Edgar Filing: ENTERTAINMENT PROPERTIES TRUST

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

Form 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2010

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

For the transition period from to

Commission file number: 001-13561

ENTERTAINMENT PROPERTIES TRUST

(Exact name of registrant as specified in its charter)


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

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

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

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


Title of each class		Name of each exchange on which registered
Common shares of beneficial interest, par value $.01 per share		New York Stock Exchange

7.75% Series B cumulative redeemable preferred shares of beneficial interest, par value $.01 per share		New York Stock Exchange

5.75% Series C cumulative convertible preferred shares of beneficial interest, par value $.01 per share		New York Stock Exchange

7.375% Series D cumulative redeemable preferred shares of beneficial interest, par value $.01 per share		New York Stock Exchange

9.00% Series E cumulative convertible preferred shares of beneficial interest, par value $.01 per share		New York Stock Exchange

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

None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the

Securities Act. Yes x No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the

Act. Yes ¨ No x

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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

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

The aggregate market value of the common shares of beneficial interest (“common shares”) of the registrant held by non-affiliates, based on the closing price on the last business day of the registrant’s most recently completed second fiscal quarter, as reported on the New York Stock Exchange, was $1,769,452,370.

At February 25, 2011, there were 46,478,917 common shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement for the 2011 Annual Meeting of Shareholders to be filed with the Commission pursuant to Regulation 14A are incorporated by reference in Part III of this Annual Report on Form 10-K.

CAUTIONARY STATEMENT CONCERNING FORWARD LOOKING STATEMENTS

With the exception of historical information, certain statements contained or incorporated by reference herein may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), such as those pertaining to our acquisition or disposition of properties, our capital resources, future expenditures for development projects, and our results of operations. Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of actual events. There is no assurance the events or circumstances reflected in the forward-looking statements will occur. You can identify forward-looking statements by use of words such as “will be,” “intend,” “continue,” “believe,” “may,” “expect,” “hope,” “anticipate,” “goal,” “forecast,” “expects,” “anticipates,” “estimates,” “offers,” “plans” “would,” “may” or other similar expressions or other comparable terms or discussions of strategy, plans or intentions in this Annual Report. Forward-looking statements necessarily are dependent on assumptions, data or methods that may be incorrect or imprecise. In addition, references to our budgeted amounts are forward looking statements. Factors that could materially and adversely affect us include, but are not limited to, the factors listed below:

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General international, national, regional and local business and economic conditions;

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Failure of current governmental efforts to stimulate the economy;

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The downturn in the credit markets;

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We have made a significant investment in a planned casino and resort development that may not be completed;

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The failure of a bank to fund a request by us to borrow money;

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Failure of banks in which we have deposited funds;

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Defaults in the performance of lease terms by our tenants;

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

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A borrower’s bankruptcy or default;

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The obsolescence of older multiplex theatres owned by some of our tenants;

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Risks of operating in the entertainment industry;

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Our ability to compete effectively;

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The majority of our megaplex theatre properties are leased by a single tenant;

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A single tenant leases or is the mortgagor of all our ski area investments;

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A single tenant leases all of our charter schools;

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Risks associated with use of leverage to acquire properties;

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Financing arrangements that require lump-sum payments;

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Our ability to sustain the rate of growth we have had in recent years;

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Our ability to raise capital;

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

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Risks of acquiring and developing properties and real estate companies;

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The lack of diversification of our investment portfolio;

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Our continued qualification as a REIT;

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The ability of our subsidiaries to satisfy their obligations;

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Financing arrangements that expose us to funding or purchase risks;

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We have a limited number of employees and the loss of personnel could harm operations;

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Fluctuations in the value of real estate income and investments;

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

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

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Risks involved in joint ventures;

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Risks in leasing multi-tenant properties;

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

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Risks of environmental liability;

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Our real estate investments are relatively illiquid;

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We own assets in foreign countries;

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Risks associated with owning or financing properties for which the tenant’s or mortgagor’s operations may be impacted by weather conditions and climate change;

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Risks associated with the ownership of vineyards;

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Our ability to pay distributions in cash or at current rates;

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Fluctuations in interest rates;

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Fluctuations in the market prices for our shares;

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

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Policy changes obtained without the approval of our shareholders;

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Equity issuances could dilute the value of our shares;

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Risks associated with changes in the Canadian exchange rate; and

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

These forward-looking statements represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Many of the factors that will determine these items are beyond our ability to control or predict. For further discussion of these factors see “Item 1A. Risk Factors” in this Annual Report on Form 10-K.

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

TABLE OF CONTENTS


			Page
PART I				5

	Item 1.	Business		5
	Item 1A.	Risk Factors		13
	Item 1B.	Unresolved Staff Comments		27
	Item 2.	Properties		27
	Item 3.	Legal Proceedings		35
	Item 4.	(Removed and Reserved)		35

PART II				36

	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		36
	Item 6.	Selected Financial Data		39
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		41
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		67
	Item 8.	Financial Statements and Supplementary Data		69
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		150
	Item 9A.	Controls and Procedures		150
	Item 9B.	Other Information		152

PART III				152

	Item 10.	Directors, Executive Officers and Corporate Governance		152
	Item 11.	Executive Compensation		152
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		152
	Item 13.	Certain Relationships and Related Transactions, and Director Independence		153
	Item 14.	Principal Accountant Fees and Services		153

PART IV				153

	Item 15.	Exhibits and Financial Statement Schedules		153

PART I

Item 1. Business

General

Entertainment Properties Trust (“we,” “us,” “our,” “EPR” or the “Company”) was formed on August 22, 1997 as a Maryland real estate investment trust (“REIT”), and an initial public offering of our common shares of beneficial interest (“common shares”) was completed on November 18, 1997. Since that time, the Company has grown into a leading specialty REIT with an investment portfolio that includes megaplex theatres, entertainment retail centers (centers typically anchored by an entertainment component such as a megaplex theatre and containing other entertainment-related or retail properties), public charter schools and other destination recreational and specialty properties. The underwriting of our investments is centered on key industry and property cash flow criteria. As further explained under “Growth Strategies” below, our investments are also guided by a focus on inflection opportunities that are associated with or support enduring uses, excellent executions, attractive economics and an advantageous market position.

We are a self-administered REIT. As of December 31, 2010, we had total assets of approximately $3.2 billion (before accumulated depreciation of approximately $0.3 billion). Our investments are generally structured as long-term triple-net leases that require the tenants to pay substantially all expenses associated with the operation and maintenance of the property, or as long-term mortgages with economics similar to our triple-net lease structure.

As of December 31, 2010, our real estate portfolio was comprised of approximately $2.8 billion in assets (before accumulated depreciation of approximately $0.3 billion) and consisted of interests in:

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107 megaplex theatre properties (including two joint venture properties) located in 33 states and Ontario, Canada;

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nine entertainment retail centers (including one joint venture property) located in Westminster, Colorado; New Rochelle, New York; Burbank, California; Suffolk, Virginia; and Ontario, Canada;

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27 public charter school properties located in eight states and the District of Columbia;

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other specialty properties, including ten wineries and six vineyards located in California and Washington and a metropolitan ski property located in Ohio;

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land parcels leased to restaurant and retail operators adjacent to several of our theatre properties;

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approximately $6.0 million in construction in progress for real estate development; and

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approximately $184.5 million in undeveloped land inventory.

As of December 31, 2010, our real estate portfolio of megaplex theatre properties consisted of approximately 8.7 million square feet and was 99% occupied and our remaining real estate portfolio consisted of 4.5 million square feet and was 92% occupied. The combined real estate portfolio consisted of 13.2 million square feet and was 97% occupied. Our theatre properties are leased to ten different leading theatre operators. For the year ended December 31, 2010, approximately 36% of our total revenue was derived from rental payments by AMC.

As of December 31, 2010, we had invested approximately $226.4 million, net of initial direct costs of $1.8 million, in 27 public charter school properties leased under a master lease to Imagine Schools, Inc. (“Imagine”). We own the fee interest in these properties; however, due to the terms of this lease it is accounted for as a direct financing lease. These properties are located in Arizona, Florida, Georgia, Indiana, Missouri, Nevada, Michigan, Ohio and the District of Columbia.

As of December 31, 2010, we had the following mortgage notes receivable with an outstanding balance of approximately $305.4 million:

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$169.0 million in mortgage financing for the development of a water park anchored entertainment village in the greater Kansas City area (the first phase of which opened in July 2009) which is additionally secured by two operating water parks in Texas; and

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$136.4 million in mortgage financing for ten metropolitan ski properties and development land located in New Hampshire, Vermont, Missouri, Indiana, Ohio and Pennsylvania.

Also, as of December 31, 2010, we had five other notes receivable with an outstanding balance of $5.1 million (including accrued interest) net of a provision for an aggregate loan loss of $8.2 million.

Our total investments were $3.1 billion at December 31, 2010. Total investments is a non-GAAP financial measure defined herein as the sum of the carrying values of rental properties (before accumulated depreciation), land held for development, property under development, mortgage notes receivable (including related accrued interest receivable), investment in direct financing lease, net, investment in joint ventures, intangible assets (before accumulated amortization) and notes receivable and related accrued interest receivable, net. Below is a reconciliation of the carrying value of total investments to the constituent items in the consolidated balance sheet at December 31, 2010 (in thousands):


Rental properties, net of accumulated depreciation	$	2,026,623
Add back accumulated depreciation on rental properties		297,068
Land held for development		184,457
Property under development		5,967
Mortage notes and related accrued interest receivable, net		305,404
Investment in a direct financing lease, net		226,433
Investment in joint ventures		22,010
Intangible assets, net of accumulated amortization		35,644
Add back accumlated amortization on intangible assets		11,479
Notes receivable and related accrued interest receivable, net		5,127

Total investments	$	3,120,212

Management believes that total investments is a useful measure for management and investors as it illustrates across which asset categories the Company’s funds have been invested. Of our total investments of $3.1 billion at December 31, 2010, $2.2 billion or 70% related to megaplex theatres, entertainment retail centers and other retail parcels, $230.2 million or 7% related to public charter schools and $708.5 million or 23% related to other destination recreational and specialty properties. Furthermore, of the $708.5 million related to other destination recreational and specialty properties, $210.1 million related to vineyards and wineries, $180.0 million related to the land held for development in Sullivan County, New York, $169.0 million related to the

water-park anchored entertainment village development in Kansas and two Texas water-parks and $149.4 million related to metropolitan ski areas. At December 31, 2010, affiliates of Imagine are the lessees of all of our public charter school properties. Similarly, Peak Resorts, Inc. (“Peak”) is the lessee of our metropolitan ski area in Ohio and is the mortgagor on five notes receivable secured by ten metropolitan ski areas and related development land.

As further described in Note 2 to the consolidated financial statements included in this Annual Report on Form 10-K, during the year ended December 31, 2010, $62.3 million, or approximately 20% of our total revenue was derived from our five entertainment retail centers in Ontario, Canada. The Company’s wholly-owned subsidiaries that hold the Canadian entertainment retail centers and third party debt represent approximately $355.2 million or 22% of the Company’s net assets as of December 31, 2010.

We aggregate the financial information of all our investments into one reportable segment because our investments have similar economic characteristics and because we do not internally report and we are not internally organized by investment or transaction type.

We believe destination entertainment, entertainment-related, public charter schools and other recreational and specialty properties are important sectors of the real estate industry and that, as a result of our focus on properties in these sectors, industry knowledge and the industry relationships of our management, we have a competitive advantage in providing capital to operators of these types of properties. We believe this focused niche approach offers the potential for higher growth and better yields.

As a result of the economic downturn and related challenges in the credit market, we tempered our focus on growth of FFO per share beginning in 2009, and instead principally focused on maintaining adequate liquidity and a strong balance sheet. During 2010, we took significant steps to implement our new strategy to migrate to an unsecured debt structure, including the issuance of $250.0 million of unsecured notes and entering into a new $320.0 million unsecured revolving credit facility. Having enhanced our liquidity position, strengthened our balance sheet and obtained access to the unsecured debt markets, we believe we are better positioned to aggressively pursue potential investments, acquisitions and financing transaction opportunities that may become available to us from time to time.

We believe our management’s knowledge and industry relationships have facilitated favorable opportunities for us to acquire, finance and lease properties. Historically, our primary challenges have been locating suitable properties, negotiating favorable lease or financing terms, and managing our real estate portfolio as we have continued to grow. We are particularly focused on property categories which allow us to use our experience to mitigate some of the risks inherent in the current economic environment. We cannot assure you that any such potential investment or acquisition opportunities will arise in the near future, or that we will actively pursue any such opportunities.

Megaplex Theatres

A significant portion of our assets consist of megaplex theatres. Megaplex theatres typically have at least 10 screens with stadium-style seating (seating with elevation between rows to provide unobstructed viewing) and are equipped with amenities that significantly enhance the audio and visual experience of the patron. We believe the development of new generation megaplex theatres, including the introduction of digital cinema technology, has accelerated the

obsolescence of many of the previous generation of multiplex theatres by setting new standards for moviegoers, who, in our experience, have demonstrated their preference for the more attractive surroundings, wider variety of films, enhanced quality of visual presentation and superior customer service typical of megaplex theatres.

We expect the development of megaplex theatres to continue in the United States and abroad over the long-term. With the development of the stadium style megaplex theatre as the preeminent format for cinema exhibition, the older generation of smaller sloped theatres has generally experienced a significant downturn in attendance and performance. As a result of the significant capital commitment involved in building megaplex theatres and the experience and industry relationships of our management, we believe we will continue to have opportunities to provide capital to exhibition businesses within the United States and abroad that seek to develop and/or operate these properties.

Entertainment Retail Centers

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

On February 3, 2011, we entered into an agreement to sell Toronto Dundas Square, a 13-level entertainment retail center located in downtown Toronto, consisting of 330,000 square feet of net rentable area and a signage business consisting of 25,000 square feet of digital and static signage, after purchasing this property out of receivership earlier in the year. The sale proceeds, net of closing costs, are expected to exceed $220 million CAD. Subject to the satisfaction of certain conditions, the transaction is expected to close by the end of the first quarter of 2011 or shortly thereafter. In addition, we hedged our foreign currency exposure on this investment by entering into a forward to sell $200 million CAD for $201.5 million U.S. dollars with a settlement date of April 15, 2011. Including the impact of foreign currency, the Company expects to record a gain in excess of $17 million upon closing.

Public Charter Schools

As one of the fastest growing segments of the multi-billion dollar education facilities sector, public charter schools continue to offer an exciting growth opportunity. More than ever, education in America is at a crossroads, and the school choice movement is growing through unprecedented bipartisan political support and enhanced media attention. Because of the raised awareness of these changes in K-12 education, and increased demand for higher academic performance in public schools, traditional sources of financing such as tax-exempt bonds and banks have struggled to meet the demand for the development of new or refurbished educational facilities. Through our wholly-owned subsidiary, Education Capital Solutions (“ECS”), we have developed relationships with charter school networks across the country that deliver a high quality education to their students. By providing these networks a “Start-To-Finish” financing option that is both consistent and predictable, we believe ECS is well positioned to provide financing for educational facilities specifically designed to meet their strategic growth plans.

Vineyards and Wineries

The wine industry has been adversely affected by recent economic conditions which continue to affect several of our tenants’ ability to perform under their leases. As a result, we have taken back certain properties due to non-performance under the related leases, and have granted concessions to other tenants in the form of rent abatement or rent deferral. We completed the sale of one vineyard and winery investment in 2010 and we will continue to pursue opportunities to sell our other vineyards and wineries over time as appropriate for overall portfolio performance.

Other Recreational and Specialty Properties

The venue replacement cycle in theatrical exhibition and public charter schools each represent what we consider to be an inflection opportunity, a demand for new capital stimulated by a need to upgrade to new technologies and delivery formats. We expect other destination retail, recreational and specialty properties to undergo similar transformations stimulated by growth, renewal and/or restructuring. We have begun and expect to continue to pursue opportunities to provide capital for such new generations of attractive and successful properties in selected niche markets.

Business Objectives and Strategies

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

Growth Strategies

As a part of our growth strategy, we will consider acquiring or developing additional megaplex theatre properties and public charter schools, and acquiring or developing other single-tenant entertainment, entertainment-related, recreational or specialty properties. We will also consider acquiring or developing additional ERC’s. We may also pursue opportunities to provide mortgage financing for these same property types in certain situations where this structure is more advantageous than owning the underlying real estate.

Our investing strategy centers on five guiding principles which we call our Five Star Investment Strategy:

Inflection Opportunity

We look for a new generation of facilities emerging as a result of age, technology, or change in the lifestyle of consumers which create development, renewal or restructuring opportunities requiring significant capital.

Enduring Value

We look for real estate that supports activities that are commercially successful and have a

reasonable basis for continued and sustainable customer demand in the future. Further, we seek circumstances where the magnitude of change in the new generation of facilities adds substantially to the customer experience.

Excellent Execution

We seek attractive locations and best-of-class executions that create market-dominant properties which we believe create a competitive advantage and enhance sustainable customer demand within the category despite a potential change in tenant. We minimize the potential for turnover by seeking tenants with a reliable track record of customer service and satisfaction.

Attractive Economics

We seek investments that provide accretive returns initially and increasing returns over time with rent escalators and percentage rent features that allow participation in the financial performance of the property. Further, we are interested in investments that provide a depth of opportunity to invest sufficient capital to be meaningful to our total financial results and also provide a diversity by market, geography or tenant operator.

Advantageous Position

In combination with the preceding principles, when investing we look for a competitive advantage such as unique knowledge of the category, access to industry information, a preferred tenant relationship, or other relationships that provide access to sites and development projects.

Operating Strategies

Lease Risk Minimization

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

Lease Structure

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

Mortgage Structure

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

Tenant and Customer Relationships

We intend to continue developing and maintaining long-term working relationships with theatre, restaurant, retail, public charter school and other recreation and specialty business operators and developers by providing capital for multiple properties on an international, national or regional basis, thereby creating efficiency and value for both the operators and the Company.

Portfolio Diversification

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

Development

We intend to continue developing properties that meet our guiding principles. We generally do not begin development of a single tenant property without a signed lease providing for rental payments during the development period that are commensurate with our level of capital investment. In the case of a multi-tenant development, we generally require a significant amount of the development to be pre-leased prior to construction to minimize lease-up risk. Going forward, we are de-emphasizing the investment in large-scale development projects with other partners in favor of smaller development projects which we control. In addition, to minimize overhead costs and to provide the greatest amount of flexibility, we generally outsource construction management to third party firms.

Capitalization Strategies

Debt and Equity Financing

In 2009, we deleveraged our balance sheet primarily by issuing equity in excess of debt during the year. Our debt to gross assets ratio (i.e. long-term debt of the Company as a percentage of total assets plus accumulated depreciation) was reduced from 44% at December 31, 2008 to 39% at December 31, 2009. In 2010, we further deleveraged our balance sheet with a debt to gross assets ratio of 37% at December 31, 2010, and expect to maintain a debt to gross assets ratio of between 35% and 45% going forward. While maintaining lower leverage mitigates the growth in per share results, we believe lower leverage and an emphasis on liquidity are prudent during the current economic downturn.

During the second quarter of 2010, we issued pursuant to a registered public offering 3.6 million common shares at a purchase price of $41.00 per share for net proceeds to us, after underwriting discounts and expenses, of $141.0 million; and issued pursuant to a private offering $250.0 million in 7.75% senior notes due on July 15, 2020 for net proceeds to us, after the initial purchasers’ discounts and commissions and expenses, of $239.4 million. Additionally, on June 30, 2010, we entered into a new $320.0 million unsecured revolving credit facility, maturing on December 1, 2013, unless extended by us, the agent and the lenders. Both the senior notes and the unsecured revolving credit facility are guaranteed by certain of our subsidiaries.

Historically, we have relied primarily on secured debt financings. The senior note offering and the new unsecured revolving credit facility represent significant steps in the implementation of our new strategy to migrate to an unsecured debt structure. In the future, we may from time to time seek to access the public and private credit markets on an opportunistic basis through the

issuance of unsecured debt securities. We believe this strategy will increase our access to capital and permit us to more efficiently match available debt and equity financing to our ongoing capital requirements.

Our sources of equity financing consist of the issuance of common shares as well as the issuance of preferred shares (including convertible preferred shares). In addition to larger underwritten registered public offerings of both common and preferred shares, we have also offered shares pursuant to registered public offerings through the direct share purchase component of our Dividend Reinvestment and Direct Share Purchase Plan (“DSP Plan”). While such offerings are generally smaller than a typical underwritten public offering, issuing common shares under the direct share purchase component of our DSP Plan allows us to access capital on a more frequent basis in a cost-effective manner. We expect to opportunistically access the equity markets in the future and, depending primarily on the size and timing of our equity capital needs, may continue to issue shares under the direct share purchase component of our DSP Plan.

Joint Ventures

We will examine and may pursue potential additional joint venture opportunities with institutional investors or developers if the investments to which they relate meet our guiding principles discussed above. We may employ higher leverage in joint ventures.

Payment of Regular Distributions

We have paid and expect to continue to pay quarterly dividend distributions to our common and preferred shareholders. Our Series B cumulative redeemable preferred shares (“Series B preferred shares”) have a dividend rate of 7.75%, our Series C cumulative convertible preferred shares (“Series C preferred shares”) have a dividend rate of 5.75%, our Series D cumulative redeemable preferred shares (“Series D preferred shares”) have a dividend rate of 7.375%, and our Series E cumulative convertible preferred shares (“Series E preferred shares”) have a dividend rate of 9.00%. Among the factors the Company’s board of trustees (“Board of Trustees”) considers in setting the common share distribution rate are the applicable REIT tax rules and regulations that apply to distributions, the Company’s results of operations, including FFO per share, and the Company’s Cash Available for Distribution (defined as net cash flow available for distribution after payment of operating expenses, debt service, and other obligations).

Competition

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

Employees

As of December 31, 2010, we had 25 full time employees.

Principal Executive Offices

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

Materials Available on Our Website

Our internet website address is www.eprkc.com. We make available, free of charge, through our website copies of our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to the Securities and Exchange Commission (the “Commission” or “SEC”). You may also view our Code of Business Conduct and Ethics, Company Governance Guidelines, Independence Standards for Trustees and the charters of our audit, nominating/company governance, finance and compensation committees on our website. Copies of these documents are also available in print to any person who requests them.

Item 1A. Risk Factors

There are many risks and uncertainties that can affect our current or future business, operating results, financial performance or share price. Here is a brief description of some of the important factors which could adversely affect our current or future business, operating results, financial condition or share price. This discussion includes a number of forward-looking statements. See “Forward Looking Statements.”

Risks That May Impact Our Financial Condition or Performance

There can be no assurance as to the impact of the U.S. government’s attempts to stimulate the economy and approve new regulations on the banking system, financial markets, real estate markets and economy as a whole.

In response to the economic crises affecting the banking system, financial markets, real estate markets and our economy as a whole, President Obama signed the American Recovery and Reinvestment Act of 2009 (“ARRA”) into law on February 17, 2009 and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) on July 21, 2010. These acts provide for further regulation of the financial securities and derivatives industries. There can be no assurance what impact the ARRA, the Dodd-Frank Act or other initiatives will have on the banking system, financial markets, real estate markets or the general economy which could materially and adversely affect our business, financial condition and results of operations.

The downturn in the credit markets has increased the cost of borrowing and has made financing more difficult to obtain, each of which may have a material adverse effect on our results of operations and business.

The economic downturn has had an adverse impact on the credit markets and, as a result, credit has become more expensive and difficult to obtain. Some lenders are imposing more stringent restrictions on the terms of credit and there has been a general reduction in the amount of credit available in the markets in which we conduct business, particularly in the mortgage-backed securities market that we have used in the past. The negative impact on the tightening of the credit markets may have a material adverse effect on us resulting from, but not limited to, an inability to finance the acquisition or development of properties on favorable terms, if at all, increased financing costs or financing with increasingly restrictive covenants.

The negative impact of the adverse changes in the credit markets on the real estate sector generally or our inability to obtain financing on favorable terms, if at all, may have a material adverse effect on our results of operations, business, financial condition or performance.

We previously made a significant investment in a planned casino and resort development. There can be no assurance that the casino project and resort development will be completed or that the deterioration of the developer’s financial condition or sources of liquidity will not have a material adverse effect on the casino project and resort development or our financial condition and results of operations.

On June 18, 2010, in connection with the settlement of litigation between us and Mr. Louis Cappelli (“Mr. Cappelli”) and his affiliates, we acquired the Concord resort property in Sullivan County, New York. There can be no assurance that the cancellation or indefinite delay of the Concord resort development or the related casino project would not have a material adverse effect on our investment in the resort property, which could cause us to record an impairment charge with respect to our interest in such property, and which could result in a material adverse effect on our financial condition and results of operations.

The failure of a bank to fund a request (or any portion of such request) by us to borrow money under one of our credit facilities could reduce our ability to make additional investments, fund our operations, service our debt and pay distributions.

We have existing credit facilities with several banking institutions. If any of these banking institutions which are a party to such credit facilities fails to fund a request (or any portion of such request) by us to borrow money under one of these existing credit facilities, our ability to make investments in our business, fund our operations and pay debt service and distributions could be reduced, each of which could result in a decline in the value of your investment.

The failure of any bank in which we deposit our funds could reduce the amount of cash we have available to pay distributions, make additional investments and service our debt.

We have diversified our cash and cash equivalents between several banking institutions in an attempt to minimize exposure to any one of these entities. However, the Federal Deposit Insurance Corporation, or “FDIC,” only insures interest-bearing accounts in amounts up to $250,000 per depositor per insured bank. We currently have cash and cash equivalents and restricted cash deposited in certain financial institutions in excess of federally insured levels. If any of the banking institutions in which we have deposited funds ultimately fails, we may lose our deposits over $250,000. The loss of our deposits may have a material adverse effect on our financial condition.

We depend on leasing space to tenants on economically favorable terms and collecting rent from our tenants, who may not be able to pay.

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

If a tenant becomes bankrupt or insolvent, that could diminish or eliminate the income we expect

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

Specifically, the recent economic downturn has adversely affected the wine industry, and has severely impacted the cash flow of many of our vineyard and winery properties, which has resulted and may continue to result in their failure to have sufficient funds to support operations or make payments under their leases.

We are exposed to the credit risk of our customers and counterparties and their failure to meet their financial obligations could adversely affect our business.

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

We could be adversely affected by a borrower’s bankruptcy or default.

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

Our theatre tenants may be adversely affected by the obsolescence of any older multiplex theatres they own or by any overbuilding of megaplex theatres in their markets.

The development of megaplex theatres has rendered many older multiplex theatres obsolete. To the extent our tenants own a substantial number of multiplexes, they have been, or may in the future be, required to take significant charges against their earnings resulting from the impairment of these assets. Megaplex theatre operators have also been and could in the future be adversely affected by any overbuilding of megaplex theatres in their markets and the cost of financing, building and leasing megaplex theatres.

Operating risks in the entertainment industry may affect the ability of our tenants to perform under their leases.

The ability of our tenants to operate successfully in the entertainment industry and remain current on their lease obligations depends on a number of factors, including the availability and popularity of motion pictures, the performance of those pictures in tenants’ markets, the allocation of popular pictures to tenants and the terms on which the pictures are licensed. Neither we nor our tenants control the operations of motion picture distributors. Megaplex theatres represent a greater capital investment, and generate higher rents, than the previous generation of multiplex theatres. For this reason, the ability of our tenants to operate profitably and perform under their leases could be dependent on their ability to generate higher revenues per screen than multiplex theatres typically produce. The success of “out-of-home” entertainment venues such as megaplex theatres, entertainment retail centers and recreational properties also depends on general economic conditions and the willingness of consumers to spend time and money on out-of-home entertainment.

Real estate is a competitive business.

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

A single tenant represents a substantial portion of our lease revenues.

For the year ended December 31, 2010, approximately 36% of our total revenue was derived from rental payments by AMC, one of the nation’s largest movie exhibition companies, under leases for megaplex theatre properties. AMCE Entertainment, Inc. (“AMCE”) has guaranteed AMC’s performance under substantially all of their leases. We have diversified and expect to continue to diversify our real estate portfolio by entering into lease transactions with a number of other leading operators. Nevertheless, our revenues and our continuing ability to service our debt and pay shareholder dividends are currently substantially dependent on AMC’s performance under its leases and AMCE’s performance under its guarantee.

We believe AMC occupies a strong position in the industry and we intend to continue acquiring and leasing back or developing new AMC theatres. However, AMC and AMCE are susceptible to the same risks as our other tenants described herein. If for any reason AMC failed to perform under its lease obligations and AMCE did not perform under its guarantee, we could be required to reduce or suspend our shareholder distributions and may not have sufficient funds to support operations or service our debt until substitute tenants are obtained. If that happened, we cannot predict when or whether we could obtain substitute quality tenants on acceptable terms.

A single tenant leases or is the mortgagor of all our investments related to metropolitan ski areas and a single tenant leases all of our public charter school properties.

Peak is the lessee of our metropolitan ski area in Ohio and is the mortgagor on five notes receivable secured by ten metropolitan ski areas and related development land. Similarly, Imagine is the lessee of all of our public charter school properties. If Peak failed to perform under its lease and mortgage loan obligations, and/or Imagine failed to perform under its master lease, we may need to reduce our shareholder distributions and may not have sufficient funds to support operations or service our debt until substitute operators are obtained. If that happened, we cannot predict when or whether we could obtain quality substitute tenants or mortgagors on acceptable terms.

There are risks inherent in having indebtedness and the use of such indebtedness to fund acquisitions.

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

Most of our debt instruments contain balloon payments which may adversely impact our financial performance and our ability to pay distributions.

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

We have grown rapidly through acquisitions and other investments. We may not be able to maintain this rapid growth and our failure to do so could adversely affect our share price.

We have experienced rapid growth in recent years. We may not be able to maintain a similar rate of growth in the future or manage our growth effectively. Our failure to do so may have a material adverse effect on our share price.

We must obtain new financing in order to grow.

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

Covenants in our debt instruments could adversely affect our financial condition and our acquisitions and development activities.

The mortgages on our properties contain customary covenants such as those that limit our ability, without the prior consent of the lender, to further mortgage the applicable property or to discontinue insurance coverage. Our unsecured revolving credit facility, senior notes and other loans that we may obtain in the future contain certain cross-default provisions as well as customary restrictions, requirements and other limitations on our ability to incur indebtedness, including covenants that limit our ability to incur debt based upon the level of our ratio of total debt to total assets, our ratio of recourse debt to total assets, our ratio of EBITDA to interest expense and fixed charges. Our ability to borrow under our unsecured revolving credit facility is also subject to compliance with certain other covenants. In addition, failure to comply with our covenants could cause a default under the applicable debt instrument, and we may then be required to repay such debt with capital from other sources. Under those circumstances, other sources of capital may not be available to us, or be available only on unattractive terms. Additionally, our ability to satisfy current or prospective lenders’ insurance requirements may be adversely affected if lenders generally insist upon greater insurance coverage against acts of terrorism than is available to us in the marketplace or on commercially reasonable terms.

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

We may acquire or develop properties or acquire other real estate related companies and this may create risks.

We may acquire or develop properties or acquire other real estate related companies when we believe that an acquisition or development is consistent with our business strategies. We may not, however, succeed in consummating desired acquisitions or in completing developments on time. In addition, we may face competition in pursuing acquisition or development opportunities that could increase our costs. Difficulties in integrating acquisitions may prove costly or time-consuming and could divert management’s attention. Acquisitions or developments in new markets or industries where we do not have the same level of market knowledge may expose us to unanticipated risks in those markets and industries to which we are unable to effectively respond and, as a result, our performance in those new markets and industries and overall may be worse than anticipated. In addition, there is no assurance that planned third party financing related to acquisition and development opportunities will be provided on a timely basis or at all, thus increasing the risk that such opportunities are delayed or fail to be completed as originally contemplated. We may also abandon acquisition or development opportunities that we have begun pursuing and consequently fail to recover expenses already incurred and have devoted management time to a matter not consummated. Furthermore, our acquisitions of new properties or companies will expose us to the liabilities of those properties or companies, some of which we may not be aware at the time of acquisition. In addition, development of our existing properties presents similar risks.

Our real estate investments are concentrated in entertainment, entertainment-related and recreational properties and a significant portion of those investments are in megaplex theatre properties, making us more vulnerable economically than if our investments were more diversified.

We acquire, develop or finance entertainment, entertainment-related and recreational properties.

A significant portion of our investments are in megaplex theatre properties. Although we are subject to the general risks inherent in concentrating investments in real estate, the risks resulting from a lack of diversification become even greater as a result of investing primarily in entertainment, entertainment-related and recreational properties. These risks are further heightened by the fact that a significant portion of our investments are in megaplex theatre properties. Although a downturn in the real estate industry could significantly adversely affect the value of our properties, a downturn in the entertainment, entertainment-related and recreational industries could compound this adverse effect. These adverse effects could be more pronounced than if we diversified our investments to a greater degree outside of entertainment, entertainment-related and recreational properties or, more particularly, outside of megaplex theatre properties.

If we fail to qualify as a REIT, we would be taxed as a corporation, which would substantially reduce funds available for payment of dividends to our shareholders.

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

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

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

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

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

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We could be subject to tax penalties and interest.

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

We will depend on dividends and distributions from our direct and indirect subsidiaries to service our debt and make distributions to our shareholders. The creditors of these subsidiaries are entitled to amounts payable to them by the subsidiaries before the subsidiaries may pay any dividends or distributions to us.

Substantially all of our assets are held through our subsidiaries. We depend on these subsidiaries for substantially all of our cash flow. The creditors of each of our direct and indirect subsidiaries are entitled to payment of that subsidiary’s obligations to them, when due and payable, before

distributions may be made by that subsidiary to us. Thus, our ability to service our debt obligations and make distributions to holders of our common and preferred shares depends on our subsidiaries’ ability first to satisfy their obligations to their creditors and then to make distributions to us. Our subsidiaries are separate and distinct legal entities and have no obligations, other than guaranties of our debt, to make funds available to us.

Our development financing arrangements expose us to funding and purchase risks.

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

We have a limited number of employees and loss of personnel could harm our operations and adversely affect the value of our common shares.

We had 25 full-time employees as of December 31, 2010 and, therefore, the impact we may feel from the loss of an employee may be greater than the impact such a loss would have on a larger organization. We are dependent on the efforts of the following individuals: David M. Brain, our President and Chief Executive Officer; Gregory K. Silvers, our Vice President, Chief Operating Officer, General Counsel and Secretary; Mark A. Peterson, our Vice President and Chief Financial Officer; Morgan G. Earnest, our Vice President and Chief Investment Officer and Michael L. Hirons, our Vice President - Finance. While we believe that we could find replacements for our personnel, the loss of their services could harm our operations and adversely affect the value of our common shares.

Risks That Apply to our Real Estate Business

Real estate income and the value of real estate investments fluctuate due to various factors.

The value of real estate fluctuates depending on conditions in the general economy and the real estate business. These conditions may also limit our revenues and available cash.

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

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international, national, regional and local economic conditions;

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

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our ability to secure adequate insurance;

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local conditions such as an oversupply of space or a reduction in demand for real estate in the area;

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competition from other available space;

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whether tenants and users such as customers of our tenants consider a property attractive;

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

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

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how well we manage our properties;

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fluctuations in interest rates;

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changes in real estate taxes and other expenses;

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changes in market rental rates;

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the timing and costs associated with property improvements and rentals;

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changes in taxation or zoning laws;

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government regulation;

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our failure to continue to qualify as a REIT for federal income tax purposes;

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availability of financing on acceptable terms or at all;

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potential liability under environmental or other laws or regulations; and

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general competitive factors.

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

There are risks associated with owning and leasing real estate.

Although our lease terms obligate the tenants to bear substantially all of the costs of operating the properties, investing in real estate involves a number of risks, including:

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

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the risk that changes in economic conditions or real estate markets may adversely affect the value of our properties;

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the risk that local conditions could adversely affect the value of our properties;

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

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

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

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

Some potential losses are not covered by insurance.

Our leases require the tenants to carry comprehensive liability, casualty, workers’ compensation, extended coverage and rental loss insurance on our properties. We believe the required coverage is of the type, and amount, customarily obtained by an owner of similar properties. We believe all of our properties are adequately insured. However, there are some types of losses, such as catastrophic acts of nature, acts of war or riots, for which we or our tenants cannot obtain

insurance at an acceptable cost. If there is an uninsured loss or a loss in excess of insurance limits, we could lose both the revenues generated by the affected property and the capital we have invested in the property. We would, however, remain obligated to repay any mortgage indebtedness or other obligations related to the property. Since September 11, 2001, the cost of insurance protection against terrorist acts has risen dramatically. There can be no assurance our tenants will be able to obtain terrorism insurance coverage, or that any coverage they do obtain will adequately protect our properties against loss from terrorist attack.

Joint ventures may limit flexibility with jointly owned investments.

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

Our multi-tenant properties expose us to additional risks.

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

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

Failure to comply with the Americans with Disabilities Act and other laws could result in substantial costs.

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

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

Potential liability for environmental contamination could result in substantial costs.

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

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

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

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

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

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

Real estate investments are relatively illiquid.

We may desire to sell a property in the future because of changes in market conditions, poor tenant performance or default of any mortgage we hold, or to avail ourselves of other opportunities. We may also be required to sell a property in the future to meet debt obligations or avoid a default. Specialty real estate projects such as megaplex theatres cannot always be sold quickly, and we cannot assure you that we could always obtain a favorable price. In addition, the Internal Revenue Code limits our ability to sell our properties. We may be required to invest in the restoration or modification of a property before we can sell it. The inability to respond promptly to changes in the performance of our property portfolio could adversely affect our financial condition and ability to service our debt and make distributions to our shareholders.

There are risks in owning assets outside the United States.

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

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

There are risks in owning or financing properties for which the tenant’s or mortgagor’s operations may be impacted by weather conditions and climate change.

We have acquired and financed metropolitan ski areas as well as vineyards and wineries, and may continue to do so in the future. The operators of these properties, our tenants or mortgagors, are dependent upon the operations of the properties to pay their rents and service their loans. The ski area operator’s ability to attract visitors is influenced by weather conditions and climate change in general, each of which may impact the amount of snowfall during the ski season. Adverse weather conditions may discourage visitors from participating in outdoor activities. In addition, unseasonably warm weather may result in inadequate natural snowfall, which increases the cost of snowmaking, and could render snowmaking wholly or partially ineffective in maintaining quality skiing conditions. Excessive natural snowfall may materially increase the costs incurred for grooming trails and may also make it difficult for visitors to obtain access to the ski resorts. Prolonged periods of adverse weather conditions, or the occurrence of such conditions during peak visitation periods, could have a material adverse effect on the operator’s financial results and could impair the ability of the operator to make rental payments or service our loans.

The ability to grow quality wine grapes and a sufficient quantity of wine grapes is influenced by weather conditions and climate change. Droughts, freezes and other weather conditions or phenomena, such as “El Nino,” may adversely affect the timing, quality or quantity of wine grape harvests, and this can have a material adverse effect on the operating results of our vineyard and winery operators. In these circumstances, the ability of our tenants to make rental payments or service our loans could be impaired.

Wineries and vineyards are subject to a number of risks associated with the agricultural industry.

Winemaking and wine grape growing are subject to a variety of agricultural risks. In addition to weather, various diseases, pests, fungi and viruses can affect the quality and quantity of wine grapes and negatively impact the profitability of our tenants. Furthermore, wine grape growing requires adequate water supplies. The water needs of our properties are generally supplied through wells and reservoirs located on the properties. Although we believe that there are adequate water supplies to meet the needs of all of our properties, a substantial reduction in water supplies could result in material losses of wine crops and vines. If our tenants suffer a downturn in their business due to any of the factors described above, they may be unable to make their lease or loan payments, which could adversely affect our results of operations and financial condition.

Risks That May Affect the Market Price of our Shares

We cannot assure you we will continue paying cash dividends at current rates.

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

Market interest rates may have an effect on the value of our shares.

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

Market prices for our shares may be affected by perceptions about the financial health or share value of our tenants and mortgagors or the performance of REIT stocks generally.

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

Limits on changes in control may discourage takeover attempts which may be beneficial to our shareholders.

There are a number of provisions in our Declaration of Trust, Bylaws, Maryland law and agreements we have with others which could make it more difficult for a party to make a tender offer for our shares or complete a takeover of the Company which is not approved by our Board of Trustees. These include:

•

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

•

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

•

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

•

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

•

requirements for advance notice of shareholder proposals at shareholder meetings;

•

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

•

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

•

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

•

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

•

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

•

provisions of employment agreements with our officers calling for share purchase loan forgiveness (under certain conditions), severance compensation and vesting of equity compensation upon a change in control.

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

We may change our policies without obtaining the approval of our shareholders.

Our operating and financial policies, including our policies with respect to acquiring or financing real estate or other companies, growth, operations, indebtedness, capitalization and dividends, are exclusively determined by our Board of Trustees. Accordingly, our shareholders do not control these policies.

Dilution could affect the value of our shares.

Our future growth will depend in part on our ability to raise additional capital. If we raise additional capital through the issuance of equity securities, the interests of holders of our common shares could be diluted. Likewise, our Board of Trustees is authorized to cause us to issue preferred shares in one or more series, the holders of which would be entitled to dividends and voting and other rights as our Board of Trustees determines, and which could be senior to or convertible into our common shares. Accordingly, an issuance by us of preferred shares could be dilutive to or otherwise adversely affect the interests of holders of our common shares. As of December 31, 2010, our Series C preferred shares are convertible, at each of the holder’s option, into our common shares at a conversion rate of 0.3572 common shares per $25.00 liquidation preference, which is equivalent to a conversion price of approximately $69.99 per common share (subject to adjustment in certain events). Additionally, as of December 31, 2010, our Series E preferred shares are convertible, at each of the holder’s option, into our common shares at a conversion rate of 0.4512 common shares per $25.00 liquidation preference, which is equivalent to a conversion price of approximately $55.41 per common share (subject to adjustment in certain events). Depending upon the number of Series C and Series E preferred shares being converted at one time, a conversion of Series C and Series E preferred shares could be dilutive to or otherwise adversely affect the interests of holders of our common shares.

Changes in foreign currency exchange rates may have an impact on the value of our shares.

The functional currency for our Canadian operations is the Canadian dollar. As a result, the proceeds from the expected sale of Toronto Dundas Square as well as our future operating results could be affected by fluctuations in the exchange rate between U.S. and Canadian dollars, which in turn could affect our share price. We have attempted to mitigate our exposure to Canadian currency exchange risk by having both our Canadian lease rentals and the debt service on our Canadian mortgage financing payable in the same currency. We have also entered into foreign currency exchange contracts to hedge in part our exposure to exchange rate fluctuations. Foreign currency derivatives are subject to future risk of loss. We do not engage in purchasing foreign exchange contracts for speculative purposes.

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

Tax reform could adversely affect the value of our shares.

There have been a number of proposals in Congress for major revision of the federal income tax laws, including proposals to adopt a flat tax or replace the income tax system with a national sales tax or value-added tax. Any of these proposals, if enacted, could change the federal income tax laws applicable to REITS, subject us to federal tax or reduce or eliminate the current deduction for dividends paid to our shareholders, any of which could negatively affect the market for our shares.

Item 1B. Unresolved Staff Comments

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

Item 2. Properties

As of December 31, 2010, our real estate portfolio consisted of 107 megaplex theatre properties and various restaurant, retail and other properties located in 33 states, the District of Columbia and Ontario, Canada. Except as otherwise noted, all of the real estate investments listed below are owned or ground leased directly by us. The following table lists our properties, their locations, acquisition dates, number of theatre screens, number of seats, gross square footage, and the tenant.


Property	Location	Acquisition date		Screens		Seats		Building (gross sq. ft)		Tenant
Megaplex Theatre Properties:
Grand 24	Dallas, TX		11/97		24		5,067		57,794	Vacant
Mission Valley 20 (1)	San Diego, CA		11/97		20		4,361		84,352	AMC
Promenade 16	Los Angeles, CA		11/97		16		2,860		129,822	AMC
Ontario Mills 30	Ontario, CA		11/97		30		5,469		131,534	AMC
Lennox 24 (1)	Columbus, OH		11/97		24		4,412		98,261	AMC
West Olive 16	Creve Coeur, MO		11/97		16		2,817		60,418	AMC
Studio 30	Houston, TX		11/97		30		6,032		136,154	AMC
Huebner Oaks 24	San Antonio, TX		11/97		24		4,400		96,004	AMC
First Colony 24 (1) (27)	Sugar Land, TX		11/97		24		5,098		107,690	AMC
Oakview 24 (28)	Omaha, NE		11/97		24		5,098		107,402	AMC
Leawood Town Center 20 (29)	Leawood, KS		2/98		20		2,995		75,224	AMC
Gulf Pointe 30 (2) (32)	Houston, TX		3/98		30		6,008		130,891	AMC
South Barrington 30 (33)	South Barrington, IL		3/98		30		6,210		130,757	AMC
Mesquite 30 (2) (31)	Mesquite, TX		4/98		30		6,008		130,891	AMC
Cantera 30 (2) (4)	Warrenville, IL		4/98		30		6,210		130,757	Regal
Hampton Town Center 24	Hampton, VA		6/98		24		5,098		107,396	AMC
Raleigh Grand 16 (3)	Raleigh, NC		8/98		16		2,596		51,450	Carolina Cinemas
Paradise 24 (21)	Davie, FL		11/98		24		4,180		96,497	Cinemark
Pompano 18 (3)	Pompano Beach, FL		11/98		18		3,424		73,637	Muvico
Boise Stadium 21 (1) (3)	Boise, ID		12/98		21		4,734		140,300	Regal
Aliso Viejo Stadium 20 (20)	Aliso Viejo, CA		12/98		20		4,352		98,557	Regal
Westminster 24 (6)	Westminster, CO		6/99		24		4,812		89,260	AMC
Woodridge 18 (2) (8)	Woodridge, IL		6/99		18		4,384		82,000	AMC
Cary Crossroads 20 (8)	Cary, NC		12/99		20		3,936		77,475	Regal
Tampa Starlight 20 (8)	Tampa, FL		1/00		20		3,928		84,000	Muvico
Palm Promenade 24 (8)	San Diego, CA		2/00		24		4,586		88,610	AMC
Elmwood Palace 20 (8)	Harahan, LA		3/02		20		4,357		90,391	AMC
Hammond Palace 10 (8)	Hammond, LA		3/02		10		1,531		39,850	AMC
Houma Palace 10 (8)	Houma, LA		3/02		10		1,871		44,450	AMC
Westbank Palace 16 (8)	Harvey, LA		3/02		16		3,176		71,607	AMC
Clearview Palace 12 (1)(8)	Metairie, LA		3/02		12		2,495		70,000	AMC
Olathe Studio 30 (8)	Olathe, KS		6/02		30		5,731		100,000	AMC
Forum 30 (8)	Sterling Heights, MI		6/02		30		5,041		107,712	AMC
Cherrydale 16 (8)	Greenville, SC		6/02		16		2,744		52,800	Regal
Livonia 20 (8)	Livonia, MI		8/02		20		3,808		76,106	AMC
Hoffman Town Centre 22 (1)(8)	Alexandria, VA		10/02		22		4,150		132,903	AMC
Colonel Glenn 18 (3)	Little Rock, AR		12/02		18		4,122		79,330	Rave
AmStar Cinema 16 (15)	Macon, GA		3/03		16		2,950		66,400	Southern
Star Southfield 20	Southfield, MI		5/03		20		7,000		112,119	AMC
Veterans 24 (9)	Tampa, FL		6/03		24		4,580		94,774	AMC
Southwind 12 (25)	Lawrence, KS		6/03		12		2,481		42,497	Wallace
New Roc City 18 and IMAX (10)	New Rochelle, NY		10/03		18		3,400		103,000	Regal
Harbour View Grande 16	Suffolk, VA		11/03		16		3,036		61,500	Regal
Columbiana Grande 14 (12)	Columbia, SC		11/03		14		3,000		56,705	Regal
The Grande 18	Hialeah, FL		12/03		18		4,900		77,400	Cobb
Mississauga 16 (7) (45)	Mississauga, ON		3/04		16		3,856		92,971	AMC
Oakville 24 (7) (45)	Oakville, ON		3/04		24		4,772		89,290	AMC
Whitby 24 (7) (45)	Whitby, ON		3/04		24		4,688		89,290	AMC
Kanata 24 (7) (45)	Kanata, ON		3/04		24		4,764		89,290	AMC
Mesa Grand 24 (19)	Mesa, AZ		3/04		24		4,530		94,774	AMC
Deer Valley 30 (3)	Phoenix, AZ		3/04		30		5,877		113,768	AMC
Hamilton 24 (3)	Hamilton, NJ		3/04		24		4,268		95,466	AMC
Grand Prairie 18	Peoria, IL		7/04		18		4,063		82,330	Rave
Lafayette Grand 16 (1) (16)	Lafayette, LA		7/04		16		2,744		61,579	Southern

Subtotal Megaplex Theatres, carried over to next page					1,143		229,010		4,885,435


Property	Location	Acquisition date		Screens		Seats		Building (gross sq. ft)		Tenant
Megaplex Theatre Properties:
Subtotal from previous page	n/a		n/a		1,143		229,010		4,885,435	n/a
Northeast Mall 18 (18)	Hurst, TX		11/04		18		3,886		94,000	Rave
Avenue 16	Melbourne, FL		12/04		16		3,600		75,850	Rave
The Grand 18 (22)	D’Iberville, MS		12/04		18		2,984		48,000	Southern
Mayfaire Cinema 16 (13)	Wilmington, NC		2/05		16		3,050		57,338	Regal
Burbank 16 (11)	Burbank, CA		3/05		16		4,232		86,551	AMC
East Ridge 18 (30)	Chattanooga, TN		3/05		18		4,133		82,330	Rave
ShowPlace 12 (24)	Indianapolis, IN		6/05		12		2,200		45,270	AMC
The Grand 14	Conroe, TX		6/05		14		2,400		45,000	Southern
The Grand 18 (26)	Hattiesburg, MS		9/05		18		2,675		57,367	Southern
Auburn Stadium 10 (5)	Auburn, CA		12/05		10		1,573		32,185	Regal
Arroyo Grande Stadium 10 (17)	Arroyo Grande, CA		12/05		10		1,714		34,500	Regal
Modesto Stadium 10 (14)	Modesto, CA		12/05		10		1,885		38,873	Regal
Manchester Stadium 16 (23)	Fresno, CA		12/05		16		3,860		80,600	Regal
Firewheel 18 (34)	Garland, TX		3/06		18		3,156		72,252	AMC
Columbia 14 (1)	Columbia, MD		3/06		14		2,512		77,731	AMC
White Oak Village Cinema 14	Garner, NC		4/06		14		2,626		50,810	Regal
The Grand 18 (1)	Winston Salem, NC		7/06		18		3,496		75,605	Southern
Valley Bend 18	Huntsville, AL		8/06		18		4,150		90,200	Rave
Cityplace 14	Kalamazoo, MI		11/06		14		2,770		70,000	Rave
The Grand 16 (1) (36)	Slidell, LA		12/06		16		2,750		62,300	Southern
Bayou 15	Pensacola, FL		12/06		15		3,361		74,400	Rave
Pier Park Grand 16	Panama City Beach, FL		5/07		16		3,496		75,605	Southern
Kalispell Stadium 14	Kalispell, MT		8/07		14		2,000		44,650	Signature
Four Seasons Station Grand 18 (1)	Greensboro, NC		11/07		18		3,343		74,517	Southern
Glendora 12 (1)	Glendora, CA		10/08		12		2,264		50,710	AMC
Ann Arbor 20	Ypsilanti, MI		12/09		20		5,602		131,098	Rave
Buckland Hills 18	Manchester, CT		12/09		18		4,317		87,700	Rave
Centreville 12	Centreville, VA		12/09		12		3,094		73,500	Rave
Davenport 53 18	Davenport, IA		12/09		18		3,772		93,755	Rave
Fairfax Corner	Fairfax, VA		12/09		14		3,544		74,689	Rave
Flint West 14	Flint, MI		12/09		14		3,493		85,911	Rave
Hazlet 12	Hazlet, NJ		12/09		12		3,000		58,300	Rave
Huber Heights 16	Huber Heights, OH		12/09		16		3,511		95,830	Rave
North Haven 12	North Haven, CT		12/09		12		2,704		70,195	Rave
Preston Crossings 16	Okolona, KY		12/09		16		3,264		79,453	Rave
Ritz Center 16	Voorhees, NJ		12/09		16		3,098		62,658	Rave
Stonybrook 20	Louisville, KY		12/09		20		3,194		84,202	Rave
The Greene 14	Beaver Creek, OH		12/09		14		3,211		73,634	Rave
West Springfield 15	West Springfield, MA		12/09		15		3,775		111,166	Rave
Western Hills 14	Cincinnati, OH		12/09		14		3,152		63,829	Rave
AMC Yonge and Dundas 24 (45)	Toronto, ON		3/10		24		4,898		97,031	AMC
Tinseltown 20 + XD	Colorado Springs, CO		6/10		20		4,613		109,986	Cinemark
Movies 10	Redding, CA		6/10		14		2,101		54,664	Cinemark
Tinseltown 14	Pueblo, CO		6/10		14		2,649		55,231	Cinemark
Tinseltown USA 15	Beaumont, TX		6/10		15		2,874		63,352	Cinemark
Hollywood Usa 20	Pasadena, TX		6/10		20		3,156		77,324	Cinemark
Tinseltown 20 + XD	Pflugerville, TX		6/10		20		4,896		103,250	Cinemark
Tinseltown 20 + XD	El Paso, TX		6/10		20		4,760		109,030	Cinemark
Grand Prairie 15	Grand Prairie, TX		6/10		15		2,717		53,880	Cinemark
Tinseltown 290 16	Houston, TX		6/10		16		4,332		100,656	Cinemark
Movies 14	McKinney, TX		6/10		14		2,704		56,088	Cinemark
Movies 14	Mishawaka, IN		6/10		14		2,999		62,088	Cinemark
Movies 10	Plano, TX		6/10		10		1,612		34,046	Cinemark

Subtotal Megaplex Theatres					1,969		400,168		8,704,625


Property	Location	Acquisition date	Screens		Seats		Building (gross sq. ft)		Tenant
Retail, Restaurant and Other Properties:
On The Border	Mesquite, TX	1/99		—		—		6,683	Brinker International
Texas Roadhouse	Mesquite, TX	1/99		—		—		6,400	Texas Roadhouse
Westminster Promenade	Westminster, CO	6/99		—		—		135,226	Multi-Tenant
Texas Land & Cattle	Houston, TX	5/00		—		—		7,733	Tx.C.C., Inc.
Vacant	Houston, TX	5/00		—		—		6,575	Vacant
Cheddar’s Casual Cafe	Mesquite, TX	5/00		—		—		7,918	Cheddars
Cherrydale Shops (8)	Greenville, SC	6/02		—		—		10,000	Multi-Tenant
Johnny Carino’s	Mesquite, TX	3/03		—		—		6,200	Kona Rest. Group, Inc.
Star Southfield Center	Southfield, MI	5/03		—		—		48,028	Multi-Tenant
New Roc City (10)	New Rochelle, NY	10/03		—		—		343,809	Multi-Tenant
Harbour View Station	Suffolk, VA	11/03		—		—		21,416	Multi-Tenant
Kanata Entertainment Centrum (7) (45)	Kanata, ON	3/04		—		—		370,981	Multi-Tenant
Mississauga Entertainment Centrum (7) (45)	Mississauga, ON	3/04		—		—		108,831	Multi-Tenant
Oakville Entertainment Centrum (7) (45)	Oakville, ON	3/04		—		—		134,222	Multi-Tenant
Whitby Entertainment Centrum (7) (45)	Whitby, ON	3/04		—		—		145,048	Multi-Tenant
V-Land	Warrenville, IL	7/04		—		—		11,755	V-Land Warrenville
Stir Crazy	Warrenville, IL	11/04		—		—		7,500	Stir Crazy Café
Burbank Village (11)	Burbank, CA	3/05		—		—		34,713	Multi-Tenant
La Cantina	Houston, TX	8/05		—		—		9,000	La Cantina Gulf Fwy, Inc.
Mad River Mountain (37)	Bellefontaine, OH	11/05		—		—		48,427	Mad River Mountain
Rack and Riddle (35) (38)	Hopland, CA	4/07		—		—		76,000	Rb Wine Associates
Austell Promenade	Austell, GA	7/07		—		—		18,410	East-West Promenade
Cosentino Wineries (40)	Pope Valley, Lockeford and Clements, CA	8/07		—		—		71,600	Vacant
EOS Estate Winery (39)	Pasa Robles, CA	8/07		—		—		120,000	Vacant
Imagine College Prep	St. Louis, MO	10/07		—		—		103,000	Imagine Schools, Inc.
East Mesa Charter Elementary	Mesa, AZ	10/07		—		—		45,214	Imagine Schools, Inc.
Rosefield Charter Elementary	Surprise, AZ	10/07		—		—		45,578	Imagine Schools, Inc.
Academy of Columbus	Columbus, OH	10/07		—		—		71,949	Imagine Schools, Inc.
South Lake Charter Elementary	Clermont, FL	10/07		—		—		62,473	Imagine Schools, Inc.
Renaissance Public School Academy	Mt. Pleasant, MI	10/07		—		—		41,678	Imagine Schools, Inc.
100 Academy of Excellence	Las Vegas, NV	10/07		—		—		59,060	Imagine Schools, Inc.
Imagine Charter Elementary	Phoenix, AZ	10/07		—		—		47,186	Imagine Schools, Inc.
Groveport Community School	Groveport, OH	10/07		—		—		66,420	Imagine Schools, Inc.
Harvard Avenue Charter School	Cleveland, OH	10/07						57,652	Imagine Schools, Inc.
Hope Community Charter School	Washington, DC	10/07		—		—		34,962	Imagine Schools, Inc.
Marietta Charter School	Marietta, GA	10/07		—		—		24,503	Imagine Schools, Inc.
Crotched Mountain	Bennington, NH	2/08		—		—		34,100	Crotched Mountain
Buena Vista Winery & Vineyards (35) (41)	Sonoma, CA	6/08		—		—		105,735	Ascentia Wine Estates
Columbia Winery (35) (42)	Sunnyside, WA	6/08		—		—		35,880	Ascentia Wine Estates
Gary Farrell Winery (35) (43)	Healdsburg, CA	6/08		—		—		21,001	Ascentia Wine Estates
Geyser Peak Winery & Vineyards (35) (44)	Geyserville, CA	6/08		—		—		360,813	Ascentia Wine Estates
Academy of Academic Success	St. Louis, MO	6/08		—		—		66,644	Imagine Schools, Inc.
Academy of Careers Elementary	St. Louis, MO	6/08		—		—		43,975	Imagine Schools, Inc.
Academy of Careers Middle School	St. Louis, MO	6/08		—		—		56,213	Imagine Schools, Inc.
Academy of Environmental Science & Math	St. Louis, MO	6/08		—		—		153,000	Imagine Schools, Inc.
International Academy of Mableton	Mableton, GA	6/08		—		—		43,188	Imagine Schools, Inc.
Master Academy	Fort Wayne, IN	6/08		—		—		161,500	Imagine Schools, Inc.
Renaissance Academy (Kensington Campus)	Kansas City, MO	6/08		—		—		53,763	Imagine Schools, Inc.
Renaissance Academy (Wallace Campus)	Kansas City, MO	6/08		—		—		79,940	Imagine Schools, Inc.
Romig Road Community School	Akron, OH	6/08		—		—		40,400	Imagine Schools, Inc.
Wesley International Academy	Atlanta, GA	6/08		—		—		40,358	Imagine Schools, Inc.

Subtotal Retail, Restaurant and Other Properties, carried over to next page				—		—		3,712,660


Property	Location	Acquisition date		Screens		Seats		Building (gross sq. ft)		Tenant
Retail, Restaurant and Other Properties:
Subtotal from previous page	n/a		n/a		—		—		3,712,660	n/a
Harbour View Marketplace	Suffolk, VA		6/09		—		—		90,267	Multi-Tenant
Carneros Vintners Custom Crush (46)	Sonoma, CA		10/09		—		—		58,232	Carneros Vintners, Inc.
Imagine Schools at South Vero	Vero Beach, FL		1/10		—		—		79,091	Imagine Schools, Inc.
Imagine Schools at West Melbourne	West Melbourne, FL		1/10		—		—		62,427	Imagine Schools, Inc.
Imagine Indiana Life Sciences Academy East	Indianappolis, IN		1/10		—		—		121,933	Imagine Schools, Inc.
Imagine Indiana Life Sciences Academy West	Indianappolis, IN		1/10		—		—		62,172	Imagine Schools, Inc.
Imagine Groveport Prep	Groveport, OH		1/10		—		—		72,346	Imagine Schools, Inc.
Toronto Dundas Square (45)	Toronto, ON		3/10		—		—		233,867	Multi-Tenant
Toby Keith’s I Love This Bar & Grill	Dallas, TX		12/10		—		—		33,250	Toby Keith’s I Love This Bar & Grill

Subtotal Retail, Restaurant and Other Properties					—		—		4,526,245

Total					1,969		400,168		13,230,870

(1)	Third party ground leased property. Although we are the tenant under the ground leases and have assumed responsibility for performing the obligations thereunder, pursuant to the leases, the theatre tenants are responsible for performing our obligations under the ground leases.

(2)	In addition to the theatre property itself, we have acquired land parcels adjacent to the theatre property, which we have or intend to lease or sell to restaurant or other entertainment themed operators.

(3)	Property is included as security for $71.0 million in mortgage notes payable.

(4)	Property is included in the Atlantic-EPR I joint venture.

(5)	Property is included as security for a $6.1 million mortgage notes payable.

(6)	Property is included as security for a $10.8 million mortgage note payable.

(7)	Property is included as security for a $103.1 million mortgage note payable.

(8)	Property is included as security for $113.0 million mortgage notes payable.

(9)	Property is included in the Atlantic-EPR II joint venture.

(10)	Property is included as security for a $59.5 million mortgage note payable and $4.0 million credit facility.

(11)	Property is included as security for a $33.2 million mortgage note payable.

(12)	Property is included as security for a $7.7 million mortgage note payable.

(13)	Property is included as security for a $7.3 million mortgage note payable.

(14)	Property is included as security for a $4.6 million mortgage note payable.

(15)	Property is included as security for a $6.1 million mortgage note payable.

(16)	Property is included as security for a $8.5 million mortgage note payable.

(17)	Property is included as security for a $4.7 million mortgage note payable.

(18)	Property is included as security for a $13.8 million mortgage note payable.

(19)	Property is included as security for a $14.7 million mortgage note payable.

(20)	Property is included as security for a $20.0 million mortgage note payable.

(21)	Property is included as security for a $20.0 million mortgage note payable.

(22)	Property is included as security for a $10.8 million mortgage note payable.

(23)	Property is included as security for a $11.1 million mortgage note payable.

(24)	Property is included as security for a $4.8 million mortgage note payable.

(25)	Property is included as security for a $4.5 million mortgage note payable.

(26)	Property is included as security for a $9.7 million mortgage note payable.

(27)	Property is included as security for a $17.3 million mortgage note payable.

(28)	Property is included as security for a $15.0 million mortgage note payable.

(29)	Property is included as security for a $14.4 million mortgage note payable.

(30)	Property is included as security for a $11.9 million mortgage note payable.

(31)	Property is included as security for a $20.4 million mortgage note payable.

(32)	Property is included as security for a $24.1 million mortgage note payable.

(33)	Property is included as security for a $24.8 million mortgage note payable.

(34)	Property is included as security for a $16.2 million mortgage note payable

(35)	Property is included as security under a $160.0 million credit facility ($86.3 million outstanding at December 31, 2010.)

(36)	Property is included as security for $10.6 million bond payable.

(37)	Property includes approximately 324 acres of land.

(38)	Property includes approximately 35 acres of land.

(39)	Property includes approximately 60 acres of land.

(40)	Property includes approximately 225 acres of land.

(41)	Property includes approximately 693 acres of land.

(42)	Property includes approximately 17 acres of land.

(43)	Property includes approximately 23 acres of land.

(44)	Property includes approximately 207 acres of land.

(45)	Property is located in Ontario, Canada.

(46)	Property includes approximately 20 acres of land.

As of December 31, 2010, our portfolio of megaplex theatre properties consisted of 8.7 million square feet and was 99% occupied, and our portfolio of retail, restaurant and other properties consisted of 4.5 million square feet and was 92% occupied. The combined portfolio consisted of 13.2 million square feet and was 97% occupied. The following table sets forth information regarding EPR’s megaplex theatre portfolio as of December 31, 2010 (dollars in thousands). This data does not include the two megaplex theatre properties held by our unconsolidated joint ventures or the Grand 24 theatre in Dallas, Texas as the lease expired in November of 2010.


Megaplex Theatre Portfolio
Year	Total Number of Leases Expiring		Square Footage		Revenue for the Year Ended December 31, 2010 (1)		% of Rental Revenue
2011		4		390,837		9,679		5.1	%
2012		3		290,316		7,308		3.9	%
2013		4		499,935		14,384		7.6	%
2014		—		—		—		—
2015		3		345,708		9,169		4.9	%
2016		2		189,519		3,971		2.1	%
2017		3		224,497		4,750		2.5	%
2018		17		1,370,639		21,276		11.3	%
2019		7		647,264		22,212		11.8	%
2020		7		415,753		8,745		4.6	%
2021		3		218,023		7,201		3.8	%
2022		9		636,822		16,108		8.6	%
2023		2		129,181		2,294		1.2	%
2024		8		674,472		14,432		7.7	%
2025		7		452,191		14,175		7.5	%
2026		5		347,710		7,122		3.8	%
2027		3		194,772		3,939		2.1	%
2028		2		147,741		7,360		3.9	%
2029		15		1,245,920		14,125		7.5	%

		104		8,421,300	$	188,250		100.0	%

(1)	Consists of rental revenue and tenant reimbursements.

Our properties are located in 33 states, the District of Columbia and in the Canadian province of Ontario. The following table sets forth certain state-by-state and Ontario, Canada information regarding our real estate portfolio as of December 31, 2010 (dollars in thousands). This data does not include the two theatre properties owned by our unconsolidated joint ventures or the public charter schools recorded as a direct financing lease.


Location	Building (gross sq. ft)		Revenue for the year ended December 31, 2010 (1)		% of Rental Revenue
California		1,759,052	$	41,780		16.1	%
Texas		1,552,061		28,050		10.8	%
Ontario, Canada		1,450,821		62,179		23.9	%
Michigan		630,974		12,180		4.7	%
Virginia		561,671		11,498		4.4	%
Florida		557,389		12,557		4.8	%
New York		446,809		9,972		3.8	%
Louisiana		440,177		9,781		3.8	%
Colorado		389,703		7,457		2.9	%
North Carolina		387,195		7,858		3.0	%
Ohio		379,981		4,845		1.9	%
Illinois		314,342		8,280		3.2	%
Kansas		217,721		5,080		2.0	%
New Jersey		216,424		4,643		1.8	%
Arizona		208,542		4,227		1.6	%
Kentucky		163,655		2,414		0.9	%
Connecticut		157,895		2,501		1.0	%
Idaho		140,300		2,081		0.8	%
South Carolina		119,505		2,230		0.9	%
Massachusets		111,166		729		0.3	%
Nebraska		107,402		2,788		1.1	%
Indiana		107,358		1,221		0.5	%
Mississippi		105,367		2,743		1.1	%
Iowa		93,755		1,100		0.4	%
Alabama		90,200		1,956		0.8	%
Georgia		84,810		1,286		0.5	%
Tennessee		82,330		1,796		0.7	%
Arkansas		79,330		1,808		0.7	%
Maryland		77,731		1,254		0.5	%
Missouri		60,418		2,328		0.9	%
Montana		44,650		902		0.3	%
Washington		35,880		671		0.3	%
New Hampshire		34,100		38		0.0	%

		11,208,714	$	260,233		100.0	%

(1)	Consists of rental revenue and tenant reimbursements.

Office Location

Our executive office is located in Kansas City, Missouri and is leased from a third party landlord. The office occupies approximately 31,831 square feet with annual rentals of approximately $350 thousand. The lease expires on September 30, 2016 with two five year extension options available.

Tenants and Leases

Our existing leases on rental property (on a consolidated basis - excluding unconsolidated joint venture properties) provide for aggregate annual rentals of approximately $230 million (not including periodic rent escalations or percentage rent). The megaplex theatre leases have an

average remaining base term lease life of approximately 11 years and may be extended for predetermined extension terms at the option of the tenant. The theatre leases are typically triple-net leases that require the tenant to pay substantially all expenses associated with the operation of the properties, including taxes, other governmental charges, insurance, utilities, service, maintenance and any ground lease payments.

Property Acquisitions in 2010

The following table lists the significant rental properties we acquired or developed during 2010:


Property	Location	Tenant	Development Cost/ Purchase Price
5 Public Charter Schools and 4 Public Charter School expansions	Various	Imagine Schools, Inc.	$51.7 million
Toronto Dundas Square	Toronto, Ontario	Multi-tenant	$111.6 million
12 Theatre Portfolio	Various	Cinemark USA	$124.4 million

Item 3. Legal Proceedings

Other than routine litigation and administrative proceedings arising in the ordinary course of business, we are not presently involved in any litigation nor, to our knowledge, is any litigation threatened against us or our properties, which is reasonably likely to have a material adverse effect on our liquidity or results of operations.

Item 4. (Removed and Reserved)

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The following table sets forth, for the quarterly periods indicated, the high and low sales prices per share for our common shares on the New York Stock Exchange (“NYSE”) under the trading symbol “EPR” and the distributions declared.


	High		Low		Distribution
2010:
Fourth quarter	$	49.73	$	42.82	$	0.6500
Third quarter		46.46		35.85		0.6500
Second quarter		46.73		36.88		0.6500
First quarter		44.00		33.41		0.6500

2009:
Fourth quarter	$	36.61	$	30.37	$	0.6500
Third quarter		35.19		19.40		0.6500
Second quarter		25.15		15.30		0.6500
First quarter		30.62		12.70		0.6500

The closing price for our common shares on the NYSE on February 25, 2011 was $46.83 per share.

We declared quarterly distributions to common shareholders aggregating $2.60 per common share in both 2010 and 2009.

While we intend to continue paying regular quarterly dividends, future dividend declarations will be at the discretion of the Board of Trustees and will depend on our actual cash flow, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code, debt covenants and other factors the Board of Trustees deems relevant. The actual cash flow available to pay dividends may be affected by a number of factors, including the revenues received from rental properties and mortgage notes, our operating expenses, debt service on our borrowings, the ability of tenants and customers to meet their obligations to us and any unanticipated capital expenditures. Our Series B preferred shares have a fixed dividend rate of 7.75%, our Series C preferred shares have a fixed dividend rate of 5.75%, our Series D preferred shares have a fixed dividend rate of 7.375% and our Series E preferred shares have a fixed dividend rate of 9.00%.

During the year ended December 31, 2010, the Company did not sell any unregistered equity securities.

On February 25, 2011, there were approximately 615 holders of record of our outstanding common shares.

Issuer Purchases of Equity Securities


Period	Total Number of Shares Purchased			Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
October 1 through October 31, 2010 common stock		12,959	⁽¹⁾		47.37		—		—

November 1 through November 30, 2010 common stock		—			—		—		—
December 1 through December 31, 2010 common stock		1,636	⁽¹⁾		47.96		—		—

Total		14,595		$	47.44		—	$	—

⁽¹⁾	The repurchase of equity securities during October and December of 2010 was completed in conjunction with employee stock option exercises. These repurchases were not made pursuant to a publicly announced plan or program.

LOGO

Total Return Analysis

12/31/2005

12/31/2006

12/31/2007

12/31/2008

12/31/2009

12/31/2010

Entertainment Properties Trust

100.00

151.93

129.42

88.61

116.94

163.07

MSCI US REIT Index

100.00

118.35

116.52

77.14

98.11

124.45

Russell 2000 Index

100.00

135.83

113.21

70.48

90.20

115.80

Source: Zacks Investment Research, Inc.

Item 6. Selected Financial Data

Operating statement data

(Dollars in thousands except per share data)


	Years Ended December 31,
	2010			2009			2008			2007			2006
Rental revenue	$	235,008			195,784			190,578			177,798			167,077
Tenant reimbursements		25,225			15,438			16,158			15,398			14,440
Other income		568			2,890			2,241			2,402			3,274
Mortgage and other financing income		52,263			44,999			60,435			28,841			10,968

Total revenue		313,064			259,111			269,412			224,439			195,759
Property operating expense		35,830			21,969			20,802			19,717			18,690
Other expense		1,297			2,495			2,103			4,205			3,486
General and administrative expense		18,227			15,169			15,286			12,717			12,087
Costs associated with loan refinancing		15,247			117			—			—			673
Interest expense, net		74,802			65,747			63,990			56,097			48,866
Transaction costs		7,787			3,321			1,628			253			428
Provision for loan losses		700			70,954			—			—			—
Impairment charges		463			6,357			—			—			—
Depreciation and amortization		52,099			42,111			38,824			34,373			31,008

Income before gain on sale of land, equity in income from joint ventures, gain on acquisition and discontinued operations		106,612			30,871			126,779			97,077			80,521

Gain on sale of land		—			—			—			129			345
Equity in income from joint ventures		2,138			895			1,962			1,583			759
Gain on acquisition		9,023			—			—			—			—

Income from continuing operations	$	117,773			31,766			128,741			98,789			81,625
Discontinued operations:
Income (loss) from discontinued operations		(3,982	)		(43,672	)		(1,237	)		1,265			664
Gain (loss) on sale of real estate		(736	)		—			119			3,240			—

Net income (loss)		113,055			(11,906	)		127,623			103,294			82,289
Add: Net loss attributable to noncontrolling interests		1,819			19,913			2,353			1,370			—

Net income attributable to Entertainment Properties Trust		114,874			8,007			129,976			104,664			82,289

Preferred dividend requirements		(30,206	)		(30,206	)		(28,266	)		(21,312	)		(11,857	)
Series A preferred share redemption costs		—			—			—			(2,101	)		—

Net income (loss) available to common shareholders of Entertainment Properties Trust	$	84,668			(22,199	)		101,710			81,251			70,432

Per share data attributable to Entertainment Properties Trust shareholders:
Basic earnings per share data:
Income from continuing operations	$	1.93			0.04			3.24			2.80			2.65
Income (loss) from discontinued operations		(0.06	)		(0.65	)		0.05			0.22			0.03

Net income (loss) available to common shareholders	$	1.87			(0.61	)		3.29			3.02			2.68

Diluted earnings per share data:
Income from continuing operations	$	1.92			0.04			3.21			2.76			2.61
Income (loss) from discontinued operations		(0.06	)		(0.65	)		0.05			0.22			0.03

Net income (loss) available to common shareholders	$	1.86			(0.61	)		3.26			2.98			2.64

Shares used for computation (in thousands):
Basic		45,206			36,122			30,910			26,929			26,317
Diluted		45,555			36,235			31,177			27,304			26,689

Cash dividends declared per common share	$	2.60			2.60			3.36			3.04			2.75

Balance sheet data

(Dollars in thousands)


	Years Ended December 31,
	2010		2009			2008		2007		2006
Net real estate investments	$	2,217,047		1,867,358			1,765,861		1,671,622		1,413,484
Mortgage notes and related accrued interest receivable, net		305,404		522,880			508,506		325,442		76,093
Investment in a direct financing lease, net		226,433		169,850			166,089		—		—
Total assets		2,923,420		2,680,732			2,633,925		2,171,633		1,571,279
Common dividends payable		30,253		27,880			27,377		21,344		18,204
Preferred dividends payable		7,551		7,552			7,552		5,611		3,110
Long-term debt		1,191,179		1,141,423			1,262,368		1,081,264		675,305
Total liabilities		1,292,162		1,212,775			1,341,274		1,145,533		714,123
Noncontrolling interests		28,019		(4,905	)		15,217		18,207		4,474
Equity		1,631,258		1,467,957			1,292,651		1,026,100		857,156

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in this Annual Report on Form 10-K. The forward-looking statements included in this discussion and elsewhere in this Annual Report on Form 10-K involve risks and uncertainties, including anticipated financial performance, 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.” 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 this Item and in Item 1A, “Risk Factors.”

Overview

Our principal business objective is to enhance shareholder value by achieving predictable and increasing FFO and dividends per share. Our prevailing strategy is to focus on long-term investments in a limited number of categories in which we maintain a depth of knowledge and relationships, and which we believe offer sustained performance throughout all economic cycles. As of December 31, 2010, our total assets exceeded $2.9 billion, and included investments in 107 megaplex theatre properties (including two joint venture properties) and various restaurant, retail, entertainment, destination recreational and specialty properties located in 33 states, the District of Columbia and Ontario, Canada. As of December 31, 2010, we had invested approximately $190.4 million in development land and property under development and approximately $305.4 million in mortgage financing for entertainment, recreational and specialty properties, including certain such properties under development.

As of December 31, 2010, our real estate portfolio of megaplex theatre properties consisted of 8.7 million square feet and was 99% occupied, and our remaining real estate portfolio consisted of 4.5 million square feet and was 92% occupied. The combined real estate portfolio consisted of 13.2 million square feet and was 97% occupied. Our theatre properties are leased to ten different leading theatre operators. At December 31, 2010, approximately 38% of our megaplex theatre properties were leased to AMC.

Substantially all of our single-tenant properties are leased pursuant to long-term, triple-net leases, under which the tenants typically pay all operating expenses of a property, including, but not limited to, all real estate taxes, assessments and other governmental charges, insurance, utilities, repairs and maintenance. A majority of our revenues are derived from rents received or accrued under long-term, triple-net leases. Tenants at our multi-tenant properties are typically required to pay common area maintenance charges to reimburse us for their pro rata portion of these costs.

Our real estate mortgage portfolio consists of seven mortgage notes totaling $305.4 million at December 31, 2010. Two of these mortgage notes, totaling $169.0 million at December 31, 2010, are secured by a water-park anchored entertainment village in Kansas City, Kansas (the first phase of which opened in July 2009 and the second phase is expected to open in 2011) as well as two other water-parks in Texas. The remaining five mortgage notes totaling $136.4 million at December 31, 2010 relate to financing provided for ski areas.

We incur general and administrative expenses including compensation expense for our executive officers and other employees, professional fees and various expenses incurred in the process of identifying, evaluating, acquiring and financing additional properties and mortgage notes. We are self-administered and managed by our Board of Trustees and executive officers. Our primary non-cash expense is the depreciation of our properties. We depreciate buildings, improvements on our properties and furniture, fixtures and equipment over a 3 to 40 year period for tax purposes and financial reporting purposes.

Our property acquisitions and financing commitments are financed by cash from operations, borrowings under our revolving credit facilities, long-term mortgage debt, and the sale of debt and equity securities. It has been our strategy to structure leases and financings to ensure a positive spread between our cost of capital and the rentals paid by our tenants. We have primarily acquired or developed new properties that are pre-leased to a single tenant or multi-tenant properties that have a high occupancy rate. We do not typically develop or acquire properties that are not significantly pre-leased. We have also entered into certain joint ventures and we have provided mortgage note financing as described above. We intend to continue entering into some or all of these types of arrangements in the foreseeable future, subject to our ability to do so in light of the current financial and economic environment.

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

However, since 2009, as a result of the economic downturn and related challenges in the credit market, we tempered our focus on growth of FFO, and instead principally focused on maintaining adequate liquidity and a strong balance sheet. In 2009, we deleveraged our balance sheet primarily by issuing equity in excess of debt during the year. Our debt to gross assets ratio (i.e. long-term debt of the Company as a percentage of total assets plus accumulated depreciation) was reduced from 44% at December 31, 2008 to 39% at December 31, 2009. In 2010, we further deleveraged our balance sheet with a debt to gross assets ratio of 37% at December 31, 2010.

During the second quarter of 2010, we issued pursuant to a registered public offering 3.6 million common shares at a purchase price of $41.00 for net proceeds to us, after underwriting discounts and expenses, of $141.0 million. We also issued pursuant to a private offering $250.0 million in 7.75% senior notes due on July 15, 2020 for net proceeds to us, after the initial purchasers’ discounts and commissions and expenses, of $239.4 million. Additionally, on June 30, 2010, we entered into a new $320.0 million unsecured revolving credit facility, maturing on December 1, 2013, unless extended by us, the agent and the lenders. Historically, we have relied primarily on secured debt financings. The senior note offering and the unsecured revolving credit facility represent significant steps in the implementation of our new strategy to migrate to an unsecured debt structure. In the future, we may from time to time seek to access the public and private credit markets on an opportunistic basis through the issuance of unsecured debt securities. We believe this strategy will increase our access to capital and permit us to more efficiently match available debt and equity financing to our ongoing capital requirements and better position us to aggressively pursue potential investments, acquisitions and financing transaction opportunities.

Throughout the remainder of 2011, we expect to maintain our debt to total gross assets ratio between 35% and 45%. Depending on our capital needs, we will seek both debt and equity capital and will consider issuing additional shares under the direct share purchase component of our DSP

Plan. While equity issuances and maintaining lower leverage mitigate the growth in per share results, we believe lower leverage and an emphasis on liquidity are prudent during the current economic downturn.

Developments in the credit and equity markets and the economic downturn since 2008 have also had a significant impact on the ability of our development partners to fully finance developments in process or to refinance development projects upon completion. As a result, the development of the water-park anchored entertainment village in Kansas was downsized and will now open in phases (the first phase opened in July 2009 and the second phase is scheduled to open in 2011). Because of the down-sizing and as a condition to provide additional funding, the collateral for our mortgage note related to this project was increased by adding mortgages on two other water parks in Texas that are owned and operated by affiliates of the entity that owns the Kansas property. On December 31, 2009, we commenced litigation against Mr. Cappelli and his affiliates seeking payment of amounts due under various loans to them and a declaratory judgment that no further investments are required to be made by us under any prior commitment to Mr. Cappelli or any of his affiliates. On June 18, 2010, we entered into a series of agreements regarding the settlement of all pending litigation and a restructuring of our investments with Mr. Cappelli and his affiliates. This settlement represented a significant restructuring of our relationship with Mr. Cappelli and his affiliates by consolidating our various investments with Mr. Cappelli into wholly-owned investments in the Concord resort property and the New Rochelle, New York entertainment retail center and eliminating our investment in the White Plains, New York entertainment retail center. On March 4, 2010, we completed the acquisition of Toronto Dundas Square, previously in receivership, by paying off senior debt of approximately $122 million Canadian dollars (CAD) and extinguishing our second mortgage note on the project. In conjunction with the acquisition, we closed on a CAD $100 million first mortgage credit facility with a group of banks, which was subsequently paid off on June 30, 2010. On February 3, 2011 we entered into an agreement to sell Toronto Dundas Square. See “Recent Developments” for more information regarding these investments.

Certain of our customers, particularly our vineyard and winery tenants and certain non-theatre retail tenants, have also experienced the effects of the economic downturn, which has generally resulted in a reduction in sales and profitability. As a result, we have seen more credit issues with these tenants than in the past, and this trend may continue in 2011. With respect to our vineyard and winery investments, we have reclaimed possession of four properties from two tenants for failure to pay rent and expect to take possession of an additional property in 2011 as part of a modification agreement with another tenant. See “Recent Developments” for more information regarding this agreement.

Our business is subject to a number of risks and uncertainties, including those described in “Risk Factors” in Item 1A of this report.

Critical Accounting Policies

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. The most significant assumptions and estimates relate to consolidation, revenue recognition, depreciable lives of the

real estate, the valuation of real estate, accounting for real estate acquisitions, estimating reserves for uncollectible receivables and the accounting for 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.

Consolidation

We consolidate certain entities if we are deemed to be the primary beneficiary in a variable interest entity (“VIE”), as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic on Consolidation (“Topic 810”). The equity method of accounting is applied to entities in which we are not the primary beneficiary as defined in Topic 810, or do not have effective control, but can exercise influence over the entity with respect to its operations and major decisions.

We adopted Accounting Standards Update (ASU) 2009-17 “Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities” (ASU 2009-17) on January 1, 2010. ASU 2009-17 amends FIN 46R to require an analysis to determine whether a variable interest gives a company a controlling financial interest in a variable interest entity. This statement requires an ongoing reassessment of and eliminates the quantitative approach previously required for determining whether a company is the primary beneficiary and requires enhanced disclosures on variable interest entities. The adoption of this statement did not have an impact on our financial position or results of operations for the year ended December 31, 2010.

Revenue Recognition

Rents that are fixed and determinable are recognized on a straight-line basis over the minimum terms of the leases. Base rent escalation in other leases is dependent upon increases in the Consumer Price Index (“CPI”) and accordingly, management does not include any future base rent escalation amounts on these leases in current revenue. Most of our leases provide for percentage rents based upon the level of sales achieved by the tenant. These percentage rents are recognized once the required sales level is achieved. Lease termination fees are recognized when the related leases are canceled and we have no continuing obligation to provide services to such former tenants.

Direct financing lease income is recognized on the effective interest method to produce a level yield on funds not yet recovered. Estimated unguaranteed residual values at the date of lease inception represent management’s initial estimates of fair value of the leased assets at the expiration of the lease, not to exceed original cost. Significant assumptions used in estimating residual values include estimated net cash flows over the remaining lease term and expected future real estate values. The estimated unguaranteed residual value is reviewed on an annual basis or more frequently if necessary. We evaluate the collectibility of our direct financing lease receivable to determine whether it is impaired. A direct financing lease receivable is considered to be impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the existing contractual terms. When a direct financing lease receivable is considered to be impaired, the amount of loss is calculated by comparing the recorded investment to the value determined by discounting the expected future cash flows at the direct financing lease receivable’s effective interest rate or to the value of the underlying collateral, less costs to sell, if such receivable is collateralized.

Real Estate Useful Lives

We are required to make subjective assessments as to the useful lives of our properties for the purpose of determining the amount of depreciation to reflect on an annual basis with respect to

those properties. These assessments have a direct impact on our net income. Depreciation and amortization are provided on the straight-line method over the useful lives of the assets, as follows:


Buildings		40 years
Tenant improvements		Base term of lease or useful life, whichever is shorter
Furniture, fixtures and equipment		3 to 25 years

Impairment of Real Estate Values

We are required to make subjective assessments as to whether there are impairments in the value of our rental properties. These estimates of impairment may have a direct impact on our consolidated financial statements.

We assess the carrying value of our rental properties whenever events or changes in circumstances indicate that the carrying amount of a property may not be recoverable. Certain factors that may occur and indicate that impairments may exist include, but are not limited to: underperformance relative to projected future operating results, tenant difficulties and significant adverse industry or market economic trends. If an indicator of possible impairment exists, a property is evaluated for impairment by comparing the carrying amount of the property to the estimated undiscounted future cash flows expected to be generated by the property. If the carrying amount of a property exceeds its estimated future cash flows on an undiscounted basis, an impairment charge is recognized in the amount by which the carrying amount of the property exceeds the fair value of the property. Management estimates fair value of our rental properties utilizing independent appraisals and/or based on projected discounted cash flows using a discount rate determined by management to be commensurate with the risk inherent in the Company.

Real Estate Acquisitions

Upon acquisitions of real estate properties, we record the fair value of acquired tangible assets (consisting of land, building, tenant improvements, and furniture, fixtures and equipment) and identified intangible assets and liabilities (consisting of above and below market leases, in-place leases, tenant relationships and assumed financing that is determined to be above or below market terms) as well as any noncontrolling interest in accordance with FASB ASC Topic 805 on Business Combinations (“Topic 805”). In addition, in accordance with Topic 805, acquisition-related costs in connection with business combinations are expensed as incurred, rather than capitalized.

Allowance for Doubtful Accounts

Management makes quarterly estimates of the collectibility of its accounts receivable related to base rents, tenant escalations (straight-line rents), reimbursements and other revenue or income. Management specifically analyzes trends in accounts receivable, historical bad debts, customer credit worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of its allowance for doubtful accounts. In addition, when customers are in bankruptcy, management makes estimates of the expected recovery of pre-petition administrative and damage claims. These estimates have a direct impact on our net income.

Mortgage Notes and Other Notes Receivable

Mortgage notes and other notes receivable, including related accrued interest receivable, consist of loans that we originated and the related accrued and unpaid interest income as of the balance

sheet date. Mortgage notes and other notes receivable are initially recorded at the amount advanced to the borrower and we defer certain loan origination and commitment fees, net of certain origination costs, and amortize them over the term of the related loan. Interest income on performing loans is accrued as earned. We evaluate the collectibility of both interest and principal for each loan to determine whether it is impaired. A loan is considered to be impaired when, based on current information and events, we determine it is probable that we will be unable to collect all amounts due according to the existing contractual terms. When a loan is considered to be impaired, the amount of loss is calculated by comparing the recorded investment to the value determined by discounting the expected future cash flows at the loan’s effective interest rate or to the fair value of the underlying collateral, less costs to sell, if the loan is collateral dependent. For impaired loans, interest income is recognized on a cash basis, unless we determine based on the loan to estimated fair value ratio the loan should be on the cost recovery method, and any cash payments received would then be reflected as a reduction of principal. Interest income recognition is recommenced if and when the impaired loan becomes contractually current and performance is demonstrated to be resumed.

Recent Developments

Debt Financing

As further discussed below under “Property Sales,” on June 15, 2010, we paid in full our $4.6 million mortgage note payable in conjunction with the sale of a vineyard and winery property.

On June 18, 2010, we entered into a series of transactions with Mr. Cappelli and his affiliates as further discussed below. Among other things, we transferred our interest in the City Center entertainment retail center which resulted in the deconsolidation of the related joint venture and the related mortgage notes payable of $118.2 million. Additionally, the Company became the lessee of a ground lease for a portion of the Concord resort property which is classified as a capital lease. Accordingly, a capital lease obligation of $9.2 million was recorded and is included in long-term debt at December 31, 2010 in the consolidated balance sheet in this Annual Report on Form 10-K.

On June 21, 2010, we prepaid our $56.3 million mortgage note that was scheduled to mature on September 10, 2010. The note was secured by the mortgage note receivable due on the same date entered into with Concord Resort in connection with the planned resort development which was settled on June 18, 2010 as further discussed below. Deferred financing costs, net of accumulated amortization, of $0.1 million were written off in connection with the prepayment of this loan and are included in costs associated with loan refinancing in the consolidated income statements in this Annual Report on Form 10-K.

On June 30, 2010, we issued $250.0 million in senior notes due on July 15, 2020. The notes bear interest at 7.75%. Interest is payable on July 15 and January 15 of each year beginning on January 15, 2011 until the stated maturity date of July 15, 2020. The notes were issued at 98.29% of their principal amount and are guaranteed by certain of our subsidiaries. The notes contain various covenants, including: (i) a limitation on incurrence of any debt which would cause the ratio of our debt to adjusted total assets to exceed 60%; (ii) a limitation on incurrence of any secured debt which would cause the ratio of secured debt to adjusted total assets to exceed 40%; (iii) a limitation on incurrence of any debt which 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 to be not less than 150% of our outstanding unsecured debt.

Additionally on June 30, 2010, we entered into a new $320.0 million unsecured revolving credit facility. The new unsecured revolving credit facility provides for the extension of credit not to exceed $320.0 million, including a $70.0 million subline for letters of credit. The new unsecured revolving credit facility contains an accordion feature whereby, subject to lender approval, the total amount of the facility may be increased to $420.0 million. The facility matures on December 1, 2013, unless extended us, the agent and the lenders. The unsecured revolving credit facility contains various restrictive covenants related to financial and operating performance.

We used the proceeds from the note offering and the new unsecured revolving credit facility to repay borrowings of $171.0 million on our previous revolving credit facility, pay in full our term loan of $117.3 million and to pay in full our Canadian dollar (“CAD”) denominated loan secured by Toronto Dundas Square with a principal amount of CAD $98.8 million ($94.1 million US). In connection with the payment in full of the term loan, the related interest rate swaps were terminated at a cost of $8.3 million. Prepayment penalties related to the termination of the Toronto Dundas Square debt were approximately CAD $1.0 million ($1.0 million US). Deferred financing costs, net of accumulated amortization, of $5.8 million were written off as part of this refinancing. As of December 31, 2010, $142.0 million was outstanding under our $320.0 million unsecured revolving credit facility.

As further discussed below under “Subsequent Events,” on February 7, 2011, we paid in full the eight term loans outstanding under our vineyard and winery term loan credit facility totaling $86.2 million.

Issuance of Common Shares

On May 11, 2010, we issued pursuant to a registered public offering 3,600,000 common shares at a purchase price of $41.00. Total net proceeds to us after underwriting discounts and expenses were approximately $141.0 million.

Investments

On January 22, 2010, we acquired five public charter school properties from Imagine Schools, Inc. and funded one expansion at a previously acquired public charter school property for a total acquisition price of $44.1 million. The properties are leased under a long-term triple-net master lease that is classified as a direct financing lease as described in Note 7 to the consolidated financial statements in this Annual Report on Form 10-K. The five properties are located in Florida, Indiana and Ohio and the expansion is located in Michigan. On September 30, 2010, we funded $7.6 million for expansions at three of our existing public charter school properties. Additionally, subsequent to December 31, 2010, we funded $2.1 million in development costs for expansion of another one of our existing public charter school properties.

On March 4, 2010, we completed the acquisition of Toronto Dundas Square, previously in receivership, by paying off senior debt of approximately $122 million Canadian dollars (CAD). Toronto Dundas Square is a 13-level entertainment retail center located in downtown Toronto, consisting of approximately 330,000 square feet of net rentable area, as well as a signage business consisting of 25,000 square feet of digital and static signage. As a result of the closing of this acquisition, our second mortgage note on the project has been extinguished. In conjunction with the acquisition, we closed on a CAD $100 million first mortgage term loan with a group of banks. As discussed above, the term loan was paid in full on June 30, 2010. See Note 3 to the consolidated financial statements in this Annual Report on Form 10-K for further discussion.

On May 1, 2010, we contributed an additional $14.9 million to our joint venture, Atlantic-EPR I, to pay off the Partnership’s long-term debt at its maturity of May 1, 2010. Pursuant to the partnership agreement, we are entitled to receive a priority return of 15% on our additional contribution.

On June 11, 2010, we acquired 12 theatre properties from a third party, for a total investment of $124.4 million. The theatre properties are located in Colorado, California, Texas and Indiana. The theatre properties contain an aggregate of approximately 192 screens, and are comprised of an aggregate of approximately 864,530 square feet of space located on 139 acres. The theatre properties are leased to Cinemark USA pursuant to triple net leases with the tenant responsible for all taxes, costs and expenses arising from the use or operation of the properties. The leases contain cross-default provisions pursuant to which a default under one lease would result in a default under each other lease. The remaining initial lease term is approximately eight years, with a step down in rent of 11.5% in the event the tenant exercises the first of five tenant options to extend for five years each.

Property Sales

On June 15, 2010, we completed the sale of a ten acre vineyard and winery facility in Napa Valley, California for $6.5 million and a loss on sale of $934 thousand was recognized during the three months ended June 30, 2010. As further detailed in Note 22 to the consolidated financial statement in this Annual Report on Form 10-K, the results of operations of the property have been classified within discontinued operations. In conjunction with the sale, we paid in full the $4.6 million mortgage note that was secured by the property and incurred $0.4 million in costs to terminate the related interest rate swap agreement.

On July 14, 2010, we sold a parcel of land including one building adjacent to one of our megaplex theatres in Arroyo Grande, California for $1.2 million and a gain on sale of $198 thousand was recognized during the three months ended September 30, 2010. As further detailed in Note 22 to the consolidated financial statements in this Annual Report on Form 10-K, the results of operations of the property have been classified within discontinued operations.

Other Mortgage Notes and Notes Receivable

On April 2, 2010, our $25.0 million first mortgage loan agreement with Peak matured. We entered into a modification agreement with Peak and per the terms of this agreement, the maturity date of the loan was extended to April 1, 2012 with a one year extension option subject to our approval and the amount available to borrow was increased to $41.0 million. The carrying value of this mortgage note receivable at December 31, 2010 was $33.7 million and the loan is secured by approximately 696 acres of development land. Per the modification agreement, Peak is required to fund debt service reserves in the first quarter of each year sufficient to pay an entire calendar year of payment obligations on all of their outstanding notes and leases. Monthly interest payments are transferred to us from these debt service reserves.

On June 14, 2010, we amended our secured mortgage loan agreements with SVV I, LLC and an affiliate of SVV I, LLC (together, “SVVI”) to provide for an additional advance of $5.0 million for additional improvements made to the Kansas City, Kansas water-park. The carrying value of this mortgage note receivable at December 31, 2010 was $169.0 million. SVVI is required to fund a debt service reserve for off-season fixed payments (those due from September to May). The reserve is to be funded in monthly installments during the months of June, July and August.

Cappelli Settlement

As discussed in Note 8 to the consolidated financial statements in this Annual Report on Form 10-K, on June 18, 2010, we entered into a series of agreements with Mr. Cappelli and several of his affiliates regarding the settlement of all pending litigation and a restructuring of our investments with Mr. Cappelli and his affiliates. The significant terms of the agreements are as follows:

Concord Resort transferred its interests in the Concord resort property to one of our wholly owned subsidiaries in exchange for its release from obligations under the Concord Mortgage Note, subject to: an option granted to Concord Resort to purchase for a two-year period our subsidiary that is holding the Concord resort property for $143.0 million, plus interest accruing on such sum at the rate of 6% per annum, a right of first refusal granted to Concord Resort with respect to purchasing our interest in the Concord resort property applicable for a period of two years, certain limitations on our ability to own or operate any casino, racino, racing or gaming facility on the Concord resort property, which is adjacent to the Concord casino property owned by an affiliate of Mr. Cappelli (the “Casino Owner”), certain limitations on the ability of the Casino Owner (or its successor) to own or operate a resort facility, golf course or other operation or facility on the Concord casino property, other than the currently contemplated casino and hotel project, and upon the execution of an agreement for the construction of the Concord casino on the Concord casino property, we agreed to lease or sublease, as applicable, two golf courses that are associated with the Concord resort property to a Cappelli affiliate on a triple net basis for an initial term of 10 years, plus five 5-year extensions at fair market value rent mutually acceptable to the parties. Additionally, we became the lessee of a ground lease which is classified as a capital lease.

We transferred to a Cappelli affiliate, KBC Concord LLC (“KBC Concord”), three promissory notes, in an aggregate principal amount of $30.0 million and for which we had previously recorded a loan loss reserve in the aggregate of $28.0 million, in exchange for an agreement by KBC Concord to pay us up to $15.0 million payable from 50% of the available cash distributed to KBC Concord from its minority interest in the Concord casino project.

We provided a commitment to acquire a $30.0 million participation (pari passu with the other lenders) from Union Labor Life Insurance Company (“ULLICO”) in a loan to be made by ULLICO and other lenders under a proposed amended and restated master credit agreement to the Concord casino project, which was conditioned upon, among other things, receipt of a $100.0 million equity investment by a major gaming operator prior to December 31, 2010. This commitment expired on December 31, 2010.

One of Mr. Cappelli’s affiliates, LC New Roc LP, transferred to us its partnership interest in New Roc Associates, L.P. (previously a consolidated joint venture that had a noncontrolling interest balance of $3.9 million at March 31, 2010), which owns New Roc, an entertainment retail center located in New Rochelle, New York, in exchange for the our interest in LC White Plains Retail LLC and LC White Plains Recreation, LLC (each part of a previously consolidated joint venture with a deficit noncontrolling interest balance of $10.0 million of March 31, 2010), which own City Center, an entertainment retail center located in White Plains, New York, and a promissory note related to City Center, in the original principal amount of $20.0 million payable by Cappelli Group, LLC to us (previously eliminated in consolidation). As a result, we now hold a 100% interest

in New Roc and have no interest in City Center. As further detailed in Note 22 to the consolidated financial statements in this Annual Report on Form 10-K, the results of operations of City Center have been classified in discontinued operations.

In addition, we paid cash and assumed liabilities of $3.7 million for the interests acquired, the acquisition of certain equipment and the payment of property obligations. The Company also incurred $1.6 million in closing costs and other expenses, including transfer taxes, and the parties mutually released and settled all claims, obligations and liabilities, including all pending litigation. As a result of the settlement, we recognized a gain of $4 thousand which is included in other income.

Vineyards and Wineries

During the second quarter of 2010, one of our vineyard and winery tenants, Sapphire Wines, LLC went into receivership. Revenue from this tenant totaled $1.1 million and $1.6 million for the nine months ended September 30, 2010 and 2009, respectively. Outstanding receivables of $2.1 million (including $175 thousand of straight-line rent) were fully reserved at June 30, 2010 and were written off during the three months ended September 30, 2010. We have assessed the carrying value of the property for impairment and no additional provision for impairment was considered necessary based on this analysis. Management determined the fair value of the assets taking into account various factors, including an independent appraisal prepared as of December 31, 2009.

Subsequent Events

On January 13, 2011, we entered into a modification agreement with our vineyard and winery tenant at four properties, Ascentia Wine Estates. The modification agreement provides for, among other things, the sale of the real property and the operations of one winery to a third-party buyer and the payment of $2.0 million in rent related to the fourth quarter of 2010. The agreement also provides for the termination of the lease on another winery and vineyard, which previously had annual rent of approximately $5.5 million. We will take possession of the property during the first quarter of 2011. Additionally, the leases on two other wineries and one other vineyard were amended to provide for a reduction in rent of $1.5 million to approximately $3.5 million annually. Our management has assessed the carrying value of the properties for impairment and no provision for impairment was considered necessary based on this analysis.

On February 3, 2011 we entered into an agreement to sell our Toronto Dundas Square entertainment retail center in downtown Toronto after purchasing this property out of receivership earlier in the year. The sale proceeds, net of closing costs, are expected to exceed $220 million CAD. Subject to the satisfaction of certain conditions, the transaction is expected to close by the end of the first quarter of 2011 or shortly thereafter. In addition, on February 3, 2011, in order to hedge the foreign currency exposure related to the expected proceeds from the anticipated sale of this property, we entered into a forward contract to sell $200 million CAD for $201.5 million U.S. dollars with a settlement date of April 15, 2011. Including the impact of foreign currency, we expect to record a gain in excess of $17 million upon closing.

On February 7, 2011, we paid in full the eight term loans outstanding under our vineyard and winery facility totaling $86.2 million. In connection with the payment in full of the term loans, the related interest rate swaps were terminated at a cost of $4.6 million. Additionally, deferred financing costs, net of accumulated amortization, of $1.8 million were written off as part of this loan prepayment.

On January 5, 2011, we entered into an agreement to acquire four theatre properties for a total investment of $36.8 million from a third-party. The transaction is expected to close in the first quarter of 2011. The theatre properties are located in New Hampshire and Maine and contain an aggregate of 56 screens. The theatre properties will be leased to Cinemagic pursuant to lease agreements that are structured as a triple net lease with the tenant responsible for all taxes, costs and expenses arising from the use or operation of the properties. As a part of this transaction, we will assume a mortgage loan of $3.8 million on one of the four theatres.

Results of Operations

Year ended December 31, 2010 compared to year ended December 31, 2009

Rental revenue was $235.0 million for the year ended December 31, 2010 compared to $195.8 million for the year ended December 31, 2009. The $39.2 million increase resulted primarily from acquisitions completed in 2009 and 2010 and base rent increases on existing properties, partially offset by a decline in rental revenue from our vineyard and winery tenants. Percentage rents of $2.1 million and $1.4 million were recognized during the year ended December 31, 2010 and 2009, respectively. Straight-line rents of $1.8 million and $2.2 million were recognized during the year ended December 31, 2010 and 2009, respectively.

Tenant reimbursements totaled $25.2 million for the year ended December 31, 2010 compared to $15.4 million for the year ended December 31, 2009. These tenant reimbursements arise from the operations of our entertainment retail centers. The $9.8 million increase is primarily due to our acquisition of Toronto Dundas Square on March 4, 2010 as described in Note 3 to the consolidated financial statements in this Annual Report on Form 10-K as well as an increase in tenant reimbursements at our retail centers in Ontario, Canada.

Other income was $0.6 million for the year ended December 31, 2010 compared to $2.9 million for the year ended December 31, 2009. This decrease of $2.3 million is primarily due to a decrease in revenues from a family bowling center in Westminster, Colorado previously operated through a wholly-owned taxable REIT subsidiary. The bowling center was converted to a third party lease on February 1, 2010. Additionally, other income decreased due to a $0.9 million gain recognized upon settlement of foreign currency forward contracts for the year ended December 31, 2009. A loss of $0.2 million was recognized for the year ended December 31, 2010 and is included in other expense. Partially offsetting these decreases, there was an increase of $0.2 million for the year ended December 31, 2010 due to golf course revenue recognized related to two golf courses on the Concord resort property, which we took ownership of on June 18, 2010 in connection with the settlement with Mr. Cappelli and his affiliates.

Mortgage and other financing income for the year ended December 31, 2010 was $52.3 million compared to $45.0 million for the year ended December 31, 2009. The $7.3 million increase is primarily due to our January 2010 acquisition of five public charter school properties and expansions during the year ended December 31, 2010 at four of our public charter school properties as further described in Note 7 to the consolidated financial statements in this Annual Report on Form 10-K. Additionally, there was increased real estate lending activities primarily related to our mortgage loan agreement with SVVI.

Our property operating expense totaled $35.8 million for the year ended December 31, 2010 compared to $22.0 million for the year ended December 31, 2009. These property operating expenses arise from the operations of our retail centers. The increase of $13.8 million resulted from our acquisition of Toronto Dundas Square on March 4, 2010 as described in Note 3 to the consolidated financial statements in this Annual Report on Form 10-K as well as well as increases in bad debt expense associated with our vineyard and winery tenants and property operating expenses at our retail centers in Ontario, Canada.

Other expense totaled $1.3 million for the year ended December 31, 2010 compared to $2.5 million for the year ended December 31, 2009. The $1.2 million decrease is primarily due to less expense recognized related to a family bowling center in Westminster, Colorado previously operated through a wholly-owned taxable REIT subsidiary as further described above.

Our general and administrative expense totaled $18.2 million for the year ended December 31, 2010 compared to $15.2 million for the year ended December 31, 2009. The increase of $3.0 million is primarily due to an increase in payroll and trustee related expenses, travel expenses, insurance expense, professional fees and franchise taxes.

Costs associated with loan refinancing were $15.2 million for the year ended December 31, 2010 and $0.1 million for the year ended December 31, 2009. For the year ended December 31, 2010, these costs related to the termination of our previous revolving credit facility, our term loan (and related interest rate swap agreements) and our loan that was secured by the Toronto Dundas Square Project. For the year ended December 31, 2009, these costs related to the amendment and restatement of our revolving credit facility and consisted of the write-off of $0.1 million of certain unamortized financing costs.

Our net interest expense increased by $9.1 million to $74.8 million for the year ended December 31, 2010 from $65.7 million for the year ended December 31, 2009. This increase resulted from the increase in the average long-term debt outstanding and an increased weighted average interest rate used to finance our real estate acquisitions and fund our mortgage notes receivable.

Transaction costs totaled $7.8 million for the year ended December 31, 2010 compared to $3.3 million for the year ended December 31, 2009. The transaction costs incurred during the year ended December 31, 2010 related to acquisition costs that were expensed as incurred in accordance with FASB ASC Topic 810 related to the acquisition of Toronto Dundas Square as well as costs associated with terminated transactions. The transaction costs incurred during the year ended December 31, 2009 primarily related to the write off of costs associated with terminated transactions as well as costs related to the acquisition of Toronto Dundas Square.

Provision for loan losses for the year ended December 31, 2010 was $0.7 million and related to a note receivable that was settled in connection with the settlement with Mr. Cappelli and affiliates entered on June 18, 2010 as further discussed in Note 8 to the consolidated financial statements in this Annual Report on Form 10-K. Provision for loan losses for the year ended December 31, 2009 was $71.0 million and related to a mortgage note receivable and six other notes receivable. As further discussed in Note 3 and 8 to the consolidated financial statements in this Annual Report on Form 10-K, the mortgage note and three of the other notes receivable were extinguished during the year ended December 31, 2010.

Impairment charges for the year ended December 31, 2010 were $0.5 million and related to an asset recorded as a result of the settlement with Mr. Cappelli and affiliates on June 18, 2010, as further discussed in Note 8 to the consolidated financial statements in the Annual Report on Form 10-K. The impairment charges for the year ended December 31, 2009 were $6.4 million and related to certain of our winery and vineyard properties. For further detail, see Note 4 to the consolidated financial statements in this Annual Report on Form 10-K.

Depreciation and amortization expense totaled $52.1 million for the year ended December 31, 2010 compared to $42.1 million for the year ended December 31, 2009. The $10.0 million increase resulted primarily from asset acquisitions completed in 2010 and 2009.

Equity in income from joint ventures totaled $2.1 million for the year ended December 31, 2010 compared to $0.9 million for the year ended December 31, 2009. The $1.2 million increase is primarily due to our contribution of an additional $14.9 million to Atlantic-EPR I to pay off the Partnership’s long-term debt at its maturity of May 1, 2010. The $14.9 million contribution earns a preferred return of 15% per the partnership agreement.

Gain on acquisition for the year ended December 31, 2010 was $9.0 million and related to the acquisition of Toronto Dundas Square on March 4, 2010. For further discussion, see Note 3 to the consolidated financial statements in this Annual Report on Form 10-K. There was no gain on acquisition for the year ended December 31, 2009.

Loss from discontinued operations totaled $4.0 million for the year ended December 31, 2010 and $43.7 million for the year ended December 31, 2009 and are due to the operations of a parcel of land including one building in Arroyo Grande, California that was sold in July 2010 as well as an entertainment retail center in White Plains, New York and a ten acre vineyard and winery facility in Napa Valley, California, both of which were disposed of in the second quarter of 2010.

Loss on sale of real estate from discontinued operations of $0.7 million for the year ended December 31, 2010 was due to a loss of approximately $0.9 million related to the sale of a ten acre vineyard and winery facility in Napa Valley, California and a gain on sale of $0.2 million from a parcel of land including one building in Arroyo Grande, California. There was no loss on sale of real estate from discontinued operations for the year ended December 31, 2009.

Noncontrolling interest totaled $1.8 million for the year ended December 31, 2010 compared to $19.9 million for the year ended December 31, 2009. This noncontrolling interest primarily related to the consolidation of a VIE at the entertainment retail center in White Plains, New York. As further discussed in Note 8 to the consolidated financial statements in this Annual Report on Form 10-K, our interest in the VIE was extinguished in connection with the settlement entered into with Mr. Cappelli and affiliates on June 18, 2010.

Year ended December 31, 2009 compared to year ended December 31, 2008

Rental revenue was $195.8 million for the year ended December 31, 2009 compared to $190.6 million for the year ended December 31, 2008. The $5.2 million increase resulted primarily from the acquisitions and developments completed in 2008 and 2009 and base rent increases on existing properties, partially offset by a reduction in rent from defaulting tenants and the impact of a weaker Canadian dollar exchange rate. Percentage rents of $1.4 million and $1.7 million were recognized during the year ended December 31, 2009 and 2008, respectively. Straight-line rents of $2.2 million and $3.1 million were recognized during the year ended December 31, 2009 and 2008, respectively.

Tenant reimbursements totaled $15.4 million for the year ended December 31, 2009 compared to $16.2 million for the year ended December 31, 2008. These tenant reimbursements arise from the operations of our retail centers. The $0.8 million decrease is primarily due to vacancies related to certain non-theatre retail tenants and the impact of a weaker Canadian dollar exchange rate for the year ended December 31, 2009 compared to the year ended December 31, 2008.

Other income was $2.9 million for the year ended December 31, 2009 compared to $2.2 million for the year ended December 31, 2008. The increase of $0.7 million is primarily due to a gain of $0.9 million recognized upon settlement of foreign currency forward contracts, partially offset by a $0.3 million decrease in income from a family bowling center in Westminster, Colorado operated through a wholly-owned taxable REIT subsidiary.

Mortgage and other financing income for the year ended December 31, 2009 was $45.0 million compared to $60.4 million for the year ended December 31, 2008. The $15.4 million decrease relates to less interest income recognized during the year ended December 31, 2009 due to impairment of certain of our mortgage and other notes receivable as further discussed in Notes 6 and 11 to the consolidated financial statements in this Annual Report on Form 10-K.

Our property operating expense totaled $22.0 million for the year ended December 31, 2009 compared to $20.8 million for the year ended December 31, 2008. These property operating expenses arise from the operations of our retail centers. The increase of $1.2 million resulted primarily from an increase in the provision for bad debts, included in property operating expense, of $1.1 million to a total of $3.1 million for the year ended December 31, 2009. Partially offsetting this increase is the impact of a weaker Canadian dollar exchange rate.

Other expense totaled $2.5 million for the year ended December 31, 2009 compared to $2.1 million for the year ended December 31, 2008. The $0.4 million decrease is primarily due to no expense recognized upon settlement of foreign currency forward contracts during the year ended December 31, 2009. This is partially offset by an increase in property operating expenses at certain vineyard and winery properties that are being operated through a wholly-owned taxable REIT subsidiary.

Our general and administrative expense totaled $15.2 million for the year ended December 31, 2009 compared to $15.3 million for the year ended December 31, 2008. The decrease of $0.1 million is due to a decrease in payroll related expenses, partially offset primarily by increases in professional fees and travel expenses.

Costs associated with loan refinancing for the year ended December 31, 2009 were $0.1 million. These costs related to the amendment and restatement of our revolving credit facility and consisted of the write-off of $0.1 million of certain unamortized financing costs. No such costs were incurred during the year ended December 31, 2008.

Our net interest expense increased by $1.7 million to $65.7 million for the year ended December 31, 2009 from $64.0 million for the year ended December 31, 2008. This increase resulted from the increase in the average long-term debt outstanding used to finance our real estate acquisitions and fund our new mortgage notes receivable as well as increased costs associated with our amended and restated revolving credit facility.

Transaction costs totaled $3.3 million for the year ended December 31, 2009 compared to $1.6 million for the year ended December 31, 2008. The increase of $1.7 million is due to the write off of costs associated with terminated transactions as well as costs that were expensed as incurred in accordance with FASB ASC Topic 810 related to the acquisition of the Toronto Dundas Square project.

Provision for loan losses for the year ended December 31, 2009 was $71.0 million and related to a mortgage note receivable and other notes receivable as further discussed in Notes 6 and 11 to the consolidated financial statements in this Annual Report on Form 10-K. There was no provision for loan losses for the year ended December 31, 2008.

Impairment charges for the year ended December 31, 2009 were $6.4 million and related to certain of our winery and vineyard properties. For further detail, see Note 4 to the consolidated financial statements in this Annual Report on Form 10-K. There were no impairment charges recorded for the year ended December 31, 2008.

Depreciation and amortization expense totaled $42.1 million for the year ended December 31, 2009 compared to $38.8 million for the year ended December 31, 2008. The $3.3 million increase resulted primarily from asset acquisitions completed in 2008 and 2009.

Equity in income from joint ventures totaled $0.9 million for the year ended December 31, 2009 compared to $2.0 million for the year ended December 31, 2008. The $1.1 million decrease resulted from the investment in the remaining 50% ownership of CS Fund I on April 2, 2008, which is classified as a direct financing lease.

Loss from discontinued operations totaled $43.7 million for the year ended December 31, 2009 and $1.2 million for the year ended December 31, 2008. Loss from discontinued operations was due to the operations of a parcel of land including one building in Arroyo Grande, California that was sold in July 2010 as well as an entertainment retail center in White Plains, New York and a ten acre vineyard and winery facility in Napa Valley, California, both of which were disposed of in the second quarter of 2010. Additionally, loss from discontinued operations was due to a parcel of land in Powder Springs, Georgia that was sold in June of 2008.

The gain on sale of real estate from discontinued operations of $0.1 million for the year ended December 31, 2008 was due to the sale of a land parcel in Powder Springs, Georgia in June of 2008. There was no gain on sale of real estate from discontinued operations for the year ended December 31, 2009.

Net loss attributable to noncontrolling interests totaled $19.9 million for the year ended December 31, 2009 compared to $2.4 million for the year ended December 31, 2008 and primarily relates to the consolidation of a VIE in which our variable interest was debt. The increase is due to a greater net loss incurred by the VIE due to the impairment charge at our entertainment retail center in White Plains, New York. For further discussion, see Note 4 to the consolidated financial statements in this Annual Report on Form 10-K.

Preferred dividend requirements for the year ended December 31, 2009 were $30.2 million compared to $28.3 million for the same period in 2008. The $1.9 million increase is due to the issuance of 3.5 million Series E convertible preferred shares in April of 2008.

Liquidity and Capital Resources

Cash and cash equivalents were $11.8 million at December 31, 2010. In addition, we had restricted cash of $16.3 million at December 31, 2010. Of the restricted cash at December 31, 2010, $7.3 million relates to cash held for our borrowers’ debt service reserves for mortgage notes receivable and the balance represents deposits required in connection with debt service, payment of real estate taxes and capital improvements.

Mortgage Debt, Credit Facilities and Term Loan

As of December 31, 2010, we had total debt outstanding of $1.2 billion. As of December 31, 2010, $785.2 million of debt outstanding was fixed rate mortgage debt secured by a portion of our rental properties and mortgage notes receivable, with a weighted average interest rate of approximately 6.0%. This $785.2 million of fixed rate mortgage debt includes $83.0 million of LIBOR based debt that had been converted to fixed rate debt with interest rate swaps as further described below.

We have $250.0 million in senior notes due on July 15, 2020. The notes bear interest at 7.75%. Interest is payable on July 15 and January 15 of each year beginning on January 15, 2011 until the stated maturity date of July 15, 2020. The notes were issued at 98.29% of their principal amount and are guaranteed by certain of our subsidiaries. The notes contain various covenants, including: (i) a limitation on incurrence of any debt which would cause the ratio of our debt to adjusted total assets to exceed 60%; (ii) a limitation on incurrence of any secured debt which would cause the ratio of secured debt to adjusted total assets to exceed 40%; (iii) a limitation on incurrence of any debt which 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 to be not less than 150% of our outstanding unsecured debt.

At December 31, 2010, we had $142.0 million in debt outstanding under our new $320.0 million unsecured revolving credit facility, with interest at a floating rate. The facility has a term expiring December 1, 2013. The amount that we are able to borrow on our revolving credit facility is a function of the values and advance rates, as defined by the credit agreement, assigned to the assets included in the borrowing base less outstanding letters of credit and less other liabilities. As of December 31, 2010, our total availability under the revolving credit facility was $178.0 million.

At December 31, 2010, VinREIT, a subsidiary that holds our vineyard and winery assets, had eight term loans outstanding aggregating $86.3 million. These term loans had maturities ranging from December 1, 2017 to June 5, 2018, were 30% recourse to us and had stated interest rates of LIBOR plus 175 basis points on loans secured by real property and LIBOR plus 200 basis points on loans secured by fixtures and equipment. We had six interest rate swaps that fixed the interest rates on $83.0 million of the outstanding loans at a weighted average rate of 5.2%. On February 7, 2011, these term loans were paid in full.

Our principal investing activities are acquiring, developing and financing entertainment, entertainment-related, recreational and specialty properties. These investing activities have generally been financed with mortgage debt and the proceeds from equity offerings. Our revolving credit facility is used to finance the acquisition or development of properties, and to provide mortgage financing. We may also issue debt securities in public or private offerings. Continued growth of our rental property and mortgage financing portfolios will depend in part on our continued ability to access funds through additional borrowings and securities offerings.

Certain of our long-term debt agreements contain customary restrictive covenants related to financial and operating performance as well as certain cross-default provisions. We were in compliance with all restrictive covenants at December 31, 2010, except that an event of default existed with respect to the Company’s winery and vineyard term loan facility due to the restructuring of certain leases with one tenant (for further detail related to the restructuring see Note 25 to the consolidated financial statements in this Annual Report on Form 10-K). Subsequent to December 31, 2010 we received a retroactive waiver of this event of default and, as discussed above, the loan facility was paid in full on February 7, 2011.

Liquidity Requirements

Short-term liquidity requirements consist primarily of normal recurring corporate operating expenses, debt service requirements and distributions to shareholders. We meet these requirements primarily through cash provided by operating activities. Net cash provided by operating activities was $180.4 million, $148.8 million and $146.3 million for the years ended December 31, 2010, 2009 and 2008, respectively. Net cash used in investing activities was $320.3 million, $192.0 million and $492.0 million for the years ended December 31, 2010, 2009 and 2008, respectively. Net cash provided by financing activities was $128.0 million, $15.7 million and $381.2 million for the years ended December 31, 2010, 2009 and 2008, respectively. We anticipate that our cash on hand, cash from operations, and funds available under our revolving credit facility will provide adequate liquidity to fund our operations, make interest and principal payments on our debt, and allow distributions to our shareholders and avoid corporate level federal income or excise tax in accordance with REIT Internal Revenue Code requirements.

Long-term liquidity requirements at December 31, 2010 consisted primarily of maturities of long-term debt. Contractual obligations as of December 31, 2010 are as follows (in thousands):


	Year ended December 31,
Contractual Obligations	2011		2012		2013		2014		2015		Thereafter		Total
Long Term Debt Obligations	$	36,266		93,376		261,532		157,055		105,336		537,614		1,191,179

Interest on Long Term Debt Obligations		70,506		68,165		57,475		44,644		40,146		111,327		392,263

Operating Lease Obligations		360		392		408		434		454		358		2,406

Total	$	107,132		161,933		319,415		202,133		145,936		649,299		1,585,848

Our unconsolidated joint venture, Atlantic EPR-II, has a mortgage note payable at December 31, 2010 of $12.6 million which matures in September 2013.

Commitments

As of December 31, 2010, we had one theatre development project and two retail development projects under construction for which we have agreed to finance the development costs. At December 31, 2010, we have have commitments to fund approximately $9.4 million of additional

improvements which are expected to be funded in 2011. Development costs are advanced by us in periodic draws. If we determine that construction is not being completed in accordance with the terms of the development agreement, we can discontinue funding construction draws. We have agreed to lease the properties to the operator at pre-determined rates.

We have provided a guarantee of the payment of certain economic development revenue bonds related to four theatres in Louisiana for which we earn a fee at an annual rate of 1.75% over the 30 year term of the bond. We have recorded $3.2 million as a deferred asset included in other assets and $3.2 million included in other liabilities in the accompanying consolidated balance sheet as of December 31, 2010 related to this guarantee. No amounts have been accrued as a loss contingency related to this guarantee because payment by us is not probable.

We have certain commitments related to our mortgage note 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 December 31, 2010, we had three mortgage notes receivable with commitments totaling approximately $36.2 million. If commitments are funded in the future, interest will be charged at rates consistent with the existing investments.

Liquidity Analysis

In analyzing our liquidity, we generally expect that our cash provided by operating activities will meet our normal recurring operating expenses, recurring debt service requirements and distributions to shareholders.

We have no significant consolidated debt that matures before 2012. However, as discussed above, subsequent to December 31, 2010, we elected to prepay $86.2 million of debt that had original maturity dates in 2017 and 2018. We also paid $4.6 million to terminate the related interest rate swap agreements. In addition, during the first quarter of 2011, we expect to acquire four theatre properties for a total investment of $36.8 million. During 2012, we have approximately $65.3 million of consolidated debt maturities. Our cash commitments, as described above, include additional commitments under various mortgage notes receivable totaling approximately $36.2 million. Of the $36.2 million of mortgage note receivable commitments, approximately $13.9 million is expected to be funded in 2011.

Our sources of liquidity as of December 31, 2010 to pay the above 2011 commitments, loan prepayment amounts and four theatre acquisitions include the remaining amount available under our new unsecured revolving credit facility of approximately $178.0 million and unrestricted cash on hand of $11.8 million. Accordingly, while there can be no assurance, we expect that our sources of cash will exceed our existing commitments over the remainder of 2011.

We believe that we will be able to repay, extend, refinance or otherwise settle our debt obligations for 2012 and thereafter as the debt comes due, and that we will be able to fund our remaining commitments as necessary. However, there can be no assurance that additional financing or capital will be available, or that terms will be acceptable or advantageous to us.

Our primary use of cash after paying operating expenses, debt service, distributions to shareholders and funding existing commitments is in growing our investment portfolio through the acquisition, development and financing of additional properties. We expect to finance these investments with borrowings under our revolving credit facility, as well as long-term debt and equity financing alternatives. The availability and terms of any such financing will depend upon

market and other conditions. If we borrow the maximum amount available under our revolving credit facility, there can be no assurance that we will be able to obtain additional investment financing (See “Risk Factors”).

Off Balance Sheet Arrangements

At December 31, 2010, we had a 31.5% and 23.8% investment interest in two unconsolidated real estate joint ventures, Atlantic-EPR I and Atlantic-EPR II, respectively, which are accounted for under the equity method of accounting. We do not anticipate any material impact on our liquidity as a result of commitments involving those joint ventures. On May 1, 2010, we contributed an additional $14.9 million to Atlantic-EPR I to pay off the Partnership’s long-term debt at its maturity of May 1, 2010. We expect to earn a priority return of 15% on our additional contribution per the partnership agreement. We recognized income of $1,945, $565 and $538 (in thousands) from our investment in the Atlantic-EPR I joint venture during the years ended December 31, 2010, 2009 and 2008, respectively. We recognized income of $350, $330 and $324 (in thousands) from our investment in the Atlantic-EPR II joint venture during the years ended December 31, 2010, 2009 and 2008, respectively. The Atlantic-EPR II joint venture has a mortgage note payable secured by a megaplex theatre. The note held by Atlantic EPR-II totals $12.6 million at December 31, 2010 and matures in September 2013. Condensed financial information for Atlantic-EPR I and Atlantic-EPR II joint ventures is included in Note 9 to the consolidated financial statements included in this Quarterly Report on Form 10-K.

The partnership agreements for Atlantic-EPR I and Atlantic-EPR II allow our partner, Atlantic of Hamburg, Germany (“Atlantic”), to exchange up to a maximum of 10% of its ownership interest per year in each of the joint ventures for common shares of the Company or, at our discretion, the cash value of those shares as defined in each of the partnership agreements. During 2008, we paid Atlantic-EPR I and Atlantic-EPR II cash of $132 and $79 (in thousands), respectively, in exchange for additional ownership in each joint venture of 0.7%. During 2009, we paid Atlantic cash of $109 and $9 (in thousands), respectively, in exchange for additional ownership of 0.7% and 0.2% for Atlantic-EPR I and Atlantic-EPR II, respectively. During 2010, we paid Atlantic cash of $627 and $186 (in thousands) in exchange for additional ownership of 2.9% and 1.6% for Atlantic-EPR I and Atlantic-EPR II, respectively. These exchanges did not impact total partners’ equity in either Atlantic-EPR I or Atlantic-EPR II.

In addition, as of December 31, 2010 and 2009, we had invested $2.9 million and $1.6 million, respectively, in unconsolidated joint ventures for two theatre projects located in China. We recognized a loss of $157 (in thousands) from its investment in these joint ventures for the year ended December 31, 2010. No income or loss was recognized for the years ended December 31, 2009 and 2008.

Capital Structure and Coverage Ratios

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 and solid interest, fixed charge and debt service coverage ratios. We expect to maintain our debt to gross assets ratio (i.e. total long-term debt to total assets plus accumulated depreciation) between 35% and 45%. However, the timing and size of our equity and debt offerings may cause us to temporarily operate over this threshold. At December 31, 2010, this ratio was 37% as compared to 39% at December 31, 2009. Our long-term debt as a percentage of our total market capitalization at December 31, 2010 was 32%; however, we do not manage to a ratio based on total market capitalization due to the

inherent variability that is driven by changes in the market price of our common shares. We calculate our total market capitalization of $3.8 billion by aggregating the following at December 31, 2010:

•

Common shares outstanding of 46,542,950 multiplied by the last reported sales price of our common shares on the NYSE of $46.25 per share, or $2.2 billion;

•

Aggregate liquidation value of our Series B preferred shares of $80.0 million;

•

Aggregate liquidation value of our Series C convertible preferred shares of $135.0 million;

•

Aggregate liquidation value of our Series D preferred shares of $115.0 million;

•

Aggregate liquidation value of our Series E convertible preferred shares of $86.3 million; and

•

Total long-term debt of $1.2 billion.

Our interest coverage ratio for the years ended December 31, 2010, 2009 and 2008 was 3.4 times, 3.1 times and 3.4 times, respectively. Interest coverage is calculated as the interest coverage amount (as calculated in the following table) divided by interest expense, gross (as calculated in the following table). We consider the interest coverage ratio to be an appropriate supplemental measure of a company’s ability to meet its interest expense obligations and management believes it is useful to investors in this regard. Our calculation of the interest coverage ratio may be different from the calculation used by other companies, and therefore, comparability may be limited. This information should not be considered as an alternative to any U.S. generally accepted accounting principles (“GAAP”) liquidity measures. The following table shows the calculation of our interest coverage ratios. Amounts below include the impact of discontinued operations, which are separately classified in the consolidated statements of income included in this Annual Report on Form 10-K (unaudited, dollars in thousands):


	Year Ended December 31,
	2010			2009			2008
Net income (loss)	$	113,055			(11,906	)		127,623
Interest expense, gross		78,420			73,390			72,658
Interest cost capitalized		(383	)		(600	)		(797	)
Depreciation and amortization		53,427			47,720			43,829
Share-based compensation expense to management and trustees		4,710			4,307			3,965
Costs associated with loan refinancing		15,620			117			—
Straight-line rental revenue		(1,883	)		(2,483	)		(3,851	)
Loss (gain) on sale of real estate from discontinued operations		736			—			(119	)
Transaction costs		7,787			3,321			1,628
Provision for loan losses		700			70,954			—
Impairment charges		463			42,158			—
Gain on acquisition		(9,023	)		—			—

Interest coverage amount	$	263,629			226,978			244,936

Interest expense, net	$	78,000			72,715			70,951
Interest income		37			75			910
Interest cost capitalized		383			600			797

Interest expense, gross	$	78,420			73,390			72,658

Interest coverage ratio		3.4			3.1			3.4

The interest coverage amount per the above table is a non-GAAP financial measure and should not be considered an alternative to any GAAP liquidity measures. It is most directly comparable to the GAAP liquidity measure, “Net cash provided by operating activities,” and is not directly comparable to the GAAP liquidity measures, “Net cash used in investing activities” and “Net cash provided by financing activities.” The interest coverage amount can be reconciled to “Net cash provided by operating activities” per the consolidated statements of cash flows included in this Annual Report on Form 10-K as follows. Amounts below include the impact of discontinued operations, which are separately classified in the consolidated statements of cash flows included in this Annual Report on Form 10-K (unaudited, dollars in thousands):


	Year Ended December 31,
	2010			2009			2008
Net cash provided by operating activities	$	180,391			148,817			146,256

Equity in income from joint ventures		2,138			895			1,962
Distributions from joint ventures		(2,482	)		(986	)		(2,262	)
Amortization of deferred financing costs		(4,809	)		(3,663	)		(3,290	)
Amortization of above market leases, net		(200	)		—			—
Increase in mortgage notes accrued interest receivable		828			1,324			20,519
Increase (decrease) in restricted cash		(951	)		148			(794	)
Increase in accounts receivable, net		7,896			(1,583	)		3,889
Decrease in notes and accrued interest receivable		(53	)		(530	)		(261	)
Increase in direct financing lease receivable		4,750			3,762			2,285
Increase in other assets		3,382			3,471			2,612
Decrease (increase) in accounts payable and accrued liabilities		(22,178	)		(104	)		2,534
Decrease in unearned rents		1,314			1,799			1,848
Straight-line rental revenue		(1,883	)		(2,483	)		(3,851	)
Interest expense, gross		78,420			73,390			72,658
Interest cost capitalized		(383	)		(600	)		(797	)
Costs associated with loan refinancing (cash portion)		9,662			—			—
Transaction costs		7,787			3,321			1,628

Interest coverage amount	$	263,629			226,978			244,936

Our fixed charge coverage ratio for the years ended December 31, 2010, 2009 and 2008 was 2.4 times, 2.2 times and 2.4 times, respectively. The fixed charge coverage ratio is calculated in exactly the same manner as the interest coverage ratio, except that preferred share dividends are also added to the denominator. We consider the fixed charge coverage ratio to be an appropriate supplemental measure of a company’s ability to make its interest and preferred share dividend payments and management believes it is useful to investors in this regard. Our calculation of the fixed charge coverage ratio may be different from the calculation used by other companies and, therefore, comparability may be limited. This information should not be considered as an alternative to any GAAP liquidity measures. Amounts below include the impact of discontinued operations, which are separately classified in the consolidated statements of income included in this Annual Report on Form 10-K. The following table shows the calculation of our fixed charge coverage ratios (unaudited, dollars in thousands):


	Year Ended December 31,
	2010		2009		2008
Interest coverage amount	$	263,629		226,978		244,936

Interest expense, gross		78,420		73,390		72,658
Preferred share dividends		30,206		30,206		28,266

Fixed charges	$	108,626		103,596		100,924

Fixed charge coverage ratio		2.4		2.2		2.4

Our debt service coverage ratio for the years ended December 31, 2010, 2009 and 2008 was 2.5 times, 2.3 times and 2.6 times, respectively. The debt service coverage ratio is calculated in exactly the same manner as the interest coverage ratio, except that recurring principal payments are also added to the denominator. We consider the debt service coverage ratio to be an appropriate supplemental measure of a company’s ability to make its debt service payments and management believes it is useful to investors in this regard. Our calculation of the debt service coverage ratio may be different from the calculation used by other companies and, therefore, comparability may be limited. This information should not be considered as an alternative to any GAAP liquidity measures. Amounts below include the impact of discontinued operations, which are separately classified in the consolidated statements of income included in this Annual Report on Form 10-K. The following table shows the calculation of our debt service coverage ratios (unaudited, dollars in thousands):


	Year Ended December 31,
	2010		2009		2008
Interest coverage amount	$	263,629		226,978		244,936

Interest expense, gross		78,420		73,390		72,658
Recurring principal payments		27,262		25,174		23,331

Debt service	$	105,682		98,564		95,989

Debt service coverage ratio		2.5		2.3		2.6

Funds From Operations (FFO)

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 and management provides FFO herein because it believes this information is useful to investors in this regard. FFO is a widely used measure of the operating performance of real estate companies and is provided here as a supplemental measure to GAAP net income available to common shareholders and earnings per share. FFO, as defined under the NAREIT definition and presented by us, is net income available to common shareholders, computed in accordance with GAAP, excluding gains and losses from sales of depreciable operating properties, 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. FFO is a non-GAAP financial measure. FFO does not represent cash flows from operations as defined by GAAP and is not indicative that cash flows are adequate to fund all cash needs and is not to be considered an alternative 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 the same way so comparisons with other REITs may not be meaningful.

The following table summarizes our FFO, including per share amounts, for the years ended December 31, 2010, 2009 and 2008 (unaudited, in thousands, except per share information):


	Year ended December 31,
	2010			2009			2008
Net income (loss) available to common shareholders of Entertainment Properties Trust	$	84,668		$	(22,199	)	$	101,710
Loss on sale of real estate		736			—			—
Real estate depreciation and amortization		52,828			46,947			43,051
Allocated share of joint venture depreciation		308			263			510
Noncontrolling interest		(1,905	)		(20,143	)		(2,630	)

FFO available to common shareholders		136,635			4,868			142,641

FFO available to common shareholders of Entertainment Properties Trust	$	136,635		$	4,868		$	142,641
Preferred dividends for Series C		—			—			7,763

Diluted FFO available to common shareholders of Entertainment Properties Trust		136,635			4,868			150,404

FFO per common share attributable to Entertainment Properties Trust:
Basic	$	3.02		$	0.13		$	4.61
Diluted		3.00			0.13			4.54

Shares used for computation (in thousands):
Basic		45,206			36,122			30,910
Diluted		45,555			36,236			33,094

Weighted average shares outstanding - diluted EPS		45,555			36,236			31,177
Effect of dilutive Series C preferred shares		—			—			1,917

Adjusted weighted average shares outstanding - diluted		45,555			36,236			33,094

Other financial information:
Dividends per common share	$	2.60			2.60