What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2021-02-22 compared with 2020-02-19 · 87 added, 81 removed, 291 unchanged (37% of the section changed)

Risks Related to Our Properties and Operations

We face certain risks related to our ownership of apartment communities and operation of our business.

Set forth below are the risks that we believe are material to IRET’s shareholders and unitholders.

Set forth below are the risks that we believe are material to our shareholders and unitholders.

You should carefully consider the following risks in evaluating our properties, business, and operations.

Our business, financial condition, cash flows, results of operations, value of our real estate assets and/or the value of an investment in our stock or units are subject to various risks and uncertainties, including those set forth below, any of which could cause our actual operating results to vary materially from our recent results or from our anticipated future results.

Risks Related to Our Properties and Operations

The current pandemic of COVID-19 and the potential future outbreak of other highly infectious or contagious diseases may materially and adversely impact and disrupt our business, income, cash flow, results of operations, financial condition, liquidity, prospects and ability to service our debt obligations, and our ability to pay dividends and other distributions to our equityholders.

One of the most significant risk factors is the continuing adverse effects of the COVID-19 pandemic and its associated potential economic impact on our financial condition, results of operations, and cash flows as well as the adverse effects on our residents and commercial tenants, the real estate market, and the global economy and financial markets generally.

The extent to which COVID-19 continues to impact us and our residents and commercial tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity, and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures.

Moreover, you should interpret many of the other risks identified in this Report, as well as the risks set forth below, as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19.

Moreover, the ongoing COVID-19 pandemic and continuing restrictions intended to prevent and mitigate its spread could have

additional adverse effects on our business, including with regards to:

• the COVID-19 pandemic and its ongoing effects on our employees, residents, and commercial tenants, third party vendors and suppliers, and apartment communities, as well as our cash flow, business, financial condition, and results of operations;

• deteriorating economic conditions and rising unemployment rates in the markets where we own apartment communities or in which we may invest in the future;

• government actions or regulations arising out of the COVID-19 pandemic that limit economic and consumer activity or affect the operation of our properties;

• rental conditions in our markets, including occupancy levels and rental rates, our potential inability to renew residents or obtain new residents upon expiration of existing leases, changes in tax and housing laws, or other factors, including the impact of the COVID-19-related governmental rules and regulations relating to rental rates, evictions, and other rental conditions;

• changes in operating costs, including real estate taxes, utilities, insurance costs, healthcare costs, and expenses related to complying with COVID-19 restrictions or otherwise responding to the COVID-19 pandemic.

Our financial performance is subject to risks associated with the real estate industry and ownership of apartment communities.

34 unchanged sentences

We also do not maintain coverage for certain catastrophic events like hurricanes and earthquakes because the cost of such insurance is deemed by management to be higher than the risk of loss due to the location of our properties.

In most cases, we have to renew our insurance policies on an annual basis and negotiate acceptable terms for coverage, exposing us to the volatility of the insurance markets, including the possibility of rate increases.

In most cases, we have to renew our insurance policies on an annual basis and negotiate acceptable terms for coverage, exposing us to the volatility of the insurance

markets, including the possibility of rate increases.

In addition, a reduction of the number of insurance providers or the unwillingness of existing insurance providers to write insurance for multifamily properties may reduce the potential availability and/or cost for obtaining insurance on our properties.

10 unchanged sentences

Changes in federal or state laws and regulations relating to climate change could result in increased costs to our business, including capital expenditures to improve the energy efficiency of our existing communities or new development communities without a corresponding increase in revenue.

Among other things, "green" building codes may seek to reduce emissions through the imposition of standards for design, construction materials, water and energy usage and efficiency and waste management The imposition of such requirements in the future, including the imposition of new energy efficiency standards or requirements relating to resistance to inclement weather, could increase the costs of maintaining or improving our properties without a corresponding increase in revenue, thereby having an adverse effect on our financial condition or results of operation.

The impact of climate

change also may increase the cost of, or make unavailable, property insurance or other hazard insurance on terms we find acceptable or necessary to adequately protect our properties.

Among other things, “green” building codes may seek to reduce emissions through the imposition of standards for design, construction materials, water and energy usage and efficiency and waste management.

The imposition of such requirements in the future, including the imposition of new energy efficiency standards or requirements relating to resistance to inclement weather, could increase the costs of maintaining or improving our properties without a corresponding increase in revenue, thereby having an adverse effect on our financial condition or results of operation.

The impact of climate change also may increase the cost of, or make unavailable, property insurance or other hazard insurance on terms we find acceptable or necessary to adequately protect our properties.

We are dependent on a concentration of our investments in a single asset class, making our results of operations more vulnerable to a downturn or slowdown in the sector or other economic factors .

1 unchanged sentence

As a result, we will be subject to risks inherent in investments in a single type of property.

A downtown or slowdown in the demand for multifamily housing may have more pronounced effects on our business and results of operations or on the value of our assets than if we had continued to be more diversified in our investments into more than one asset class.

A downturn or slowdown in the demand for multifamily housing may have more pronounced effects on our business and results of operations or on the value of our assets than if we had continued to be more diversified in our investments into more than one asset class.

Our operations are concentrated in certain regions of the United States, and we are subject to general economic conditions in the regions in which we operate.

8 unchanged sentences

In addition, we may fail to provide quality housing and continuous access to amenities as a result of other factors, including mechanical failure, power failure, inclement weather, physical or electronic security breaches, vandalism or acts of terrorism, or other similar events.

Any of these issues could cause our residents to terminate or fail to renew their leases, could expose us to additional costs or liability claims, and could damage our reputation, any of which could impact our ability to provide quality housing and consistent operation of our apartment communities, which in turn could materially affect our business and results of operations.

Any of these issues could cause our residents to terminate or fail to renew their leases, could expose us to additional costs or liability claims, and could damage

our reputation, any of which could impact our ability to provide quality housing and consistent operation of our apartment communities, which in turn could materially affect our business and results of operations.

Competition may negatively impact our earnings.

9 unchanged sentences

Our ability to dispose of assets also may be limited by constraints on our ability to use disposition proceeds to make acquisitions on financially attractive terms.

Some of our properties were acquired using limited partnership units of IRET Properties, our operating partnership, and are subject to certain tax-protection agreements that restrict our ability to sell these properties in transactions that would create current taxable income to the former owners.

Some of our properties were acquired using limited partnership units of Centerspace, LP, our operating partnership, and are subject to certain tax-protection agreements that restrict our ability to sell these properties in transactions that would create current taxable income to the former owners.

As a result, we are motivated to structure the sale of these assets as tax-free exchanges, the requirements of which are technical and may be difficult to achieve.

21 unchanged sentences

We face risks associated with security breaches or disruptions, whether through cyber-attacks or cyber intrusions over the Internet, malware, computer viruses, attachments to emails, or persons inside our organization.

The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity, and sophistication of attempted attacks and intrusions around the world have increased.

The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by

computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity, and sophistication of attempted attacks and intrusions around the world have increased.

In the normal course of business, we and our service providers (including service providers engaged in providing web hosting, property management, leasing, accounting and/or payroll software/services) collect and retain certain personal information provided by our residents, employees, and vendors.

11 unchanged sentences

In arranging for the disposal or treatment of hazardous or toxic substances, we also may be liable for the costs of removal of, or remediation of, these substances at that disposal or treatment facility, whether or not we own or operate the facility.

In connection with our current or former ownership (direct or indirect), operation, management, development, and/or control of real properties, we may be potentially liable for removal or remediation costs with respect to hazardous or toxic substances at those properties, as well as certain other costs, including governmental fines

and claims for injuries to persons and property.

Although we are not aware of any such claims associated with our existing properties that would have a material adverse effect on our business, potential future costs and damage claims may be substantial and could exceed any insurance coverage we may have for such events or such coverage may not exist.

15 unchanged sentences

Negative posts or comments about us through social media, whether by residents or prospective residents, could damage our reputation or that of our apartment communities, whether or not such claims or posts are valid, which in turn could adversely affect our business and results of operations.

Similarly, disclosure of any non-public sensitive information relating to our business or our residents or prospective residents could damage our reputation, our business, or our results of operations.

Similarly, disclosure of any non-public sensitive information relating to

our business or our residents or prospective residents could damage our reputation, our business, or our results of operations.

The continuing evolution of social media will present us with new and ongoing challenges and risks.

6 unchanged sentences

The resulting time required for development, redevelopment, and lease-up means that we may have to wait years for significant cash returns.

Complying with zoning and permitting law may affect our acquisition, redevelopment, and development costs.

We face risks associated with zoning and permitting of our communities, the majority of which are governed by municipal, county, and state regulations.

We may be liable for costs associated with bringing communities into compliance and additionally may face costs or delays when seeking approvals for redevelopment or development projects within our portfolio.Some regulations related to zoning or permitting allow governmental entities to discontinue operations if violations are left uncured, which would significantly impact our business.

We are not aware of any non-compliance at our communities that would have a material adverse effect on our business.

Future cash flows may not be sufficient to ensure recoverability of the carrying value of our real estate assets.

8 unchanged sentences

Noncompliance could result in the imposition of fines by government authorities or the award of damages to private litigants.

The costs of complying

with these laws and regulations may be substantial, and limits or restrictions on construction, or the completion of required renovations, may limit the implementation of our investment strategy or reduce overall returns on our investments.

The costs of complying with these laws and regulations may be substantial, and limits or restrictions on construction, or the completion of required renovations, may limit the implementation of our investment strategy or reduce overall returns on our investments.

Risks related to joint ventures may adversely affect our financial performance and results of operations.

6 unchanged sentences

Even when we have a controlling interest, certain major decisions may require partner approval, such as the sale, acquisition, or financing of a property.

Actual or threatened terrorist attacks may adversely affect our business .

Actual or threatened terrorist attacks and other acts of war or violence could adversely affect our business.

Attacks that directly impact one or more of our apartment communities could significantly affect our ability to operate these communities, thereby impairing our ability to achieve our expected results.

Our insurance may not adequately cover all losses from a terrorist attack, and the ongoing effects of any terrorist attacks or threatened terrorist attacks could adversely affect the U.S.

economy generally and our business in particular.

A terrorism attack, other geopolitical crisis, or widespread outbreak of an illness or other health issue, such as the COVID-19 pandemic, could negatively affect various aspects of our business, including our workforce and supply chains, and could make it more difficult and expensive to meet our obligations to our residents.

Our operations are susceptible to

national or international events, including acts or threats of war or terrorism, political instability, natural disasters, and health epidemics or pandemics.

These risks include a widespread outbreak of an illness or other health issue, such as the COVID-19 pandemic, resulting in a worldwide pandemic that has affected hundreds of countries around the world, including the U.S.

The COVID-19 pandemic has resulted in travel bans, quarantines, and work restrictions that prohibit many employees from going to work.

As a result of pandemics, including COVID-19, businesses can be shut down, supply chains can be interrupted, slowed, or rendered inoperable, and individuals can become ill, quarantined, or otherwise unable to work and/or travel due to health reasons or governmental restrictions.

Governmental mandates may require dramatic changes at our apartment communities or could impact the availability of goods or services from many of our suppliers for extended or indefinite periods of time.

Potential changes to the financial condition of Fannie Mae and Freddie Mac and in government support for apartment communities may adversely affect our business .

Historically, we have depended on the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) to provide financing for certain apartment communities.

Although Fannie Mae and Freddie Mac have a mandate to support multifamily housing through their financing activities, there are current government proposals relating to the future of agency mortgage finance in the U.S.

that could involve the phase-out of Fannie Mae and Freddie Mac.

Although Fannie Mae and Freddie Mac have a mandate to support multifamily housing through their financing activities, government proposals relating to the future of agency mortgage finance in the U.S.

could involve the phase-out of Fannie Mae and Freddie Mac.

Although we believe that Fannie Mae and Freddie Mac will continue to provide liquidity to the multifamily sector, any phase-out of Fannie Mae and Freddie Mac, change in their mandate, or reduction in government support for apartment communities generally could result in adverse changes to interest rates, capital availability, development of additional apartment communities, and the value of these communities.

9 unchanged sentences

We are subject to the normal risks associated with debt financing, including the risks that:

our cash flow will be insufficient to meet required payments of principal and interest;

• our cash flow will be insufficient to meet required payments of principal and interest, particularly if net operating income is reduced significantly due to the effects of the COVID-19 pandemic;

• we will not be able to renew, refinance, or repay our indebtedness when due;

the terms of any renewal or refinancing will be less favorable than the terms of our current indebtedness.

These risks increase when credit markets are tight.

• the terms of any renewal or refinancing are at terms less favorable than the terms of our current indebtedness.

These risks increase when credit markets are tight, as they may be during the COVID-19 pandemic.

In general, when the credit markets are tight, we may encounter resistance from lenders when we seek financing or refinancing for properties or proposed acquisitions, and the terms of such financing or refinancing are likely to be less favorable to us than the terms of our current indebtedness.

3 unchanged sentences

If we are unable to refinance our indebtedness on acceptable terms, or at all, we may be forced to dispose of one or more properties on disadvantageous terms, which may result in losses.

These losses could have a material adverse effect on our business, our ability to make distributions to our shareholders, and our ability to pay amounts due

These losses could have a material adverse effect on our business, our ability to make distributions to our shareholders, and our ability to pay amounts due on our debt.

If a property is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments or refinance the debt at maturity, the mortgagor could foreclose upon the property, appoint a receiver, and receive an assignment of rents and leases or pursue other remedies, including taking ownership of the property, all with a consequent loss of revenues and asset value.

Foreclosures also could affect our ability to obtain new debt and could create taxable income without accompanying cash proceeds, thereby hindering our ability to meet the REIT distribution requirements of the Code and impeding our ability to obtain financing for our other properties.

The restrictive terms of indebtedness may cause acceleration of debt payments and constrain our ability to conduct certain transactions .

At December 31, 2019 , we and our Operating Partnership had outstanding borrowings of approximately $651.5 million .

Some of this indebtedness contains financial covenants relating to fixed charge coverage ratios, maximum secured debt, maintenance of unencumbered asset value, and total debt to gross assets, among others.

Some covenants present new constraints as we navigate investments and dispositions with respect to our ability to invest in certain markets, add incremental secured and recourse debt, and add overall leverage.

If an event of default occurs, our lenders may increase rates or declare borrowings under the loan agreements to be due and payable immediately, which could have an adverse effect on our ability to make distributions to our shareholders and pay amounts due on our debt.

Restrictive covenants in our debt agreements may limit our operating and financial flexibility, and our inability to comply with these covenants could have significant implications .

Our indebtedness, which at December 31, 2020 totaled outstanding borrowings of approximately $721.3 million, contains a number of significant restrictions and covenants.

These restrictions and covenants include financial covenants relating to fixed charge coverage ratios, maximum secured debt, maintenance of

unencumbered asset value, and total debt to total asset value, among others and certain non-financial covenants.

These may limit our ability to make future investments and dispositions, add incremental secured and recourse debt, and add overall leverage.

Our ability to comply with these covenants will depend on our future performance, which may be affected by events beyond our control.

Our failure to comply with these covenants would be an event of default.

An event of default under the terms of our indebtedness would permit the lenders to accelerate indebtedness under effected agreements, which would include agreements that contain cross-acceleration provisions with respect to other indebtedness.

Rising interest rates may affect our cost of capital and financing activities.

9 unchanged sentences

LIBOR has been used as a primary benchmark for short-term interest rates, including under our credit facility.

Daily LIBOR interest rates have been published since January 1, 1986 and have become deeply entrenched into the global financial markets.

Post-financial crisis, regulation has significantly reduced bank appetite to issue commercial paper and wholesale deposits, which means there is a very low volume of transactions upon which banks can base their LIBOR submissions.

As a result, central banks around the world, including the Federal Reserve, have commissioned working groups of market participants and official sector representatives with the goal of finding suitable replacements for LIBOR based on observable market transactions.

It is expected a transition away from the widespread use of LIBOR to alternative rates will occur over the course of the next few years.

Financial Conduct Authority (FCA), which regulates LIBOR, has announced it has commitments from panel banks to continue to contribute to LIBOR through the end of 2021, but it will not use its powers to compel contributions beyond such date.

Accordingly, there is considerable uncertainty regarding the publication of such rates beyond 2021.

The Federal Reserve Bank of New York and various other authorities have commenced the publication of reforms and actions relating to alternatives to U.S.

dollar LIBOR.

The ICE Benchmark Administration, in its capacity as administrator of USD LIBOR, has announced it plans to extend publication of USD LIBOR (excluding one-week and two-month tenor) by 18 months to June 2023.

However, a joint statement by key regulatory authorities calls on banks to cease entering into new contracts that use USD LIBOR as a reference rate by no later than December 31, 2021.

The Alternative References Rates Committee, a steering committee comprised of large U.S.

financial institutions, has proposed replacing USD LIBOR with a new index calculated by short-term repurchase agreements - Secured Overnight Financing Rate (SOFR).

At this time, no consensus exists as to what rate or rates may become accepted alternatives to LIBOR, and it is impossible to predict whether and to what extent banks will continue to provide LIBOR submissions to the administrator of LIBOR, whether LIBOR rates will cease to be published or supported before or after 2021 or whether any additional reforms to LIBOR may be enacted in the United Kingdom or elsewhere.

Although the full impact of such reforms and actions, together with any transition away from LIBOR, including the potential or actual discontinuance of LIBOR publication, remains unclear, these changes may have a material adverse impact on the availability of financing.

34 unchanged sentences

Our future growth depends, in part, on our ability to raise additional equity capital, which will have the effect of diluting the interests of our common shareholders.

Our future growth depends upon, among other things, our ability to raise equity capital and issue limited partnership units of IRET Properties.

Our future growth depends upon, among other things, our ability to raise equity capital and issue limited partnership units of Centerspace, LP.

Sales of substantial amounts of our common or preferred shares in the public market, or the perception that such sales or issuances might occur, may dilute the interests of the current common shareholders and could adversely affect the market price of our common shares.

4 unchanged sentences

Without the approval of our common shareholders, our Board of Trustees may establish additional classes or series of our shares of beneficial interest, and such classes or series may have dividend rights, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences, or other rights and preferences that are superior to the rights of the holders of our common shares.

In that regard, in September 2017, we filed a shelf registration statement with the SEC that

enables us to sell an undetermined number of equity and debt securities as defined in the prospectus, including under the 2019 ATM Program.

In that regard, in September 2017, we filed a shelf registration statement with the SEC that enables us to sell an undetermined number of equity and debt securities as defined in the prospectus, including under the 2019 ATM Program.

Future sales of common shares, preferred shares, or convertible debt securities may dilute current shareholders and could have an adverse impact on the market price of our common shares.

1 unchanged sentence

Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal control over financial reporting.

If we were to identify one or more material weaknesses in our internal control over financial reporting, we could lose investor confidence in our financial reporting and results of operations, which in turn could have an adverse effect on our stock price.

If we were to identify one or more material weaknesses in our internal control over financial reporting, we could lose

investor confidence in our financial reporting and results of operations, which in turn could have an adverse effect on our stock price.

Certain provisions of our Declaration of Trust may limit a change in control and deter a takeover.

In order to maintain our qualification as a REIT, among other things, our Declaration of Trust provides that any transaction that would result in our disqualification as a REIT under Section 856 of the Code will be void, including any transaction that would result in the following:

• less than 100 Persons owning our shares;

• our being “closely held” within the meaning of Section 856(h) of the Code;

• 50% or more of the fair market value of our shares being held by Persons other than “United States persons,” for federal income tax purposes.

If the transaction is not void, then the shares in violation of the foregoing conditions will automatically be exchanged for an equal number of excess shares, and these excess shares will be transferred to an excess share trustee for the exclusive benefit of the charitable beneficiaries named by our Board of Trustees.

The Trust’s Declaration of Trust also provides a limit on a Person owning in excess of the ownership limit of 9.8%, in number or value, of the Trust’s outstanding shares, although the Board of Trustees retains the ability to make exceptions to this ownership threshold.

These limitations may have the effect of preventing a change in control or takeover of us by a third party, even if the change in control or takeover would be in the best interests of our shareholders.

Risks Related to Tax Matters

10 unchanged sentences

Because we need to meet these tests to maintain our qualification as a REIT, it could cause us to have to forgo certain business opportunities and potentially require us to liquidate otherwise attractive investments.

The fact that we hold substantially all of our assets (except for qualified REIT subsidiaries) through IRET Properties, our operating partnership, and its subsidiaries, and our ongoing reliance on factual determinations, such as determinations related to the valuation of our assets, further complicates the application of the REIT requirements for us.

If IRET Properties or one or more of our subsidiaries is determined to be taxable as a corporation, we may fail to qualify as a REIT.

The fact that we hold substantially all of our assets (except for qualified REIT subsidiaries) through Centerspace, LP, our operating partnership, and its subsidiaries, and our ongoing reliance on factual determinations, such as determinations related to the valuation of our assets, further complicates the application of the REIT requirements for us.

If Centerspace, LP or one or more of our subsidiaries is determined to be taxable as a corporation, we may fail to qualify as a REIT.

Either our failure to qualify as a REIT, for any reason, or the imposition of taxes on excess net income from non-qualifying sources, could adversely affect our business and our ability to make distributions to our shareholders and pay amounts due on our debt.

2 unchanged sentences

This treatment would reduce funds available for investment or distributions to the holders of our securities due to the additional tax liability to us for the year or years involved, and we would no longer be able to deduct, and would not be required to make, distributions to our shareholders.

To the extent that distributions to the holders of our securities had been made in anticipation of qualifying as a REIT, we may need short-term debt or long-term debt or proceeds from asset sales or sales of common shares to fund required distributions as a result of differences in timing between the actual receipt of income and the recognition of income for federal income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required debt or amortization payments.

capital expenditures, the creation of reserves or required debt or amortization payments.

The inability of our cash flows to cover our distribution requirements could have an adverse impact on our ability to raise short and long-term debt or sell equity securities in order to fund distributions required to maintain our REIT status.

Failure of our operating partnership to qualify as a partnership would result in corporate taxation and significantly reduce the amount of cash available for distribution.

We believe that IRET Properties, our operating partnership, qualifies as a partnership for federal income tax purposes.

We believe that Centerspace, LP, our operating partnership, qualifies as a partnership for federal income tax purposes.

However, we can provide no assurance that the IRS will not challenge its status as a partnership for federal income tax purposes or that a court would not sustain such a challenge.

If the IRS were to be successful in treating IRET Properties as an entity taxable as a corporation (such as a publicly traded partnership taxable as a corporation), we would cease to qualify as a REIT because the value of our ownership interest in IRET Properties would exceed 5% of our assets and because we would be considered to hold more than 10% of the voting securities and value of the outstanding securities of another corporation.

The imposition of a corporate tax on IRET Properties would significantly reduce the amount of cash available for distribution.

Certain provisions of our Declaration of Trust may limit a change in control and deter a takeover.

In order to maintain our qualification as a REIT, our Declaration of Trust provides that any transaction that would result in our disqualification as a REIT under Section 856 of the Code will be void, including any transaction that would result in the following:

less than 100 people owning our shares;

our being “closely held” within the meaning of Section 856(h) of the Code;

50% or more of the fair market value of our shares being held by persons other than “United States persons.”

The Trust's Declaration of Trust also provides a limit on a person owning in excess of the ownership limit of 9.8%, in number or value, of the Trust's outstanding shares, although the Board of Trustees retains the ability to make exceptions to this ownership threshold.

If the IRS were to be successful in treating Centerspace, LP as an entity taxable as a corporation (such as a publicly traded partnership taxable as a corporation), we would cease to qualify as a REIT because the value of our ownership interest in Centerspace, LP would exceed 5% of our assets and because we would be considered to hold more than 10% of the voting securities and value of the outstanding securities of another corporation.

The imposition of a corporate tax on Centerspace, LP would significantly reduce the amount of cash available for distribution.

Legislative or regulatory actions affecting REITs could have an adverse effect on us or our shareholders.

2 unchanged sentences

Treasury Department, which may result in revisions to regulations and interpretations as well as statutory changes.

In 2017, Congress passed tax legislation (the “2017 Tax Cuts and Jobs Act”) that significantly changed the U.S.

federal income taxation of U.S.

businesses and their owners, including REITs and their shareholders.

The Tax Cuts and Jobs Act of 2017 also contained provisions that may reduce the relative competitive advantage of operating as a REIT.

For example, the Tax Cuts and Jobs Act of 2017 lowered income tax rates on individuals and corporations, easing the burden of double taxation on corporate dividends and potentially causing the single level of taxation on REIT distributions to be relatively less attractive.

The Tax Cuts and Jobs Act of 2017 also contains provisions allowing the expensing of capital expenditures, which could result in the bunching of taxable income and required distributions for REITs, and provisions further limiting the deductibility of interest expense, which could disrupt the real estate market.

Changes made by the 2017 Tax Cuts and Jobs Act that could affect our shareholders include the following:

reducing the individual U.S.

federal income tax rates on ordinary income (with the highest rate being reduced from 39.6% to 37% for taxable years beginning after December 31, 2017 and before January 1, 2026;

permanently eliminating the progressive corporate tax rate structure, including dividends we may distribute to our shareholders that are not designated as capital gains dividends or qualified dividend income, which will allow individuals, trusts, and estate to deduct up to 20% of such amounts for taxable years beginning after December 31, 2017 and before January 1, 2026;

reducing the highest rate of withholding on distributions to non-U.S.

shareholders that are treated as attributable to gains from the sale or exchange of U.S.

real property interests from 35% to 21%;

limiting our deductions for net operating losses arising in taxable years beginning after December 31, 2017 to 80% of REIT taxable income (determined without regard to the dividends paid deduction);

eliminating the corporate alternative minimum tax.

We cannot predict whether, when, or to what extent the Tax Cuts and Jobs Act of 2017 and any new U.S.

14 unchanged sentences

The failure to reinvest proceeds from sales of properties into tax-deferred exchanges could necessitate payments to unitholders with tax protection agreements.

We have tax protection agreements in place on twenty properties.

If these properties are sold in a taxable transaction, we must make the unitholders associated with these particular properties whole through the payment of their related tax.

We dispose of properties in transactions intended to qualify as “like-kind exchanges” under Section 1031 of the Code whenever possible.

If we are not able to satisfy all of the technical requirements of Section 1031, or if Section 1031 is repealed, selling a property with a tax protection agreement could trigger a material obligation to make the associated unitholders whole.

Complying with REIT requirements may force us to forgo otherwise attractive opportunities or liquidate otherwise attractive investments.

5 unchanged sentences

Even if we qualify as a REIT under the U.S.

tax code, we may be subject to certain federal, state, and local taxes on our income and assets, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, property, and transfer taxes, such as mortgage recording taxes.

property, and transfer taxes, such as mortgage recording taxes.

Any of these taxes would decrease cash available for distribution to our shareholders.

11 unchanged sentences

A TRS may hold assets and earn income that would not be qualifying assets or income if held or earned directly by a REIT.

Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS.

A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS.

Overall, no more than 20% of the value of a REIT's assets may consist of stock or securities of one or more TRSs, and the TRS rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation.

The rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis.

Our TRS is subject to applicable federal, state, and local income tax on its taxable income, and its after-tax net income will be available for distribution to us but is not required to be distributed to us.

We believe that the aggregate value of the stock and securities of our TRS is and will continue to be less than 20% of the value of our total assets (including our TRS stock and securities).

We will continue to monitor the value of our investments in our TRS for the purpose of ensuring compliance with TRS ownership limitations.

We will scrutinize all of our transactions with our TRS to ensure that they are entered into on arm's-length terms to avoid incurring the 100% excise tax described above.

There can be no assurance, however, that we will be able to comply with the 20% limitation discussed above or to avoid application of the 100% excise tax discussed above.

Our TRS is subject to applicable federal, state, and local income tax on any taxable income.

TRS rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis.

We scrutinize transactions with our TRS to ensure that they are entered into on arm's-length terms to avoid incurring the 100% excise tax described above.

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.

What changed 10-K

Item 1A. Risk Factors