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Risks Related to Our Company
−Removed: • We currently have not identified all of the credit investments, properties or other real estate-related assets we intend to purchase.
+Added: • We intend to identify additional credit investments, properties and other real estate-related assets we intend to purchase.
For this and other reasons, an investment in our shares is speculative.
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• We may be unable to pay or maintain cash distributions or increase distributions over time.
+Added: • Cybersecurity risks and cyber incidents may adversely affect our business in the event we or our manager, our transfer agent or any other party that provides us with essential services experiences cyber incidents.
+Added: • If we, our operating partnership and any other subsidiaries do not maintain exemptions from registration under the Investment Company Act, we will be subject to significant regulations and restrictions on our business and investments, which could materially and adversely impact us.
Risks Associated with Our Credit Segment
1 unchanged sentence
• We are subject to risks relating to real estate-related securities, including CMBS.
−Removed: • We o perate in a highly competitive market for lending and investment opportunities, which may limit our ability to originate or acquire desirable loans and investments in our target assets.
+Added: • We operate in a highly competitive market for lending and investment opportunities, which may limit our ability to originate or acquire desirable loans and investments in our target assets.
• Commercial real estate-related investments that are secured, directly or indirectly, by real property are subject to delinquency, foreclosure and loss, which could result in losses to us.
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• Failure to maintain our qualification as a REIT for U.S.
−Removed: federal income tax purposes would adversely affect our operations and our ability to make distributions.
−Removed: • We may be subject to adverse legislative or regulatory tax changes that could increase our tax liability or reduce our operating flexibility.
−Removed: • To maintain our qualification as a REIT, we must meet annual distribution requirements, which may force us to forego otherwise attractive opportunities or borrow funds during unfavorable market conditions.
−Removed: This could delay or hinder our ability to meet our investment objectives and reduce our stockholders’ overall returns.
+Added: federal income tax purposes would cause us to be taxed as a regular domestic corporation, which would adversely affect our operations and our ability to make distributions.
+Added: • We could be subject to a material tax liability if our sales of properties are treated as prohibited transactions.
+Added: • We may be subject to adverse legislative or regulatory tax changes that could increase our tax liability, reduce our operating flexibility and reduce the value of our common stock.
+Added: • To maintain our REIT status, we may have to borrow funds on a short-term basis during unfavorable market conditions.
+Added: • Compliance with REIT requirements may cause us to forego otherwise attractive opportunities, which may hinder or delay our ability to meet our investment objectives and reduce our stockholders’ overall return.
Risks Related to Our Company
−Removed: We currently have not identified all of the credit investments, properties or other real estate-related assets we intend to purchase.
+Added: We intend to identify additional credit investments, properties and other real estate-related assets we intend to purchase.
For this and other reasons, an investment in our shares is speculative.
−Removed: We currently have not identified all of the credit investments, properties or other real estate-related assets that we may purchase.
+Added: We intend to identify additional credit investments, properties and other real estate-related assets in which to invest.
We have established policies relating to the types of assets we will acquire and the creditworthiness of tenants of our properties or other investment opportunities, but our manager has wide discretion in implementing these policies, subject to the oversight of our Board.
−Removed: Additionally, our manager has discretion to determine the location, number and size of our investments and the percentage of net proceeds we may dedicate to a single investment.
+Added: Additionally, subject to our investment guidelines, our manager has discretion to determine the location, number and size of our investments and the percentage of net proceeds we may dedicate to a single investment.
As a result, you will not be able to evaluate the economic merit of our future investments until after such investments have been made.
Therefore, an investment in our shares is speculative.
−Removed: Our stockholders should consider our prospects in light of the risks, uncertainties and difficulties frequently encountered by companies that, like us, have not identified all credit investments, properties or real estate-related assets that they intend to purchase.
+Added: Our stockholders should consider our prospects in light of the risks, uncertainties and difficulties frequently encountered by companies that, like us, have not identified all investments they intend to originate or purchase.
To be successful in this market, we and our manager must, among other things:
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We expect that our Board will make that determination in the future based, in part, upon advice from our manager.
−Removed: If our stockholders are able to find a buyer for their shares, our stockholders will likely have to sell them at a substantial discount to the most recent estimated per share NAV of our common stock of $6.57 as of September 30, 2022.
+Added: If our stockholders are able to find a buyer for their shares, our stockholders will likely have to sell them at a substantial discount to the most recent estimated per share NAV of our common stock of $6.09 as of January 31, 2024.
It also is likely that our common stock will not be accepted as the primary collateral for a loan.
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As a result, there can be no assurance that:
−Removed: • stockholders will be able to realize the estimated per share NAV upon attempting to sell their shares of our common stock;
+Added: • stockholders would be able to realize the estimated per share NAV even if they were able to sell their shares of our common stock;
• we will be able to achieve, for our stockholders, the estimated per share NAV upon a listing of our shares of common stock on a national securities exchange, a merger, or a sale of our portfolio.
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Distributions are based primarily on cash flows from operations.
−Removed: The amount of cash available for distributions is affected by many factors, such
−Removed: as the performance of our manager in selecting investments for us to make, selecting tenants for our properties and securing financing arrangements, our ability to make investments, the amount of income we receive from our investments, and our operating expense levels, as well as many other variables.
+Added: The amount of cash available for distributions is affected by many factors, such as the performance of our manager in selecting investments for us to make, selecting tenants for our properties and securing financing arrangements, our ability to make investments, the amount of income we receive from our investments, and our
+Added: operating expense levels, as well as many other variables.
We may not always be in a position to pay distributions to our stockholders and any distributions we do make may not increase over time.
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There also is a risk that we may not have sufficient cash flows from operations to fund distributions required to maintain our REIT status.
−Removed: We have paid, and may continue to pay, some of our distributions from sources other than cash flows from operations, including borrowings and proceeds from asset sales, which may reduce the amount of capital we ultimately deploy in our real estate operations and may negatively impact the value of our common stock.
−Removed: Additionally, distributions at any point in time may not reflect the current performance of our properties or our current operating cash flows.
−Removed: Our organizational documents permit us to pay distributions from any source, including net proceeds from public or private offerings, borrowings, advances from our sponsor or our manager and the deferral of fees and expense reimbursements by our manager, in our sole discretion.
+Added: We have paid, and may continue to pay, some of our distributions from sources other than cash flows from operations, including borrowings and proceeds from asset sales, which may reduce the amount of capital we ultimately deploy in our operations and may negatively impact the value of our common stock.
+Added: Additionally, distributions at any point in time may not reflect the current performance of our assets or our current operating cash flows.
+Added: Our organizational documents permit us to pay distributions from any source, including net proceeds from public or private offerings, borrowings or advances and the deferral of fees and expense reimbursements by our manager, in our sole discretion.
To the extent that cash flows from operations have been or are insufficient to fully cover our distributions to our stockholders, we have paid, and may continue to pay, some of our distributions from sources other than cash flows from operations.
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We have no limits on the amounts we may use to pay distributions from sources other than cash flows from operations.
−Removed: The payment of distributions from sources other than cash provided by operating activities may reduce the amount of proceeds available for acquisitions and operations or cause us to incur additional interest expense as a result of borrowed funds, and may cause subsequent holders of our common stock to experience dilution.
+Added: The payment of distributions from sources other than cash provided by operating activities may reduce the amount of proceeds available for acquisitions, originations and operations or cause us to incur additional interest expense as a result of borrowed funds and may cause subsequent holders of our common stock to experience dilution.
This may negatively impact the value of our common stock.
−Removed: Because the amount we pay in distributions may exceed our earnings and our cash flows from operations, distributions may not reflect the current performance of our properties or our current operating cash flows.
+Added: Because the amount we pay in distributions may exceed our earnings and our cash flows from operations, distributions may not reflect the current performance of our assets or our current operating cash flows.
To the extent distributions exceed cash flows from operations, distributions may be treated as a return of our stockholders’ investment and could reduce their basis in our common stock.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K.
−Removed: The declaration, amount and payment of future cash distributions on our common stock are subject to uncertainty due to current market conditions.
+Added: The declaration, amount and payment of future cash distributions on our common stock are subject to uncertainty.
All distributions will be declared at the discretion of our Board and will depend on our earnings, our financial condition, REIT distribution requirements, and other factors as our Board may deem relevant from time to time.
−Removed: The economic impacts resulting from the COVID-19 pandemic and the emergence of new variants of the virus could adversely affect our ability to pay distributions.
Our Board is under no obligation or requirement to declare future distributions and will continue to assess our common stock distribution rate on an ongoing basis, as market conditions and our financial position continue to evolve.
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We have experienced net losses in the past (calculated in accordance with GAAP), and we may not be profitable or realize growth in the value of our assets.
−Removed: Many of our losses can be attributed to start-up costs, general and administrative expenses, depreciation and amortization, as well as acquisition expenses incurred in connection with purchasing properties or making other investments.
+Added: Operating losses may be attributed to start-up costs, general and administrative expenses, depreciation and amortization, as well as acquisition expenses incurred in connection with purchasing properties or making other investments.
Our ability to sustain profitability is uncertain and depends on the demand for, and value of, our portfolio of loans and properties.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report on Form 10-K and our accompanying consolidated financial statements and notes thereto.
−Removed: It may be difficult to accurately reflect material events that may impact the estimated per share NAV of our common stock between valuations and, accordingly, we may issue shares in our DRIP or repurchase shares at too high or too low of a price.
+Added: It may be difficult to accurately reflect material events that may impact the estimated per share NAV of our common stock between valuations and, accordingly, we may issue shares in our DRIP or redeem shares at too high or too low of a price.
Our independent valuation firm calculates estimates of the market value of our principal real estate and real estate-related assets, and our Board determines the net value of our real estate and real estate-related assets and liabilities taking into consideration such estimates provided by the independent valuation firm.
The Board is ultimately responsible for determining the estimated per share NAV of our common stock.
−Removed: Since our Board is only required to determine our estimated per share NAV at least annually, there may be changes in the value of our properties that are not fully reflected in the most recent estimated per
−Removed: share NAV of our common stock.
+Added: Since our Board is only required to determine our estimated per share NAV at least annually, there may be changes in the value of our real estate and real estate-related assets that are not fully reflected in the most recent estimated per share NAV of our common stock.
As a result, the published estimated per share NAV may not fully reflect changes in value that may have occurred since the prior valuation.
Furthermore, our manager monitors our portfolio, but it may be difficult to reflect changing market conditions or material events that may impact the value of our portfolio between valuations, or to obtain timely or complete information regarding any such events.
−Removed: Therefore, the estimated per share NAV published before the announcement of an extraordinary event may differ significantly from our actual per share NAV until such time as sufficient information is available and analyzed, the financial impact is fully evaluated, and the appropriate adjustment is made to our estimated per share NAV, as determined by our Board.
−Removed: Any resulting disparity may be to the detriment of an acquiror of our common stock or a stockholder redeeming shares pursuant to our share redemption program.
−Removed: The Board last established an updated estimated per share NAV of the Company's shares as of September 30, 2022 on December 19, 2022.
+Added: Therefore, the estimated per share NAV published before the announcement of an extraordinary event may differ
+Added: significantly from our actual per share NAV until such time as sufficient information is available and analyzed, the financial impact is fully evaluated, and the appropriate adjustment is made to our estimated per share NAV, as determined by our Board.
+Added: Any resulting disparity may be to the detriment of an acquiror of our common stock or a stockholder requesting share redemptions pursuant to our share redemption program.
+Added: As of December 31, 2023, the Board last established an updated estimated per share NAV of the Company’s shares as of September 30, 2023 on November 9, 2023.
+Added: On February 29, 2024, the Board established an updated estimated per share NAV of the Company’s shares using a valuation date of January 31, 2024.
Our future success depends to a significant degree upon certain key personnel of our manager.
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A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources.
−Removed: These incidents may
−Removed: be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption.
+Added: These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption.
+Added: The risk of a security breach or disruption, particularly through cyberattacks or cyber intrusions, including by computer hackers, nation-state affiliated actors, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased, and will likely continue to increase in the future.
+Added: threats are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer “hackers”, threat actors, “hacktivists”, organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors.
+Added: Some actors now engage and are expected to continue to engage in cyberattacks, including, without limitation, nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities.
+Added: During times of war and other major conflicts, we and the third-party service providers upon which we rely may be vulnerable to heightened risk of these attacks, including retaliatory cyberattacks.
The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our tenant and stockholder relationships.
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Any material adverse effect experienced by our manager, our transfer agent and other parties that provide us with services essential to our operations could, in turn, have an adverse impact on us.
+Added: Remote work has become more common among the employees and personnel of our manager and other third-party service providers and has increased risks to the information technology systems and confidential, proprietary and sensitive data of our manager and other third-party service providers as more of those employees utilize network connections, computers and devices outside of the employer’s premises or network, including working at home, while in transit, and in public locations.
+Added: Those employees working remotely could expose our manager and other third-party service providers to additional cybersecurity risks and vulnerabilities as their systems could be negatively affected by vulnerabilities present in external systems and technologies outside of their control.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results.
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Investing in mortgage, bridge or mezzanine loans could adversely affect our return on our loan investments.
−Removed: We have invested, and may continue to invest, in mezzanine loans and may make or acquire mortgage or bridge loans, or participations in such loans, to the extent our manager determines that it is advantageous for us to do so.
−Removed: However, if we make or invest in mortgage, bridge or mezzanine loans, we will be at risk of defaults on those loans caused by many conditions beyond our control, including local and other economic conditions affecting real estate values and interest rate levels.
+Added: We have invested, and may continue to invest, in mezzanine loans and may originate or acquire mortgage or bridge loans, or participations in such loans, to the extent our manager determines that it is advantageous for us to do so.
+Added: However, if we originate or invest in mortgage, bridge or mezzanine loans, we will be at risk of defaults on those loans caused by many conditions beyond our control, including local and other economic conditions affecting real estate values and interest rate levels.
If there are defaults under these loans, we may not be able to repossess and sell quickly any properties securing such loans.
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Real estate-related securities are often unsecured and also may be subordinated to other obligations of the issuer.
−Removed: As a result, investments in real estate-related securities may be subject to risks of (1) limited liquidity in the secondary trading market in the case of unlisted or thinly traded securities, (2) substantial market price volatility resulting from changes in prevailing interest rates in the case of traded equity securities, (3) subordination to the prior claims of banks and other senior lenders to the issuer, (4) the operation of mandatory sinking fund or call/redemption provisions during periods of declining interest rates that could cause the issuer to reinvest redemption proceeds in lower yielding assets, (5) the possibility that earnings of the issuer or that income from collateral may be insufficient to meet debt service and distribution obligations and (6) the declining creditworthiness and potential for insolvency of the issuer during periods of rising interest rates and economic slowdown or downturn.
+Added: As a result, investments in real estate-related securities may be subject to risks of (1) limited liquidity in the secondary trading market in the case of unlisted or thinly traded securities, (2) substantial market price volatility resulting from changes in prevailing interest rates in the case of traded securities, (3) subordination to the prior claims of banks and other senior lenders to
+Added: the issuer, (4) the operation of mandatory sinking fund or call/redemption provisions during periods of declining interest rates that could cause the issuer to reinvest redemption proceeds in lower yielding assets, (5) the possibility that earnings of the issuer or that income from collateral may be insufficient to meet debt service and distribution obligations and (6) the declining creditworthiness and potential for insolvency of the issuer during periods of rising interest rates and economic slowdown or downturn.
These risks may adversely affect the value of outstanding real estate-related securities and the ability of the obliged parties to repay principal and interest or make distribution payments.
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CMBS are issued by investment banks and non-regulated financial institutions and are not insured or guaranteed by the U.S.
−Removed: The value of CMBS may change due to shifts in the market’s perception of issuers and
−Removed: regulatory or tax changes adversely affecting the mortgage securities market as a whole and may be negatively impacted by any dislocation in the mortgage-backed securities market in general.
+Added: The value of CMBS may change due to shifts in the market’s perception of issuers and regulatory or tax changes adversely affecting the mortgage securities market as a whole and may be negatively impacted by any dislocation in the mortgage-backed securities market in general.
CMBS are also subject to several risks created through the securitization process.
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In certain instances, third-party guarantees or other forms of credit support can reduce the credit risk.
−Removed: Our mezzanine loans involve greater risks of loss than senior loans secured by income‑producing properties.
+Added: Mezzanine loans, preferred equity and other investments that are subordinated or otherwise junior in an issuer’s capital structure involve greater risks of loss than first mortgage loans.
We may continue to invest in mezzanine loans, which sometimes take the form of subordinated loans secured by second mortgages on the underlying property or more commonly take the form of loans secured by a pledge of the ownership interests of either the entity owning the property or a pledge of the ownership interests of the entity that owns the interest in the entity owning the property.
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As a result, we may not recover some or all of our investment.
−Removed: In addition, mezzanine loans may have higher loan‑to‑value ratios than conventional mortgage loans, resulting in less equity in the property and increasing the risk of loss of principal.
+Added: In addition, mezzanine loans may have higher loan‑to‑value ratios than first mortgage loans, resulting in less equity in the property and increasing the risk of loss of principal.
Significant losses related to our mezzanine loans would result in operating losses for us and may limit our ability to make distributions to our stockholders.
−Removed: Our preferred equity investments involve a greater risk of loss than conventional debt financing.
−Removed: Our preferred equity investments involve a higher degree of risk than conventional debt financing due to a variety of factors, including their non-collateralized nature and subordinated ranking to other loans and liabilities of the entity in which such preferred equity is held.
+Added: We have also made, and may continue to make, preferred equity investments, which involve a higher degree of risk than conventional debt financing due to a variety of factors, including their non-collateralized nature and subordinated ranking to other loans and liabilities of the entity in which such preferred equity is held.
Accordingly, if the issuer defaults on our investment, we would only be able to proceed against such entity in accordance with the terms of the preferred security and not against any property owned by such entity.
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As a result, we may lose all or a significant part of our investment, which could result in significant losses.
−Removed: Bridge loans involve a greater risk of loss than traditional investment-grade mortgage loans with fully insured borrowers.
−Removed: We may acquire bridge loans secured by first lien mortgages on a property to borrowers who are typically seeking short-term capital to be used in an acquisition, construction or rehabilitation of a property, or other short-term liquidity needs.
+Added: Bridge loans involve a greater risk of loss than traditional mortgage loans on stabilized properties.
+Added: We may originate or acquire bridge loans secured by first lien mortgages on a property to borrowers who are typically seeking short-term capital to be used in an acquisition, construction or rehabilitation of a property, or other short-term liquidity needs.
The typical borrower under a bridge loan has usually identified an undervalued asset that has been under-managed and/or is located in a recovering market.
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Any deterioration of real estate fundamentals could negatively impact our performance by making it more difficult for borrowers of our mortgage loans, or borrower entities, to satisfy their debt payment obligations, increasing the default risk applicable to borrower entities, and/or making it more difficult for us to generate attractive risk-adjusted returns.
−Removed: Changes in general economic conditions will affect the creditworthiness of borrower entities and/or the value of underlying real estate collateral relating to our investments and may include economic and/or market
−Removed: fluctuations, changes in environmental, zoning and other laws, casualty or condemnation losses, regulatory limitations on rents, decreases in property values, changes in the appeal of properties to tenants, changes in supply and demand, fluctuations in real estate fundamentals, the financial resources of borrower entities, energy supply shortages, various uninsured or uninsurable risks, natural disasters, political events, terrorism and acts of war, changes in government regulations, changes in real property tax rates and/or tax credits, changes in operating expenses, changes in interest rates, changes in inflation rates, changes in the availability of debt financing and/or mortgage funds which may render the sale or refinancing of properties difficult or impracticable, increased mortgage defaults, increases in borrowing rates, negative developments in the economy and/or adverse changes in real estate values generally and other factors that are beyond our control.
+Added: Changes in general economic conditions will affect the creditworthiness of borrower entities and/or the value of underlying real estate collateral relating to our investments and may include economic and/or market fluctuations, changes in environmental, zoning and other laws, casualty or condemnation losses, regulatory limitations on rents, decreases in property values, changes in the appeal of properties to tenants, changes in supply and demand, fluctuations in real estate fundamentals, the financial resources of borrower entities, energy supply shortages, various uninsured or uninsurable risks, natural disasters, political events, terrorism and acts of war, changes in government regulations, changes in real property tax rates and/or tax credits, changes in operating expenses, changes in interest rates, changes in inflation rates, changes in the availability of debt financing and/or mortgage funds which may render the sale or refinancing of properties difficult or impracticable, increased mortgage defaults, increases in borrowing rates, negative developments in the economy and/or adverse changes in real estate values generally and other factors that are beyond our control.
We cannot predict the degree to which economic conditions generally, and the conditions for real estate debt investing in particular, will improve or decline.
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and global economies or in the real estate debt markets could have a material adverse effect on our business, financial condition, and results of operations.
−Removed: We may find it necessary or desirable to foreclose on certain of the loans or CMBS we acquire, and the foreclosure process may be lengthy and expensive.
−Removed: We may find it necessary or desirable to foreclose on certain of the loans or CMBS we acquire, and the foreclosure process may be lengthy and expensive.
+Added: Commercial real estate-related investments that are secured, directly or indirectly, by real property are subject to delinquency, foreclosure and loss, which could result in losses to us.
+Added: We may find it necessary or desirable to foreclose on certain of the loans that we originate or acquire or CMBS that we acquire, and the foreclosure process may be lengthy and expensive.
+Added: We may find it necessary or desirable to foreclose on certain of the loans or CMBS that we acquire, and the foreclosure process may be lengthy and expensive.
+Added: The ability of a borrower to repay a loan secured by an income-producing property typically is dependent primarily upon the successful operation of the property rather than upon the existence of independent income or assets of the borrower.
+Added: If the net operating income of the property is reduced, the borrower’s ability to repay the loan may be impaired.
+Added: Net operating income of an income-producing property can be affected by, among other things:
+Added: • tenant mix and tenant bankruptcies;
+Added: • success of tenant businesses;
+Added: • property management decisions, including with respect to capital improvements, particularly in older building structures;
+Added: • property location and condition;
+Added: • competition from other properties offering the same or similar services;
+Added: • changes in laws that increase operating expenses or limit rents that may be charged;
+Added: • any liabilities relating to environmental matters at the property;
+Added: • changes in global, national, regional, or local economic conditions and/or specific industry segments;
+Added: • global trade disruption, significant introductions of trade barriers and bilateral trade frictions;
+Added: • declines in global, national, regional or local real estate values;
+Added: • declines in global, national, regional or local rental or occupancy rates;
+Added: • changes in interest rates, foreign exchange rates, and in the state of the credit and securitization markets and the debt and equity capital markets, including diminished availability or lack of debt financing for commercial real estate;
+Added: • changes in real estate tax rates, tax credits and other operating expenses;
+Added: • changes in governmental rules, regulations and fiscal policies, including income tax regulations and environmental legislation;
+Added: • acts of God, terrorism, social unrest and civil disturbances, which may decrease the availability of or increase the cost of insurance or result in uninsured losses;
+Added: • adverse changes in zoning laws.
The protection of the terms of the applicable loan, including the validity or enforceability of the loan and the maintenance of the anticipated priority and perfection of the applicable security interests may not be adequate.
−Removed: Furthermore, claims may be asserted by lenders or borrowers that might interfere with enforcement of our rights.
+Added: Furthermore, claims may be
+Added: asserted by lenders or borrowers that might interfere with enforcement of our rights.
Borrowers may resist foreclosure actions by asserting numerous claims, counterclaims and defenses against us, including, without limitation, lender liability claims and defenses, even when the assertions may have no basis in fact, in an effort to prolong the foreclosure action and seek to force the lender into a modification of the loan or a favorable buy-out of the borrower’s position in the loan.
1 unchanged sentence
At any time prior to or during the foreclosure proceedings, the borrower may file for bankruptcy or its equivalent, which would have the effect of staying the foreclosure actions and further delaying the foreclosure process and potentially result in a reduction or discharge of a borrower’s debt.
−Removed: Foreclosure may create a negative public perception of the related property, resulting in a diminution of its value, and in the event of any such foreclosure or other similar real estate owned-proceeding, we would also become the subject to the various risks associated with direct ownership of real estate, including environmental liabilities.
+Added: Foreclosure may create a negative public perception of the related property, resulting in a diminution of its value, and in the event of any such foreclosure or other similar real estate owned-proceeding, we would also become subject to the various risks associated with direct ownership of real estate, including environmental liabilities.
Even if we are successful in foreclosing on a loan, the liquidation proceeds upon sale of the underlying real estate may not be sufficient to recover our cost basis in the loan, resulting in a loss to us.
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Our estimates and judgments may not be correct and, therefore, our results of operations and financial condition could be severely impacted.
−Removed: Accounting Standards Update 2016-13, Financial Instruments—Credit Losses—Measurement of Credit Losses on Financial Instruments (Topic 326) , which replaces the “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the Current Expected Credit Loss model (“CECL”), became effective for us on January 1, 2020.
−Removed: Under the CECL model, we are required to provide allowances for credit losses on certain financial assets carried at amortized cost, such as loans held-for-investment and held-to-maturity debt securities, including related future funding commitments and accrued interest receivable.
+Added: Under Accounting Standards Update 2016-13, Financial Instruments—Credit Losses—Measurement of Credit Losses on Financial Instruments (Topic 326) , we are required to provide allowances for credit losses on certain financial assets carried at amortized cost, such as loans held-for-investment and held-to-maturity debt securities, including related future funding commitments and accrued interest receivable.
The measurement of expected credit losses is to be based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.
1 unchanged sentence
This differs significantly from the “incurred loss” model previously required under GAAP, which delayed recognition until it was probable a loss had been incurred.
−Removed: Accordingly, the adoption of the CECL model has materially affected how we determine our credit loss provision and required us to significantly increase our allowance and recognize provisions for credit losses earlier in the lending cycle.
−Removed: Moreover, the CECL model creates more volatility in the level of our credit loss provisions.
+Added: Accordingly, the current expected credit losses (“CECL”) model creates more volatility in the level of our credit loss provisions.
If we are required to materially increase our future level of credit loss allowances for any reason, such increase could adversely affect our business, results of operations, liquidity and financial condition.
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In certain situations, we:
−Removed: • acquire investments subject to rights of senior classes, special servicers or collateral managers under intercreditor, servicing agreements or securitization documents;
+Added: • acquire investments subject to rights of senior and/or subordinate classes, special servicers or collateral managers under intercreditor, servicing agreements or securitization documents;
• pledge our investments as collateral for financing arrangements;
7 unchanged sentences
In addition, we will generally pay all or a portion of the expenses relating to our joint ventures and we may, in certain circumstances, be liable for the actions of our partners or co-venturers.
−Removed: Commercial real estate-related investments that are secured, directly or indirectly, by real property are subject to delinquency, foreclosure and loss, which could result in losses to us.
−Removed: Commercial real estate debt instruments (e.g., mortgages, mezzanine loans and preferred equity) that are secured by commercial property are subject to risks of delinquency and foreclosure and risks of loss.
−Removed: The ability of a borrower to repay a loan secured by an income-producing property typically is dependent primarily upon the successful operation of the property rather than upon the existence of independent income or assets of the borrower.
−Removed: If the net operating income of the property is reduced, the borrower’s ability to repay the loan may be impaired.
−Removed: Net operating income of an income-producing property can be affected by, among other things:
−Removed: • tenant mix and tenant bankruptcies;
−Removed: • success of tenant businesses;
−Removed: • property management decisions, including with respect to capital improvements, particularly in older building structures;
−Removed: • property location and condition;
−Removed: • competition from other properties offering the same or similar services;
−Removed: • changes in laws that increase operating expenses or limit rents that may be charged;
−Removed: • any liabilities relating to environmental matters at the property;
−Removed: • changes in global, national, regional, or local economic conditions and/or specific industry segments;
−Removed: • global trade disruption, significant introductions of trade barriers and bilateral trade frictions;
−Removed: • declines in global, national, regional or local real estate values;
−Removed: • declines in global, national, regional or local rental or occupancy rates;
−Removed: • changes in interest rates, foreign exchange rates, and in the state of the credit and securitization markets and the debt and equity capital markets, including diminished availability or lack of debt financing for commercial real estate;
−Removed: • changes in real estate tax rates, tax credits and other operating expenses;
−Removed: • changes in governmental rules, regulations and fiscal policies, including income tax regulations and environmental legislation;
−Removed: • acts of God, terrorism, social unrest and civil disturbances, which may decrease the availability of or increase the cost of insurance or result in uninsured losses;
−Removed: • adverse changes in zoning laws.
−Removed: In addition, we are exposed to the risk of judicial proceedings with our borrowers and entities in which we invest, including bankruptcy or other litigation, as a strategy to avoid foreclosure or enforcement of other rights by us as a lender or investor.
−Removed: In the event that any of the properties or entities underlying or collateralizing our loans or investments experiences any of the foregoing events or occurrences, the value of, and return on, such investments could be reduced, which would adversely affect our results of operations and financial condition.
Our secured debt agreements impose, and additional lending facilities may impose, restrictive covenants, which may restrict our flexibility to determine our operating policies and investment strategy.
−Removed: We borrow funds under secured debt agreements with various counterparties.
−Removed: The documents that govern these secured debt agreements and the related guarantees contain, and additional lending facilities may contain, customary affirmative and negative covenants, including financial covenants applicable to us that may restrict our flexibility to determine our operating policies and investment strategy.
−Removed: In particular, these agreements may require us to maintain specified minimum levels of capacity under our credit facilities and cash.
+Added: We are party to various secured debt agreements with various counterparties.
+Added: The documents that govern these secured debt agreements contain, and additional lending facilities may contain, customary affirmative and negative covenants, including financial covenants applicable to us that may restrict our flexibility to determine our operating policies and investment strategy.
+Added: In particular, these agreements require us, and future similar agreements may require us, to maintain specified minimum levels of borrowing capacity under the credit facilities and cash.
As a result, we may not be able to leverage our assets as fully as we would otherwise choose, which could reduce our return on assets.
+Added: Further, this could also make it difficult for us to satisfy the distribution requirements necessary to maintain our qualification as a REIT for U.S.
+Added: federal income tax purposes.
If we are unable to meet these collateral obligations, our financial condition and prospects could deteriorate significantly.
2 unchanged sentences
We may also be subject to cross-default and acceleration rights in our other debt arrangements.
−Removed: Further, this could also make it difficult for us to satisfy the distribution requirements necessary to maintain our qualification as a REIT for U.S.
−Removed: federal income tax purposes.
−Removed: Difficulty in redeploying the proceeds from repayments of our existing loans and other investments could materially and adversely affect us.
−Removed: As our loans and other investments are repaid, we may attempt to redeploy the proceeds we receive into new loans and investments and repay borrowings under our secured revolving repurchase agreements and other financing arrangements.
−Removed: It is possible that we will fail to identify reinvestment options that would provide a yield and/or a risk profile that is comparable to the asset that was repaid.
−Removed: If we fail to redeploy the proceeds we receive from repayment of a loan or other investment in equivalent or better alternatives, we could be materially and adversely affected.
−Removed: In addition, we may continue to invest in CMBS as part of our investment strategy.
+Added: Difficulty in redeploying the proceeds from repayments or redemptions of our existing loans and other investments could materially and adversely affect us.
+Added: As our loans and other investments are repaid or redeemed, we may attempt to redeploy the proceeds we receive into new loans and investments and repay borrowings under our secured revolving repurchase agreements and other financing arrangements.
+Added: It is possible that we will fail to identify reinvestment options that would provide a yield and/or a risk profile that is comparable to the asset that was repaid or redeemed.
+Added: If we fail to redeploy the proceeds we receive from repayment or redemption of a loan or other investment in equivalent or better alternatives, we could be materially and adversely affected.
+Added: In addition, we expect to continue to invest in CMBS as part of our investment strategy.
Subordinate interests such as CMBS and similar structured finance investments generally are not actively traded and are relatively illiquid investments.
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However, the value of certain other assets may be affected by prepayment rates.
−Removed: For example, if
−Removed: we acquire fixed rate CRE debt securities investments or other fixed rate mortgage-related securities, or a pool of such fixed rate mortgage-related securities, we anticipate that the mortgage loans underlying these fixed rate securities will prepay at a projected rate generating an expected yield.
+Added: For example, if we acquire fixed rate CRE debt securities investments or other fixed rate mortgage-related securities, or a pool of such fixed rate mortgage-related securities, we anticipate that the mortgage loans underlying these fixed rate securities will prepay at a projected rate generating an expected yield.
If we were to purchase these securities at a premium to par value, when borrowers prepay the mortgage loans underlying these securities faster than expected, the increase in corresponding prepayments on these securities will likely reduce the expected yield.
−Removed: Conversely, if we were to purchase these securities at a discount to par value, when borrowers prepay the mortgage loans underlying these securities slower than expected, the decrease in corresponding prepayments on these securities will likely increase the expected yield.
+Added: Conversely, if we were to purchase these securities at a discount to par value,
+Added: when borrowers prepay the mortgage loans underlying these securities slower than expected, the decrease in corresponding prepayments on these securities will likely increase the expected yield.
In addition, if we were to purchase these securities at a discount to par value, when borrowers prepay the mortgage loans underlying these securities faster than expected, the increase in corresponding prepayments on these securities will likely increase the expected yield.
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We are subject to additional risks associated with investments in the form of loan participation interests.
−Removed: We have in the past invested, and may in the future invest, in loan participation interests in which another lender or lenders share with us the rights, obligations and benefits of a commercial mortgage loan made by an originating lender to a borrower.
+Added: We own, and may in the future invest in, loan participation interests in which another lender or lenders share with us the rights, obligations and benefits of a commercial mortgage loan made by an originating lender to a borrower.
Accordingly, we will not be in privity of contract with a borrower because the other lender or participant is the record holder of the loan and, therefore, we will not have any direct right to any underlying collateral for the loan.
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If the loans that we originate or acquire do not comply with applicable laws, we may be subject to penalties, which could materially and adversely affect us.
−Removed: Loans that we originate or acquire may be directly or indirectly subject to U.S.
+Added: Loans that we originate or acquire may be directly or indirectly subject to foreign or U.S.
federal, state or local governmental laws.
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Any credit ratings on our investments are subject to ongoing evaluation by credit rating agencies, and we cannot assure you that any such ratings will not be changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant.
−Removed: If rating agencies assign a lower-than-expected rating or reduce or withdraw, or indicate that they may reduce or withdraw, their ratings of our investments in the future, the value of these investments could significantly decline, which would adversely affect the value of our investment portfolio and could result in losses upon disposition or the failure of borrowers to satisfy their debt service obligations to us.
+Added: If rating agencies assign a lower-than-expected rating or reduce or withdraw, or indicate that they may reduce or withdraw, their ratings of our investments in the future, the value of these investments could
+Added: significantly decline, which would adversely affect the value of our investment portfolio and could result in losses upon disposition or the failure of borrowers to satisfy their debt service obligations to us.
Our commercial construction lending may expose us to increased lending risks.
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Our operating results will be subject to risks generally incident to the ownership of real estate, including:
−Removed: • changes in international, national or local economic or geographic conditions (including as a result of the outbreak of COVID-19, the emergence of any future variants thereof and the possible resistance of variants to currently available vaccines);
+Added: • changes in international, national or local economic or geographic conditions (including in connection with a widespread pandemic or outbreak of a highly infectious or contagious disease, such as COVID-19);
• changes in supply of or demand for similar or competing properties in an area (including as a result of an increased prevalence of remote work);
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• periods of high interest rates and tight money supply.
−Removed: The outbreak of COVID-19 that began in the fourth quarter of 2019 has led to an economic slowdown.
During periods of economic slowdown, rising interest rates or declining demand for real estate, or the public perception that any of these events may occur, could result in a general decline in rents or an increased incidence of defaults under existing leases.
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While we select policy specifications and insured limits that we believe are appropriate and adequate given the relative risk of loss, insurance coverages provided by tenants, the cost of the coverage and industry practice, there can be no assurance that we will not experience a loss that is uninsured or that exceeds policy limits.
−Removed: In addition, we may reduce or discontinue terrorism, earthquake, flood or other insurance on some or all of our properties in the future if the cost of premiums
−Removed: for any of these policies exceeds, in our judgment, the value of the coverage discounted for the risk of loss.
+Added: In addition, we may reduce or discontinue terrorism, flood or other insurance on some or all of our properties in the future if the cost of premiums for any of these policies exceeds, in our judgment, the value of the coverage discounted for the risk of loss.
Our title insurance policies may not insure for the current aggregate market value of our portfolio, and we do not intend to increase our title insurance coverage as the market value of our portfolio increases.
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In addition, if the damaged properties are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if these properties were irreparably damaged.
−Removed: In addition, we carry several different lines of insurance, placed with several large insurance carriers.
+Added: In addition, we carry several
+Added: different lines of insurance, placed with several large insurance carriers.
If any one of these large insurance carriers were to become insolvent, we would be forced to replace the existing insurance coverage with another suitable carrier, and any outstanding claims would be at risk for collection.
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In addition, historically, during periods of increasing interest rates, real estate valuations have generally decreased as a result of rising capitalization rates, which tend to be positively correlated with interest rates.
−Removed: Consequently, prolonged periods of higher interest rates may negatively impact the valuation of our portfolio as well as lower
−Removed: sales proceeds from future dispositions.
+Added: Consequently, prolonged periods of higher interest rates may negatively impact the valuation of our portfolio as well as lower sales proceeds from future dispositions.
Further, as a result of the 100% prohibited transactions tax applicable to REITs, we intend to hold our properties for investment, rather than primarily for sale in the ordinary course of business, which may cause us to forgo or defer sales of properties that otherwise would be favorable.
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Some of our leases may not contain rental increases over time, or the rental increases may be less than the fair market rate at a future point in time.
−Removed: When that is the case, the value of the leased property to a potential purchaser may not increase over time, which may restrict our ability to sell that property, or if we are able to sell that property, may result in a sale price less than the price that we paid to purchase the property or the price that could be obtained if the rental was at the then-current market rate.
+Added: When that is the case, the value of the leased property to a potential purchaser may not increase over
+Added: time, which may restrict our ability to sell that property, or if we are able to sell that property, may result in a sale price less than the price that we paid to purchase the property or the price that could be obtained if the rental was at the then-current market rate.
We expect to hold the various real properties we acquire until such time as we decide that a sale or other disposition is appropriate given our REIT status and business objectives.
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If we are unable to lease properties on terms that require the tenants to pay all or some of the properties’ operating expenses, if our tenants fail to pay these expenses as required or if expenses we are required to pay exceed our expectations, we could have less funds available for future acquisitions or cash available for distributions to our stockholders.
−Removed: Inflation may adversely affect our financial condition and results of operations.
+Added: Inflation and rising interest rates may adversely affect our financial condition and results of operations.
Since we may incur leverage to make investments, our income depends, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds.
Inflation remained high in 2023.
−Removed: During the 12 months ended December 2022, the consumer price index rose 6.5%, compared to the 12 months ended December 2021.
−Removed: The Federal Reserve raised the federal funds rate a total of seven times during 2022, resulting in a range from 4.25% to 4.50% as of December 31, 2022.
−Removed: It is expected that the Federal Reserve may continue to increase the federal funds rate throughout 2023 to, among other things, control inflation.
+Added: During the 12 months ended December 2023, the consumer price index rose 3.4%.
+Added: The Federal Reserve raised the federal funds rate a total of four times during 2023, to control inflation, resulting in a range from 5.25% to 5.50% as of December 31, 2023.
+Added: Although there are expectations that the Federal Reserve will begin reducing the federal funds rate in 2024, these expectations may not materialize.
Should the Federal Reserve continue to raise rates in the future, this will likely result in further increases in market interest rates.
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There may not, however, be a corresponding increase in our revenues.
−Removed: reduction in the rate of return on new investments relative to the rate of return on current investments, and any reduction in the rate of return on current investments, could adversely impact our income, reducing our ability to service the interest obligations on, and to repay the principal of, our indebtedness.
+Added: Any reduction in the rate of return on new investments relative to the rate of return on current investments, and any reduction in the rate of return on current investments, could adversely impact our income, reducing our ability to service the interest obligations on, and to repay the principal of, our indebtedness.
An increase in inflation could have an adverse impact on our floating rate mortgages, credit facilities and general and administrative expenses, as these costs could increase at a rate higher than our rental and other revenue.
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Many of our competitors own properties similar to ours in the same markets in which our properties are located.
−Removed: If one of our properties is nearing the end of the lease term or becomes vacant and our competitors (which could include funds sponsored by affiliates of our manager) offer space at rental rates below current market rates or below the rental rates we currently charge our tenants, we may lose existing or potential tenants and we
−Removed: may be pressured to reduce our rental rates below those we currently charge or to offer substantial rent concessions in order to retain tenants when such tenants’ leases expire or to attract new tenants.
+Added: If one of our properties is nearing the end of the lease term or becomes vacant and our competitors (which could include funds sponsored by affiliates of our manager) offer space at rental rates below current market rates or below the rental rates we currently charge our tenants, we may lose existing or potential tenants and we may be pressured to reduce our rental rates below those we currently charge or to offer substantial rent concessions in order to retain tenants when such tenants’ leases expire or to attract new tenants.
In addition, if our competitors sell assets similar to assets we intend to sell in the same markets and/or at valuations below our valuations for comparable assets, we may be unable to dispose of our assets at all or at favorable pricing or on favorable terms.
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We might want to sell our co-ownership interests in a given property or other investment at a time when the other co-owners in such property or investment do not desire to sell their interests.
−Removed: Therefore, because we anticipate that it will be much more difficult to find a willing buyer for our co-ownership interests in an investment than it would be to find a buyer for a property we owned outright, we may not be able to sell our co-ownership interest in a property at the time we would like to sell.
+Added: Therefore, because we anticipate that it will be much
+Added: more difficult to find a willing buyer for our co-ownership interests in an investment than it would be to find a buyer for a property we owned outright, we may not be able to sell our co-ownership interest in a property at the time we would like to sell.
Terrorist attacks, acts of violence or war or public health crises may affect the markets in which we operate and have a material adverse effect on our financial condition, results of operations and ability to pay distributions to our stockholders.
The strength and profitability of our business depends on demand for and the value of our properties.
−Removed: The war between Russia and Ukraine and resulting economic sanctions imposed by many countries on Russia have led to disruption, instability and volatility in global markets and industries and have had a negative impact on the global economy and global supply chains.
+Added: The war between Russia and Ukraine and the current escalating Israel-Hamas conflict have led to disruption, instability and volatility in global markets and industries and have had a negative impact on the global economy and global supply chains.
Disruption, instability, volatility and decline in global economic activity, whether caused by acts of war, other acts of aggression or terrorism, in each case regardless of where it occurs, could in turn harm the demand for and the value of our properties.
−Removed: In addition, public health crises (including the COVID-19 outbreak and any future variants) may result in declining economic activity, which could harm the demand for and the value of our properties and may negatively affect our operations and our stockholders’ investments.
+Added: In addition, public health crises may result in declining economic activity, which could harm the demand for and the value of our properties and may negatively affect our operations and our stockholders’ investments.
We may acquire real estate assets located in areas that are susceptible to terrorist attacks or acts of war.
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Further, certain losses resulting from these types of events are uninsurable or not insurable at reasonable costs.
−Removed: More generally, any terrorist attack, other act of violence or war, or public health crisis (such as the COVID-19 outbreak and any future variants) could result in increased volatility in, or damage to, the United States and worldwide financial markets and economy, all of which could adversely affect our tenants’ ability to pay rent on their leases or our ability to borrow money or issue capital stock at acceptable prices, which could have a material adverse effect on our financial condition, results of operations and ability to pay distributions to our stockholders.
−Removed: Our business and/or operations and the businesses of our tenants could be materially and adversely affected by the risks, or the public perception of the risks, related to a pandemic or other health crisis, such as COVID-19 and any future variants.
−Removed: The COVID-19 outbreak, including variants thereof, and the associated “shelter-in-place” or “stay-at-home” orders or other quarantine mandates or public health guidance issued by local, state or federal authorities has adversely affected a number of our tenants’ businesses.
−Removed: The extent to which the lingering effects of the COVID-19 pandemic continues to impact our operations and those of our tenants will depend on future developments, including, among other factors, the duration, spread and resurgences of the virus, including certain variants thereof, along with related travel advisories and restrictions, the recovery time of the disrupted supply chains and industries, the impact of labor market interruptions, the impact of government interventions, the pace, scope and efficacy of vaccination programs, and general uncertainty as to the impact of COVID-19, including related variants and the possible resistance of variants to currently available vaccines, on the global economy.
−Removed: Management will continue to monitor the impact to our business, financial condition, results of operations, cash flow, and occupancy.
−Removed: Accordingly, we cannot predict the significance, extent or duration of any adverse impact of the COVID-19 pandemic on our business, financial condition, results of operations, cash flows or occupancy.
+Added: More generally, any terrorist attack, other act of violence or war, or public health crisis could result in increased volatility in, or damage to, the United States and worldwide financial markets and economy, all of which could adversely affect our tenants’ ability to pay rent on their leases or our ability to borrow money or issue capital stock at acceptable prices, which could have a material adverse effect on our financial condition, results of operations and ability to pay distributions to our stockholders.
+Added: The long-term macroeconomic effects of the COVID-19 pandemic and any future pandemic or epidemic could have a material adverse impact on our financial performance and results of operations.
+Added: While many of the direct impacts of the COVID-19 pandemic have eased, the longer-term macroeconomic effects on global supply chains, inflation, labor shortages and wage increases continue to impact many industries, including those of certain of our tenants.
+Added: Moreover, with the potential for new variants of COVID-19 to emerge, governments and businesses may re-impose aggressive measures to help slow its spread in the future.
+Added: For this reason, among others, the potential global impacts are uncertain and difficult to assess.
+Added: While we believe that our business is well-positioned for the post-COVID environment, long-term macroeconomic effects, including from supply and labor shortages, of the COVID-19 pandemic may in the future have an adverse impact on our estimated per share NAV, results of operations and cash flows, and may have an adverse impact on our ability to source new investments, obtain financing, fund distributions to stockholders and satisfy redemption requests, among other factors.
+Added: The full extent of the impact and effects of COVID-19 will depend on future developments, including, among other factors, future variants of the virus, availability, acceptance and effectiveness of vaccines along with related travel advisories, quarantines and restrictions, the recovery time of the disrupted supply chains and industries, the impact of labor market interruptions, the impact of government interventions, and uncertainty with respect to the duration of the global economic slowdown.
+Added: COVID-19, or any future pandemics or epidemics, and resulting impacts on the financial, economic and capital markets environment, and future developments in these and other areas present uncertainty and risk with respect to our performance, results of operations and ability to continue to pay distributions to our stockholders.
We are subject to risks that affect the retail real estate environment generally.
6 unchanged sentences
increases in operating costs, such as common area maintenance, real estate taxes, utility rates and insurance premiums;
−Removed: higher energy or fuel costs resulting from adverse weather conditions, natural disasters, geopolitical concerns, terrorist activities (including the war between Russia and Ukraine, which has led to disruption, instability and volatility in global markets and industries) and other factors;
+Added: higher energy or fuel costs resulting from adverse weather conditions, natural disasters, geopolitical concerns (including the war between Russia and Ukraine and the current escalating Israel-Hamas conflict, which have led to disruption, instability and volatility in global markets and industries), terrorist activities and other factors;
changes in interest rate levels and the cost and availability of financing;
−Removed: a weakening of local real estate conditions,
−Removed: such as an oversupply of, or a reduction in demand for, retail space or retail goods, and the availability and creditworthiness of current and prospective tenants;
+Added: a weakening of local real estate conditions, such as an oversupply of, or a reduction in demand for, retail space or
+Added: retail goods, and the availability and creditworthiness of current and prospective tenants;
trends in the retail industry;
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• the impact of an increase in energy costs on consumers and its consequential effect on the number of shopping visits to our properties;
−Removed: • a pandemic or other health crisis, such as the outbreak of COVID-19 and any future variants thereof;
+Added: • a pandemic or other health crisis;
• consequences of any armed conflict involving, or terrorist attack against, the United States.
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• the continuation, renewal or enforcement of our agreements with our manager and its affiliates, including the Management Agreement;
−Removed: • property acquisitions or other investments acquired from programs sponsored or operated by affiliates of our manager, which might entitle affiliates of our manager to commissions and possible success-based sale fees in connection with its services for the seller;
−Removed: • property acquisitions from third parties, which entitle our manager to advisory fees;
−Removed: • property or asset dispositions, which may entitle our manager or its affiliates to disposition fees;
−Removed: • borrowings to acquire properties, which borrowings will increase the acquisition and advisory fees payable to our manager;
+Added: • acquisitions or other investments acquired from programs sponsored or operated by affiliates of our manager, which might entitle affiliates of our manager to commissions and possible success-based sale fees in connection with its services for the seller;
+Added: • acquisitions from third parties, which entitle our manager to advisory fees;
+Added: • dispositions, which may entitle our manager or its affiliates to disposition fees;
+Added: • borrowings to acquire assets, which borrowings will increase the acquisition and advisory fees payable to our manager;
• how and when to recommend to our Board a proposed strategy to provide our stockholders with liquidity, which proposed strategy, if implemented, could entitle our manager to the payment of significant fees.
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Our Investment Advisor and its sub-advisor have, and will continue to have, substantial discretion, within our investment guidelines, to make decisions related to the acquisition, management and disposition of our investment securities.
−Removed: If our Investment Advisor and its sub-advisor do not succeed in implementing the investment securities portion of our investment strategy, our performance will suffer.
+Added: If our Investment Advisor and its sub-advisor do not succeed in implementing the investment securities portion of our investment strategy, our performance may suffer.
In addition, even though CMFT Securities has the ability to terminate our Investment Advisor at any time and therefore also terminate the sub-advisor, a termination fee may be required to be paid in connection with such termination and it may be difficult and costly to terminate and replace our Investment Advisor and the sub-advisor.
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Other programs sponsored by affiliates of our manager, as well as CIM and certain of its affiliates, use investment strategies that are similar to ours;
−Removed: therefore, our executive officers and the officers and key personnel of our manager and its affiliates may face conflicts of interest relating to the purchase and leasing of properties, and such conflicts may not be resolved in our favor.
+Added: therefore, our executive officers and the officers and key personnel of our manager and its affiliates may face conflicts of interest relating to transactions that may be competitive with, or complementary to, our business, and such conflicts may not be resolved in our favor.
CIM and its affiliates may have investment objectives, strategy and criteria, including targeted asset types, substantially similar to ours.
−Removed: As a result, we may be seeking to acquire properties and real estate-related assets, including mortgage loans, at the same time as CIM or its affiliates, or one or more of the other real estate programs sponsored by our manager or its affiliates.
−Removed: Certain of our executive officers and certain officers of our manager also are executive officers of CIM or its affiliates and other programs sponsored by our manager or its affiliates, the general partners of other private investment programs sponsored by our manager or its affiliates and/or the advisors or fiduciaries of other real estate programs sponsored by our manager or its affiliates.
−Removed: Accordingly, there is a risk that the allocation of acquisition opportunities may result in our acquiring a property that provides lower returns to us than a property purchased by another real estate program sponsored by our manager or its affiliates.
+Added: As a result, we may be seeking to acquire properties and real estate-related assets, including mortgage loans, at the same time as CIM or its affiliates, or one or more of the other programs sponsored by our manager or its affiliates.
+Added: Certain of our executive officers and certain officers of our manager also are executive officers of CIM or its affiliates and other programs sponsored by our manager or its affiliates, and/or the general partners of other private investment programs sponsored or managed by CIM or its affiliates.
+Added: Accordingly, there is a risk that the allocation of acquisition opportunities could materially and adversely affect our business, financial condition, results of operations, cash flows, our estimated per share NAV of our common stock and our ability to satisfy our debt obligations and to make distributions to our stockholders.
In addition, we have acquired, and may continue to acquire, properties in geographic areas where CIM or its affiliates or other real estate programs sponsored by CIM or its affiliates, own properties.
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DeBacker, is a vice president of our manager and is an officer of certain of its affiliates.
−Removed: Conflicts with our business and interests are most likely to arise from involvement in activities related to (1) allocation of new acquisition opportunities, management time and operational expertise among us and the other entities, (2) our purchase of properties from, or sale of properties to, affiliated entities, (3) the timing and terms of the acquisition or sale of an asset, (4) development of our properties by affiliates, (5) investments with affiliates of our manager, (6) compensation to our manager and its affiliates, and (7) our relationship with, and compensation to, our dealer manager.
+Added: Conflicts with our business and interests are most likely to arise from involvement in activities related to (1) allocation of new acquisition opportunities, management time and operational expertise among us and the other entities, (2) our purchase of assets from, or sale of assets to, affiliated entities, (3) the timing and terms of the acquisition or sale of an asset, (4) development of our properties by affiliates, (5) investments with affiliates of our manager, (6) compensation to our manager and its affiliates, and (7) our relationship with, and compensation to, our dealer manager.
Even if these persons do not violate their duties to us and our stockholders, they will have competing demands on their time and resources and may have conflicts of interest in allocating their time and resources among us and these other entities and persons.
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In addition, we are permitted to borrow funds from affiliates of our manager, including our sponsor, and to sell and lease our assets to affiliates of our manager, and we have not established a policy that specifically addresses how we will determine the sale or lease price in any such transaction.
−Removed: Any such borrowings, sale or lease transaction must be approved by a majority of our directors, including a majority of our independent directors, not
−Removed: otherwise interested in such transaction as being fair and reasonable to us.
−Removed: To the extent that we acquire any properties from affiliates of our manager, borrow funds from affiliates of our manager or sell or lease our assets to affiliates of our manager, such transactions could result in a conflict of interest.
+Added: Any such borrowings, sale or lease transaction must be approved by a majority of our directors, including a majority of our independent directors, not otherwise interested in such transaction as being fair and reasonable to us.
+Added: To the extent that we acquire any properties from
+Added: affiliates of our manager, borrow funds from affiliates of our manager or sell or lease our assets to affiliates of our manager, such transactions could result in a conflict of interest.
Our manager faces conflicts of interest relating to joint ventures or other co-ownership arrangements that we may enter into with CIM or its affiliates, or another real estate program sponsored or operated by CIM, which could result in a disproportionate benefit to CIM or its affiliates, or another program sponsored by CIM.
We may enter into joint ventures or co-ownership arrangements (including co-investment transactions) with CIM or its affiliates, or another program sponsored or operated by CIM for the acquisition, development or improvement of properties, as well as the acquisition of real estate-related assets.
−Removed: Since one or more of the officers of our manager are officers of CIM or its affiliates, including CIM and/or the advisors to other real estate programs sponsored by CIM, our manager may face conflicts of interest in determining which real estate program should enter into any particular joint venture or co-ownership arrangement.
+Added: Since one or more of the officers of our manager are officers of CIM or its affiliates, including CIM and/or the advisors to other programs sponsored by CIM, our manager may face conflicts of interest in determining which real estate program should enter into any particular joint venture or co-ownership arrangement.
These persons also may have a conflict in structuring the terms of the relationship between us and any affiliated co-venturer or co-owner, as well as conflicts of interests in managing the joint venture, which may result in the co-venturer or co-owner receiving benefits greater than the benefits that we receive.
1 unchanged sentence
In addition, if we become listed for trading on a national securities exchange, we may develop more divergent goals and objectives from any affiliated co-venturer or co-owner that is not listed for trading.
−Removed: In the event we enter into a joint venture or other co-ownership arrangement with another real estate program sponsored by CIM or its affiliates, or another real estate investment program sponsored by CIM that has a term shorter than ours, the joint venture may be required to sell its properties earlier than we may desire to sell the properties.
−Removed: Even if the terms of any joint venture or other co-ownership agreement between us and CIM or its affiliates, or another real estate program sponsored by CIM grants us the right of first refusal to buy such properties, we may not have sufficient funds or borrowing capacity to exercise our right of first refusal under these circumstances.
+Added: In the event we enter into a joint venture or other co-ownership arrangement with another real estate program sponsored by CIM or its affiliates, or another real estate investment program sponsored by CIM that has a term shorter than ours, the joint venture may be required to sell its assets earlier than we may desire to sell the assets.
+Added: Even if the terms of any joint venture or other co-ownership agreement between us and CIM or its affiliates, or another real estate program sponsored by CIM grants us the right of first refusal to buy such assets, we may not have sufficient funds or borrowing capacity to exercise our right of first refusal under these circumstances.
We have adopted certain procedures for dealing with potential conflicts of interest as further described in Part I, Item 1.
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This provision of our charter may discourage a person from initiating a tender offer for our shares and prevent our stockholders from receiving a premium to the purchase price for their shares in such a transaction.
−Removed: If we are required to register as an investment company under the Investment Company Act, we could not continue our current business plan, which may significantly reduce the value of our stockholders’ investment.
−Removed: We intend to conduct our operations, and the operations of our operating partnership and any other subsidiaries, so that no such entity meets the definition of an “investment company” under Section 3(a)(1) of the Investment Company Act.
−Removed: Under the Investment Company Act, in relevant part, a company is an “investment company” if:
−Removed: • pursuant to Section 3(a)(1)(A), it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities;
−Removed: • pursuant to Section 3(a)(1)(C), it is engaged, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of its total assets (exclusive of U.S.
−Removed: government securities and cash items) on an unconsolidated basis (the 40% test).
−Removed: “Investment securities” exclude U.S.
−Removed: government securities and securities of majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act.
−Removed: We intend to monitor our operations and our assets on an ongoing basis in order to ensure that neither we, nor any of our subsidiaries, meet the definition of “investment company” under Section 3(a)(1) of the Investment Company Act.
+Added: If we are unable to qualify for an exclusion from the definition of an investment company under the Investment Company Act, it could have a material adverse effect on us.
+Added: Section 3(a)(1)(A) of the Investment Company Act defines an investment company as any issuer that is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities, which for these purposes includes loans and participation interests therein.
+Added: Section 3(a)(1)(C) of the Investment Company Act defines an investment company as any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of the issuer’s total assets (exclusive of U.S.
+Added: Government securities and cash items) on an unconsolidated basis.
+Added: We intend to conduct our operations, and the operations of our operating partnership and any other subsidiaries, so as to qualify for the exclusion from the definition of an investment company provided by Section 3(c)(5)(C) of the Investment Company Act.
+Added: Section 3(c)(5)(C) excludes from the definition of an investment company entities that are “primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate” (“Qualifying Interests”).
+Added: As reflected in a series of no-action letters, the SEC staff’s position on Section 3(c)(5)(C) generally requires that in order to qualify for this exclusion, an issuer must maintain:
+Added: • at least 55% of the value of its assets in Qualifying Interests,
+Added: • at least an additional 25% of its assets in other permitted real estate-related interests (reduced by any amount the issuer held in excess of the 55% minimum requirement for Qualifying Interests), and
+Added: • no more than 20% of its assets in other than Qualifying Interests and real estate-related assets,
+Added: and also that the interests in real estate meet other criteria described in such no-action letters.
+Added: We will classify our assets for purposes of our 3(c)(5)(C) exemption based upon the no-action positions taken by the SEC staff and interpretive guidance provided by the SEC and its staff.
+Added: These no-action positions are based on specific factual situations that may be substantially different from the factual situations we may face, and a number of these no-action positions were issued more than 20 years ago.
+Added: No assurance can be given that the SEC or its staff will concur with our classification of our assets.
+Added: In addition, the SEC or its staff may, in the future, issue further guidance that may require us to re-classify our assets for purposes of the Investment Company Act.
+Added: If we are required to re-classify our assets, we may no longer be in compliance with the exemption from the definition of an investment company provided by Section 3(c)(5)(C) of the Investment Company Act.
+Added: Qualifying for an exemption from registration under the Investment Company Act will limit our ability to make certain investments.
+Added: For example, these restrictions may limit our and our subsidiaries’ ability to invest directly in mortgage-backed securities that represent less than the entire ownership in a pool of mortgage loans, debt and equity tranches of securitizations and certain asset-backed securities, non-controlling equity interests in real estate companies or in assets not related to real estate.
+Added: Although we intend to monitor our portfolio, there can be no assurance that we will be able to maintain this exemption from registration.
+Added: A change in the value of any of our assets could negatively affect our ability to maintain our exemption from regulation under the Investment Company Act.
+Added: To maintain compliance with the Section 3(c)(5)(C) exemption, we may be unable to sell assets we would otherwise want to sell and may need to sell assets we would otherwise wish to retain.
+Added: In addition, we may have to acquire additional assets that we might not otherwise have acquired or may have to forego opportunities to acquire assets that we would otherwise want to acquire and would be important to our investment strategy.
If we were obligated to register as an investment company, we would have to comply with a variety of substantive requirements under the Investment Company Act imposing, among other things:
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• potentially, compliance with daily valuation requirements.
−Removed: In order for us to not meet the definition of an “investment company” and avoid regulation under the Investment Company Act, we must engage primarily in the business of buying real estate.
−Removed: To avoid meeting the definition of an “investment company” under Section 3(a)(1) of the Investment Company Act, we may be unable to sell assets we would otherwise want to sell and may need to sell assets we would otherwise wish to retain.
−Removed: Similarly, we may have to acquire additional income or loss generating assets that we might not otherwise have acquired or may have to forgo opportunities to acquire interests in companies that we would otherwise want to acquire and would be important to our investment strategy.
−Removed: Accordingly, our Board may not be able to change our investment policies as it may deem appropriate if such change would cause us to meet the definition of an “investment company.” In addition, a change in the value of any of our assets could negatively affect our ability to avoid being required to register as an investment company.
−Removed: If we were required to register as an investment company but failed to do so, we would be prohibited from engaging in our business, and criminal and civil actions could be brought against us.
−Removed: In addition, our contracts would be unenforceable unless a court were to require enforcement, and a court could appoint a receiver to take control of us and liquidate our business.
The Board may change certain of our policies without stockholder approval, which could alter the nature of our stockholders’ investment.
If our stockholders do not agree with the decisions of our Board, they only have limited control over changes in our policies and operations and may not be able to change such policies and operations.
−Removed: The Board determines our major policies, including our policies regarding investments, financing, growth, debt capitalization, REIT qualification and distributions.
+Added: The Board determines any major policies of ours, including our policies regarding investments, financing, growth, debt capitalization, REIT qualification and distributions.
Our investment policies may change over time.
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As a result, the nature of our stockholders’ investment could change without their consent.
+Added: Our stockholders generally have limited voting rights.
Under the Maryland General Corporation Law (“MGCL”), our stockholders generally have a right to vote only on the following:
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All of such shares may be issued in the discretion of our Board.
−Removed: Our stockholders will suffer dilution of their equity investment in us upon future issuances of our capital stock, including in the event that we (1) issue shares pursuant to our Secondary DRIP Offering (unless such stockholders elect to fully participate in the Secondary DRIP Offering), (2) sell securities that are convertible into shares of our common stock, (3) issue shares of our common stock in a private offering of securities to institutional investors, (4) issue shares of our common stock to our manager, its successors or assigns, in payment of an outstanding fee obligation as set forth under our Management Agreement or (5) issue shares of our common stock to sellers of properties acquired by us in connection with an exchange of limited partnership interests of our operating partnership.
+Added: Our stockholders will suffer dilution of their equity investment in us upon future issuances of our capital stock, including in the event that we (1) issue shares pursuant to our Secondary DRIP Offering (unless such stockholders elect to fully participate in the Secondary DRIP Offering), (2) sell securities that are convertible into shares of our common stock, (3) issue shares of our common stock in a private offering of securities to institutional investors, (4) issue shares of our common stock to our manager, its successors
+Added: or assigns, in payment of an outstanding fee obligation as set forth under our Management Agreement or (5) issue shares of our common stock to sellers of properties acquired by us in connection with an exchange of limited partnership interests of our operating partnership.
In addition, the partnership agreement of our operating partnership contains provisions that would allow, under certain circumstances, other entities, including other real estate programs sponsored or operated by CIM, to merge into or cause the exchange or conversion of their interest in that entity for interests of our operating partnership.
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Other duties, including fiduciary duties, may be modified or eliminated in the partnership’s partnership agreement.
−Removed: The partnership agreement of our operating partnership provides that, for so long as we own a controlling interest in our operating partnership,
−Removed: any conflict that cannot be resolved in a manner not adverse to either our stockholders or the limited partners will be resolved in favor of our stockholders.
+Added: The partnership agreement of our operating partnership provides that, for so long as we own a controlling interest in our operating partnership, any conflict that cannot be resolved in a manner not adverse to either our stockholders or the limited partners will be resolved in favor of our stockholders.
Additionally, the partnership agreement expressly limits our liability by providing that we and our officers, directors, agents and employees, will not be liable or accountable to our operating partnership for losses sustained, liabilities incurred or benefits not derived if we or our officers, directors, agents or employees acted in good faith.
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If any mortgages contain cross-collateralization or cross-default provisions, a default on a single property could affect multiple properties.
−Removed: If any of our properties are foreclosed upon due to a default, our ability to pay cash distributions to our
−Removed: stockholders will be adversely affected, which could result in our losing our REIT status and would result in a decrease in the value of our stockholders’ investment.
+Added: If any of our properties are foreclosed upon due to a default, our ability to pay cash distributions to our stockholders will be adversely affected, which could result in our losing our REIT status and would result in a decrease in the value of our stockholders’ investment.
We intend to rely on external sources of capital to fund future capital needs, and if we encounter difficulty in obtaining such capital, we may not be able to meet maturing obligations or make any additional acquisitions.
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Because of this dividend requirement, we may not be able to fund from cash retained from operations all of our future capital needs, including capital needed to refinance maturing obligations or make new acquisitions.
−Removed: The capital and credit markets have experienced extreme volatility and disruption as a result of the global outbreak of COVID-19 and the emergence of variants thereof.
−Removed: We believe that such volatility and disruption are likely to continue into the foreseeable future.
−Removed: The Federal Reserve has indicated that it will continue to raise interest rates in 2023 to combat inflation.
+Added: Although there are expectations that the Federal Reserve will begin reducing the federal funds rate in 2024, these expectations might not materialize and the Federal Reserve may instead continue to raise interest rates in 2024 to combat inflation.
If interest rates remain at an elevated level because of the Federal Reserve’s attempt to combat inflation, it could hinder our ability to obtain new debt financing or refinance our maturing debt on favorable terms or at all or to raise debt and equity capital.
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We run the risk of being unable to finance or refinance our assets on favorable terms or at all.
−Removed: If interest rates are high when we desire to mortgage our assets or when existing loans come due and the assets need to be refinanced, we may not be able to, or may choose not to, finance the assets and we would be required to use cash to purchase or repay outstanding obligations.
+Added: If interest rates are high when we desire to mortgage our assets or when existing loans come due and the assets need to be refinanced, we may not be
+Added: able to, or may choose not to, finance the assets and we would be required to use cash to purchase or repay outstanding obligations.
Our inability to use debt to finance or refinance our assets could reduce the number of assets we can acquire, which could reduce our operating cash flows and the amount of cash distributions we can make to our stockholders.
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We have incurred indebtedness, and in the future may incur additional indebtedness, that bears interest at a variable rate.
−Removed: The Federal Reserve raised the federal funds rate a total of seven times during 2022 and it is expected that the Federal Reserve may continue to increase the federal funds rate throughout 2023 to, among other things, control inflation.
+Added: The Federal Reserve raised the federal funds rate a total of four times during 2023 and although there are expectations that the Federal Reserve will begin reducing the federal funds rate in 2024, these expectations might not materialize.
Should the Federal Reserve continue to raise rates in the future, this will likely result in further increases in market interest rates.
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If we are unable to manage these risks effectively, our results of operations, financial condition and ability to pay distributions to our stockholders will be adversely affected.
−Removed: Changes in banks’ inter-bank lending rate reporting practices or the method pursuant to which the London Interbank Offered Rate (“LIBOR”) is determined may adversely affect the value of the financial obligations to be held or issued by us that are linked to LIBOR.
−Removed: LIBOR and other indices which are deemed “benchmarks” are the subject of recent national, international, and other regulatory guidance and proposals for reform.
−Removed: Some of these reforms are already effective while others are still to be implemented.
−Removed: These reforms may cause such benchmarks to perform differently than in the past, or have other consequences which cannot be predicted.
−Removed: As published by the Federal Reserve Bank of New York, it currently appears that, over time, U.S.
−Removed: Dollar LIBOR may be replaced by the Secured Overnight Financing Rate (“SOFR”).
−Removed: In March 2021, the Financial Conduct Authority (“FCA”) confirmed its intention to cease publishing one week and two-month LIBOR after December 31, 2021 and all remaining LIBOR after June 30, 2023.
−Removed: At this time, it is not known whether or when SOFR or other alternative reference rates will attain market traction as replacements for LIBOR.
−Removed: However, the manner and timing of this shift is currently unknown.
−Removed: Market participants are still considering how various types of financial instruments and securitization vehicles would react to a discontinuation of LIBOR.
−Removed: It is possible that not all of our assets and liabilities will transition away from LIBOR at the same time, and it is possible that not all of our assets and liabilities will transition to the same alternative reference rate, in each case increasing the difficulty of hedging.
−Removed: The process of transition involves operational risks.
−Removed: It is also possible that no transition will occur for many financial instruments.
−Removed: At this time, it is not possible to predict the effect of any such changes, any establishment of alternative reference rates or any other reforms to LIBOR that may be implemented.
−Removed: Uncertainty as to the nature of such potential changes, alternative reference rates or other reforms may adversely affect the market for or value of any securities on which the interest or dividend is determined by reference to LIBOR, loans, derivatives and other financial obligations or on our overall financial condition or results of operations.
−Removed: More generally, any of the above changes or any other consequential changes to LIBOR or any other “benchmark” as a result of international, national or other proposals for reform or other initiatives, or any further uncertainty in relation to the timing and manner of implementation of such changes, could have a material adverse effect on the value of and return on any securities based on or linked to a “benchmark.”
Federal Income and Other Tax Risks
Failure to maintain our qualification as a REIT for U.S.
−Removed: federal income tax purposes would adversely affect our operations and our ability to make distributions.
+Added: federal income tax purposes would cause us to be taxed as a regular domestic corporation, which would adversely affect our operations and our ability to make distributions.
We are currently taxed as a REIT under the Code.
−Removed: Our ability to maintain our qualification as a REIT will depend upon our ability to meet requirements regarding our organization and ownership, distributions of our income, the nature and diversification of our income and assets and other tests imposed by the Code.
−Removed: Future legislative, judicial or administrative changes to the U.S.
−Removed: federal income tax laws could be applied retroactively, which could result in our disqualification as a REIT.
−Removed: If we fail to continue to qualify as a REIT for any taxable year, we will be subject to U.S.
−Removed: federal income tax on our taxable income at corporate rates.
−Removed: In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year of losing our REIT status.
−Removed: Losing our REIT status would reduce our net earnings available for the acquisition of assets or distribution to our stockholders because of the additional tax liability.
−Removed: In addition, distributions to our stockholders would no longer qualify for the dividends paid deduction, and we would no longer be required to make distributions.
−Removed: If we lose our REIT status, we might be required to borrow funds or liquidate some assets in order to pay the applicable tax.
−Removed: Our failure to continue to qualify as a REIT would adversely affect the return on our stockholders’ investment.
+Added: We believe that our current and proposed organization, ownership and method of operation will enable us to maintain our qualification and taxation as a REIT.
+Added: However, we cannot assure you that we will continue to qualify as such.
+Added: This is because qualification as a REIT involves the application of highly technical and complex provisions of the Code as to which there are only limited judicial and administrative interpretations and involves the determination of facts and circumstances not entirely within our control.
+Added: Furthermore, new legislation, new regulations, administrative interpretations or court decisions, in each instance potentially with retroactive effect, could make it more difficult or impossible for us to qualify as a REIT.
+Added: If we fail to qualify, or to remain qualified, as a REIT in any taxable year, then:
+Added: • we would be taxed as a regular domestic corporation, which under current laws, among other things, means being unable to deduct distributions to stockholders in computing taxable income and being subject to federal income tax on our taxable income at the regular corporate income tax rate;
+Added: • any resulting tax liability could be substantial and could have a material adverse effect on our book value;
+Added: • unless we were entitled to relief under applicable statutory provisions, we would be required to pay taxes, and therefore, our cash available for distribution to stockholders would be reduced for each of the years during which we did not qualify as a REIT and for which we had taxable income;
+Added: • we generally would not be eligible to requalify as a REIT for the subsequent four full taxable years.
We could be subject to a material tax liability if our sales of properties during 2023 are treated as prohibited transactions.
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In general, under the Safe Harbor, a sale of property will not be treated as a sale of dealer property subject to the 100% tax if:
−Removed: (a) the REIT held the property for not less than two years, (b) the aggregate expenditures made by the REIT during the two years preceding the date of sale that are includible in the basis of the property do not exceed 30% of the net selling price, (c) in the case of land or improvements, the REIT has held the property for not less than two years for production of rental income, and (d) one of the following is true:
+Added: (a) the REIT held the property for not less than two years, (b) the aggregate expenditures made by the REIT during the two years preceding the date of sale that are includable in the basis of the property do not exceed 30% of the net selling price, (c) in the case of land or improvements, the REIT has held the property for not less than two years for production of rental income, and (d) one of the following is true:
(1) during the taxable year the REIT does not make more than seven sales of property, (2) the aggregate adjusted bases of properties sold during the year does not exceed 10% of the aggregate bases of all of the properties of the REIT at the beginning of the year, (3) the fair market value of properties sold during the year does not exceed 10% of the fair market value of all of the properties of the REIT at the beginning of the year, (4) the aggregate adjusted bases of properties sold during the year does not exceed 20% of the aggregate bases of all of the properties of the REIT at the beginning of the year, provided that the “3-year average adjusted bases percentage” for the taxable year does not exceed 10%, or (5) the fair market value of properties sold during the year does not exceed 20% of the fair market value of all of the properties of the REIT at the beginning of the year, provided that the “3-year average fair market value percentage” for the taxable year does not exceed 10%.
−Removed: During the year ended December 31, 2022, we sold a total of 134 properties and an outparcel of land (the “2022 Sales”), which, excluding assets sold for a loss, resulted in a tax gain of approximately $138.3 million.
−Removed: Although we held each property for over two years, the sales did not qualify under the Safe Harbor because there were more than seven sales during the year ended December 31, 2022 and the total value and basis of the assets sold exceeded the 10% threshold for the year ended December 31, 2022 and also the 20% limitation with respect to the 3-year average, as discussed above.
+Added: During the year ended December 31, 2023, we sold a total of 188 properties (the “2023 Sales”), which, excluding assets sold for a loss, resulted in a tax gain of approximately $272.3 million.
+Added: The sales did not qualify under the Safe Harbor because there were more than seven sales during the year ended December 31, 2023 and the total value and basis of the assets sold exceeded the 10% threshold for the year ended December 31, 2023 and also the 20% limitation with respect to the three-year average, as discussed above.
However, failing to satisfy the Safe Harbor in connection with a particular sale does not necessarily mean that the sale will conclusively be treated as a prohibited transaction.
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Such an additional deemed distribution could cause our stockholders to be subject to additional income tax liability.
−Removed: Unless our stockholders are a tax-exempt entity, they may have to use funds from other sources to pay their tax liability arising as a result of the distributions reinvested in our shares.
−Removed: Dividends payable by REITs generally do not qualify for the reduced tax rates available for some dividends.
−Removed: Income from “qualified dividends” payable to U.S.
−Removed: stockholders that are individuals, trusts and estates are generally subject to tax at preferential rates.
−Removed: Dividends payable by REITs, however, generally are not eligible for the preferential tax rates applicable to qualified dividend income (but under the Tax Cuts and Jobs Act, U.S.
−Removed: stockholders that are individuals, trusts and estates generally may deduct up to 20% of ordinary dividends from a REIT for taxable years beginning after December 31, 2017, and before January 1, 2026).
−Removed: Although these rules do not adversely affect the taxation of REITs or dividends payable by REITs, to the extent that the preferential rates continue to apply to regular corporate qualified dividends, investors who are
−Removed: individuals, trusts and estates may perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could materially and adversely affect the value of the shares of REITs.
−Removed: We may be subject to adverse legislative or regulatory tax changes that could increase our tax liability or reduce our operating flexibility.
+Added: Unless our stockholders are a tax-exempt entity, they may be forced to use funds from other sources to pay their tax liability arising as a result of the distributions reinvested in our shares.
+Added: Generally, ordinary dividends payable by REITs do not qualify for reduced U.S.
+Added: federal income tax rates.
+Added: Currently, the maximum tax rate applicable to qualified dividend income payable to certain non-corporate U.S.
+Added: shareholders is 20%.
+Added: Dividends payable by REITs, however, generally are not eligible for the reduced rate.
+Added: Although this does not adversely affect the taxation of REITs or dividends payable by REITs, the more favorable rates applicable to regular corporate qualified dividends could cause certain non-corporate investors to perceive investments in REITs to be relatively less attractive than investments in the shares of common stock of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our common stock.
+Added: However, commencing with taxable years beginning on or after January 1, 2018 and continuing through 2025, individual taxpayers may be entitled to claim a deduction in determining their taxable income of 20% of ordinary REIT dividends (dividends other than capital gain dividends and dividends attributable to certain qualified dividend income received by us), which temporarily reduces the effective tax rate on such dividends.
+Added: Stockholders are urged to consult with their tax advisors regarding the effect of this change on effective tax rates with respect to REIT dividends.
+Added: We may be subject to adverse legislative or regulatory tax changes that could increase our tax liability, reduce our operating flexibility and reduce the value of our common stock.
In recent years, numerous legislative, judicial and administrative changes have been made in the provisions of U.S.
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Any such changes could have an adverse effect on an investment in our shares or on the market value or the resale potential of our assets.
−Removed: Although REITs generally receive better tax treatment than entities taxed as regular corporations, it is possible that future legislation would result in a REIT having fewer tax advantages, and it could become more advantageous for a company that acquires real estate to elect to be treated for U.S.
−Removed: federal income tax purposes as a regular corporation.
−Removed: As a result, our charter provides our Board with the power, under certain circumstances, to revoke or otherwise terminate our REIT election and cause us to be taxed as a regular corporation, without the vote of our stockholders.
−Removed: Our Board has fiduciary duties to us and our stockholders and could only cause such changes in our tax treatment if it determines in good faith that such changes are in the best interest of our stockholders.
+Added: Although REITs generally receive certain tax advantages compared to entities taxed as regular domestic corporations, it is possible that future legislation would result in a REIT having fewer tax advantages, and it could become more advantageous for a company that invests in real estate to elect to be treated for U.S.
+Added: federal income tax purposes as a corporation.
+Added: As a result, our charter provides our Board with the power, under certain circumstances, to revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that changes to U.S.
+Added: federal income tax laws and regulations or other considerations mean it is no longer in our best interest to qualify as a REIT.
+Added: According to publicly released statements, a top legislative priority of President Biden’s administration and of Democrats in the Senate and the House of Representatives is significant tax increases and various other changes to U.S.
+Added: It is unclear whether any legislation will be enacted into law or, if enacted, what form it would take, and it is also unclear whether there could be regulatory or administrative action that could affect U.S.
+Added: The impact of tax reform and any potential tax changes on an investment in our shares is uncertain.
In addition, the Tax Cuts and Jobs Act made significant changes to the U.S.
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While the changes in the Tax Cuts and Jobs Act generally appear to be favorable with respect to REITs, the extensive changes to non-REIT provisions in the Code may have unanticipated effects on us or our stockholders.
−Removed: In addition, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) made technical corrections, or temporary modifications, to certain provisions of the Tax Cuts and Jobs Act.
+Added: In addition, the Coronavirus Aid, Relief, and Economic Security Act made technical corrections, or temporary modifications, to certain provisions of the Tax Cuts and Jobs Act.
Additional changes to tax laws were enacted as part of the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”).
Many of the material provisions of the Inflation Reduction Act exempt REITs.
−Removed: We urge our stockholders to consult with their own tax advisor with respect to the status of the Tax Cuts and Jobs Act, the CARES Act, the Inflation Reduction Act and other legislative, regulatory or administrative developments and proposals and their potential effect on holding our common stock.
−Removed: In certain circumstances, we may be subject to certain federal, state and local taxes as a REIT, which would reduce our cash available for distribution to our stockholders.
−Removed: Even if we maintain our status as a REIT, we may be subject to certain federal, state and local taxes.
−Removed: For example, as discussed above, net income from the sale of properties that are “dealer” properties sold by a REIT (a “prohibited transaction” under the Code) will be subject to a 100% excise tax.
−Removed: Additionally, if we are not able to make sufficient distributions to eliminate our REIT taxable income, we may be subject to tax as a corporation on our undistributed REIT taxable income.
−Removed: We may also decide to retain income we earn from the sale or other disposition of our property and pay income tax directly on such income.
+Added: We urge our stockholders to consult with their own tax advisor with respect to the status of legislative, regulatory or administrative developments and proposals and their potential effect on holding our common stock.
+Added: We may incur tax liabilities that would reduce our cash available for distribution to our stockholders.
+Added: Even if we maintain our status as a REIT, we may become subject to U.S.
+Added: federal income taxes and related state and local taxes.
+Added: For example, as discussed above, net income from the sale of properties that are “dealer” properties sold by a REIT (a
+Added: “prohibited transaction” under the Code) will be subject to a 100% excise tax.
+Added: We may not make sufficient distributions to avoid excise taxes applicable to REITs.
+Added: Similarly, if we were to fail a gross income test (and did not lose our REIT status because such failure was due to reasonable cause and not willful neglect) we would be subject to tax on the income that does not meet the gross income test requirements.
+Added: We also may decide to retain net capital gain we earn from the sale or other disposition of our investments and pay income tax directly on such income.
In that event, our stockholders would be treated as if they earned that income and paid the tax on it directly.
−Removed: However, stockholders that are tax-exempt, such as charities or qualified pension plans, would have no benefit from their deemed payment of such tax liability.
−Removed: We may also be subject to state and local taxes on our income or property, either directly or at the level of our operating partnership or at the level of the other entities through which we indirectly own our assets.
−Removed: Any federal, state or local taxes we pay will reduce our cash available for distribution to our stockholders.
+Added: However, stockholders that are tax-exempt, such as charities or qualified pension plans, would have no benefit from their deemed payment of such tax liability unless they file U.S.
+Added: federal income tax returns and thereon seek a refund of such tax.
+Added: We also may be subject to state and local taxes on our income or property, including franchise, payroll, mortgage recording and transfer taxes, either directly or at the level of our operating partnership or at the level of the other entities through which we indirectly own our assets, such as our taxable REIT subsidiaries, which are subject to full U.S.
+Added: federal, state, local and foreign corporate-level income taxes.
+Added: Any taxes we pay directly or indirectly will reduce our cash available for distribution to our stockholders.
If our operating partnership or certain other subsidiaries fail to maintain their status as disregarded entities or partnerships, their income may be subject to taxation, which would reduce the cash available to us for distribution to our stockholders.
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Such a re-characterization of CMFT OP’s subsidiaries also could threaten our ability to maintain REIT status.
−Removed: To maintain our qualification as a REIT we must meet annual distribution requirements, which may force us to forgo otherwise attractive opportunities or borrow funds during unfavorable market conditions.
−Removed: This could delay or hinder our ability to meet our investment objectives and reduce our stockholders’ overall return.
−Removed: In order to maintain our qualification as a REIT, we must distribute annually to our stockholders at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and excluding any net capital gain.
−Removed: We will be subject to U.S.
−Removed: federal income tax on our undistributed taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which dividends we pay with respect to any calendar year are less than the sum of (a) 85% of our ordinary income, (b) 95% of our capital gain net income and (c) 100% of our undistributed income from prior years.
−Removed: Further, to maintain our qualification as a REIT, we must ensure that we meet the REIT gross income tests annually and that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified REIT real estate assets, including certain mortgage loans and certain kinds of mortgage-related securities.
−Removed: The remainder of our investment in securities (other than government securities, qualified real estate assets and stock of a taxable REIT subsidiary (“TRS”)) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer.
−Removed: In addition, in general, no more than 5% of the value of our assets (other than government securities, qualified real estate assets and stock of a TRS) can consist of the securities of any one issuer, no more than 20% of the value of our total assets can be represented by securities of one or more TRSs and no more than 25% of the value of our total assets can be represented by certain debt securities of publicly offered REITs.
−Removed: If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences.
−Removed: As a result, we may be required to liquidate assets from our portfolio or not make otherwise attractive investments in order to maintain our qualification as a REIT.
+Added: To maintain our REIT status, we may have to borrow funds on a short-term basis during unfavorable market conditions.
+Added: In order to maintain our qualification as a REIT, we generally must distribute annually to our stockholders a minimum of 90% of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP), determined without regard to the dividends-paid deduction and excluding net capital gains.
+Added: We will be subject to regular corporate income taxes on any undistributed REIT taxable income each year.
+Added: Additionally, we will be subject to a 4% nondeductible excise tax on any amount by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from previous years.
+Added: Payments we make to our stockholders under our share redemption program will not be taken into account for purposes of these distribution requirements.
+Added: If we do not have sufficient cash to make distributions necessary to preserve our REIT status for any year or to avoid taxation, we may be forced to borrow funds or sell assets even if the market conditions at that time are not favorable for these borrowings or sales.
+Added: These options could increase our costs or reduce our equity.
+Added: Compliance with REIT requirements may cause us to forego otherwise attractive opportunities, which may hinder or delay our ability to meet our investment objectives and reduce our stockholders’ overall return.
+Added: To maintain our qualification as a REIT, we are required at all times to satisfy tests relating to, among other things, the sources of our income, the nature and diversification of our assets, the ownership of our shares of common stock and the amounts we distribute to our stockholders.
+Added: Compliance with the REIT requirements may impair our ability to operate solely on the basis of maximizing profits.
+Added: For example, we may be required to make distributions to stockholders at disadvantageous times or when we do not have funds readily available for distribution.
+Added: Compliance with REIT requirements may force us to liquidate or restructure otherwise attractive investments.
+Added: To maintain our qualification as a REIT, we must ensure that we meet the REIT gross income tests annually and that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified REIT real estate assets, including certain mortgage loans and certain kinds of mortgage-related securities.
+Added: The remainder of our investment in securities (other than qualified real estate assets and government securities) generally cannot
+Added: include more than 10% of the voting securities (other than securities that qualify for the straight debt safe harbor) of any one issuer or more than 10% of the value of the outstanding securities of more than any one issuer unless we and such issuer jointly elect for such issuer to be treated as a “taxable REIT subsidiary” under the Code (“TRS”).
+Added: Debt will generally meet the “straight debt” safe harbor if the debt is a written unconditional promise to pay on demand or on a specified date a certain sum of money, the debt is not convertible, directly or indirectly, into shares of common stock, and the interest rate and the interest payment dates of the debt are not contingent on the profits, the borrower’s discretion, or similar factors.
+Added: Additionally, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer, and no more than 20% of the value of our assets may be represented by securities of one or more TRSs.
+Added: If we fail to comply with these requirements at the end of any calendar quarter, we must dispose of a portion of our assets within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions in order to avoid losing our REIT qualification and suffering adverse tax consequences.
+Added: In order to satisfy these requirements and maintain our qualification as a REIT, we may be forced to liquidate assets from our portfolio or not make otherwise attractive investments.
These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.
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federal income and excise taxes on our earnings, it is possible that we might not always be able to do so.
−Removed: Our mezzanine loans may not qualify as real estate assets and could adversely affect our status as a REIT.
+Added: The failure of a mezzanine loan to qualify as a real estate asset could adversely affect our ability to qualify as a REIT.
We have invested and may continue to invest in mezzanine loans, for which the IRS has provided a safe harbor, but not rules of substantive law.
−Removed: Pursuant to the safe harbor, if a mezzanine loan meets certain requirements, the IRS will treat the mezzanine loan as a real estate asset for purposes of the REIT asset tests, and interest derived from the mezzanine loan will be treated as qualifying mortgage interest for purposes of the REIT 75% income test.
−Removed: To the extent that any mezzanine loans do not meet all of the requirements for reliance on the safe harbor, such loans may not be real estate assets and could adversely affect our qualification as a REIT.
+Added: Pursuant to the safe harbor, if a mezzanine loan meets certain requirements, it will be treated by the IRS as a real estate asset for purposes of the REIT asset tests, and interest derived from the mezzanine loan will be treated as qualifying mortgage interest for purposes of the REIT 75% income test.
+Added: We may acquire mezzanine loans that do not meet all of the requirements of this safe harbor.
+Added: In the event we own a mezzanine loan that does not meet the safe harbor, the IRS could challenge such loan’s treatment as a real estate asset for purposes of the REIT asset and income tests and, if such a challenge were sustained, we could fail to qualify as a REIT.
We may fail to qualify as a REIT or become subject to a penalty tax if the IRS successfully challenges our treatment of our mezzanine loans and certain preferred equity investments as debt for U.S.
11 unchanged sentences
stockholders may be subject to U.S.
−Removed: federal withholding tax and may be subject to U.S.
−Removed: federal income tax upon the disposition of our shares.
−Removed: Gain recognized by a non-U.S.
−Removed: stockholder upon the sale or exchange of our common stock generally will not be subject to U.S.
−Removed: federal income taxation unless such stock constitutes a “U.S.
−Removed: real property interest” (“USRPI”) under the Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”).
−Removed: Our common stock will not constitute a USRPI so long as we are a “domestically-controlled qualified investment entity.” A domestically-controlled qualified investment entity includes a REIT if at all times during a specified testing period, less than 50% in value of such REIT’s stock is held directly or indirectly by non-U.S.
−Removed: stockholders.
−Removed: We believe that we are a domestically-controlled qualified investment entity.
−Removed: However, because our common stock is and will be freely transferable, no assurance can be given that we are or will be a domestically-controlled qualified investment entity.
−Removed: Even if we do not qualify as a domestically-controlled qualified investment entity at the time a non-U.S.
−Removed: stockholder sells or exchanges our common stock, gain arising from such a sale or exchange would not be subject to U.S.
−Removed: taxation under FIRPTA as a sale of a USRPI if:
−Removed: (a) our common stock is “regularly traded,” as defined by applicable Treasury Regulations, on an established securities market, and (b) such non-U.S.
−Removed: stockholder owned, actually or constructively, 10% or less of our common stock at any time during the five-year period ending on the date of the sale.
+Added: federal tax upon their disposition of our common stock or upon their receipt of certain distributions from us.
+Added: In addition to any potential withholding tax on ordinary dividends, a non-U.S.
+Added: stockholder, other than a “qualified shareholder” or a “qualified foreign pension fund,” that disposes of a “U.S.
+Added: real property interest” (“USRPI”) (which includes shares of stock of a U.S.
+Added: corporation whose assets consist principally of USRPIs), is generally subject to U.S.
+Added: federal income tax under the Foreign Investment in Real Property Tax Act of 1980, as amended (“FIRPTA”), on the amount received from such disposition.
+Added: Such tax does not apply, however, to the disposition of stock in a REIT that is “domestically controlled.” Generally, a REIT is domestically controlled if less than 50% of its stock, by value, has been owned directly or indirectly by non-U.S.
+Added: persons during a continuous five-year period ending on the date of disposition or, if shorter, during the entire period of the REIT’s existence.
+Added: We cannot assure you that we will continue to qualify as a domestically controlled REIT.
+Added: If we were to fail to so maintain our qualification, amounts received by a non-U.S.
+Added: stockholder on certain dispositions of our common stock (including a repurchase) would be subject to tax under FIRPTA, unless (i) our shares of common stock were regularly traded on an established securities market and (ii) the non-U.S.
+Added: stockholder did not, at any time during a specified testing period, hold more than 10% of our common stock.
+Added: holder other than a “qualified shareholder” or a “qualified foreign pension fund,” that receives a distribution from a REIT that is attributable to gains from the disposition of a USRPI as described above, including in connection with a redemption of our common stock, is generally subject to U.S.
+Added: federal income tax under FIRPTA to the extent such distribution is attributable to gains from such disposition, regardless of whether the difference between the fair market value and the tax basis of the USRPI giving rise to such gains is attributable to periods prior to or during such non-U.S.
+Added: holder’s ownership of our common stock.
+Added: In addition, a redemption of our common stock may be subject to withholding as an ordinary dividend.
+Added: We seek to act in the best interests of the Company as a whole and not in consideration of the particular tax consequences to any specific holder of our shares of common stock.
+Added: Potential non-U.S.
+Added: stockholders should inform themselves as to the U.S.
+Added: tax consequences, and the tax consequences within the countries of their citizenship, residence, domicile, and place of business, with respect to the purchase, ownership and disposition of our common stock.
Distributions to tax-exempt stockholders may be classified as unrelated business taxable income.
11 unchanged sentences
federal income tax purposes, we will be required to pay some state and local taxes on our properties.
−Removed: The real property taxes on our properties may increase as property tax rates change or as our
−Removed: properties are assessed or reassessed by taxing authorities.
+Added: The real property taxes on our properties may increase as property tax rates change or as our properties are assessed or reassessed by taxing authorities.
Therefore, the amount of property taxes we pay in the future may increase substantially.
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Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT.
−Removed: Unless exempted by our Board, for so long as we continue to qualify as a REIT, our charter prohibits, among other limitations on ownership and transfer of shares of our stock, any person from beneficially or constructively owning (applying certain attribution rules under the Code) more than 9.8% in value of the aggregate of our outstanding shares of stock and more than 9.8% (in value or in number of shares, whichever is more restrictive) of any class or series of our shares of stock.
+Added: Unless exempted by our Board, for so long as we continue to qualify as a REIT, our charter prohibits, among other limitations on ownership and transfer of shares of our stock, any person from beneficially or constructively owning (applying certain attribution rules under the Code) more than 9.8% in value of the aggregate of our outstanding shares of stock and more than 9.8% (in value or in number of shares, whichever is more restrictive) of any class or
+Added: series of our shares of stock.
The Board, in its sole discretion and upon receipt of certain representations and undertakings, may exempt a person (prospectively or retrospectively) from the ownership limits.
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• whether their investment is made in accordance with the documents and instruments governing the Benefit Plan or IRA, including any investment policy;
−Removed: • whether their investment satisfies the prudence, diversification and other requirements of Sections 404(a)(1)(B) and 404(a)(1)(C) of ERISA or any similar rule under other applicable laws or regulations;
+Added: • whether their investment satisfies the prudence and diversification requirements of Sections 404(a)(1)(B) and 404(a)(1)(C) of ERISA and other applicable provisions of ERISA and the Code;
• whether their investment will impair the liquidity needs, the minimum and other distribution requirements, or the tax withholding requirements that may be applicable to such Benefit Plan or IRA;
3 unchanged sentences
• whether their investment will cause our assets to be treated as “plan assets” of the Benefit Plan or IRA;
+Added: • whether the investment will not constitute a non-exempt prohibited transaction under Title I of ERISA or Section 4975 of the Code.
Failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA, the Code, or other applicable statutory or common law may result in the imposition of civil and criminal (if the violation is willful) penalties, and can subject the fiduciary to equitable remedies.
−Removed: In addition, if an investment in our common stock constitutes a prohibited transaction under ERISA or the Code, the “party-in-interest” (within the meaning of ERISA) or “disqualified person” (within the meaning of the Code) who authorized or directed the investment may have to compensate the plan for any losses the plan suffered as a result of the transaction or restore to the plan any profits made by such person as a result of the transaction, or may be subject to excise taxes with respect to the amount involved.
+Added: In addition, if an investment in our common stock constitutes a prohibited transaction under ERISA or the Code, the “party-in-interest” (within the meaning of ERISA) or “disqualified person” (within
+Added: the meaning of the Code) who authorized or directed the investment may have to compensate the plan for any losses the plan suffered as a result of the transaction or restore to the plan any profits made by such person as a result of the transaction, or may be subject to excise taxes with respect to the amount involved.
In the case of a prohibited transaction involving an IRA, the IRA may be disqualified and all of the assets of the IRA may be deemed distributed and subject to tax.
16 unchanged sentences
If stockholders require liquidity, they may generally sell their shares, but such sale may be at a price less than the price at which they initially purchased their common stock.
−Removed: If stockholders
−Removed: fail to withdraw required minimum distributions from their plan or account, they may be subject to certain taxes and tax penalties.
+Added: If stockholders fail to withdraw required minimum distributions from their plan or account, they may be subject to certain taxes and tax penalties.
Our investments in construction loans require us to make estimates about the fair value of land improvements that may be challenged by the IRS.
27 unchanged sentences
To the extent that excess inclusion income is allocated from a TMP to a tax-exempt stockholder of a REIT that is not subject to unrelated business income tax (such as a government entity), the REIT will be subject to tax on this income at the highest applicable corporate tax rate.
−Removed: In this case, we are authorized to reduce and intend to reduce distributions to such
−Removed: stockholders by the amount of such tax paid by the REIT that is attributable to such stockholder’s ownership.
+Added: In this case, we are authorized to reduce and intend to reduce distributions to such stockholders by the amount of such tax paid by the REIT that is attributable to such stockholder’s ownership.
The manner in which excess inclusion income is calculated, or would be allocated to stockholders, including allocations among shares of different classes of stock, remains unclear under current law.
1 unchanged sentence
Tax-exempt investors, foreign investors and taxpayers with net operating losses should carefully consider the tax consequences described above, and are urged to consult their tax advisors.
−Removed: UNRESOLVED STAFF COMMENTS
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.