarter of 2023.

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

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

Overview

Business

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

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

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

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

Historically, our primary challenges had been locating suitable properties, negotiating favorable lease or financing terms (on new or existing properties), and managing our portfolio as we 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 Item 1A - “Risk Factors” in our 2022 Annual Report, as supplemented by Item 1A - "Risk Factors" in this Quarterly Report on Form 10-Q.

As of June 30, 2023, our total assets were approximately $5.7 billion (after accumulated depreciation of approximately $1.4 billion) with properties located in 44 states, Ontario and Quebec, Canada. Our total investments (a non-GAAP financial measure) were approximately $6.7 billion at June 30, 2023. See "Non-GAAP Financial Measures" for the reconciliation of "Total assets" in the consolidated balance sheet to total investments at June 30, 2023 and December 31, 2022. 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.

As of June 30, 2023, our Experiential segment consisted of the following property types (owned or 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 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 consisted of the following property types (owned or 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 prior approval and 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 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 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 six months ended June 30, 2023 and 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	%

The major factors impacting our results for the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022 were as follows:

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

•The effect of property acquisitions as well as dispositions that occurred in 2023 and 2022;

•The decrease in interest expense due to an increase in capitalized interest and interest income on short-term investments; and

•The increase in impairment charges, general and administrative expense, loss on sales of real estate and loss from joint ventures offset by a decrease in transaction costs and credit loss expense.

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

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related notes. In preparing these financial statements, management has made its best estimates and assumptions that affect the reported assets and liabilities and the reported amounts of revenues and expenses during the reporting period. The most significant assumptions and estimates relate to the valuation of real estate, accounting for real estate acquisitions, assessing the collectibility of receivables and the credit loss related to mortgage and other notes receivable. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates. A summary of critical accounting policies and estimates is included in our 2022 Annual Report. For the six months ended June 30, 2023, there were no changes to critical accounting policies.

Recent Developments

Investment Spending

Our investment spending during the six months ended June 30, 2023 and 2022 totaled $98.7 million and $239.2 million, respectively, and 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


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 $1.6 million and $0.3 million in capitalized interest for the six months ended June 30, 2023 and 2022, respectively, and $0.1 million in capitalized other general and administrative direct project costs for both the six months ended June 30, 2023 and 2022. Excluded from the table above is approximately $5.5 million and $1.5 million of maintenance capital expenditures and other spending for the six months ended June 30, 2023 and 2022, respectively.

Dispositions

During the six months ended June 30, 2023, we 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. In connection with these sales, we recognized a net loss on sale of $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 six months ended June 30, 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 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 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 $11.6 million in 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 six months ended June 30, 2023 compared to the three and six months ended June 30, 2022

Analysis of Revenue

The following table summarizes our total revenue (dollars in 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

(1) For the three months ended June 30, 2023 compared to the three months ended June 30, 2022, the increase in minimum rent resulted primarily from an increase of $4.2 million related 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 2023 and 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 improved collections of rent being recognized on 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 in rental revenue of $0.4 million from property dispositions.

During the three and six months ended June 30, 2023, there were no significant lease renewals on existing properties.

(2) The increase in percentage rent for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 was due primarily to higher percentage rent recognized from one ski property in 2023.

(3) The increase in mortgage and other financing income during the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022 related to income from additional investments on an existing mortgage note receivable, as well as 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 and other line items (dollars in thousands):


	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 for the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022 related primarily to an increase in payroll and benefit costs, as well as an increase in professional fees, including those related to the comprehensive restructuring agreement with Regal.

(2) The decrease in transaction costs during the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022 was due to a decrease in costs related to equity method investments and fewer terminated 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 $6.8 million related to one mortgage note receivable and $3.1 million related to two notes receivable recorded during the three months ended June 30, 2022.

(4) Impairment charges recognized during the three and six months ended June 30, 2023 primarily related to 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 June 30, 2023 compared to the three and three and six months ended June 30, 2022 resulted primarily from acquisitions and developments completed in 2023 and 2022. This was partially offset by property dispositions that occurred during 2023 and 2022.

(6) The decrease in interest expense, net, for the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022, resulted primarily from an increase in 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 interest expense at these joint ventures for the three and six months ended June 30, 2023.

Liquidity and Capital Resources

Cash and cash equivalents were $99.7 million at June 30, 2023. As of June 30, 2023, we had no uninsured deposits. In addition, we had restricted cash of $2.6 million at June 30, 2023, which related primarily to escrow deposits required for property management and debt agreements or held for potential acquisitions and redevelopments.

Mortgage Debt, Senior Notes and Unsecured Revolving Credit Facility

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

At June 30, 2023, we had outstanding $2.5 billion in aggregate principal amount of unsecured senior notes (excluding the private placement notes discussed below) ranging in interest rates from 3.60% to 4.95%. The notes contain various covenants, including: (i) a limitation on incurrence of any debt that would cause the ratio of our debt to adjusted total assets to exceed 60%; (ii) a limitation on incurrence of any secured debt that would cause the ratio of secured debt to adjusted total assets to exceed 40%; (iii) a limitation on incurrence of any debt that would cause our debt service coverage ratio to be less than 1.5 times; and (iv) the maintenance at all times of our total unencumbered assets such that they are not less than 150% of our outstanding unsecured debt. Interest payments on our unsecured senior notes are due semiannually.

At June 30, 2023, we had no outstanding balance under our $1.0 billion unsecured revolving credit facility. Our unsecured revolving credit facility is governed by the terms of a Third Amended, Restated and Consolidated Credit Agreement, dated as of October 6, 2021 (the "Third Consolidated Credit Agreement"). The facility will mature on October 6, 2025. We have two options to extend the maturity date of the facility by an additional six months each (for a total of 12 months), subject to paying additional fees and the absence of any default. The facility provides for an initial maximum principal amount of borrowing availability of $1.0 billion with an "accordion" feature under which we may increase the total maximum principal amount available by $1.0 billion, to a total of $2.0 billion, subject to lender consent. The unsecured revolving credit facility bears interest at a floating rate of SOFR plus 1.30% (based on our unsecured debt ratings and with a SOFR floor of zero), which was 6.40% at June 30, 2023. Additionally, the facility fee on the revolving credit facility is 0.25%.

At June 30, 2023, we had outstanding $316.2 million of senior unsecured notes that were issued in a private placement transaction. The private placement notes were issued in two tranches with $148.0 million due August 22, 2024, and $192.0 million due August 22, 2026. At 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 facility and the private placement notes contain financial covenants or restrictions that limit our levels of consolidated debt, secured debt, investments outside certain categories, stock repurchases and dividend distributions and require us to maintain a minimum consolidated tangible net worth and meet certain coverage levels for fixed charges and debt service. Additionally, these debt instruments contain cross-default provisions if we default under other indebtedness exceeding certain amounts. Those cross-default thresholds vary

from $50.0 million to $75.0 million, depending upon the debt instrument. We were in compliance with all financial and other covenants under our debt instruments at June 30, 2023.

Our principal investing activities are acquiring, developing and financing Experiential properties. These investing activities have generally been financed with senior unsecured notes, as well as the proceeds from equity offerings. Our unsecured revolving credit facility and 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 or incur new mortgage debt on existing properties. We may also issue equity securities in connection with acquisitions. Continued growth of our real estate investments and mortgage financing portfolios will depend in part on our continued ability to access funds through additional borrowings and securities offerings and, to a lesser extent, our ability to assume debt in connection with property acquisitions. We may also fund investments with the proceeds from asset dispositions. As discussed above, we intend to fund our investments in the near term primarily from cash from operations and borrowing availability under our unsecured revolving credit facility, subject to maintaining our leverage levels consistent with past practice, due to our current elevated cost of capital.

Liquidity Requirements

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


	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 June 30, 2023, we had 16 development projects with commitments to fund an aggregate of approximately $178.3 million, of which approximately $70.7 million is expected to be funded in 2023. Development costs are advanced by us in periodic draws. If we determine that construction is not being completed in accordance with the terms of the development agreement, we can discontinue funding construction draws. We have agreed to lease the properties to the operators at pre-determined rates upon completion of construction.

We have certain commitments related to our mortgage notes investments that we may be required to fund in the future. We are generally obligated to fund these commitments at the request of the borrower or upon the occurrence of events outside of our direct control. As of June 30, 2023, we had four mortgage notes with commitments totaling approximately $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.

In connection with construction of our development projects and related infrastructure, certain public agencies require posting of surety bonds to guarantee that our obligations are satisfied. These bonds expire upon the completion of the improvements or infrastructure. As of June 30, 2023, we had two surety bonds outstanding totaling $2.6 million.

Liquidity Analysis

We currently anticipate that our cash on hand, cash from operations, funds available under our unsecured revolving credit facility and proceeds from asset dispositions will provide adequate liquidity to meet our financial commitments, including 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 debt maturities. We have no scheduled debt payments due in 2023 and $136.6 million due in 2024. We currently believe that we will be able to repay, extend, refinance or otherwise settle our debt maturities as the debt comes due and that we will be able to fund our remaining commitments, as necessary. However, there can be no assurance that additional financing or capital will be available, or that terms will be acceptable or advantageous to us, particularly in light of the 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. 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 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. As of June 30, 2023, our debt to total assets ratio was 49%, our net debt to adjusted EBITDAre ratio was 5.0x and our net debt to gross assets ratio was 39% (see "Non-GAAP Financial Measures" for calculation).

Non-GAAP Financial Measures

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

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

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

FFO, FFOAA and AFFO are widely used measures of the operating performance of real estate companies and are provided here as supplemental measures to GAAP net income 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 six months ended June 30, 2023 and 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 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.

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 AFFO per share for the three and six months ended June 30, 2023 and June 30, 2022. Therefore, the additional common shares that would result from the conversion and the corresponding add-back of the preferred dividends declared on those shares are included in the calculation of diluted FFO, FFOAA and AFFO per share.

Net Debt

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

Gross Assets

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

Net Debt to Gross Assets Ratio

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

EBITDAre

NAREIT developed EBITDAre as a relative non-GAAP financial measure of REITs, independent of a company's capital structure, to provide a uniform basis to measure the enterprise value of a company. Pursuant to the definition of EBITDAre by the Board of Governors of NAREIT, we calculate EBITDAre as net income, 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 EBITDAre

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

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

Net Debt to Adjusted EBITDAre Ratio

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

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


	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.

Total Investments

Total investments is a non-GAAP financial measure defined as the sum of the carrying values of real estate investments (before accumulated depreciation), land held for development, property under development, mortgage notes receivable and related accrued interest 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 assets (computed in accordance with GAAP) to total investments is included in the following table (unaudited, in thousands):


	June 30, 2023		December 31, 2022

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

Total Investments:
Real estate investments, net of accumulated depreciation	$	4,659,678	$	4,714,136
Add back accumulated depreciation on real estate investments	1,369,790		1,302,640
Land held for development	20,168		20,168
Property under development	80,650		76,029
Mortgage notes and related accrued interest receivable, net	466,459		457,268

Investment in joint ventures	53,763		52,964
Intangible assets, gross (1)	64,156		60,109
Notes receivable and related accrued interest receivable, net (1)	4,274		2,872
Total investments	$	6,718,938	$	6,686,186


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

	June 30, 2023		December 31, 2022
Intangible assets, gross	$	64,156	$	60,109
Less: accumulated amortization on intangible assets	(27,173)		(23,487)
Notes receivable and related accrued interest receivable, net	4,274		2,872
Prepaid expenses and other current assets	33,625		33,559
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 June 30, 2023, we had a $1.0 billion unsecured revolving credit facility with no outstanding balance. We also had a $25.0 million bond that bears interest at a floating rate but has been fixed through an interest rate swap agreement.

As of June 30, 2023, we had a 65% investment interest in two unconsolidated real estate joint ventures related to two experiential lodging properties located in St. Petersburg Beach, Florida. At 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 (SOFR) on this note to 3.5% from May 19, 2022 to 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 six Canadian properties and the rents received from tenants of the properties are payable in CAD. In order to hedge our CAD denominated cash flows and our net investment in our six Canadian properties, we entered into cross-currency swaps designated as cash flow hedges and foreign currency 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 $150.0 million CAD and $118.7 million USD. The net effect of these swaps is to lock in an exchange rate of $1.26 CAD per USD on approximately $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.

We entered into three USD-CAD cross-currency swaps that became effective June 1, 2022, mature on 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.

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 value of $90.0 million CAD and $69.2 million USD with a settlement date of December 2, 2024. The exchange rate of this forward contract is approximately $1.30 CAD per USD.

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

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

Item 4. Controls and Procedures

Evaluation of disclosures controls and procedures

As of June 30, 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 internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter of the fiscal year to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

There 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 factors set forth under Item 1A - "Risk Factors" in our 2022 Annual 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 risk factor with the same title set forth under Item 1A - "Risk Factors" in our 2022 Annual Report.

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

The ability of our customers to operate successfully in the experiential real estate industry and remain current on their obligations depends on a number of factors, including, with respect to theatres, the availability and popularity of motion pictures, the performance of those pictures in tenants' markets, the allocation of popular pictures to tenants, the release window (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 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 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

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 completed in conjunction with the vesting of employee nonvested shares. These repurchases were not made pursuant to a publicly announced plan or program.

Item 3. Defaults Upon Senior Securities

There were no reportable events during the quarter ended June 30, 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 June 30, 2023 otherwise reportable under this Item 5.

Item 6. Exhibits


3.1*			Composite of Amended and Restated Declaration of Trust of the Company (inclusive of all amendments through May 26, 2023), is attached hereto as Exhibit 3.1.
31.1*			Certification of Gregory K. Silvers pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, is attached hereto as Exhibit 31.1.
31.2*			Certification of Mark A. Peterson pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, is attached hereto as Exhibit 31.2.
32.1**			Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is attached hereto as Exhibit 32.1.
32.2**			Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is attached hereto as Exhibit 32.2.
101.INS*			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*			Inline XBRL Taxonomy Extension Schema
101.CAL*			Inline XBRL Extension Calculation Linkbase
101.DEF*			Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB*			Inline XBRL Taxonomy Extension Label Linkbase
101.PRE*			Inline XBRL Taxonomy Extension Presentation Linkbase
104*			Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

* Filed herewith.

** Furnished herewith.

SIGNATURES

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

EPR Properties

Dated:

August 3, 2023

/s/ Gregory K. Silvers

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

Dated:

August 3, 2023

/s/ Tonya L. Mater

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

COMPOSITE COPY OF

AMENDED AND RESTATED

DECLARATION OF TRUST

EPR PROPERTIES

(As Amended Through May 26, 2023)

EPR Properties, a Maryland real estate investment trust (the "Trust") under Title 8 of the Corporations and Associations Article of the Annotated Code of Maryland ("Title 8"), desires to amend and restate its Declaration of Trust as currently in effect and as hereinafter amended.

The following provisions are all of the provisions of the Declaration of Trust currently in effect as hereinafter amended:

FIRST: The name of the real estate investment trust (the "Trust") is: EPR Properties. Under circumstances in which the Board of Trustees of the Trust (the "Board of Trustees" or "Board") determines that the use of the name of the Trust is not practicable or advisable, the Trust may use any other designation or name for the Trust.

SECOND: The Trust is a real estate investment trust within the meaning of Title 8. The Trust shall not be deemed to be a general partnership, limited partnership, joint venture, joint stock company or a corporation (but nothing herein shall preclude the Trust from being treated for tax purposes as an association under the Internal Revenue Code of 1986, as amended (the "Code")).

THIRD: The purposes for which the Trust is formed is to engage in any lawful act or activity for which real estate investment trusts may be formed under the laws of the State of Maryland.

FOURTH: The current address of the principal office of the Trust is 1221 Baltimore Avenue, Kansas City, Missouri 64105. The post office address of the principal office of the Trust in the State of Maryland is c/o The Prentice-Hall Corporation System, Maryland, 11 East Chase Street, Baltimore, Maryland 21202. The name and address of the resident agent of the Trust in the State of Maryland is The Prentice-Hall Corporation System, Maryland, 11 East Chase Street, Baltimore, Maryland 21202. The resident agent is a corporation located in the State of Maryland.

FIFTH:

Section 1. The number of Trustees of the Trust shall initially be five (5), which number may be increased or decreased from time to time by the vote of a majority of the entire Board of Trustees, but such number shall in no case be less than three. Any such determination shall be by the Board of Trustees and shall continue in effect unless and until changed by the Board of Trustees, but no such changes shall affect the term of any Trustee then serving. A majority of the entire Board of Trustees shall constitute a quorum for the transaction of business.

Section 2. Each person elected as a Trustee of the Trust after the 2018 annual meeting of shareholders, whether to succeed a person whose term of office as a Trustee has expired (including the expiration of such person’s term) or to fill any vacancy, shall be elected for a term

expiring at the next annual meeting. Each Trustee elected at or prior to the 2018 annual meeting of shareholders shall be deemed to serve as a member of the class of Trustees to which he or she was so elected for the term elected. At and after the 2021 annual meeting of shareholders, the Trustees shall no longer be classified with respect to the time for which they hold office. Notwithstanding the foregoing, each Trustee shall hold office until a successor has been elected or qualified or until his or her earlier death, resignation or removal.

Section 3. (a) A Trustee shall perform his or her duties as a trustee, including his or her duties as a member of a committee of the Board of Trustees on which he or she serves:

(i) in good faith;

(ii) in a manner he or she reasonably believes to be in the best interest of the Trust; and

(iii) with the care that an ordinarily prudent person in a like position would use under similar circumstances.

(b) In performing his or her duties, a Trustee is entitled to rely on any information, opinion, report or statement, including any financial statement or other financial data, prepared or presented by:

(i) an officer or employee of the Trust whom the Trustee reasonably believes to be reliable and competent in the matters presented;

(ii) a lawyer, certified public accountant, investment banker or other person, as to the matter which the Trustee reasonably believes to be within the person's professional or expert competence; or

(iii) a committee of the Board of Trustees on which the Trustee does not serve, as to a matter within its designated authority, if the Trustee reasonably believes the committee to merit confidence.

Section 4. Any Trustee may resign by written notice to the Board, effective upon execution and delivery to the Trust of such written notice or upon any future date specified in the notice. Subject to the rights of holders of one or more classes or series of Preferred Shares to elect or remove one or more Trustees, a Trustee may be removed at any time, for cause, at a meeting of the shareholders, by the affirmative vote of two thirds of all the votes entitled to be cast generally in the election of Trustees.

For purposes of this Section 4, "cause" shall mean and be limited to any one of the following:

(a) A Trustee is guilty of gross negligence or willful misconduct in the performance of his or her services on behalf of the Trust; or

(b) A Trustee is guilty of a material act or omission in the performance of his or her services on behalf of the Trust:

(i) which was committed in bad faith; or

(ii) which was the result of active and deliberate dishonesty; or

(iii) from which the Trustee actually received an improper personal benefit in money, property or services; or

(c) A Trustee is guilty of a criminal act in the performance of his or her services on behalf of the Trust in which the Trustee had reasonable cause to believe his or her act was unlawful.

SIXTH: In furtherance and not in limitation of the powers conferred by statute, the Board of Trustees is expressly authorized to make, alter, amend or repeal the Bylaws of the Trust. The Declaration of Trust shall be construed with the presumption in favor of the grant of power and authority to the Board. Any construction of the Declaration of Trust or determination made in good faith by the Board concerning its powers and authority hereunder shall be conclusive.

SEVENTH:

Section 1. Indemnification. The Trust shall, to the maximum extent permitted by Maryland law in effect from time to time, indemnify (a) any individual who is a present or former trustee or officer of the Trust or (b) any individual who, while a trustee or officer of the Trust and at the request of the Trust, serves or has served as a director, officer, shareholder, partner, trustee, employee or agent of any real estate investment trust, corporation, partnership, joint venture, trust, employee benefit plan or any other enterprise, from and against any claim, liability, judgment, penalty, fine or amount paid in settlement, together with reasonable expenses actually incurred in advance of final disposition of a proceeding, to which such person may become subject or which such person may incur by reason of his or her status as such. The Trust shall have the power, with the approval of its Board of Trustees, to provide such indemnification and advancement of expenses to a person who served a predecessor of the Trust in any of the capacities described in (a) or (b) above and to any employee or agent of the Trust or a predecessor of the Trust.

Section 2. Insurance. The Trust may purchase and maintain insurance on behalf of any person who is or was a trustee, officer, employee or agent of the Trust or who, while a trustee, officer, employee or agent of the Trust is or was serving at the request of the Trust as a director, officer, shareholder, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against liability asserted against or incurred by such person in that capacity or arising from such person's status as such, whether or not the Trust would have the power to indemnify such person against the same liability under Section 1 of this Article SEVENTH.

EIGHTH:

Section 1. Authorized Shares. The beneficial interest of the Trust shall be divided into shares of beneficial interest (the "Shares"). The Trust has authority to issue 125,000,000 common shares of beneficial interest, $0.01 par value per share ("Common Shares"), and 25,000,000 preferred shares of beneficial interest, $0.01 par value per share ("Preferred Shares"). The Board of Trustees, without any action by the shareholders of the Trust, may amend the Declaration of Trust from time to time to increase or decrease the aggregate number of Shares or the number of

Shares of any class that the Trust has authority to issue. If shares of one class of beneficial interest are classified or reclassified into shares of another class of beneficial interest pursuant to Sections 2, 3 or 4 of this Article EIGHTH, the number of authorized shares of the former class shall be automatically decreased and the number of authorized shares of the latter class shall be automatically increased, in each case by the number of shares so classified or reclassified, so that the aggregate number of shares of beneficial interest of all classes that the Trust has authority to issue shall not be more than the total number of shares of beneficial interest set forth in the second sentence of this paragraph.

Section 2. Common Shares. Subject to the provisions of Article NINTH, each Common Share shall entitle the holder thereof to one vote on each matter upon which holders of Common Shares are entitled to vote. The Board of Trustees may reclassify any unissued Common Shares from time to time in one or more classes or series of Shares.

Section 3. Preferred Shares. The Board of Trustees may classify any unissued Preferred Shares and reclassify any previous classified but unissued Preferred Shares of any series from time to time in one or more series of Shares.

Section 4. Classified or Reclassified Shares. Prior to issuance of classified or reclassified Shares of any class or series, the Board of Trustees by resolution shall (a) designate that class or series to distinguish it from all other classes and series of Shares; (b) specify the number of Shares to be included in the class or series; (c) set, subject to the provisions of Article NINTH and subject to the express terms of any class or series of Shares outstanding at the time, the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption for each class or series; and (d) cause the Trust to file articles supplementary with the State Department of Assessments and Taxation of Maryland (the "SDAT"). Any of the terms of any class or series of Shares set pursuant to clause (c) of this Section 4 may be made dependent upon facts ascertainable outside the Declaration of Trust (including the occurrence of any event, including a determination or action by the Trust or any other person or body) and may vary among holders thereof, provided that the manner in which such facts or variations shall operate upon the terms of such class or series of Shares is clearly and expressly set forth in the articles supplementary filed with the SDAT.

Section 5. Authorization by Board of Share Issuance. The Board of Trustees may authorize the issuance from time to time of Shares of any class or series, whether now or hereafter authorized, or securities or rights convertible into Shares of any class or series, whether now or hereafter authorized, for such consideration (whether in cash, property, past or future services, obligation for future payment or otherwise) as the Board of Trustees may deem advisable (or without consideration in the case of a Share split or Share dividend), subject to such restrictions or limitations, if any, as may be set forth in the Declaration of Trust or the Bylaws of the Trust.

Section 6. Dividends and Distributions. The Board of Trustees may from time to time authorize and declare to shareholders such dividends or distributions, in cash or other assets of the Trust or in securities of the Trust or from any other source as the Board of Trustees in its discretion shall determine. The Board of Trustees shall endeavor to authorize and declare such dividends and distributions as shall be necessary for the Trust to qualify as a real estate

investment trust under the Code; however, shareholders shall have no right to any dividend or distribution unless and until authorized and declared by the Board. The exercise of the powers and rights of the Board of Trustees pursuant to this Section 6 shall be subject to provisions of any class or series of Shares at the time outstanding. Notwithstanding any other provision in the Declaration of Trust, no determination shall be made by the Board of Trustees nor shall any transaction be entered into by the Trust which would cause any Shares or other beneficial interest in the Trust not to constitute "transferable shares" or "transferable certificates of beneficial interest" under Section 856(a)(2) of the Code or which would cause any distribution to constitute a preferential dividend as described in Section 562(c) of the Code.

Section 7. General Nature of Shares. All Shares shall be personal property entitling the shareholders only to those rights provided in the Declaration of Trust. The shareholders shall have no interest in the property of the Trust and shall have no right to compel any partition, division, dividend or distribution of the Trust or of the property of the Trust. The death of a shareholder shall not terminate the Trust. The Trust is entitled to treat as shareholders only those persons in whose names Shares are registered as holders of Shares on the beneficial interest ledger of the Trust.

Section 8. Fractional Shares. The Trust may, without the consent or approval of any shareholder, issue fractional Shares, eliminate a fraction of a Share by rounding up or down to a full Share, arrange for the disposition of a fraction of a Share by the person entitled to it, or pay cash for the fair value of a fraction of a Share.

Section 9. Declaration and Bylaws. All shareholders are subject to the provisions of the Declaration of Trust and the Bylaws of the Trust.

Section 10. Declaration and Combinations of Shares. Subject to an express provision to the contrary in the terms of any class or series of beneficial interest hereafter authorized, the Board of Trustees shall have the power to divide or combine the outstanding shares of any class or series of beneficial interest, without a vote of shareholders, so long as the number of shares combined into one share in any such combination or series of combinations within any period of twelve months is not greater than 100.

NINTH:

Section 1. Definitions. For the purposes of this Article NINTH, the following terms shall have the following meanings:

"Beneficial Ownership" shall mean ownership of Shares by a Person who (i) would be treated as an owner of such Shares under section 542(a)(2) of the Code either directly or constructively through the application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code or (ii) would be treated as an owner of such Shares under Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code. The terms "Beneficial Owner," "Beneficially Owns," "Beneficially Own" and "Beneficially Owned" shall have the correlative meanings.

"Charitable Beneficiary" shall mean an organization or organizations described in Sections 170(b)(1)(A) and 170(c) of the Code and identified by the Board of Trustees as the beneficiary or beneficiaries of the Excess Share Trust.

"Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.

"Excess Shares" shall mean Shares resulting from an event described in Section 3 of this Article NINTH.

"Excess Share Trust" shall mean the trust created pursuant to Section 3 and Section 14 of this Article NINTH.

"Excess Share Trustee" shall mean a person, who shall be unaffiliated with the Trust, any Purported Beneficial Transferee and any Purported Record Transferee, identified by the Board of Trustees as the trustee of the Excess Share Trust.

"Fair Market Value" shall mean the last reported sales price reported on the New York Stock Exchange for Shares on the trading day immediately preceding the relevant date, or if not then traded on the New York Stock Exchange, the last reported sales price for Shares on the trading day immediately preceding the relevant date as reported on any exchange or quotation system over or through which such Shares may be traded, or if not then traded over or through any exchange or quotation system, then the market price of such Shares on the relevant date as determined in good faith by the Board of Trustees.

"Initial Public Offering" shall mean the sale of Shares to the public pursuant to the Trust's first effective registration statement for such Shares under the Securities Act of 1933, as amended.

"Ownership Limit" shall initially mean 9.8%, in number of Shares or value, of the outstanding Shares of any class or series of Common Stock or Preferred Stock of the Trust. The number and value of the outstanding Shares of any class or series of Common Stock or Preferred Stock of the Trust shall be determined by the Board of Trustees in good faith, which determination shall be conclusive for all purposes hereof.

"Person" shall mean an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c)(17) of the Code), portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.

"Purported Beneficial Transferee" shall mean, with respect to any purported Transfer which results in Excess Shares, as defined below in Section 3 of this Article NINTH, the Person who would have been the beneficial holder of the Shares, if such Transfer had been valid under Section 2 of this Article NINTH.

"Purported Record Transferee" shall mean, with respect to any purported Transfer which results in Excess Shares, as defined below in Section 3 of this Article NINTH, the Person who

would have been the record holder of the Shares, if such Transfer had been valid under Section 2 of this Article NINTH.

"REIT" shall mean a real estate investment trust under Section 856 of the Code.

"REIT Provisions of the Code" means Sections 856 through 860 of the Code and any successor or other provisions of the Code relating to real estate investment trusts (including provisions as to the attribution of ownership of beneficial interests therein) and the regulations promulgated thereunder.

"Restriction Termination Date" shall mean the first day after the date of the Initial Public Offering on which the Board of Trustees determines that it is no longer in the best interests of the Trust to attempt to, or continue to, qualify as a REIT.

"Shares" shall mean the shares of the Trust as may be authorized and issued from time to time pursuant to Article EIGHTH.

"Transfer" shall mean any sale, transfer, gift, assignment, devise or other disposition of Shares (including (a) the granting of any option or entering into any agreement for the sale, transfer or other disposition of Shares, (b) the sale, transfer, assignment or other disposition of any securities or rights convertible into or exchangeable for Shares and (c) any transfer or other disposition of any interest in Shares as a result of a change in the marital status of the holder thereof), whether voluntary or involuntary, whether of record, constructively or beneficially and whether by operation of law or otherwise. The terms "Transfers" and "Transferred" shall have the correlative meanings.

Section 2. Ownership Limitation.

(A) Except as provided in Section 11 and Section 19 of this Article NINTH and subject to clause (E) of this Section 2, from the date of the Initial Public Offering until the Restriction Termination Date, no Person, or Persons acting as a group, shall Beneficially Own Shares in excess of the Ownership Limit.

(B) Except as provided in Section 11 and Section 19 of this Article NINTH and subject to clause (E) of this Section 2, from the date of the Initial Public Offering until the Restriction Termination Date, any Transfer that, if effective, would result in any Person Beneficially Owning Shares in excess of the Ownership Limit shall be void ab initio as to the Transfer of such Shares which would be otherwise Beneficially Owned by such Person in excess of the Ownership Limit; and the intended transferee shall acquire no rights in such Shares.

(C) Except as provided in Section 11 and Section 19 of this Article NINTH and subject to clause (E) of this Section 2, from the date of the Initial Public Offering until the Restriction Termination Date, any Transfer that, if effective, would result in the Shares being beneficially owned (as provided in Section 856(a) of the Code) by less than 100 Persons (determined without reference to any rules of attribution) shall be void ab initio as to the Transfer of such Shares which would be otherwise beneficially owned (as provided in Section 856(a) of the Code) by the transferee; and the intended transferee shall acquire no rights in such Shares.

(D) Except as provided in Section 11 and Section 19 of this Article NINTH and subject to clause (E) of this Section 2, from the date of the Initial Public Offering until the Restriction Termination Date, any Transfer that, if effective, would result in the Trust being "closely held" within the meaning of Section 856(h) of the Code shall be void ab initio as to the Transfer of the Shares which would cause the Trust to be "closely held" within the meaning of Section 856(h) of the Code; and the intended transferee shall acquire no rights in such Shares.

(E) Nothing contained in this Article NINTH shall preclude the settlement of any transaction entered into through the facilities of the New York Stock Exchange. The fact that the settlement of any transaction occurs or takes place shall not negate the effect of any other provision of this Article NINTH and any transferee in such a transaction shall be subject to all of the provisions and limitations set forth in this Article NINTH.

Section 3. Excess Shares.

(A) If, notwithstanding the other provisions contained in this Article NINTH, at any time after the date of the Initial Public Offering until the Restriction Termination Date, there is a purported Transfer such that any Person would Beneficially Own Shares in excess of the applicable Ownership Limit, then, except as otherwise provided in Section 11 of this Article NINTH, Shares directly owned by such Person in excess of the Ownership Limit shall be automatically designated as Excess Shares (without reclassification) until such Person does not own Shares in excess of the applicable Ownership Limit. The designation of such Shares as Excess Shares shall be effective as of the close of business on the business day prior to the date of the purported Transfer. If, after designation of such Shares owned directly by a Person as Excess Shares, such Person still owns Shares in excess of the applicable Ownership Limit, Shares Beneficially Owned by such Person constructively in excess of the Ownership Limit shall be designated as Excess Shares until such Person does not own Shares in excess of the applicable Ownership Limit. Where such Person owns Shares constructively through one or more Persons and the Shares held by such other Persons must be designated as Excess Shares, the designation of Shares as Excess Shares held by such other Persons shall be pro rata.

(B) If, notwithstanding the other provisions contained in this Article NINTH, at any time after the date of the Initial Public Offering until the Restriction Termination Date, there is a purported Transfer of Shares or any sale, transfer, gift, assignment, devise or other disposition of shares or other interests of a direct or indirect shareholder of the Trust which, if effective, would cause the Trust to become "closely held" within the meaning of Section 856(h) of the Code, then any Shares being Transferred which would cause the Trust to be "closely held" within the meaning of Section 856(h) of the Code (rounded up to the nearest whole Share) shall be automatically designated as Excess Shares and be treated as provided in this Article NINTH. Such designation and treatment shall be effective as of the close of business on the business day prior to the date of the purported Transfer. If, after the designation of any such Shares as Excess Shares, the Trust is still "closely held" within the meaning of Section 856(h) of the Code, an amount of Shares owned directly by any individual whose Beneficial Ownership of Shares in the Trust increased as a result of the sale, transfer, gift, assignment, devise or other disposition of shares or other interests of a direct or indirect shareholder of the Trust and is one of the five individuals who caused the Trust to be "closely held" within the meaning of Section 856(h) of the Code, shall be automatically designated as Excess Shares until the Trust is not "closely held" within the meaning of Section 856(h) of the Code. Where several similarly situated individuals

exist, the designation of Shares as Excess Shares shall be pro rata. If, after applying the foregoing provisions the Trust is still "closely held" within the meaning of Section 856(h) of the Code, any Shares constructively owned by such individuals shall be designated as Excess Shares, on a pro rata basis among similarly situated individuals, until the Trust is not "closely held" within the meaning of Section 856(h) of the Code.

(C) If, at any time after the date of the Initial Public Offering until the Restriction Termination Date, an event other than a purported Transfer (an "Event") occurs which would cause any Person to Beneficially Own Shares in excess of the Ownership Limit, then, except as otherwise provided in Section 11 of this Article NINTH, Shares Beneficially Owned by such Person in excess of the Ownership Limit shall be automatically designated as Excess Shares to the extent necessary to eliminate such excess ownership. The designation of Shares as Excess Shares shall be effective as of the close of business on the business day prior to the date of the Event. In determining which Shares are designated as Excess Shares, Shares Beneficially Owned by any Person who caused the Event to occur shall be designated as Excess Shares before any Shares not so held are designated. Where several similarly situated Persons exist, the designation of Shares as Excess Shares shall be pro rata. If any Person is required to designate Shares as Excess Shares pursuant to this Clause (C) of this Section 3 of this Article NINTH, such Person shall first designate Shares directly held by such Person before designating Shares Beneficially Owned constructively. Where such Person owns Shares constructively through one or more Persons and the Shares held by such other Persons must be designated as Excess Shares, the designation of Shares by such other Persons shall be pro rata.

Section 4. Prevention of Transfer. If the Board of Trustees or its designee shall at any time determine in good faith that a Transfer has taken place in violation of Section 2 of this Article NINTH or that a Person intends to acquire or has attempted to acquire Beneficial Ownership (determined without reference to any rules of attribution) of any Shares in violation of Section 2 of this Article NINTH, the Board of Trustees or its designee shall take such action as it deems advisable to refuse to give effect to or to prevent such Transfer, including, but not limited to, refusing to give effect to such Transfer on the books of the Trust or instituting proceedings to enjoin such Transfer; provided, however, that any Transfers or attempted Transfers in violation of Section 2 of this Article NINTH shall automatically result in the designation and treatment described in Section 3 of this Article NINTH, irrespective of any action (or non-action) by the Board of Trustees.

Section 5. Notice to Trust. Any Person who acquires or attempts to acquire Shares in violation of Section 2 of this Article NINTH, or any Person who is a transferee such that Excess Shares result under Section 3 of this Article NINTH, shall immediately give written notice or, in the event of a proposed or attempted Transfer, give at least 15 days prior written notice to the Trust of such event. Such person shall also provide to the Trust such other information as the Trust may request in order to determine the effect, if any, of such Transfer or attempted Transfer on the Trust's status as a REIT and shall execute and deliver such instruments and provide such further cooperation and assistance as the Board of Trustees deems advisable to preserve the status of the Trust as a REIT.

Section 6. Information for Trust. From the date of the Initial Public Offering until the Restriction Termination Date:

(A) every Beneficial Owner of more than 5% (or such other lower percentages as required pursuant to regulations under the Code) of the number or value of any class or series of Common Stock or Preferred Stock of the Trust shall, within 30 days after January 1 of each year, give written notice to the Trust stating the name and address of such Beneficial Owner, the number of Shares of such class or series of Common Stock or Preferred Stock Beneficially Owned, and a description of how such Shares are held. Each such Beneficial Owner shall provide to the Trust such additional information as the Trust may reasonably request in order to determine the effect, if any, of such Beneficial Ownership on the Trust's status as a REIT and to ensure compliance with the Ownership Limit.

(B) each Person who is a Beneficial Owner of Shares and each Person (including the shareholder of record) who is holding Shares for a Beneficial Owner shall provide to the Trust in writing such information with respect to direct, indirect and constructive ownership of Shares as the Board of Trustees deems reasonably necessary to comply with the provisions of the Code applicable to a REIT, to determine the Trust's status as a REIT, to comply with the requirements of any taxing authority or governmental agency or to determine any such compliance.

Section 7. Other Actions by Board. Subject to Section 2 of this Article NINTH, nothing contained in this Article NINTH shall limit the authority of the Board of Trustees to take such other action as it deems necessary or advisable to protect the Trust and the interests of its shareholders by preservation of the Trust's status as a REIT, provided, however, that no provision of this Section 7 shall preclude the settlement of any transaction entered into through the facilities of the New York Stock Exchange.

Section 8. Ambiguities. In the case of an ambiguity in the application of any of the provisions of this Article NINTH, including any definition contained in Section 1, the Board of Trustees shall have the power to determine the application of the provisions of this Article NINTH with respect to any situation based on the facts known to it. In the event this Article NINTH requires or permits an action by the Board of Trustees and the Declaration of Trust fails to provide specific guidance with respect to such action, the Board of Trustees shall have the power to determine the action to be taken so long as such action is not contrary to the provisions of Article NINTH.

Section 9. Increase or Decrease in Ownership Limits. Subject to the limitations provided in Section 10 of this Article NINTH, the Board of Trustees may from time to time increase or decrease the Ownership Limit; provided, however, that any decrease may only be made prospectively as to subsequent holders (other than a decrease as a result of a retroactive change in existing law that would require a decrease to retain REIT status, in which case such decrease shall be effective immediately).

Section 10. Limitations on Changes in Ownership Limits.

(A) The Ownership Limit may not be increased if, after giving effect to such increase, five individual Beneficial Owners of Shares could Beneficially Own, in the aggregate, more than 49.9% in number or value of the outstanding Shares.

(B) Prior to the modification of any Ownership Limit pursuant to Section 9 of this Article NINTH, the Board of Trustees may require such opinions of counsel, affidavits, undertakings or

agreements as it may deem necessary or advisable in order to determine or ensure the Trust's status as a REIT.

Section 11. Waivers by the Board. The Board of Trustees with a ruling from the Internal Revenue Service, an opinion of counsel to the effect that such exemption will not result in the Trust being "closely held" within the meaning of Section 856(h) of the Code, or such other evidence as the Board of Trustees deems necessary in its sole discretion may exempt, on such conditions and terms as the Board of Trustees deems necessary in its sole discretion, a Person from the Ownership Limit if the Board of Trustees obtains such representations and undertakings from such Person as the Board of Trustees may deem appropriate and such Person agrees that any violation of the terms of such exemption or attempted violation of the same will result in, to the extent necessary, the designation of Shares held by such Person as Excess Shares in accordance with Section 3 of this Article NINTH.

Section 12. Legend. Each certificate for Shares shall bear substantially the following legend:

The securities represented by this certificate are subject to restrictions on ownership and transfer for the purpose of the Trust's maintenance of its status as a real estate investment trust under the Internal Revenue Code of 1986, as amended. Except as otherwise provided pursuant to the Declaration of Trust of the Trust, no Person may Beneficially Own Shares in excess of 9.8% (or such greater percentage as may be determined by the Board of Trustees of the Trust) of the number or value of the outstanding Shares of any class or series of the Common Stock or Preferred Stock of the Trust. Any Person who attempts or proposes to Beneficially Own Shares in excess of the above limitations must notify the Trust in writing at least 15 days prior to such proposed or attempted Transfer. All capitalized terms in this legend have the meanings defined in the Declaration of Trust of the Trust, a copy of which, including the restrictions on transfer, will be furnished to each shareholder on request and without charge. If the restrictions on transfer are violated, the securities represented hereby which are in excess of the above limitations will be designated and treated as Excess Shares which will be held in trust by the Excess Share Trustee for the benefit of the Charitable Beneficiary.

Instead of the foregoing legend, the certificate may state that the Trust will furnish a full statement about certain restrictions on transferability to a shareholder on request and without charge.

Section 13. Severability. If any provision of this Article NINTH or any application of any such provision is determined to be void, invalid or unenforceable by any court having jurisdiction over the issue, the validity and enforceability of the remaining provisions shall be affected only to the extent necessary to comply with the determination of such court.

Section 14. Transfer of Excess Shares. Upon any purported Transfer that results in Excess Shares pursuant to Section 3 of this Article NINTH, such Excess Shares shall be deemed to have been transferred to the Excess Share Trustee, as trustee of a special trust for the exclusive benefit

of the Charitable Beneficiary. The Trust shall name a Charitable Beneficiary, if one does not already exist, within five days of the discovery of any designation of any Excess Shares; however, the failure to so name a Charitable Beneficiary shall not affect the designation of Shares as Excess Shares or the transfer thereof to the Excess Share Trustee. Excess Shares so held in trust shall be issued and outstanding Shares of the Trust. The Purported Record Transferee or Purported Record Holder shall have no rights in such Excess Shares except as provided in Section 17 of this Article NINTH.

Section 15. Distributions on Excess Shares. Any dividends (whether taxable as a dividend, return of capital or otherwise) on Excess Shares shall be paid to the Excess Share Trust for the benefit of the Charitable Beneficiary. Upon liquidation, dissolution or winding up, the Purported Record Transferee shall receive, for each Excess Share, the lesser of (1) the amount per share of any distribution made upon liquidation, dissolution or winding up or (2) the price paid by the Purported Record Transferee for the Excess Shares, or if the Purported Record Transferee did not give value for the Excess Shares, the Fair Market Value of the Excess Shares on the day of the event causing the Excess Shares to be held in trust. Any such dividend paid or distribution paid to the Purported Record Transferee in excess of the amount provided in the preceding sentence prior to the discovery by the Trust that the Shares with respect to which the dividend or distribution was made had been designated as Excess Shares shall be repaid, upon demand, to the Excess Share Trust for the benefit of the Charitable Beneficiary.

Section 16. Voting of Excess Shares. The Excess Share Trustee shall be entitled to vote the Excess Shares on behalf of the Charitable Beneficiary on any matter. Subject to Maryland law, any vote cast by a Purported Record Transferee with respect to the Excess Shares prior to the discovery by the Trust that the Excess Shares were held in trust will be rescinded ab initio; provided, however, that if the Trust has already taken irreversible action with respect to a merger, reorganization, sale of all or substantially all the assets, dissolution of the Trust or other action by the Trust, then the vote cast by the Purported Record Transferee shall not be rescinded. The owner of the Excess Shares will be deemed to have given an irrevocable proxy to the Excess Share Trustee to vote the Excess Shares for the benefit of the Charitable Beneficiary.

Notwithstanding the provisions of this Article NINTH, until the Trust has received notification that Excess Shares have been transferred into an Excess Share Trust, the Trust shall be entitled to rely on its share transfer and other shareholder records for purposes of preparing lists of shareholders entitled to vote at meetings, determining the validity and authority of proxies and otherwise conducting votes of shareholders.

Section 17. Non-Transferability of Excess Shares. Excess Shares shall be transferable only as provided in this Section 17. At the direction of the Board of Trustees, the Excess Share Trustee shall transfer the Shares held in the Excess Share Trust to a Person or Persons whose ownership of such Shares will not violate the Ownership Limit. If such a transfer is made to such a Person or Persons, the interest of the Charitable Beneficiary shall terminate and proceeds of the sale shall be payable to the Purported Record Transferee and to the Charitable Beneficiary. The Purported Record Transferee shall receive the lesser of (1) the price paid by the Purported Record Transferee for the Shares or, if the Purported Record Transferee did not give value for the Shares, the Fair Market Value of the Shares on the day of the event causing the Shares to be held in trust, or (2) the price received by the Excess Share Trust from the sale or other disposition of the Shares. Any proceeds in excess of the amount payable to the Purported Record Transferee

will be paid to the Charitable Beneficiary. The Excess Share Trustee shall be under no obligation to obtain the highest possible price for the Excess Shares. Prior to any transfer of any Excess Shares by the Excess Share Trustee, the Trust must have waived in writing its purchase rights under Section 18. It is expressly understood that the Purported Record Transferee may enforce the provisions of this Section against the Charitable Beneficiary.

If any of the foregoing restrictions on transfer of Excess Shares is determined to be void, invalid or unenforceable by any court of competent jurisdiction, then the Purported Record Transferee may be deemed, at the option of the Trust, to have acted as an agent of the Trust in acquiring such Excess Shares in trust and to hold such Excess Shares on behalf of the Trust.

Section 18. Call by Trust on Excess Shares. Excess Shares shall be deemed to have been offered for sale to the Trust, or its designee, at a price per Share equal to the lesser of (a) the price per Share in the transaction that created such Excess Shares (or, in the case of a devise, gift or other transaction in which no value was given for such Excess Shares, the Fair Market Value at the time of such devise, gift or other transaction) and (b) the Fair Market Value of the Excess Shares on the date the Trust, or its designee, accepts such offer (the "Redemption Price"). The Trust shall have the right to accept such offer for a period of ninety days after the later of (x) the date of the Purported Transfer which resulted in such Excess Shares and (y) the date the Board of Trustees determines in good faith that a Transfer resulting in Excess Shares has occurred, if the Trust does not receive a notice of such Transfer pursuant to Section 5 of this Article NINTH but in no event later than a permitted Transfer pursuant to and in compliance with the terms of Section 17 of this Article NINTH. Unless the Board of Trustees determines that it is in the interests of the Trust to make earlier payments of all of the amount determined as the Redemption Price per Share in accordance with the preceding sentence, the Redemption Price may be payable at the option of the Board of Trustees at any time up to but not later than the five years after the date the Trust accepts the offer to purchase the Excess Shares. In no event shall the Trust have an obligation to pay interest to the Purported Record Transferee.

Section 19. Underwritten Offerings. The Ownership Limit shall not apply to the acquisition of Shares or rights, options or warrants for, or securities convertible into, Shares by an underwriter in a public offering, provided that the underwriter makes a timely distribution of such Shares or rights, options or warrants for, or securities convertible into, Shares.

Section 20. Enforcement. The Trust is authorized specifically to seek equitable relief, including injunctive relief, to enforce the provisions of this Article NINTH.

Section 21. Non-Waiver. No delay or failure on the part of the Trust or the Board of Trustees in exercising any right hereunder shall operate as a waiver of any right of the Trust or the Board of Trustees, as the case may be, except to the extent specifically waived in writing.

TENTH:

Section 1. Meetings. There shall be an annual meeting of the shareholders, to be held on such notice and at such time (after the delivery of the annual report) and location, within or without the State of Maryland, as shall be determined by or in the manner prescribed in the Bylaws, for the election of the Trustees, if required, and for the transaction of any other business within the powers of the Trust. Except as otherwise provided in the Declaration of Trust, special

meetings of shareholders may be called in the manner provided in the Bylaws. If there are no Trustees, the officers of the Trust shall promptly call a special meeting of the shareholders entitled to vote for the election of successor Trustees. Any meeting may be adjourned and reconvened as the Trustees determine or as provided in the Bylaws.

Section 2. Voting Rights. Subject to the provisions of any class or series of Shares then outstanding, the shareholders shall be entitled to vote only on the following matters: (a) election of Trustees as provided in ARTICLE FIFTH and the removal of Trustees as provided in ARTICLE FIFTH; (b) amendment of the Declaration of Trust as provided in ARTICLE TWELFTH; (c) termination of the Trust as provided in ARTICLE FIFTEENTH; (d) merger or consolidation of the Trust, or the sale or disposition of substantially all of the Trust Property, as provided in ARTICLE FOURTEENTH; and (e) such other matters with respect to which the Board of Trustees has adopted a resolution declaring that a proposed action is advisable and directing that the matter be submitted to the shareholders for approval or ratification. Except with respect to the foregoing matters, no action taken by the shareholders at any meeting shall in any way bind the Board of Trustees. Elections of Trustees need not be by written ballot unless the Bylaws of the Trust so provide.

Section 3. Preemptive and Appraisal Rights. Except as may be provided by the Board of Trustees in setting the terms of classified or reclassified Shares pursuant to ARTICLE EIGHTH or as may be otherwise agreed by contract, no holder of Shares shall, as such holder, (a) have any preemptive right to purchase or subscribe for any additional Shares of the Trust or any other security of the Trust which it may issue or sell or (b) except as expressly required by Title 8, have any right to require the Trust to pay him the fair value of his Shares in an appraisal or similar proceeding.

Section 4. Shareholder Vote. Except as specifically provided in ARTICLE FIFTH, notwithstanding any provision of law permitting or requiring any action to be taken or authorized by the affirmative vote of the holders of a greater number of votes, any such action shall be effective and valid if taken or authorized by a majority of the number of votes entitled to be cast on the matter.

Section 5. Board Approval. The submission of any action to the shareholders for their consideration shall first be approved by the Board of Trustees.

Section 6. Actions by Shareholders without a Meeting. The Bylaws of the Trust may provide that any action required or permitted to be taken by the shareholders may be taken without a meeting by the written consent of the shareholders entitled to cast a sufficient number of votes to approve the matter as required by statute, the Declaration of Trust or the Bylaws of the Trust, as the case may be.

Section 7. Books. The books of the Trust may be kept (subject to applicable law) outside the State of Maryland at such place or places as may be designated from time to time by the Board of Trustees or in the Bylaws of the Trust.

ELEVENTH: The Trust reserves the right to amend, alter, change or repeal any provision contained in this Declaration of Trust (including the contract rights of any outstanding Shares) in the manner now or hereafter prescribed or permitted by statute. All rights at any time conferred

upon the shareholders of the Trust by this Declaration of Trust are granted subject to the reservations in this Article ELEVENTH.

TWELFTH: Except as otherwise specifically provided herein, any amendment to this Declaration of Trust shall be approved by the affirmative vote of a majority of all the votes entitled to be cast on the matter. The Board of Trustees may amend this Declaration of Trust from time to time to qualify the Trust as a REIT under the Code or Title 8 by the affirmative vote of not less than two thirds of the Trustees, without the consent of any shareholders.

THIRTEENTH: To the maximum extent that Maryland law in effect from time to time permits limitation of the liability of trustees and officers, no trustee or officer of the Trust shall be liable to the Trust or its shareholders for money damages. Neither the amendment nor repeal of this Article THIRTEENTH, nor the adoption or amendment of any other provision of the Declaration of Trust or Bylaws of the Trust inconsistent with this Article THIRTEENTH, shall apply to or affect in any respect the applicability of the preceding sentence with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption. In the absence of any Maryland statute limiting the liability of trustees and officers of a Maryland real estate investment trust for money damages in a suit by or on behalf of the Trust or by any shareholder, no Trustee or officer of the Trust shall be liable to the Trust or to any shareholder for money damages except to the extent that (a) the Trustee or officer actually received an improper benefit or profit in money, property, or services, in which event such Trustee or officer shall be liable for the amount of the benefit or profit in money, property, or services actually received; or (b) a judgment or other final adjudication adverse to the Trustee or officer is entered in a proceeding based on a finding in the proceeding that the Trustee's or officer's action or failure to act was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding.

FOURTEENTH: Subject to the provisions of any class or series of Shares at the time outstanding, the Trust may (a) merge the Trust with or into another entity, (b) consolidate the Trust with one or more other entities into a new entity or (c) sell, lease, exchange or otherwise transfer all or substantially all of the Trust Property. Any such action must be approved by the Board of Trustees in the manner provided in Title 8 and, after notice to all shareholders entitled to vote on the matter, by the affirmative vote of a majority of all the votes entitled to be cast on the matter.

FIFTEENTH:

Section 1. Duration. The Trust shall continue perpetually unless terminated pursuant to Section 2 of this ARTICLE FIFTEENTH or any applicable provision of Title 8.

Section 2. Termination.

(a) Subject to the provisions of any class or series of Shares at the time outstanding, the Trust may be terminated at any meeting of shareholders, by the affirmative vote of a majority of all the votes entitled to be cast on the matter. Upon the termination of the Trust:

(i) The Trust shall carry on no business except for the purpose of winding up its affairs.

(ii) The Trustees shall proceed to wind up the affairs of the Trust and all of the powers of the Trustees under the Declaration of Trust shall continue, including the powers to fulfill or discharge the Trust's contracts, collect its assets, sell, convey, assign, exchange, transfer or otherwise dispose of all or any part of the remaining property of the Trust to one or more persons at public or private sale for consideration which may consist in whole or in part of cash, securities or other property of any kind, discharge or pay its liabilities and do all other acts appropriate to liquidate its business.

(iii) After paying or adequately providing for the payment of all liabilities, and upon receipt of such releases, indemnities and agreements as the Board of Trustees deem necessary for their protection, the Trust may distribute the remaining property of the Trust among the shareholders so that after payment in full or the setting apart for payment of such preferential amounts, if any, to which the holders of any Shares at the time outstanding shall be entitled, the remaining property of the Trust shall, subject to any participating or similar rights of Shares at the time outstanding, be distributed ratably among the holders of Common Shares at the time outstanding.

(b) After termination of the Trust, the liquidation of its business and the distribution to the shareholders as herein provided, a majority of the Trustees shall execute and file with the Trust's records a document certifying that the Trust has been duly terminated, and the Trustees shall be discharged from all liabilities and duties hereunder, and the rights and interests of all shareholders shall cease.

SIXTEENTH: The undersigned Chairman acknowledges this Declaration of Trust to be the act of the Trust and as to all matters or facts required to be verified under oath, the undersigned Chairman acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.

SEVENTEENTH: This Declaration of Trust is executed by the undersigned Trustee and delivered in the State of Maryland with reference to the laws thereof, and the rights of all parties and the validity, construction and effect of every provision hereof shall be subject to and construed according to the laws of the State of Maryland without regard to conflicts of laws provisions thereof.

EIGHTEENTH: Any certificate shall be final and conclusive as to any person dealing with the Trust if executed by the Secretary or an Assistant Secretary of the Trust or a Trustee, and if certifying to: (a) the number or identity of Trustees, officers of the Trust or shareholders; (b) the due authorization of the execution of any document; (c) the action or vote taken, and the existence of a quorum, at a meeting of the Board of Trustees or shareholders; (d) a copy of the Declaration of Trust or of the Bylaws as a true and complete copy as then in force; (e) an amendment to the Declaration of Trust; (f) the termination of the Trust; or (g) the existence of any fact relating to the affairs of the Trust. No purchaser, lender, transfer agent or other person shall be bound to make any inquiry concerning the validity of any transaction purporting to be made by the Trust on its behalf or by any officer, employee or agent of the Trust.

NINETEENTH: In this Declaration of Trust, unless the context otherwise requires, words used in the singular or in the plural include both the plural and singular and words denoting any gender include all genders. The title and headings of different parts are inserted for convenience and shall not affect the meaning, construction or effect of this Declaration of Trust. In defining or interpreting the powers and duties of the Trust and its Trustees and officers, reference may be made by the Trustees or officers, to the extent appropriate and not inconsistent with the Code or Title 8, to Titles 1 through 3 of the Corporations and Associations Article of the Annotated Code of Maryland. In furtherance and not in limitation of the foregoing, in accordance with the provisions of Title 3, Subtitles 6 and 7, of the Corporations and Associations Article of the Annotated Code of Maryland, the Trust shall be included within the definition of "corporation" for purposes of such provisions.

TWENTIETH:

Section 1. Definitions. For purposes of this Article TWENTIETH, the following terms shall have the following meanings:

"Affiliate" (and derivatives of such term) shall have the meaning ascribed to such term under Rule 12b-2 promulgated by under the Exchange Act.

"Affiliated Company" shall mean any partnership, corporation, limited liability company, trust or other entity directly or indirectly Affiliated or under common Ownership or Control with the Trust including, without limitation, any subsidiary, holding company or intermediary company (as those or similar terms are defined under the Gaming Laws of any applicable Gaming Jurisdictions), in each case that is registered or licensed under applicable Gaming Laws.

"Control" (and derivatives of such term) (i) with respect to any Person, shall have the meaning ascribed to such term under Rule 12b-2 under the Exchange Act, (ii) with respect to any Interest, shall mean the possession, directly or indirectly, of the power to direct, whether by agreement, contract, agency or otherwise, the voting rights or disposition of such Interest, and (iii) as applicable, the meaning ascribed to the term "control" (and derivatives of such term) under the Gaming Laws of any applicable Gaming Jurisdictions.

"Discount" shall mean such percentage (up to 100%) as the Board may determine in its sole and absolute discretion, taking into account such equitable and other factors as it deems appropriate. With respect to any amount, the Discount shall mean the Discount percentage of such amount.

"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time.

"Gaming" or "Gaming Activities" shall mean the conduct of gaming and gambling activities, race books and sports pools, or the use of gaming devices, equipment and supplies in the operation of a casino, pari-mutuel facility, card club, website, mobile application or other enterprise, including, without limitation, slot machines, gaming tables, cards, dice, gaming chips, player tracking systems, cashless wagering systems, mobile gaming systems, inter-casino linked systems and related and associated equipment, supplies and systems.

"Gaming Authorities" shall mean all international, national, foreign, domestic, federal, state, provincial, regional, local, tribal, municipal and other regulatory and licensing bodies, instrumentalities, departments, commissions, authorities, boards, officials, tribunals and agencies with authority over or responsibility for the regulation of Gaming within any Gaming Jurisdiction.

"Gaming Jurisdictions" shall mean all jurisdictions, domestic and foreign, and their political subdivisions, in which Gaming Activities are or may be lawfully conducted, including, without limitation, all Gaming Jurisdictions in which the Trust or any of the Affiliated Companies currently conducts or may in the future conduct Gaming Activities.

"Gaming Laws" shall mean all laws, statutes and ordinances pursuant to which any Gaming Authority possesses regulatory, permit and licensing authority over the conduct of Gaming Activities, or the Ownership or Control of an Interest in an entity which conducts Gaming Activities, in any Gaming Jurisdiction, all orders, decrees, rules and regulations promulgated thereunder, all written and unwritten policies of the Gaming Authorities and all written and unwritten interpretations by the Gaming Authorities of such laws, statutes, ordinances, orders, decrees, rules, regulations and policies.

"Gaming Licenses" shall mean all licenses, permits, certifications, notifications, consents, approvals, orders, authorizations, registrations, findings of suitability, franchises, exemptions, waivers, concessions and entitlements issued by any Gaming Authority necessary for or relating to the conduct of Gaming Activities by any Person or the Ownership or Control by any Person of an Interest in an entity that conducts or may in the future conduct Gaming Activities.

"Interest" shall mean the stock or other securities of an entity or any other interest or financial or other stake therein, including, without limitation, the Securities.

"Own" or "Ownership" (and derivatives of such terms) shall mean (i) ownership of record, (ii) "beneficial ownership" as defined in Rule 13d-3 or Rule 16a-1(a)(2) promulgated under the Exchange Act, and (iii) as applicable, the meaning ascribed to the terms "own" or "ownership" (and derivatives of such terms) under the Gaming Laws of any applicable Gaming Jurisdictions.

"Person" shall have the meaning ascribed to that term in Section 1 of Article NINTH.

"Redemption Date" shall mean the date set forth in the Redemption Notice by which the Securities Owned or Controlled by an Unsuitable Person or an Affiliate of an Unsuitable Person are to be redeemed by the Trust or any of its Affiliated Companies, which redemption date shall be determined in the sole and absolute discretion of the Board but which shall in no event be fewer than 45 calendar days following the date of the Redemption Notice, unless (i) otherwise required by a Gaming Authority or pursuant to any applicable Gaming Laws, (ii) prior to the expiration of such 45-day period, the Unsuitable Person shall have sold (or otherwise fully transferred or otherwise disposed of its Ownership of) its Securities to a Person that is not an Unsuitable Person (in which case, such Redemption Notice will only apply to those Securities that have not been sold or otherwise disposed of) by the selling Unsuitable Person (and, commencing as of the date of such sale, the purchaser or recipient of such Securities shall have all of the rights of a Person that is not an Unsuitable Person), or (iii) the cash or other

Redemption Price necessary to effect the redemption shall have been deposited in trust for the benefit of the Unsuitable Person or its Affiliate and shall be subject to immediate withdrawal by such Unsuitable Person or its Affiliate upon (x) surrender of the certificate(s) evidencing the Securities to be redeemed accompanied by a duly executed stock power or assignment or (y) if the Securities are uncertificated, upon the delivery of a duly executed assignment or other instrument of transfer.

"Redemption Notice" shall mean that notice of redemption delivered by the Trust pursuant to this Article to an Unsuitable Person or an Affiliate of an Unsuitable Person if a Gaming Authority so requires the Trust, or if the Board deems it necessary or advisable, to redeem such Unsuitable Person's or his, her or its Affiliate's Securities. Each Redemption Notice shall set forth (i) the Redemption Date, (ii) the number and type of Securities to be redeemed, (iii) the Redemption Price and the manner of payment therefor, (iv) the place where any certificates for such Securities shall be surrendered for payment, and (v) any other requirements of surrender of the certificates, including how such certificates are to be endorsed, if at all.

"Redemption Price" shall mean the price to be paid by the Trust for the Securities to be redeemed pursuant to this Article, which shall be that price (if any) required to be paid by the Gaming Authority making the finding of unsuitability, or if such Gaming Authority does not require a certain price to be paid (including if the finding of unsuitability is made by the Board alone), the least of (i) the Fair Market Value (as defined in Section 1 of Article NINTH) on the date of the Redemption Notice, minus the Discount, (ii) the Fair Market Value on the Redemption Date, minus the Discount, or (iii) the actual amount paid by the Owner or Affiliate of such Owner in the acquisition of Ownership of such Securities, minus the Discount. The Trust may pay the Redemption Price in any combination of cash and/or promissory note as required by the applicable Gaming Authority and, if not so required (including if the finding of unsuitability is made by the Board alone), as determined by the Board, provided, that in the event the Trust elects to pay all or any portion of the Redemption Price with a promissory note, such promissory note shall contain such terms and conditions as the Board determines necessary or advisable, including without limitation, subordination provisions, to comply with any law or regulation then applicable to the Trust or any Affiliate of the Trust or to prevent a default under, breach of, event of default under or acceleration of any loan, promissory note, mortgage, indenture, line of credit, or other debt or financing agreement of the Trust or any Affiliate of the Trust or otherwise. Subject to the foregoing, the principal amount of the promissory note together with any unpaid interest shall be due and payable no later than the tenth anniversary of delivery of the note and interest on the unpaid principal thereof shall be payable annually in arrears at the rate of two 2% per annum.

"Securities" shall mean the Shares and the capital stock, member's interests or membership interests, partnership interests or other equity securities of any Affiliated Company.

"Unsuitable Person" shall mean a Person who (i) fails or refuses to file an application, or has withdrawn or requested the withdrawal of a pending application, to be found suitable by any Gaming Authority or for any Gaming License, (ii) is denied or disqualified from eligibility for any Gaming License by any Gaming Authority, (iii) is determined by a Gaming Authority to be unsuitable or disqualified to Own or Control any Securities, (iv) is determined by a Gaming Authority to be unsuitable to be Affiliated, associated or involved with a Person engaged in Gaming Activities in any Gaming Jurisdiction, (v) causes any Gaming License of the Trust or

any Affiliated Company to be lost, rejected, rescinded, suspended, revoked or not renewed by any Gaming Authority, or causes the Trust or any Affiliated Company to be threatened by any Gaming Authority with the loss, rejection, rescission, suspension, revocation or non-renewal of any Gaming License (in each of (ii) through (v) above, regardless of whether such denial, disqualification or determination by a Gaming Authority is final and/or non-appealable), or (vi) is deemed likely, in the sole and absolute discretion of the Board, to (A) preclude or materially delay, impede, impair, threaten or jeopardize any Gaming License held by the Trust or any Affiliated Company or the Trust's or any Affiliated Company's application for, right to the use of, entitlement to, or ability to obtain or retain, any Gaming License, (B) cause or otherwise result in, the disapproval, cancellation, termination, material adverse modification or non-renewal of any material contract to which the Trust or any Affiliated Company is a party, or (C) cause or otherwise result in the imposition of any materially burdensome or unacceptable terms or conditions on any Gaming License of the Trust or any Affiliated Company.

Section 2. Compliance with Gaming Laws. All Securities shall be held subject to the restrictions and requirements of all applicable Gaming Laws. All Persons Owning or Controlling Securities shall comply with all applicable Gaming Laws, including any provisions of such Gaming Laws that require such Person to file applications for Gaming Licenses with, and provide information to, the applicable Gaming Authorities. Any Transfer of Securities may be subject to the prior approval of the Gaming Authorities and/or the Trust or the applicable Affiliated Company, and any purported Transfer thereof in violation of such requirements shall be void ab initio.

Section 3. Ownership Restrictions. Any Person who Owns or Controls five percent (5%) or more of any class or series of the Trust's Securities shall promptly notify the Trust, stating the name and address of such owner, the number of Shares Owned and a description of the manner in which such Shares are held. In addition, any Person who Owns or Controls any of the Trust's Securities shall, to the extent reasonably requested by the Trust in order to comply with applicable Gaming Law or for the Trust to determine whether the Person is an Unsuitable Person:

(a) provide to the Gaming Authorities in each Gaming Jurisdiction in which the Trust or any Affiliated Company either conducts Gaming or has a pending application for a Gaming License all information regarding such Person as may be requested or required by such Gaming Authorities; and

(b) respond to written or oral questions or inquiries from any such Gaming Authorities or the Trust. Any Person who Owns or Controls any of the Trust's Securities, by virtue of such Ownership or Control, consents to the performance of any personal background investigation that may be required by any Gaming Authorities or that may otherwise be deemed advisable by the Trust.

Section 4. Finding of Unsuitability.

(a) The Securities Owned or Controlled by an Unsuitable Person or an Affiliate of an Unsuitable Person shall be redeemable by the Trust or the applicable Affiliated Company, out of funds legally available therefor, as directed by a Gaming Authority and, if not so directed, as and to the extent deemed necessary or advisable by the Board, in which event the Trust shall deliver

a Redemption Notice to the Unsuitable Person or its Affiliate and shall redeem or purchase or cause one or more Affiliated Companies to purchase the Securities on the Redemption Date and for the Redemption Price set forth in the Redemption Notice. From and after the Redemption Date, such Securities shall no longer be deemed to be outstanding, such Unsuitable Person or Affiliate of such Unsuitable Person shall cease to be a shareholder, member, partner or owner, as applicable, of the Trust and/or Affiliated Company with respect to such Securities, and all rights of such Unsuitable Person or Affiliate of such Unsuitable Person in such Securities, other than the right to receive the Redemption Price, shall cease. In accordance with the requirements of the Redemption Notice, such Unsuitable Person or its Affiliate shall surrender the certificate(s), if any, representing the Securities to be so redeemed and comply with any other requirements for the surrender and redemption of such Securities.

(b) Commencing on the date that a Gaming Authority serves notice of a determination of unsuitability or disqualification of a holder of Securities, or the Board otherwise determines that a Person is an Unsuitable Person, and until the Securities Owned or Controlled by such Person are Owned or Controlled by a Person who is not an Unsuitable Person, it shall be unlawful for such Unsuitable Person or any of its Affiliates to and such Unsuitable Person and its Affiliates shall not: (i) receive any dividend, payment, distribution or interest with regard to the Securities, (ii) exercise, directly or indirectly or through any proxy, trustee, or nominee, any voting or other right conferred by such Securities, and such Securities shall not for any purposes be included in the Securities of the Trust or the applicable Affiliated Company entitled to vote, (iii) receive any remuneration that may be due to such Person, accruing after the date of such notice of determination of unsuitability or disqualification by a Gaming Authority, in any form from the Trust or any Affiliated Company for services rendered or otherwise, or (iv) be or continue as a manager, officer, partner, trustee or director of the Trust or any Affiliated Company.

Section 5. Indemnification. Any Unsuitable Person and any Affiliate of an Unsuitable Person shall indemnify and hold harmless the Trust and its Affiliated Companies for any and all losses, costs, and expenses, including attorneys' costs, fees and expenses, incurred by the Trust and its Affiliated Companies as a result of, or arising out of, such Unsuitable Person's Ownership or Control of Securities, failure or refusal to comply with the provisions of this Article, or failure to divest himself, herself or itself of any Securities when and in the specific manner required by the Gaming Authorities or this Article.

Section 6. Injunctive Relief. The Trust shall be entitled to injunctive or other equitable relief in any court of competent jurisdiction to enforce the provisions of this Article and each Person who Owns or Controls Securities shall be deemed to have consented to injunctive or other equitable relief and acknowledged, by virtue of such Ownership or Control, that the failure to comply with this Article will expose the Trust and the Affiliated Companies to irreparable injury for which there is no adequate remedy at law and that the Trust and the Affiliated Companies shall be entitled to injunctive or other equitable relief to enforce the provisions of this Article.

Section 7. Non-Exclusivity of Rights. The right of the Trust or any Affiliated Company to redeem Securities pursuant to this Article shall not be exclusive of any other rights the Trust or any Affiliated Company may have or hereafter acquire under any agreement, provision of the bylaws of the Trust or such Affiliated Company or otherwise. To the extent permitted under

applicable Gaming Laws, the Trust shall have the right, exercisable in the sole discretion of the Board, either:

(a) to cause all Securities Owned or Controlled by an Unsuitable Person or an Affiliate of an Unsuitable Person to be deemed to be transferred to an Excess Share Trustee in accordance with Section 14 of Article NINTH, by providing notice thereof to the Unsuitable Person or its Affiliate; or

(b) to propose that the parties, immediately upon the delivery of the Redemption Notice, enter into an agreement or other arrangement, including, without limitation, a divestiture trust or divestiture plan, which will reduce or terminate an Unsuitable Person's Ownership or Control of all or a portion of its Securities.

Section 8. Further Actions. Nothing contained in this Article shall limit the authority of the Board to take such other action, to the extent permitted by law, as it deems necessary or advisable to protect the Trust or the Affiliated Companies from the denial or loss or threatened denial or loss of any Gaming License of the Trust or any of its Affiliated Companies. Without limiting the generality of the foregoing, the Board may conform any provisions of this Article to the extent necessary to make such provisions consistent with Gaming Laws, without the need for shareholder approval, except to the extent that shareholder approval is specifically required by Title 8. In addition, the Board may, to the extent permitted by law, from time to time establish, modify, amend or rescind bylaws, regulations, and procedures of the Trust not inconsistent with the express provisions of this Article for the purpose of determining whether any Person is an Unsuitable Person and for the orderly application, administration and implementation of the provisions of this Article. Such procedures and regulations shall be kept on file with the Secretary of the Trust, the secretary of each of the Affiliated Companies and with the transfer agent, if any, of the Trust and/or any Affiliated Companies, and shall be made available for inspection and, upon reasonable request, mailed to any record holder of Securities.

Section 9. Authority of the Board. The Board shall have exclusive authority and power to administer this Article and to exercise all rights and powers specifically granted to the Board or the Trust, or as may be necessary or advisable in the administration of this Article. All such actions which are done or made by the Board shall be final, conclusive and binding on the Trust and all other Persons; provided, that the Board may delegate all or any portion of its duties and powers under this Article to a committee of the Board as it deems necessary or advisable.

Section 10. Severability. If any provision of this Article or the application of any such provision to any Person or under any circumstance shall be held invalid, illegal, or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision of this Article.

Section 11. Termination and Waivers. Except as may be required by any applicable Gaming Law or Gaming Authority, the Board may waive any of the rights of the Trust or any restrictions contained in this Article in any instance in which and to the extent the Board determines that a waiver would be in the best interests of the Trust. Except as required by a Gaming Authority, nothing in this Article shall be deemed or construed to require the Trust to repurchase any Securities Owned or Controlled by an Unsuitable Person or an Affiliate of an Unsuitable Person.

Section 12. Legend. Each certificate for Shares shall bear substantially the following legend:

"The Securities represented by this certificate are subject to the obligations and restrictions imposed by applicable Gaming Laws. These obligations and restrictions, as set forth in the Trust's Declaration of Trust, include, but are not limited to: (i) the obligation to comply with all applicable Gaming Laws, including requirements to file applications for Gaming Licenses, to provide information to Gaming Authorities (as defined in the Trust's Declaration of Trust) and to consent to the performance of any background investigation required by Gaming Authorities, (ii) the obligation to notify the Trust of the ownership or control of five percent (5%) or more of any class or series of the Trust's Securities, (iii) upon notice of a determination of unsuitability or disqualification of the holder of the Securities by Gaming Authorities or upon the determination by the Board that the holder of the Securities is an Unsuitable Person, the redemption of the Securities, and (iv) upon notice of a determination of unsuitability or disqualification of the holder of the Securities by Gaming Authorities or upon the determination by the Board that the holder of the Securities is an Unsuitable Person, the immediate prohibition against (A) the receipt of any dividend, payment, distribution or interest with regard to the Securities, (B) the exercise, directly or indirectly or through any proxy, trustee, or nominee, any voting or other right conferred by such Securities, and such Securities shall not for any purposes be included in the Securities of the Trust or the applicable Affiliated Company entitled to vote, (C) the receipt of any remuneration that may be due to such person, accruing after the date of such notice of determination of unsuitability or disqualification by a Gaming Authority, in any form from the Trust or any Affiliated Company for services rendered or otherwise, or (D) the existence or continuation of such person as a manager, officer, partner, trustee or director of the Trust or any Affiliated Company. All capitalized terms in this legend have the meanings defined in the Trust's Declaration of Trust, a copy of which, including the obligations and restrictions related to ownership, will be sent without charge to each shareholder who so requests, within five business days after receipt of a written request therefor."

* * *

EXHIBIT 31.1

CERTIFICATION

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.

I, Gregory K. Silvers, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of EPR Properties;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:	August 3, 2023	/s/ Gregory K. Silvers
		Gregory K. Silvers
		Chairman, President and Chief Executive Officer (Principal Executive Officer)

EXHIBIT 31.2

CERTIFICATION

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.

I, Mark A. Peterson, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of EPR Properties;

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:	August 3, 2023	/s/ Mark A. Peterson
		Mark. A. Peterson
		Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)

EXHIBIT 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350 AS

ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT

I, Gregory K. Silvers, President and Chief Executive Officer of EPR Properties (the “Issuer”), have executed this certification for furnishing to the Securities and Exchange Commission in connection with the filing with the Commission of the registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2023 (the “Report”). I hereby certify that, to the best of my knowledge and belief:

(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.



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

Date: August 3, 2023

EXHIBIT 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350 AS

ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT

I, Mark A. Peterson, Executive Vice President and Chief Financial Officer of EPR Properties (the “Issuer”), have executed this certification for furnishing to the Securities and Exchange Commission in connection with the filing with the Commission of the registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2023 (the “Report”). I hereby certify that, to the best of my knowledge and belief:

(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.



			/s/ Mark A. Peterson
			Mark A. Peterson Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)

Date: August 3, 2023