What changed in this filing

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Item 1A. Risk Factors

2022-02-15 compared with 2021-02-18 · 185 added, 227 removed, 238 unchanged (63% of the section changed)

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The summary below provides an overview of many of the risks we face that are described in this section.

Additional risks, beyond those summarized below or discussed under the caption “Risk Factors” or described elsewhere in this Annual Report on Form 10-K, may also materially and adversely impact our business, operations or financial results.

Additional risks, beyond those summarized below, discussed under the caption “Risk Factors” or described elsewhere in this Annual Report on Form 10-K, may also materially and adversely impact our business, operations or financial results.

Consistent with the foregoing, the risks we face include, but are not limited to, the following:

• failure to complete the Monmouth Transaction or to execute on our financing plan for the Monmouth Transaction as we currently intend, including by obtaining equity investments from one or more joint venture investors or by selling properties we have identified for sale for the proceeds we expect, could have material and adverse effects on us;

• our tenants may be unable to satisfy their lease obligations to us, which could materially and adversely affect us;

• we may be unable to renew our leases with current tenants when our leases expire, lease our properties to new tenants without decreasing rents or incurring significant costs or otherwise, or to increase rents when our rents are reset;

• the concentration of our investments in industrial and logistics properties may result in us being adversely affected by cyclical economic conditions, particularly to the extent our tenants are negatively impacted, and the development of new industrial and logistics properties exceeding increase in demand for such properties;

• the geographic concentration of our properties in Hawaii and the tenant concentration of our properties with single tenants may subject us to greater risks of loss than if our properties had more geographic and tenant diversity;

• the COVID-19 pandemic and its resulting economic impact may materially adversely affect our and our tenants’ businesses, operations, financial results and liquidity;

• we may be unable to grow our business by acquisitions of additional properties, and we face significant competition for acquisition opportunities and tenants;

• we have debt and may incur additional debt, and we are subject to the covenants and conditions contained in the agreements governing our debt, which may restrict our operations and ability to make investments and distributions;

• we may be unable to renew our leases with current tenants when our leases expire or lease our properties to new tenants without decreasing rents or incurring significant costs, providing certain concessions or otherwise;

• the concentration of our investments in industrial and logistics properties leased to single tenants may result in us being adversely affected by cyclical economic conditions and subject us to greater risks of loss than if our properties had more industry sector and tenant diversity;

• following the completion of the Monmouth Transaction, we may be unable to further grow our business by acquiring additional properties, and we face significant competition for tenants and for acquisition opportunities;

• risks associated with the development, redevelopment or repositioning of our properties may cause delays in leasing those properties and generating cash flows from those properties;

• we have debt and we intend to incur additional debt, including in connection with the Monmouth Transaction, and we are subject to the covenants and conditions contained in the agreements governing our debt, which may restrict our operations and ability to make investments and distributions;

• REIT distribution requirements and any limitations on our ability to access reasonably priced capital may adversely impact our ability to carry out our business plan, and we are subject to risks associated with our qualification for taxation as a REIT;

• our distributions to our shareholders may be reduced or eliminated and the form of payment could change;

• changes in market interest rates, including changes that may result from the expected phase out of LIBOR, may adversely affect us;

• ownership of real estate is subject to environmental risks and liabilities as well as risks from adverse weather, natural disasters and climate events;

• changes in market interest rates, including changes resulting from the phase out of LIBOR, may adversely affect us;

• ownership of real estate is subject to environmental risks and liabilities, as well as risks from adverse weather, natural disasters and climate change and climate related events, and we may incur significant costs and invest significant amounts with respect to these matters;

• our existing and any future joint ventures may limit our flexibility with jointly owned investments and we may not realize the benefits we expect from these arrangements;

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• we depend upon RMR LLC to manage our business and implement our growth strategy and RMR LLC has broad discretion in operating our day to day business;

• we rely on RMR LLC’s information technology and systems and the failure of the security or functioning of such technology or systems could materially and adversely affect us;

• any material failure, inadequacy, interruption or security breach of RMR LLC’s information technology or systems could materially harm us;

• our management structure and agreements with RMR LLC and our relationships with our related parties, including our Managing Trustees, RMR LLC and others affiliated with them, may create conflicts of interest;

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Other risks of which we are not yet aware, or that we currently believe are not material, may also materially and adversely impact our business operations or financial results.

If any of the events or circumstances described below occurs, our business, financial condition, results of operations or ability to make distributions to our shareholders could be adversely affected and the value of an investment in our securities could decline.

If any of the events or circumstances described below occurs, our business, financial condition, liquidity, results of operations or ability to make distributions to our shareholders could be adversely impacted and the value of an investment in our securities could decline.

Investors and prospective investors should consider the risks described below and the information contained under the caption “Warning Concerning Forward-Looking Statements” and elsewhere in this Annual Report on Form 10-K before deciding whether to invest in our securities.

Risks Related to the Monmouth Transaction

The Monmouth Transaction is subject to the satisfaction of conditions which may not be satisfied or completed on a timely basis, if at all.

Failure to complete the Monmouth Transaction could have material and adverse effects on us.

The completion of the Monmouth Transaction is subject to the satisfaction of conditions, including, among others, the approval of the holders of at least two-thirds of Monmouth’s outstanding common stock.

These conditions make the timing of the completion of the Monmouth Transaction, and the completion of the Monmouth Transaction itself, uncertain.

Either we, or Monmouth, may elect to terminate the Merger Agreement in certain circumstances, and we and Monmouth can mutually decide to terminate the Merger Agreement at any time prior to the consummation of the Merger, either before or after approval of the

Monmouth stockholders.

In addition, if legal proceedings are instituted against Monmouth, us or others relating to the Merger Agreement, that also could delay or prevent the Merger from becoming effective within the agreed upon timeframe.

If the Monmouth Transaction is not completed or is significantly delayed, we may be adversely affected, including as a result of the following:

• we will be required to pay our costs relating to the Merger, such as legal, accounting and financial advisory fees, whether or not the Merger is completed;

• the time and attention committed by our management team to matters relating to the Monmouth Transaction could otherwise have been devoted to pursuing other opportunities;

• the market price of our common shares could decline to the extent that the then current market price is positively affected by a market assumption that the Monmouth Transaction will be completed.

If we do not enter into a joint venture with one or more institutional investors for equity investments in the amounts we currently expect, or if our committed debt financing is not available, we may be required to obtain alternative financing for the Monmouth Transaction on terms which are materially less favorable to us.

We intend to finance the cash consideration and the fees, expenses and costs incurred in connection with the Monmouth Transaction by entering into a joint venture with one or more institutional investors for equity investments of up to $1.3 billion, and with proceeds from new mortgage debt and the assumption of existing Monmouth mortgage debt.

Depending on the ultimate amount of the joint venture equity investments, we may also use proceeds from the sale of up to approximately $1.6 billion of Monmouth properties to finance this transaction.

In addition, in connection with the financing of the Monmouth Transaction, we have obtained commitments from lenders to make a bridge loan available to us under which we may borrow up to $4.0 billion for 364 days.

However, we may not be able to enter into such joint venture or obtain such equity investments on favorable terms, and we may not be able to find alternative financing in such amount and/or on as favorable terms, if at all.

In addition, there are conditions to the funding of the bridge loan facility that may not be satisfied.

In the event any of these funds are not available or are available in less than the full amount anticipated, or if we are unable to repay the amounts outstanding under the bridge loan facility prior to its expiration, we will be required to seek alternative financing, and our available cash flow to fund working capital, capital expenditures, acquisitions and other business activities may be reduced.

In such event, the alternative financing may be more expensive and the expected benefits of the Monmouth Transaction could be reduced or eliminated.

We may not succeed in selling properties we may identify for sale in connection with the long term financing of the Monmouth Transaction and any proceeds we may receive from any such sales we do complete may be less than expected, and we may incur losses with respect to any such sales.

In connection with the long term financing of the Monmouth Transaction, we may sell up to $1.6 billion of Monmouth properties.

Our ability to sell properties and the prices we receive upon any sale, may be affected by various factors.

In particular, these factors could arise from weaknesses in or a lack of established markets for the properties we have identified for sale, changes in the financial condition or prospects of prospective purchasers for and the tenants of the properties, the terms of leases with tenants at certain of the properties, the characteristics, quality and prospects of the properties, the availability of financing to potential purchasers on reasonable terms, the number of prospective purchasers, the number of competing properties in the market, unfavorable local, national or international economic conditions, industry trends and changes in laws, regulations or fiscal policies of jurisdictions in which the properties are located.

We may not succeed in selling properties or other assets and any sales may be delayed or may not occur or, if sales do occur, the terms may not meet our expectations, and we may incur losses in connection with any sales.

Risks Related to Our Business

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The failure of our tenants and any applicable parent guarantor to satisfy their lease obligations to us, whether due to a downturn in their business or otherwise, could materially and adversely affect us.

The majority of our properties are leased to single tenants, which may subject us to greater risks of loss than if each of our properties had multiple tenants.

The majority of our rental revenues from our properties as of December 31, 2020 were from properties leased to single tenants.

The value of single tenant properties is materially dependent on the performance of those tenants under their respective leases.

The majority of our properties are industrial and logistics properties leased to single tenants, which may subject us to greater risks of loss than if our properties had more industry sector and tenant diversity.

Our properties are substantially all industrial and logistics properties leased to single tenants and we intend to acquire similar additional properties, including in the Monmouth Transaction.

This concentration may expose us to the risk of economic downturns in the industrial and logistics sector to a greater extent than if we were invested in other sectors of the real estate industry.

Further, the value of single tenant properties is materially dependent on the performance of those tenants under their respective leases.

Many of our single tenant leases require that certain property level operating expenses and capital expenditures, such as real estate taxes, insurance, utilities, maintenance and repairs, including increases with respect thereto, be paid, or reimbursed to us, by our tenants.

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Because most of our properties are leased to single tenants, the adverse impact of individual tenant defaults or non-renewals is likely to be greater than would be the case if our properties were leased to multiple tenants.

In addition, the default, financial distress or bankruptcy of a tenant could cause interruptions in the receipt of rental revenue and/or result in a vacancy, which is, in the case of a single tenant property, likely to result in the complete reduction in the operating cash flows generated by the property and may decrease the value of that property.

We may be unable to lease our properties when our leases expire.

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If our tenants do not renew their leases, we may be unable to obtain new tenants to maintain or increase the historical occupancy rates of, or rents from, our properties.

We may experience declining rents or incur significant costs to renew our leases with current tenants or lease our properties to new tenants.

We may experience declining rents or incur significant costs to renew our leases with current tenants, lease our properties to new tenants or when our rents reset at our properties in Hawaii.

When we renew our leases with current tenants or lease to new tenants, we may experience rent decreases, and we may have to spend substantial amounts for leasing commissions, tenant improvements or other tenant inducements.

Moreover, many of our Mainland Properties have been specially designed for the particular businesses of our tenants;

if the current leases for such properties are terminated or are not renewed, we may be required to renovate such properties at substantial costs, decrease the rents we charge or provide other concessions in order to lease such properties to new tenants.

When rents are reset under the leases at our Hawaii Properties, the rents may decline.

Our investments are concentrated in industrial and logistics properties.

Our properties are substantially all industrial and logistics properties and we intend to acquire similar additional properties.

The market demand to lease industrial and logistics properties generally reflects conditions in the U.S.

If the general economy slows, the demand to lease industrial and logistics properties may be reduced and the value of our common shares may decline.

The adverse impact of cyclical economic conditions affecting industrial and logistics properties may have a greater impact on the value of our common shares than if we were invested in several different types of properties, including residential, office or other properties, in addition to industrial and logistics properties.

A significant number of our properties are located on the island of Oahu, HI, and we are exposed to risks as a result of this geographic concentration.

A significant number of our properties are located on the island of Oahu, HI.

This geographic concentration creates risks.

For example, Oahu’s remote location on a volcanic island makes our properties there vulnerable to certain risks from natural disasters, such as tsunamis, hurricanes, flooding, volcanic eruptions and earthquakes, which could cause damage to our properties, affect our Hawaii tenants’ abilities to pay rent to us and cause the value of our properties and our securities to decline.

The COVID-19 pandemic and its resulting economic impact may materially adversely affect our business, operations, financial results and liquidity.

The strain of coronavirus that causes the viral disease known as COVID-19 has been declared a pandemic by the World Health Organization, and the U.S.

Health and Human Services Secretary has declared a public health emergency in the United States in response to the outbreak.

The COVID-19 pandemic has had a substantial adverse impact on the global economy, including the U.S.

Although to date some of our tenants have benefitted from the increased reliance on e-commerce and logistics to support retailers and communities with essential services throughout the United States, challenges to the supply chain due to the COVID-19 pandemic, such as widespread illness that negatively impacts the workforce or other supply chain issues, may negatively impact our tenants’ businesses and operations.

Further, the demand for e-commerce and logistics may decline, particularly if the current economic conditions do not continue to improve or if they worsen for an extended period.

If that occurs, our tenants may become unable to pay rent to us and we may be unable to replace any lost revenues we may experience.

Further, these conditions could result in declining market rents where our properties are located, which may adversely affect our future rents.

We typically conduct leasing activities at our properties.

Accordingly, reductions in the ability of prospective tenants to visit our properties due to the COVID-19 pandemic could reduce rental revenue and ancillary operating revenue produced by our properties.

Concerns relating to the outbreak could also cause on-site personnel not to report to work at our properties, which could adversely affect tenant operations at our properties.

In addition, if tenants default on our leases, we may experience increased vacancies and we may be unable to replace those tenancies for an extended period or at all, we may incur significant costs in connection with seeking and entering into any new or renewal leases, and the terms of any leases we may enter may not be as favorable to us as the terms of our existing leases.

We cannot predict the extent and duration of the COVID-19 pandemic or the severity and duration of its economic impact.

Potential consequences of the current unprecedented measures taken in response to the spread of the virus that causes COVID-19, and current market disruptions and volatility affecting us include, but are not limited to:

• increased risk of default or bankruptcy of our tenants;

• reduced economic demand resulting from mass employee layoffs or furloughs in response to governmental action taken to slow the spread of the virus that causes COVID-19, which could impact the continued viability of our tenants and the demand for industrial and logistics properties;

• possible significant declines in the value of our properties or our inability to sell properties we may identify for sale due to decreased demand for our properties;

• our failure to pay interest or principal when due on our outstanding debt, which may result in the acceleration of payment for our outstanding debt and our being unable to borrow under our revolving credit facility;

• our inability to comply with certain financial covenants that could result in our defaulting under our debt agreements;

• our inability to maintain our current distribution rate, or make any distributions, to our shareholders;

• declines in the market price of our common shares;

• our inability to access debt and equity capital on attractive terms, or at all.

Further, the extent and strength of any economic recovery after the COVID-19 pandemic ends or otherwise are uncertain and subject to various factors and conditions.

Our business, operations and financial position may continue to be negatively impacted after the COVID-19 pandemic ends and may remain at depressed levels compared to prior to the outbreak of the COVID-19 pandemic and those conditions may continue for an extended period.

Bankruptcy law may adversely impact us.

The occurrence of a tenant bankruptcy could reduce the rent we receive from that tenant.

In addition, the continued existence of the COVID-19 pandemic may increase the risk of our tenants filing for bankruptcy.

If a tenant becomes bankrupt, federal law may prohibit us from evicting that tenant based solely upon its bankruptcy.

In addition, a bankrupt tenant may be authorized to reject and terminate its lease with us.

Any claims against a bankrupt tenant for unpaid future rent would be subject to statutory limitations that may be substantially less than the contractually specified rent we are owed under the lease, and any claim we have for unpaid past rent, may not be paid in full.

Many of our tenants do not have credit ratings.

The majority of our tenants are not rated by any nationally recognized credit rating organization.

It is more difficult to assess the ability of a tenant that is not rated to meet its obligations than that of a rated tenant.

Moreover, tenants may be rated when we enter leases with them but their ratings may be later lowered or terminated during the term of the leases.

Because we have many unrated tenants, we may experience a higher percentage of tenant defaults than landlords who have a higher percentage of highly rated tenants.

When we reset rents, renew or extend leases or lease to new tenants at our Hawaii Properties, our rents may decrease, and our ability to increase rents may be limited in the future by government action.

Some of our Hawaii Properties require the rents to be reset periodically based on fair market values, which could result in rental increases or decreases.

Our ability to increase rents when rent resets occur will depend upon then prevailing market conditions, which are beyond our control.

While rent resets involving our Hawaii Properties have, in the aggregate, resulted in rent increases during the period of our and our predecessors’ ownership, in some instances rent resets have resulted in rent decreases.

Accordingly, the historical increases achieved from rent resets involving our Hawaii Properties may not be repeated in the future.

In the past, the Hawaii state legislature has enacted legislation that would have limited rent increases at certain of our Hawaii Properties.

District Court in Hawaii later held that this legislation violated the U.S.

Constitution and therefore was unenforceable.

However, the Hawaii state legislature may in the future adopt laws to limit rent increases at our Hawaii Properties, and we may not be successful in any challenge we make to that legislation.

Moreover, even if we were successful in challenging such laws, the cost of doing so may be significant.

We may be unable to grow our business by acquisitions of additional properties, and we might encounter unanticipated difficulties and expenditures relating to our acquired properties.

Our business plans involve the acquisition of additional properties.

Moreover, many of our properties have been specially designed for the particular businesses of our tenants;

if the current leases for those properties are terminated or are not renewed, we may be required to renovate those properties at substantial costs, decrease the rents we charge or provide other concessions in order to lease those properties to new tenants.

In addition, some of our Hawaii Properties require the rents to be reset periodically based on fair market values, which could result in rental increases or decreases.

When we reset rents at our Hawaii Properties, our rents may decrease.

Following the completion of the Monmouth Transaction, we may be unable to further grow our business by acquiring additional properties, and we might encounter unanticipated difficulties and expenditures relating to the properties we acquire in the Monmouth Transaction or other properties we may acquire in the future.

Our business plan includes the acquisition of additional properties.

Our ability to make profitable acquisitions is subject to risks, including, but not limited to, risks associated with:

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• the availability, terms and cost of debt and equity capital.

We might encounter unanticipated difficulties and expenditures relating to our acquired properties.

• notwithstanding pre-acquisition due diligence, we could acquire a property that contains undisclosed defects in design or construction;

These risks may limit our ability to grow our business by acquiring additional properties.

In addition, we might encounter unanticipated difficulties and expenditures relating to our acquired properties.

• notwithstanding pre-acquisition due diligence, we could acquire a property that contains undisclosed defects in design or construction or unknown liabilities, including those related to undisclosed environmental contamination;

• an acquired property may be located in a new market where we may face risks associated with investing in an unfamiliar market;

• the market in which an acquired property is located may experience unexpected changes that adversely affect the property’s value;

• the occupancy of and rents from properties that we acquire may decline during our ownership;

• property operating costs for our acquired properties may be higher than anticipated, which may result in tenants that pay or reimburse us for those costs terminating their leases or our acquired properties not yielding expected returns.

• we may acquire properties subject to unknown liabilities and without any recourse, or with limited recourse, such as liability for the cleanup of undisclosed environmental contamination or for claims by tenants, vendors or other persons related to actions taken by former owners of the properties.

For these reasons, among others, we might not realize the anticipated benefits of our acquisitions, and our business plan to acquire additional properties may not succeed or may cause us to experience losses.

Future leases may require us to pay property operating costs.

While our properties are generally leased to tenants that are financially responsible to pay or reimburse us for all, or substantially all, increases in property level operating and maintenance expenses, many industrial and logistics properties do not utilize this lease structure.

In the future, we may enter into new leases or acquire properties subject to leases that make us responsible for property level operating costs;

and we may be adversely affected if such costs increase.

We are exposed to risks associated with property development, redevelopment and repositioning that could adversely affect us, including our financial condition and results of operations.

We currently have one property under development and we intend to continue to engage in development, redevelopment and repositioning activities with respect to our properties, and, as a result, we are subject to certain risks, which could adversely affect us, including our financial condition and results of operations.

These risks include cost overruns and untimely completion of construction due to, among other things, weather conditions, inflation, labor or material shortages or delays in receiving permits or other governmental approvals, as well as the availability and pricing of financing on favorable terms or at all.

These risks could result in substantial unanticipated delays and increased development and renovation costs and could prevent the initiation or the completion of development, redevelopment or repositioning activities and cause delays in leasing these properties and generating cash flows from these properties or possible loss of tenancies, any of which could have a material adverse effect on our business, financial condition and results of operations.

We face significant competition.

We face significant competition for acquisition opportunities from other investors, including publicly traded and private REITs, numerous financial institutions, individuals, foreign investors and other public and private companies.

We believe that the rapid growth in e-commerce sales, which has intensified as a result of the COVID-19 pandemic, will continue to result in strong demand and increase the competition for industrial real estate.

Some of our competitors may have greater financial and other resources than us.

Because of competition for acquisitions, we may be unable to acquire desirable properties or we may pay higher prices for, and realize lower net cash flows than we hope to achieve from, acquisitions.

We also face competition for tenants at our properties.

We face significant competition for tenants at our properties.

Some competing properties may be newer, better located or more attractive to tenants.

Competing properties may have lower rates of occupancy than our properties, which may result in competing owners offering available space at lower rents than we offer at our properties.

Development activities may increase the supply of properties of the type we own in the leasing markets in which we own properties and increase the competition we face.

In addition, the continuing strong demand for industrial and logistics properties is encouraging new development of these properties.

If the development of new industrial and logistics properties exceeds the increase in demand for these properties, our existing properties may be unable to successfully compete for tenants with newer developed buildings and our income and the values of our properties may decline.

Competition may make it difficult for us to attract and retain tenants and may reduce the rents we are able to charge and the values of our properties.

The development of new industrial and logistics properties may exceed any increase in demand for such properties.

The continuing strong demand for industrial and logistics properties is encouraging new development of such properties.

If the development of new industrial and logistics properties exceeds the increase in demand for such properties, our existing properties may be unable to successfully compete for tenants with newer developed buildings, our income and the value of our properties may decline.

We have debt and we may incur additional debt.

We also face competition for acquisition opportunities from other investors, including publicly traded and private REITs, numerous financial institutions, individuals, foreign investors and other public and private companies.

Some of our competitors may have greater financial and other resources than us.

Because of competition for acquisitions, we may be unable to acquire desirable properties or we may pay higher prices for, and realize lower net cash flows than we hope to achieve from, acquisitions.

We have debt and we intend to incur additional debt, including in connection with the Monmouth Transaction.

As of December 31, 2021, our consolidated indebtedness was $832.0 million and our ratio of consolidated net debt to total gross assets (total assets plus accumulated depreciation) was 38.7%, and we had $568.0 million available for borrowing under our $750.0 million revolving credit facility.

The agreement governing our revolving credit facility, or our credit agreement, includes a feature under which the maximum borrowing availability may be increased to up to $1.5 billion in certain circumstances.

In addition, in connection with the Monmouth Transaction, we expect to incur up to an additional $4.0 billion of secured debt.

We are subject to numerous risks associated with our debt, including the risk that our cash flows could be insufficient for us to make required payments on our debt.

There are no limits in our organizational documents on the amount of debt we may incur, and we may incur substantial debt.

Our debt obligations could have important consequences to our securityholders.

Our debt obligations could have important consequences to our security holders.

Our incurrence of debt may increase our vulnerability to adverse economic, market and industry conditions, limit our flexibility in planning for, or reacting to, changes in our business, and place us at a disadvantage in relation to competitors that have lower debt levels.

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We may not be able to satisfy all of these conditions or may default on some of these covenants for various reasons, including for reasons beyond our control.

Complying with these covenants may limit our ability to take actions that may be beneficial to us and our securityholders.

For example, our credit agreement requires us to maintain certain debt service ratios.

Our ability to comply with such covenants will depend upon the net rental income we receive from our properties.

If the occupancy at our properties declines or if our rents decline, we may be unable to borrow under our revolving credit facility.

If we are unable to borrow under our revolving credit facility, we may be unable to meet our obligations or grow our business by acquiring additional properties.

If we default under our revolving credit facility, our lenders may demand immediate payment and may elect not to fund future borrowings.

During the continuance of any event of default under our credit agreement, we may be limited or in some cases prohibited from making distributions to our shareholders.

Any default under our credit agreement that results in acceleration of our obligations to repay outstanding indebtedness or in our no longer being permitted to borrow under our revolving credit facility would likely have serious adverse consequences to us and would likely cause the value of our securities to decline.

Complying with these covenants may limit our ability to take actions that may be beneficial to us and our security holders.

For example, our credit agreement requires us to comply with certain financial and other covenants.

Similarly, our secured debt agreements also contain financial and/or operating covenants, including, among other things, certain coverage ratios, as well as limitations on the ability to incur secured and unsecured debt.

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Secured indebtedness exposes us to the possibility of foreclosure, which could result in the loss of our investment in certain of our subsidiaries or in a property or group of properties or other assets that secure that indebtedness.

We currently have a $650.0 million mortgage loan secured by 186 of our properties, a $350.0 million mortgage loan secured by 11 properties that are owned by a joint venture in which we own a 22% equity interest, and a $57.0 million mortgage note that is secured by another property owned by such joint venture, subject to certain limitations.

In addition, in connection with the Monmouth Transaction, we expect to incur up to an additional $4.0 billion of secured debt.

Incurring secured indebtedness, including mortgage indebtedness, increases our risk of asset and property losses because defaults on indebtedness secured by our assets may result in foreclosure actions initiated by lenders and ultimately our loss of the property or other assets securing any loans for which we are in default.

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See “Material United States Federal Income Tax Considerations—REIT Qualification Requirements—Annual Distribution Requirements” included in Part I, Item 1 of this Annual Report on Form 10-K.

Accordingly, we may not be able to retain sufficient cash to fund our operations, repay our debts, invest in our properties or fund our acquisitions or development or redevelopment efforts.

Accordingly, we may not be able to retain sufficient cash to fund our operations, repay our debts, invest in our properties or fund our acquisitions or development, redevelopment or repositioning efforts.

Our business strategies therefore depend, in part, upon our ability to raise additional capital at reasonable costs.

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Because the earnings we are permitted to retain are limited by the rules governing REIT qualification and taxation, if we are unable to raise reasonably priced capital, we may not be able to carry out our business plan.

Changes in market interest rates, including changes that may result from the expected phase out of LIBOR, may adversely affect us.

Interest rates have remained at relatively low levels on a historical basis, and the U.S.

Federal Reserve System, or the U.S.

Federal Reserve, has indicated that it does not expect to raise interest rates in response to the COVID-19 pandemic and current market conditions until at least the end of 2023.

There can be no assurance, however, that the U.S.

Federal Reserve will not raise rates prior to that time.

Low market interest rates, particularly if they remain over a sustained period, may increase our use of debt capital to fund property acquisitions, lower capitalization rates for property purchases and increase competition for property purchases, which may reduce our ability to acquire new properties.

In addition, as noted in Part II, Item 7A of this Annual Report on Form 10-K, LIBOR is currently expected to be phased out for new contracts by December 31, 2021 and for pre-existing contracts by June 30, 2023.

The interest rate under our revolving credit facility is based on LIBOR and the interest we may pay on any future debt we may incur may also be based on LIBOR.

We currently expect that the determination of interest under our revolving credit facility would be based on the alternative rates provided under our credit agreement or would be revised to provide for an interest rate that approximates the existing interest rate as calculated in accordance with LIBOR.

Despite our current expectations, we cannot be sure that, if LIBOR is phased out or transitioned, the changes to the determination of interest under our credit agreement would approximate the current calculation in accordance with LIBOR.

An alternative interest rate index that may replace LIBOR may result in our paying increased interest.

Changes in market interest rates, including changes resulting from the phase out of LIBOR, may adversely affect us.

Changes in market interest rates may be sudden and may significantly impede our growth.

Interest rates have remained at relatively low levels on a historical basis, but the U.S.

Federal Reserve recently indicated that, in light of the economic recovery and higher than anticipated inflation, it expects to raise interest rates as early as March 2022.

However, the timing, number and amount of any such future interest rate increases are uncertain.

In addition, as noted in Part II, Item 7A of this Annual Report on Form 10-K, LIBOR has been phased out for new contracts and is expected to be phased out for pre-existing contracts by June 30, 2023.

We are required to pay interest on

borrowings under our revolving credit facility at floating rates based on LIBOR, and interest we may pay on any future borrowings under our revolving credit facility may also require that we pay interest based upon LIBOR.

We currently expect that the determination of interest under our revolving credit facility will be revised as provided under our credit agreement or amended as necessary to provide for an interest rate that approximates the existing interest rate as calculated in accordance with LIBOR.

Despite our current expectations, we cannot be sure that any changes to the determination of interest under our credit agreement would approximate the current calculation in accordance with LIBOR.

We cannot be certain of what standard, if any, will replace LIBOR if it is phased out or transitioned, and any alternative interest rate index that may replace LIBOR may result in our paying increased interest.

Interest rate increases may materially and negatively affect us in several ways, including:

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When interest rates increase, our interest costs will increase, which could adversely affect our cash flows, our ability to pay principal and interest on our debt, our cost of refinancing our fixed rate debts when they become due and our ability to make or sustain distributions to our shareholders.

Additionally, if we choose to hedge our interest rate

risk, we cannot be sure that the hedge will be effective or that our hedging counterparty will meet its obligations to us.

Additionally, if we choose to hedge our interest rate risk, we cannot be sure that the hedge will be effective or that our hedging counterparty will meet its obligations to us;

• property values are often determined, in part, based upon a capitalization of rental income formula.

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Increases in interest rates could lower the value of our properties and cause the value of our securities to decline.

Failure to hedge effectively against interest rate changes may adversely affect our results of operations.

We may use derivatives to manage our exposure to interest rate volatility on debt instruments, including hedging for future debt issuances, as well as to increase our exposure to floating interest rates.

There can be no assurance that any such hedging arrangements will have the desired beneficial impact.

Such arrangements, which can include a number of counterparties, may expose us to additional risks, including failure of any of our counterparties to perform under these contracts, and may involve extensive costs, such as transaction fees or breakage costs, if we terminate them.

Hedging may reduce the overall returns on our investments, which could reduce our cash available for distribution to our shareholders.

The REIT provisions of the IRC may limit our ability to utilize advantageous hedging techniques or cause us to implement some hedges through a TRS, which could further reduce our overall returns.

Failure to hedge effectively against interest rate changes may materially adversely affect our financial condition, results of operations and cash flow.

A significant number of our properties are located on the island of Oahu, Hawaii, and we are exposed to risks as a result of this geographic concentration.

A significant number of our properties are located on the island of Oahu, Hawaii.

This geographic concentration creates risks.

For example, Oahu’s remote location on a volcanic island makes our properties there vulnerable to certain risks from natural disasters, such as tsunamis, hurricanes, flooding, volcanic eruptions and earthquakes, as well as possible sea rise as a result of climate change, which could cause damage to our properties, affect our Hawaii tenants’ abilities to pay rent to us and cause the values of our properties and our securities to decline.

Further, the operating results and values of our Hawaii Properties are impacted by local market conditions as well as possible government action that may limit our ability to increase rents.

Ownership of real estate is subject to environmental risks and liabilities.

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These laws also expose us to the possibility that we may become liable to government agencies or third parties for costs and damages they incur in connection with hazardous substances.

The costs and damages that may arise from environmental hazards may be substantial and are difficult to assess and estimate for numerous reasons, including uncertainty about the extent of contamination, alternative treatment methods that may be applied, the location of the property which subjects it to differing local laws and regulations and their interpretations, as well as the time it may take to remediate contamination.

The costs and damages that may arise from environmental hazards may be substantial and are difficult to assess and estimate for numerous reasons, including uncertainty

about the extent of contamination, alternative treatment methods that may be applied, the location of the property which subjects it to differing local laws and regulations and their interpretations, as well as the time it may take to remediate contamination.

In addition, these laws also impose various requirements regarding the operation and maintenance of properties and recordkeeping and reporting requirements relating to environmental matters that require us or the tenants of our properties to incur costs to comply with.

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We may incur substantial liabilities and costs for environmental matters.

Ownership of real estate is subject to risks from adverse weather, natural disasters and climate events.

Severe weather may have an adverse effect on certain properties we own.

Rising sea levels could cause flooding at some of our properties, including some of our Hawaii Properties, which may have an adverse effect on properties we own.

When major weather, natural disasters or climate-related events, such as hurricanes, floods and wildfires, occur at or near our properties, our tenants may need to suspend operations of the impacted property until the event has ended and the property is then ready for operation.

We or the tenants of our properties may incur significant costs and losses as a result of these activities, both in terms of operating, preparing and repairing our properties in anticipation of, during and after a severe weather, natural disaster or climate-related event and in terms of potential lost business due to the interruption in operating our properties.

Our insurance and our tenants’ insurance may not adequately compensate us or them for these costs and losses.

Also, concerns about climate change have resulted in various treaties, laws and regulations that are intended to limit carbon emissions and address other environmental concerns.

These and other laws may cause energy or other costs at our properties to increase.

Laws enacted to mitigate climate change may make some of our properties obsolete or cause us to make material investments in our properties, which could materially and adversely affect our financial condition or the financial condition of our tenants and their ability to pay rent to us and cause the value of our properties to decline.

In addition, concerns about climate change and increasing storm intensities may increase the cost of insurance for our properties or potentially render it unavailable to obtain.

We are subject to risks from adverse weather, natural disasters and climate change and climate related events, and we incur significant costs and invest significant amounts with respect to these matters.

We are subject to risks and could be exposed to additional costs from adverse weather, natural disasters and climate change and climate related events.

For example, our properties could be severely damaged or destroyed from either singular extreme weather events (for example floods, storms and wildfires) or through long-term impacts of climatic conditions (such as precipitation frequency, weather instability and rise of sea levels).

Such events could also adversely impact us or the tenants of our properties if we or they are unable to operate our or their businesses due to damage resulting from such events.

If we fail to adequately prepare for such events, our revenues, results of operations and financial condition may be impacted.

In addition, we may incur significant costs in preparing for possible future climate change or climate related events or in response to our tenants’ requests for such investments and we may not realize desirable returns on those investments.

Our existing and any future joint ventures may limit our flexibility with jointly owned investments and we may not realize the benefits we expect from these arrangements.

We are currently party to a joint venture, and we may in the future sell or contribute additional properties or acquire, develop or recapitalize properties to or in this joint venture or other joint ventures that we may enter.

We are currently party to a joint venture, we expect to enter into an additional joint venture in connection with the Monmouth Transaction and we may in the future sell or contribute additional properties or acquire, develop or recapitalize properties to or in this joint venture or other joint ventures that we may enter.

Our participation in our existing joint venture is subject to risks, including the following:

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In the future, we may acquire properties for which we are responsible for the costs of insurance.

In the past few years, the costs of insurance have increased significantly, and these increased costs have had an adverse effect on us and our tenants.

Increased insurance costs may adversely affect our tenants’ abilities to pay us rent or result in downward pressure on rents we can charge under new or renewed leases.

Losses of a catastrophic nature, such as those caused by hurricanes, flooding, volcanic eruptions and earthquakes, among other things, losses as a result of outbreaks of pandemics, including the COVID-19 pandemic, or losses from terrorism, may be covered by insurance policies with limitations such as large deductibles or co-payments that we or a tenant may not be able to pay.

Insurance proceeds may not be adequate to restore an affected property to its condition prior to a loss or to compensate us for our losses, including the loss of future revenues from an affected property.

Similarly, our other insurance, including our general liability insurance, may not provide adequate insurance to cover our losses.

In addition, we do not have any insurance to limit losses that we may incur as a result of known or unknown environmental conditions.

Further, we cannot be sure that certain types of risks that are currently insurable will continue to be insurable on an economically feasible basis, and we may discontinue, or agree to our tenants discontinuing, certain insurance coverage on some or all of our properties in the future if we determine that the cost of premiums for any of these policies exceeds the value of the coverage.

If an uninsured loss or a loss in excess of insured limits occurs and if we are not able to recover amounts from our applicable tenants for those losses, we may have to incur uninsured costs to mitigate such losses or lose all or a portion of the capital invested in a property, as well as the anticipated future revenue from the property.

We might also remain obligated for any financial obligations related to the property, even if the property is irreparably damaged.

In addition, future changes in the insurance industry’s risk assessment approach and pricing structure could further increase the cost of insuring our properties or decrease the scope of insurance coverage, either of which could have an adverse effect on our financial condition, results of operations, liquidity and ability to pay distributions to our shareholders.

Real estate construction and redevelopment creates risks.

We may develop new properties or redevelop some of our existing properties as the existing leases expire, as our tenants’ needs change or to pursue any other opportunities that we believe are desirable.

The development and redevelopment of new and existing buildings involves significant risks in addition to those involved in the ownership and operation of leased properties, including the risks that construction may not be completed on schedule or within budget, resulting in increased construction costs and delays in leasing such properties and generating cash flows.

Development activities are also subject to risks relating to the inability to obtain, or delays in obtaining, all necessary zoning, land use, building, occupancy, and other required government permits and authorizations.

Once completed, any new properties may perform below anticipated financial results.

The occurrence of one or more of these circumstances in connection with our development or redevelopment activities could have an adverse effect on our financial condition, results of operations and the values of our properties.

RMR LLC relies on information technology and systems in its provision of services to us, and any material failure, inadequacy, interruption or security failure of that technology or those systems could materially and adversely affect us.

RMR LLC relies on information technology and systems, including the Internet and cloud-based infrastructures, commercially available software and its internally developed applications, to process, transmit, store and safeguard information and to manage or support a variety of its business processes (including managing our building systems), including financial transactions and maintenance of records, which may include personal identifying information of employees and tenants and lease data.

If these systems experience material security or other failures, inadequacies or interruptions of its information technology, we could incur material costs and losses and our operations could be disrupted as a result.

Further, third party vendors could experience similar events with respect to their information technology and systems that impact the products and services they provide to RMR LLC or us.

RMR LLC relies on commercially available systems, software, tools and monitoring, as well as its internally developed applications and internal procedures and personnel, to provide security for processing, transmitting, storing and safeguarding confidential tenant, customer and vendor information, such as personally identifiable information related to its employees and others and information regarding its and our financial accounts.

RMR LLC takes various actions, and incurs significant costs, to maintain and protect the operation and security of its information technology and systems, including the data maintained in those systems.

However, it is possible that these measures will not prevent the systems’ improper functioning or a compromise in security, such as in the event of a cyberattack or the improper disclosure of personally identifiable information.

In the past few years, the costs of insurance have increased significantly, and these increased costs have had an adverse effect on us and certain of our tenants.

Increased insurance costs may adversely affect our applicable tenants’ abilities to pay us rent or result in downward pressure on rents we can charge under new or renewed leases.

Insurance proceeds may not be adequate to restore an affected property to its condition prior to a loss or to compensate us for our losses, including lost revenues or other costs.

Certain losses, such as losses we may incur as a result of known or unknown environmental conditions, are not covered by our insurance.

Market conditions or our loss history may limit the scope of insurance or coverage available to us or our applicable tenants on economic terms.

If we determine that an uninsured loss or a loss in excess of insured limits occurs and if we are not able to recover amounts from our applicable tenants for certain losses, we may have to incur uninsured costs as a result or lose all or a portion of the capital invested in a property, as well as the anticipated future revenue from the property.

Changes in global supply chain conditions may result in reduced demand for industrial and logistics properties.

The global economy, including the U.S.

economy, has been experiencing supply chain challenges, which, at times, have reduced the availability of goods and materials, caused price inflation and increased the time from order to receipt of goods and materials.

In addition, increasing market and government concerns about climate change may cause changes in the process for manufacturing, producing and transporting of goods and materials.

Market and governmental actions taken in response to these conditions may result in reduced transporting of goods and lower demand for industrial and logistics properties.

For example, if increased onshoring of manufacturing to countries where the goods or materials are consumed, decreased global trade and increased localization of commercial ecosystems occur, there may be reduced volume of, and travel distance for, transporting goods, which may reduce demand for our properties.

Further, if 3D printing technology, which allows for more localized manufacture and production of products, expands and gains wide market acceptance, the demand for transporting and storing goods at our properties may decrease and other technological changes could be developed and adopted in the future that have a similar effect.

If so, our properties may decline in value and our business, operations and financial condition could be adversely impacted.

Our distributions to our shareholders may be reduced or eliminated and the form of payment could change.

We intend to continue to make regular quarterly distributions to our shareholders.

• our ability to make or sustain the rate of distributions may be adversely affected if any of the risks described in this Annual Report on Form 10-K occur, including any negative impact caused by the prolonged duration of the COVID-19 pandemic and its aftermath on our business, results of operations and liquidity;

• our making of distributions is subject to restrictions contained in the agreements governing our debt and may be subject to restrictions in future debt obligations we may incur;

during the continuance of any event of default under the agreements governing our debt, we may be limited or in some cases prohibited from making distributions to our shareholders;

• the timing and amount of any distributions will be determined at the discretion of our Board of Trustees and will depend on various factors that our Board of Trustees deems relevant, including our FFO attributable to common shareholders, our Normalized FFO attributable to common shareholders, requirements to maintain our qualification for taxation as a REIT, limitations in the agreements governing our debt, the availability to us of debt and equity capital, our dividend yield and our dividend yield compared to the dividend yields of other industrial REITs, our expectation of our future capital requirements and operating performance and our expected needs for and availability of cash to pay our obligations.

For these reasons, among others, our distribution rate may decline or we may cease making distributions to our shareholders.

Further, in order to preserve liquidity, we may elect to pay distributions to our shareholders in part in a form other than cash, such as issuing additional common shares of ours to our shareholders, as permitted by the applicable tax rules.

RMR LLC relies on information technology and systems in providing services to us, and any material failure, inadequacy, interruption or security breach of that technology or those systems could materially harm us.

If these systems experience material failures, inadequacies or interruptions, we could incur material costs and losses and our operations could be disrupted as a result.

RMR LLC takes various actions, and incurs significant costs, to maintain and protect the operation and security of information technology and systems, including the data maintained in those systems.

However, these measures may not prevent the systems’ improper functioning or a compromise in security.

Security breaches, computer viruses, attacks by hackers, online fraud schemes and similar breaches can create significant system disruptions, shutdowns, fraudulent transfer of assets or unauthorized disclosure of confidential information.

The risk of a security breach or disruption, particularly through cyberattack 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 from around the world have increased.

Our cybersecurity risks are heightened by, among other things, the evolving nature of the threats faced, advances in computer capabilities, new discoveries in the field of cryptography and new and increasingly sophisticated methods used to perpetrate illegal or fraudulent activities, including cyberattacks, email or wire fraud and other attacks exploiting security vulnerabilities in RMR LLC’s or other third parties’ information technology networks and systems or operations.

Any failure to maintain the security, proper function and availability of RMR LLC’s information technology and systems, or certain third party vendors’ failure to similarly protect their information technology and systems that are relevant to RMR LLC’s or our operations, or to safeguard RMR LLC’s or our business processes, assets and information could result in financial losses, interrupt our operations, damage our reputation, cause us to be in default of material contracts and subject us to liability claims or regulatory penalties, any of which could materially and adversely affect our business and the value of our securities.

The COVID-19 pandemic may adversely impact RMR LLC’s ability to maintain the security, proper function and availability of information technology and systems since a continued period of remote working by its employees or individuals with whom RMR LLC works outside of its organization could strain its technology resources and introduce operational risk, including heightened cybersecurity risk.

Remote working environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts that seek to exploit the COVID-19 pandemic.

Although most of RMR LLC’s office-based employees have returned to the office, the ongoing transition to in person work arrangements, or any return to remote work in light of the resurgence of the COVID-19 pandemic may result in the continuation of many of the risks of offsite work arrangements.

In addition, RMR LLC’s data security, data privacy, investor reporting and business continuity processes could be impacted by a third party’s inability to perform due to the COVID-19 pandemic or by the failure of, or attack on, their information systems and technology.

Any failure by RMR LLC or third party vendors to maintain the security, proper function and availability of RMR LLC’s information technology and systems could result in financial losses, interrupt our operations, damage our reputation, cause us to be in default of material contracts and subject us to liability claims or regulatory penalties, any of which could materially and adversely affect our business and the value of our securities.

Third party expectations relating to ESG factors may impose additional costs and expose us to new risks.

There is an increasing focus from certain investors and certain of our tenants and other stakeholders concerning corporate responsibility, specifically related to ESG factors.

Some investors may use these factors to guide their investment strategies and, in some cases, may choose not to invest in us, or otherwise do business with us, if they believe our or RMR LLC’s policies relating to corporate responsibility are inadequate.

Third party providers of corporate responsibility ratings and reports on companies have increased in number, resulting in varied and, in some cases, inconsistent standards.

In addition, the criteria by which companies’ corporate responsibility practices are assessed are evolving, which could result in greater expectations of us and RMR LLC and cause us and RMR LLC to undertake costly initiatives to satisfy such new criteria.

Alternatively, if we or RMR LLC elect not to or are unable to satisfy such new criteria or do not meet the criteria of a specific third party provider, some investors may conclude that our or RMR LLC’s policies with respect to corporate responsibility are inadequate.

We and RMR LLC may face reputational damage in the event that our or their corporate responsibility procedures or standards do not meet the standards set by various constituencies.

If we and RMR LLC fail to satisfy the expectations of investors and our tenants and other stakeholders or our or RMR LLC’s initiatives are not executed as planned, our and RMR LLC’s reputation and financial results could be adversely affected, and our revenues, results of operations and ability to grow our business may be negatively impacted.

Risks Related to Our Relationships with RMR LLC

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Our ability to achieve our business objectives depends on RMR LLC and its ability to effectively manage our properties, to appropriately identify and complete our acquisitions and dispositions and to execute our growth strategy.

Accordingly, our business is dependent upon RMR LLC’s business contacts, its ability to successfully hire, train, supervise and manage its personnel and its ability to maintain its operating systems.

Accordingly, our business is dependent upon RMR LLC’s business contacts, its ability to successfully hire,

train, supervise and manage its personnel and its ability to maintain its operating systems.

If we lose the services provided by RMR LLC or its key personnel, our business and growth prospects may decline.

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RMR LLC is a majority-owned subsidiary of RMR Inc.

The Chair of our Board of Trustees and one of our Managing Trustees, Adam Portnoy, as the sole trustee of ABP Trust, is the controlling shareholder of RMR Inc.

The Chair of our Board of Trustees who is also one of our Managing Trustees, Adam Portnoy, as the sole trustee of ABP Trust, is the controlling shareholder of RMR Inc.

and is a managing director and the president and chief executive officer of RMR Inc.

and an officer and employee of RMR LLC.

RMR LLC or its subsidiary also acts as the manager to four other Nasdaq listed REITs:

OPI, which primarily owns office properties leased to single tenants and high credit quality tenants, including government tenants;

DHC, which primarily owns senior living communities, medical office and life science buildings and other healthcare related properties;

SVC, which owns a diverse portfolio of hotels and net lease service and necessity-based retail properties;

and TRMT, which focuses on originating and investing in first mortgage whole loans secured by middle market and transitional commercial real estate.

RMR LLC also provides services to other publicly and privately owned companies, including:

Five Star, which operates senior living communities and provides rehabilitation and wellness services;

TA, which operates and franchises travel centers, standalone truck service facilities and restaurants;

and Sonesta, which operates, manages and franchises hotels, resorts and cruise boats.

A subsidiary of RMR LLC is an investment adviser to RMRM, which recently converted from a registered investment company to a publicly traded mortgage REIT.

Portnoy serves as chair of the board of trustees or board of directors, as applicable, of DHC, OPI, SVC, Five Star and TA and as managing director, managing trustee, director or trustee, as applicable, of the companies managed by RMR LLC or its subsidiaries.

RMR LLC or its subsidiary also acts as the manager to certain other Nasdaq listed companies and private companies, as noted elsewhere in this Annual Report on Form 10-K, and Mr.

Portnoy serves as a managing director, managing trustee, director or trustee, as applicable, of those companies, and as chair of the board of trustees or board of directors, as applicable, of certain of those companies.

John Murray, our other Managing Trustee and our President and Chief Executive Officer, Richard Siedel, Jr., our Chief Financial Officer and Treasurer, and Yael Duffy, our Vice President and Chief Operating Officer, are also officers and employees of RMR LLC.

Murray is also a managing trustee and the president and chief executive officer of SVC and Mr.

Siedel is also the chief financial officer and treasurer of DHC.

Murray and Siedel and Ms.

Murray is also a managing trustee and the president and chief executive officer of Service Properties Trust, or SVC, and Mr.

Siedel is also the chief financial officer and treasurer of Diversified Healthcare Trust, or DHC.

Portnoy, Murray and Siedel and Ms.

Duffy have duties to RMR LLC, Mr.

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In addition to his investments in RMR Inc.

and RMR LLC, Adam Portnoy holds equity investments in other companies to which RMR LLC or its subsidiaries provide management services and some of these companies have significant cross ownership interests, including, for example:

as of December 31, 2020, Mr.

Portnoy beneficially owned, in aggregate, 1.2% of our outstanding common shares, 6.3% of Five Star’s outstanding common stock (including through ABP Trust), 1.5% of OPI’s outstanding common shares, 1.1% of DHC’s outstanding common shares, 2.3% of RMRM’s outstanding common shares, 1.1% of SVC’s outstanding common shares, 4.5% of TA’s outstanding common shares (including through RMR LLC) and 19.4% of TRMT’s outstanding common shares (including through Tremont Realty Advisors LLC).

and RMR LLC, Mr.

Portnoy holds equity investments in other companies to which RMR LLC or its subsidiaries provide management services and some of these companies have significant cross ownership interests.

Our executive officers may also own equity investments in other companies to which RMR LLC or its subsidiaries provide management services.

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In our management agreements with RMR LLC, we acknowledge that RMR LLC may engage in other activities or businesses and act as the manager to any other person or entity (including other REITs) even though such person or entity has investment policies and objectives similar to our policies and objectives and we are not entitled to preferential treatment in receiving information, recommendations and other services from RMR LLC.

Accordingly, we may lose investment opportunities to, and may compete for tenants with, other businesses managed by RMR LLC or its subsidiaries, including our existing joint venture.

Accordingly, we may lose investment opportunities to, and may compete for tenants with, other businesses managed by RMR LLC or its subsidiaries, including our existing and any future joint ventures.

We cannot be sure that our Code of Conduct or our governance guidelines, or other procedural protections we adopt will be sufficient to enable us to identify, adequately address or mitigate actual or alleged conflicts of interest or ensure that our transactions with related persons are made on terms that are at least as favorable to us as those that would have been obtained with an unrelated person.

Our management agreements with RMR LLC were not negotiated on an arm’s length basis and their fee and expense structure may not create proper incentives for RMR LLC, which may increase the risk of an investment in our common shares.

As a result of our relationships with RMR LLC and its current and former controlling shareholder(s), our management agreements with RMR LLC were not negotiated on an arm’s length basis between unrelated parties, and therefore, while such agreements were negotiated with the use of a special committee and disinterested Trustees, the terms, including the fees payable to RMR LLC, may not be as favorable to us as they would have been if they were negotiated on an arm’s length basis between unrelated parties.

As a result of our relationships with RMR LLC and its current and former controlling shareholder(s), our management agreements with RMR LLC were not negotiated on an arm’s length basis between unrelated parties, and therefore, while such agreements were negotiated with the use of a special committee and disinterested Trustees, the terms, including the fees payable to RMR LLC, may be different from those negotiated on an arm’s length basis between unrelated parties.

Our property management fees are calculated based on rents we receive and construction supervision fees for construction at our properties overseen and managed by RMR LLC, and our base business management fee is calculated based upon the lower of the historical costs of our real estate investments and our market capitalization.

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These provisions substantially increase the cost to us of terminating the management agreements without cause, which may limit our ability to end our relationship with RMR LLC as our manager.

The payment of the termination fee could have a material adverse effect on our financial condition, including our ability to pay dividends to our shareholders.

The payment of the termination fee could have a material adverse effect on our financial condition, including our ability to pay distributions to our shareholders.

Our management arrangements with RMR LLC may discourage a change of control of us.

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For these reasons, our management agreements with RMR LLC may discourage a change of control of us, including a change of control which might result in payment of a premium for our common shares.

We are party to transactions with related parties that may increase the risk of allegations of conflicts of interest, and such allegations may impair our ability to realize the benefits we expect from these transactions.

We are party to transactions with related parties that may increase the risk of allegations of conflicts of interest.

We are party to transactions with related parties, including with entities controlled by Adam Portnoy or to which RMR LLC or its subsidiaries provide management services.

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We are subject to the risk that our shareholders or the shareholders of RMR Inc.

or other related parties may challenge any such related party transactions and the agreements entered into as part of them.

If such a challenge were to be successful, we might not realize the benefits expected from the transactions being challenged.

Moreover, any such challenge could result in substantial costs and a diversion of our management’s attention, could have a material adverse effect on our reputation, business and growth and could adversely affect our ability to realize the benefits expected from the transactions, whether or not the allegations have merit or are substantiated.

or other related parties may challenge any such related party transactions.

If challenges to related party transactions were to be successful, we might not realize the benefits expected from the transactions being challenged.

Moreover, any such challenge could result in substantial costs and a diversion of our management’s attention, could have a material adverse effect on our reputation, business and growth and could

adversely affect our ability to realize the benefits expected from the transactions, whether or not the allegations have merit or are substantiated.

We may be at an increased risk for dissident shareholder activities due to perceived conflicts of interest arising from our management structure and relationships.

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Additionally, provisions contained in our declaration of trust and bylaws or under Maryland law may have a similar impact, including, for example, provisions relating to:

• the current division of our Trustees into classes until our 2023 annual meeting of shareholders, with three classes remaining with terms expiring in 2021, 2022 and 2023, respectively (although effective at our 2021 annual meeting of shareholders, Trustees of the class of trustees whose term expires at that meeting or expires at a subsequent annual meeting of shareholders will be elected annually, with all of our Trustees being elected annually as of our 2023 annual meeting of shareholders, and with a majority of our current Trustees having terms expiring at our 2022 annual meeting of shareholders);

• the current different terms of our Trustees, with a majority of our existing Trustees having terms expiring in 2022 and the remainder having terms expiring in 2023, which could delay a change of control of us (although beginning at our 2023 annual meeting of shareholders and thereafter, all of our Trustees will stand for election for one year terms);

• limitations on shareholder voting rights with respect to certain actions that are not approved by our Board of Trustees;

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As a result, we and our shareholders may have more limited rights against our present and former Trustees and officers than might otherwise exist absent the provisions in our declaration of trust and indemnification agreements or that might exist with other companies, which could limit our shareholders’ recourse in the event of actions not in their best interest.

Disputes with RMR LLC and OPI (as successor by merger to SIR) may be referred to mandatory arbitration proceedings, which follow different procedures than in-court litigation and may be more restrictive to those asserting claims than in-court litigation .

Our agreements with RMR LLC and OPI (as successor by merger to SIR) provide that any dispute arising thereunder will be referred to mandatory, binding and final arbitration proceedings if we, or any other party to such dispute unilaterally so demands.

As a result, we and our shareholders would not be able to pursue litigation in state or federal court against RMR LLC or OPI if we or any other parties against whom the claim is made unilaterally demands the matter be resolved by arbitration.

Disputes with RMR LLC may be referred to mandatory arbitration proceedings, which follow different procedures than in-court litigation and may be more restrictive to those asserting claims than in-court litigation.

Our agreements with RMR LLC provide that any dispute arising thereunder will be referred to mandatory, binding and final arbitration proceedings if we, or any other party to such dispute unilaterally so demands.

As a result, we and our shareholders would not be able to pursue litigation in state or federal court against RMR LLC if we or any other parties against whom the claim is made unilaterally demands the matter be resolved by arbitration.

In addition, the ability to collect attorneys’ fees or other damages may be limited in the arbitration proceedings, which may discourage attorneys from agreeing to represent parties wishing to bring such litigation.

Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain actions and proceedings that may be initiated by our shareholders, which could limit our shareholders’ ability to obtain a judicial forum they deem favorable for disputes with us or our Trustees, officers, manager, agents or employees.

Our bylaws currently provide that the Circuit Court for Baltimore City, Maryland will be the sole and exclusive forum for:

(1) any derivative action or proceeding brought on our behalf;

(2) any action asserting a claim for breach of a duty owed by any Trustee, officer, manager, agent or employee of ours to us or our shareholders;

(3) any action asserting a claim against us or any Trustee, officer, manager, agent or employee of ours arising pursuant to Maryland law, our declaration of trust or bylaws brought by or on behalf of a shareholder, either on his, her or its own behalf, on our behalf or on behalf of any series or class of our shareholders or shareholders against us or any Trustee, officer, manager, agent or employee of ours, including any disputes, claims or controversies relating to the meaning, interpretation, effect, validity, performance or enforcement of our declaration of trust or bylaws;

(2) any action asserting a claim for breach of a duty owed by any Trustee, officer, manager or other agent of ours to us or our shareholders;

(3) any action asserting a claim against us or any Trustee, officer, manager, agent or employee of ours arising pursuant to Maryland law, our declaration of trust or bylaws brought by or on behalf of a shareholder, either on his, her or its own behalf, on our behalf or on behalf of any series or class of shares of beneficial interest of ours or by our shareholders against us or any Trustee, officer, manager, agent or employee of ours, including any disputes, claims or controversies relating to the meaning, interpretation, effect, validity, performance or enforcement of our declaration of trust or bylaws;

or (4) any action asserting a claim against us or any Trustee, officer, manager, agent or employee of ours that is governed by the internal affairs doctrine.

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Any person or entity purchasing or otherwise acquiring or holding any interest in our shares of beneficial interest shall be deemed to have notice of and to have consented to these provisions of our bylaws, as they may be amended from time to time.

The exclusive forum provision of our bylaws may limit a shareholder’s ability to bring a claim in a judicial forum that the shareholder believes is favorable for disputes with us or our Trustees, officers, manager, agents or employees, which may discourage lawsuits against us and our Trustees, officers, manager, agents or employees.

The exclusive forum provision of our bylaws may limit a shareholder’s ability to bring a claim in a judicial forum that the shareholder believes is favorable for disputes with us or our Trustees, officers, manager or other agents, which may discourage lawsuits against us and our Trustees, officers, manager or other agents.

Risks Related to Our Taxation

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We generally must distribute annually at least 90% of our REIT taxable income, subject to specified adjustments and excluding any net capital gain, in order to maintain our qualification for taxation as a REIT under the IRC.

To the extent that we satisfy this distribution requirement, federal corporate income tax will not apply to the earnings that we distribute, but if we distribute less than 100% of our REIT taxable income, then we will be subject to federal corporate income tax on our undistributed taxable income.

To the extent that we satisfy this distribution requirement, federal corporate income tax will not apply to the earnings that we distribute, but if we

distribute less than 100% of our REIT taxable income, then we will be subject to federal corporate income tax on our undistributed taxable income.

We intend to make distributions to our shareholders to comply with the REIT requirements of the IRC.

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Also, our income tax expense could increase if jurisdictions in which we hold property modified their income tax treatment of REITs, such as by limiting or eliminating favorable income tax deductions (including the dividends paid deduction).

In fact, in 2019 the Hawaii state legislature passed a bill that would have eliminated the dividends paid deduction afforded to REITs under Hawaii tax laws and otherwise required REITs to either file a composite tax return or pay withholding tax attributable to distributions to non-Hawaii resident shareholders.

While this bill was ultimately vetoed by the governor of Hawaii, similar legislation has been reintroduced in this year's legislative session.

In fact, the Hawaii state legislature passed a bill in 2019 that would have eliminated the dividends paid deduction afforded to REITs under Hawaii tax laws and otherwise required REITs to either file a composite tax return or pay withholding tax attributable to distributions to non-Hawaii resident shareholders.

While that bill was ultimately vetoed by the governor of Hawaii, similar legislation has been reintroduced in this year’s legislative session.

In addition, in order to meet the requirements for qualification and taxation as a REIT under the IRC, prevent the recognition of particular types of non-cash income, or avert the imposition of a 100% tax that applies to specified gains derived by a REIT from dealer property or inventory, we may hold or dispose of some of our assets and conduct some of our operations through our TRSs or other subsidiary corporations that will be subject to corporate level income tax at regular rates.

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

We may incur adverse tax consequences if Monmouth has failed or fails to qualify for taxation as a REIT for U.S.

federal income tax purposes.

As a condition of the closing of the Monmouth Transaction, Monmouth’s counsel will provide us with an opinion that Monmouth has been organized and has operated in conformity with the requirements for qualification and taxation as a REIT under the IRC.

If, contrary to that opinion and our expectation, Monmouth has failed or fails to qualify for taxation as a REIT for U.S.

federal income tax purposes, then we may inherit significant tax liabilities in the Monmouth Transaction because, as the successor by merger to Monmouth, we would generally inherit any corporate income tax liabilities of Monmouth, including penalties and interest.

It is unclear whether the IRC provisions that are generally available to remediate REIT compliance failures will be available to us as a successor in respect of any determination that Monmouth failed to qualify for taxation as a REIT.

If and to the extent the remedial provisions are available to us to address Monmouth’s REIT qualification and taxation for the applicable period prior to or including the Monmouth Transaction, we may incur significant cash outlays in connection with the remediation, possibly including (a) required distribution payments to shareholders and associated interest payments to the IRS, and (b) tax and interest payments to the IRS and state and local tax authorities.

Monmouth’s failure before the completion of the Monmouth Transaction to qualify for taxation as a REIT and our efforts to remedy any such failure could have an adverse effect on our results of operations and financial condition.

Legislative or other actions affecting REITs could materially and adversely affect us and our shareholders.

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We cannot predict how changes in the tax laws might affect us or our shareholders.

New legislation, Treasury regulations, administrative interpretations or court decisions could significantly and negatively affect our ability to remain qualified for taxation as a REIT or the tax consequences of such qualification to us and our shareholders.

Risks Related to Our Securities

Our distributions to our shareholders may be reduced or eliminated and the form of payment could change.

We intend to continue to make regular quarterly distributions to our shareholders.

• our making of distributions is subject to restrictions contained in the agreements governing our debt and may be subject to restrictions in future debt obligations we may incur;

during the continuance of any event of default

under the agreements governing our debt, we may be limited or in some cases prohibited from making distributions to our shareholders;

For these reasons, among others, our distribution rate may decline or we may cease making distributions to our shareholders.

Changes in market conditions could adversely affect the value of our securities.

As with other publicly traded equity securities and REIT securities, the value of our common shares and other securities depends on various market conditions that are subject to change from time to time, including:

• the extent of investor interest in our securities;

• the general reputation of REITs and externally managed companies and the attractiveness of our equity securities in comparison to other equity securities, including securities issued by other real estate based companies or by other issuers less sensitive to rises in interest rates;

• our underlying asset value;

• investor confidence in the stock and bond markets, generally;

• market interest rates;

• national economic conditions;

• changes in tax laws;

• general market conditions, including factors unrelated to our operating performance;

• perception of our environmental, social and governance policies relative to other companies.

We believe that one of the factors that investors consider important in deciding whether to buy or sell equity securities of a REIT is the distribution rate, considered as a percentage of the price of the equity securities, relative to market interest rates.

Interest rates have been at historically low levels for an extended period of time.

There is a general market perception that REIT shares outperform in low interest rate environments and underperform in rising interest rate environments when compared to the broader market.

Federal Reserve has indicated that it does not expect to raise interest rates in response to the COVID-19 pandemic and current market conditions until at least the end of 2023.

There can be no assurance, however, that the U.S.

Federal Reserve will not raise rates prior to that time.

Federal Reserve increases interest rates or if there is a market expectation of such increases, prospective purchasers of REIT equity securities may want to achieve a higher distribution rate.

Thus, higher market interest rates, or the expectation of higher interest rates, could cause the value of our securities to decline.

Further issuances of debt or equity securities may adversely affect our shareholders.

As a REIT, we generally will not be able to retain sufficient cash to fund our operations, repay our debts, invest in our properties and fund acquisitions and development or redevelopment efforts, and therefore, our ability to execute our business strategy depends on our access to an appropriate blend of debt financing, which may include secured and unsecured debt, and equity financing, which may include common and preferred shares.

The interests of our existing shareholders could be diluted if we issue additional equity securities.

In addition, if we decide in the future to issue debt or equity securities that rank senior to our common shares, it is likely that they will be governed by an indenture or other instrument containing covenants restricting our operating flexibility.

Also, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common shares and may result in further dilution to our shareholders.

Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or even estimate the amount, timing or nature of our future capital offerings.

Thus, our shareholders will bear the risk of our future offerings reducing the market price of our common shares and diluting the value of their common shares.

New legislation, Treasury regulations, administrative interpretations

or court decisions could significantly and negatively affect our ability to remain qualified for taxation as a REIT or the tax consequences of such qualification to us and our shareholders.

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