What changed in this filing

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Item 1A. Risk Factors

2023-02-17 compared with 2022-02-18 · 74 added, 102 removed, 537 unchanged (25% of the section changed)

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Risks Related to Our Business.

The COVID-19 pandemic, the measures intended to prevent its spread and those government actions intended to mitigate its economic impact have had, and may continue to have, adverse effects, some of which may be material, on our business, results of operations and financial condition.

The ongoing COVID-19 pandemic has caused severe disruptions to the United States and global economy and may have an adverse impact on our business, results of operations and financial condition.

An economic slowdown, a lengthy or severe recession, declining real estate values, or changes in interest rates, including the continued transition from LIBOR, could harm our operations, affect our ability to obtain financing on reasonable terms and have other adverse effects on us.

If economic conditions deteriorate and/or we experience a turbulent economic environment, we will likely:

(i) experience increases in loan loss reserves and other impairments;

(ii) encounter difficulty estimating loan loss reserves;

and (iii) experience a decline in loan repayments.

If we are unable to invest excess capital on acceptable terms, or at all, it would likely result is a declining portfolio and would adversely affect the returns from our investments and our operating results.

(1) experience increases in loan loss reserves and other impairments;

(2) encounter difficulty estimating loan loss reserves;

and (3) experience a decline in loan repayments.

If we are unable to invest excess capital on acceptable terms, or at all, it would likely result in a declining portfolio and would adversely affect the returns from our investments and our operating results.

The real estate investment business is highly competitive, and our success depends on our ability to compete, including attracting and retaining qualified loan originators to grow and maintain our relationships with key customers and with the GSEs, U.S.

Department of HUD and institutional investors.

Our business is subject to risk of loss in connection with defaults on loans, failed loan deliveries to GSE’s and potential requirements to repurchase loans already sold to GSE’s for a breach of representations or warranties.

Our business is subject to risk of loss in connection with defaults on loans, failed loan deliveries to GSEs and potential requirements to repurchase loans already sold to GSEs or other issuers of securitizations for a breach of representations or warranties.

If we fail to act proactively with delinquent borrowers in an effort to avoid defaults, the number of delinquent loans could increase, which could have a material adverse effect on us.

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We are subject to certain general risks, all of which could have an adverse effect on our business, financial condition and results of operations, such as:

(i) volatility in our stock price;

(ii) losses of key personnel with long standing business relationships;

(iii) adverse resolutions of lawsuits;

(iv) future terrorist attacks;

and (v) changes to laws and regulations , including environmental, social and governance matters.

(1) volatility in our stock price;

(2) losses of key personnel with long standing business relationships;

(3) adverse resolutions of lawsuits;

(4) future terrorist attacks;

and (5) changes to laws and regulations , including environmental, social and governance matters.

Risks Related to Our Business

The COVID-19 pandemic has caused, and may continue to cause, significant disruptions to the U.S.

and global economies, as well as volatility and negative pressure in equity, credit and mortgage markets.

The outbreak has led the federal and state governments to impose measures intended to control its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines and shelter-in-place orders.

The impact of the pandemic and measures taken to prevent its spread and limit the economic impact of the pandemic have negatively impacted us and could further negatively impact our business, perhaps in a material manner.

The ongoing COVID-19 pandemic has caused severe disruptions to the United States and global economy and to our business and may continue to have an adverse impact on our business, results of operations and financial condition.

The ongoing effects of the COVID-19 pandemic have caused significant disruptions to the U.S.

and global economies.

Although vaccine availability and usage have continued to increase, which has led to less negative short-term effects, such as travel bans, quarantines, layoffs and shutdowns, the ongoing longer-term macroeconomic effects on inflation, interest rates, capital markets, labor

shortages, property values and global supply chains continue to negatively impact many industries, including the U.S.

commercial real estate market.

In addition, new strains of COVID-19 continue to emerge, which may cause governments and businesses to re-impose aggressive measures to help slow its spread, making the future impact difficult to predict.

More particularly, the consequences of the COVID-19 pandemic that have had, and may continue to have in the future, adverse impacts on our business are as follows:

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● In the event of any forced sales of the securities and other assets that secure our repurchase and other financing arrangements, such sales may be on terms less favorable to us than might otherwise be available under normal conditions, which could result in losses;

● Disruptions in the credit markets may negatively impact our ability to execute on securitizations, which may have an adverse effect on our liquidity and results of operations;

● Disruptions in the credit markets have had, and may continue to have, a negative impact our ability to execute on securitizations, which may have an adverse effect on our liquidity and results of operations;

● To the extent conditions worsen, there may be a materially negative effect on our results of operations, and, in turn, on cash available for distribution to our stockholders, on the value of our assets and on the market price of our common stock.

Since the current expected credit loss (“CECL”) methodology for the recognition of credit losses estimates losses for the life of our investment, our financial results may be negatively affected when weak or deteriorating economic conditions are forecasted, which generally results in increases in credit losses under CECL.

As a result of factoring in the COVID-19 pandemic to the forecasts used to estimate our credit losses, we incurred significant provision expense for credit losses in 2020, followed by reversals of provision expense in 2021, and we may experience increased volatility in our future provisions for credit losses.

As a result of factoring in the ongoing macroeconomic effects of the COVID-19 pandemic to the forecast models used to estimate our credit losses, we may experience continued volatility in our future provisions for credit losses.

To the extent the COVID-19 pandemic adversely affects our business, results of operations, financial condition and cash flows, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.

There are no comparable recent events that provide guidance as to the effect of COVID-19 as a global pandemic may have, other than what has transpired to date, and as a result, its ultimate impact on our operations and financial results remains highly uncertain and subject to change.

In response to the pandemic, Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act.

Additional COVID-19 federal legislation was enacted as part of the Consolidated Appropriations Act, 2021.

Together such legislation has provided billions of dollars of relief to individuals, businesses of all sizes, state and local governments and other public facilities suffering the impact of the pandemic.

The CARES Act includes mortgage loan forbearance and modification programs to qualifying borrowers who have difficulty making their loan payments.

In addition, the Federal Reserve has announced its commitment to purchase U.S.

Treasury securities, asset backed securities, municipal bonds and other assets, in addition to making loans to and purchasing bonds from private companies.

Possible impacts of this legislation and regulatory action include:

● Over the near and intermediate term, the economic impacts of the pandemic have, and may continue to, negatively impact the financial stability of our mortgage loan borrowers and the properties underlying the loans, due in part to the effects of mortgage loan forbearance and modification programs and suspensions of landlords' ability to enforce evictions;

● Weakness in the economy may result in us receiving fewer requests for new loans, which may adversely affect our results of operations;

● Under applicable Fannie Mae policies and guidelines, we are required to make principal and interest advances on the loans we service for Fannie Mae and are responsible for bearing the burden of funding these advances for extended periods of time before receiving reimbursement from Fannie Mae, which may adversely affect our liquidity and financial condition;

● If we are unable to find financing sources for these servicing advance obligations, similar to the credit facility we currently have noted further below, or if we can continue to obtain financing, but the cost and terms of any such financing are less advantageous than we have received in the past, that could have material adverse consequences on our liquidity and financial condition;

● There can be no assurance as to how, in the long term, these actions and other actions by the U.S.

government will affect the efficiency, liquidity and stability of the financial and mortgage markets.

To the extent the financial or mortgage markets do

not respond favorably to any of these actions, or such actions do not function as intended, our business, results of operations, financial condition and liquidity may continue to be adversely affected, perhaps materially.

Due to the current stimulus actions of the U.S.federal government, the effect of the pandemic may not be fully reflected in our results of operations until future periods.

The COVID-19 pandemic may impact the health and operational efficiencies of our employee base and strain our interactions with our customers.

The possible adverse effects of the pandemic on our workforce and interactions with our customers include:

● The COVID-19 pandemic may adversely impact the continued availability of our personnel, including our executive officers, and our ability to recruit, attract and retain skilled personnel;

● If significant portions of our workforce, including key personnel, are unable to work effectively because of illness, government actions or other restrictions implemented in connection with COVID-19, the adverse impact on our business could be material;

● At the beginning of the COVID-19 pandemic, and in some cases we still, have shifted in-person customer events to virtual-only experiences and we may deem it advisable to similarly alter, postpone or cancel entirely additional customer, employee or industry events in the future.

Our virtual customer, employee and industry events may not be as successful as in-person events.

This could adversely affect our customers’ ability or willingness to purchase our offerings.

An economic slowdown, a lengthy or severe recession, or declining real estate values could harm our operations.

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The valuation process requires certain estimates and judgments, which are more difficult to make during a period in which available commercial real estate credit is limited and commercial real estate transactions have decreased.

Our estimates and

judgments are based on several factors, including projected cash flows from the collateral securing our loans, loan structure, including the availability of reserves and recourse guarantees, likelihood of repayment in full at loan maturity, potential for refinancing by other lenders and expected market discount rates for varying property types.

Our estimates and judgments are based on several factors, including projected cash flows from the collateral securing our loans, loan structure, including the availability of reserves and recourse guarantees, likelihood of repayment in full at loan maturity, potential for refinancing by other lenders and expected market discount rates for varying property types.

If our estimates and judgments are not correct, our results of operations and financial condition could be severely impacted.

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Loan repayments are a significant source of liquidity for us.

If borrowers are unable to refinance loans at maturity, the loans could go into default and the liquidity that we expect to receive from such repayments will not be available.

If borrowers are unable to refinance loans at maturity, the loans could go into default and the liquidity that we expect to receive from such repayments may not be available.

Further, in the event the commercial real estate finance market deteriorates, borrowers that have extension rights will be more likely to exercise such rights, which will further delay our ability to access liquidity through repayments.

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Changes in interest rates and the continued transition from LIBOR could have an adverse effect on our net investment income.

A significant portion of our loans and borrowings in our business are variable-rate instruments based on LIBOR.

In the event of a significant rising interest rate environment and/or economic downturn, defaults could increase and result in credit losses, which could adversely affect our liquidity and operating results, and such delinquencies or defaults could have an adverse effect on the spreads between interest-earning assets and interest-bearing liabilities.

In addition, if interest rates rise, it is likely that our income from our investment in a residential mortgage banking business would be adversely affected, since rising rates generally decrease the demand for residential real estate loans and the number of loan originations.

In 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to stop persuading or compelling banks to submit rates for the calculation of LIBOR to the administrator of LIBOR after 2021.

The Federal Reserve, in conjunction with the Alternative Reference Rates Committee (“ARRC”), a steering committee comprised of large U.S.

A significant portion of our loans and borrowings in our business are variable-rate instruments.

While some elements of our business may benefit from rising rates, in the event of a significant rising interest rate environment and/or economic downturn, defaults could increase and result in credit losses, which could adversely affect our liquidity and operating results, and such delinquencies or defaults could have an adverse effect on the spreads between interest-earning assets and interest-bearing liabilities.

In addition, as interest rates rise, it is likely that income from our investment in a residential mortgage banking business would be adversely affected, since rising rates generally decrease the demand for residential real estate loans and the number of loan originations.

In 2021, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that all LIBOR tenors relevant to us will cease to be published and will no longer be representative after June 30, 2023.

This coincides with an announcement made by the ICE Benchmark Administration Limited indicating that it would have to cease publication of LIBOR tenors immediately after the last publication on June 30, 2023, as a result of not having access to necessary input data to calculate such LIBOR tenors.

Therefore, the Federal Reserve, along with the Federal Deposit Insurance Corporation (“FDIC”) and Office of the Comptroller of the Currency issued supervisory guidance encouraging financial institutions to cease entering into new contracts that are indexed off U.S.

dollar LIBOR by December 31, 2021.

The Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S.

financial institutions, announced replacement of U.S.

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Treasury securities called the Secured Overnight Financing Rate (“SOFR”).

The first publication of SOFR was released in 2018.

On July 29, 2021, ARRC formally announced that it recommends the forward-looking SOFR term rates for use in business loans, including securities backed by such assets.

However, forward-looking SOFR term rates will not be representative of three-month LIBOR, and there is no requirement to continue to publish forward-looking SOFR term rates, in which case we, our lenders, and our portfolio company borrowers may be required to use other measurements of SOFR, as applicable.

Providing some clarification, in November 2020, the ICE Benchmark Administration (“IBA”) announced that it will consult on its intentions to cease the publication of one week and two month USD LIBOR following the LIBOR publication on December 31, 2021, and to cease the publication of the remaining USD LIBOR settings following the LIBOR publication on June 30, 2023, effectively extending the transition timeline.

On or around the same date, the Federal Reserve, along with the Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency issued supervisory guidance encouraging financial institutions to cease entering into new contracts that are indexed off USD LIBOR by December 31, 2021.

Our revolving credit facilities include provisions addressing the future discontinuation of LIBOR that are broadly consistent with the approach recommended by the ARRC.

In connection with such recommendations and developments, all variable rate loans originated by us beginning January 1, 2022 have been indexed to SOFR.

In addition, all of our historical loan origination contracts and credit facility agreements include provisions for determining an alternative base rate in the event that LIBOR is discontinued.

Such provisions provide for a transition, upon the occurrence of certain triggers, to a SOFR-based interest rate or, under certain circumstances, interest rates based on another benchmark to be determined, together in each case with certain spread adjustments and other changes necessary to implement such replacement benchmark.

We will continue to follow industry announcements made by the Federal Reserve, ARRC, and IBA to secure appropriate guidance, To best prepare for the transition, we have formed an internal task force to oversee the coordination of our transition from LIBOR, which includes evaluating and mitigating the risks associated with the transition.

Key areas of focus for the task force include managing the transition for legacy transactions, updating agreements and contracts that use LIBOR as a reference rate, modifying policies and procedures to account for the transition, communicating with our

internal and external stakeholders, and preparing for the risks associated with transitioning from LIBOR to a successor reference rate.

We have an internal task force to oversee the coordination of our transition from LIBOR, which includes evaluating and mitigating the risks associated with the transition.

Notwithstanding our efforts, the transition away from LIBOR may ultimately have a material adverse effect on our business, financial condition and results of operations, including the result of changes in interest rates payable to us by our borrowers or payable by us to our lenders.

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Preferred equity investments involve a greater risk of loss than traditional mortgage financing.

In our Structured Business, we invest in preferred equity investments, which involve a higher degree of risk than traditional mortgage financing.

In our Structured Business, we may invest in preferred equity investments, which involve a higher degree of risk than traditional mortgage financing.

Such investments are usually subordinate to other loans and are not secured by the property underlying the investment.

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As a result, we may not recover some or all of our investment.

We invest in mezzanine loans which are subject to a greater risk of loss than loans secured by a first priority mortgage lien.

We may invest in mezzanine loans which are subject to a greater risk of loss than loans secured by a first priority mortgage lien.

In our Structured Business, we may invest in mezzanine loans that are generally secured by a pledge of the ownership interests of the entity that directly or indirectly owns the property.

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In the event of a bankruptcy of our borrower, we may not have full recourse to the assets of the borrower, or the borrower’s assets may not be sufficient to satisfy our mezzanine loan.

If a borrower defaults on our mezzanine loan or debt senior to our loan, or in the event of a borrower bankruptcy, our

mezzanine loan will be satisfied only after the senior debt is paid.

If a borrower defaults on our mezzanine loan or debt senior to our loan, or in the event of a borrower bankruptcy, our mezzanine loan will be satisfied only after the senior debt is paid.

As a result, we may not recover some or all of our investment.

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In addition, Fannie Mae can increase our risk-sharing obligations if the loan does not meet specific underwriting criteria or if the loan defaults within 12 months of its sale to Fannie Mae.

As of December 31, 2021, the Agency Business had pledged $63.7 million in restricted liquidity as collateral against future losses under $19.13 billion of loans outstanding that are subject to risk-sharing obligations.

At December 31, 2022, the Agency Business had pledged $64.4 million in restricted liquidity as collateral against future losses under $19.04 billion of loans outstanding that are subject to risk-sharing obligations.

Fannie Mae collateral requirements may change in the future.

As of December 31, 2021, the Agency Business's allowance for loss-sharing balance was $56.1 million, which may not be sufficient to cover future loss sharing obligations.

At December 31, 2022, the Agency Business’s allowance for loss-sharing balance was $57.2 million, which may not be sufficient to cover future loss sharing obligations.

While our Agency Business originates loans that meet the underwriting guidelines defined by Fannie Mae, in addition to our own internal underwriting guidelines, underwriting criteria may not always protect against loan defaults.

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Our Agency Business is required to pledge restricted cash as collateral for our loss sharing obligations.

As of December 31, 2021, this requirement totaled $63.7 million and was satisfied with a $45.0 million letter of credit issued to Fannie Mae by one of our lenders and $18.7 million of cash collateral.

At December 31, 2022, this requirement totaled $64.4 million and was satisfied with a $64.0 million letter of credit and cash issued to Fannie Mae.

Our current letter of credit facility expires in September 2025.

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The credit risk premium offered by Fannie Mae for new loans can change periodically but remains fixed once we enter into a commitment to sell the loan.

Over the past several years, Fannie Mae loan servicing fees have increased due to the market pricing of credit risk.

There can be no assurance that such fees will continue to remain at such levels or that such levels will be sufficient if delinquencies occur.

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Our Agency Business bears the risk that a borrower will choose not to close on a loan that has been pre-sold to an investor or that the investor will choose not to purchase a loan under certain circumstances, including, for example, a casualty event that impacts the condition of a property after we fund the loan and prior to the investor purchase date.

We also bear the risk of serious errors in loan

documentation that prevent timely delivery of the loan prior to the investor purchase date.

We also bear the risk of serious errors in loan documentation that prevent timely delivery of the loan prior to the investor purchase date.

A failure to deliver a loan could be a default under the warehouse facility we used to finance the loan.

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we are authorized to do business and to sell or assign the loan;

the loan conforms to the requirements of the GSE or HUD and certain laws and regulations;

the loan conforms to the requirements of the GSEs or HUD and certain laws and regulations;

the underlying mortgage represents a valid first lien on the property and there are no other liens on the property;

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Substantially all of our assets are pledged as collateral for our borrowings.

In addition, we may acquire real property

subject to debt obligations.

In addition, we may acquire real property subject to debt obligations.

The return on our investments and cash available for distribution to our stockholders may be reduced to the extent that changes in market conditions increase our financing cost relative to the income that we can derive from our assets.

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We may not be able to acquire suitable investments for a CLO issuance, or we may not be able to issue CLOs on attractive terms, or at all, which may require us to utilize more costly financing for our investments.

We have financed, and, if the opportunities exist in the future, we may continue to finance certain of our investments in our Structured Business through the issuance of CLOs.

During the period we are acquiring investments for eventual long-term financing through CLOs, we have typically financed these investments through repurchase and credit agreements.

We have financed, and, if the opportunities exist in the future, we may continue to finance certain investments in our Structured Business through the issuance of CLOs.

During the period we are acquiring investments for eventual long-term financing through CLOs, we have typically financed these investments through credit and repurchase agreements.

We are subject to the risk that we will not be able to acquire a sufficient amount of eligible investments to maximize the efficiency of a CLO issuance.

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In particular, pursuant to the Dodd-Frank Act, various federal agencies have promulgated rules that require issuers in securitizations to retain at least 5% of the risk associated with the securities.

To the extent we utilize the securitization market and retain this risk of loss through subordinate interests or B Piece bonds in our CLO and Private Label securitizations, this could reduce our returns on these transactions.

To the extent we utilize the securitization market and retain this risk of loss through subordinate interests or B Piece bonds in our securitized debt transactions, this could reduce our returns on these transactions.

Our loans and investments may be subject to fluctuations in interest rates which may not be adequately protected, or protected at all, by our hedging strategies.

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The business failure of a hedging counterparty will most likely result in a default.

Default by our counterparty may result in the loss of unrealized

profits and force us to cover our resale commitments, if any, at the then current market price.

Default by our counterparty may result in the loss of unrealized profits and force us to cover our resale commitments, if any, at the then current market price.

Although generally we will seek to reserve the right to terminate our hedging positions, it may not always be possible to dispose of or close out a hedging position without the consent of the counterparty, and we may not be able to enter into an offsetting contract to cover our risk.

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Our investments financed in foreign locations may involve significant risks.

We have financed, and, if the opportunities exist in the future, we may continue to finance, certain of our investments outside of the U.S.

We have financed, and, if the opportunities exist in the future, we may continue to finance, certain investments outside of the U.S.

Financing investments in foreign locations may expose us to additional risks not typically inherent in the U.S.

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Current laws and regulations impose qualification and licensing obligations on our business, in addition to imposing requirements and restrictions affecting, among other things:

loan originations, interest rates, finance and other fees that we may charge, disclosures

to borrowers, the terms of secured transactions, collection, repossession and claims handling procedures, personnel qualifications and other trade practices.

loan originations, interest rates, finance and other fees that we may charge, disclosures to borrowers, the terms of secured transactions, collection, repossession and claims handling procedures, personnel qualifications and other trade practices.

Our business is also subject to inspection by certain state regulatory authorities.

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Several of the bills require the wind down or receivership of the GSEs within a specified period of enactment and place certain restrictions on the GSEs’ activities prior to being wound down or placed into receivership.

It is unclear at this time what the Biden administration’s views are with respect to the future of the GSE’s.

It is unclear at this time what the Biden administration’s views are with respect to the future of the GSEs.

We expect Congress will continue to consider housing finance reform, including conducting hearings and considering legislation that could alter the housing finance system, including the activities or operations of the GSEs.

We cannot predict the prospects for the enactment, timing or content of legislative proposals regarding the future status of the GSEs.

In October 2021, the FHFA announced that its 2022 loan origination caps for Fannie Mae and Freddie Mac will be $78 billion for each enterprise for a total opportunity of $156 billion (the “2022 Caps”), which has increased from its 2021 loan origination caps of $70 billion for each enterprise.

In November 2022, the FHFA announced that its 2023 loan origination caps for Fannie Mae and Freddie Mac will be $75 billion for each enterprise for a total opportunity of $150 billion (the “2023 Caps”), which has decreased from its 2022 loan origination caps of $78 billion for each enterprise.

The FHFA has stated that they will continue to monitor the market and reserves the right to increase the 2023 Caps if warranted, however, they will not reduce the 2023 Caps if the market is smaller than initially projected.

The 2023 Caps will continue to apply to all multifamily business, have no exclusions, and mandate that 50% be directed towards mission driven, affordable housing.

The FHFA will also require at least 25% be affordable to residents at or below 60% of area median income for 2022, up from 20% in 2021.

The FHFA has removed the requirement that at least 25% be affordable to residents at or below 60% of area median income (“AMI”) to reduce inconsistencies with their housing goals regulation.

Further, the FHFA has changed certain definitions of mission driven affordable housing and also allows loans to finance energy or water efficiency improvements with units affordable at or below 80% of AMI to be classified as mission-driven, up from 60% AMI in 2022.

This increase will allow the GSEs to expand their effort on energy and water conservation measures at workforce housing properties.

Our originations with the GSEs are highly profitable executions as they provide significant gains from the sale of our loans, non-cash gains related to MSRs and servicing revenues.

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Risks Related to Our Corporate and Ownership Structure

We may be significantly influenced by ACM and our chief executive officer.

ACM and our chief executive officer have significant influence over our policies and strategies.

Our chairman, chief executive officer and president is also the chief executive officer of ACM, and beneficially owns approximately 35% of the outstanding membership interests of ACM.

ACM has approximately 8% of the voting power of our outstanding stock as of December 31, 2021.

As a result of our chief executive officer’s beneficial ownership of stock held by ACM, as

well as his beneficial ownership of additional shares of our common stock, our chief executive officer has approximately 8% of the voting power of our outstanding stock as of December 31, 2021.

ACM has approximately 7% of the voting power of our outstanding stock at December 31, 2022.

As a result of our chief executive officer’s beneficial ownership of stock held by ACM, as well as his beneficial ownership of additional shares of our common stock, our chief executive officer has approximately 7% of the voting power of our outstanding stock at December 31, 2022.

Because of his positions with us and ACM, and his ability to effectively vote a substantial minority of our outstanding stock, our chief executive officer has significant influence over our policies and strategy.

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Our Board of Directors is divided into three classes of directors.

The current terms of the Class I, Class II and Class III directors will expire in 2022, 2023 and 2024, respectively.

The current terms of the Class II, Class III and Class I directors will expire in 2023, 2024 and 2025, respectively.

Directors of each class are chosen for three-year terms upon the expiration of their current terms, and each year one class of directors is elected by the stockholders.

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To the extent that we satisfy the distribution requirement, but distribute less than 100% of our taxable income, we will be subject to federal corporate income tax on our undistributed taxable income.

In addition, we

will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under federal tax laws.

In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under federal tax laws.

From time to time, we may generate taxable income greater than our net income for financial reporting purposes, or our taxable income may be greater than our cash flow available for distribution to our stockholders.

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Treasury Department, which results in statutory changes as well as frequent revisions to regulations and interpretations.

The Tax Cuts and Jobs Act enacted in 2017 (“Tax Reform Act”) made substantial changes to the Internal Revenue Code.

The Tax Cuts and Jobs Act enacted in 2017 made substantial changes to the Internal Revenue Code.

Among those changes for corporations, beginning in 2018, the corporate federal tax rate (which impacts our TRS) was reduced from 35% to 21%;

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stockholders who are individuals, trusts or estates, and whose income exceeds certain thresholds, are required to pay a 3.8% medicare tax on our dividends and gain from the sale of our stock.

Furthermore, certain provisions of the recently enacted legislation, including the CARES Act and the Consolidated Appropriations Act, may still require guidance through the issuance of treasury regulations in order to assess their full scope and impact to us.

The Inflation Reduction Act of 2022 (“IRA”) enacted in August 2022 introduced various new provisions to the Internal Revenue Code.

Among those new provisions affecting corporations include the corporate book minimum tax and an excise tax on net stock repurchases effective January 1, 2023.

As REITs, we and our subsidiary, ARSR are exempt from these provisions.

While such provisions may be applicable to our TRSs, we currently do not expect the IRA to have a material impact on our consolidated financial statements.

Furthermore, certain provisions of the recently enacted legislations, including the IRA, may still require guidance through the issuance of treasury regulations in order to assess their full scope and impact to us.

There may be a substantial delay before the issuance of such treasury regulations, increasing the uncertainty as to the ultimate effect of the statutory amendments on us.

There may also be further technical corrections legislation proposed with respect to the provisions of the recently enacted legislation, the effect of which cannot be predicted and may be adverse to us or our stockholders.

The Biden administration and the members of Congress have been negotiating its tax and economic policy bill that would affect both individual and business taxes.

As the scope of the tax and economic provisions previously proposed in the Build Back Better Act reconciliation bill currently remain uncertain and are subject to further negotiations by policy makers, we cannot determine how such proposals and the ensuing legislation, if any, would impact us or our stockholders.

General Risks

The price of our common stock may be volatile.

The trading price of our common stock may be highly volatile and could be subject to a number of factors beyond our control, including the general reputation of REITs and the attractiveness of our equity securities in comparison to other equity securities, including securities issued by other real estate-based companies, our financial performance, and general stock and bond market conditions.

The trading price of our common stock may be highly volatile and could be subject to a number of factors beyond our control, including (1) the general reputation of REITs and the attractiveness of our equity securities in comparison to other equity securities, including securities issued by other real estate-based companies, (2) our financial performance, (3) coordinated buying and selling activity by market participants, including market manipulation, (4) publication of information in the media, including online blog and social media about our Company by third parties, and (5) general stock and bond market conditions.

The market value of our stock is based primarily on the market’s perception of our growth potential and our current and future earnings and dividends.

Consequently, our stock may trade at prices that are higher or lower than its book value.

If our future earnings or dividends are less than expected, it is likely that the market price of our stock will diminish.

Consequently, our common stock may trade at prices that are higher or lower than our book value per share of common stock.

If our future earnings or dividends are less than expected, it is likely that the market price of our common stock will diminish.

At times, stock markets experience extreme price and volume fluctuations that affect the market prices of equity securities of many companies.

These fluctuations may be unrelated or disproportionate to the operating performance of those companies.

These broad market fluctuations, as well as general economic, political and market conditions such as recessions and interest rate changes, may negatively impact the market price of our stock.

If the market price of our stock declines, you may not realize any return on your investment and may lose some or all of your investment.

These broad market fluctuations, as well as general economic, political and market conditions such as recessions and interest rate changes, may negatively impact the market price of our common stock.

If the market price of our common stock declines, you may not realize any return on your investment and may lose some or all of your investment.

Companies that experience volatility in the market price of their stock may be subject to securities class action litigation.

8 unchanged sentences

The adverse resolution of litigation brought against us or any of our assets could have a material adverse effect on our financial condition and results of operations.

See Note 14 for information on current litigation.

See Note 14 for information on litigation matters.

The impact of any future terrorist attacks and the availability of terrorism insurance expose us to certain risks.

25 unchanged sentences

Legal Proceedings

We are not involved in any material litigation nor, to our knowledge, is any material litigation threatened against us, other than the litigation described in Note 14 of this report.

We have not made a loss accrual for this litigation because we believe that it is not probable that a loss has been incurred and an amount cannot be reasonably estimated.

Information with respect to certain legal proceedings is set forth in Note 14 and is incorporated herein by reference.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors