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Item 1A. Risk Factors

2024-02-20 compared with 2023-02-21 · 106 added, 88 removed, 457 unchanged (30% of the section changed)

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Risks Relating to Our Business and Operations

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Our real estate portfolio is concentrated across a limited number of states, which subjects us to an increased risk of significant loss if adverse weather, economic, or regulatory changes or developments in the markets in which our properties are located occur.

Since our current real estate profile is concentrated across a limited number of states, we are currently subject to adverse changes in the political or regulatory climate in those states or specific counties where our properties are located that could adversely affect our real estate portfolio and our ability to lease properties.

Since our current real estate profile is concentrated across a limited number of states, we are subject to adverse changes in the political or regulatory climate in those states or specific counties where our properties are located that could adversely affect our real estate portfolio and our ability to lease properties.

The geographic concentration of our portfolio could also cause us to be more susceptible to adverse weather, economic or regulatory changes, or developments in the markets in which our properties are located than if we owned a more geographically-diverse portfolio, which could materially and adversely affect the value of our farms and our ability to lease our farms on favorable terms or at all.

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We expect that a significant number of our future tenants will be independent farming operations, about which there is generally little or no publicly available operating and financial information.

As a result, we will rely on our Adviser to perform due diligence investigations of these tenants, their operations, and their prospects.

As a result, we rely on our Adviser to perform due diligence investigations of these tenants, their operations, and their prospects.

We may not learn all of the material information we need to know regarding these businesses through our investigations.

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• expenditure of money and time on development that may not be completed;

• inability to achieve rental rents per acre at newly-developed farms to make the properties profitable;

• inability to achieve rental rates per acre at newly-developed farms to make the properties profitable;

• higher than estimated costs, including labor and planting, irrigation or other related costs;

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We currently lease many of our properties to medium-sized, independent farming operations and agricultural businesses, which may have limited financial and personnel resources and, therefore, may be less stable than larger companies, which could impact our ability to generate rental revenue.

We expect to lease a significant number of our properties to medium-sized farming operations and related agricultural businesses, which will expose us to a number of unique risks related to these entities.

We expect to lease a significant number of our properties to medium-sized farming operations and related agricultural businesses, which will expose us to a number of risks specifically related to these entities.

For example, medium-sized agricultural businesses may be more likely than larger farming operations to have difficulty making lease payments when they experience adverse events.

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In addition, our target tenants may face intense competition, including competition from companies with greater financial resources, which could lead to price pressure on crops that could lower our tenants’ income.

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Furthermore, the success of a medium-sized business may also depend on the management talents and efforts of one or a small group of persons.

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Our stockholders are unable to evaluate the economic merits of our investments or the terms of any dispositions of properties.

Our Adviser has broad authority to make acquisitions of properties and dispositions of properties.

Our Adviser has broad authority to make acquisitions and dispositions of properties.

There can be no assurance that our Adviser will be able to continue to identify or negotiate acceptable terms for the acquisition or dispositions of properties or that we will be able to continue to acquire or dispose of such properties on favorable terms.

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We expect that single tenants will continue to occupy most of our farms, and, therefore, the success of our investments will continue to be materially dependent on the financial stability of these tenants.

Some of our tenants may have been recently restructured using leverage acquired in a leveraged transaction, may otherwise be subject to significant debt obligations, or may have been adversely impacted by public health emergencies, including the COVID-19 pandemic.

Tenants that are subject to significant debt obligations may be unable to make their rent payments if there are adverse changes in their businesses or in general economic conditions.

Tenants that have been impacted adversely by public health emergencies, including the COVID-19 pandemic, may not be able to make timely rental payments due to labor shortages, supply chain issues, or due to government-mandated lockdowns or other measures taken to address such public health emergencies.

Tenants that have been impacted adversely by public health emergencies may not be able to make timely rental payments due to labor shortages, supply chain issues, or due to government-mandated lockdowns or other measures taken to address such public health emergencies.

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

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In addition, these companies’ revenues and expenses may fluctuate according to the growing season, which may impact their ability to make regular lease payments.

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Any lease payment defaults by a tenant could adversely affect our cash flows and cause us to reduce the amount of distributions to stockholders.

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A reduction in the rent we receive could have a material adverse effect on our cash flow and ability to make distributions to our stockholders.

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Our investments in farmland used for permanent crops have a higher risk profile than farmland used for annual row crops.

Since our IPO, we have expanded our investment focus to include farms used for permanent crops, and we intend to continue to add to our investments in farmland used for permanent crops in the future.

Permanent crops have plant structures (such as

trees, vines, or bushes) that produce yearly crops without being replanted.

Permanent crops have plant structures (such as trees, vines, or bushes) that produce yearly crops without being replanted.

Examples include almonds, apples, blueberries, figs, pistachios, oranges, and table and wine grapes.

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To lease the cropland that we intend to acquire, these properties will require access to sufficient water to make them suitable for farming.

Additionally, the ability of our current tenants to be able to make their rental payments is also dependent upon sufficient access to water.

Although we expect to acquire properties with sufficient water access, should the need arise for additional wells from which to obtain water, we would be required to obtain permits prior to drilling such wells.

Additionally, the ability of our current tenants to make their rental payments is dependent upon sufficient access to water.

Although we expect to acquire properties with sufficient water access, should the need arise for additional wells from which to obtain water, we likely would be required to obtain permits prior to drilling such wells.

Permits for drilling water wells are required by state and county regulations, and such permits may be difficult to obtain due to the limited supply of water in areas where we expect to acquire properties, such as the farming regions of California.

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Our agricultural properties are subject to adverse weather conditions, seasonal variability, crop disease and other contaminants, which may affect our tenants’ ability to pay rent and thereby have an adverse effect on our results of operations and our ability to make distributions to stockholders.

Fresh produce, including produce used in canning and other packaged food operations, is vulnerable to adverse weather conditions, including windstorms, floods, drought and temperature extremes, which are quite common but difficult to predict.

Because fresh produce is highly perishable and generally must be brought to market and sold soon after harvest, unfavorable

growing conditions can reduce both crop size and crop quality.

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Because fresh produce is highly perishable and generally must be brought to market and sold soon after harvest, unfavorable growing conditions can reduce both crop size and crop quality.

Seasonal factors, including supply and consumer demand, may also have an effect on the crops grown by our tenants.

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It is difficult to predict the occurrence or severity of such product recalls as well as the impact of these upon our tenants.

Although we do not expect that a significant portion our rental payments will be based on the quality of our tenants’ harvests, any of these factors could have a material adverse effect on our tenants’ ability to pay rent to us, which in turn could have a material adverse effect on our ability to make distributions to our stockholders.

Although we do not expect that a significant portion of our rental payments will be based on the quality of our tenants’ harvests, any of these factors could have a material adverse effect on our tenants’ ability to pay rent to us, which in turn could have a material adverse effect on our ability to make distributions to our stockholders.

As permanent crops produce yearly crops without being replanted, they are more expensive to replace and more susceptible to disease and poor weather than annual row crops.

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Many climatologists predict increases in average temperatures, more extreme temperatures and increases in volatile weather over time.

The effects of climate change may be more significant along coastlines, such as in the California coastal areas where we partially focus our acquisition efforts, due to rising sea levels resulting from melting of polar ice caps, which could result in increased risk of coastal erosion, flooding, degradation in the availability and quality of groundwater aquifers, and expanding agricultural weed and pest populations.

The effects of climate change may be more significant along coastlines, such as in the California coastal areas where we partially focus our acquisition efforts, due to rising sea levels resulting from the melting of polar ice caps, which could result in increased risk of coastal erosion, flooding, degradation in the availability and quality of groundwater aquifers, and expanding agricultural weed and pest populations.

As a result, the effects of climate change could make our properties less suitable for farming or other alternative uses, which could adversely impact the value of our properties, our ability to generate rental revenue from leasing our properties and our cash available for distribution to stockholders.

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To the extent we issue debt securities, other instruments of indebtedness, or additional preferred stock or borrow additional money from banks or other financial institutions, we will be additionally exposed to risks associated with leverage, including increased risk of loss.

If we issue additional preferred securities that rank senior to our common shares in our capital structure, the holders of such preferred securities may have separate voting rights and other rights, preferences, or privileges, economic and otherwise, more favorable than those of our common shares and our currently-designated preferred securities (including our Series B Preferred Stock, Series C Preferred Stock, Series D Term Preferred Stock, and Series E Preferred Stock), and the issuance of such preferred securities could have the effect of delaying, deferring, or preventing a transaction or a change of control that might involve a premium price for common stockholders.

If we issue additional preferred securities that rank senior to our common shares in our capital structure, the holders of such preferred securities may have separate voting rights and other rights, preferences, or privileges, economic and otherwise, more favorable than those of our common shares and our currently-designated preferred securities, and the issuance of such preferred securities could have the effect of delaying, deferring, or preventing a transaction or a change of control that might involve a premium price for common stockholders.

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Any inability to access additional financing on terms that are favorable to us may adversely affect our ability to grow and our business generally.

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If we are unable to make our debt payments as required, either under our current credit facilities or any future facilities, a lender could foreclose on certain of the properties securing its loan.

This could cause us to lose part or all of our investment in the property, which in turn could cause the value of our common stock, Series B Preferred Stock, Series C Preferred Stock, Series D Term Preferred Stock, or Series E Preferred Stock or the distributions to our stockholders to be reduced or delayed.

This could cause us to lose part or all of our investment in the property, which in turn could cause the value of our common stock, any of our currently-designated preferred securities, or the distributions to our stockholders to be reduced or delayed.

As we consider additional debt financing from third-party lenders, our assets may become highly leveraged, which may result in losses.

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An increased amount of leverage may expose us to cash flow problems if rental income decreases.

Under those circumstances, in order to pay our debt obligations, including distribution and dividend payments to shareholders, we might be required to sell properties at a loss or be unable to make distributions or decrease distributions to our stockholders.

Under those circumstances, in order to pay our debt obligations, including distribution and dividend payments to stockholders, we might be required to sell properties at a loss or be unable to make distributions or decrease distributions to our stockholders.

A failure to pay amounts due to lenders or redeem shares of our Series D Term Preferred Stock under the mandatory redemption requirement may result in a default on our obligations and result in certain penalties, such as increased interest rates.

Additionally, our degree of leverage could adversely affect our ability to obtain additional financing and may have an adverse effect on the public market price of shares of our publicly-traded common stock, Series B Preferred Stock, and Series D Term Preferred Stock.

We face a risk from the fact that certain of our properties are cross-collateralized.

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Competition for the acquisition of agricultural real estate may impede our ability to make acquisitions, increase the cost of these acquisitions or decrease or prevent increases in the occupancy and rental rates of our current properties.

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We will compete for the acquisition of properties with many other entities engaged in agricultural and real estate investment activities, including corporate agriculture companies, financial institutions, institutional pension funds, real estate companies, private equity funds and private real estate investors.

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Although the current development market contains uncertainties, these uncertainties may be more acute over time, since we do

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not intend to acquire properties that are expected to be converted to urban or suburban uses in the near term.

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The devotion of a portion of our properties to these oil and gas

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operations would reduce the amount of the surface available for farming or farm-related uses, which could adversely impact the rents that we receive from leasing these properties.

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A significant change in interest rates could have an adverse impact on our results of operations.

The Federal Reserve has increased the federal funds rate significantly over the past 12 months and may continue to do so, depending on certain key economic indicators, such as rising inflation or the unemployment rate.

Any such future increases may cause interest rates and borrowing costs to rise even further, which may negatively impact our ability to access the debt markets on favorable terms.

While the U.S.

Federal Reserve increased the federal funds rate 11 times from March 2022 through July 2023, they have held the federal funds rate flat since then.

Future decisions on the federal funds rate will depend on a variety of key economic indicators, including inflation and the unemployment rate, among others.

Any future increases may cause interest rates and borrowing costs to rise even further, which may negatively impact our ability to access the debt markets on favorable terms.

Any prolonged adverse economic conditions could have a material adverse effect on our business, financial condition, and results of operations.

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Federal Reserve is a major participant in, and its actions significantly impact, the real estate debt markets.

While the Federal Reserve is expected to make gradual increases in the federal funds rate, there can be no assurance if and when such increases will be made.

These increases in the federal funds rate and any future increases due to other key economic indicators, such as the unemployment rate or inflation, may cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on favorable terms and the market value of our capital stock.

The Federal Reserve has kept the federal funds rate flat since July 2023, and there can be no assurance if or when any reductions will be announced.

Partly due to increases in the federal funds rate prior to July 2023 and the uncertainty over future actions of the Federal Reserve, borrowing costs remain high.

Should the Federal Reserve continue to keep the federal funds rate flat for a prolonged period of time, or should it announce further increases, this may cause interest rates and borrowing costs to remain high or rise even further, which may negatively impact our ability to access the debt markets on favorable terms and the market value of our capital stock.

This may result in future acquisitions by us generating lower overall economic returns and increasing the costs associated with refinancing current debt, which could potentially reduce future cash flow available for distributions.

It is difficult to predict future legislation, regulation, and executive actions, and we cannot predict or control the impact future actions by regulators or government bodies, such as the U.S.

Federal Reserve, will have on our business.

It is difficult to predict future legislation, regulation, and executive actions, and we cannot predict or control the impact future actions by regulators or government bodies, such as the Federal Reserve, will have on our business.

Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations or the operations of businesses in which we invest, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our business, financial condition, and operating results.

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We also rely extensively on computer systems to process transactions and manage our business.

A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity, or availability of our information resources.

These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems or those of our third-party providers for purposes of misappropriating assets, stealing confidential information, corrupting data, or causing operational disruption.

The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation, and damage to our business relationships.

Despite careful security and controls design, implementation, updating, and independent third-party verification, our information technology systems, and those of our third-party providers, could become subject to cybersecurity incidents.

A cybersecurity incident is defined by the SEC as an unauthorized occurrence, or a series of related unauthorized occurrences, on or conducted through our information systems that jeopardize the confidentiality, integrity, or availability of our information resources or any information residing therein.

A cybersecurity incident may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems or those of our third-party providers for purposes of misappropriating assets, stealing confidential information, corrupting data, or causing operational disruption.

The result of a cybersecurity incident may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation, and damage to our business relationships.

As our reliance on technology has increased, so have the risks posed to our information systems, both internal and those provided to us by third-party service providers.

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

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

Our business may be adversely affected by public health emergencies, including the ongoing effects of the COVID-19 pandemic.

Although the macroeconomic impact of the pandemic has decreased in comparison to earlier in the pandemic, the COVID-19 pandemic caused, both in the U.S.

and globally, significant disruptions to financial markets, labor and supply disruptions and shortages, and inflationary economic conditions.

All of these adverse macroeconomic effects have led to global economic volatility and could adversely impact our business.

Further, any public health emergency, including any outbreak of COVID-19, SARS, H1N1/09 flu, avian flu, other coronavirus, Ebola or other existing or new epidemic diseases, or the threat thereof, could have a significant adverse impact on the Company and could adversely affect the Company’s ability to fulfill its investment objectives.

The extent of the impact of any public health emergency on the Company’s operational and financial performance will depend on many factors, including the duration and scope of such public health emergency, the extent of any related travel advisories and restrictions implemented, the impact of such public health emergencies on overall supply and demand, goods and services, investor liquidity, consumer confidence and levels of economic activity, and the extent of its disruption to important global, regional, and local supply chains and economic markets, all of which are highly uncertain and cannot be predicted.

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

We have implemented processes, procedures, and internal controls to help prevent, detect, and mitigate cybersecurity threats and cyber intrusions, but these measures, as well as our increased awareness of the nature and extent of a threat of a cyber-incident,

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

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

Our business may be adversely affected by public health emergencies.

Any public health emergency, including any outbreak of COVID-19, SARS, H1N1/09 flu, avian flu, other coronavirus, Ebola or other existing or new epidemic diseases, or the threat thereof, could have a significant adverse impact on us and could adversely affect our ability to fulfill our investment objectives.

The extent of the impact of any public health emergency on our operational and financial performance will depend on many factors, including the duration and scope of such public health emergency, the extent of any related travel advisories and restrictions implemented, the impact of such public health emergencies on overall supply and demand, goods and services, investor liquidity, consumer confidence and levels of economic activity, and the extent of its disruption to important global, regional, and local supply chains and economic markets, all of which are highly uncertain and cannot be predicted.

The effects of a public health emergency may disrupt the operations of our tenant-farmers and pose the risk that they may be prevented from conducting normal business activities for an unknown period of time, including shutdowns that may be requested or mandated by governmental authorities.

We cannot accurately estimate the impact that a public health threat could have on our farmland portfolio, but it could disrupt the businesses of our tenant-farmers and impact their ability to make lease payments to us, including under modified lease terms allowing for deferred rent, thereby decreasing the overall value of our leasehold interests in the properties, which could adversely impact our business, financial condition, or results of operations.

Further, the operations of the Company may be significantly impacted, or even temporarily or permanently halted, as a result of government shelter-in-place measures, vaccine mandates, voluntary and precautionary restrictions on travel or meetings, paused or reversed reopening orders, and other factors related to a public health emergency, including its potential adverse impact on the health of the Adviser’s and Administrator’s personnel.

As a result, there is a risk that this continuing crisis could adversely impact the Company’s ability to source, manage, and divest investments and the Company’s ability to achieve its investment objectives, all of which could result in significant losses to the Company and could impact the Company’s ability to make interest and distribution payments to lenders and stockholders, respectively, including their respective amounts.

Further, our operations may be significantly impacted, or even temporarily or permanently halted, as a result of government shelter-in-place measures, vaccine mandates, voluntary and precautionary restrictions on travel or meetings, paused or reversed reopening orders, and other factors related to a public health emergency, including its potential adverse impact on the health of our Adviser’s and Administrator’s personnel.

As a result, there is a risk that this continuing crisis could adversely impact our ability to source, manage, and divest investments and the Company’s ability to achieve its investment objectives, all of which could result in significant losses to us and could impact our ability to make interest and distribution payments to lenders and stockholders, respectively, including their respective amounts.

Risks Associated With Our Use of an Adviser to Manage Our Business

We are dependent upon our key management personnel for our future success, particularly David Gladstone, Terry Lee Brubaker, Bill Reiman, Bill Frisbie, Lewis Parrish, and Jay Beckhorn.

We are dependent on our senior management and other key management members to carry out our business and investment strategies.

We are dependent upon our key management personnel for our future success, particularly David Gladstone, Terry Lee Brubaker, Bill Reiman, Lewis Parrish, and Jay Beckhorn.

We have no employees and are therefore dependent on the senior management and other key management members who are employed by our Adviser or Administrator, as applicable, to carry out our business and investment strategies.

Our future success depends to a significant extent on the continued service and coordination of our senior management team, particularly David Gladstone, our chairman, chief executive officer and president;

Terry Lee Brubaker, our vice chairman and chief operating officer;

Bill Reiman and Bill Frisbie, our Executive Vice Presidents;

Terry Lee Brubaker, our chief operating officer;

Bill Reiman, our Executive Vice President;

and Lewis Parrish, our chief financial officer and assistant treasurer.

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Brubaker is also an executive officer of our Adviser and our Administrator.

The departure of any of our executive officers or key personnel of our Adviser could have a material adverse effect on our ability to implement our business strategy and to achieve our investment objectives.

The departure of any of our executive officers or key personnel of our Adviser or Administrator, as applicable, could have a material adverse effect on our ability to implement our business strategy and to achieve our investment objectives.

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

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Our Adviser manages our real estate portfolio and locates, evaluates, recommends and negotiates the acquisition of our real estate investments and mortgage loans.

At the same time, our Advisory Agreement permits our Adviser to conduct other commercial activities and to provide management and advisory services to other entities, including, but not limited to, Gladstone Commercial, Gladstone Capital, and Gladstone Investment, each of which is affiliated with us.

At the same time, our Advisory Agreement permits our Adviser to conduct other

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commercial activities and to provide management and advisory services to other entities, including, but not limited to, Gladstone Commercial, Gladstone Capital, and Gladstone Investment, each of which is affiliated with us.

Each of our executive officers, other than Mr.

Parrish, is also an executive officer of Gladstone Commercial, which actively makes real

estate investments, and Gladstone Capital and Gladstone Investment, which actively make loans to and invest in small- and medium-sized companies.

Parrish, is also an executive officer of Gladstone Commercial, which actively makes real estate investments, and Gladstone Capital and Gladstone Investment, which actively make loans to and invest in small- and medium-sized companies.

As a result, we may, from time to time, have conflicts of interest with our Adviser in its management of our business and that of Gladstone Commercial, Gladstone Investment, or Gladstone Capital, which may arise primarily from the involvement of our Adviser, Gladstone Commercial, Gladstone Capital, Gladstone Investment, and their affiliates in other activities that may conflict with our business.

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• Our articles of incorporation prohibit ownership of more than 3.3% of the outstanding shares of our capital stock by one person, except for certain qualified institutional investors, which are limited to holding 9.8% of our common stock.

As of December 31, 2022, David Gladstone, our chairman, chief executive officer, and president, and pursuant to an exception approved by our Board of Directors and in compliance with our charter, owned, directly or indirectly, including through certain foundations and trusts, approximately 7.2% of our common stock, and the Gladstone Future Trust, for the benefit of Mr.

As of December 31, 2023, David Gladstone, our chairman, chief executive officer, and president, and pursuant to an exception approved by our Board of Directors and in compliance with our charter, owned, directly or indirectly,

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including through certain foundations and trusts, approximately 7.0% of our common stock, and the Gladstone Future Trust, for the benefit of Mr.

Gladstone’s children, owned approximately 1.9% of our common stock.

The ownership restriction may discourage a change of control and may deter individuals or entities from making tender offers for our

capital stock, which offers might otherwise be financially attractive to our stockholders or which might cause a change in our management.

• Our Board is divided into three classes, with the term of the directors in each class expiring every third year.

The ownership restriction may discourage a change of control and may deter individuals or entities from making tender offers for our capital stock, which offers might otherwise be financially attractive to our stockholders or which might cause a change in our management.

• Our Board of Directors is divided into three classes, with the term of the directors in each class expiring every third year.

At each annual meeting of stockholders, the successors to the class of directors whose term expires at such meeting will be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election.

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Our Operating Partnership may enter into tax protection agreements in connection with issuing OP Units to acquire additional properties which could provide that if we dispose of any interest in the protected acquired property prior to a certain time, we will indemnify the other party for its tax liabilities attributable to the built-in gain that exists with respect to such property.

Therefore, although it may be in our stockholders’ best interests that we sell one of these properties, it may be economically prohibitive for us to do so if we are a party to such a tax protection agreement.

Therefore, although it may be in our stockholders’ best interests that we sell one of these properties, it may be economically

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prohibitive for us to do so if we are a party to such a tax protection agreement.

While we do not currently have any of these tax protection agreements in place currently, we may enter into such agreements in the future.

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Our charter grants our Board of Directors the right to classify or reclassify any unissued shares of capital stock, increase or decrease the authorized number of shares and establish the preference and rights of any preferred stock without stockholder approval.

Under our charter, we currently have authority to issue shares of both common stock and preferred stock (inclusive of our Series B Preferred Stock, Series C Preferred Stock, Series D Term Preferred Stock, and Series E Preferred Stock).

Under our charter, we currently have authority to issue shares of both common stock and preferred stock.

Our Board of Directors has the authority, without a stockholders’ vote, to classify or reclassify any unissued shares of stock, including common stock, into preferred stock (or vice versa), to increase or decrease the authorized number of shares of common stock and preferred stock and to establish the preferences and rights of any preferred stock or other class or series of shares to be issued.

Because our Board of Directors has the power to establish the preferences and rights of additional classes or series of stock without a stockholders’ vote, our Board of Directors may give the holders of any class or series of stock preferences, powers and rights, including voting rights, senior to the rights of holders of existing stock.

Holders of our Series B Preferred Stock, Series C Preferred Stock, Series D Term Preferred Stock, Series E Preferred Stock and future holders of any securities ranking senior to our common stock have dividend and/or liquidation rights that are senior to the rights of the holders of our common stock.

Holders of our currently-designated preferred securities and future holders of any securities ranking senior to our common stock have dividend and/or liquidation rights that are senior to the rights of the holders of our common stock.

Additional issuances of securities senior to our common stock may negatively impact the value of our common stock and further restrict the ability of holders of our common stock to receive dividends and/or liquidation rights.

In addition to our outstanding borrowings and common stock, our capital structure also includes our Series B Preferred Stock, Series C Preferred Stock, Series D Term Preferred Stock, and Series E Preferred Stock.

In the future, we may attempt to increase our capital resources by completing additional offerings of our Series B Preferred Stock, Series C Preferred Stock, Series D Term Preferred Stock, Series E Preferred Stock or other equity securities or by issuing debt securities.

In the event of a liquidation, lenders with respect to any outstanding borrowings (including our lines of credit), holders of any debt securities, and holders of any preferred stock issuances (including our Series B Preferred Stock, Series C Preferred Stock, Series D Term Preferred Stock, Series E Preferred Stock, and any other preferred stock with parity ranking we may issue in the future) would receive a distribution of our available assets in full prior to the holders of our common stock.

In addition to our outstanding borrowings and common stock, our capital structure also includes our currently-designated preferred securities.

In the future, we may attempt to increase our capital resources by completing additional offerings of these preferred securities or other equity securities or by issuing debt securities.

In the event of a liquidation, lenders with respect to any outstanding borrowings, holders of any debt securities, and holders of any preferred stock issuances (including our currently-designated preferred securities and any other preferred stock with parity ranking we may issue in the future) would receive a distribution of our available assets in full prior to the holders of our common stock.

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

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As such, our common stockholders bear the risk of our future offerings reducing the per-share trading price of our common stock and diluting their interest in us.

Further, holders of our Series B Preferred Stock, Series C Preferred Stock, Series D Term Preferred Stock, and Series E Preferred Stock rank senior in priority of dividend payments, which may restrict our ability to declare and pay dividends to our common stockholders at the current rate, or at all.

We may not have sufficient earnings and profits to pay distributions on the Series B Preferred Stock, Series C Preferred Stock, Series D Term Preferred Stock, Series E Preferred Stock, or common stock to be treated as dividends.

The distributions payable by us on the Series B Preferred Stock, Series C Preferred Stock, Series D Term Preferred Stock, Series E Preferred Stock, or common stock may exceed our current and accumulated earnings and profits, as calculated for U.S.

Further, holders of our currently-designated preferred securities rank senior in priority of dividend payments, which may restrict our ability to declare and pay dividends to our common stockholders at the current rate, or at all.

We may not have sufficient earnings and profits to pay distributions on our currently-designated preferred securities or common stock to be treated as dividends.

The distributions payable by us on our currently-designated preferred securities or common stock may exceed our current and accumulated earnings and profits, as calculated for U.S.

federal income tax purposes, at the time of payment.

If that were to occur, it would result in the amount of distributions that exceed our current and accumulated earnings and profits being treated first as a return of capital to the extent of the holder’s adjusted tax basis in the Series B Preferred Stock, Series C Preferred Stock, Series D Term Preferred Stock, Series E Preferred Stock, or common stock and then, to the extent of any excess over such adjusted tax basis, as capital gain.

If that were to occur, it would result in the amount of distributions that exceed our current and accumulated earnings and profits being treated first as a return of capital to the extent of the holder’s adjusted tax basis in the respective security and then, to the extent of any excess over such adjusted tax basis, as capital gain.

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We may not be able to maintain our qualification as a REIT for federal income tax purposes, which would subject us to federal income tax on our taxable income at regular corporate rates, thereby reducing the amount of funds available for paying distributions to stockholders.

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• 95% of our capital gain net income for that year;

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• 100% of our undistributed taxable income from prior years.

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In addition, our officers and directors, our Adviser and its affiliates could be deemed to be fiduciaries under ERISA and subject to

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other conditions, restrictions and prohibitions under Part 4 of Title I of ERISA.

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Risks Relating to the Market for our Common Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Term Preferred Stock, and Series E Preferred Stock

Future issuances and sales of shares of our common stock, Series B Preferred Stock, Series C Preferred Stock, Series D Term Preferred Stock, Series E Preferred Stock, or other series of preferred securities, or the perception that such issuances will occur, may have adverse effects on the trading prices of our shares.

We cannot predict the effect, if any, of future issuances and sales of our common stock, Series B Preferred Stock, Series C Preferred Stock, Series D Term Preferred Stock, Series E Preferred Stock, possible other series of preferred securities, or the availability of shares for future sales, on the market price of our common stock, Series B Preferred Stock, or Series D Term Preferred Stock, each of which is publicly traded.

Sales of substantial amounts of our common stock (including shares of our common stock issuable upon the conversion of OP Units that we may issue from time to time), Series B Preferred Stock, Series C Preferred Stock, Series D Term Preferred Stock, or Series E Preferred Stock or the perception that these sales could occur may adversely affect prevailing market prices for our common stock, Series B Preferred Stock, or Series D Term Preferred Stock (each of which is publicly traded), or, if and when listed on a national securities exchange, our Series C Preferred Stock or Series E Preferred Stock.

Future issuances and sales of shares of our common stock, our currently-designated preferred securities, future series of preferred securities, or the perception that such issuances will occur, may have adverse effects on the trading prices of our shares.

We cannot predict the effect, if any, of future issuances and sales of our common stock, our currently-designated preferred securities, possible future series of preferred securities, or the availability of shares for future sales on the market price of our publicly-traded common stock and preferred securities.

Sales of substantial amounts of our common stock (including shares of our common stock issuable upon the conversion of OP Units that we may issue from time to time) or our currently-designated preferred securities, or the perception that these sales could occur, may adversely affect prevailing market prices for our publicly-traded common stock and preferred securities.

An increase in market interest rates may have an adverse effect on the market price of our common stock.

One of the factors that investors may consider in deciding whether to buy or sell our common stock is our distribution yield, which is our distribution rate as a percentage of our share price, relative to market interest rates.

If market interest rates increase, prospective investors may desire a higher distribution yield on our common stock or may seek securities paying higher dividends or interest.

If market interest rates

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increase, prospective investors may desire a higher distribution yield on our common stock or may seek securities paying higher dividends or interest.

The market price of our common stock likely will be based primarily on the earnings that we derive from rental income with respect to our properties and our related distributions to stockholders, and not from the underlying appraised value of the properties themselves.

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For instance, if interest rates rise without an increase in our distribution rate, the market price of our common stock could decrease because potential investors may require a higher distribution yield on our common stock as market rates on interest-bearing securities, such as bonds, rise.

Shares of the Series B Preferred Stock, Series C Preferred Stock, Series D Term Preferred Stock, and Series E Preferred Stock are subordinated to existing and future debt, and your interests could be diluted by the issuance of additional preferred stock or by other transactions.

Payment of accrued dividends on the Series B Preferred Stock, Series C Preferred Stock, Series D Term Preferred Stock, and Series E Preferred Stock will be subordinated to all of our existing and future debt and will be structurally subordinate to the obligations of our subsidiaries.

In addition, we may issue additional shares of another class or series of preferred stock ranking on parity with the Series B Preferred Stock, Series C Preferred Stock, Series D Term Preferred Stock, or Series E Preferred Stock with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up.

None of the provisions relating to the Series B Preferred Stock, Series C Preferred Stock, Series D Term Preferred Stock, or Series E Preferred Stock relate to or limit our indebtedness or afford the holders of the Series B Preferred Stock, Series C Preferred Stock, Series D Term Preferred Stock, or Series E Preferred Stock protection in the event of a highly-leveraged or other transaction, including a merger or the sale, lease or conveyance of all or substantially all our assets or business, that might adversely affect the holders of the Series B Preferred Stock, Series C Preferred Stock, Series D Term Preferred Stock, or Series E Preferred Stock, other than in connection with a Change of Control Triggering Event (as defined by the Certificate of Designations).

These factors may affect the trading price of the Series B Preferred Stock or Series D Term Preferred Stock (each of which is publicly traded), or, if and when listed on a national securities exchange, our Series C Preferred Stock or Series E Preferred Stock.

We operate as a holding company dependent upon the assets and operations of our subsidiaries, and because of our structure, we may not be able to generate the funds necessary to make distributions on the Series B Preferred Stock, Series C Preferred Stock, Series D Term Preferred Stock, or Series E Preferred Stock.

Shares of our currently-designated preferred securities are subordinated to existing and future debt, and your interests could be diluted by the issuance of additional preferred stock or by other transactions.

Payment of accrued dividends on our currently-designated preferred securities will be subordinated to all of our existing and future debt and will be structurally subordinate to the obligations of our subsidiaries.

In addition, we may issue additional shares of another class or series of preferred stock ranking on parity with our currently-designated preferred securities with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up.

None of the provisions relating to our currently-designated preferred securities relate to or limit our indebtedness or afford the holders of these securities protection in the event of a highly-leveraged or other transaction, including a merger or the sale, lease, or conveyance of all or substantially all our assets or business, that might adversely affect the holders of our currently-designated preferred securities, other than in connection with a Change of Control Triggering Event (as defined by the Certificate of Designations).

These factors may affect the trading price of our publicly-traded preferred securities.

We generally operate as a holding company that conducts its businesses primarily through the Operating Partnership, which, in turn, is a holding company conducting its business through its subsidiaries.

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Accordingly, we are dependent on cash flows and payments of funds to us by our subsidiaries as distributions, loans, advances, leases, or other payments from our subsidiaries to generate the funds necessary to make distributions or dividends on our securities.

Our subsidiaries’ ability to pay such distributions and/or make such loans, advances, leases, or other payments may be restricted by, among other things, applicable laws and regulations, current and future debt agreements, and management agreements into which our subsidiaries may enter, which may impair our ability to make cash payments on our securities, including the Series B Preferred Stock, Series C Preferred Stock, Series D Term Preferred Stock, and Series E Preferred Stock.

In addition, such agreements may prohibit or limit the ability of our subsidiaries to transfer any of their property or assets to us, any of our other subsidiaries, or to third parties.

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In addition, because we are a holding company, stockholders’ claims will be structurally subordinated to all existing and future liabilities and obligations (whether or not for borrowed money) of the Operating Partnership and its subsidiaries.

Therefore, in the event of our bankruptcy, liquidation, or reorganization, claims of holders of the Series B Preferred Stock, Series C Preferred Stock, Series D Term Preferred Stock, and Series E Preferred Stock will be satisfied only after all of our and the Operating Partnership’s and its subsidiaries’ liabilities and obligations have been paid in full.

We intend to apply for quotation on Nasdaq for each of the Series C Preferred Stock and the Series E Preferred Stock in the future;

however, there is currently no public market for either security.

Even after listing, if achieved, a liquid secondary trading market may not develop, and the features of the Series C Preferred Stock and Series E Preferred Stock may not provide you with favorable liquidity options.

There is currently no public market for either the Series C Preferred Stock or the Series E Preferred Stock.

We intend to apply to list the Series C Preferred Stock on Nasdaq or another national securities exchange by December 31, 2023, and we intend to apply to list the Series E Preferred Stock on Nasdaq or another national securities exchange or to include these shares for quotation on a national securities market sometime within 12 months following the Series E Preferred Stock offering’s

termination date.

Until shares of the Series C Preferred Stock or Series E Preferred Stock are listed on Nasdaq or another national securities exchange, if ever, holders of such shares may be unable to sell them at all or, if they are able to, only at substantial discounts from the liquidation preference.

Even if the Series C Preferred Stock or Series E Preferred Stock is listed on Nasdaq or another national securities exchange within one calendar year of the respective offerings’ termination date, as anticipated, there is a risk that such shares may be thinly traded, and the market for such shares may be relatively illiquid compared to the market for other types of securities, with the spread between the bid and asked prices considerably greater than the spreads of other securities with comparable terms and features.

Additionally, our charter contains restrictions on the ownership and transfer of our securities, including the Series C Preferred Stock and Series E Preferred Stock, and these restrictions may inhibit your ability to sell the Series C Preferred Stock or Series E Preferred Stock promptly, or at all.

Also, since neither the Series C Preferred Stock nor the Series E Preferred Stock has a stated maturity date, you may be forced to hold your Series C Preferred Stock or Series E Preferred Stock and receive stated dividends on the shares when, as, and if authorized by our Board of Directors and declared by us with no assurance as to ever receiving the liquidation preference.

We will be required to terminate the Series E Offering (as defined elsewhere in this Form 10-K) if our common stock, Series B Preferred Stock, and the Series D Term Preferred Stock are all no longer listed on Nasdaq or another national securities exchange.

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

We intend to apply for quotation on Nasdaq for the Series E Preferred Stock in the future;

however, there is currently no public market for this security.

Even after listing, if achieved, a liquid secondary trading market may not develop, and the features of the Series E Preferred Stock may not provide holders of such shares with favorable liquidity options.

There is currently no public market for the Series E Preferred Stock.

We intend to apply to list the Series E Preferred Stock on Nasdaq or another national securities exchange or to include these shares for quotation on a national securities market sometime within 12 months following the Series E Preferred Stock offering’s termination date.

Until shares of the Series E Preferred Stock are listed on Nasdaq or another national securities exchange, if ever, holders of such shares may be unable to sell them at all or, if they are able to, only at substantial discounts from the liquidation preference.

Even if the Series E Preferred Stock is listed on Nasdaq or another national securities exchange within one calendar year of the respective offerings’ termination date, as anticipated, there is a risk that such shares may be thinly traded, and the market for such shares may be relatively illiquid compared to the market for other types of securities, with the spread between the bid and asked prices considerably greater than the spreads of other securities with comparable terms and features.

Additionally, our charter contains restrictions on the ownership and transfer of our securities, including the Series E Preferred Stock, and these restrictions may inhibit your ability to sell the Series E Preferred Stock promptly, or at all.

Also, since the Series E Preferred Stock has a stated maturity date, holders may be forced to hold the Series E Preferred Stock and receive stated dividends on the shares when, as, and if authorized by our Board of Directors and declared by us with no assurance as to ever receiving the liquidation preference.

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We will be required to terminate the Series E Offering (as defined elsewhere in this Form 10-K) if our common stock and our publicly-traded, currently-designated preferred securities are all no longer listed on Nasdaq or another national securities exchange.

The Series E Preferred Stock is a “covered security” and therefore is not subject to registration under the state securities, or “Blue Sky,” regulations in the various states in which it may be sold due to its seniority to our common stock, which is listed on Nasdaq.

In the event that our common stock, Series B Preferred Stock, and Series D Term Preferred Stock are all no longer listed on Nasdaq or another national securities exchange, we will be required to register this offering in any state in which we offer shares of the Series E Preferred Stock.

In the event that our common stock and our publicly-traded, currently-designated preferred securities are all no longer listed on Nasdaq or another national securities exchange, we will be required to register this offering in any state in which we offer shares of the Series E Preferred Stock.

This would require the termination of this offering and could result in our raising an amount of gross proceeds that is substantially less than the amount of the gross proceeds we expect to raise if the maximum amount of the Series E Offering is sold.

This would reduce our ability to make additional investments and limit the further diversification of our portfolio.

The Series B Preferred Stock, Series C Preferred Stock, Series D Term Preferred Stock, and Series E Preferred Stock will bear a risk of redemption by us.

Our currently-designated preferred securities all bear a risk of redemption by us.

We may voluntarily redeem some or all of the Series B Preferred Stock at any time, and we may voluntarily redeem some or all of the Series C Preferred Stock on or after June 1, 2024.

In addition, we may voluntarily redeem some or all of the Series E Preferred Stock on or after the first anniversary of the offering’s termination date.

Any such redemptions may occur at a time that is unfavorable to shareholders.

Before January 31, 2026, we may, at our option, redeem the Series D Term Preferred Stock, in whole or in part, at any time or from time to time.

Any such redemptions may occur at a time that is unfavorable to stockholders.

We may have an incentive to redeem any of our series of preferred stock voluntarily if market conditions allow us to issue common stock, other preferred stock, or debt securities at a dividend or interest rate that is lower than the dividend rate on such series of preferred stock.

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.

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Item 1A. Risk Factors