Item 1A. Risk Factors
ITEM 1A. Risk Factors
Investing in our common stock involves risks and uncertainties. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Annual Report on Form 10-K and our other filings with the SEC, before making an investment decision regarding our common stock and other securities. The risks we face include, but are not limited to, the following:
Risks Related to our Business and Operations
• our investments are concentrated in the temperature-controlled warehouse industry and in certain geographic areas, some of which are susceptible to adverse local conditions such as natural disasters, economic slowdowns and localized oversupply of warehouse space;
• inflation could continue to have a negative impact on our business and results of operations;
• labor shortages, increased turnover and work stoppages may have a material adverse effect on us and may negatively impact our customers’ ability to produce and ship products for storage;
• supply chain disruptions may continue to have a material adverse impact on us;
• national, international, regional and local economic conditions, including impacts and uncertainty from trade disputes and tariffs on goods imported to the United States and goods exported to other countries may have a material adverse impact on us;
• risks associated with expansion and development, which could result in lower than expected returns and unforeseen costs and liabilities;
• the short-term nature of many of our customer contracts and lack of fixed storage commitments;
• we may be unable to successfully expand our operations into new markets;
• a failure or breach of our IT systems, cybersecurity attacks or a breach of our information security systems, networks or processes could cause business disruptions, loss of confidential information, remediation costs or damages;
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• competition in our markets may increase over time as our competitors open new or expand existing warehouses;
• we depend on certain customers for a substantial amount of our warehouse segment revenues;
• we may incur liabilities or reputational harm from quality-control issues associated with our services;
• we hold leasehold interests in many of our warehouses, which we may be forced to vacate if we default on our obligations thereunder or are unable to renew such leases upon their expiration;
• charges for impairment of goodwill or other long-lived assets and declining real estate valuations could adversely affect our earnings and financial condition;
• geopolitical conflicts may adversely affect our business and results of operation.
General Risks Related to the Real Estate Industry
• we could incur significant costs and liabilities due to environmental problems, climate change or natural disasters;
• our insurance coverage may be insufficient to cover potential liabilities or losses;
• our properties may contain or develop harmful molds or have other air quality issues;
• illiquidity of real estate developments could impede our ability to respond to adverse changes;
• ongoing litigation risks which could result in material liabilities and harm our business;
• our current and future joint venture investments face risks stemming from our partial ownership interests in such properties.
Risks Related to our Debt Financings
• we have a substantial amount of indebtedness that may limit our financial and operating activities;
• increases in interest rates could increase the amount of our debt service;
• we are dependent on external sources of capital, the continuing availability of which is uncertain;
• adverse changes in our credit ratings could negatively impact our financing activity.
Risks Related to our Organization and Structure
• our Board can take many actions even if our stockholders disagree or if they are otherwise not in the stockholders’ best interest;
• we have fiduciary duties as the general partner of our Operating Partnership.
Risks Related to our Common Stock
• cash available for distribution to stockholders may not be sufficient to pay distributions at expected levels;
• any future debt could dilute our existing stockholders and may be senior to our common stock;
• common stock eligible for future sale may have adverse effects on the market price of our common stock.
REIT and Tax Related Risks
• our failure to qualify as a REIT for U.S. federal income tax purposes, or our failure to remediate if we failed to so qualify, could have a material adverse effect on us;
• meeting annual distribution requirements could result in material harm to our company;
• we conduct a portion of our business through taxable REIT subsidiaries (“TRSs”), which are subject to certain tax risks;
• complying with REIT requirements may cause us to forgo otherwise attractive opportunities;
• future changes to the U.S. federal income tax laws could have a material adverse impact on us;
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• distributions payable by REITs generally do not qualify for any reduced tax rates;
• we may be subject to U.S. federal, state, local and foreign taxes, reducing funds available for distribution;
• complying with REIT requirements may result in tax liabilities and limit our ability to hedge; and
• our Operating Partnership’s failure to qualify as a partnership for U.S. federal income tax purposes could have a material adverse impact on us.
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