What changed in this filing

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Item 1A. Risk Factors

2022-02-25 compared with 2021-02-26 · 132 added, 127 removed, 318 unchanged (45% of the section changed)

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Risks Related to Our Business

Our company and our business model are relatively new, which may make our business difficult to evaluate.

We commenced operations in 2012, and after our initial public offering in 2013, were among the first public companies to pursue our investment strategy of purchasing, renovating, developing, maintaining and managing a large number of residential properties and leasing them to tenants.

The lack of a long-term company and industry track record covering multiple real estate cycles may make it difficult for you to evaluate our potential future performance.

In addition, our strategy of developing a significant pipeline of single-family homes for rent is relatively new and unprecedented among public companies which may further complicate

evaluating our potential future performance.

We may encounter unanticipated problems implementing our investment strategy and operations, which may adversely affect our results of operations and ability to make distributions to our shareholders and cause our share price to decline significantly.

Our future growth depends, in part, on the availability of additional debt or equity financing.

If we cannot obtain additional financing on terms favorable or acceptable to us, our growth may be limited.

The execution of our growth strategy will involve the use of debt and equity financing, particularly given that as a REIT we are required to distribute a significant portion of our taxable income which reduces our ability to retain earnings to fund growth.

Our inability in the future to obtain additional financing on attractive terms, or at all, could adversely impact our ability to execute our business strategy, which could adversely affect our growth prospects and future shareholder returns.

Our revenue and expenses are not directly correlated, and because a large percentage of our costs and expenses are fixed, we may not be able to adapt our cost structure to offset declines in our revenue.

Most of the expenses associated with our business, such as acquisition costs, repairs and maintenance costs, real estate taxes, HOA fees, insurance, utilities, personal and ad valorem taxes, employee wages and benefits and other general corporate expenses, are relatively inflexible and will not necessarily decrease with a reduction in revenue from our business.

Some components of our fixed assets depreciate more rapidly and will require a significant amount of ongoing capital expenditures.

Some components of our fixed

assets depreciate more rapidly and will require a significant amount of ongoing capital expenditures.

Our expenses and ongoing capital expenditures also will be affected by inflationary increases, and certain of our cost increases may exceed the rate of inflation in any given period.

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As a result, we may not be able to fully offset rising costs and capital spending by raising rental rates, which could have a material adverse effect on our results of operations and cash available for distribution.

We are dependent on our executive officers and dedicated personnel, and the departure of any of our key personnel could materially and adversely affect us.

We also face intense competition for highly skilled managerial, investment, financial and operational personnel.

We rely on a small number of individuals to carry out our business and investment strategies.

Any of our senior management may cease to provide services to us at any time.

The loss of the services of any of our key management personnel, or our inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business and financial results.

High inflation could adversely affect our operating results.

Inflation has significantly increased since the start of 2021.

Inflationary pressures have increased our direct and indirect operating and development costs, including for labor at the corporate, property management and development levels, third-party contractors and vendors, building materials, insurance, transportation and taxes.

Although our leases permit some price increases to be charged back to our tenants, such as with increased energy prices, to the extent we are unable to offset these cost increases through higher rents or other measures, our operating results will be adversely affected.

Our residents may also be adversely impacted by higher cost of living expenses, including food, energy and transportation, which may increase our rate of tenant defaults and harm our operating results.

High inflation may also correspond with increased interest risk rate, which may increase our cost of capital and adversely affect our business.

For more information on interest rate risk, see Part II, “Item 7A.

Quantitative and Qualitative Disclosures About Market Risk—Interest Rate Risk.”

We are dependent on our key management and staff and their departures could materially and adversely affect us.

We also face intense competition for hiring highly skilled managerial, investment, financial and operational personnel.

We rely on our key management and staff to carry out our business and to execute on our strategic plan.

Any of our senior management, key staff or skilled employees may cease to provide services to us at any time.

The loss of the services of key management and staff, or our inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business and financial results.

In addition, we will continue to need to attract and retain additional qualified personnel but may not be able to do so on acceptable terms or at all.

Competition for highly skilled managerial, investment, financial and operational personnel is intense.

As additional large real estate investors have entered the single-family rental and related business, we have faced increased challenges in hiring and retaining personnel, and we cannot assure our shareholders that we will be successful in attracting and retaining such skilled personnel.

Many of our operating markets are experiencing extremely tight labor markets, with job openings at record high levels.

We face intense competition for retaining and hiring skilled employees, particularly in light of the rapidly evolving conditions in the labor market and with respect to our development activities.

The recent entrance of large real estate investors into the single-family rental business and unprecedented workforce changes coinciding with the COVID-19 pandemic, have exacerbated labor conditions in our sector.

These competitive labor conditions have significantly increased compensation expectations for existing and prospective personnel.

The broader labor market is also experiencing a shortage of qualified workers which has further increased the competition we face for qualified employees.

If we are unable to hire and retain qualified personnel as required, our growth and operating results could be adversely affected.

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We may acquire properties that we plan to renovate extensively.

We also may acquire properties that we expect to be in good condition only to discover unforeseen defects and problems that require extensive renovation and capital expenditures.

To the extent properties are leased to existing tenants, renovations may be

postponed until the tenant vacates the premises, and we will pay the costs of renovating.

We also may acquire properties that we expect to be in good condition only to discover unforeseen defects that require extensive renovation and capital expenditures.

To the extent properties are leased to existing tenants, renovations may be postponed until the tenant vacates the premises, and we will pay the costs of renovating.

In addition, from time to time, in order to reposition properties in the rental market, we will be required to make ongoing capital improvements and replacements and perform significant renovations and repairs that tenant deposits and insurance may not cover.

Our properties have infrastructure and appliances of varying ages and conditions.

Consequently, we routinely retain independent contractors and trade professionals to perform physical repair work and are exposed to all of the risks inherent in property renovation and maintenance, including potential cost overruns, increases in labor and materials costs, delays by contractors in completing work, delays in the timing of receiving necessary work permits, certificates of occupancy and poor workmanship.

If our assumptions regarding the costs or timing of renovation and maintenance across our properties prove to be materially inaccurate, our operating results and ability to make distributions to our shareholders may be adversely affected.

Our properties also have infrastructure and appliances of varying ages and conditions.

We routinely retain independent contractors and trade professionals to perform repair work and are exposed to all risks inherent in property renovation and maintenance, including potential cost overruns, increases in labor and

materials costs, delays by contractors, delays in receiving work permits, certificates of occupancy and poor workmanship.

The current supply chain issues and labor force issues in the U.S.

has increased these risks.

If our assumptions regarding the costs or timing of renovation and maintenance across our properties prove to be materially inaccurate, our operating results may be adversely affected.

We face significant competition for acquisitions of our target properties, which may limit our strategic opportunities and increase the cost to acquire those properties.

We face significant competition for attractive acquisition opportunities in our target markets from other large real estate investors, including developers, some of which may have greater financial resources and a lower cost of capital than we do.

We also compete with individual private home buyers and small-scale investors.

Several REITs and other funds have deployed, and others may in the future deploy, significant amounts of capital to purchase single-family homes and may have investment objectives that overlap and compete with ours, including in our target markets.

We face significant competition for acquisition opportunities in our target markets from other large real estate investors, including developers, some of which may have greater financial resources and a lower cost of capital than we do.

We also compete with private home buyers and small-scale investors.

Several REITs and other funds have deployed, and others may in the future deploy, significant amounts of capital to purchase single-family homes and may have investment objectives that compete with ours, including in our target markets.

This activity has adversely impacted our level of purchases in certain of our target markets.

If our business model or a similar model proves to be successful, we can expect competition to intensify significantly.

As a result, the purchase price of potential acquisition properties may be significantly elevated, or we may be unable to acquire properties on desirable terms or at all.

As more well-capitalized companies pursue our business strategy, we expect competition will continue to intensify.

As a result, the purchase price of potential acquisitions may be significantly elevated, or we may be unable to acquire properties on desirable terms or at all.

We face competition in the leasing market for quality tenants, which may limit our ability to rent our single-family homes on favorable terms or at all.

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These competitive factors will impact our occupancy and the rents we can charge.

Our evaluation of acquisition properties involves a number of assumptions that may prove inaccurate, which could result in us paying too much for properties we acquire or our properties failing to perform as we expect.

In determining whether a particular property meets our investment criteria, we make a number of assumptions, including assumptions related to estimated time of possession and estimated renovation costs and time frames, annual operating costs, market rental rates and potential rent amounts, time from purchase to leasing and tenant default rates.

Our evaluation of acquisition properties and development land involves a number of assumptions that may prove inaccurate, which could result in us paying too much for properties or land we acquire or our properties failing to perform as we expect.

In determining whether a particular property, including land for development, meets our investment criteria, we make a number of assumptions, including assumptions related to estimated time of possession and estimated renovation and/or development costs and time frames, annual operating costs, market rental rates and potential rent amounts, time from purchase to leasing and tenant default rates.

These assumptions may prove inaccurate.

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We have occasionally acquired and may continue to acquire properties purchased as portfolios in bulk from other owners of single-family homes.

To the extent the management and leasing of such properties has not been consistent with our property management and leasing standards, we may be subject to a variety of risks, including risks relating to the condition of the properties, the credit quality and employment stability of the tenants and compliance with applicable laws, among others.

To the extent the management and leasing of such properties has not been consistent with our property management and leasing standards, we may be subject to risks relating to the condition of the properties, the credit quality and employment stability of the tenants and compliance with applicable laws, among others.

In addition, financial and other information provided to us regarding such portfolios during our due diligence may be inaccurate, and we may not discover such inaccuracies until it is too late to seek remedies against such sellers.

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We have a significant development program that involves the acquisition of land and construction of homes.

We have a limited track record of building homes for rent.

We have a limited track record of building homes for rent and our strategy of developing a significant pipeline of single-family homes for rent is relatively new among public companies.

Rental home construction can involve substantial up-front costs to acquire land and to build a rental home or rental community before a home is available for rent and generates income.

In addition to the up-front costs, building rental homes and rental communities involve potentially significant new risks to our business, such as delays or cost increases due to changes in or failure to meet regulatory requirements, including permitting and zoning regulations, failure of lease rentals on newly-constructed properties to achieve anticipated investment returns, inclement weather, adverse site selection, unforeseen site conditions or shortages of suitable land, construction materials and labor and other risks described below.

We may be unable to achieve our objective of building new rental homes and rental communities that generate acceptable returns and, as a result, our growth and results of operations may be adversely impacted.

Building rental homes and rental communities also involves significant risks to our business, such as delays or cost increases due to changes in or failure to meet regulatory requirements, including permitting and zoning regulations, failure of lease rentals on newly-constructed properties to

achieve anticipated investment returns, inclement weather, adverse site selection, unforeseen site conditions or shortages of suitable land, construction materials and labor and other risks described below.

We may be unable to achieve building new rental homes and rental communities that generate acceptable returns and, as a result, our growth and results of operations may be adversely impacted.

Our success in expanding our development activities depends in large part on our ability to acquire land that is suitable for residential homebuilding and meets our land investment criteria.

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Should suitable lots or land become less available, the number of homes we could build and lease could be reduced, and the cost of land could increase, perhaps substantially, which could adversely impact our growth and results of operations.

If we experience disruptions, shortages or increased costs of labor and supplies or other circumstances beyond our control, there could be delays or increased costs in constructing new rental homes, which could adversely affect our growth and operating results.

Our ability to build new rental homes may be adversely affected by circumstances beyond our control, including:

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inadequacies in components purchased from building supply companies;

and shortages delays in availability, or fluctuations in prices of building materials.

and shortages or delays in availability of building materials, including as a result of supply-chain issues, or fluctuations in prices of building materials, such as the cost of lumber, or in labor costs.

Any of these circumstances could give rise to delays in the start or completion of, or could increase the cost of, constructing new rental homes.

We are subject to risks from natural disasters and severe weather.

Natural disasters and severe weather such as earthquakes, tornadoes, hurricanes or floods may result in significant damage to our properties and significant delays to our development projects.

The extent of our casualty losses and loss in rental income in connection with such events depends on the severity of the event and the total amount of exposure in the affected area.

We have a concentration of homes in areas susceptible to hurricanes, including Florida and our Southeast markets.

We are subject to risks from natural disasters and severe weather, including hurricanes and floods.

Natural disasters and severe weather such as earthquakes, tornadoes, hurricanes, floods and wildfires may result in significant damage to our properties and significant delays to our development projects.

We have a concentration of homes in areas susceptible to hurricanes, including in Florida and other states in the Southeast.

When we have geographic concentration of exposures, a single catastrophe (such as an earthquake) or destructive weather event (such as a hurricane) affecting a region may have a significant negative effect on our financial condition and results of operations.

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Our reputation, financial performance and ability to make distributions to our shareholders would be adversely affected if a significant number of our tenants fail to meet their lease obligations or fail to renew their leases.

For example, tenants may default on rent payments, make unreasonable and repeated demands for service or improvements, make unsupported or unjustified complaints to regulatory or political authorities, use our properties for illegal purposes, damage or make unauthorized structural changes to our properties that are not covered by security deposits, refuse to leave the property upon termination of the lease, engage in domestic violence or similar disturbances, disturb nearby residents with noise, trash, odors or eyesores, fail to comply with HOA regulations, sublet to less desirable individuals in violation of our lease or permit unauthorized persons to live with them.

Damage to our properties may delay re-leasing after eviction, necessitate expensive repairs or impair the rental income or value of the property resulting in a lower than expected rate of return.

Increases in unemployment levels and other adverse changes in the economic conditions in our markets could result in substantial tenant defaults.

In the event of a tenant

default or bankruptcy, we may experience delays in enforcing our rights as landlord at that property and will incur costs in protecting our investment and re-leasing the property.

In the event of a tenant default or bankruptcy, we may experience delays in enforcing our rights as landlord at that property and will incur costs in protecting our investment and re-leasing the property.

In addition, we rely on information supplied by prospective residents in making tenant selections, which may in some cases be false.

Our short-term leases require us to re-lease our properties frequently, which we may be unable to do on attractive terms, on a timely basis or at all.

Substantially all of our new leases have a duration of one year.

The majority of our new leases have a duration of one year.

As these leases permit tenants to leave at the end of the lease term without penalty, we anticipate our rental revenues may be affected by declines in market rents more quickly than if our leases were for longer terms.

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However, many of the policies covering casualty losses may be subject to substantial deductibles and carveouts, and we will be self-insured up to the amount of the deductibles and carveouts.

There are also some losses, including losses from floods, windstorms, fires, earthquakes, acts of war, acts of terrorism or riots, that may not always be insured against or that are not generally fully insured against because it is not deemed economically feasible or prudent to do so.

In addition, changes in the cost or availability of insurance could expose us to uninsured casualty losses.

In the event that any of the properties we acquire incur a casualty loss that is not fully covered by insurance, the value of our assets will be reduced by the amount of any such uninsured loss, and we could experience a significant loss of capital invested and potential revenues in these properties and could potentially remain obligated under any recourse debt associated with the property.

If we incur a casualty loss that is not fully covered by insurance, the value of our assets will be reduced by the amount of any such uninsured loss, and we could experience a significant loss of capital invested and potential revenues in these properties and could potentially remain obligated under any recourse debt associated with the property.

Inflation, changes in building codes and ordinances, environmental considerations and other factors might also keep us from using insurance proceeds to replace or renovate a property after it has been damaged or destroyed.

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Information security risks have generally increased in recent years due to the rise in new technologies and the increased sophistication and activities of perpetrators of cyber attacks.

In the ordinary course of our business we acquire and store sensitive data, including intellectual property, our proprietary business information and personally identifiable information of our prospective and current tenants, our employees and third-party service providers in our branch offices and on our networks and website.

The secure processing and maintenance of this information is critical to our operations and business strategy.

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A significant number of our properties are part of HOAs, which are private entities that regulate the activities of, and levy assessments on properties in, a residential subdivision.

HOAs in which we own properties may have or enact onerous or arbitrary rules

that restrict our ability to renovate, market or lease our properties or require us to renovate or maintain such properties at standards or costs that are in excess of our planned operating budgets.

Such rules may include requirements for landscaping, limitations on signage promoting a property for lease or sale, or the use of specific construction materials in renovations.

HOAs in which we own properties may have onerous or arbitrary rules that restrict our ability to renovate, market or lease our properties or require us to renovate or maintain such properties at standards or costs that are in excess of our planned operating budgets.

Such rules may include requirements for landscaping, limitations on signage promoting a property for lease or sale, or the use of specific materials in renovations.

The number of HOAs that impose limits on the number of property owners who may rent their homes is increasing.

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Furthermore, many HOAs impose restrictions on the conduct of occupants of homes and the use of common areas and we may have tenants who violate HOA rules and for which we may be liable as the property owner and for which we may not be able to obtain reimbursement from the resident.

Additionally, the boards of directors of the HOAs in which we own properties may not make important disclosures about the properties or may block our access to HOA records, initiate litigation, restrict our ability to sell our properties, impose assessments or arbitrarily change the HOA rules.

Additionally, the boards of directors of the HOAs may not make important disclosures about the properties or may block our access to HOA records, initiate litigation, restrict our ability to sell our properties, impose assessments or arbitrarily change the HOA rules.

We may be unaware of or unable to review or comply with HOA rules before purchasing the property and any such excessively restrictive or arbitrary regulations may cause us to sell such property at a loss, prevent us from renting such property or otherwise reduce our cash flow from such property, which would have an adverse effect on our returns on these properties.

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Investments in partnerships, joint ventures or other entities may, under certain circumstances, involve risks not present were a third-party not involved, including the possibility that joint venture partners might become bankrupt or fail to fund their share of required capital contributions.

Joint venture partners may have economic or other business interests or goals that are inconsistent with our business interests or goals and may be in a position to take actions contrary to our policies or objectives.

Joint venture partners may have economic or other business interests or goals that are inconsistent with our

business interests or goals and may be in a position to take actions contrary to our policies or objectives.

Such investments also may have the potential risk of impasses on decisions, such as a sale, because neither we nor our partners would have full control over the partnership or joint venture.

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Government investigations or legal proceedings brought by governmental authorities may result in significant costs and expenses and reputational harm and may divert resources from our operations and therefore could have a material adverse effect on our business, financial condition, operating results or cash flows.

From time to time, we are subject to government investigations or legal proceedings brought by governmental authorities.

Government investigations and any related legal proceedings may result in significant costs and expenses, including legal fees, and divert management attention and company resources from our operations and execution of our business strategy.

From time to time, we are subject to government inquiries and investigations and legal proceedings brought by governmental authorities.

These inquiries, investigations and any related legal proceedings may result in significant costs and expenses, including legal fees, and divert management attention and company resources from our operations and execution of our business strategy.

If any such proceedings are resolved adversely, governmental agencies could impose damages and fines, and may issue injunctions, cease and desist orders, bars on serving as a public company officer or director and other equitable remedies against us or our directors and officers.

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These covenants may restrict our ability to engage in transactions that we believe would otherwise be in the best interests of our shareholders.

Further, such restrictions could make it difficult for us to satisfy the requirements necessary to maintain our qualification as a REIT for U.S.

federal income tax purposes.

Further, such restrictions could adversely impact our ability to maintain our qualification as a REIT for tax purposes.

Failure to meet our financial covenants could result from, among other things, changes in our results of operations, the incurrence of additional debt, substantial impairments in the value of our properties or changes in general economic conditions.

If we violate covenants in our revolving credit facility, unsecured senior notes, securitizations or future agreements, we could be required to repay all or a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on attractive terms or at all.

Adverse changes in our credit ratings could negatively affect our financing ability.

Our credit ratings may affect the amount of capital we can access, as well as the terms and pricing of any debt we may incur.

There can be no assurance that we will be able to maintain our current investment grade credit ratings.

In the event that our current credit ratings are downgraded or removed, we would most likely incur higher borrowing costs and experience greater difficulty in obtaining additional financing, which in turn could have a material adverse impact on our financial condition, results of operations, cash flows and liquidity.

If we violate covenants in our financing arrangements, we could be required to repay all or a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on attractive terms or at all.

We are subject to risks from the global pandemic associated with COVID-19 and we may in the future be subject to risks from other public health crises.

Our business is subject to risks from the COVID-19 pandemic that is currently impacting our tenants, employees and suppliers.

The COVID-19 pandemic has spread rapidly, adversely affecting public health, economic activity and employment.

The COVID-19 pandemic has spread rapidly, adversely affecting public health, economic activity and employment, and

recent resurgences due to variants or strains, such as the Delta and Omicron variants, have led to surges in cases and hospitalizations.

The risks to our business from the COVID-19 pandemic include:

• The COVID-19 pandemic and the measures taken to combat it have resulted in a significant increase in unemployment .

• The COVID-19 pandemic and the measures taken to combat it resulted in, and may again result in, significant increases in unemployment .

Our operating results depend significantly on the ability of our current and prospective tenants to pay their rent.

To the extent our current tenants or prospective tenants experience unemployment, deteriorating financial conditions, and declines in household income, they may be unwilling or unable to pay rent in full on a timely basis or renew or enter into new leases for our homes, and our revenues and operating results could be negatively affected.

We have received a number of tenant inquiries regarding rent relief and we continue to work closely with delinquent residents on a case-by-case basis to find the resolution that is best for the resident and the Company.

Although minimal to date, workout options have included and may in the future include deferred payment plans which we began offering in June, or, where appropriate, early lease termination.

The longer the COVID-19 pandemic continues, the greater the adverse impact may be on our tenants’ ability to make timely rental payments, on prospective residents to afford our homes, and ultimately on our occupancy.

• State, local, federal and industry-initiated efforts in response to the COVID-19 pandemic may continue to adversely affect our business.

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In addition, government restrictions on movement have and may in the future limit the ability of prospective tenants to visit our properties or new tenants to move into our properties.

These government efforts to respond to the COVID-19 pandemic may continue to increase possible credit losses and may adversely affect our occupancy levels.

These restrictions may continue to increase possible credit losses and may adversely affect our occupancy levels.

• Our acquisition and development activities have been slowed.

Our growth may be adversely impacted as our ability to acquire and construct homes has been negatively affected by COVID-19.

Due to market uncertainties regarding future asset values at the beginning of the COVID-19 pandemic, we temporarily suspended acquisitions through traditional channels and our National Builder Program but have since resumed acquisitions through these channels.

We have continued new home construction, which most states permit as an essential business activity;

however, some states where we are constructing new homes, such as Washington, temporarily prohibited residential construction during the early stages of the COVID-19

pandemic and may institute future prohibitions.

We have also experienced certain other COVID-19 related construction delays, including government office slowdowns.

In addition, adverse impacts on the supply of construction materials and labor may delay or halt our construction activity.

We have continued new home construction;

however, some states where we are constructing new homes temporarily prohibited residential construction during the early stages of the COVID-19 pandemic and may institute future prohibitions.

We have also experienced COVID-19 related construction delays, including government office slowdowns.

In addition, adverse impacts on the supply of construction materials and labor have and in the future may delay or halt or increase the costs of our construction activity.

• Our employees face COVID-19 health risks.

If a significant number of our employees, or if key personnel, are unable to work as a result of COVID-19, this would adversely impact our business and operating results.

In addition, during the COVID-19 outbreak, substantially all of our employees are working remotely and depend on Internet and third-party communications vendors that may be unreliable, experience shut-downs or be subject to new cybersecurity risks, adversely impacting operations.

In addition, since the start of the COVID-19 outbreak, substantially all of our employees have been working either remotely or on a hybrid schedule and depend on Internet and third-party communications vendors that may be unreliable, experience shut-downs or be subject to new cybersecurity risks, adversely impacting operations.

• COVID-19 may impact our ability to maintain our properties .

Some tenants may be reluctant to request routine maintenance during the COVID-19 pandemic.

We believe that some tenants have been and may continue to be reluctant to request routine maintenance during the COVID-19 pandemic.

Deferring routine repairs and maintenance may impact the value and desirability of our rental homes.

It may also increase the expense and difficulty of completing these repairs in the future and may delay other needed repairs when the COVID-19 pandemic no longer constrains business activity.

It may also increase the expense and difficulty of completing these repairs in the future and may delay other needed repairs.

We believe that the degree to which COVID-19 continues to adversely impact our business, operating results, cash flows, ability to make distributions, ability to service our debt and/or financial condition will be driven primarily by the duration, spread and severity of the pandemic, including with respect to resurgences, new variants or strains, such as the Delta and Omicron variants, the impact of government regulations, vaccine adoption rates (including boosters), the effectiveness of vaccines against any future variants or strains, employee retention issues resulting from vaccine mandates, and the direct and indirect economic effects of the pandemic and containment measures, among others, all of which are uncertain and difficult to predict.

As a result, we are not able at this time to estimate the effect of these factors on our business, but the adverse impact on our business, results of operations, financial condition and cash flows could be material.

Future public health crises could have similar impacts.

Settlement provisions contained in the January 2022 Forward Sale Agreements could result in substantial dilution to our earnings per share or result in substantial cash payment obligations.

In January 2022, the Company completed an underwritten public offering for 23,000,000 of its Class A common shares of beneficial interest, $0.01 par value per share, of which 10,000,000 shares were issued directly by the Company, and 13,000,000 shares were offered on a forward basis at the request of the Company by the forward sellers.

In connection with this offering, the Company entered into forward sale agreements with the forward purchasers (the “January 2022 Forward Sale Agreements”) for these 13,000,000 shares.

The forward purchasers under the January 2022 Forward Sale Agreements will have the right to accelerate its forward sale agreement (with respect to all or any portion of the transaction under such forward sale agreement that such forward purchaser determines is affected by an event described below) and require us to settle on a date specified by such forward purchaser if:

• the forward purchaser is unable, after using commercially reasonable efforts, to, or would incur a materially increased cost to, acquire, establish, maintain or unwind its hedge position with respect to the relevant forward sale agreement, and we do not elect to pay an adjustment amount or amend the relevant forward sale agreement accordingly;

• the forward purchaser is unable, after using commercially reasonable efforts, to borrow (or maintain borrowing of) a number of our Class A common shares equal to the number of our Class A common shares underlying the relevant forward sale agreement or that, with respect to borrowing such number of our Class A common shares, it would incur a rate of borrowing that is greater than the borrow cost specified in the relevant forward sale agreement, subject to certain exceptions in the case of such a rate of borrowing that is greater than a borrow cost specified in such forward sale agreement, and we do not elect to pay an adjustment amount or amend the relevant forward sale agreement accordingly;

• certain ownership thresholds applicable to the forward purchaser and its affiliates are exceeded;

• we declare a dividend or distribution on our Class A common shares with a cash value in excess of a specified amount, or with an ex-dividend date that occurs earlier than a specified date, or we declare certain non-cash dividends;

• an announcement occurs of an event or transaction that, if consummated, would result in a merger event, tender offer, nationalization, delisting or change in law (as determined pursuant to the terms of the applicable forward sale agreement);

• certain other events of default, termination events or other specified events occur, including, among other things, any material misrepresentation made by us in connection with entering into the relevant forward sale agreement or a market disruption event during a specified period that lasts for more than eight scheduled trading days (in each case, as determined pursuant to the terms of the applicable forward sale agreement).

Each forward purchaser’s decision to exercise its right to accelerate the applicable forward sale agreement and require us to settle the relevant forward sale agreement will be made irrespective of our interests, including our need for capital.

In such cases, we could be required to issue and deliver our Class A common shares under the physical settlement provisions or, if we so elect and the relevant forward purchaser so permits our election in its good faith and in its reasonable discretion, net share settlement provisions of the relevant forward sale agreement (and in the event that such net share settlement requires issuance and delivery of our Class A common shares) irrespective of our capital needs, which would result in dilution to our earnings per share.

We expect that the applicable forward sale agreement will be physically settled by delivery of our Class A common shares, unless we elect cash settlement or net share settlement, subject to the satisfaction of certain conditions.

Upon physical settlement or, if we so elect, net share settlement of any January 2022 Forward Sale Agreement, delivery of our Class A common shares in connection with such physical settlement or, to the extent we are obligated to deliver our Class A common shares, net share settlement will result in dilution to our earnings per share.

If we elect cash settlement or net share settlement with respect to all or a portion of our Class A common shares underlying the applicable forward sale agreement, we expect the applicable forward purchaser (or an affiliate thereof) to purchase a number of our Class A common shares in secondary market transactions over an unwind period to (i) return our Class A common shares to securities lenders in order to unwind the applicable forward purchaser’s hedge (after taking into consideration any Class A common shares to be delivered by us to the applicable forward purchaser, in the case of net share settlement);

and (ii) if applicable, in the case of net share settlement, deliver our Class A common shares to us to the extent required in settlement of such forward sale agreement.

In addition, the purchase of our Class A common shares in connection with a forward purchaser or its affiliate unwinding its hedge positions could cause the price of our Class A common shares to increase over such time (or reduce the amount of decrease over such time), thereby increasing the amount of cash we would owe to such forward purchaser (or decreasing the amount of cash such forward purchaser would owe us) upon a cash settlement of the applicable forward sale agreement or the number of our Class A common shares we would deliver to such forward purchaser (or decreasing the number of our Class A common shares such forward purchaser would deliver to us) upon net share settlement of such forward sale agreement.

The forward sale price we expect to receive upon physical settlement of any January 2022 Forward Sale Agreement will be subject to adjustment on a daily basis based on a floating interest rate factor equal to the overnight bank funding rate less a spread to be mutually agreed by us and the applicable forward purchaser, and will be decreased on certain dates based on amounts related to expected dividends on our Class A common shares during the term of such forward sale agreement.

If the overnight bank funding rate is less than the spread under such forward sale agreement on any day, the interest rate factor will result in a daily reduction of the applicable forward sale price.

As of January 19, 2022, the overnight bank funding rate was less than the spread, reducing the proceeds that we would receive upon settlement of the January 2022 Forward Sale Agreements.

If the prevailing market price of our Class A common shares during the relevant valuation period under any forward sale agreement is above the relevant forward sale price, in the case of cash settlement, we would pay the relevant forward purchaser an amount in cash equal to the difference or, in the case of net

share settlement, we would deliver to the relevant forward purchaser a number of our Class A common shares having a value equal to the difference, and, in each case, such difference would include a commission to such forward purchaser.

Thus, we could be responsible for a potentially substantial cash or stock payment.

In case of our bankruptcy or insolvency, the January 2022 Forward Sale Agreements will automatically terminate, and we would not receive the expected proceeds from the forward sale of our Class A common shares.

If we file for or a regulatory authority with jurisdiction over us institutes, or we consent to a proceeding seeking a judgment in bankruptcy or insolvency or any other similar relief under any other related laws, or we or a regulatory authority with jurisdiction over us presents a petition for our winding-up or liquidation, and we consent to such a petition, any forward sale agreement then in effect will automatically terminate.

If the January 2022 Forward Sale Agreements so terminate, we would not be obligated to deliver to the relevant Forward Purchaser any Class A common shares not previously delivered, and such Forward Purchaser would be discharged from its obligation to pay the relevant forward sale price per share in respect of any Class A common shares not previously settled under the applicable forward sale agreement.

Therefore, to the extent that there are any Class A common shares with respect to which a forward sale agreement has not been settled at the time of the commencement of any such bankruptcy or insolvency proceedings, we would not receive the relevant forward sale price per share in respect of those Class A common shares.

Risks Related to the Real Estate Industry

Our performance and the value of our properties are subject to general economic conditions and risks associated with our real estate assets.

If the properties we acquire do not generate income sufficient to meet operating expenses, including debt service and capital expenditures, our ability to make distributions to the Company’s shareholders and the Operating Partnership’s ability to make distributions to its OP unitholders, including AH4R, could be adversely affected.

There are significant expenditures associated with an investment in real estate (such as debt service, real estate taxes, insurance and maintenance costs) that generally do not decline when circumstances reduce the income from the property.

Income from and the value of our properties may be adversely affected by numerous factors, including general economic conditions (particularly increases in unemployment), property supply and demand fundamentals and rent control or rent stabilization or other housing laws, which could prevent us from raising rents.

Environmentally hazardous conditions may adversely affect our financial condition, cash flows and operating results.

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We may be subject to environmental laws or regulations relating to our properties, such as those concerning lead-based paint, mold, asbestos, proximity to power lines or other issues.

We cannot assure you that future laws, ordinances or regulations will not impose any material environmental liability, or that the current environmental condition of our

properties will not be affected by the operations of residents, existing conditions of the land, operations in the vicinity of the properties or the activities of unrelated third parties.

We cannot assure you that future laws, ordinances or regulations will not impose any material environmental liability, or that the current environmental condition of our properties will not be affected by the operations of residents, existing conditions of the land, operations in the vicinity of the properties or the activities of unrelated third parties.

In addition, we may be required to comply with various local, state and federal fire, health, life-safety and similar regulations.

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Tenant relief laws, including laws restricting evictions, rent control laws and other regulations that limit our ability to increase rental rates may negatively impact our rental income and profitability.

As landlord of numerous properties, we are involved regularly in evicting tenants who are not paying their rent or are otherwise in material violation of the terms of their lease.

As landlord of numerous properties, we are involved regularly in evicting tenants who are not paying their rent or are otherwise in material violation of their lease.

Eviction activities impose legal and managerial expenses that raise our costs.

The eviction process is typically subject to legal barriers, mandatory “cure” policies and other sources of expense and delay, each of which may delay our ability to gain possession and stabilize the property.

Additionally, state and local landlord-tenant laws may impose legal duties to assist tenants in relocating to new housing, or restrict the landlord’s ability to recover certain costs or charge tenants for damage tenants cause to the landlord’s premises.

Because such laws vary by state and locality, we and any regional and local property managers we hire will need to be familiar with and take all appropriate steps to comply with all applicable landlord tenant laws, and we will need to incur supervisory and legal expenses to ensure such compliance.

Additionally, landlord-tenant laws may impose legal duties to assist tenants in relocating to new housing, or restrict the landlord’s ability to recover certain costs or charge tenants for damage caused by them.

Because such laws vary by state and locality, we and any regional and local property managers we hire will need to take all appropriate steps to comply with all applicable landlord tenant laws, and we will need to incur supervisory and legal expenses to ensure such compliance.

To the extent that we do not comply with state or local laws, we may be subjected to civil litigation filed by individuals, in class actions or by state or local law enforcement.

We may be required to pay our adversaries’ litigation fees and expenses if judgment is entered against us in such litigation, or if we settle such litigation.

We may be required to pay our adversaries’ litigation fees and

expenses if judgment is entered against us in such litigation, or if we settle such litigation.

Furthermore, rent control laws or other regulations that may limit our ability to increase rental rates may affect our rental income.

If rent controls unexpectedly became applicable to certain of our properties, our revenue from and the value of such properties could be adversely affected.

Since the onset of the COVID-19 pandemic, there have been increases in restrictions and other regulations on evictions and rent increases and we believe these increases will continue given the ongoing effects of the pandemic, economic challenges nationally and in many of our markets and increasing political support for these types of regulations.

Since the onset of the COVID-19 pandemic, there have been increases in restrictions and other regulations on evictions and rent increases and we believe these increases will continue given increasing political support for these types of regulations.

Class action, tenant rights and consumer demands, litigation and adverse media publicity could directly limit and constrain our operations and may result in significant litigation expenses.

Certain organizations, including tenant rights and housing advocacy organizations have been critical of our business model.

We have been and may in the future be a target of legal demands, litigation and adverse media publicity driven by these organizations.

While we intend to conduct our business lawfully and in compliance with applicable landlord-tenant and consumer laws, such organizations might work in conjunction with trial and pro bono lawyers in one state or multiple states to attempt to bring claims against us on a class action basis for damages or injunctive relief and to seek to publicize our activities in a negative light.

We have been and may in the future be a target of litigation and adverse media publicity driven by these organizations.

While we intend to conduct our business lawfully and in compliance with applicable landlord-tenant and consumer laws, such organizations might work in conjunction with trial and pro bono lawyers to attempt to bring claims against us on a class action basis for damages or injunctive relief and to seek to publicize our activities in a negative light.

We cannot anticipate what form such actions might take, or what remedies they may seek.

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If they are successful in any such endeavors, they could directly limit and constrain our operations, adversely impact our business and may impose on us significant litigation expenses, including settlements to avoid continued litigation or judgments for damages or injunctions.

Climate change and related regulatory actions may adversely affect our business.

To the extent that significant changes in the climate occur in areas where our communities are located, we may experience extreme weather and/or changes in precipitation and temperature, all of which may result in physical damage to, or a decrease in demand for, properties located in these areas or affected by these conditions.

Should the impact of climate change be material in nature, including significant property damage to or destruction of our properties, or occur for lengthy periods of time, our financial condition or results of operations may be adversely affected.

In addition, changes in federal, state and local legislation and regulation based on concerns about climate change could result in delays and increased costs to complete our developments and increased capital expenditures on our existing properties (for example, to improve their energy efficiency and/or resistance to inclement weather) without a corresponding increase in revenue, and, as a result, adversely impact our financial results and operations.

The direct and indirect impacts of climate change may adversely affect our business.

We have been and may continue to be adversely impacted by the direct consequences of climate change, such as property damage due to increases in the frequency, duration and severity of extreme weather events, such as hurricanes and floods.

Similarly, changes in precipitation levels could lead to increases in droughts or wildfires that could adversely impact demand for our communities.

The increases in property damage due to these events have also contributed to the increases in costs we have faced in property insurance.

In addition, changes in federal, state and local legislation and regulation based on concerns about climate change could result in delays and increased costs to complete our development projects and increased capital expenditures on our existing properties (for example, to improve their energy efficiency and/or resistance to inclement weather) without a corresponding increase in revenue, and, as a result, adversely impact our financial results and operations.

It would be difficult for us to quickly generate cash from sales of our properties.

Real estate investments, particularly large portfolios of properties, are relatively illiquid.

If we had a sudden need for significant cash, it would be difficult for us to fund such need quickly through a sale of our properties.

If we had a sudden need for significant cash, it would be difficult for us to quickly sell our properties.

Our ability to sell our properties may also be limited by our need to avoid the 100% prohibited transactions tax that is imposed on gain recognized by a REIT from the sale of property characterized as dealer property.

In order to ensure that we avoid such characterization, we may be required to hold

our properties for a minimum period of time and comply with certain other requirements in the Code or dispose of our properties through a TRS.

In order to ensure that we avoid such characterization, we may be required to hold our properties for a minimum period of time and comply with certain other requirements in the Code or dispose of our properties through a TRS.

Risks Related to Our Ownership, Organization and Structure

AH4R’s fiduciary duties as the general partner of the Operating Partnership could create conflicts of interest, which may impede business decisions that could benefit our shareholders.

As the sole general partner of the Operating Partnership, AH4R has a fiduciary duty to the other limited partners in the Operating Partnership, the discharge of which may conflict with the interests of the Company’s shareholders.

As the sole general partner of the Operating Partnership, AH4R has a fiduciary duty to the other limited partners in the Operating Partnership, which may conflict with the interests of the Company’s shareholders.

The limited partners of the Operating Partnership have agreed that, in the event of a conflict in the fiduciary duties owed by AH4R to the Company’s shareholders and in AH4R’s capacity as the general partner of the Operating Partnership to such limited partner, AH4R is under no obligation to give priority to the interests of such limited partner.

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Our senior management, trustees and their affiliates may have significant voting influence due to their stock ownership.

Members of the Company’s senior management, trustees and their affiliates hold significant amounts of the Company’s Class A and Class B common shares and Class A units in the Operating Partnership.

Each Class A common share is entitled to one vote.

Each Class B common share is entitled to 50 votes and converts into Class A common shares on a one for one basis for every 49 partnership units converted.

Class A units in the Operating Partnership are nonvoting.

The Company’s dual class structure was put in place when the Company was organized to provide voting rights to holders of units in the Operating Partnership corresponding with their equity ownership.

All members of the Company’s senior management, trustees and their affiliates hold Class A common shares and Class B common shares that represent approximately 22.2% of the current voting power of the Company as of December 31, 2020.

Members of the Company’s senior management, trustees and their affiliates collectively hold significant amounts of the Company’s Class A common shares, entitled to one vote each, and Class B common shares, entitled to 50 votes each and which convert into Class A common shares on a one for one basis for every 49 partnership units converted, and Class A units in the

Operating Partnership, which are nonvoting.

This structure was put in place when the Company was organized to provide voting rights to holders of units in the Operating Partnership corresponding with their equity ownership.

All members of the Company’s senior management, trustees and their affiliates collectively hold Class A common shares or Class B common shares that represent approximately 20.9% of the current voting power of the Company as of December 31, 2021.

Assuming the conversion of all of the Class A units held by these individuals into Class A common shares, they would own approximately 30.4% of the voting power of the Company based on the Company’s outstanding common shares as of December 31, 2021.

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Certain provisions of the Maryland General Corporation Law (the “MGCL”) applicable to Maryland real estate investment trusts may have the effect of inhibiting a third-party from making a proposal to acquire us or of impeding a change in control under circumstances that otherwise could provide our shareholders with the opportunity to realize a premium over the then-prevailing market price of their shares, including:

outstanding voting shares or an affiliate or associate of ours who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner of 10% or more of the voting power of our then outstanding shares) or an affiliate of any interested shareholder for five years after the most recent date on which the shareholder becomes an interested shareholder, and thereafter imposes two super-majority shareholder voting requirements on these combinations, unless, among other conditions, our common shareholders receive a minimum price, as defined in the MGCL, for their shares and the consideration is received in cash or in the same form as previously paid by the interested shareholder for its shares;

• “business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested shareholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our outstanding voting shares or an affiliate or associate of ours who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner of 10% or more of the voting power of our then outstanding shares) or an affiliate of any interested shareholder for five years after the most recent date on which the shareholder becomes an interested shareholder, and thereafter imposes two super-majority shareholder voting requirements on these combinations, unless, among other conditions, our common shareholders receive a minimum price, as defined in the MGCL, for their shares and the consideration is received in cash or in the same form as previously paid by the interested shareholder for its shares;

• “control share” provisions that provide that our “control shares” (defined as voting shares that, when aggregated with all other shares controlled by the shareholder, entitle the shareholder to exercise one of three increasing ranges of voting power in electing trustees) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares”) have no voting rights except to the extent approved by our shareholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding shares owned by the acquirer, by our officers or by our employees who are also trustees of our company.

By resolution of the Company’s board of trustees, we have opted out of the business combination provisions of the MGCL and provided that any business combination between us and any other person is exempt from the business combination provisions of the MGCL, provided that the business combination is first approved by the Company’s board of trustees (including a majority of trustees who are not affiliates or associates of such persons).

In addition, pursuant to a provision in the Company’s bylaws, we have opted out of the control share provisions of the MGCL.

However, the Company’s board of trustees may by resolution elect to opt into the business combination provisions of the MGCL and we may, by amending the Company’s bylaws, opt into the control share provisions of the MGCL in the future.

In addition, the “unsolicited takeover” provisions of Title 3, Subtitle 8 of the MGCL permit the board of trustees of a Maryland REIT, without shareholder approval and regardless of what is currently provided in its declaration of trust or bylaws, to implement certain takeover defenses, including adopting a classified board or increasing the vote required to remove a trustee.

Such takeover defenses may have the effect of inhibiting a third-party from making an acquisition proposal for us or of delaying, deferring or preventing a change in control of us under the circumstances that otherwise could provide our common shareholders with the opportunity to realize a premium over the then-current market price.

In July 2013, the Company’s board of trustees and the Company’s shareholders approved an amendment to the Company’s declaration of trust under which we elected not to be subject to these provisions.

Therefore, any revocation or modification of this opt-out would require an amendment to the Company’s declaration of trust that is first recommended by the Company’s board of trustees and then approved by a majority of all the votes entitled to be cast generally in the election of trustees.

By resolution of the Company’s board of trustees, we have opted out of the business combination provisions of the MGCL and provided that any business combination between us and any other person is exempt from those provisions, provided that the business combination is first approved by the Company’s board of trustees (including a majority of trustees who are not affiliates or associates of such persons).

In addition, pursuant to a provision in the Company’s bylaws, we have opted out of the MGCL’s control share provisions of the MGCL.

However, the Company’s board of trustees may by resolution opt into the business combination provisions and we may, by amending the Company’s bylaws, opt into the control share provisions of the MGCL in the future.

Risks Related to Qualification and Operation as a REIT

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We may be subject to the prohibited transactions tax equal to 100% of net gain upon a disposition of real property that we hold.

Although a safe harbor is available, for which certain sales of property by a REIT are not subject to the 100% prohibited transaction tax, we cannot assure you that we can comply with the safe harbor or that we will avoid owning property that may be characterized as held primarily for sale to customers in the ordinary course of business.

Although a safe harbor is available, for which certain sales of property by a REIT are not subject to the 100% prohibited transaction

tax, we cannot assure you that we can comply with the safe harbor or that we will avoid owning property that may be characterized as held primarily for sale to customers in the ordinary course of business.

Consequently, we may choose not to engage in certain sales of our properties or we may conduct such sales through our TRS, which would be subject to U.S.

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The REIT provisions of the Code may limit our ability to hedge our assets and operations.

Under these provisions, any income that we generate from transactions intended to hedge our interest rate risk will be excluded from gross income for purposes of the REIT 75% and 95% gross income tests if the instrument hedges interest rate risk on liabilities used to carry or acquire real estate assets or manages the risk of certain currency fluctuations, and such instrument is properly identified under applicable Treasury Regulations.

Under the Code, any income that we generate from transactions intended to hedge our interest rate risk will be excluded from gross income for purposes of the REIT 75% and 95% gross income tests if the instrument hedges interest rate risk on liabilities used to carry or acquire real estate assets or manages the risk of certain currency fluctuations, and such instrument is properly identified under applicable Treasury Regulations.

Income from hedging transactions that do not meet these requirements will generally constitute non-qualifying income for purposes of both the REIT 75% and 95% gross income tests.

As a result of these rules, we may have to limit our use of hedging techniques that might otherwise be advantageous or implement those hedges through a TRS.

This could increase the cost of our hedging activities because our TRS would be subject to tax on gains or expose us to greater risks associated with changes in interest

rates than we would otherwise want to bear.

This could increase the cost of our hedging activities because our TRS would be subject to tax on gains or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear.

In addition, losses in our TRS will generally not provide any tax benefit, except for being carried back or forward against past or future taxable income in the TRS, provided, however, losses in our TRS arising in taxable years beginning after December 31, 2021, may only be carried forward and may only be deducted against 80% of future taxable income in the TRS.

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In addition, for taxable years beginning after December 31, 2017, taxpayers, including TRS, are subject to a limitation on their ability to deduct net business interest generally equal to 30% of adjusted taxable income, subject to certain exceptions.

However, the Coronavirus Aid, Relief, and Economic Security Act enacted in March 2020 generally increased the 30% limitation to a 50% limitation for any taxable year beginning in 2019 and 2020 for corporate taxpayers.

This provision may limit the ability of our TRS to deduct interest, which could increase its taxable income.

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The Company’s board of trustees may not grant an exemption from these restrictions to any proposed transferee whose ownership in excess of the applicable ownership limit would result in our failing to qualify as a REIT.

These restrictions on ownership and transfer will not apply, however, if the Company’s board of trustees determines that it is no longer in our best interest to continue to qualify as a REIT.

These restrictions on ownership and transfer will not apply, however, if the Company’s board of trustees determines that it is no longer in our best interest to continue to qualify as

The share ownership restrictions of the Code for REITs and the ownership and transfer restrictions in our declaration of trust may inhibit market activity in our equity shares and restrict our business combination opportunities.

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Our access to third-party sources of capital depends on a number of factors, including the market’s perception of our growth potential, our current debt levels, the market price of our common or preferred shares, and our current and potential future earnings.

We cannot assure you that we will have access to such capital on favorable terms at the desired times, or at all, which may

cause us to curtail our investment activities and/or to dispose of assets at inopportune times, and could materially and adversely affect us and the trading price of our common or preferred shares.

We cannot assure you that we will have access to such capital on favorable terms at the desired times, or at all, which may cause us to curtail our investment activities and/or to dispose of assets at inopportune times, and could materially and adversely affect us and the trading price of our common or preferred shares.

We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our outstanding common or preferred shares.

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federal tax laws, regulations, interpretations or rulings will be adopted.

Any legislative action may prospectively or retroactively modify our tax treatment and, therefore, may adversely affect our taxation or our Company’s shareholders.

Any legislative action may prospectively or retroactively modify our tax treatment and, therefore, may adversely affect our taxation or our shareholders.

We urge you to consult with your tax advisor with respect to the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our stock.

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For example, dividends received by the FP Shareholders generally could be treated as (i) additional dividend income to the NFP Shareholders and (ii) ordinary income, in whole or in part, to the FP Shareholders.

In addition, the extent to which NFP

Shareholders could deduct payments deemed made on the financing instruments and the withholding taxes and information reporting requirements that could apply are uncertain.

In addition, the extent to which NFP Shareholders could deduct payments deemed made on the financing instruments and the withholding taxes and information reporting requirements that could apply are uncertain.

Transactions involving fast-pay stock arrangements are treated as “listed transactions” for U.S.

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Finally, treatment as a listed transaction would mean that certain of our “material advisors” (as defined under applicable Treasury Regulations) also would be required to file a disclosure statement with the IRS.

Prospective shareholders should consult their own tax advisors as to the application of these rules to their individual circumstances.

We and certain of our advisors could decide to file disclosure statements with the IRS on a protective basis to avoid the risk of penalties, even if it is uncertain that our preferred shares are in fact Fast-Pay Stock or that such advisor is a “material advisor.” Prospective shareholders should consult their own tax advisors as to the application of these rules to their individual circumstances.

UNRESOLVED STAFF COMMENTS

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What changed 10-K

Item 1A. Risk Factors