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Item 1A. Risk Factors

2025-03-20 compared with 2024-03-21 · 34 added, 18 removed, 110 unchanged (32% of the section changed)

An investment in our securities involves various risks.

The following discusses risk factors that could affect our business, operations and financial condition.

If any of these risks, as well as other risks and uncertainties that we have not yet identified or that we currently believe are not material, become realized, we could be materially adversely affected and the value of our securities could decline.

In addition, the following risk factors may contain “forward looking statements” and should be read in conjunction with Management’s Discussion and Analysis of Financial condition and Results of Operations, and the financial statements and related notes in this Annual Report on Form 10-K.

All investors should carefully consider the following risk factors in conjunction with the other information in this report before trading our securities.

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In addition, provisions of the Internal Revenue Code may limit our ability to sell properties (without incurring significant tax costs) in some situations when it may be otherwise economically advantageous to do so, thereby adversely affecting returns to stockholders and adversely impacting our ability to meet our obligations.

Our business may be impacted as a result of any health emergency like the pandemic impact the coronavirus.

Our business may be impacted as a result of any health emergency.

Considerable uncertainty still surrounds the recent Covid-19 pandemic, including its conclusion, the availability of and effectiveness of vaccines, the potential short-term and long term effects, including but not limited to shifts in consumer housing demand based on geography, affordability, housing type (e.g., multi-family vs.

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multi-bedroom), mainly resulting from the paradigm shift of work culture, the decentralization of corporate headquarters and the success of “work from home” models.

Moreover, local, state and national measures taken to limit the spread of the

recent pandemic have already resulted in significant economic impacts and mortality rates, the duration and scope of which cannot currently be predicted.

The extent to which our financial condition or operating results will be effected in the future by any future pandemic will largely depend on future demand and developments, which are highly uncertain and cannot be accurately predicted.

Moreover, local, state and national measures taken to limit the spread of the recent pandemic have already resulted in significant economic impacts and mortality rates, the duration and scope of which cannot currently be predicted.

We face risks associated with and have been the target of security breaches through cyber attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems.

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In recent years, cyber-attacks against companies have increased in frequency, scope and potential damage.

Malicious damage (such as the introduction of viruses and cyber-attacks) or a large-scale malfunction may adversely affect the group's business and results, including damage to the group's reputation, and the group's financial condition.

Malicious damage (such as the introduction of viruses and cyber-attacks) or a large-scale malfunction may adversely affect our business and results, including damage to our reputation, and our financial condition.

FACTORS AFFECTING OUR ASSETS

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Any of these events could adversely affect cash flow from operations and our ability to make distributions to shareholders and service indebtedness.

A significant portion of the costs of owning property, such as real estate taxes, insurance, and debt service payments, are not necessarily reduced when circumstances cause a decrease in rental income from the properties.

Our reliance on third-party management companies s to operate certain of our properties may harm our business.

A significant portion of the costs of owning property, such as real estate taxes, insurance, and debt service payments, are not necessarily reduced or able to be recouped when circumstances cause a decrease in rental income from the properties.

Our reliance on third-party management companies to operate certain of our properties may harm our business.

We rely on third party property managers to manage the daily operations of our properties.

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We may experience increased operating costs which could adversely affect our financial results and the value of our properties.

Our properties are subject to increases in operating expenses such as insurance, cleaning, electricity, heating, ventilation and air conditioning, administrative costs and other costs associated with security, landscaping, repairs, and maintenance of the properties.

Our properties are subject to increases in operating expenses such as insurance, cleaning, maintenance, electricity, heating, ventilation and air conditioning, administrative costs and other costs associated with security, landscaping, repairs, and maintenance of the properties.

While some current tenants are obligated by their leases to reimburse us for a portion of these costs, there is no assurance that these tenants will make such payments or agree to pay these costs upon renewal or new tenants will agree to pay these costs.

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However, if an unknown liability was later asserted against the acquired properties, we might be required to pay substantial sums to settle it, which could adversely affect cash flow.

We engage in development and redevelopment activities with respect to certain of our properties.

To the extent that we do so, we are subject to certain risks, including the following:

• we may not complete a development or redevelopment project on schedule or within budgeted amounts (as a result of risks beyond our control, such as weather, labor conditions, permitting issues, material shortages and price increases);

• we may be unable to lease the developed or redeveloped properties at budgeted rental rates or lease up the property within budgeted time frames;

• we may devote time and expend funds on development or redevelopment of properties that we may not complete;

• we may encounter delays or refusals in obtaining all necessary zoning, land use, and other required entitlements, and building, occupancy and other required governmental permits and authorizations, and our costs to comply with the conditions imposed by such permits and authorizations could increase;

• we may encounter delays, refusals and unforeseen cost increases resulting from third-party litigation or objections;

• we may fail to obtain the financial results expected from properties we develop or redevelop.

Many of our properties are concentrated in our primary markets and we may suffer economic harm as a result of adverse conditions in those markets.

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In return for lower interest rates and favorable terms, HUD loans involve extensive regulatory compliance.

While we hope to continue utilizing HUD insured loans in the future, should we not be able to access such loans, or should HUD cease to permit us to access or assume HUD insured debt, we would likely incur significantly increased interest costs and shorter term conventional loans (assuming we are able to obtain conventional loans) and possibly need to utilize funds from disposal of investments or other properties to finance such activities.

While we hope to continue utilizing HUD insured loans in the future, should we not be able to access such loans, or should HUD cease to permit us to access or assume HUD insured debt, we would likely incur significantly increased interest costs and shorter term conventional loans (assuming we are able to obtain conventional loans) and possibly will need to utilize funds from disposal of investments or other properties to finance such activities.

An increase in interest rates would increase interest costs on variable rate debt and could adversely impact the ability to refinance existing debt.

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We may not be able to realize the full potential value of the assets and may incur costs related to the early extinguishment of the debt secured by such assets.

We engage in development and redevelopment activities with respect to certain of our properties.

To the extent that we do so, we are subject to certain risks, including the following:

• We may not complete a development or redevelopment project on schedule or within budgeted amounts (as a result of risks beyond our control, such as weather, labor conditions, permitting issues, material shortages and price increases);

• We may be unable to lease the developed or redeveloped properties at budgeted rental rates or lease up the property within budgeted time frames;

• We may devote time and expend funds on development or redevelopment of properties that we may not complete;

• We may encounter delays or refusals in obtaining all necessary zoning, land use, and other required entitlements, and building, occupancy and other required governmental permits and authorizations, and our costs to comply with the conditions imposed by such permits and authorizations could increase;

• We may encounter delays, refusals and unforeseen cost increases resulting from third-party litigation or objections;

• We may fail to obtain the financial results expected from properties we develop or redevelop;

Ownership through partnerships and joint ventures could limit property performance.

We have in the past, and may in the future, develop and/or acquire properties in partnerships and similar joint ventures, including those in which we may own a preferred interest, when we believe circumstances warrant this type of investment.

Our organizational documents do not limit the amount of available funds that we can invest in partnerships or other joint venture structures.

As of December 31, 2024, we had no active joint ventures with any investment funds at risk.

Investments in partnerships and joint ventures, including limited liability companies, involve risks such as the following:

• Our partners could become bankrupt, in which event we and any other remaining partners would generally remain liable for the liabilities of the venture;

• Our partners could have economic or other business interests or goals which are inconsistent with our business objectives;

• Our partners could be in a position to take action contrary to our instructions, requests or objectives, including our policies involving development of properties;

• Governing agreements in partnerships and joint ventures often contain restrictions on the transfer of an interest or “by-sell” or other provisions which could result in the purchase or sale of the interest at a disadvantageous time or on disadvantageous terms.

We generally will seek to maintain sufficient control of partnerships or joint ventures to permit us to achieve our business objectives;

however, in the event it fails to meet expectations or becomes insolvent, we could lose our investment in the partnership or joint venture.

We could incur more debt.

We operate with a policy of incurring indebtedness only when it is advisable in the opinion of our Board of Directors and management.

We could incur additional indebtedness by borrowing under a line of credit, mortgaging properties we own, restructuring existing indebtedness, and/or issuing debt securities in public offerings or private transactions.

The degree of indebtedness could affect our ability to obtain additional financing for working capital, capital expenditures, acquisitions, or other corporate purposes and make us more vulnerable to a down turn in business or the economy in general.

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