EPR PROPERTIES
For the period ended Sep 30, 2024. Filed Oct 31, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Oct 31, 2024
EPR$59.51-0.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-01.
0001045450-24-000059
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-31.
0001045450-24-000086
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 116 previous paragraphs and 127 current paragraphs.
72 unchanged; 38 reworded; 16 added; 5 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 11 previous and 10 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (16)
Current report
•159 theatre properties;
Current report
•22 fitness & wellness properties;
Current report
•The recognition of provision for credit losses, net for the nine months ended September 30, 2024 versus the recognition of benefit for credit losses, net for nine months ended September 30, 2023; and
Current report
•The recognition of loss on sale of real estate versus gain in sale of real estate for the three months ended September 30, 2024 versus the three months ended September 30, 2023 and the recognition of higher gain on sale of real estate for the nine months ended September 30, 2024 versus the nine months ended September 30, 2023.
Current report
During and subsequent to the nine months ended September 30, 2024, two experiential lodging properties located in St. Pete Beach, Florida that we hold as equity investments through joint ventures, were significantly damaged by two weather events. On September 26, 2024, Hurricane Helene made landfall on St. Pete Beach as a Category 3 storm and damaged the joint ventures' experiential lodging properties. On October 9, 2024, further damage was caused by Hurricane Milton. The properties will remain closed as the joint ventures continue to assess and repair damage and we do not anticipate that the properties will re-open until well into 2025. We plan to work in good faith with our joint venture partners, the non-recourse debt provider and the insurance companies to identify a path forward which we expect will result in the eventual removal of both experiential properties from our portfolio. Accordingly, we determined that our investment in these joint ventures had no fair value and was not recoverable, and during the third quarter of 2024, recognized $12.1 million in other-than-temporary impairment charges on joint ventures related to these equity investments.
Current report
Capital Markets Activities
Current report
On August 22, 2024, we repaid our $136.6 million Series A unsecured private placement notes due 2024, using funds available on our $1.0 billion senior unsecured revolving credit facility.
Current report
During the nine months ended September 30, 2024, we entered into a Fourth Amended, Restated and Consolidated Credit Agreement (the "Amended Credit Agreement"). See discussion below in Liquidity and Capital Resources and Note 8 to the consolidated financial statements in this Quarterly Report on Form 10-Q for additional information.
Current report
Three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023
Current report
During the three months ended September 30, 2024, there were no significant lease renewals on existing properties.
Current report
(2) The increase in percentage rent (amounts above base rent) for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 was due primarily to higher percentage rent recognized from our theatre tenants, one cultural property tenant, one attraction property tenant and our gaming tenant.
Current report
(4) The loss on sale of real estate for the three months ended September 30, 2024 related to the sale of two theatre properties and one vacant early childhood education center. The net gain on sale of real estate for the three months ended September 30, 2023 related to the sales of two vacant theatre properties and two early childhood education centers.
Current report
(5) The increase in interest expense, net for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 resulted primarily from an increase in average borrowings and an increase in our weighted average interest rate on outstanding debt due to borrowings on our unsecured revolving credit facility. This increase was also due to a decrease in interest income from short-term investments related to cash on hand.
Current report
(7) The increase in impairment charges on joint ventures for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 related to other-than-temporary impairments of our equity investments in two joint ventures holding two experiential lodging properties located in St. Pete Beach, Florida due to hurricane damage described above.
Current report
On September 19, 2024, we entered into the Amended Credit Agreement providing for a new amended and restated senior unsecured revolving credit facility. The Amended Credit Agreement amended, restated and replaced our prior senior unsecured revolving credit facility provided under the Third Amended, Restated and Consolidated Credit Agreement. The amendments to the prior facility, among other things: (i) extended the maturity date of the revolving credit facility; (ii) generally reduced the interest rate payable on outstanding loans; (iii) eliminated the tangible net worth covenant; (iv) modified the secured debt to total assets financial covenant to permit increased secured debt if we so elect; and (v) modified and simplified the capitalization rates used to value assets under the facility.
Current report
In connection with entering into the Amended Credit Agreement, we incurred $9.0 million in fees that were capitalized in deferred financing costs and amortized as part of the effective yield. These fees are included in "Other assets" in the accompanying consolidated balance sheet as of September 30, 2024. During the nine months ended September 30, 2024, we also recorded a non-cash write-off of deferred financing costs (net of accumulated amortization), totaling $0.3 million to "Costs associated with loan refinancing or payoff" in connection with entering into the Amended Credit Agreement.
Removed paragraphs (5)
Previous report
•161 theatre properties;
Previous report
•21 fitness & wellness properties;
Previous report
Three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023
Previous report
(3) The change in provision (benefit) for credit losses, net for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was due to credit loss expense related to new mortgage notes funded in 2024 and 2023 and changes in macro-economic factors included in our forward-looking commercial real estate forecasting tool used to estimate our current expected credit losses.
Previous report
(5) The decrease in depreciation and amortization expense for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 resulted primarily from property dispositions that occurred during 2024 and 2023. This was partially offset by acquisitions and developments completed in 2024 and 2023.
Reworded paragraphs (38)
Previous wording
As of June 30, 2024, our total assets were approximately $5.6 billion (after accumulated depreciation of approximately $1.5 billion) with properties located in 44 states, Ontario and Quebec, Canada. Our total investments (a non-GAAP financial measure) were approximately $6.9 billion at June 30, 2024. See "Non-GAAP Financial Measures" for the reconciliation of "Total assets" in the consolidated balance sheet to total investments at June 30, 2024 and December 31, 2023. We group our investments into two reportable segments, Experiential and Education. As of June 30, 2024, our Experiential investments comprised $6.4 billion, or 93%, and our Education investments comprised $0.5 billion, or 7%, of our total investments.
Current wording
As of September 30, 2024, our total assets were approximately $5.7 billion (after accumulated depreciation of approximately $1.5 billion) with properties located in 44 states, Ontario and Quebec, Canada. Our total investments (a non-GAAP financial measure) were approximately $6.9 billion at September 30, 2024. See "Non-GAAP Financial Measures" for the reconciliation of "Total assets" in the consolidated balance sheet to total investments at September 30, 2024 and December 31, 2023. We group our investments into two reportable segments, Experiential and Education. As of September 30, 2024, our Experiential investments comprised $6.4 billion, or 93%, and our Education investments comprised $0.5 billion, or 7%, of our total investments.
Previous wording
As of June 30, 2024, our owned Experiential real estate portfolio consisted of approximately 19.6 million square feet, which includes 0.4 million square feet of properties we intend to sell. The Experiential portfolio, excluding the properties we intend to sell, was 99% leased and included $59.1 million in property under development and $20.2 million in undeveloped land inventory.
Current wording
As of September 30, 2024, our owned Experiential real estate portfolio consisted of approximately 19.5 million square feet, which includes 0.4 million square feet of properties we intend to sell. The Experiential portfolio, excluding the properties we intend to sell, was 99% leased and included $76.9 million in property under development and $20.2 million in undeveloped land inventory.
Previous wording
•61 early childhood education center properties; and
Current wording
•60 early childhood education center properties; and
Previous wording
The combined owned portfolio consisted of 20.9 million square feet and was 99% leased excluding the 0.4 million square feet of properties we intend to sell.
Current wording
The combined owned portfolio consisted of 20.8 million square feet and was 99% leased excluding the 0.4 million square feet of properties we intend to sell.
Previous wording
REITs are generally experiencing heightened risks and uncertainties resulting from current challenging economic conditions, including significant volatility and negative pressure in financial and capital markets, higher cost of capital, high inflation and other risks and uncertainties associated with the current economic environment. Although we intend to continue making future investments, we expect our levels of investment spending to be reduced in the near-term due to elevated costs of capital, and near-term investments will be funded primarily from cash on hand, excess cash flow, disposition proceeds and borrowing availability under our unsecured revolving credit facility, subject to maintaining our leverage levels consistent with past practice. As a result, we intend to continue to be more selective in making future investments and acquisitions until such time as economic conditions improve and our cost of capital improves.
Current wording
REITs are generally experiencing heightened risks and uncertainties resulting from current challenging economic conditions, including significant volatility and negative pressure in financial and capital markets, higher cost of capital, lasting impacts of high inflation and other risks and uncertainties associated with the current economic environment. Although we intend to continue making future investments, we expect our levels of investment spending to be reduced in the near-term due to elevated costs of capital, and near-term investments will be funded primarily from cash on hand, excess cash flow, disposition proceeds and borrowing availability under our unsecured revolving credit facility, subject to maintaining our leverage levels consistent with past practice. As a result, we intend to continue to be more selective in making future investments and acquisitions until such time as economic conditions improve and our cost of capital improves.
Previous wording
As of June 30, 2024, as a result of the COVID-19 pandemic, we continue to recognize revenue on a cash basis for AMC and two other tenants, one of which has deferred rent from this period that is not booked as a receivable of approximately $11.5 million. We collected all deferred receivables from accrual basis tenants that were deferred due to the COVID-19 pandemic. During the six months ended June 30, 2024 and 2023, we collected $0.6 million and $13.8 million, respectively, in deferred rent and interest from cash basis customers and from customers for which the deferred payments were not previously recognized as revenue.
Current wording
As of September 30, 2024, as a result of the COVID-19 pandemic, we continue to recognize revenue on a cash basis for AMC and two other tenants, one of which has deferred rent from this period that is not booked as a receivable of approximately $11.5 million. We collected all deferred receivables from accrual basis tenants that were deferred due to the COVID-19 pandemic. During the nine months ended September 30, 2024 and 2023, we collected $0.6 million and $35.7 million, respectively, in deferred rent and interest from cash basis customers and from customers for which the deferred payments were not previously recognized as revenue.
Previous wording
Our total revenue, net income available to common shareholders per diluted share and Funds From Operations As Adjusted ("FFOAA") per diluted share (a non-GAAP financial measure) are detailed below for the three and six months ended June 30, 2024 and 2023 (in millions, except per share information):
Current wording
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, 2024 and 2023 (in millions, except per share information):
Previous wording
The major factors impacting our results for the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023 were as follows:
Current wording
The major factors impacting our results for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023 were as follows:
Previous wording
•The increase in other income and other expense related to additional operating properties; and
Current wording
•The increase in other income and other expense related to additional operating properties;
Previous wording
•The increase in provision (benefit) for credit losses, net, and equity in loss from joint ventures offset by the decrease in impairment charges and general and administrative expense as well as an increase in gain on sale of real estate.
Current wording
•The decrease in impairment charges and general and administrative expense;
Previous wording
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related notes. In preparing these financial statements, management has made its best estimates and assumptions that affect the reported assets and liabilities and the reported amounts of revenues and expenses during the reporting period. The most significant assumptions and estimates relate to the valuation of real estate, accounting for real estate acquisitions, assessing the collectibility of receivables and the credit loss related to mortgage and other notes receivable. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates. A summary of critical accounting policies and estimates is included in our 2023 Annual Report. For the six months ended June 30, 2024, there were no changes to critical accounting policies.
Current wording
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related notes. In preparing these financial statements, management has made its best estimates and assumptions that affect the reported assets and liabilities and the reported amounts of revenues and expenses during the reporting period. The most significant assumptions and estimates relate to the valuation of real estate, accounting for real estate acquisitions, assessing the collectibility of receivables and the credit loss related to mortgage and other notes receivable. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates. A summary of critical accounting policies and estimates is included in our 2023 Annual Report. For the nine months ended September 30, 2024, there were no changes to critical accounting policies.
Previous wording
Our investment spending during the six months ended June 30, 2024 and 2023 totaled $132.7 million and $98.7 million, respectively, and is detailed below (in thousands):
Current wording
Our investment spending during the nine months ended September 30, 2024 and 2023 totaled $214.6 million and $135.5 million, respectively, and is detailed below (in thousands):
Previous wording
The above amounts include $1.4 million and $1.6 million in capitalized interest for the six months ended June 30, 2024 and 2023, respectively, and $88 thousand and $103 thousand in capitalized other general and administrative direct project costs for the six months ended June 30, 2024 and 2023, respectively. Excluded from the table above is approximately $2.9 million and $5.6 million of maintenance capital expenditures and other spending for the six months ended June 30, 2024 and 2023, respectively.
Current wording
The above amounts include $2.3 million and $2.5 million in capitalized interest for the nine months ended September 30, 2024 and 2023, respectively, and $114 thousand and $103 thousand in capitalized other general and administrative direct project costs for the nine months ended September 30, 2024 and 2023, respectively. Excluded from the table above is approximately $5.4 million and $7.1 million of maintenance capital expenditures and other spending for the nine months ended September 30, 2024 and 2023, respectively.
Previous wording
During the six months ended June 30, 2024, we completed the sales of two cultural properties, four vacant theatre properties and one leased theatre property for net proceeds totaling $56.5 million. In connection with these sales, we recognized a gain on sale totaling $19.4 million.
Current wording
During the nine months ended September 30, 2024, we completed the sales of two cultural properties, six vacant theatre properties, one leased theatre property and one vacant early childhood education center for net proceeds totaling $65.1 million. In connection with these sales, we recognized a net gain on sale totaling $16.0 million.
Previous wording
During the six months ended June 30, 2024, we reassessed the holding period of one of our theatre properties that is operated through a third-party management agreement. We determined that the carrying value of the theatre did not exceed the sum of the undiscounted cash flows and estimated the fair value of the real estate investments of this property using an independent appraisal. Accordingly, we recognized impairment charges totaling $11.8 million for the six months ended June 30, 2024.
Current wording
During the nine months ended September 30, 2024, we reassessed the holding period of one of our theatre properties that is operated through a third-party management agreement. We determined that the carrying value of the theatre property did not exceed the sum of the undiscounted cash flows and estimated the fair value of the real estate investments of this property using an independent appraisal. Accordingly, we recognized impairment charges totaling $11.8 million for the nine months ended September 30, 2024.
Previous wording
(1) For the three months ended June 30, 2024 compared to the three months ended June 30, 2023, the decrease in minimum rent resulted from a decrease of $5.2 million related to the comprehensive restructuring agreement with Regal entered into on June 27, 2023, a $7.3 million decrease in deferred rental repayments from cash basis tenants, a $1.8 million decrease from property dispositions and a $0.4 million decrease from vacant properties. This decrease was partially offset by an increase in rental revenue of $1.9 million related to property acquisitions and developments completed in 2024 and 2023 and an increase in rental revenue on existing properties of $1.8 million.
Current wording
(1) For the three months ended September 30, 2024 compared to the three months ended September 30, 2023, the decrease in minimum rent resulted from a decrease of $2.7 million related to the comprehensive restructuring agreement with Regal entered into on June 27, 2023, a $16.9 million decrease in deferred rental repayments from cash basis tenants, a $1.2 million decrease from property dispositions and a $0.9 million decrease from vacant properties. This decrease was partially offset by an increase in rental revenue of $1.8 million related to property acquisitions and developments completed in 2024 and 2023 and an increase in rental revenue on existing properties of $1.6 million.
Previous wording
For the six months ended June 30, 2024 compared to the six months ended June 30, 2023, the decrease in minimum rent resulted from a decrease of $11.4 million related to the comprehensive restructuring agreement with Regal entered into on June 27, 2023, a $13.2 million decrease in deferred rental repayments from cash basis tenants, a $3.2 million decrease from property dispositions and a $0.9 million decrease from vacant properties. This decrease was partially offset by an increase in rental revenue of $4.1 million related to property acquisitions and developments completed in 2024 and 2023 and an increase in rental revenue on existing properties of $3.0 million.
Current wording
For the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, the decrease in minimum rent resulted from a decrease of $11.5 million related to the comprehensive restructuring agreement with Regal entered into on June 27, 2023, a $32.7 million decrease in deferred rental repayments from cash basis tenants, a $4.6 million decrease from property dispositions and a $1.6 million decrease from vacant properties. This decrease was partially offset by an increase in rental revenue of $5.9 million related to property acquisitions and developments completed in 2024 and 2023 and an increase in rental revenue on existing properties of $4.6 million.
Previous wording
During the six months ended June 30, 2024, we renewed ten lease agreements on approximately 295 thousand square feet and experienced a decrease of approximately 0.5% in rental rates and paid no leasing commissions with respect to these lease renewals.
Current wording
During the nine months ended September 30, 2024, we renewed ten lease agreements on approximately 295 thousand square feet and experienced a decrease of approximately 0.5% in rental rates and paid no leasing commissions with respect to these lease renewals.
Previous wording
(2) The increase in straight-line rent for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 was due to property acquisitions and developments completed in 2024 and 2023 as well as straight-line rent receivable for Regal recognized during the three and six months ended June 30, 2024 in connection with reestablishing accrual basis accounting for Regal at August 1, 2023.
Current wording
(3) The increase in straight-line rent for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was due to property acquisitions and developments completed in 2024 and 2023 as well as straight-line rent receivable for Regal recognized during the nine months ended September 30, 2024 in connection with reestablishing accrual basis accounting for Regal at August 1, 2023.
Previous wording
(3) The increase in other income for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 related primarily to an increase in operating income from the addition of five operating theatre properties in the third quarter of 2023 that were previously leased by Regal.
Current wording
(4) The increase in other income for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 related primarily to an increase in operating income from the addition of five operating theatre properties in the third quarter of 2023 that were previously leased by Regal. One of these properties was closed on September 20, 2024 and is currently vacant as we prepare to sell it.
Previous wording
(4) The increase in mortgage and other financing income during the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 related to interest income on new mortgage notes funded in 2024 and 2023 and from additional investments on existing mortgage note receivables.
Current wording
(5) The increase in mortgage and other financing income during the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 related to interest income on new mortgage notes funded in 2024 and 2023 and from additional investments on existing mortgage note receivables.
Previous wording
(1) The increase in other expense for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 related primarily to the addition of operating expense from five theatre properties that were previously leased by Regal.
Current wording
(1) The increase in other expense for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 related primarily to the addition of operating expense from five theatre properties that were previously leased by Regal. One of these properties was closed on September 20, 2024 and is currently vacant as we prepare to sell it.
Previous wording
(2) The decrease in general and administrative expense for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 related primarily to a decrease in payroll and benefit costs, a decrease in franchise taxes due to a state legislative change that went into effect during the second quarter of 2024 as well as a decrease in professional fees, including those related to the comprehensive restructuring agreement with Regal in 2023.
Current wording
(2) The decrease in general and administrative expense for the three months ended September 30, 2024 compared to the three months ended September 30, 2024 related primarily to a decrease in payroll and benefit costs. The decrease in general and administrative expense during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 related to a decrease in payroll and benefit costs, a decrease in franchise taxes due to a state legislative change that went into effect during the second quarter of 2024 as well as a decrease in professional fees, including those related to the comprehensive restructuring agreement with Regal in 2023.
Previous wording
(4) Impairment charges recognized during the three and six months ended June 30, 2024 related to one theatre property that is operated through a third-party management agreement and impairment charges recognized during the three and six months ended June 30, 2023 primarily related to eight properties surrendered by Regal not included in the new master lease.
Current wording
(3) Impairment charges recognized during the nine months ended September 30, 2024 related to one theatre property that was operated through a third-party management agreement but, as disclosed above, was closed on September 20, 2024 and is currently vacant as we prepare to sell it. Impairment charges recognized during the three months ended September 30, 2023, related to two theatre properties that were part of a workout with a smaller theatre tenant and impairment charges recognized during the nine months ended September 30, 2023 related to these two theatre properties and eight properties surrendered by Regal not included in the new master lease.
Previous wording
(6) The gain on sale of real estate for the six months ended June 30, 2024 related to the sale of two cultural properties, four vacant theatre properties and one leased theatre property. The loss on sale of real estate for the six months ended June 30, 2023 related to the sale of one vacant eat & play property, one early childhood education center and a land parcel.
Current wording
The gain on sale of real estate 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. The net gain on sale of real estate for the nine months ended September 30, 2023 related to the sale of two vacant theatre properties, one vacant eat & play property, three vacant early childhood education centers and a land parcel.
Previous wording
(7) The increase in equity in loss from joint ventures for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 related to lower revenues and higher expenses, including depreciation and interest, at our joint ventures during the six months ended June 30, 2024.
Current wording
(6) The increase in equity in loss from joint ventures for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 primarily related to higher expenses, including insurance, depreciation and interest, at our joint ventures during the three and nine months ended September 30, 2024 as well as the impact from Hurricane Helene that damaged two hotels in St. Pete Beach, Florida as discussed above.
Previous wording
Cash and cash equivalents were $33.7 million at June 30, 2024. As of June 30, 2024, we had no uninsured deposits. In addition, we had restricted cash of $3.0 million at June 30, 2024, which related primarily to escrow deposits required for property management and debt agreements or held for potential acquisitions and redevelopments.
Current wording
Cash and cash equivalents were $35.3 million at September 30, 2024. As of September 30, 2024, we had no uninsured deposits. In addition, we had restricted cash of $3.0 million at September 30, 2024, which related primarily to escrow deposits required for property management and debt agreements or held for potential acquisitions and redevelopments.
Previous wording
At June 30, 2024, we had total debt outstanding of $2.8 billion, of which 99% was unsecured.
Current wording
At September 30, 2024, we had total debt outstanding of $2.9 billion, of which 99% was unsecured.
Previous wording
Subsequent to quarter-end, on July 3, 2024, we amended our Third Consolidated Credit Agreement, which governs our unsecured revolving credit facility, to incorporate the Canadian Overnight Repo Rate Average (CORRA) as a replacement index rate benchmark with respect to loans denominated in Canadian Dollars (CAD) as the Canadian Dollar Offered Rate (CDOR) has been phased out.
Current wording
At September 30, 2024, we had$169.0 million outstanding balance under our $1.0 billion unsecured revolving credit facility. On July 3, 2024, we amended our Third Amended, Restated and Consolidated Credit Agreement, which governs our unsecured revolving credit facility, to incorporate the Canadian Overnight Repo Rate Average (CORRA) as a replacement index rate benchmark with respect to loans denominated in Canadian Dollars (CAD) as the Canadian Dollar Offered Rate (CDOR) has been phased out.
Previous wording
At June 30, 2024, we had no outstanding balance under our $1.0 billion unsecured revolving credit facility. Our unsecured revolving credit facility is governed by the terms of a Third Amended, Restated and Consolidated Credit Agreement, dated as of October 6, 2021 (the "Third Consolidated Credit Agreement"). The facility will mature on October 6, 2025. We have two options to extend the maturity date of the facility by an additional six months each (for a total of 12 months), subject to paying additional fees and the absence of any default. The facility provides for an initial maximum principal amount of borrowing availability of $1.0 billion with an "accordion" feature under which we may increase the total maximum principal amount available by $1.0 billion, to a total of $2.0 billion, subject to lender consent. The unsecured revolving credit facility bears interest at a floating rate of SOFR plus 1.30% (based on our unsecured debt ratings and with a SOFR floor of zero), which was 6.63% at June 30, 2024. Additionally, the facility fee on the revolving credit facility is 0.25%.
Current wording
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 new 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 new credit facility matures on October 2, 2028. We have two options to extend the maturity date of the new 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 unsecured revolving credit facility bears interest at a floating rate of SOFR plus 1.15% (based on our unsecured debt ratings and with a SOFR floor of zero), which was 5.98% at September 30, 2024. Additionally, the facility fee on the revolving credit facility is 0.25%.
Previous wording
At June 30, 2024, we had outstanding $316.2 million of senior unsecured notes that were issued in a private placement transaction. The private placement notes were issued in two tranches, with $136.6 million due August 22, 2024, and $179.6 million due August 22, 2026. At June 30, 2024, the interest rates for the private placement notes were 4.35% and 4.56% for the Series A notes due 2024 and the Series B notes due 2026, respectively.
Current wording
At September 30, 2024, 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, 2024, the interest rate for these Series B private placement notes was 4.56%. The private placement notes were originally issued in two tranches: Series A due 2024; and Series B due 2026. On August 22, 2024, we repaid in full the Series A notes for $136.6 million using funds available under our $1.0 billion senior unsecured revolving credit facility.
Previous wording
Our unsecured revolving credit facility and the private placement notes contain financial covenants or restrictions that limit our levels of consolidated debt, secured debt, investments outside certain categories, stock repurchases and dividend distributions and require us to maintain a minimum consolidated tangible net worth and meet certain coverage levels for fixed charges and debt service. Additionally, these debt instruments contain cross-default provisions if we default under other indebtedness exceeding certain amounts. Those cross-default thresholds vary from $50.0 million to $75.0 million, depending upon the debt instrument. We were in compliance with all financial and other covenants under our debt instruments at June 30, 2024.
Current wording
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 debt instruments at September 30, 2024.
Previous wording
As of June 30, 2024, we had 15 development projects with commitments to fund an aggregate of approximately $161.4 million, of which approximately $63.6 million is expected to be funded in the remainder of 2024. 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.
Current wording
As of September 30, 2024, we had 13 development projects with commitments to fund an aggregate of approximately $144.1 million, of which approximately $31.1 million is expected to be funded in the remainder of 2024. 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.
Previous wording
We have certain commitments related to our mortgage notes investments that we may be required to fund in the future. We are generally obligated to fund these commitments at the request of the borrower or upon the occurrence of events outside of our direct control. As of June 30, 2024, we had five mortgage notes with commitments totaling approximately $85.5 million, of which $33.4 million is expected to be funded in the remainder of 2024. If commitments are funded in the future, interest will be charged at rates consistent with the existing investments.
Current wording
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, 2024, we had five mortgage notes with commitments totaling approximately $73.1 million, of which $20.2 million is expected to be funded in the remainder of 2024. If commitments are funded in the future, interest will be charged at rates consistent with the existing investments.
Previous wording
Long-term liquidity requirements consist primarily of debt maturities. We have $136.6 million of debt maturities due August 22, 2024. We currently believe that we will be able to repay, extend, refinance or otherwise settle our debt maturities as the debt comes due and that we will be able to fund our remaining commitments, as necessary. However, there can be no assurance that additional financing or capital will be available, or that terms will be acceptable or advantageous to us, particularly in light of the challenging economic environment and our elevated cost of capital.
Current wording
Long-term liquidity requirements consist primarily of debt maturities. We have $300.0 million of debt maturities due April 1, 2025. We currently believe that we will be able to repay, extend, refinance or otherwise settle our debt maturities as the debt comes due and that we will be able to fund our remaining commitments, as necessary. However, there can be no assurance that additional financing or capital will be available, or that terms will be acceptable or advantageous to us, particularly in light of the challenging economic environment and our elevated cost of capital.
Previous wording
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), and the non-cash portion of mortgage and other financing income.
Current wording
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.
Previous wording
The following table summarizes our FFO, FFOAA and AFFO including per share amounts for FFO and FFOAA, for the three and six months ended June 30, 2024 and 2023 and reconciles such measures to net income available to common shareholders, the most directly comparable GAAP measure (unaudited, in thousands, except per share information):
Current wording
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, 2024 and 2023 and reconciles such measures to net income available to common shareholders, the most directly comparable GAAP measure (unaudited, in thousands, except per share information):
Previous wording
The effect of the conversion of our convertible preferred shares is calculated using the if-converted method and the conversion, which results in the most dilution is included in the computation of per share amounts. The conversion of the 5.75% Series C cumulative convertible preferred shares and the 9.00% Series E cumulative convertible preferred shares would be dilutive to FFO, FFOAA and AFFO per share for the three and six months ended June 30, 2024 and June 30, 2023. 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.
Current wording
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, 2024 and September 30, 2023. 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.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
•The increase in equity in loss from joint ventures and the increase in impairment charges on joint ventures;
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
During the three months ended June 30, 2024, we renewed nine lease agreements on approximately 230 thousand square feet and experienced a decrease of approximately 1.5% in rental rates and paid no leasing commissions with respect to these lease renewals.