What changed in this filing

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Item 1A. Risk Factors

2026-02-18 compared with 2025-02-18 · 43 added, 52 removed, 399 unchanged (19% of the section changed)

7 unchanged sentences

Risks related to our business and properties

Certain of our tenants and borrowers may be unable to pay rent or make mortgage payments, which could adversely affect our cash available to make distributions to our stockholders.

Some of our tenants and borrowers may have recently been either restructured using leverage, or acquired in a leveraged transaction.

Tenants and borrowers that are subject to significant debt obligations may be unable to make their rent or mortgage payments if there are adverse changes to their businesses or because of the impact of public health emergencies.

Rising interest rates, inflation and recessionary conditions also impact a tenant’s ability to timely make their rent or mortgage payments.

Certain of our tenants may be unable to pay rent, which could adversely affect our cash available to make distributions to our stockholders.

Some of our tenants may have recently been either restructured using leverage, or acquired in a leveraged transaction.

Tenants that are subject to significant debt obligations may be unable to make their rent payments if there are adverse changes to their businesses or because of the impact of public health emergencies.

Rising interest rates, inflation and recessionary conditions also impact a tenant’s ability to timely make their rent payments.

Tenants that have experienced leveraged restructurings or acquisitions will generally have substantially greater debt and substantially lower net worth than they had prior to the leveraged transaction.

In addition, the payment of rent and debt service may reduce the working capital available to leveraged entities and prevent them from devoting the resources necessary to remain competitive in their industries.

In situations where management of the tenant or borrower will change after a transaction, it may be difficult for our Adviser to determine with reasonable certainty the likelihood of the tenant’s or borrower’s business success and of its ability to pay rent or make mortgage payments throughout the lease or loan term.

In addition, the payment of rent may reduce the working capital available to leveraged entities and prevent them from devoting the resources necessary to remain competitive in their industries.

In situations where management of the tenant will change after a transaction, it may be difficult for our Adviser to determine with reasonable certainty the likelihood of the tenant’s business success and of its ability to pay rent throughout the lease term.

These companies generally are more vulnerable to adverse economic and business conditions, and increases in interest rates.

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If the sale-leaseback were re-characterized as a joint venture, we could be treated as a co-venturer with our lessee with regard to the property.

As a result, we

could be held liable, under some circumstances, for debts incurred by the lessee relating to the property.

As a result, we could be held liable, under some circumstances, for debts incurred by the lessee relating to the property.

Either of these outcomes could adversely affect our cash flow and our ability to pay distributions to stockholders.

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Illiquidity of certain of our real estate investments may make it difficult for us to sell properties in response to market conditions and could harm our financial condition and ability to make distributions to our stockholders.

We focus our investments on industrial and office properties, a number of which include manufacturing facilities, special use storage or warehouse facilities and special use single or multi-tenant properties.

These types of properties are relatively illiquid compared to other types of real estate and financial assets.

We focus our investments on industrial properties, a number of which include manufacturing facilities, special use storage or warehouse facilities and special use single or multi-tenant properties.

Our real estate portfolio also includes office properties, which are a secondary focus for our business.

Our types of real estate properties are relatively illiquid compared to other types of real estate and financial assets.

This illiquidity will limit our ability to quickly change our portfolio in response to changes in economic or other conditions.

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With these properties, if the current lease is terminated or not renewed, we may be required to renovate the property or to make rent concessions to lease the property to another tenant or sell the property.

In addition, in the event we are forced to sell the property, we may have

difficulty selling it to a party other than the tenant or borrower due to the special purpose for which the property may have been designed.

In addition, in the event we are forced to sell the property, we may have difficulty selling it to a party other than the tenant or borrower due to the special purpose for which the property may have been designed.

These and other limitations may affect our ability to sell or re-lease properties without adversely affecting returns to our stockholders.

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• Lower middle market businesses typically have narrower product lines and smaller market shares than large businesses.

Because our target tenants and borrowers are typically smaller businesses that may have narrower product lines and smaller market share, they may be more vulnerable to competitors’ actions and market conditions, as well as general economic downturns.

• There is generally little or no publicly available information about our target tenants and borrowers.

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We generally do not have fixed guidelines for industry concentration, but we are restricted from exceeding an industry concentration greater than 20% without approval of our investment committee.

As of December 31, 2024, 15.8% of our total lease revenue was earned from tenants in the Diversified/Conglomerate Services industry, 14.5% was earned from tenants in the Automotive industry, 9.9% was earned from tenants in the Buildings and Real Estate industry, and 9.0% was earned from tenants in the Telecommunications industry.

As of December 31, 2025, 15.2% was earned from tenants in the Automotive industry, 12.6% of our total lease revenue was earned from tenants in the Diversified/Conglomerate Services industry, 9.6% was earned from tenants in the Buildings and Real Estate industry, and 8.7% was earned from tenants in the Telecommunications industry.

As a result, a downturn in an industry in which we have invested a significant portion of our total assets could have a material adverse effect on us.

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If a tenant defaults, our lease revenues would be reduced and our expenses associated with carrying the property would increase, as we would be responsible for payments such as taxes and insurance.

Lease payment

defaults by these tenants could adversely affect our cash flows and cause us to reduce the amount of distributions to stockholders.

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

Lease payment defaults by these tenants could adversely affect our cash flows and cause us to reduce the amount of distributions to stockholders.

In the event of a default by a tenant, we may experience delays in enforcing our rights as landlord and may incur

substantial costs in protecting our investment and re-leasing our property.

If a lease is terminated, there is no assurance that we will be able to lease the property for the rent previously received or sell the property without incurring a loss.

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If this were to occur, we could incur significant remedial costs and we may also be subject to material private damage claims and awards.

Concern about indoor exposure to mold has been increasing, as exposure to mold may cause a variety of adverse health effects and symptoms, including allergic or other

Concern about indoor exposure to mold has been increasing, as exposure to mold may cause a variety of adverse health effects and symptoms, including allergic or other reactions.

If we become subject to claims in this regard, it could materially and adversely affect us and our future insurability for such matters.

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The availability of credit has been and may in the future again be adversely affected by illiquid credit markets, which could result in financing terms that are less attractive to us and/or the unavailability of certain types of debt financing.

Regulatory pressures and the burden of troubled and uncollectible loans has led some lenders and institutional investors to reduce, and in some cases, cease to provide funding to borrowers.

Regulatory pressures and the burden of troubled and uncollectible loans have led some lenders and institutional investors to reduce, and in some cases, cease to provide funding to borrowers.

If these market conditions recur or if interest rates continue to fluctuate significantly, they may limit our ability and the ability of our tenants to timely refinance maturing liabilities and access the capital markets to meet liquidity needs, or may cause our tenants to incur increased costs associated with issuing debt instruments, which may materially affect our financial condition and results of operations and the value of our equity securities and our ability to sustain payment of distributions to stockholders at current levels.

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These covenants require us to, among other things, maintain certain financial ratios, including fixed charge coverage, debt service coverage and a minimum net worth.

We are also required to limit our distributions to stockholders to 95% of our FFO.

We are also required to limit our distributions to stockholders to 95% of our Core Funds from Operations (“FFO”) (as defined in the Advisory Agreement).

As of December 31, 2025, we were in compliance with these covenants.

However, our continued compliance with these covenants depends on many factors, and could be impacted by current or future economic conditions, and thus there are no assurances that

we will continue to comply with these covenants.

Failure to comply with these covenants would result in a default which, if we were unable to obtain a waiver from the lenders, could accelerate our repayment obligations under the Credit Facility and thereby have a material adverse impact on our liquidity, financial condition, results of operations and ability to pay distributions to stockholders.

However, our continued compliance with these covenants depends on many factors, and could be impacted by current or future economic conditions, and thus there are no assurances that we will continue to comply with these covenants.

Failure to comply with these covenants would result in a default which, if we were unable to obtain a waiver from the lenders,

could accelerate our repayment obligations under the Credit Facility and thereby have a material adverse impact on our liquidity, financial condition, results of operations and ability to pay distributions to stockholders.

Because our business strategy relies on external financing, we may be negatively affected by restrictions on additional borrowings, and the risks associated with leverage, including our debt service obligations.

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We look to institutional buyers for our bond issuances and we look to regional banks, insurance companies and other non-bank lenders, and, to a lesser extent, the commercial mortgage backed securities (“CMBS”) market to issue mortgages to finance our real estate activities.

For the year ended December 31, 2024, we obtained approximately $15.2 million in long-term mortgage financing and $75.0 million of long-term private debt financing, which we used to acquire additional properties and repay our revolving credit facility and bank term loans.

For the year ended December 31, 2025, we obtained approximately $85.0 million of long-term private debt financing, which we used to acquire additional properties and repay our revolving credit facility and bank term loans.

If we are unable to make our debt payments as required, a mortgage lender could foreclose on the property securing its loan.

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Although we believe that we have significant excess collateral and capacity, future asset values are uncertain.

If we were unable to meet a request to add collateral

to this unsecured asset pool under the Credit Facility, this inability could have a material adverse effect on our liquidity and our ability to meet our loan covenants.

If we were unable to meet a request to add collateral to this unsecured asset pool under the Credit Facility, this inability could have a material adverse effect on our liquidity and our ability to meet our loan covenants.

Interest rate fluctuations may adversely affect our results of operations.

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Certain of our leases contain escalations based on market interest rates and the interest rate on our Credit Facility is variable.

We have $7.3 million outstanding principal on variable rate mortgages as of December 31, 2024.

We do not have any variable rate mortgages that are not swapped to fixed rates as of December 31, 2025.

Although we seek to mitigate this risk by structuring such provisions to contain a maximum interest rate or escalation rate, as applicable, and generally obtain rate caps and interest rate swaps to limit our exposure to interest rate risk, these features or arrangements do not eliminate this risk.

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

A decline in the credit rating of the 2029 Notes, which we guarantee, will increase our cost of such debt.

A decline in the credit rating of the $75.0 million senior unsecured 6.47% notes (the “2029 Notes”) and the $85.0 million senior unsecured 5.99% notes (the “2030 Notes”), which we guarantee, will increase our cost of such debt.

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

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Adverse changes in our credit ratings could negatively impact our business and, in particular, our refinancing and other capital market activities, our ability to manage debt maturities, our future growth and our development and acquisition activity.

The 2029 Notes and certain of our other secured loans contain, and any other future indebtedness we incur may contain, various covenants, including business activity restrictions, and the failure to comply with those covenants could materially adversely affect us.

The 2029 Notes and certain of our other secured loans contain, and any other future indebtedness we incur may contain, certain covenants, which, among other things, restrict our activities, including, the incurrence of indebtedness, disposition of assets, mergers and transactions with affiliates.

The 2029 Notes, the 2030 Notes, and certain of our other secured loans contain, and any other future indebtedness we incur may contain, various covenants, including business activity restrictions, and the failure to comply with those covenants could materially adversely affect us.

The 2029 Notes, the 2030 Notes, and certain of our other secured loans contain, and any other future indebtedness we incur may contain, certain covenants, which, among other things, restrict our activities, including, the incurrence of indebtedness, disposition of assets, mergers and transactions with affiliates.

We are also subject to financial and operating covenants including, as applicable, requirements to maintain certain financial coverage ratios and restrictions on our ability to make distributions to stockholders.

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Our ownership of properties through ground leases exposes us to risks which are different than those resulting from our ownership of fee title to other properties.

We have acquired an interest in three of our properties by acquiring a leasehold interest in the land underlying the property, and we may acquire additional properties in the future that are subject to similar ground leases.

We have acquired an interest in four of our properties by acquiring a leasehold interest in the land underlying the property, and we may acquire additional properties in the future that are subject to similar ground leases.

In this situation, while we own the building that occupies the land subject to the ground lease, we have no economic interest in the land underlying the property and do not control this land;

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Our future success depends to a significant extent on the continued service and coordination of our senior management team, particularly David Gladstone, our chairman and chief executive officer, Arthur “Buzz” Cooper, our president, and Gary Gerson, our chief financial officer.

Although we, through our Adviser and Administrator, engage in customary mitigating activities, such as succession planning, the unplanned departure of any of our executive officers or key personnel from the Adviser or Administrator, as applicable, could have a material adverse effect on our ability to implement our business strategy and to achieve our investment objectives.

Although we, through our Adviser and Administrator, engage in customary mitigating activities, such as succession planning, the death, disability, or the unplanned departure of any of our executive officers or key personnel from the Adviser or Administrator, as applicable, could have a material adverse effect on our ability to implement our business strategy and to achieve our investment objectives.

Our success depends on the performance of our Adviser and if our Adviser makes inadvisable investment or management decisions, our operations could be materially adversely impacted.

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As we grow, our Adviser may be required to hire, train, supervise and manage new employees.

Adviser’s failure to effectively manage our future growth could have a material adverse effect on our business, financial condition and results of operations.

Our Adviser’s failure to effectively manage our future growth could have a material adverse effect on our business, financial condition and results of operations.

We may have conflicts of interest with our Adviser and other affiliates.

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Our Adviser is not obligated to provide a waiver of the incentive fee, which could negatively impact our earnings and our ability to maintain our current level of, or increase, distributions to our stockholders.

The Advisory Agreement contemplates a quarterly incentive fee based on our Core Funds from Operations (“FFO”) (as defined in the Advisory Agreement).

The Advisory Agreement contemplates a quarterly incentive fee based on our FFO (as defined in the Advisory Agreement).

Our Adviser has the ability to issue a full or partial waiver of the incentive fee for current and future periods;

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Any waiver issued by our Adviser is a voluntary, non-contractual, unconditional and irrevocable waiver.

For the year ended December 31, 2022, our Advisor did not issue a full or partial waiver of the incentive fee.

Under the amendment of the Advisory Agreement dated January 10, 2023, our Advisor was not entitled to receive an incentive fee for the quarters ended March 31, 2023 and June 30, 2023.

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No waivers were required, as the incentive fees for the 12-month period were contractually eliminated.

For the year ended December 31, 2024, our Adviser issued a voluntary waiver of a portion of the incentive fee of $2.3 million.

If our Adviser does not issue other voluntary waivers in future quarters, it could negatively impact

our earnings and may compromise our ability to maintain our current level of, or increase, distributions to our stockholders, which could have a material adverse impact on the market price of our securities.

For the years ended December 31, 2025 and 2024, our Adviser issued a voluntary waiver of a portion of the incentive fee of $1.5 million and $2.3 million, respectively.

If our Adviser does not issue other voluntary waivers in future quarters, it could negatively impact our earnings and may compromise our ability to maintain our current level of, or increase, distributions to our stockholders, which could have a material adverse impact on the market price of our securities.

Risks Related to Qualification and Operation as a REIT

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The remainder of our investment in securities (other than government securities, securities of taxable REIT subsidiaries (“TRSs”) and qualified real estate assets) generally cannot include more than 10% by voting power or vote of the outstanding securities of any one issuer.

In addition, in general, no more than 5% of the value of our assets (other than government securities, securities of TRSs and qualified real estate assets) can consist of the securities of any one issuer, and no more than 20% (25% for taxable years beginning before January 1, 2018) of the value of our total assets can be represented by the securities of one or more TRSs.

In addition, in general, no more than 5% of the value of our assets (other than government securities, securities of TRSs and qualified real estate assets) can consist of the securities of any one issuer, and no more than 25% (20% for taxable years beginning after December 31, 2017 and before January 1, 2026) of the value of our total assets can be represented by the securities of one or more TRSs.

We also must ensure that (i) at least 75% of our gross income for each taxable year consists of certain types of income that we derive, directly or indirectly, from investments relating to real property or mortgages on real property or qualified temporary investment income and (ii) at least 95% of our gross income for each taxable year consists of income that is qualifying income for purposes of the 75% gross income test, other types of interest and distributions, gain from the sale or disposition of stock or securities, or any combination of these.

In addition, we may be required to make distributions to our stockholders at disadvantageous times or when we do not have funds readily available for distribution.

If we fail to comply with these requirements at the end of any calendar quarter, we must qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences.

If we fail to comply with these requirements at the end of any calendar quarter, we must

qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences.

As a result, we may be required to liquidate otherwise attractive investments, and may be unable to pursue investments that would otherwise be advantageous to us to satisfy the asset and gross income requirements for qualifying as a REIT.

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The ownership limit does not apply to (i) offerors which, in accordance with applicable federal and state securities laws, make a cash tender offer, where at least 90% of the outstanding shares of our stock (not including shares or subsequently issued securities convertible into common stock which are held by the tender offeror and any “affiliates” or “associates” thereof within the meaning of the Exchange Act) are duly tendered and accepted pursuant to the cash tender offer;

(ii) an underwriter in a

public offering of our shares;

(iii) a party initially acquiring shares in a transaction involving the issuance of our shares of capital stock, if our Board determines such party will timely distribute such shares such that, following such distribution, such shares will not be deemed excess shares;

(ii) an underwriter in a public offering of our shares;

shares will not be deemed excess shares;

and (iv) a person or persons which our Board exempt from the ownership limit upon appropriate assurances that our qualification as a REIT is not jeopardized.

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Therefore, in the event of our bankruptcy, liquidation or reorganization, claims of our stockholders will be satisfied only after all of our and our Operating Partnership’s and its subsidiaries’ liabilities and obligations have been paid in full.

The number of shares of preferred stock outstanding may increase as a result of bimonthly closings related to our Offering of Series F Preferred Stock, which could adversely affect our business, financial condition and results of operations.

The number of outstanding shares of preferred stock may increase as a result of bimonthly closings related to our Offering of Series F Preferred Stock.

The issuance of additional shares of Preferred Stock could have significant consequences on our future operations, including:

• making it more difficult for us to meet our payment and other obligations to holders of our preferred stock and under our Credit Facility and to pay dividends on our common stock;

• reducing the availability of our cash flow to fund acquisitions and for other general corporate purposes, and limiting our ability to obtain additional financing for these purposes;

• limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, and adverse changes the industry in which we operate and the general economy.

Any of the above-listed factors could have an adverse effect on our business, financial condition and results of operations and our ability to meet our payment obligations under our Credit Facility and monthly dividend obligations with respect to our preferred stock and to pay dividends on our common stock.

We are subject to restrictions that may discourage a change of control.

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We cannot assure investors that the market price of our common and preferred stock will not fluctuate or decline in the future.

Some market conditions that could negatively affect our share price or result in fluctuations in the price or trading volume of our securities include, but are not limited to:

conditions that could negatively affect our share price or result in fluctuations in the price or trading volume of our securities include, but are not limited to:

• price and volume fluctuations in the stock market from time to time, which are often unrelated to the operating performance of particular companies;

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In addition, cybersecurity threats such as those noted above have increased in recent years in part due to increasingly numerous and sophisticated malicious cyber actors.

We have implemented processes, procedures and internal controls to help prevent, detect and mitigate cybersecurity threats and cyber intrusions, but these measures, as well as our increased awareness of the nature and extent of a threat of a cyber-incident, do not guarantee that a cyber-incident will not occur, will be timely detected and/or that our financial results, operations or confidential information will not be negatively impacted by such an incident.

guarantee that a cyber-incident will not occur, will be timely detected and/or that our financial results, operations or confidential information will not be negatively impacted by such an incident.

The development and maintenance of these measures are also costly and require ongoing monitoring, testing and updating as technologies and processes change, and efforts to overcome cybersecurity measures become increasingly sophisticated.

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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