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Section 1: 10-K (10-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ý
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number: 001-13561
 
EPR PROPERTIES
(Exact name of registrant as specified in its charter)

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
 
Name of each exchange on which registered
Common shares of beneficial interest, par value $.01 per share
 
New York Stock Exchange
5.75% Series C cumulative convertible preferred shares of beneficial interest, par value $.01 per share
 
New York Stock Exchange
9.00% Series E cumulative convertible preferred shares of beneficial interest, par value $.01 per share
 
New York Stock Exchange
5.75% Series G cumulative redeemable preferred shares of beneficial interest, par value $.01 per share
 
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None.
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes  ý     No  ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.     Yes  ¨    No  ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or 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
 
ý
  
Accelerated filer
 
¨
Non-accelerated filer
 
¨ (Do not check if a smaller reporting company)
  
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 accounting 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  ý
The aggregate market value of the common shares of beneficial interest (“common shares”) of the registrant held by non-affiliates, based on the closing price on the last business day of the registrant’s most recently completed second fiscal quarter, as reported on the New York Stock Exchange, was $5,341,162,143.
At February 27, 2018, there were 74,316,991 common shares outstanding.
 
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for the 2018 Annual Meeting of Shareholders to be filed with the Commission pursuant to Regulation 14A are incorporated by reference in Part III of this Annual Report on Form 10-K.



CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
With the exception of historical information, certain statements contained or incorporated by reference herein may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), such as those pertaining to our acquisition or disposition of properties, our capital resources, future expenditures for development projects, and our results of operations and financial condition. Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of actual events. There is no assurance the events or circumstances reflected in the forward-looking statements will occur. You can identify forward-looking statements by use of words such as “will be,” “intend,” “continue,” “believe,” “may,” “expect,” “hope,” “anticipate,” “goal,” “forecast,” “pipeline,” “estimates,” “offers,” “plans,” “would,” or other similar expressions or other comparable terms or discussions of strategy, plans or intentions in this Annual Report on Form 10-K. 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:
Global economic uncertainty and disruptions in financial markets;
Reduction in discretionary spending by consumers;
Adverse changes in our credit ratings;
Fluctuations in interest rates;
The duration or outcome of litigation, or other factors outside of litigation such as project financing, relating to our significant investment in a planned casino and resort development which may cause the development to be indefinitely delayed or canceled;
Unsuccessful development, operation, financing or compliance with licensing requirements of the planned casino and resort development by the third-party lessee;
Risks related to overruns for the construction of common infrastructure at our planned casino and resort development for which we would be responsible;
Defaults in the performance of lease terms by our tenants;
Defaults by our customers and counterparties on their obligations owed to us;
A borrower's bankruptcy or default;
Our ability to renew maturing leases with theatre tenants on terms comparable to prior leases and/or our ability to lease any re-claimed space from some of our larger theatres at economically favorable terms;
Risks of operating in the entertainment industry;
Our ability to compete effectively;
Risks associated with a single tenant representing a substantial portion of our lease revenues;
The ability of our public charter school tenants to comply with their charters and continue to receive funding from local, state and federal governments, the approval by applicable governing authorities of substitute operators to assume control of any failed public charter schools and our ability to negotiate the terms of new leases with such substitute tenants on acceptable terms, and our ability to complete collateral substitutions as applicable;
The ability of our build-to-suit education tenants to achieve sufficient enrollment within expected timeframes and therefore have capacity to pay their agreed upon rent, including the ability of our early education tenant, Children's Learning Adventure, to successfully negotiate a restructuring and secure capital necessary to achieve positive cash flow;
Risks relating to our tenants' exercise of purchase options or borrowers' exercise of prepayment options related to our education properties;
Risks associated with our level of indebtedness;
Risks associated with use of leverage to acquire properties;
Financing arrangements that require lump-sum payments;
Our ability to raise capital;
Covenants in our debt instruments that limit our ability to take certain actions;
The concentration and lack of diversification of our investment portfolio;
Our continued qualification as a real estate investment trust for U.S. federal income tax purposes;
The ability of our subsidiaries to satisfy their obligations;

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Financing arrangements that expose us to funding or purchase risks;
Our reliance on a limited number of employees, the loss of which could harm operations;
Risks associated with security breaches and other disruptions;
Changes in accounting 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, and how well we manage our properties;
Our ability to secure adequate insurance and risk of potential uninsured losses, including from natural disasters;
Risks involved in joint ventures;
Risks in leasing multi-tenant properties;
A failure to comply with the Americans with Disabilities Act or other laws;
Risks of environmental liability;
Risks associated with the relatively illiquid nature of our real estate investments;
Risks with owning assets in foreign countries;
Risks associated with owning, operating or financing properties for which the tenants', mortgagors' or our operations may be impacted by weather conditions and climate change;
Risks associated with the development, redevelopment and expansion of properties and the acquisition of other real estate related companies;
Our ability to pay dividends in cash or at current rates;
Fluctuations in the market prices for our shares;
Certain limits on changes in control imposed under law and by our Declaration of Trust and Bylaws;
Policy changes obtained without the approval of our shareholders;
Equity issuances that could dilute the value of our shares;
Future offerings of debt or equity securities, which may rank senior to our common shares;
Risks associated with changes in the Canadian exchange rate; and
Changes in laws and regulations, including tax laws and regulations.

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 this Annual Report on Form 10-K.

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


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TABLE OF CONTENTS
 
 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
Item 1.
 
 
Item 1A.
 
 
Item 1B.
 
 
Item 2.
 
 
Item 3.
 
 
Item 4.
 
 
 
 
 
 
 
 
 
 
 
 
Item 5.
 
 
Item 6.
 
 
Item 7.
 
 
Item 7A.
 
 
Item 8.
 
 
Item 9.
 
 
Item 9A.
 
 
Item 9B.
 
 
 
 
 
 
 
 
 
 
 
 
Item 10.
 
 
Item 11.
 
 
Item 12.
 
 
Item 13.
 
 
Item 14.
 
 
 
 
 
 
 
 
 
 
 
 
Item 15.
 
 
Item 16.
 

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PART I

Item 1. Business

General

EPR Properties (“we,” “us,” “our,” “EPR” or the “Company”) was formed on August 22, 1997 as a Maryland real estate investment trust (“REIT”), and an initial public offering of our common shares of beneficial interest (“common shares”) was completed on November 18, 1997. Since that time, the Company has grown into a leading specialty REIT with an investment portfolio that includes primarily entertainment, recreation and education properties. The underwriting of our investments is centered on key industry and property cash flow criteria, as well as the credit metrics of our tenants and customers. As further explained under “Growth Strategies” below, our investments are also guided by a focus on inflection opportunities that are associated with or support enduring uses, excellent executions, attractive economics and an advantageous market position.

We are a self-administered REIT. As of December 31, 2017, our total assets were approximately $6.2 billion (after accumulated depreciation of approximately $0.7 billion). Our investments are generally structured as long-term triple-net leases that require the tenants to pay substantially all expenses associated with the operation and maintenance of the property, or as long-term mortgages with economics similar to our triple-net lease structure.

Our total investments (a non-GAAP financial measure) were approximately $6.7 billion at December 31, 2017. See "Non-GAAP Financial Measures" for the calculation of total investments and reconciliation of total investments to "Total assets" in the consolidated balance sheet at December 31, 2017 and 2016. We group our investments into four reportable operating segments: Entertainment, Recreation, Education and Other. Our total investments at December 31, 2017 consisted of interests in the following:

$2.9 billion or 44% related to entertainment properties, which includes megaplex theatres, entertainment retail centers (centers typically anchored by an entertainment component such as a megaplex theatre and containing other entertainment-related or retail properties), family entertainment centers and other retail parcels;

$2.2 billion or 32% related to recreation properties, which includes ski properties, attractions, golf entertainment complexes and other recreation facilities;

$1.4 billion or 21% related to education properties, which consists of investments in public charter schools, early education centers and K-12 private schools; and

$179.3 million or 3% related to other properties, which consists of the Resorts World Catskills (formerly Adelaar) casino and resort project in Sullivan County, New York (excluding $50.6 million related to the Resorts World Catskills indoor waterpark project included in recreation).

We believe entertainment, recreation and education are highly enduring sectors of the real estate industry and that, as a result of our focus on properties in these sectors, industry relationships and the knowledge of our management, we have a competitive advantage in providing capital to operators of these types of properties. We believe this focused niche approach offers the potential for higher growth and better yields.

We believe our management’s knowledge and industry relationships have facilitated favorable opportunities for us to acquire, finance and lease properties. Historically, our primary challenges have been locating suitable properties, negotiating favorable lease or financing terms, and managing our real estate portfolio as we have continued to grow.

We are particularly focused on property categories which allow us to use our experience to mitigate some of the risks inherent in a changing economic environment. We cannot provide any assurance that any such potential investment or acquisition opportunities will arise in the near future, or that we will actively pursue any such opportunities.


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Although we are primarily a long-term investor, we may also sell assets if we believe that it is in the best interest of our shareholders or pursuant to contractual rights of our tenants or our customers.

Entertainment

As of December 31, 2017, our Entertainment segment consisted of investments in megaplex theatres, entertainment retail centers, family entertainment centers and other retail parcels totaling approximately $2.9 billion with interests in:
147 megaplex theatres located in 34 states;
seven entertainment retail centers (which included seven additional megaplex theatres) located in Colorado, New York, California, and Ontario, Canada;
11 family entertainment centers located in Colorado, Georgia, Illinois, Indiana, Florida and Texas;
land parcels leased to restaurant and retail operators adjacent to several of our theatre properties;
$101.3 million in construction in progress primarily for real estate development and redevelopment of megaplex theatres as well as other retail redevelopment projects; and
$4.5 million in undeveloped land inventory.

As of December 31, 2017, our owned real estate portfolio of megaplex theatres consisted of approximately 11.0 million square feet and was 100% leased and our remaining owned entertainment real estate portfolio consisted of 2.0 million square feet and was 96% leased. The combined owned entertainment real estate portfolio consisted of 13.1 million square feet and was 99% leased. Our owned theatre properties are leased to 15 different leading theatre operators. A significant portion of our total revenue was derived from rental payments by American Multi-Cinema, Inc. ("AMC"). For the year ended December 31, 2017, approximately $114.4 million or 19.9% of the Company's total revenues were derived from rental payments by AMC.

A significant portion of our entertainment assets consist of modern megaplex theatres. The modern megaplex theatre provides a significantly enhanced audio and visual experience for the patrons versus other formats. A significant trend currently exists among national and local exhibitors to further enhance the customer experience. These enhancements include reserved, luxury seating and expanded food and beverage offerings, including the addition of alcohol and more efficient point of sale systems. The evolution of the theatre industry over the last 20 years from the sloped floor theatre to the megaplex stadium theatre to the expanded amenity theatre has demonstrated that exhibitors and their landlords are willing to make investments in their theatres to take the customer experience to the next level.

As exhibitors improve the customer experience with more spacious and comfortable seating options, they are required to make physical changes to the existing seating configurations that typically result in a significant loss of existing seats. It was once a concern that such seat loss would be a negative to theatres that thrive on opening weekend business of new movie releases; however, customers have responded favorably to these changes. Exhibitors are learning that enhanced amenities are changing the patrons’ movie-going habits resulting in significantly increased seat utilization and increased food and beverage revenue.

As exhibitors pursue the renovation of theatres with enhanced amenities, we are working with our tenants generally toward the end of their primary lease terms to extend the terms of their leases beyond the initial option periods, finance improvements where applicable and to recapture land where seat count reductions alleviate parking requirements. In conjunction with these changes, we may also make changes to the rental rates to better reflect the existing market demands and additional capital invested. In addition to positioning expiring theatre assets for continued success, the renovation of these assets creates an opportunity to diversify the Company's tenant base into other entertainment or retail uses adjacent to a movie theatre.

The theatre box office continues to reflect solid performance. Box office revenues reached a record high during 2016 and were less than 3% lower than that record in 2017, according to Box Office Mojo. We expect the development of new megaplex theatres and the conversion or partial conversion of existing theatres to enhanced amenity formats to continue in the United States and abroad over the long-term. As a result of the significant capital commitment involved

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in building new megaplex theatres and redeveloping existing theatres, as well as the experience and industry relationships of our management, we believe we will continue to have opportunities to provide capital to exhibition businesses in the future.

We also continue to seek opportunities for the development of additional restaurant, retail and other entertainment venues around our existing portfolio. The opportunity to capitalize on the traffic generation of our market-dominant theatres to create entertainment retail centers (“ERCs”) not only strengthens the execution of the megaplex theatre but adds diversity to our tenant and asset base. We have and will continue to evaluate our existing portfolio for additional development of retail and entertainment density, and we will also continue to evaluate the purchase or financing of existing ERCs that have demonstrated strong financial performance and meet our quality standards. The leasing and property management requirements of our ERCs are generally met through the use of third-party professional service providers.

Our family entertainment center operators offer a variety of entertainment options including bowling, bocce ball and karting as well as an observation deck on the 94th floor of the John Hancock building in downtown Chicago, Illinois.

We will continue to seek opportunities for the development of, or acquisition of, other entertainment related properties that leverage our expertise in this area.

Recreation

As of December 31, 2017, our Recreation segment consisted of investments in ski properties, attractions, golf entertainment complexes and other recreation totaling approximately $2.2 billion with interests in:
26 ski properties located in 6 states;
20 attractions located in 12 states;
30 golf entertainment complexes located in 17 states;
eight other recreation properties located in 6 states; and
$125.2 million in construction in progress for golf entertainment complexes and the development of an indoor waterpark hotel at the Resorts World Catskills casino and resort project located in Sullivan County, New York.
As of December 31, 2017, our owned recreation real estate portfolio was 100% leased.

Our ski properties provide a sustainable advantage for the experience conscious consumer, providing outdoor entertainment during the winter. All of the ski properties that serve as collateral for our mortgage notes in this area, as well as our five owned properties, offer snowmaking capabilities and provide a variety of terrains and vertical drop options. We believe that the primary appeal of our ski properties lies in the convenient and reliable experience consumers can expect. Given that all of our ski properties are located near major metropolitan areas, they offer skiing and snowboarding without the expense, travel, or lengthy preparations of remote ski resorts. Furthermore, advanced snowmaking capabilities increase the reliability of the experience versus other ski properties that do not have such capabilities. Our ski properties are leased to, or we have mortgage notes receivable from, 10 different operators. We expect to continue to pursue opportunities in this area.

Our attraction portfolio consists of waterparks and amusement parks, both of which draw a diverse segment of customers. Our attraction operators continue to deliver innovative and compelling attractions along with high standards of service, making our attractions a day of fun that's accessible for families, teens, locals and tourists. Waterparks and amusement parks offer experiences designed to appeal to all ages while remaining accessible in both cost and proximity. As many waterparks are growing from single-day attendance to a destination getaway, we believe indoor waterpark hotels increase the four-season appeal at many resorts. Our attraction properties are leased to, or we have mortgage notes receivable from, seven different operators. We expect to continue to pursue opportunities in this area.

Our golf entertainment complexes are leased to, or under mortgage with, Topgolf, which combines golf with entertainment, competition and food and beverage service. By combining an interactive entertainment and food and

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beverage experience with a long-lived recreational activity, we believe Topgolf provides an innovative, enjoyable and repeatable customer experience. We expect to continue to pursue opportunities related to golf entertainment complexes.

Our other recreation portfolio consists of both classic and innovative activities. This includes our investments in fitness and wellness properties, as well as in new recreation properties such as iFly, which provides a unique indoor sky-diving experience to its guests.

We will continue to seek opportunities for the development of, or acquisition of, other recreation related properties that leverage our expertise in this area.

Education

As of December 31, 2017, our Education segment consisted of investments in public charter schools, early education centers and K-12 private schools totaling approximately $1.4 billion with interests in:
65 public charter schools located in 19 states and the District of Columbia;
65 early education centers located in 17 states;
15 private schools located in 10 states;
$25.5 million in construction in progress for real estate development or expansions of public charter schools and early education centers; and
$12.4 million in undeveloped land inventory.

As of December 31, 2017, our owned education real estate portfolio consisted of approximately 4.2 million square feet and was 92% leased. This reflects the termination of nine CLA leases, as further discussed in Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Recent Developments”.

Public charter schools are tuition-free, independent schools that are publicly funded by local, state and federal tax dollars based on enrollment. Driven by the need to improve the quality of public education and provide more school choices in the U.S., public charter schools are one of the fastest growing segments of the multi-billion dollar educational facilities sector, and we believe a critical need exists for the financing of new and refurbished educational facilities. To meet this need, we have established relationships with public charter school operators, authorizers and developers across the country and expect to continue to develop our leadership position in providing real estate financing in this area. Public charter schools are operated pursuant to charters granted by various state or other regulatory authorities and are dependent upon funding from local, state and federal tax dollars. Like public schools, public charter schools are required to meet both state and federal academic standards. We have 45 different operators for our owned public charter schools.

Various government bodies that provide educational funding have pressure to reduce their spending budgets and have reduced educational funding in some cases and may continue to reduce educational funding in the future. This can impact our tenants' operations and potentially their ability to pay our scheduled rent. However, these reductions differ state by state and have historically been more significant at the post-secondary education level than at the K-12 level that our tenants serve. Furthermore, while there can be no assurance as to the level of these cuts, we analyze each state's fiscal situation and commitment to the charter school movement before providing financing in a new state, and also factor in anticipated reductions (as applicable) in the states in which we do decide to do business.

As with public charter schools, the Company's expansion into both early education centers and private schools is supported by strong unmet demand, and we expect to increase our investment in both of these areas.

Early education centers continue to see demand due to the proliferation of dual income families and the increasing emphasis on early childhood education, beyond traditional daycare. There is increased demand for curriculum-based, child-centered learning. We believe this property type is a logical extension of our education platform and allows us to increase our diversity and geographical reach with these assets.


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We believe K-12 private schools have significant growth potential when they have differentiated, high quality offerings. Many private schools in large urban and suburban areas are at capacity and have large waiting lists making admission more difficult. The demand for nonsectarian private education has increased in recent years as parents and students become more focused on the comprehensive impact of a strong school environment.

We will continue to seek opportunities for the development of, or acquisition of, other education related properties that leverage our expertise in this area.

Many of our education lease and mortgage agreements contain purchase or prepayment options whereby the tenant or borrower can acquire the property or prepay the mortgage loan for a premium over the total development cost at certain points during the terms of the agreements. If these properties meet certain criteria, the tenants may be able to obtain bond or other financing at lower rates and therefore be motivated to exercise these options. We do not anticipate that all of these options will be exercised but cannot determine at this time the amount or timing of such option exercises. Additionally, it is difficult to forecast when these options will be exercised, which can create volatility in our earnings. In accordance with GAAP, prepayment penalties related to mortgage agreements are included in mortgage and other financing income and are included in FFO as adjusted (See Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Funds From Operations” for a discussion of FFO and FFO as adjusted, which are non-GAAP measures). However, if a tenant exercises the option to purchase a property under lease, GAAP requires that a gain on sale be recognized for the amount of cash received over the carrying value of the property and gains on sale are typically excluded from FFO as adjusted. Accordingly, for consistency in presentation and with the wording and intent of the lease provisions, we treat the premium over the total development cost (i.e. the undepreciated cost) as a termination fee and include such fees in FFO as adjusted, and only the difference between the total development cost and the carrying value is treated as gain on sale and excluded from FFO as adjusted.

During the year ended December 31, 2017, we received prepayment of $3.4 million on one mortgage note receivable that was secured by a public charter school located in Dallas, Texas and we received a prepayment fee of $0.6 million.  In addition, pursuant to tenant purchase options, we completed the sale of eight public charter schools located in Colorado, Arizona, North Carolina and Utah for net proceeds totaling $97.3 million.  In connection with these sales, we recognized gains on sale of $20.7 million of which $20.0 million has been included in termination fees in FFO as adjusted (a non-GAAP financial measure) per the methodology discussed above.

As of December 31, 2017, an estimate of the number of education properties potentially impacted by option exercises, the total development cost and the total potential amount of the prepayment penalties or lease termination fees in the first option period by year are as follows (dollars in thousands):
Year Option First Exercisable
 
Number of Education Properties
 
Total Development Cost
 
Total Potential Termination Fees/Prepayment Penalties in First Option Period
2018
 
9
 
$
90,730

 
$
17,200

2019
 
12
 
136,013

 
24,051

2020
 
7
 
51,154

 
9,300

2021
 
12
 
92,587

 
19,475

2022
 
3
 
35,228

 
5,692

Thereafter
 
4
 
155,888

 
22,746



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Other

As of December 31, 2017, our Other segment consisted primarily of land under ground lease, property under development and land held for development totaling approximately $179.3 million related to the Resorts World Catskills casino and resort project in Sullivan County, New York, which we previously referred to as the Adelaar casino and resort project. Our ground lease tenant is expected to invest in excess of $920.0 million in the construction of the casino and resort project, and it first opened for business in February 2018.

Business Objectives and Strategies

Our vision is to become the leading specialty REIT by focusing our unique knowledge and resources on select real estate segments which provide the potential for outsized returns.

Our long-term primary business objective is to enhance shareholder value by achieving predictable and increasing Funds From Operations (“FFO”) and dividends per share (See Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Funds From Operations” for a discussion of FFO, which is a non-GAAP measure). Our prevailing strategy is to focus on long-term investments in a limited number of categories in which we maintain a depth of knowledge and relationships, and which we believe offer sustained performance throughout all economic cycles. We intend to achieve this objective by continuing to execute the Growth Strategies, Operating Strategies and Capitalization Strategies described below.

Growth Strategies

Central to our growth is remaining focused on acquiring or developing properties in our primary investment segments: Entertainment, Recreation and Education. We may also pursue opportunities to provide mortgage financing for these investment segments in certain situations where this structure is more advantageous than owning the underlying real estate.

Our segment focus is consistent with our strategic organizational design which is structured around building centers of knowledge and strong operating competencies in each of our primary segments. Retention and building of this knowledge depth creates a competitive advantage allowing us to more quickly identify key market trends.

To this end, we will deliberately apply information and our ingenuity to identify properties which represent potential logical extensions within each of our segments, or potential future investment segments. As part of our strategic planning and portfolio management process we assess new opportunities against the following five key underwriting principles:

Inflection Opportunity
Specialty versus commodity real estate
New or emerging generation of real estate as a result of age, technology or change in consumer lifestyle or habits

Enduring Value
Underlying activity long-lived
Real estate that supports commercially successful activities
Outlook for business stable or growing

Excellent Execution
Best-of-class executions that create market-dominant properties
Sustainable customer demand within the category despite a potential change in tenancy
Tenants with a reliable track record of customer service and satisfaction

Attractive Economics
Initially accretive with escalating yield over time
Rent participation features which allow for participation in financial performance

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Scalable depth of opportunity
Strong, stable rent coverage and the potential for cross default features

Advantageous Position
First mover advantage and/or dominant player in real estate ownership or financing
Preferred tenant or borrower relationship that provides access to sites and development projects
Data available to assess and monitor performance

Operating Strategies

Lease Risk Minimization
To avoid initial lease-up risks and produce a predictable income stream, we typically acquire or develop single-tenant properties that are leased under long-term leases. We believe our willingness to make long-term investments in properties offers our tenants financial flexibility and allows tenants to allocate capital to their core businesses. Although we will continue to emphasize single-tenant properties, we have acquired or developed, and may continue to acquire or develop, multi-tenant properties we believe add shareholder value.

Lease Structure
We have structured our leasing arrangements to achieve a positive spread between our cost of capital and the rents paid by our tenants. We typically structure leases on a triple-net basis under which the tenants bear the principal portion of the financial and operational responsibility for the properties. During each lease term and any renewal periods, the leases typically provide for periodic increases in rent and/or percentage rent based upon a percentage of the tenant’s gross sales over a pre-determined level. In our multi-tenant property leases and some of our theatre leases, we generally require the tenant to pay a common area maintenance (“CAM”) charge to defray its pro rata share of insurance, taxes and maintenance costs.

Mortgage Structure
We have structured our mortgages to achieve economics similar to our triple-net lease structure with a positive spread between our cost of capital and the interest paid by our tenants. During each mortgage term and any renewal periods, the notes typically provide for periodic increases in interest and/or participating features based upon a percentage of the tenant’s gross sales over a pre-determined level.

Development and Redevelopment
We intend to continue developing properties and redeveloping existing properties that are consistent with our growth strategies. We generally do not begin development of a single-tenant property without a signed lease providing for rental payments that are commensurate with our level of capital investment. In the case of a multi-tenant development, we generally require a significant amount of the development to be pre-leased prior to construction to minimize lease-up risks. In addition, to minimize overhead costs and to provide the greatest amount of flexibility, we generally outsource construction management to third-party firms.

We believe our build-to-suit development program is a competitive advantage. First, we believe our strong relationships with our tenants and developers drive new investment opportunities that are often exclusive to us, rather than bid broadly, and with our deep knowledge of their businesses, we believe we are a value-added partner in the underwriting of each new investment. Second, we offer financing from start to finish for a build-to-suit project such that there is no need for a tenant to seek separate construction and permanent financing, which we believe makes us a more attractive partner. Third, we are actively developing strong relationships with tenants in our select segments leading to multiple investments without strict investment portfolio allocations. Finally, multiple investments with the same tenant allows us in most cases to include cross-default provisions in our lease or financing contracts, meaning a default in an obligation to us at one location is a default under all obligations with that tenant.
We will also investigate opportunities to redevelop certain of our existing properties. We may redevelop properties in conjunction with a lease renewal or new tenant, or we may redevelop properties that have more earnings potential due to the redevelopment. Additionally, certain of our properties have excess land where we will proactively seek opportunities to further develop.

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Tenant and Customer Relationships
We intend to continue developing and maintaining long-term working relationships with entertainment, recreation, education and other specialty business operators and developers by providing capital for multiple properties on a regional, national and international basis, thereby creating efficiency and value for both the operators and the Company.

Portfolio Diversification
We will endeavor to further diversify our asset base by property type, geographic location and tenant or customer. In pursuing this diversification strategy, we will target entertainment, recreation, education and other specialty business operators that we view as leaders in their market segments and have the ability to compete effectively and perform under their agreements with the Company.

Dispositions
We will consider property dispositions for reasons such as creating price awareness of a certain property type, opportunistically taking advantage of an above market offer or reducing exposure related to a certain tenant, property type or geographic area.

Capitalization Strategies

Debt and Equity Financing
Our ratio of net debt to adjusted EBITDA, a non-GAAP measure (see "Non-GAAP Financial Measures" for definitions and reconciliations), is our primary measure to evaluate our capital structure and the magnitude of our debt against our operating performance. Additionally, we utilize our ratio of net debt to gross assets as a secondary measure to evaluate our capital structure. We expect to maintain our net debt to adjusted EBITDA ratio between 4.6x to 5.6x. See Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” for a further discussion of this ratio.

We rely primarily on an unsecured debt structure. In the future, while we may obtain secured debt from time to time or assume secured debt financing obligations in acquisitions, we intend to issue primarily unsecured debt securities to satisfy our debt financing needs. We believe this strategy increases our access to capital and permits us to more efficiently match available debt and equity financing to our ongoing capital requirements.

Our sources of equity financing consist of the issuance of common shares as well as the issuance of preferred shares (including convertible preferred shares). In addition to larger underwritten registered public offerings of both common and preferred shares, we have also offered shares pursuant to registered public offerings through the direct share purchase component of our Dividend Reinvestment and Direct Share Purchase Plan (“DSP Plan”). While such offerings are generally smaller than a typical underwritten public offering, issuing common shares under the direct share purchase component of our DSP Plan allows us to access capital on a more frequent basis in a cost-effective manner. We expect to opportunistically access the equity markets in the future and, depending primarily on the size and timing of our equity capital needs, may continue to issue shares under the direct share purchase component of our DSP Plan. Furthermore, we may issue shares in connection with acquisitions in the future.
 
Joint Ventures
We will examine and may pursue potential additional joint venture opportunities with institutional investors or developers if the investments to which they relate meet our guiding principles discussed above. We may employ higher leverage in joint ventures.


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Payment of Regular Dividends
We pay dividend distributions to our common shareholders on a monthly basis (as opposed to a quarterly basis). We expect to continue to pay dividend distributions to our preferred shareholders on a quarterly basis. Our Series C cumulative convertible preferred shares (“Series C preferred shares”) have a dividend rate of 5.75%, our Series E cumulative convertible preferred shares (“Series E preferred shares”) have a dividend rate of 9.00% and our Series G cumulative redeemable preferred shares ("Series G preferred shares") have a dividend rate of 5.75%. Among the factors the Company’s board of trustees (“Board of Trustees”) considers in setting the common share dividend rate are the applicable REIT tax rules and regulations that apply to dividends, the Company’s results of operations, including FFO and FFO as adjusted per share, and the Company’s Cash Available for Distribution (defined as net cash flow available for distribution after payment of operating expenses, debt service, preferred dividends and other obligations).

Competition

We compete for real estate financing opportunities with other companies that invest in real estate, as well as traditional financial sources such as banks and insurance companies. REITs have financed, and may continue to seek to finance, entertainment, recreation, education and other specialty properties as new properties are developed or become available for acquisition.

Employees

As of December 31, 2017, we had 63 full-time employees.

Principal Executive Offices

The Company’s principal executive offices are located at 909 Walnut Street, Suite 200, Kansas City, Missouri 64106; telephone (816) 472-1700.

Materials Available on Our Website

Our internet website address is www.eprkc.com. We make available, free of charge, through our website copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “Commission” or “SEC”). You may also view our Code of Business Conduct and Ethics, Company Governance Guidelines, Independence Standards for Trustees and the charters of our Audit, Nominating/Company Governance, Finance and Compensation and Human Capital Committees on our website. Copies of these documents are also available in print to any person who requests them. We do not intend for information contained in our website to be part of this Annual Report on Form 10-K.

Item 1A. Risk Factors
There are many risks and uncertainties that can affect our current or future business, operating results, financial performance or share price. The following discussion describes important factors which could adversely affect our current or future business, operating results, financial condition or share price. This discussion includes a number of forward-looking statements. See “Cautionary Statement Concerning Forward-Looking Statements.”

Risks That May Impact Our Financial Condition or Performance

Global economic uncertainty and disruptions in the financial markets may impair our ability to refinance existing obligations or obtain new financing for acquisition or development of properties.
There continues to be global economic uncertainty. Increased uncertainty in the wake of the "Brexit" referendum in the United Kingdom in June 2016, in which the majority of voters voted in favor of an exit from the European Union, the formal notice by the United Kingdom in March 2017 of its exit from the European Union, as well as political changes in the U.S. and abroad, have contributed to volatility in the global financial markets. Although the U.S. economy

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has continued to improve, there can be no assurances that the U.S. economy will continue to improve or that a future recession will not occur. We rely in part on debt financing to finance our investments and development. To the extent that turmoil in the financial markets returns or intensifies, it has the potential to adversely affect our ability to refinance our existing obligations as they mature or obtain new financing for acquisition or development of properties and adversely affect the value of our investments. If we are unable to refinance existing indebtedness on attractive terms at its maturity, we may be forced to dispose of some of our assets. Uncertain economic conditions and disruptions in the financial markets could also result in a substantial decrease in the value of our investments, which could also make it more difficult to refinance existing obligations or obtain new financing.

Many of our customers, consisting of tenants and borrowers, operate in market segments that depend upon discretionary spending by consumers. Any reduction in discretionary spending by consumers within the market segments in which our customers or potential customers operate could adversely affect such customers' operations and, in turn, reduce the demand for our properties or financing solutions.
Most of our portfolio is leased to or financed with customers operating service or retail businesses on our property locations. Movie theatres, entertainment retail centers, recreation and entertainment venues, early childhood education centers, private K-12 schools, ski properties and attractions represent some of the largest market investments in our portfolio; and AMC, Topgolf, Regal Cinemas, Inc. and Cinemark USA, Inc. represented our largest customers for the year ended December 31, 2017. The success of most of these businesses depends on the willingness or ability of consumers to use their discretionary income to purchase our customers' products or services. A downturn in the economy could cause consumers to reduce their discretionary spending within the market segments in which our customers or potential customers operate, which could adversely affect such customers' operations and, in turn, reduce the demand for our properties or financing solutions.

Adverse changes in our credit ratings could impair our ability to obtain additional debt and equity financing on favorable terms, if at all, and negatively impact the market price of our securities, including our common shares.
The credit ratings of our senior unsecured debt and preferred equity securities are based on our operating performance, liquidity and leverage ratios, overall financial position and other factors employed by the credit rating agencies in their rating analyses of us. Our credit ratings can affect the amount and type of capital we can access, as well as the terms of any financings we may obtain. There can be no assurance that we will be able to maintain our current credit ratings and in the event that our current credit ratings deteriorate, we would likely incur a higher cost of capital and it may be more difficult or expensive to obtain additional financing or refinance existing obligations and commitments. Also, a downgrade in our credit ratings would trigger additional costs or other potentially negative consequences under our current and future credit facilities and debt instruments.

An increase in interest rates could increase interest cost on new debt, and could materially adversely impact our ability to refinance existing debt, sell assets and limit our acquisition and development activities.
The U.S. Federal Reserve increased its benchmark interest rate multiple times in 2017 and has continued signaling that rates could continue to rise. If interest rates continue to increase, so could our interest costs for any new debt. This increased cost could make the financing of any acquisition and development activity more costly. Rising interest rates could limit our ability to refinance existing debt when it matures, or cause us to pay higher interest rates upon refinancing and increase interest expense on refinanced indebtedness. In addition, an increase in interest rates could decrease the amount third parties are willing to pay for our assets, thereby limiting our ability to reposition our portfolio promptly in response to changes in economic or other conditions.

We previously made a significant investment in a planned casino and resort development (the “Resorts World Catskills Project”), which is now the subject of ongoing litigation. We cannot predict the duration or outcome of this litigation. Prolonged litigation or an unfavorable outcome could have a material adverse effect on the Resorts World Catskills Project or our financial condition and results of operations.
Prior proposed casino and resort developers Concord Associates, L.P., Concord Resort, LLC and Concord Kiamesha LLC, which are affiliates of Louis Cappelli and from whom we acquired the Resorts World Catskills resort property (the "Cappelli Group"), commenced litigation against the Company beginning in 2011 regarding matters relating to the acquisition of that property and our relationship with Empire Resorts, Inc. ("Empire Resorts") and certain of its subsidiaries (together with Empire Resorts, collectively, the "Empire Project Parties"). This litigation involves three

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separate cases filed in state and federal court. Two of the cases, a state and the federal case, are closed and resulted in no liability to the Company.

The remaining case was filed on October 20, 2011 by the Cappelli Group against the Company and two of its affiliates in the Supreme Court of the State of New York, County of Westchester (the "Westchester Action"), asserting a claim for breach of contract and the implied covenant of good faith, and seeking damages of at least $800 million, based on allegations that the Company had breached an agreement (the "Casino Development Agreement"), dated June 18, 2010. We moved to dismiss the complaint in the Westchester Action based on a decision issued by the Sullivan County Supreme Court (one of the two closed cases discussed above) on June 30, 2014, as affirmed by the Appellate Division, Third Department (the "Sullivan Action"). On January 26, 2016, the Westchester County Supreme Court denied the our motion to dismiss but ordered the Cappelli Group to amend its pleading and remove all claims and allegations previously determined by the Sullivan Action. On February 18, 2016, the Cappelli Group filed an amended complaint asserting a single cause of action for breach of the covenant of good faith and fair dealing based upon allegations the Company had interfered with plaintiffs’ ability to obtain financing which complied with the Casino Development Agreement. On March 23, 2016, the Company filed a motion to dismiss the Cappelli Group’s revised amended complaint. On January 5, 2017, the Westchester County Supreme Court denied the Company’s second motion to dismiss. Discovery is ongoing.

We believe we have meritorious defenses to this litigation and intend to defend it vigorously. There can be no assurances, however, as to the duration or ultimate outcome of this litigation, nor can there be any assurances as to the costs we may incur in defending against or resolving this litigation. In addition, if the outcome of the litigation is unfavorable to us, it could result in a material adverse effect on our financial condition and results of operations.

The success of the Resorts World Catskills Project is largely dependent upon the successful development and operation of the Resorts World Casino and Resort, which requires the Empire Project Parties to comply with the terms of a gaming license. If Empire Resorts fails to satisfy its obligations under the gaming license, the Resorts World Catskills Project may be indefinitely delayed or canceled, and if we are unable to identify suitable alternative uses for the property, this could lead to a material adverse effect on our financial condition and results of operations.
On December 21, 2015, Montreign Operating Company, LLC (“Montreign”), a subsidiary of Empire Resorts, was awarded a license (a “Gaming Facility License”) by the New York State Gaming Commission to operate the Resorts World Catskills Casino and Resort, a key component of the Resorts World Catskills Project. On January 17, 2018, the Resorts World Catskills Casino and Resort announced its plans to open the casino resort to the public on February 8, 2018. The Gaming Facility License is subject to a number of conditions, including the requirement that Montreign invest, or cause to be invested, no less than $854 million in the initial phase of the Resorts World Catskills Project, as well as additional and continuing regulatory conditions imposed by the Gaming Commission.

There can be no assurance that the Resorts World Catskills Casino and Resort will fully comply with the financial or other conditions of the Gaming Facility License. In the event it fails to comply with the conditions of the Gaming Facility License, the Resorts World Catskills Project may be indefinitely delayed or canceled, and there can be no assurance that a suitable alternate use for the property, whether involving gaming or otherwise, will be identified, which could result in a material adverse effect on our investment and on our financial condition and results of operations.

We expect to finance the cost of construction of common infrastructure at the Resorts World Catskills Project primarily through the issuance of tax-exempt public infrastructure bonds, and we could overrun budgeted costs for such infrastructure construction, which could significantly exceed the proceeds from the issuance of such bonds.
We are responsible for the construction of the Resorts World Catskills Project common infrastructure, which is expected to be financed primarily through the issuance of tax-exempt public infrastructure bonds. The debt service of these bonds is expected to be paid primarily through special assessments levied against the property held by the benefited users.  In June 2016, the Sullivan County Infrastructure Local Development Corporation issued $110.0 million of Series 2016 Revenue Bonds, which is expected to fund a substantial portion of such construction costs. We received an initial reimbursement of $43.4 million of construction costs and additional reimbursements of $23.9 million during the year ended December 31, 2017, and we expect to receive an additional $21.0 million of reimbursements over the balance of the construction period, which is expected to be completed in 2018. There can be no assurance that the cost of construction of common infrastructure for the Resorts World Catskills Project will not exceed our budgeted amounts

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of approximately $90.0 million, subject to budget adjustments and related approvals. If so, such excess may not be funded by the tax-exempt public infrastructure bonds and, to the extent they exceed certain negotiated caps, or are allocated to land held by us for development, may not be proportionately recovered from our tenants.

We depend on leasing space to tenants on economically favorable terms and collecting rent from our tenants, who may not be able to pay.
At any time, a tenant may experience a downturn in its business that may weaken its financial condition. Similarly, a general decline in the economy may result in a decline in demand for space at our commercial properties. Our financial results depend significantly on leasing space at our properties to tenants on economically favorable terms. In addition, because a majority of our income comes from leasing real property, our income, funds available to pay indebtedness and funds available for distribution to our shareholders will decrease if a significant number of our tenants cannot pay their rent or if we are not able to maintain our levels of occupancy on favorable terms. If our tenants cannot pay their rent or we are not able to maintain our levels of occupancy on favorable terms, there is also a risk that the fair value of the underlying property will be considered less than its carrying value and we may have to take a charge against earnings. In addition, if a tenant does not pay its rent, we might not be able to enforce our rights as landlord without significant delays and substantial legal costs.

If a tenant becomes bankrupt or insolvent, that could diminish or eliminate the income we expect from that tenant's leases. If a tenant becomes insolvent or bankrupt, we cannot be sure that we could recover the premises from the tenant promptly or from a trustee or debtor-in-possession in a bankruptcy proceeding relating to the tenant. On the other hand, a bankruptcy court might authorize the tenant to terminate its leases with us. If that happens, our claim against the bankrupt tenant for unpaid future rent would be subject to statutory limitations that might be substantially less than the remaining rent owed under the leases. In addition, any claim we have for unpaid past rent would likely not be paid in full and we would also have to take a charge against earnings for any accrued straight-line rent receivable related to the leases.

We are exposed to the credit risk of our customers and counterparties and their failure to meet their financial obligations could adversely affect our business.
Our business is subject to credit risk. There is a risk that a customer or counterparty will fail to meet its obligations when due. Customers and counterparties that owe us money may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure or other reasons. Although we have procedures for reviewing credit exposures to specific customers and counterparties to address present credit concerns, default risk may arise from events or circumstances that are difficult to detect or foresee. Some of our risk management methods depend upon the evaluation of information regarding markets, clients or other matters that are publicly available or otherwise accessible by us. That information may not, in all cases, be accurate, complete, up-to-date or properly evaluated. In addition, concerns about, or a default by, one customer or counterparty could lead to significant liquidity problems, losses or defaults by other customers or counterparties, which in turn could adversely affect us. We may be materially and adversely affected in the event of a significant default by our customers and counterparties.

We could be adversely affected by a borrower's bankruptcy or default.
If a borrower becomes bankrupt or insolvent or defaults under its loan, that could force us to declare a default and foreclose on any available collateral. As a result, future interest income recognition related to the applicable note receivable could be significantly reduced or eliminated. There is also a risk that the fair value of the collateral, if any, will be less than the carrying value of the note and accrued interest receivable at the time of a foreclosure and we may have to take a charge against earnings. If a property serves as collateral for a note, we may experience costs and delays in recovering the property in foreclosure or finding a substitute operator for the property. If a mortgage we hold is subordinated to senior financing secured by the property, our recovery would be limited to any amount remaining after satisfaction of all amounts due to the holder of the senior financing. In addition, to protect our subordinated investment, we may desire to refinance any senior financing. However, there is no assurance that such refinancing would be available or, if it were to be available, that the terms would be attractive.

The base terms of some of our theatre leases are expiring and there is no assurance that such leases will be renewed at existing lease terms or that we can lease any re-claimed space from some of our larger theatres at economically favorable terms.

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The base terms of some of our theatre leases are expiring. For theatres that are not performing as well as they did in the past, the tenants have and may continue to seek rent or other concessions or not renew at all. Furthermore, some tenants of our larger megaplex theatres desire to down-size the theatres they lease to respond to market trends. As a result, these tenants have and may continue to seek rent or other concessions from us, including requiring us to down-size the theatres or otherwise modify the properties in order to renew their leases. Furthermore, while any such screen reductions would likely create opportunities to reclaim a portion of the former theatres for conversion to other uses, there is no guarantee that we can re-lease such space or that such leases would be at economically favorable terms.

Operating risks in the entertainment industry may affect the ability of our tenants to perform under their leases.
The ability of our tenants to operate successfully in the entertainment industry and remain current on their lease obligations depends on a number of factors, including the availability and popularity of motion pictures, the performance of those pictures in tenants' markets, the allocation of popular pictures to tenants, the release window (represents the time that elapses from the date of a picture's theatrical release to the date it is available on other mediums) and the terms on which the pictures are licensed. Neither we nor our tenants control the operations of motion picture distributors. 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 may in the future consider alternative film delivery methods. The success of “out-of-home” entertainment venues such as megaplex theatres, entertainment retail centers and recreational properties also depends on general economic conditions and the willingness of consumers to spend time and money on out-of-home entertainment.

In addition, some of our theatre tenants have disclosed that they are subject to pending anti-trust investigations by the U.S. Department of Justice and several states regarding such tenants' alleged anticompetitive practices, including seeking agreements with motion picture distributors for exclusive rights to releases in certain markets. There can be no assurances as to the outcome of such investigations or whether such investigations will materially adversely affect such tenants' operations and, in turn, their ability to perform under their leases.

Real estate is a competitive business.
Our business operates in highly competitive environments. We compete with a large number of real estate property owners and developers, some of which may be willing to accept lower returns on their investments. Principal factors of competition are rent or interest charged, attractiveness of location, the quality of the property and breadth and quality of services provided. If our competitors offer space at rental rates below the rental rates we are currently charging our tenants, we may lose potential tenants, and we may be pressured to reduce our rental rates below those we currently charge in order to retain tenants when our tenants' leases expire. Our success depends upon, among other factors, trends of the national and local economies, financial condition and operating results of current and prospective tenants and customers, availability and cost of capital, construction and renovation costs, taxes, governmental regulations, legislation and population trends.

A single tenant represents a substantial portion of our lease revenues.
AMC theatres, one of the nation's largest movie exhibition companies, is the lessee of a substantial number of our megaplex theatre properties. On December 21, 2016, AMC announced that it closed its acquisition of Carmike cinemas upon which AMC became responsible for Carmike's performance under its leases with us. For the year ended December 31, 2017, approximately $114.4 million or 19.9% of our total revenues were derived from rental payments by AMC (including rental payments for Carmike). AMC Entertainment, Inc. (“AMCE”) has guaranteed AMC's performance under substantially all of their leases. We have diversified and expect to continue to diversify our real estate portfolio by entering into lease transactions with a number of other leading operators or by acquiring or seeking to acquire other properties. Nevertheless, our revenues and our continuing ability to service our debt and pay shareholder dividends are currently substantially dependent on AMC's performance under its leases, including the leases acquired in the Carmike acquisition, and AMCE's performance under its guarantee.

We believe AMC occupies a strong position in the industry and we intend to continue acquiring and leasing back or developing new AMC theatres. However, AMC and AMCE are susceptible to the same risks as our other tenants described herein. If for any reason AMC failed to perform under its lease obligations, including the leases acquired in the Carmike acquisition, and AMCE did not perform under its guarantee, we could be required to reduce or suspend our shareholder dividends and may not have sufficient funds to support operations or service our debt until substitute

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tenants are obtained. If that happened, we cannot predict when or whether we could obtain substitute quality tenants on acceptable terms.

Public charter schools are operated pursuant to charters granted by various state or other regulatory authorities and are dependent upon compliance with the terms of such charters in order to obtain funding from local, state and federal governments. We could be adversely affected by a public charter school's failure to comply with its charter, non-renewal of a charter upon expiration or by its reduction or loss of funding.
Our public charter school properties operate pursuant to charters granted by various state or other regulatory authorities, which are generally shorter than our lease terms, and most of the schools have undergone or expect to undergo compliance audits or reviews by such regulatory authorities. Such audits and reviews examine the financial as well as the academic performance of the school. Adverse audit or review findings could result in non-renewal or revocation of a public charter school's charter, or in some cases, a reduction in the amount of state funding, repayment of previously received state funding or other economic sanctions. Our public charter school tenants are also dependent upon funding from local, state and federal governments, which are currently experiencing budgetary constraints, and any reduction or loss of such funding could adversely affect a public charter school's ability to comply with its charter and/or pay its obligations.

Our master lease agreement with Imagine Schools, Inc. ("Imagine") provides certain contractual protections designed to mitigate risk, such as risk arising from the revocation of a charter of one or more Imagine schools. Subject to our approval and certain other terms and conditions, the master lease agreement also allows Imagine to repurchase from us the public charter school properties that are causing technical defaults. Imagine may, in substitution for such properties, sell to us public charter school properties that would otherwise comply with the lease agreement. However, there is no guarantee that acceptable schools will be available for substitutions or that such substitutions or repurchases will be completed. In addition, while governing authorities may approve substitute operators for failed public charter schools to ensure continuity for students, we cannot predict when or whether applicable governing authorities would approve such substitute operators, nor can we predict whether we could reach lease agreements with such substitute tenants on acceptable terms. In addition, Imagine has in certain previous sales of properties to third parties agreed to pay us the difference between our carrying value and the sales price. Imagine also has a mortgage note obligation to us as a result of sales of certain properties to Imagine. If Imagine or any other operator is unable to provide adequate substitute collateral under its lease with us, and/or is unable to pay its obligations, we may be required to record an impairment loss or sell schools for less than their net book value.

Our build-to-suit education tenants may not achieve sufficient enrollment within expected timeframes and therefore may not be able to pay their agreed upon rent, which could adversely affect our financial results.
A significant portion of our education investments include investments in build-to-suit projects. When construction is completed for these projects, tenants may require some period of time to achieve full enrollment, and we may provide them with lease terms that are more favorable to the tenant during this timeframe. Tenants that fail to achieve sufficient enrollment within expected timeframes may be unable to pay their rent pursuant to the agreed upon lease terms or at all. If we are required to restructure lease terms or take other action with respect to the applicable property, our financial results may be impacted by lower lease revenues, recording an impairment loss, writing off rental amounts or otherwise.

During 2017, cash flow of Children’s Learning Adventure USA, LLC (“CLA”) was negatively impacted by challenges brought on by its rapid expansion and related ramp up to stabilization and by adverse weather events in Texas during the third quarter of 2017. During 2017, we participated in negotiations among CLA and other landlords regarding a potential restructuring. Although negotiations are on-going and progress has been made toward a restructuring, investments necessary to accomplish the restructuring have not yet been secured. Certain subsidiaries of CLA who are tenants under our leases have filed Chapter 11 petitions in bankruptcy seeking the protections of the Bankruptcy Code. We intend to pursue legal remedies to secure possession of these properties as expeditiously as possible. We believe that the time it will take to achieve this outcome gives CLA ample opportunity to negotiate a restructuring which, if successful, would obviate the need to evict CLA from these properties. There can be no assurances as to the ultimate outcome of such a restructuring or our pursuit of our legal remedies with respect to these properties.


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We are subject to risks relating to provisions included in some of our leases or financing arrangements with operators of our education properties pursuant to which such operators have the option to purchase leased properties or prepay notes relating to financed education properties.
Some of our leases or financing arrangements with education operators include provisions pursuant to which tenant operators may purchase leased properties and mortgagor operators may prepay notes relating to financed education properties, in each case, subject to option exercise payments or prepayment penalties. Some of these tenant or mortgagor operators may be able to obtain alternative financing on more economically favorable terms, in which case, such operators may choose to exercise their purchase option or prepayment right. If such operators exercise their purchase options or prepayment rights, we cannot provide any assurances that we would be able to redeploy the capital associated with these properties in other investments or that such investments would provide comparable returns, which could reduce our earnings going forward. Additionally, it can be difficult to forecast when tenants will exercise their purchase option or borrowers will prepay, which can create volatility in our earnings.

Our indebtedness may affect our ability to operate our business and may have a material adverse effect on our financial condition and results of operations.
We have a significant amount of indebtedness. As of December 31, 2017, we had total debt outstanding of approximately $3.1 billion. Our indebtedness could have important consequences, such as:

limiting our ability to obtain additional financing to fund our working capital needs, acquisitions, capital expenditures or other debt service requirements or for other purposes;

limiting our ability to use operating cash flow in other areas of our business because we must dedicate a substantial portion of these funds to service debt;

limiting our ability to compete with other companies who are not as highly leveraged, as we may be less capable of responding to adverse economic and industry conditions;

restricting us from making strategic acquisitions, developing properties or exploiting business opportunities;

restricting the way in which we conduct our business because of financial and operating covenants in the agreements governing our existing and future indebtedness;

exposing us to potential events of default (if not cured or waived) under financial and operating covenants contained in our debt instruments that could have a material adverse effect on our business, financial condition and operating results;

increasing our vulnerability to a downturn in general economic conditions or in pricing of our investments;

negatively impacting our credit ratings; and

limiting our ability to react to changing market conditions in our industry and in our customers’ industries.

In addition to our debt service obligations, our operations require substantial investments on a continuing basis. Our ability to make scheduled debt payments, to refinance our obligations with respect to our indebtedness and to fund capital and non-capital expenditures necessary to meet our remaining commitments on existing projects and maintain the condition of our assets, as well as to provide capacity for the growth of our business, depends on our financial and operating performance, which, in turn, is subject to prevailing economic conditions and financial, business, competitive, legal and other factors.

Subject to the restrictions in our unsecured revolving credit facility, our unsecured term loan facility and the debt instruments governing our existing senior notes, we may incur significant additional indebtedness, including additional secured indebtedness. Although the terms of our unsecured revolving credit facility, our unsecured term loan facility and the debt instruments governing our existing senior notes contain restrictions on the incurrence of additional

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indebtedness, these restrictions are subject to a number of qualifications and exceptions, and additional indebtedness incurred in compliance with these restrictions could be significant. If new debt is added to our current debt levels, the risks described above could increase.

There are risks inherent in having indebtedness and the use of such indebtedness to fund acquisitions.
We currently use debt to fund portions of our operations and acquisitions. In a rising interest rate environment, the cost of our existing variable rate debt and any new debt will increase. We have used leverage to acquire properties and expect to continue to do so in the future. Although the use of leverage is common in the real estate industry, our use of debt exposes us to some risks. If a significant number of our tenants fail to make their lease payments and we do not have sufficient cash to pay principal and interest on the debt, we could default on our debt obligations. A small amount of our debt financing is secured by mortgages on our properties and we may enter into additional secured mortgage financing in the future. If we fail to meet our mortgage payments, the lenders could declare a default and foreclose on those properties.

Most of our debt instruments contain balloon payments which may adversely impact our financial performance and our ability to pay dividends.
Most of our financing arrangements require us to make a lump-sum or "balloon" payment at maturity. There can be no assurance that we will be able to refinance such debt on favorable terms or at all. To the extent we cannot refinance such debt on favorable terms or at all, we may be forced to dispose of properties on disadvantageous terms or pay higher interest rates, either of which would have an adverse impact on our financial performance and ability to pay dividends to our shareholders.

We must obtain new financing in order to grow.
As a REIT, we are required to distribute at least 90% of our taxable net income to shareholders in the form of dividends. Other than deciding to make these dividends in our common shares, we are limited in our ability to use internal capital to acquire properties and must continually raise new capital in order to continue to grow and diversify our investment portfolio. Our ability to raise new capital depends in part on factors beyond our control, including conditions in equity and credit markets, conditions in the industries in which our tenants are engaged and the performance of real estate investment trusts generally. We continually consider and evaluate a variety of potential transactions to raise additional capital, but we cannot assure that attractive alternatives will always be available to us, nor that our share price will increase or remain at a level that will permit us to continue to raise equity capital publicly or privately.

Covenants in our debt instruments could adversely affect our financial condition and our acquisitions and development activities.
Some of our properties are subject to mortgages that contain customary covenants such as those that limit our ability, without the prior consent of the lender, to further mortgage the applicable property or to discontinue insurance coverage. Our unsecured revolving credit facility, term loan facility, senior notes and other loans that we may obtain in the future contain certain cross-default provisions as well as customary restrictions, requirements and other limitations on our ability to incur indebtedness, including covenants involving our maximum total debt to total asset value; maximum permitted investments; minimum tangible net worth; maximum secured debt to total asset value; maximum unsecured debt to eligible unencumbered properties; minimum unsecured interest coverage; and minimum fixed charge coverage. Our ability to borrow under our unsecured revolving credit facility and our term loan facility is also subject to compliance with certain other covenants. We also have senior notes issued in a private placement transaction that are subject to certain covenants. In addition, failure to comply with our covenants could cause a default under the applicable debt instrument, and we may then be required to repay such debt with capital from other sources. Under those circumstances, other sources of capital may not be available to us, or be available only on unattractive terms. Additionally, our ability to satisfy current or prospective lenders' insurance requirements may be adversely affected if lenders generally insist upon greater insurance coverage against acts of terrorism than is available to us in the marketplace or on commercially reasonable terms.

We rely on debt financing, including borrowings under our unsecured revolving credit facility, term loan facility, issuances of debt securities and debt secured by individual properties, to finance our acquisition and development activities and for working capital. If we are unable to obtain financing from these or other sources, or to refinance existing indebtedness upon maturity, our financial condition and results of operations would likely be adversely affected.

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Our real estate investments are concentrated in entertainment, recreation and education properties and a significant portion of those investments are in megaplex theatre properties, making us more vulnerable economically than if our investments were more diversified.
We acquire, develop or finance entertainment, recreation and education properties. A significant portion of our investments are in megaplex theatre properties. Although we are subject to the general risks inherent in concentrating investments in real estate, the risks resulting from a lack of diversification become even greater as a result of investing primarily in entertainment, recreation and education properties. These risks are further heightened by the fact that a significant portion of our investments are in megaplex theatre properties. Although a downturn in the real estate industry could significantly adversely affect the value of our properties, a downturn in the entertainment, recreation and education industries could compound this adverse effect. These adverse effects could be more pronounced than if we diversified our investments to a greater degree outside of entertainment, recreation and education properties or, more particularly, outside of megaplex theatre properties.

If we fail to qualify as a REIT, we would be taxed as a corporation, which would substantially reduce funds available for payment of dividends to our shareholders.
If we fail to qualify as a REIT for federal income tax purposes, we will be taxed as a corporation. We are organized and believe we qualify as a REIT, and intend to operate in a manner that will allow us to continue to qualify as a REIT. However, we cannot provide any assurance that we have always qualified and will remain qualified in the future. This is because qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), on which there are only limited judicial and administrative interpretations, and depends on facts and circumstances not entirely within our control. In addition, future legislation, new regulations, administrative interpretations or court decisions may significantly change the tax laws, the application of the tax laws to our qualification as a REIT or the federal income tax consequences of that qualification.

If we were to fail to qualify as a REIT in any taxable year (including any prior taxable year for which the statute of limitations remains open), we would face tax consequences that could substantially reduce the funds available for the service of our debt and payment of dividends:

we would not be allowed a deduction for dividends paid to shareholders in computing our taxable income and would be subject to federal income tax at regular corporate rates;

we could be subject to the federal alternative minimum tax and possibly increased state and local taxes;

unless we are entitled to relief under statutory provisions, we could not elect to be treated as a REIT for four taxable years following the year in which we were disqualified; and

we could be subject to tax penalties and interest.

In addition, if we fail to qualify as a REIT, we will no longer be required to pay dividends. As a result of these factors, our failure to qualify as a REIT could adversely affect the market price for our shares.

We will depend on distributions from our direct and indirect subsidiaries to service our debt and pay dividends to our shareholders. The creditors of these subsidiaries, and our direct creditors, are entitled to amounts payable to them before we pay any dividends to our shareholders.
Substantially all of our assets are held through our subsidiaries. We depend on these subsidiaries for substantially all of our cash flow. The creditors of each of our direct and indirect subsidiaries are entitled to payment of that subsidiary's obligations to them, when due and payable, before distributions may be made by that subsidiary to us. In addition, our creditors, whether secured or unsecured, are entitled to amounts payable to them before we may pay any dividends to our shareholders. Thus, our ability to service our debt obligations and pay dividends to holders of our common and preferred shares depends on our subsidiaries' ability first to satisfy their obligations to their creditors and then to pay distributions to us and our ability to satisfy our obligations to our direct creditors. Our subsidiaries are separate and

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distinct legal entities and have no obligations, other than limited guaranties of certain of our debt, to make funds available to us.

Our development financing arrangements expose us to funding and completion risks.
Our ability to meet our construction financing obligations which we have undertaken or may enter into in the future depends on our ability to obtain equity or debt financing in the required amounts. There is no assurance we can obtain this financing or that the financing rates available will ensure a spread between our cost of capital and the rent or interest payable to us under the related leases or mortgage notes receivable. As a result, we could fail to meet our construction financing obligations or decide to cease such funding which, in turn, could result in failed projects and penalties, each of which could have a material adverse impact on our results of operations and business.

We have a limited number of employees and loss of personnel could harm our operations and adversely affect the value of our shares.
We had 63 full-time employees as of December 31, 2017 and, therefore, the impact we may feel from the loss of an employee may be greater than the impact such a loss would have on a larger organization. We are dependent on the efforts of the following individuals: Gregory K. Silvers, our President and Chief Executive Officer; Mark A. Peterson, our Executive Vice President and Chief Financial Officer; Morgan G. Earnest, our Senior Vice President and Chief Investment Officer; Craig L. Evans, our Senior Vice President, General Counsel and Secretary; Michael L. Hirons, our Senior Vice President - Strategy & Asset Management; and Tonya L. Mater, our Vice President and Chief Accounting Officer. While we believe that we could find replacements for our personnel, the loss of their services could harm our operations and adversely affect the value of our shares.

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer. Our service providers and our tenants and their business partners are exposed to similar risks.
In the ordinary course of our business, we collect and store sensitive data, including our proprietary business information and that of our tenants and clients and personally identifiable information of our employees, in our facility and on our network. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our network and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, disrupt our operations, damage our reputation, and cause a loss of confidence, which could adversely affect our business. Our service providers and our tenants and their business partners are exposed to similar risks and the occurrence of a security breach or other disruption with respect to their information technology and infrastructure could, in turn, have a material adverse impact on our results of operations and business.

Changes in accounting standards issued by the Financial Accounting Standards Board ("FASB") or other standard-setting bodies may adversely affect our financial statements.
Our financial statements are subject to the application of U.S. GAAP, which is periodically revised and/or expanded. From time to time, we are required to adopt new or revised accounting standards issued by recognized authoritative bodies, including the FASB and the SEC. It is possible that future accounting standards we are required to adopt, such as the amended guidance for revenue recognition and leases, may require changes to the current accounting treatment that we apply to our consolidated financial statements and may require us to make significant changes to our systems. Such changes could result in a material adverse impact on our business, financial condition and results of operations.

Risks That Apply to Our Real Estate Business

Real estate income and the value of real estate investments fluctuate due to various factors.
The value of real estate fluctuates depending on conditions in the general economy and the real estate business. These conditions may also limit our revenues and available cash. The rents and interest we receive and the occupancy levels at our properties may decline as a result of adverse changes in any of the factors that affect the value of our real estate. If our revenues decline, we generally would expect to have less cash available to pay our indebtedness and distribute to our shareholders. In addition, some of our unreimbursed costs of owning real estate may not decline when the related rents decline.

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The factors that affect the value of our real estate include, among other things:

international, national, regional and local economic conditions;

consequences of any armed conflict involving, or terrorist attack against, the United States or Canada;

the threat of domestic terrorism or pandemic outbreaks, which could cause customers of our tenants to avoid public places where large crowds are in attendance, such as megaplex theatres or recreational properties operated by our tenants;

our ability to secure adequate insurance;

natural disasters, such as earthquakes, hurricanes and floods, which could exceed the aggregate limits of insurance coverage;

local conditions such as an oversupply of space or 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;

the financial condition of our tenants, including the extent of tenant bankruptcies or defaults;

whether we are able to pass some or all of any increased operating costs through to tenants;

how well we manage our properties;

fluctuations in interest rates;

changes in real estate taxes and other expenses;

changes in market rental rates;

the timing and costs associated with property improvements and rentals;

changes in taxation or zoning laws;

government regulation;

availability of financing on acceptable terms or at all;

potential liability under environmental or other laws or regulations; and

general competitive factors.

The rents and interest we receive and the occupancy levels at our properties may decline as a result of adverse changes in any of these factors. If our revenues decline, we generally would expect to have less cash available to pay our indebtedness and distribute to our shareholders. In addition, some of our unreimbursed costs of owning real estate may not decline when the related rents decline.

There are risks associated with owning and leasing real estate.
Although our lease terms obligate the tenants to bear substantially all of the costs of operating the properties, investing in real estate involves a number of risks, including:

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the risk that tenants will not perform under their leases, reducing our income from the leases or requiring us to assume the cost of performing obligations (such as taxes, insurance and maintenance) that are the tenant's responsibility under the lease;

we may not always be able to lease properties at favorable rates or certain tenants may require significant capital expenditures by us to conform existing properties to their requirements;

we may not always be able to sell a property when we desire to do so at a favorable price; and

changes in tax, zoning or other laws could make properties less attractive or less profitable.

If a tenant fails to perform on its lease covenants, that would not excuse us from meeting any debt obligation secured by the property and could require us to fund reserves in favor of our lenders, thereby reducing funds available for payment of dividends. We cannot be assured that tenants will elect to renew their leases when the terms expire. If a tenant does not renew its lease or if a tenant defaults on its lease obligations, there is no assurance we could obtain a substitute tenant on acceptable terms. If we cannot obtain another quality tenant, we may be required to modify the property for a different use, which may involve a significant capital expenditure and a delay in re-leasing the property.

Some potential losses are not covered by insurance.
Our leases require the tenants to carry comprehensive liability, casualty, workers' compensation, extended coverage and rental loss insurance on our properties. We believe the required coverage is of the type, and amount, customarily obtained by an owner of similar properties. We believe all of our properties are adequately insured. However, there are some types of losses, such as catastrophic acts of nature, acts of war or riots, for which we or our tenants cannot obtain insurance at an acceptable cost. If there is an uninsured loss or a loss in excess of insurance limits, we could lose both the revenues generated by the affected property and the capital we have invested in the property. We would, however, remain obligated to repay any mortgage indebtedness or other obligations related to the property. In addition, the cost of insurance protection against terrorist acts has risen dramatically over the years. There can be no assurance our tenants will be able to obtain terrorism insurance coverage, or that any coverage they do obtain will adequately protect our properties against loss from terrorist attack.

Joint ventures may limit flexibility with jointly owned investments.
We may continue to acquire or develop properties in joint ventures with third parties when those transactions appear desirable. We would not own the entire interest in any property acquired by a joint venture. Major decisions regarding a joint venture property may require the consent of our partner. If we have a dispute with a joint venture partner, we may feel it necessary or become obligated to acquire the partner's interest in the venture. However, we cannot ensure that the price we would have to pay or the timing of the acquisition would be favorable to us. If we own less than a 50% interest in any joint venture, or if the venture is jointly controlled, the assets and financial results of the joint venture may not be reportable by us on a consolidated basis. To the extent we have commitments to, or on behalf of, or are dependent on, any such “off-balance sheet” arrangements, or if those arrangements or their properties or leases are subject to material contingencies, our liquidity, financial condition and operating results could be adversely affected by those commitments or off-balance sheet arrangements.

Our multi-tenant properties expose us to additional risks.
Our entertainment retail centers in Colorado, New York, California, and Ontario, Canada, and similar properties we may seek to acquire or develop in the future, involve risks not typically encountered in the purchase and lease-back of real estate properties which are operated by a single tenant. The ownership or development of multi-tenant retail centers could expose us to the risk that a sufficient number of suitable tenants may not be found to enable the centers to operate profitably and provide a return to us. This risk may be compounded by the failure of existing tenants to satisfy their obligations due to various factors, including the current economic crisis. These risks, in turn, could cause a material adverse impact to our results of operations and business.


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Retail centers are also subject to tenant turnover and fluctuations in occupancy rates, which could affect our operating results. Multi-tenant retail centers also expose us to the risk of potential “CAM slippage,” which may occur when the actual cost of taxes, insurance and maintenance at the property exceeds the CAM fees paid by tenants.

Failure to comply with the Americans with Disabilities Act and other laws could result in substantial costs.
Most of our properties must comply with the Americans with Disabilities Act (“ADA”). The ADA requires that public accommodations reasonably accommodate individuals with disabilities and that new construction or alterations be made to commercial facilities to conform to accessibility guidelines. Failure to comply with the ADA can result in injunctions, fines, damage awards to private parties and additional capital expenditures to remedy noncompliance. Our leases require the tenants to comply with the ADA.

Our properties are also subject to various other federal, state and local regulatory requirements. We do not know whether existing requirements will change or whether compliance with future requirements will involve significant unanticipated expenditures. Although these expenditures would be the responsibility of our tenants, if tenants fail to perform these obligations, we may be required to do so.

Potential liability for environmental contamination could result in substantial costs.
Under federal, state and local environmental laws, we may be required to investigate and clean up any release of hazardous or toxic substances or petroleum products at our properties, regardless of our knowledge or actual responsibility, simply because of our current or past ownership of the real estate. If unidentified environmental problems arise, we may have to make substantial payments, which could adversely affect our cash flow and our ability to service our debt and pay dividends to our shareholders. This is because:

as owner, we may have to pay for property damage and for investigation and clean-up costs incurred in connection with the contamination;

the law may impose clean-up responsibility and liability regardless of whether the owner or operator knew of or caused the contamination;

even if more than one person is responsible for the contamination, each person who shares legal liability under environmental laws may be held responsible for all of the clean-up costs; and

governmental entities and third parties may sue the owner or operator of a contaminated site for damages and costs.

These costs could be substantial and in extreme cases could exceed the value of the contaminated property. The presence of hazardous substances or petroleum products or the failure to properly remediate contamination may adversely affect our ability to borrow against, sell or lease an affected property. In addition, some environmental laws create liens on contaminated sites in favor of the government for damages and costs it incurs in connection with a contamination. Most of our loan agreements require the Company or a subsidiary to indemnify the lender against environmental liabilities. Our leases require the tenants to operate the properties in compliance with environmental laws and to indemnify us against environmental liability arising from the operation of the properties. We believe all of our properties are in material compliance with environmental laws. However, we could be subject to strict liability under environmental laws because we own the properties. There is also a risk that tenants may not satisfy their environmental compliance and indemnification obligations under the leases. Any of these events could substantially increase our cost of operations, require us to fund environmental indemnities in favor of our lenders, limit the amount we could borrow under our unsecured revolving credit facility and term loan facility and reduce our ability to service our debt and pay dividends to shareholders.

Real estate investments are relatively illiquid.
We have previously disclosed our intent to undertake certain asset dispositions. In addition, we may desire to sell other properties in the future because of changes in market conditions, poor tenant performance or default of any mortgage we hold, or to avail ourselves of other opportunities. We may also be required to sell a property in the future to meet debt obligations or avoid a default. Specialty real estate projects such as we have cannot always be sold quickly, and

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we cannot assure you that we could always obtain a favorable price. In addition, the Internal Revenue Code limits our ability to sell our properties. We may be required to invest in the restoration or modification of a property before we can sell it. The inability to respond promptly to changes in the performance of our property portfolio could adversely affect our financial condition and ability to service our debt and pay dividends to our shareholders.

There are risks in owning assets outside the United States.
Our properties in Canada are subject to the risks normally associated with international operations. The rentals under our Canadian leases are payable in Canadian dollars, which could expose us to losses resulting from fluctuations in exchange rates to the extent we have not hedged our position. Canadian real estate and tax laws are complex and subject to change, and we cannot assure you we will always be in compliance with those laws or that compliance will not expose us to additional expense. We may also be subject to fluctuations in Canadian real estate values or markets or the Canadian economy as a whole, which may adversely affect our Canadian investments.

Additionally, we have made investments in projects located in China and may enter other international markets, which may have similar risks as described above as well as unique risks associated with a specific country.

There are risks in owning or financing properties for which the tenant's, mortgagor's or our operations may be impacted by weather conditions and climate change.
We have acquired and financed ski properties and expect to do so in the future. The operators of these properties, our tenants or mortgagors, are dependent upon the operations of the properties to pay their rents and service their loans. The ski property operator's ability to attract visitors is influenced by weather conditions and climate change in general, each of which may impact the amount of snowfall during the ski season. Adverse weather conditions may discourage visitors from participating in outdoor activities. In addition, unseasonably warm weather may result in inadequate natural snowfall, which increases the cost of snowmaking, and could render snowmaking wholly or partially ineffective in maintaining quality skiing conditions and attracting visitors. Excessive natural snowfall may materially increase the costs incurred for grooming trails and may also make it difficult for visitors to obtain access to the ski property. We also own and finance attractions (including waterparks) which would also be subject to risks relating to weather conditions such as in the case of waterparks and amusement parks, excessive rainfall or unseasonable temperatures. Prolonged periods of adverse weather conditions, or the occurrence of such conditions during peak visitation periods, could have a material adverse effect on the operator's financial results and could impair the ability of the operator to make rental payments or service our loans.

We face risks associated with the development, redevelopment and expansion of properties and the acquisition of other real estate related companies.
We may develop, redevelop or expand new or existing properties or acquire other real estate related companies, and these activities are subject to various risks.  We may not be successful in pursuing such development or acquisition opportunities. In addition, newly developed or redeveloped/expanded properties or newly acquired companies may not perform as well as expected. We are subject to other risks in connection with any such development or acquisition activities, including the following:

we may not succeed in completing developments or consummating desired acquisitions on time;

we may face competition in pursuing development or acquisition opportunities, which could increase our costs;

we may encounter difficulties and incur substantial expenses in integrating acquired properties into our operations and systems and, in any event, the integration may require a substantial amount of time on the part of both our management and employees and therefore divert their attention from other aspects of our business;

we may undertake developments or acquisitions in new markets or industries where we do not have the same level of market knowledge, which may expose us to unanticipated risks in those markets and industries to which we are unable to effectively respond, such as an inability to attract qualified personnel with knowledge of such markets and industries;


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we may incur construction costs in connection with developments, which may be higher than projected, potentially making the project unfeasible or unprofitable;

we may incur unanticipated capital expenditures in order to maintain or improve acquired properties;

we may be unable to obtain zoning, occupancy or other governmental approvals;

we may experience delays in receiving rental payments for developments that are not completed on time;

our developments or acquisitions may not be profitable;

we may need the consent of third parties such as anchor tenants, mortgage lenders and joint venture partners, and those consents may be withheld;

we may incur adverse tax consequences if we fail to qualify as a REIT for U.S. federal income tax purposes following an acquisition;

we may be subject to risks associated with providing mortgage financing to third parties in connection with transactions, including any default under such mortgage financing;

we may face litigation or other claims in connection with, or as a result of, acquisitions, including claims from terminated employees, tenants, former stockholders or other third parties;

the market price of our common shares, preferred shares and debt securities may decline, particularly if we do not achieve the perceived benefits of any acquisition as rapidly or to the extent anticipated by securities or industry analysts or if the effect of an acquisition on our financial condition, results of operations and cash flows is not consistent with the expectations of these analysts;

we may issue shares in connection with acquisitions resulting in dilution to our existing shareholders; and

we may assume debt or other liabilities in connection with acquisitions.

In addition, there is no assurance that planned third-party financing related to development and acquisition opportunities will be provided on a timely basis or at all, thus increasing the risk that such opportunities are delayed or fail to be completed as originally contemplated. We may also abandon development or acquisition opportunities that we have begun pursuing and consequently fail to recover expenses already incurred and have devoted management time to a matter not consummated.  In some cases, we may agree to lease or other financing terms for a development project in advance of completing and funding the project, in which case we are exposed to the risk of an increase in our cost of capital during the interim period leading up to the funding, which can reduce, eliminate or result in a negative spread between our cost of capital and the payments we expect to receive from the project. Furthermore, our acquisitions of new properties or companies will expose us to the liabilities of those properties or companies, some of which we may not be aware at the time of acquisition. In addition, development of our existing properties presents similar risks.  If a development or acquisition is unsuccessful, either because it is not meeting our expectations or was not completed according to our plans, we could lose our investment in the development or acquisition.


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Risks That May Affect the Market Price of Our Shares

We cannot assure you we will continue paying cash dividends at current rates.
Our dividend policy is determined by our Board of Trustees. Our ability to continue paying dividends on our common shares, to pay dividends on our preferred shares at their stated rates or to increase our common share dividend rate will depend on a number of factors, including our liquidity, our financial condition and results of future operations, the performance of lease and mortgage terms by our tenants and customers, our ability to acquire, finance and lease additional properties at attractive rates, and provisions in our loan covenants. If we do not maintain or increase our common share dividend rate, that could have an adverse effect on the market price of our common shares and possibly our preferred shares. Furthermore, if the Board of Trustees decides to pay dividends on our common shares partially or substantially all in common shares, that could have an adverse effect on the market price of our common shares and possibly our preferred shares.

Market interest rates may have an effect on the value of our shares.
One of the factors that investors may consider in deciding whether to buy or sell our common shares or preferred shares is our dividend rate as a percentage of our share price, relative to market interest rates. If market interest rates increase, prospective investors may desire a higher dividend rate on our common shares or seek securities paying higher dividends or interest.

Market prices for our shares may be affected by perceptions about the financial health or share value of our tenants and mortgagors or the performance of REIT stocks generally.
To the extent any of our tenants or customers, or their competition, report losses or slower earnings growth, take charges against earnings or enter bankruptcy proceedings, the market price for our shares could be adversely affected. The market price for our shares could also be affected by any weakness in the performance of REIT stocks generally or weakness in any of the sectors in which our tenants and customers operate.

Limits on changes in control may discourage takeover attempts which may be beneficial to our shareholders.
There are a number of provisions in our Declaration of Trust and Bylaws and under Maryland law and agreements we have with others, any of which could make it more difficult for a party to make a tender offer for our shares or complete a takeover of the Company which is not approved by our Board of Trustees. These include:

a staggered Board of Trustees that can be increased in number without shareholder approval;

a limit on beneficial ownership of our shares, which acts as a defense against a hostile takeover or acquisition of a significant or controlling interest, in addition to preserving our REIT status;

the ability of the Board of Trustees to issue preferred or common shares, to reclassify preferred or common shares, and to increase the amount of our authorized preferred or common shares, without shareholder approval;

limits on the ability of shareholders to remove trustees without cause;

requirements for advance notice of shareholder proposals at shareholder meetings;

provisions of Maryland law restricting business combinations and control share acquisitions not approved by the Board of Trustees and unsolicited takeovers;

provisions of Maryland law protecting corporations (and by extension REITs) against unsolicited takeovers by limiting the duties of the trustees in unsolicited takeover situations;

provisions in Maryland law providing that the trustees are not subject to any higher duty or greater scrutiny than that applied to any other director under Maryland law in transactions relating to the acquisition or potential acquisition of control;


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provisions of Maryland law creating a statutory presumption that an act of the trustees satisfies the applicable standards of conduct for trustees under Maryland law;

provisions in loan or joint venture agreements putting the Company in default upon a change in control; and

provisions of employment agreements and other compensation arrangements with our employees calling for severance compensation and vesting of equity compensation upon termination of employment upon a change in control or certain events of the officers' termination of service.

Any or all of these provisions could delay or prevent a change in control of the Company, even if the change was in our shareholders' interest or offered a greater return to our shareholders.

We may change our policies without obtaining the approval of our shareholders.
Our operating and financial policies, including our policies with respect to acquiring or financing real estate or other companies, growth, operations, indebtedness, capitalization and dividends, are exclusively determined by our Board of Trustees. Accordingly, our shareholders do not control these policies.

Dilution could affect the value of our shares.
Our future growth will depend in part on our ability to raise additional capital. If we raise additional capital through the issuance of equity securities, the interests of holders of our common shares could be diluted. Likewise, our Board of Trustees is authorized to cause us to issue preferred shares in one or more series, the holders of which would be entitled to dividends and voting and other rights as our Board of Trustees determines, and which could be senior to or convertible into our common shares. Accordingly, an issuance by us of preferred shares could be dilutive to or otherwise adversely affect the interests of holders of our common shares. As of December 31, 2017, our Series C preferred shares are convertible, at each of the holder's option, into our common shares at a conversion rate of 0.3857 common shares per $25.00 liquidation preference, which is equivalent to a conversion price of approximately $64.82 per common share (subject to adjustment in certain events). Additionally, as of December 31, 2017, our Series E preferred shares are convertible, at each of the holder's option, into our common shares at a conversion rate of 0.4616 common shares per $25.00 liquidation preference, which is equivalent to a conversion price of approximately $54.16 per common share (subject to adjustment in certain events). Under certain circumstances in connection with a change in control of our Company, holders of our Series G preferred shares may elect to convert some or all of their Series G preferred shares into a number of our common shares per Series G preferred share equal to the lesser of (a) the $25.00 per share liquidation preference, plus accrued and unpaid dividends divided by the market value of our common shares or (b) 0.7389 shares. Depending upon the number of Series C, Series E and Series G preferred shares being converted at one time, a conversion of Series C, Series E and Series G preferred shares could be dilutive to or otherwise adversely affect the interests of holders of our common shares. In addition, we may issue a significant amount of equity securities in connection with acquisitions or investments, with or without seeking shareholder approval, which could result in significant dilution to our existing shareholders.

Future offerings of debt or equity securities, which may rank senior to our common shares, may adversely affect the market price of our common shares.
If we decide to issue debt securities in the future, which would rank senior to our common shares, it is likely that they will be governed by an indenture or other instrument containing covenants restricting our operating flexibility. Additionally, any equity securities or convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common shares and may result in dilution to owners of our common shares. We and, indirectly, our shareholders, will bear the cost of issuing and servicing such securities. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, holders of our common shares will bear the risk of our future offerings reducing the market price of our common shares and diluting the value of their shareholdings in us.

Changes in foreign currency exchange rates may have an impact on the value of our shares.
The functional currency for our Canadian operations is the Canadian dollar. As a result, our future operating results could be affected by fluctuations in the exchange rate between U.S. and Canadian dollars, which in turn could affect

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our share price. We have attempted to mitigate our exposure to Canadian currency exchange risk by entering into foreign currency exchange contracts to hedge in part our exposure to exchange rate fluctuations. Foreign currency derivatives are subject to future risk of loss. We do not engage in purchasing foreign exchange contracts for speculative purposes.

Additionally, we have made investments in China and may enter other international markets which pose similar currency fluctuation risks as described above.

We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our shares.
At any time, the U.S. federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or regulations may be changed, possibly with retroactive effect. In addition, there have been a number of proposals in Congress with respect to tax laws, including proposals to adopt a flat tax or replace the income tax system with a national sales tax or value-added tax.

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law. The Tax Cuts and Jobs Act made many significant changes to the U.S. federal income tax laws applicable to businesses and their owners, including REITs and their shareholders. Pursuant to this legislation, as of January 1, 2018, (1) the federal income tax rate applicable to corporations is reduced to 21%, (2) the highest marginal individual income tax rate is reduced to 37%, and (3) the corporate alternative minimum tax is repealed. In addition, individuals, estates and trusts may deduct up to 20% of certain pass-through income, including ordinary REIT dividends that are not “capital gain dividends” or “qualified dividend income,” subject to complex limitations. For taxpayers qualifying for the full deduction, the effective maximum tax rate on ordinary REIT dividends would be 29.6% (through taxable years ending in 2025). The maximum rate of withholding with respect to our distributions to non-U.S. shareholders that are treated as attributable to gains from the sale or exchange of U.S. real property interests is also reduced from 35% to 21%. The deduction of net interest expense is limited for all businesses, other than certain electing businesses, including real estate businesses, which limitation could adversely affect our taxable REIT subsidiaries.

While the changes in the Tax Cuts and Jobs Act generally appear to be favorable with respect to REITs, the extensive changes to non-REIT provisions in the Internal Revenue Code may have unanticipated effects on us or our shareholders. Moreover, Congressional leaders have recognized that the process of adopting extensive tax legislation in a short amount of time without hearings and substantial time for review is likely to have led to drafting errors, issues needing clarification and unintended consequences that will have to be reviewed in subsequent tax legislation. At this point, it is not clear when Congress will address these issues or when the Internal Revenue Service will be able to issue administrative guidance on the changes made in the Tax Cuts and Jobs Act.

We cannot predict if or when any new U.S. federal income tax law, regulation or administrative interpretation, or any amendment to any existing U.S. federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective or whether any such law, regulation or interpretation may take effect retroactively. We and our shareholders could be adversely affected by any such change in, or any new, U.S. federal income tax law, regulation or administrative interpretation. Furthermore, any proposals seeking broader reform of U.S. federal income tax laws, if enacted, could change the federal income tax laws applicable to REITs, subject us to federal tax or reduce or eliminate the current deduction for dividends paid to our shareholders, any of which could negatively affect the market for our shares.

Item 1B. Unresolved Staff Comments

There are no unresolved comments from the staff of the SEC required to be disclosed herein as of the date of this Annual Report on Form 10-K.


26


Item 2. Properties

As of December 31, 2017, our real estate portfolio (including properties securing our mortgage notes) consisted of investments in each of our four operating segments. The Entertainment segment included investments in 147 megaplex theatre properties, seven entertainment retail centers (which include seven additional megaplex theatre properties) and 11 family entertainment centers. The Recreation segment included investments in 26 ski properties, 20 attractions, 30 golf entertainment complexes and eight other recreation properties. The Education segment included investments in 65 public charter school properties, 65 early education centers and 15 private school properties. The Other segment consisted primarily of the land under ground lease, property under development and land held for development related to the Resorts World Catskills casino and resort project in Sullivan County, New York. Our properties are located in 42 states, the District of Columbia and Ontario, Canada. Except as otherwise noted, all of the real estate investments listed below are owned or ground leased directly by us. The following table lists our owned properties (excludes properties under development, land held for development and properties securing our mortgage notes) listed by segment, their locations, acquisition dates, number of theatre screens (if applicable), number of seats (if applicable), gross square footage (except for certain attraction properties where such number is not meaningful), and the tenant.

27


Location
 
Acquisition
date
 
Screens
 
Seats
 
Building
(gross sq. ft)
 
Tenant
Entertainment Properties:
 
 
 
 
 
 
 
 
 
 
San Antonio, TX
 
11/97
 
14

 
2,722

 
53,583

 
Regal
Dallas, TX
 
11/97
 
14

 
2,962

 
56,430

 
Studio Movie Grill
Sugar Land, TX (1)
 
11/97
 
24

 
4,367

 
107,690

 
AMC
Leawood, KS
 
11/97
 
20

 
962

 
75,224

 
AMC
Omaha, NE
 
11/97
 
24

 
4,668

 
107,402

 
AMC
Columbus, OH (1)
 
11/97
 
24

 
4,461

 
98,261

 
AMC
San Diego, CA (1)
 
11/97
 
20

 
4,173

 
84,352

 
AMC
Ontario, CA
 
11/97
 
20

 
2,350

 
131,534

 
AMC
Houston, TX
 
11/97
 
30

 
4,925

 
136,154

 
AMC
Creve Coeur, MO
 
11/97
 
16

 
1,029

 
60,418

 
AMC
San Antonio, TX
 
11/97
 

 

 
27,485

 
Altitude Trampoline Park
Houston, TX
 
2/98
 
29

 
5,115

 
130,891

 
AMC
South Barrington, IL
 
3/98
 
21

 
2,069

 
130,757

 
AMC
Mesquite, TX
 
4/98
 
30

 
3,095

 
130,891

 
AMC
Hampton, VA
 
6/98
 
24

 
4,673

 
107,396

 
AMC
Raleigh, NC
 
8/98
 
16

 
2,596

 
51,450

 
Cinemark
Davie, FL
 
11/98
 
24

 
4,180

 
96,497

 
Cinemark
Pompano Beach, FL
 
11/98
 
18

 
3,424

 
73,637

 
AMC
Aliso Viejo, CA
 
12/98
 
20

 
4,238

 
98,557

 
Regal
Boise, ID (1)
 
12/98
 
22

 
4,883

 
140,300

 
Regal
Woodridge, IL (2)
 
6/99
 
18

 
4,397

 
82,000

 
AMC
Tampa, FL
 
6/99
 
24

 
2,124

 
84,000

 
AMC
Westminster, CO
 
6/99
 
24

 
4,693

 
89,260

 
AMC
Cary, NC
 
12/99
 
20

 
3,883

 
77,475

 
Regal
Houston, TX
 
5/00
 

 

 
7,808

 
Various
Westminster, CO
 
12/01
 

 

 
138,051

 
Various
Metairie, LA (1)
 
3/02
 
11

 
2,127

 
70,000

 
AMC
Harahan, LA
 
3/02
 
20

 
4,116

 
90,391

 
AMC
Hammond, LA
 
3/02
 
10

 
1,530

 
39,850

 
AMC
Houma, LA
 
3/02
 
10

 
1,766

 
44,450

 
AMC
Harvey, LA
 
3/02
 
16

 
3,053

 
71,607

 
AMC
Greenville, SC
 
6/02
 
16

 
2,814

 
52,830

 
Regal
Sterling Heights, MI
 
6/02
 
30

 
4,925

 
107,712

 
AMC
Olathe, KS
 
6/02
 
28

 
4,191

 
100,251

 
AMC
Greenville, SC
 
6/02
 

 

 
10,000

 
Various
Livonia, MI
 
8/02
 
20

 
3,604

 
75,106

 
AMC
Alexandria, VA (1)
 
10/02
 
22

 
3,640

 
132,903

 
AMC
Little Rock, AR
 
12/02
 
18

 
3,997

 
79,330

 
Cinemark
Macon, GA
 
3/03
 
16

 
2,950

 
66,400

 
Southern
Southfield, MI
 
5/03
 
20

 
5,962

 
112,119

 
AMC
Southfield, MI
 
5/03
 

 

 
19,852

 
Various
Lawrence, KS
 
6/03
 
12

 
2,386

 
42,497

 
Regal
New Rochelle, NY
 
10/03
 
18

 
4,893

 
102,267

 
Regal
New Rochelle, NY
 
10/03
 

 

 
343,809

 
Various
Columbia, SC
 
11/03
 
14

 
2,938

 
56,705

 
Regal
Hialeah, FL
 
12/03
 
18

 
4,900

 
77,400

 
Cobb
Phoenix, AZ
 
3/04
 
17

 
1,783

 
113,768

 
AMC
Mesa, AZ
 
3/04
 
14

 
1,257

 
94,774

 
AMC
Hamilton, NJ
 
3/04
 
24

 
4,183

 
95,466

 
AMC
Mississagua, ON (6)
 
3/04
 
16

 
3,856

 
92,971

 
Cineplex
Kanata, ON (6)
 
3/04
 
24

 
4,764

 
89,290

 
Landmark Cinemas
Whitby, ON (6)
 
3/04
 
24

 
4,688

 
89,290

 
Landmark Cinemas
Oakville, ON (6)
 
3/04
 
24

 
4,772

 
89,290

 
Cineplex
Subtotal Entertainment Properties, carried over to next page
 
938

 
167,084

 
4,737,831

 
 

28


Location
 
Acquisition
date
 
Screens
 
Seats
 
Building
(gross sq. ft)
 
Tenant
Entertainment Properties:
 
 
 
 
 
 
 
 
 
 
Subtotal from previous page
 
n/a
 
938

 
167,084

 
4,737,831

 
 
Mississagua, ON (6)
 
3/04
 

 

 
115,934

 
Various
Kanata, ON (6)
 
3/04
 

 

 
384,373

 
Various
Whitby, ON (6)
 
3/04
 

 

 
149,487

 
Various
Oakville, ON (6)
 
3/04
 

 

 
140,830

 
Various
Lafayette, LA (1)
 
7/04
 
16

 
2,744

 
61,579

 
Southern
Peoria, IL
 
7/04
 
18

 
4,063

 
82,330

 
AMC
Warrenville, IL
 
7/04
 

 

 
7,500

 
Various
Hurst, TX
 
11/04
 
18

 
3,914

 
98,250

 
Cinemark
D'Iberville, MS
 
12/04
 
18

 
2,802

 
59,533

 
Southern
Melbourne, FL
 
12/04
 
16

 
3,600

 
75,850

 
AMC
Wilmington, NC
 
2/05
 
16

 
1,165

 
57,338

 
Regal
Chattanooga, TN
 
3/05
 
18

 
4,133

 
82,330

 
AMC
Burbank, CA
 
3/05
 
16

 
3,809

 
86,551

 
AMC
Burbank, CA
 
3/05
 

 

 
34,818

 
Various
Conroe, TX
 
6/05
 
14

 
2,403

 
45,000

 
Southern
Indianapolis, IN
 
6/05
 
12

 
942

 
45,700

 
AMC
Hattiesurg, MS
 
9/05
 
18

 
2,675

 
57,367

 
Southern
Arroyo Grande, CA
 
12/05
 
10

 
1,714

 
35,760

 
Regal
Auburn, CA
 
12/05
 
10

 
1,563

 
35,089

 
Regal
Fresno, CA
 
12/05
 
16

 
3,866

 
80,600

 
Regal
Modesto, CA (1)
 
12/05
 
10

 
3,866

 
38,873

 
Regal
Columbia, MD (1)
 
3/06
 
14

 
2,459

 
63,306

 
AMC
Garland, TX (3)
 
3/06
 
17

 
3,028

 
75,252

 
AMC
Garner, NC
 
4/06
 
14

 
2,619

 
50,810

 
Regal
Winston Salem, NC (1)
 
7/06
 
18

 
3,496

 
75,605

 
Southern
Huntsville, AL
 
8/06
 
18

 
4,150

 
90,200

 
AMC
Kalamazoo, MI
 
11/06
 
10

 
1,007

 
65,525

 
AMC
Slidell, LA (1) (4)
 
12/06
 
16

 
2,695

 
62,300

 
Southern
Pensacola, FL
 
12/06
 
15

 
3,361

 
74,400

 
AMC
Panama City Beach, FL
 
5/07
 
16

 
3,636

 
75,605

 
Southern
Kalispell, MT
 
8/07
 
14

 
2,088

 
44,650

 
Cinemark
Greensboro, NC (1)
 
11/07
 
18

 
3,320

 
74,517

 
Southern
Glendora, CA (1)
 
10/08
 
12

 
2,186

 
50,710

 
AMC
Ypsilanti, MI
 
12/09
 
20

 
5,602

 
131,098

 
Cinemark
Manchester, CT
 
12/09
 
18

 
4,317

 
87,700

 
Cinemark
Centreville, VA
 
12/09
 
12

 
3,094

 
73,500

 
Cinemark
Davenport, IA
 
12/09
 
18

 
3,772

 
93,755

 
Cinemark
Fairfax, VA
 
12/09
 
14

 
3,544

 
74,689

 
Cinemark
Flint, MI
 
12/09
 
14

 
3,493

 
85,911

 
Cinemark
Hazlet, NJ
 
12/09
 
12

 
3,000

 
58,300

 
Cinemark
Huber Heights, OH
 
12/09
 
16

 
1,624

 
95,830

 
Cinemark
North Haven, CT
 
12/09
 
14

 
1,329

 
57,202

 
Cinemark
Okolona, KY
 
12/09
 
16

 
3,264

 
79,453

 
Cinemark
Voorhees, NJ
 
12/09
 
16

 
3,098

 
62,658

 
AMC
Louisville, KY
 
12/09
 
20

 
3,194

 
84,202

 
AMC
Beaver Creek, OH
 
12/09
 
14

 
3,211

 
73,634

 
Cinemark
West Springfield, MA
 
12/09
 
15

 
3,775

 
111,166

 
Cinemark
Cincinnati, OH
 
12/09
 
14

 
3,152

 
63,829

 
Cinemark
Beaumont, TX
 
6/10
 
15

 
2,805

 
63,352

 
Cinemark
Colorado Springs, CO
 
6/10
 
20

 
4,597

 
109,986

 
Cinemark
El Paso, TX
 
6/10
 
20

 
4,742

 
109,030

 
Cinemark
Subtotal Entertainment Properties, carried over to next page
 
1,634

 
306,001

 
8,831,098

 
 

29


Location
 
Acquisition
date
 
Screens
 
Seats
 
Building
(gross sq. ft)
 
Tenant
Entertainment Properties:
 
 
 
 
 
 
 
 
 
 
Subtotal from previous page
 
n/a
 
1,634

 
306,001

 
8,831,098

 
 
Grand Prairie, TX
 
6/10
 
15

 
2,654

 
53,880

 
Cinemark
Houston, TX
 
6/10
 
16

 
4,369

 
100,656

 
Cinemark
McKinney, TX
 
6/10
 
14

 
2,603

 
56,088

 
Cinemark
Mishawaka, IN
 
6/10
 
14

 
2,999

 
62,088

 
Cinemark
Pasadena, TX
 
6/10
 
20

 
3,156

 
77,324

 
Cinemark
Pflugerville, TX
 
6/10
 
20

 
4,654

 
103,250

 
Cinemark
Plano, TX
 
6/10
 
10

 
1,612

 
34,046

 
Cinemark
Pueblo, CO
 
6/10
 
14

 
2,649

 
55,231

 
Cinemark
Redding, CA
 
6/10
 
14

 
2,101

 
46,793

 
Cinemark
Virginia Beach, VA (1)
 
12/10
 
7

 
630

 
20,745

 
Beach Cinema Bistro Group, Inc.
Dallas, TX
 
12/10
 

 

 
33,250

 
GMBG
Merrimack, NH
 
3/11
 
12

 
1,810

 
42,400

 
Cinemagic
Hooksett, NH
 
3/11
 
15

 
2,248

 
55,000

 
Cinemagic
Saco, ME
 
3/11
 
13

 
2,256

 
54,000

 
Cinemagic
Westbrook, ME
 
3/11
 
16

 
2,292

 
53,000

 
Cinemagic
Twin Falls, ID (1)
 
4/11
 
13

 
2,100

 
38,736

 
Cinema West
Northbrook, IL (1)
 
7/11
 

 

 
39,289

 
Pinstripes
Jacksonville, FL
 
2/12
 

 

 
46,000

 
Main Event
Indianapolis, IN
 
2/12
 

 

 
65,000

 
Main Event
Dallas, TX (1)
 
3/12
 
11

 
1,672

 
62,684

 
LOOK Cinemas
Oakbrook, IL (1)
 
3/12
 

 

 
66,442

 
Pinstripes
Southern Pines, NC
 
6/12
 
10

 
1,696

 
36,180

 
Frank Theatres, LLC
Albuquerque, NM (1)
 
6/12
 
16

 
3,033

 
71,297

 
Regal
Austin, TX
 
9/12
 
10

 
946

 
36,000

 
Alamo Draft House Cinemas
Champaign, IL (1)
 
9/12
 
13

 
2,896

 
55,063

 
AMC
Gainesville, VA (1)
 
2/13
 
10

 
2,906

 
57,943

 
Regal
Lafayette, LA (1) (4)
 
8/13
 
14

 
2,267

 
52,957

 
Southern
New Iberia, LA (1) (4)
 
8/13
 
10

 
1,384

 
32,760

 
Southern
San Francisco, CA
 
8/13
 
5

 
537

 
19,237

 
Alamo Draft House Cinemas
Tuscaloosa, AL (1)
 
9/13
 
16

 
2,912

 
65,442

 
Cobb
Warrenville, IL (2)
 
10/13
 
17

 
3,866

 
70,000

 
Regal
Tampa, FL
 
10/13
 
11

 
762

 
94,774

 
AMC
Warrenville, IL
 
10/13
 

 

 
35,000

 
Main Event
Opelika, AL
 
11/12
 
13

 
2,896

 
55,063

 
AMC
Bedford, IN
 
4/14
 
7

 
1,009

 
22,152

 
Regal
Seymour, IN
 
4/14
 
8

 
1,216

 
24,905

 
Regal
Wilder, KY
 
4/14
 
14

 
991

 
54,645

 
Regal
Bowling Green, KY
 
4/14
 
12

 
1,803

 
48,658

 
Regal
New Albany, IN
 
4/14
 
16

 
2,824

 
68,575

 
Regal
Clarksville, TN
 
4/14
 
16

 
2,824

 
73,208

 
Regal
Williamsport, PA
 
4/14
 
12

 
1,872

 
44,608

 
Regal
Noblesville, IN
 
4/14
 
12

 
708

 
33,892

 
Regal
Moline, IL
 
4/14
 
14

 
2,270

 
54,817

 
Regal
O'Fallon, MO
 
4/14
 
14

 
2,114

 
51,958

 
Regal
McDonough, GA
 
4/14
 
16

 
2,602

 
57,941

 
Regal
Virginia Beach, VA
 
2/15
 
12

 
1,200

 
43,764

 
Regal
Yulee, FL
 
2/15
 
10

 
1,796

 
36,200

 
AMC
Schaumburg, IL
 
4/15
 

 

 
25,052

 
Punch Bowl Social
Jacksonville, FL
 
5/15
 
24

 
1,951

 
82,064

 
AMC
Denham Springs, LA (1)
 
5/15
 
14

 
2,200

 
46,360

 
Southern
Crystal Lake, IL
 
7/15
 
16

 
1,173

 
73,000

 
Regal
Laredo, TX
 
12/15
 
7

 
816

 
31,800

 
Alamo Draft House Cinemas
Corpus Christi, TX
 
12/15
 
7

 
794

 
30,360

 
Alamo Draft House Cinemas
Marietta, GA
 
2/16
 

 

 
105,470

 
Andretti Indoor Karting & Games
Stapleton, CO
 
5/16
 

 

 
24,799

 
Punch Bowl Social
Orlando, FL
 
5/16
 

 

 
128,000

 
Andretti Indoor Karting & Games
Delmont, PA
 
6/16
 
12

 
1,720

 
45,319

 
AMC
Subtotal Entertainment Properties, carried over to next page
 
2,246

 
403,790

 
11,886,263

 
 

30


Location
 
Acquisition
date
 
Screens
 
Seats
 
Building
(gross sq. ft)
 
Tenant
Entertainment Properties:
 
 
 
 
 
 
 
 
 
 
Subtotal from previous page
 
n/a
 
2,246

 
403,790

 
11,886,263

 
 
Kennewick, WA
 
6/16
 
12

 
1,722

 
47,004

 
AMC
Franklin, TN
 
6/16
 
20

 
3,300

 
109,956

 
AMC
Mobile, AL
 
6/16
 
16

 
1,885

 
60,471

 
AMC
El Paso, TX
 
6/16
 
16

 
1,792

 
60,283

 
AMC
Edinburg, TX
 
6/16
 
20

 
2,500

 
87,539

 
AMC
Hendersonville, TN
 
7/16
 
16

 
3,027

 
65,966

 
Regal
Houston, TX
 
10/16
 
10

 
1,082

 
46,525

 
Star Cinema Grill
Detroit, MI
 
11/16
 
9

 
1,026

 
56,804

 
Emagine Entertainment
Dallas, TX
 
12/16
 

 

 
49,950

 
Pinstack
Fort Wayne, IN
 
05/17
 
14

 
1,200

 
69,212

 
Regal
Wichita, KS
 
05/17
 
18

 
4,044

 
93,905

 
Regal
Wichita, KS
 
05/17
 
7

 
690

 
28,875

 
Regal
Richmond, TX
 
8/17
 
22

 
5,221

 
180,000

 
Regal
Tomball, TX
 
8/17
 
19

 
2,138

 
100,000

 
Regal
Cleveland, OH (2)
 
8/17
 
24

 
2,198

 
100,717

 
Cinemark
Cleveland, OH
 
8/17
 

 

 
25,739

 
Various
Subtotal Entertainment Properties
 
 
 
2,469

 
435,615

 
13,069,209

 
 
 
 
 
 
 
 
 
 
 
 
 
Education Properties:
 
 
 
 
 
 
 
 
 
 
Columbus, OH
 
9/07
 

 

 
38,808

 
Imagine Schools, Inc.
Mesa, AZ
 
9/07
 

 

 
45,214

 
Imagine Schools, Inc.
Surprise, AZ
 
9/07
 

 

 
45,578

 
Imagine Schools, Inc.
Las Vegas, NV
 
10/07
 

 

 
49,690

 
Imagine Schools, Inc.
Groveport, OH
 
10/07
 

 

 
150,346

 
Imagine Schools, Inc.
Cleveland, OH
 
10/07
 

 

 
57,652

 
Harvard Avenue Community School
Washington, DC
 
10/07
 

 

 
34,962

 
Imagine Schools, Inc.
Phoenix, AZ
 
10/07
 

 

 
47,186

 
Imagine Schools, Inc.
Baton Rouge, LA
 
3/11
 

 

 
54,975

 
CSDC
Goodyear, AZ
 
4/11
 

 

 
37,502

 
Bradley Project Development
Phoenix, AZ
 
11/11
 

 

 
56,724

 
Skyline Schools Project Development
Buckeye, AZ
 
4/12
 

 

 
85,154

 
Schoolhouse Buckeye LLC
Tarboro, NC
 
7/12
 

 

 
110,000

 
NE Carolina Prep Acad Project Development
Chester Upland, PA
 
3/13
 

 

 
25,200

 
CSMI
Hollywood, SC
 
3/13
 

 

 
59,181

 
Lowcountry Leadership Project Development
Lake Pleasant, AZ
 
3/13
 

 

 
15,309

 
CLA Properties
Camden, NJ
 
4/13
 

 

 
59,024

 
Mastery Academy
Vista, CA
 
5/13
 

 

 
26,454

 
Bella Mente Project Development
Columbus, OH
 
5/13
 

 

 
40,905

 
Imagine Schools, Inc.
Dayton, OH
 
5/13
 

 

 
56,385

 
Imagine Schools, Inc.
Toledo, OH
 
5/13
 

 

 
48,375

 
Imagine Schools, Inc.
Gilbert, AZ
 
5/13
 

 

 
52,723

 
CAFA Gilbert Investments
Chicago, IL
 
5/13
 

 

 
62,900

 
Concept Schools
Chandler, AZ
 
7/13
 

 

 
70,000

 
Skyline Chandler Project Development
Columbus, OH
 
11/13
 

 

 
67,059

 
Imagine Schools, Inc.
Goodyear, AZ
 
6/13
 

 

 
20,746

 
CLA Properties
Salt Lake City, UT
 
7/13
 

 

 
160,000

 
Schoolhouse Galleria LLC
Oklahoma City, OK
 
8/13
 

 

 
25,737

 
CLA Properties
Las Vegas, NV