EPR Properties: Form 10-Q for the period ended Sep 30, 2025

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q of EPR Properties (the “Company”, “EPR”, “we” or “us”). The forward-looking statements included in this discussion and elsewhere in this Quarterly Report on Form 10-Q involve risks and uncertainties, including anticipated financial performance, anticipated liquidity and capital resources, business prospects, industry trends, shareholder returns, performance of leases by tenants, performance on loans to customers and other matters, which reflect management's best judgment based on factors currently known. See “Cautionary Statement Concerning Forward-Looking Statements,” which is incorporated herein by reference. Actual results and experience could differ materially from the anticipated results and other expectations expressed in our forward-looking statements as a result of a number of factors, including but not limited to those discussed in Part II, Item 1A - "Risk Factors" in this Quarterly Report on Form 10-Q and Item 1A - "Risk Factors" in our 2024 Annual Report.

Overview

Business

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

Our investment portfolio includes ownership of and long-term mortgages on Experiential and Education properties. Substantially all of our owned single-tenant properties are leased pursuant to long-term, triple-net leases under which the tenants typically pay all operating expenses of the property. Tenants at our owned multi-tenant properties are typically required to pay common area maintenance charges to reimburse us for their pro-rata portion of these costs.

We believe our management’s knowledge and industry relationships have facilitated opportunities for us to acquire, finance and lease properties. It has been our strategy to structure leases and financings to ensure a positive spread between our cost of capital and the rentals or interest paid by our tenants. We have primarily acquired or developed new properties that are pre-leased to a single tenant or multi-tenant properties with a high occupancy rate. We have also entered into certain joint ventures and provided mortgage note financing. We intend to continue entering into some or all of these types of arrangements in the foreseeable future.

Historically, our primary challenges have been locating suitable properties, negotiating favorable lease or financing terms (on new or existing properties), managing our expanding portfolio and having a cost of capital that allows us to grow our investments in new properties beyond those funded primarily with free cash and disposition proceeds.

As of September 30, 2025, our total assets were approximately $5.5 billion (after accumulated depreciation of approximately $1.7 billion) with properties located in 43 states and Canada. Our total investments (a non-GAAP financial measure) were approximately $6.9 billion as of September 30, 2025. See "Non-GAAP Financial Measures" for the reconciliation of "Total assets" in the consolidated balance sheet to total investments at September 30, 2025 and December 31, 2024. We group our investments into two reportable segments, Experiential and Education. As of September 30, 2025, our Experiential investments comprised $6.5 billion, or 94%, and our Education investments comprised $0.4 billion, or 6%, of our total investments.

As of September 30, 2025, our Experiential portfolio (excluding property under development, undeveloped land inventory and two joint venture properties) consisted of the following property types (owned or financed):

• 150 theatre properties;
• 59 eat & play properties (including seven theatres located in entertainment districts);
• 25 attraction properties;
• 11 ski properties;
• four experiential lodging properties;
• 24 fitness & wellness properties;
• one gaming property; and
• one cultural property.

As of September 30, 2025, our wholly-owned Experiential real estate portfolio consisted of approximately 18.5 million square feet, was 99% leased or operated and included $67.4 million in property under development and $20.2 million in undeveloped land inventory.

As of September 30, 2025, our Education portfolio consisted of the following property types (owned or financed):

• 46 early childhood education center properties; and
• nine private school properties.

As of September 30, 2025, our wholly-owned Education real estate portfolio consisted of approximately 1.1 million square feet and was 100% leased.

The combined wholly-owned portfolio consisted of 19.6 million square feet and was 99% leased or operated.

International Trade Environment

Throughout 2025, the U.S. government has imposed, and is considering imposing, tariffs and trade restrictions on certain goods produced outside of the United States, including an indication that a tariff on foreign-made films may be imposed. In response to these actions, certain foreign jurisdictions have imposed, or are considering imposing, tariffs and retaliatory restrictions on goods produced in the United States. In addition, the U.S. government has announced and rescinded numerous tariffs on various foreign jurisdictions, which has increased uncertainty regarding the ultimate effect of tariffs on economic conditions.

The overall economic uncertainty caused by these or additional changes in the U.S. or international trade policy, along with continued uncertainty surrounding such policies, could also lead to weakened economic conditions, contribute to inflation and increased borrowing costs and could lead to decreased consumer spending. Additionally, tariff increases may impact us by increasing the cost of imported construction materials, which in turn can lead to higher development and renovation expenses. This increase in costs may result in reduced yields on development projects and potentially delay or result in cancelling planned projects. Furthermore, our tenants are similarly experiencing negative pressures from these uncertain economic conditions, which could negatively affect their ability to satisfy their obligations to us.

Operating Results

Our total revenue, net income available to common shareholders per diluted share and Funds From Operations As Adjusted ("FFOAA") per diluted share (a non-GAAP financial measure) are detailed below for the three and nine months ended September 30, 2025 and 2024 (in millions, except per share information):

The major factors impacting our results for the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024 were as follows:

• The effect of investments and dispositions that occurred in 2025 and 2024;
• The recognition of lower other income and other expense primarily related to having fewer operating properties for the three and nine months ended September 30, 2025 versus the three and nine months ended September 30, 2024;
• The recognition of higher general and administrative expense, transaction costs and income tax expense for the three and nine months ended September 30, 2025 versus the three and nine months ended September 30, 2024 as well as higher retirement and severance expense for the three months ended September 30, 2025 versus the three months ended September 30, 2025;
• The increase in provision for credit losses, net for the three and nine months ended September 30, 2025 versus the three and nine months ended September 30, 2024;
• The recognition of impairment charges for the nine months ended September 30, 2024 and impairment charges on joint ventures for the three and nine months ended September 30, 2024 versus no such expense recognized for the three and nine months ended September 30, 2025;
• The recognition of higher gain on sale of real estate and early ground lease termination for the three and nine months ended September 30, 2025 versus the three and nine months ended September 30, 2024; and
• The recognition of higher equity in income from joint ventures and lower equity in loss from joint ventures for the three and nine months ended September 30, 2025 versus the three and nine months ended September 30, 2024, respectively.

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

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related notes. In preparing these financial statements, management has made its best estimates and assumptions that affect the reported assets and liabilities and the reported amounts of revenues and expenses during the reporting period. The most significant assumptions and estimates relate to the valuation of real estate, accounting for real estate acquisitions, assessing the collectability of receivables and the credit loss related to mortgage and other notes receivable. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates. A summary of critical accounting policies and estimates is included in our 2024 Annual Report. For the nine months ended September 30, 2025, there were no changes to critical accounting policies.

Recent Developments

Investment Spending

Our investment spending during the nine months ended September 30, 2025 and 2024 totaled $140.8 million and $214.6 million, respectively, and is detailed below (in thousands):

Nine Months Ended September 30, 2025

Nine Months Ended September 30, 2024

The above amounts include $3.2 million and $2.3 million in capitalized interest for the nine months ended September 30, 2025 and 2024, respectively, and $245 thousand and $114 thousand in capitalized other general and administrative direct project costs for the nine months ended September 30, 2025 and 2024, respectively. Excluded from the table above is approximately $3.7 million and $5.4 million of maintenance capital expenditures for the nine months ended September 30, 2025 and 2024, respectively.

Dispositions

During the nine months ended September 30, 2025, we completed the sales of three vacant theatre properties, two operating theatre properties, two leased theatre properties, one vacant early childhood education center, one land parcel and 10 leased early childhood education centers for net proceeds totaling $125.7 million. In connection with these sales, we recognized a net gain on sale totaling $30.8 million.

During the nine months ended September 30, 2025, we received $8.1 million in proceeds representing prepayment in full on two mortgage note receivables that were secured by two early childhood education center properties.

During the three months ended September 30, 2025, we executed an early termination option of a ground lease on an eat & play property. As a result of the early termination, we recognized a gain of $3.4 million due to the reassessment of the lease term and the corresponding remeasurement of the lease liability and right-of-use asset. The gain is included in "Gain (loss) on sale of real estate and early ground lease termination" in the accompanying consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2025.

Chief Investment Officer Transition

During the three months ended September 30, 2025, our Executive Vice President and Chief Investment Officer, Greg Zimmerman, notified us of his intention to retire from his position in the first quarter of 2026. The role of Executive Vice President and Chief Investment Officer will be assumed by Ben Fox, who joined us in August of 2025. Mr. Fox previously served as Managing Director in the Net Lease Division of Ares Management Corporation (“Ares”), a global alternative investment manager operating in the credit, private equity and real estate markets. Prior to Ares, Mr. Fox served as Executive Vice President, Asset Management and Operations at Realty Income, where he oversaw and managed approximately 7,000 properties across the U.S. and U.K. For the three months ended September 30, 2025, we recorded retirement and severance expense related to Mr. Zimmerman's expected retirement totaling $1.1 million, which included cash payments totaling $0.3 million and accelerated vesting of nonvested shares totaling $0.8 million.

Capital Markets Activities

Upon maturity, on April 1, 2025, we fully repaid $300.0 million of senior unsecured notes using borrowings under our $1.0 billion senior unsecured revolving credit facility.

As discussed further below, on June 3, 2025, we filed a new universal shelf registration statement and a new shelf registration statement for our Dividend Reinvestment and Direct Share Purchase Plan (“DSP Plan”) with the SEC.

On September 22, 2025, we entered into amendment number one to our Fourth Amended, Restated and Consolidated Credit Agreement, dated as of September 19, 2024 (the "Amended Credit Agreement"), to remove the SOFR index adjustment with respect to loans denominated in U.S. dollars.

Results of Operations

Three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024

Analysis of Revenue

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

(1) For the three months ended September 30, 2025 compared to the three months ended September 30, 2024, the increase in minimum rent resulted from an increase of $4.3 million related to property acquisitions and developments completed in 2025 and 2024. In addition, there was a net increase in minimum rent of $2.8 million related to rental revenue on existing properties. This was partially offset by a decrease in rental revenue of $1.0 million from property dispositions.

During the three months ended September 30, 2025, we renewed three lease agreements on approximately 19 thousand square feet and experienced an increase of approximately 4.0% in rental rates and paid no leasing commissions with respect to these lease renewals.

For the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, the increase in minimum rent resulted from an increase of $8.7 million related to property acquisitions and developments completed in 2025 and 2024. In addition, there was a net increase in minimum rent of $4.9 million related to rental revenue on existing properties. This was partially offset by a decrease in rental revenue of $2.4 million from property dispositions.

During the nine months ended September 30, 2025, we renewed five lease agreements on approximately 160 thousand square feet and experienced an increase of approximately 1.6% in rental rates and paid $1.0 million in leasing commissions with respect to one of these lease renewals.

(2) The increase in percentage rent (i.e., amounts above base rent) for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 was due primarily to higher percentage rent recognized from our theatre tenants, and was partially offset by lower percentage rent recognized from our attraction properties. The increase in percentage rent for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 was due to higher percentage rent recognized from our theatre tenants and one of our early childhood education center tenants, and was partially offset by lower percentage rent recognized from our attraction properties.

(3) The decrease in other income for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024 related primarily to a decrease in operating income from three operating theatre properties that were sold during the nine months ended September 30, 2025.

(4) The increase in mortgage and other financing income for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024 related to interest income on a new mortgage note funded in 2024 and from additional investments on existing mortgage note receivables in 2025 and 2024. In addition, $1.8 million of participating interest income was recognized during the nine months ended September 30, 2025, which related to amounts under review with one borrower regarding the calculation of participating interest income from prior periods that was resolved during the nine months ended September 30, 2025. No participating interest income was recognized during the nine months ended September 30, 2024.

Analysis of Expenses and Other Line Items

The following table summarizes our expenses and other line items (dollars in thousands):

(1) The decrease in other expense for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024 related primarily to a decrease in operating expense from three operating theatre properties that were sold during the nine months ended September 30, 2025.

(2) The increase in general and administrative expense for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024 related primarily to an increase in payroll and benefit costs, including annual incentive and share-based compensation.

(3) The change in provision (benefit) for credit losses, net for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024 was due to credit loss expense of $6.2 million recognized to fully reserve one mortgage note receivable and changes in our estimated current expected credit losses mostly due to macro-economic conditions.

(4) Impairment charges recognized during the nine months ended September 30, 2024 related to one theatre property. No impairment charges were recognized during the three and nine months ended September 30, 2025.

(5) The gain on sale of real estate and early ground lease termination for the nine months ended September 30, 2025 related to the sale of three vacant theatre properties, two operating theatre properties, two leased theatre properties, one vacant early childhood education center, one land parcel and 10 leased early childhood education centers, and exercising an early termination option of a ground lease on an eat & play property.

The gain on sale of real estate and early ground lease termination for the nine months ended September 30, 2024 related to the sale of two cultural properties, six vacant theatre properties, one leased theatre property and one vacant early childhood education center.

(6) The increase in equity in income from joint ventures for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 and decrease in equity in loss from joint ventures for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 related primarily to the decision to exit our joint ventures in Breaux Bridge, Louisiana and St. Pete Beach, Florida.

(7) Impairment charges on joint ventures recognized during the three and nine months ended September 30, 2024 related to other-than-temporary impairments on our equity investments in two joint ventures holding two experiential lodging properties located in St. Pete Beach, Florida due to hurricane damage. No impairment charges on joint ventures were recognized during the three and nine months ended September 30, 2025.

Liquidity and Capital Resources

Cash and cash equivalents were $13.7 million at September 30, 2025. In addition, we had restricted cash of $16.0 million at September 30, 2025, which related primarily to escrow deposits required for property management, mortgage note and debt agreements or held for potential acquisitions, developments and redevelopments.

Mortgage Debt, Senior Notes and Unsecured Revolving Credit Facility

At September 30, 2025, we had total debt outstanding of $2.8 billion, of which 99% was unsecured.

At September 30, 2025, we had outstanding $2.2 billion in aggregate principal amount of unsecured senior notes (excluding the private placement notes discussed below) ranging in interest rates from 3.60% to 4.95%. The notes contain various covenants, including: (i) a limitation on incurrence of any debt that would cause the ratio of our debt to adjusted total assets to exceed 60%; (ii) a limitation on incurrence of any secured debt that would cause the ratio of secured debt to adjusted total assets to exceed 40%; (iii) a limitation on incurrence of any debt that would cause our debt service coverage ratio to be less than 1.5 times; and (iv) the maintenance at all times of our total unencumbered assets such that they are not less than 150% of our outstanding unsecured debt. Interest payments on our unsecured senior notes are due semiannually.

Upon maturity, on April 1, 2025, we fully repaid $300.0 million of senior unsecured notes using borrowings under our $1.0 billion senior unsecured revolving credit facility.

At September 30, 2025, we had $379.0 million outstanding balance under our $1.0 billion unsecured revolving credit facility. Our unsecured revolving credit facility is governed by the terms of the Amended Credit Agreement. On September 22, 2025, we entered into amendment number one to the Amended Credit Agreement to remove the SOFR index adjustment with respect to loans denominated in U.S. dollars. The facility will mature on October 2, 2028. We have two options to extend the maturity date of this credit facility by an additional six months each (for a total of 12 months), subject to paying additional fees and the absence of any default. The Amended Credit Agreement provides for an initial maximum principal amount of borrowing availability of $1.0 billion, which includes a $100.0 million letter-of-credit subfacility and a $300.0 million foreign currency revolving credit subfacility. The credit facility contains an "accordion" feature under which we may increase the total maximum principal amount available by $1.0 billion, to a total of $2.0 billion, subject to lender consent. The unsecured revolving credit facility bears interest at a floating rate of SOFR plus 1.05% (based on our unsecured debt ratings and with a SOFR floor of zero), which was 5.17% at September 30, 2025. Additionally, the facility fee on the revolving credit facility is 0.25%.

At September 30, 2025, we had outstanding $179.6 million of Series B senior unsecured notes that were issued in a private placement transaction and are due on August 22, 2026. At September 30, 2025, the interest rate for these Series B private placement notes was 4.56%.

Our unsecured revolving credit facility and the private placement notes contain financial covenants or restrictions that limit our levels of consolidated debt, secured debt, investments outside certain categories, stock repurchases and dividend distributions and require us to meet certain coverage levels for fixed charges and debt service. Additionally, these debt instruments contain cross-default provisions if we default under other indebtedness exceeding certain amounts. Those cross-default thresholds vary from $50.0 million to $75.0 million, depending upon the debt instrument. We were in compliance with all financial and other covenants under our consolidated debt instruments at September 30, 2025.

In 2024, two experiential lodging properties located in St. Pete Beach, Florida, in which we hold unconsolidated equity investments through two joint ventures, were severely damaged by two hurricanes and remain closed. We continue to work in good faith with our joint venture partners, the non-recourse debt provider and the insurance companies to identify a path forward in which we expect to result in the removal of the unconsolidated equity investments in these experiential lodging properties and the related non-recourse debt from our portfolio, although there can be no assurances as to the outcome of those discussions.

Our principal investing activities are acquiring, developing and financing Experiential properties. These investing activities have generally been financed with senior unsecured notes and the proceeds from equity offerings. Our unsecured revolving credit facility and cash from operations are also used to finance the acquisition or development of properties, and to provide mortgage financing. We have and expect to continue to issue debt securities in public or private offerings. We have and may in the future assume mortgage debt in connection with property acquisitions or incur new mortgage debt on existing properties. We may also issue equity securities in connection with acquisitions. Continued growth of our real estate investments and mortgage financing portfolios will depend in part on our continued ability to access funds through additional borrowings and securities offerings and, to a lesser extent, our ability to assume debt in connection with property acquisitions. We may also fund investments with the proceeds from asset dispositions.

Capital Markets

On June 3, 2025, we filed a new universal shelf registration statement with the SEC. The securities covered by this registration statement include common shares, preferred shares, debt securities, depository shares, warrants and units. We may periodically offer one or more of these securities in amounts, prices and on terms to be announced when and if these securities are offered. The specifics of any future offerings along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering. The registration statement is effective for a term of three years and replaced our expiring universal shelf registration statement filed in 2022.

Additionally, on June 3, 2025, we filed a shelf registration statement with the SEC, for our DSP Plan, which permits the issuance of up to 25,000,000 common shares. The registration statement is effective for a term of three years and replaced our expiring DSP Plan shelf registration statement filed in 2022.

Liquidity Requirements

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

Commitments

As of September 30, 2025, we had 13 development projects with commitments to fund an aggregate of approximately $70.7 million, of which approximately $22.1 million is expected to be funded in the remainder of 2025. Development costs are advanced by us in periodic draws. If we determine that construction is not being completed in accordance with the terms of the development agreement, we may discontinue funding construction draws. We have agreed to lease the properties to the operators at pre-determined rates upon completion of construction.

We have certain commitments related to our mortgage notes investments that we may be required to fund in the future. We are generally obligated to fund these commitments at the request of the borrower or upon the occurrence of events outside of our direct control. As of September 30, 2025, we had two mortgage notes with commitments totaling approximately $49.8 million, of which $2.8 million is expected to be funded in the remainder of 2025. If commitments are funded in the future, interest will be charged at rates consistent with the existing investments.

Liquidity Analysis

We currently anticipate that our cash on hand, cash from operations, funds available under our unsecured revolving credit facility and proceeds from asset dispositions will provide adequate liquidity to meet our financial commitments, including the amounts needed to fund our operations, make recurring debt service payments, allow distributions to our shareholders and avoid corporate level federal income or excise tax in accordance with REIT Internal Revenue Code requirements.

Long-term liquidity requirements consist primarily of debt maturities. Upon maturity, on April 1, 2025, we fully repaid $300.0 million of senior unsecured notes, using borrowings under our $1.0 billion senior unsecured revolving credit facility. We have $629.6 million of debt maturities due in 2026. We currently believe that we will be able to repay, extend, refinance or otherwise settle our debt maturities as the debt comes due and that we will be able to fund our remaining commitments, as necessary. However, there can be no assurance that additional financing or capital will be available, or that terms will be acceptable or advantageous to us.

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

Capital Structure

We believe that our shareholders are best served by a conservative capital structure. Therefore, we seek to maintain a conservative debt level on our balance sheet as measured primarily by our net debt to adjusted EBITDAre ratio (see "Non-GAAP Financial Measures" for definitions). Because adjusted EBITDAre, as defined, does not include the annualization of investments put in service, acquired or disposed of during the quarter, or the potential earnings on property under development, the annualization of percentage rent and adjustments for other items, we also look at an additional ratio that reflects these adjustments. We also seek to maintain conservative interest, fixed charge, debt service coverage and net debt to gross asset ratios (see "Non-GAAP Financial Measures" for calculations).

Non-GAAP Financial Measures

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

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

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

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

The following table summarizes our FFO, FFOAA and AFFO including per share amounts for FFO and FFOAA, for the three and nine months ended September 30, 2025 and 2024 and reconciles such measures to net income available to common shareholders, the most directly comparable GAAP measure (unaudited, in thousands, except per share information):

37

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

The effect of the conversion of our convertible preferred shares is calculated using the if-converted method and the conversion, which results in the most dilution is included in the computation of per share amounts. The conversion of the 5.75% Series C cumulative convertible preferred shares and the 9.00% Series E cumulative convertible preferred shares would be dilutive to FFO, FFOAA and AFFO per share for the three and nine months ended September 30, 2025 and 2024. Therefore, the additional common shares that would result from the conversion and the corresponding add-back of the preferred dividends declared on those shares are included in the calculation of diluted FFO and FFOAA per share and would be included in a calculation of AFFO per share.

Net Debt

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

Gross Assets

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

Net Debt to Gross Assets Ratio

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

EBITDAre

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

Management provides EBITDAre herein because it believes this information is useful to investors as a supplemental performance measure because it can help facilitate comparisons of operating performance between periods and with other REITs. Our method of calculating EBITDAre may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. EBITDAre is not a measure of performance under GAAP, does not represent cash generated from operations as defined by GAAP and is not indicative of cash available to fund all cash needs, including distributions. This measure should not be considered an alternative to net income or any other GAAP measure as a measurement of the results of our operations or cash flows or liquidity as defined by GAAP.

Adjusted EBITDAre

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

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

Net Debt to Adjusted EBITDAre Ratio

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

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

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Total Investments

Total investments is a non-GAAP financial measure defined as the sum of the carrying values of real estate investments (before accumulated depreciation), land held for development, property under development, mortgage notes receivable and related accrued interest receivable, net, investment in joint ventures, intangible assets, gross (before accumulated amortization and included in other assets) and notes receivable and related accrued interest receivable, net (included in other assets). Total investments is a useful measure for management and investors as it illustrates across which asset categories the Company's funds have been invested. Our method of calculating total investments may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. A reconciliation of total assets (computed in accordance with GAAP) to total investments is included in the following table (unaudited, in thousands):

Impact of Recently Issued Accounting Standards

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

We are exposed to market risks, primarily relating to potential losses due to changes in interest rates and foreign currency exchange rates. We seek to mitigate the effects of fluctuations in interest rates by matching the term of new investments with new long-term fixed rate borrowings whenever possible. As of September 30, 2025, we had a $1.0 billion unsecured revolving credit facility with $379.0 million outstanding. We also had a $25.0 million bond that bears interest at a floating rate but has been fixed through an interest rate swap agreement.

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

Cash Flow Hedges of Interest Rate Risk

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

We are exposed to foreign currency risk against our functional currency, the U.S. dollar ("USD"), on our six Canadian properties and the rents received from tenants of the properties are payable in the Canadian dollar ("CAD"). In order to hedge our CAD denominated cash flows and our net investment in our six Canadian properties, we entered into cross-currency swaps designated as cash flow hedges and foreign currency forwards designated as net investment hedges as further described below.

Cash Flow Hedges of Foreign Exchange Risk-Cross Currency Swaps

We entered into six USD-CAD cross-currency swaps that became effective October 1, 2024, with a total fixed original notional value of $170.0 million CAD and $125.0 million USD. The net effect of these swaps is to lock in an exchange rate of $1.35 CAD per USD on approximately $15.3 million annual CAD denominated cash flows through December 2026.

We entered into two USD-CAD cross-currency swaps that became effective on December 1, 2024 with a total fixed original notional value of $90.0 million CAD and $66.2 million USD. The net effect of these swaps is to lock in an exchange rate of $1.35 CAD per USD on approximately $8.1 million annual CAD denominated cash flows through December 2026.

Fair Value Hedge of Foreign Exchange Risk-Cross Currency Swap

We entered into a USD-CAD cross-currency swap that became effective September 25, 2025, with a total fixed notional value of $27.9 million CAD and $20.0 million USD. The cross-currency swap includes an initial and final exchange of the principal balance of the CAD denominated mortgage note receivable with an exchange rate of $1.392 CAD per USD. In addition to the initial and final exchange, we have monthly exchanges on the notional value of $27.9 million CAD. The net effect of these swaps is to lock in an exchange rate of $1.246 CAD per USD on approximately $2.2 million annual CAD denominated cash flows through September 2030.

Net Investment Hedges - Foreign Currency Forward Contracts

We entered into two forward contracts that became effective December 19, 2024 with a fixed notional value of $200.0 million CAD and $142.8 million USD with a settlement date of December 1, 2026. The exchange rate of these forward contracts is approximately $1.40 CAD per USD.

We entered into a forward contract that became effective December 19, 2024 with a fixed notional value of $90.0 million CAD and $64.3 million USD with a settlement date of December 1, 2026. The exchange rate of this forward contract is approximately $1.40 CAD per USD.

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

See Note 8 to the consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information on our derivative financial instruments and hedging activities.

Evaluation of disclosure controls and procedures

As of September 30, 2025, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based upon and as of the date of that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Limitations on the effectiveness of controls

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

Change in internal controls

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

Other than the risk factor below, there have been no material changes to the risk factors associated with our business previously disclosed in Item 1A - "Risk Factors" in our 2024 Annual Report.

Actual and perceived changes in U.S. trade policies, including changes to existing trade agreements and heightened global trade tensions, and retaliatory responses from other countries may have a material adverse effect on our business, results of operations and financial condition.

Our business, results of operations and financial condition may be adversely affected by uncertainty and changes in U.S. trade policies, including tariffs, trade agreements or other trade restrictions imposed by the U.S. or other governments. In recent months, the U.S. government has imposed, and is considering imposing, tariffs and trade restrictions on certain goods produced outside of the U.S., including an indication that a significant tariff on foreign-made films may be imposed. In response to these actions, certain foreign jurisdictions have imposed, or are considering imposing, tariffs and retaliatory restrictions on goods produced in the United States. Several tariff announcements have been followed by announcements of limited exemptions and temporary pauses. Changes in tariffs and trade restrictions can be, and have been, announced with little or no advance notice. These actions are unprecedented, have caused substantial uncertainty and volatility in financial markets and resulted in retaliatory countermeasures on U.S. goods by its trading partners.

Construction of our development projects requires access to steel and other materials. Any imposition of or increase in tariffs on imports of steel or other materials, as well as corresponding price increases for such materials available domestically, could increase our development project construction costs and our costs to maintain our existing properties. To the extent that we are unable to pass all or any such cost increases on to our customers, such cost increases could adversely affect our returns on investment. Higher materials costs could also diminish our ability to develop new projects at acceptable returns and limit our ability to pursue growth opportunities.

Tariffs or other trade restrictions, increasing trade tensions, or other changes in similar governmental policies could increase our operating costs, reduce discretionary consumer spending, cause disruptions or shortages in global supply chains and negatively impact the U.S., regional or local economies in which we, our tenants and their customers operate, any of which could adversely impact our business, results of operations and financial condition.