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Item 1A. Risk Factors

2023-09-28 compared with 2022-09-28 · 698 added, 412 removed, 96 unchanged (92% of the section changed)

An investment in our common stock and preferred stock involves substantial risks.

In addition to the other information contained in our Registration Statements and

Offering Circulars, and any accompanying supplements thereto, stockholders should consider carefully the following information regarding our common and preferred stock.

The risks set out below may not be the only risks we face but are the

material risks of which we are presently aware.

If any of the following risks are realized, our business, financial condition and results of operations could be materially and adversely affected.

In such case the price of our common stock

and preferred stock could decline, and stockholders may lose all or part of their investment.

You should specifically consider the following material risks in addition to the other information

contained in this Annual Report on Form 10-K.

The occurrence of any of the following risks might have a material adverse effect on our business, financial condition and results of operations, which could cause the price of our common

stock and preferred stock to decline and could result in our stockholders losing some or all of their investment.

The risks and uncertainties discussed below are not the only ones we face, but do represent those risks and

uncertainties that we believe are most significant to our business, operating results, financial condition, prospects and forward-looking statements.

As used herein, the term “you” refers to our current stockholders or potential

investors in our common or preferred stock, as applicable.

RISK FACTORS SUMMARY

The following is a summary of the most significant risks relating to our business activities that we have identified.

If any of these risks occur, our business, financial condition, or results of

operation, including our ability to generate cash and make distributions, could be materially adversely affected.

For a more complete understanding of our material risk factors, this summary should be read in conjunction with the

detailed discussion of our risk factors, which follows this summary.

Risks Related to Investing in Real Estate

Real property investments are subject to various risks, many of which are beyond our control, which could cause declines in our operating revenues and/or the underlying value of one or more of our properties.

The market for real estate investments is highly competitive and investments in real estate-related assets can be speculative.

Illiquidity of real estate investments could significantly affect our ability to respond to adverse changes in the performance of our properties and harm our financial condition.

We could be exposed to environmental liabilities, which could impact the value of real properties that we may acquire or underlying our investments.

We will likely receive limited representations and warranties from sellers, and may not obtain audited results of prior operations for certain properties in which we have invested in.

We may not obtain independent third-party appraisals or valuation reports on all of our investments.

We may be adversely affected by unfavorable economic conditions, particularly in the specific geographic areas where our investments are concentrated.

Inflation may adversely affect our financial condition and results of operations.

Our success is materially dependent on attracting qualified tenants and, when vacancies occur, we may not be able to re-lease or renew leases at the investments held by us on terms favorable to us, or at all.

The bankruptcy, insolvency or diminished creditworthiness of our tenants under their leases or delays by our tenants in making rental payments could seriously harm our operating results and financial condition.

Significant restrictions on transfer and encumbrance of investments subject to mortgage or other debt financing are expected, and we may experience delays in the sale of an investment.

We face possible risks associated with climate change.

Risks Related to Our Financial Position

Future debt or capital stock issuances by the Company could dilute the ownership interest of current stockholders, and could subject us to covenants restricting our future financial and operating flexibility.

We do not have guaranteed cash flow, and if we pay distributions from sources other than our cash flow from operations, we will have fewer funds available for investments and our stockholders’ overall return will be

While we are subject to minimum distribution requirements to maintain our status as a REIT, such distributions are not guaranteed and the availability and timing of cash distributions is uncertain.

We may in the future choose to pay dividends in our own stock, in which case you may be required to pay income taxes in excess of the cash dividends you receive.

Risks Related to Our Business Operations and Strategy

We may change our targeted investment and operational policies without stockholder consent.

Our Board of Directors can revoke our REIT qualification without stockholder approval.

Our future growth will depend on our ability to acquire real estate investments in several competitive real estate markets, and lack of diversification in numbers or types of investments increases our dependence on

individual investments.

We may experience difficulty in ultimately selling any property or groups of properties which no longer fit our investment criteria or are impractical to lease and maintain, which could force us to sell a property at a

price that reduces the return to our investors.

Subject to broad investment guidelines approved by our Board of Directors, we are dependent on the investment analysis and management services provided by our Advisers and their key personnel for our success.

Our investments will be carried at estimated fair value as determined by our Investment Adviser and there may be uncertainty as to the value of these investments.

We, through our Advisers, are often required to make a number of judgments in applying accounting policies, and different estimates and assumptions in the application of these policies could result in changes to our

reporting of financial condition and results of operations.

The occurrence of cyber incidents, or a deficiency in our cybersecurity, could cause a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships,

all of which could negatively impact our financial results.

Risks Related to Our Organization and Corporate Structure

Our Charter permits our Board of Directors to issue stock with terms that may subordinate the rights of common stockholders or preferred shareholders or discourage a third party from acquiring us in a manner that might

result in a premium price to our stockholders.

Our rights and the rights of our shareholders to recover claims against our officers, directors and our Advisers are limited.

Risks Related to Conflicts of Interest

The Advisory Agreements with our Advisers were not negotiated on an arm’s-length basis and may not be as favorable to us as if they had been negotiated with an unaffiliated third party.

We may have conflicts of interest with our Adviser and other affiliates, which may result in investment decisions that are not in the best interest of our stockholders.

Our Adviser, its officers and their respective affiliates will face conflicts of interest relating to the purchase and leasing of real estate investments, and such conflicts may not be resolved in our favor.

We have not adopted any specific conflicts of interest policies, and, therefore, other than in respect of the restrictions placed on our Advisers in the Advisory Agreements, we will be reliant upon the good faith of our

Adviser, officers and directors in the resolution of any conflict.

Risks Associated with Debt Financing

We expect to use mortgage and other debt financing to acquire properties or interests in properties and otherwise incur other indebtedness, which could subject us to the risk of losing properties in foreclosure if our cash

flow is insufficient to make loan payments and reduce the cash available for distribution to stockholders.

High levels of debt or increases in interest rates could increase the amount of our loan payments, which could reduce the cash available for distribution to stockholders.

High mortgage rates may make it difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire, our cash flow from operations and the amount of cash distributions we can

If we are required to make payments under any “bad boy” carve-out guaranties that we may provide in connection with certain mortgages and related loans, our business and financial results could be materially adversely

Interest-only indebtedness may increase our risk of default and ultimately may reduce our funds available for distribution to our stockholders.

Rising interest rates could increase our borrowing costs, adversely affecting our cash flows and reducing the amounts available for distributions to our stockholders.

We may use floating rate, interest-only or short-term loans to acquire investments.

Risks Related to Our Taxation as a REIT

Failure to remain qualified as a REIT would result in higher taxes and reduced cash available for distribution to our stockholders.

Complying with minimum required distributions and other REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments.

Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flows.

The stock ownership limit imposed by the Internal Revenue Code for REITs and in our Charter may inhibit market activity in our stock and may restrict our business combination opportunities.

Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends, and a failure to make required distributions would subject us to U.S.

federal corporate income tax.

The prohibited transactions tax may subject us to tax on our gain from sales of property and limit our ability to dispose of our properties.

We may be unable to generate sufficient revenue from operations, operating cash flow or portfolio income to pay our operating expenses, and our operating expenses could rise, diminishing our ability and to pay distributions

to our stockholders.

We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our shares.

Risk Related to COVID-19 and Other Infectious Diseases

COVID-19, or the future outbreak of other highly infectious or contagious diseases, has and could continue to materially and adversely impact or disrupt our financial condition, results of operations, cash flows and

performance, as well as adversely affect our and our tenants’ financial condition and results of operations.

Risks Related to Investing in Real Estate

Real estate investments are subject to risks particular to real property, including:

Adverse changes in national and local economic and market conditions, including the credit and securitization markets;

Changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance with laws and regulations, fiscal policies and ordinances;

Impacts from governmental laws and regulations, fiscal policies and zoning ordinances, including the impact of environmental laws and regulations, and related compliance costs, including costs to comply with future changes;

Takings by condemnation or eminent domain;

Real estate conditions, such as an oversupply of or a reduction in demand for real estate space in the area;

Real estate conditions, such as an oversupply of or a reduction in demand for real estate space in the area, which could adversely affect market rental rates;

The perceptions of tenants and prospective tenants of the convenience, attractiveness and safety of our properties;

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Changes in interest rates and in the availability, cost and terms of mortgage funding;

The impact of present or future environmental legislation and compliance with environmental laws;

Economic or physical decline of the areas where our investments are located

Deterioration in the physical condition of our investments and resulting maintenance expenses;

Acts of war or terrorism, including the consequences of terrorist attacks;

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Cost of compliance with the Americans with Disabilities Act.

If any of these or similar events occur, it may reduce our return from an affected property or investment and reduce or eliminate our ability to make distributions to stockholders.

Any of these or similar events may reduce our return from an affected property or investment and reduce or eliminate our ability to make distributions to stockholders.

The market for real estate investments is highly competitive.

Identifying attractive real estate investment opportunities, particularly in the multi-family residential real estate sector, is difficult and involves a high degree of uncertainty.

Furthermore, the historical performance of a particular property or market is not a guarantee or prediction of the property’s or market’s future performance.

There can be no assurance that we will be able to locate suitable acquisition

opportunities in our target markets, achieve our investment goal and objectives, or fully deploy for our cash.

Identifying attractive real estate investment opportunities is difficult and involves a high degree of uncertainty.

Furthermore, the historical performance of a particular property or market is not a

guarantee or prediction of the property’s or market’s future performance.

There can be no assurance that we will be able to locate suitable acquisition opportunities in our target markets, achieve our investment goal and objectives,

or fully deploy for our cash.

Because of the recent growth in demand for real estate investments, there may be increased competition among investors to invest in the same asset classes as we do.

This competition may

lead to an increase in the investment prices or otherwise less favorable investment terms.

If this situation occurs with a particular investment, our return on that investment is likely to be less than the return it could have achieved if

it had invested at a time of less investor competition for the investment.

For this and other reasons, the Adviser is under no restrictions concerning the timing of investments.

This competition may lead to an

increase in the investment prices or otherwise less favorable investment terms.

If this situation occurs with a particular investment, our return on that investment is likely to be less than the return we could have achieved if we had

invested at a time of less investor competition for the investment.

For this and other reasons, the Real Estate Adviser is under no restrictions concerning the timing of investments.

Real estate investments are not as liquid as other types of assets, which may reduce economic returns to our stockholders.

Real estate investments are not as liquid as other types of investments.

The market for the sale of real estate properties can vary greatly and it may take a significant amount of time for us to sell

any particular property on favorable terms, if at all.

As a result, our ability to sell under-performing assets in our portfolio or respond to changes in economic and other conditions may be relatively limited.

Investments in real estate-related assets can be speculative.

Investments in real estate-related assets can involve speculative risks and always involve substantial risks.

No assurance can be given that the Adviser will be able to execute the

investment strategy or that stockholders in the company will realize their investment objectives.

No assurance can be given that our stockholders will realize a substantial return (if any) on their investment or that they will not lose

their entire investment in us.

Our investments may be concentrated.

We expect to diversify our investments, and do not expect to concentrate on any single investment.

However, our investments may nonetheless result in significant concentration in a

single investment, especially in our initial stages of operation, or in a group of investments in one or more target markets.

If such an investment experienced a material adverse event, or if investments in a particular target market

experienced material adverse event specific to that particular market, we and our stockholders would likely be significantly and adversely affected.

No assurance can be given that the Advisers will be able to execute the investment strategy

or that stockholders in the company will realize their investment objectives.

No assurance can be given that our stockholders will realize a substantial return (if any) on their investment or that they will not lose their entire

investment in us.

We will likely receive limited representations and warranties from sellers.

Investments will likely be acquired with limited representations and warranties from the seller regarding the condition of the investment, the status of leases, the presence of hazardous substances, the

status of governmental approvals and entitlements and other significant matters affecting the use, ownership and enjoyment of the investment.

As a result, if defects in an investment or other matters adversely affecting an investment

are discovered, we may not be able to pursue a claim for damages against the seller of the investment.

The extent of damages that we may incur as a result of such matters cannot be predicted, but potentially could result in a

significant adverse effect on the value of the affected investments.

We may be subject to the risk of liability and casualty loss as the owner of an investment.

It is expected that the Adviser will maintain or cause to be maintained insurance against certain liabilities and other losses for an investment, but the insurance obtained will not

cover all amounts or types of loss.

There is no assurance that any liability that may occur will be insured or that, if insured, the insurance proceeds will be sufficient to cover the loss.

There are certain categories of loss that may be or may become uninsurable or not economically insurable, such as earthquakes, floods and hazardous waste.

Further, if losses arise from

hazardous substance contamination that cannot be recovered from a responsible party, the financial viability of the affected investment may be substantially impaired.

It is possible that we will acquire an investment with known or unknown

environmental problems that may adversely affect our investments.

We will maintain insurance against certain liabilities and other losses for an investment, but the insurance obtained will not cover all amounts or types of loss.

There is no assurance that any loss

that may occur will be insured or that, if insured, the insurance proceeds will be sufficient to cover the loss.

There are certain categories of loss that may be or may become uninsurable or not economically insurable, such as earthquakes, floods and liabilities related to hazardous waste.

Further, if losses arise

from hazardous substance contamination that cannot be recovered from a responsible party, the financial viability of the affected investment may be substantially impaired.

It is possible that we will acquire an investment with known

or unknown environmental problems that may adversely affect our investments.

We could be exposed to environmental liabilities with respect to investments to which we take title.

In the course of our business, and taking title to properties, we could be subject to environmental liabilities with respect to such properties.

In such a circumstance, we may be held

liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or we may be required to investigate or

clean up hazardous or toxic substances or chemical releases at a property.

In such a circumstance, we may be held liable to a

governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or we may be required to investigate or clean up

hazardous or toxic substances or chemical releases at a property.

The costs associated with investigation or remediation activities could be substantial.

If we become subject to significant environmental liabilities, our

business, financial condition, liquidity and results of operations could be materially and adversely affected.

If we become subject to significant environmental liabilities, our business,

financial condition, liquidity and results of operations could be materially and adversely affected.

Liability relating to environmental matters may impact the value of the properties that we may acquire or underlying our investments.

Under various U.S.

federal, state and local laws, an owner or operator of real property may become liable for the costs of removal of certain hazardous substances released on its property.

often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of such hazardous substances.

If we fail to disclose environmental issues, we could also be liable to a buyer or

lessee of a property.

There may be environmental problems associated with our properties which we were unaware of at the time of acquisition.

The presence of hazardous substances may adversely affect our ability to sell

real estate, including the affected property, or to borrow additional funds using real estate as collateral.

The presence of hazardous substances, if any, on our properties may cause us to incur substantial remediation costs and

potential costs of indemnification in the case of properties we sell or rent to others, thus harming our financial condition.

The discovery of material environmental liabilities attached to such properties could have a material

adverse effect on our results of operations and financial condition and our ability to make distributions to our stockholders.

Discovery of previously undetected environmentally hazardous conditions, including mold or asbestos, may lead to liability for adverse health effects and costs of

remediating the problem could adversely affect our operating results.

Under various U.S.

federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the cost of removal or remediation

of hazardous or toxic substances on, under or in such property.

The costs of removal or remediation could be substantial.

Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the

presence of such hazardous or toxic substances.

Environmental laws also may impose restrictions on the manner in which property may be used, and these restrictions may require substantial expenditures.

Environmental laws provide for

sanctions in the event of noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties.

Certain environmental laws and common law principles could be used to impose liability for release

of and exposure to hazardous substances, including asbestos-containing materials into the air, and third parties may seek recovery from owners or operators of real properties for personal injury or property damage associated with

exposure to released hazardous substances.

The cost of defending against claims of liability, of compliance with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims

related to any contaminated property could materially adversely affect our business, assets or results of operations and, consequently, amounts available for distribution to our security holders.

Adverse economic conditions may negatively affect our results of operations and, as a result, our ability to make distributions to our stockholders or to realize

appreciation in the value of our investments.

Our operating results may be adversely affected by market and economic challenges, which may negatively affect our returns and profitability and, as a result, our ability to make distributions to our

stockholders or to realize appreciation in the value of our investments.

These market and economic challenges may include, but are not limited to, the following:

any future downturn in the U.S.

economy and the related reduction in spending, reduced home prices and high unemployment could result in tenant defaults under leases, vacancies at our office, industrial, retail or

multifamily properties, and concessions or reduced rental rates under new leases due to reduced demand;

the rate of household formation or population growth in our target markets or a continued or exacerbated economic slow-down experienced by the local economies where our properties are located or by the real estate industry

generally may result in changes in the supply of or demand for apartment units in our target markets;

the failure of the real estate market to attract the same level of capital investment in the future that it attracts at the time of our purchases or a reduction in the number of companies seeking to acquire properties may

result in the value of our investments not appreciating or decreasing significantly below the amount we pay for these investments.

The length and severity of any economic slow-down or downturn cannot be predicted.

Our operations and, as a result, our ability to make distributions to our stockholders and/or our ability to realize

appreciation in the value of our properties could be materially and adversely affected to the extent that an economic slow-down or downturn is prolonged or becomes severe.

We may be adversely affected by unfavorable economic changes in the specific geographic areas where our investments are concentrated.

We expect that our investments will be located throughout the United States.

We expect to diversify our investments, and expect that our real estate investments will be located throughout the United States.

However, our investments may nonetheless result in significant

concentration in an investment or group of investments in one or more target markets.

Our largest concentration of investments are in California, Arizona, and Connecticut.

Adverse conditions

(including business layoffs or downsizing, industry slowdowns, changing demographics and other factors) in the areas where our investments are located and/or concentrated, including any cities or towns within such target States, and local

real estate conditions (such as oversupply of, or reduced demand for, office, industrial, retail or multifamily properties) may have an adverse effect on the value of our investments.

A material decline in the demand or the ability of

tenants to pay rent, or the general market for sales of multi-family properties in such geographic areas may result in a material decline in our cash available for distribution to our stockholders.

Adverse conditions (including business layoffs or downsizing,

industry slowdowns, changing demographics and other factors) in the areas where our investments are located and/or concentrated, including any cities or towns within such target States, and local real estate conditions (such as

oversupply of, or reduced demand for, office, industrial, retail or multifamily properties) may have an adverse effect on the value of our investments.

A material decline in the demand or the ability of tenants to pay rent, or the

general market for sales of multi-family properties in such geographic areas may result in a material decline in our cash available for distribution to our stockholders.

Inflation may adversely affect our financial condition and results of operations.

Increased inflation could have a more pronounced negative impact on any variable rate debt we incur in the future and on our results of operations.

During times when inflation is greater than increases

in rent, the contracted rent increases called for under our leases may be unable to keep pace with the rate of inflation.

Additionally, substantial inflationary pressures and increased costs may have an adverse impact on our tenants,

which may adversely affect the ability of our tenants to pay rent.

Our Hollywood Apartment building has variable interest rate debt but has an interest rate cap which has mitigated and we believe will continue to mitigate the effect of rising interest rates.

other loans that become floating rate loans after an initial period of years.

If interest rates do not decrease before the initial period ends our interest costs on those loans will increase after the initial period.

Our success is materially dependent on attracting qualified tenants.

We will not collect revenue for a property while it is vacant and we will be responsible for all utility costs and maintenance services until we are able to lease it.

Our success is

dependent on the financial stability of tenants in the aggregate.

If we cannot rent our properties or our tenants default on our leases or fail to comply with the terms of our leases, our operations, financial performance, and the quality

and value of our properties could be negatively impacted.

Our success is dependent on the

financial stability of tenants in the aggregate.

If we cannot rent our properties or our tenants default on our leases or fail to comply with the terms of our leases, our operations, financial performance, and the quality and value of

our properties could be negatively impacted.

We may not be able to re-lease or renew leases at the investments held by us on terms favorable to us or at all.

We are subject to risks that upon expiration or earlier termination of the leases for our properties that such properties may not be re-leased or, if re-leased, the terms of the renewal

or re-leasing (including the costs of required renovations or concessions to tenants) may be less favorable than current lease terms.

Any of these situations may result in extended periods where there is a significant decline in revenues

or no revenues generated by an investment.

We are subject to risks that upon expiration or earlier termination of the leases for our properties that such properties may not be re-leased or, if re-leased, the terms of the renewal or re-leasing

(including the costs of required renovations or concessions to tenants) may be less favorable than current lease terms.

Any of these situations may result in extended periods where there is a significant decline in revenues or no

revenues generated by an investment.

If we are unable to re-lease or renew leases for all or substantially all of our investments, or if the rental rates upon such renewal or re-leasing are significantly lower than expected, and if

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required to reduce or eliminate distributions to our stockholders.

The bankruptcy, insolvency or diminished creditworthiness of our tenants under their leases or delays by our tenants in making rental payments

could seriously harm our operating results and financial condition.

The bankruptcy, insolvency or diminished creditworthiness of our tenants under their leases or delays by our tenants in making rental payments could seriously harm

our operating results and financial condition.

We will lease our properties to tenants, and we receive rents from our tenants during the terms of their respective leases.

A tenant’s ability to pay rent is often initially determined

by the creditworthiness of the tenant and the income of the tenant.

A tenant’s ability to pay rent is often initially determined by the

creditworthiness of the tenant and the income of the tenant.

However, if a tenant’s credit deteriorates or a tenant’s income deteriorates, the tenant may default on its obligations under its lease and the tenant may also become

The bankruptcy or insolvency of our tenants or other failure to pay is likely to adversely affect the income produced by our real estate investments.

Any bankruptcy filings by or relating to one of our tenants could bar us from

collecting pre-bankruptcy debts from that tenant or its property, unless we receive an order permitting us to do so from the bankruptcy court.

A tenant bankruptcy could delay our efforts to collect past due balances under the relevant

leases, and could ultimately preclude full collection of these sums.

Any bankruptcy filings by or relating to one of our tenants could bar us

from collecting pre-bankruptcy debts from that tenant or its property, unless we receive an order permitting us to do so from the bankruptcy court.

A tenant bankruptcy could delay our efforts to collect past due balances under the

relevant leases, and could ultimately preclude full collection of these sums.

If a tenant files for bankruptcy, we may not be able to evict the tenant solely because of such bankruptcy or failure to pay.

A court, however, may authorize a tenant to

reject and terminate its lease with us.

In such a case, our claim against the tenant for unpaid, future rent would be subject to a statutory cap that might be substantially less than the remaining rent owed under the lease.

certain amounts paid to us within 90 days prior to the tenant’s bankruptcy filing could be required to be returned to the tenant’s bankruptcy estate.

In any event, it is highly unlikely that a bankrupt or insolvent tenant would pay in

full amounts it owes us under its lease.

In other circumstances, where a tenant’s financial condition has become impaired, we may agree to partially or wholly terminate the lease in advance of the termination date in consideration for a

lease termination fee that is likely less than the agreed rental amount.

A court, however, may

authorize a tenant to reject and terminate its lease with us.

In such a case, our claim against the tenant for unpaid, future rent would be subject to a statutory cap that might be substantially less than the remaining rent owed under

In addition, certain amounts paid to us within 90 days prior to the tenant’s bankruptcy filing could be required to be returned to the tenant’s bankruptcy estate.

In any event, it is highly unlikely that a bankrupt or

insolvent tenant would pay in full amounts it owes us under its lease.

In other circumstances, where a tenant’s financial condition has become impaired, we may agree to partially or wholly terminate the lease in advance of the

termination date in consideration for a lease termination fee that is likely less than the agreed rental amount.

If a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for damages.

Any unsecured claim we hold against a bankrupt entity may

be paid only to the extent that funds are available and only in the same percentage as is paid to all other holders of unsecured claims.

We may recover substantially less than the full value of any unsecured claims, which would harm our

financial condition.

We may not obtain audited results of operation of individual investments.

Any unsecured

claim we hold against a bankrupt entity may be paid only to the extent that funds are available and only in the same percentage as is paid to all other holders of unsecured claims.

We may recover substantially less than the full value

of any unsecured claims, which would harm our financial condition.

We may not obtain audited results of prior operations for certain properties in which we investment.

In some cases, we will not obtain audited operating statements regarding the prior operations of an investment.

In such case, we will rely on unaudited financial information provided by

the sellers of the investments.

In such case, we will rely on unaudited financial information provided by the sellers of

the investments.

Thus, it is possible that information relied upon by us with respect to the acquisition of some of the investments may not be accurate at the time that we acquire such investment.

Significant restrictions on transfer and encumbrance of investments are expected.

The terms of any mortgage or other debt financing for an investment are expected to prohibit the transfer or further encumbrance of that investment or any interest in that investment

except with the lender’s prior consent, which consent each lender is expected to be able to withhold.

Significant restrictions on transfer and encumbrance of investments subject to mortgage or other debt financing are expected.

The terms of any mortgage or other debt financing applicable to an investment are expected to prohibit the transfer or further encumbrance of that investment or any interest in that investment except

with the lender’s prior consent, which consent each lender is expected to be able to withhold.

The relative illiquidity of the investments may prevent or substantially impair our ability to dispose of an investment at times when it

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If we were forced to immediately liquidate some or all of our investments, the proceeds are likely to result in a significant loss, if such a liquidation is possible at all.

We may not obtain appraisals or reports.

We typically may not obtain independent third-party appraisals or valuations of an investment, or other reports with respect to an investment, before we invest in such investment.

do not obtain such third-party appraisals or valuations, there can be no assurance that an investment’s value will exceed its cost or that any sale or other disposition of such investment will result in a profit.

Third-party appraisals

and other reports may be prepared for lenders, in which case we typically will try to obtain a copy of such appraisals and reports for review, as well as reliance letters from the third-party preparers to allow us to rely on appraisals

To the extent we do not obtain such other reports or reliance letters before investing in an investment, the risk of investing in such investment may be increased.

We may not obtain independent third-party appraisals or valuation reports on all of our investments.

We typically may not obtain independent third-party appraisals or valuations, or other reports concerning an investment, before we invest in such investment.

If we do not obtain such third-party

appraisals or valuations, there can be no assurance that an investment’s value will exceed its cost or that any sale or other disposition of such investment will result in a profit.

Third-party appraisals and other reports may be

prepared for lenders, in which case we typically will try to obtain a copy of such appraisals and reports for review, as well as reliance letters from the third-party preparers to allow us to rely on appraisals and reports.

extent we do not obtain such other reports or reliance letters before making an investment, the risk of such investment may be increased.

We may experience delays in the sale of an investment.

Should we need to dispose of an investment, it may not be possible to sell any or all of our investments at a favorable price, or at all, in the desired time frame.

If we are unable to sell

our investments in the time frames or for the prices anticipated, our ability to make distributions to you may be materially delayed or reduced, you may not be able to get a return of capital as expected or you may not have any

liquidity with respect to your investment in our securities.

We face possible risks associated with climate change.

We may become subject to laws or regulations related to climate change, which could cause our business, results of operations and financial condition to be impacted adversely.

Both the federal

government and many of the states and localities in which we operate have enacted, and may continue to enact, certain climate change laws and regulations or have begun regulating carbon footprints and greenhouse gas emissions.

Although these laws and regulations have not had any known material adverse effects on our business to date, they could result in substantial costs, including compliance costs, increased energy costs, retrofit costs and construction

costs, including monitoring and reporting costs, and capital expenditures for environmental control facilities and other new equipment..

We cannot predict how future laws and regulations, or future interpretations of current laws and

regulations, related to climate change will affect our business, results of operations and financial condition.

Additionally, the potential physical impacts of climate change on our operations are highly uncertain, and would be

particular to the geographic circumstances in areas in which we operate.

These may include changes to global weather patterns, which could include local changes in rainfall and storm patterns and intensities, water shortages, changing

sea levels and changing temperature averages or extremes.

These impacts may adversely affect our properties, our business, financial condition and results of operations.

Additionally, there has been increasing public focus by investors, environmental activists, the media and governmental and nongovernmental organizations on a variety of environmental, social and other

sustainability matters.

We may make commitments relating to sustainability matters that affect us, including the design and implementation of specific risk mitigation strategic initiatives relating to sustainability.

If we are not

effective in addressing environmental, social and other sustainability matters affecting our business, or setting and meeting relevant sustainability goals, our reputation may suffer.

Risks Related to Our Financial Position

We are subject to risks associated with debt and capital stock issuances, and such issuances may have consequences to holders of shares of our

If we were to raise additional capital through the issuance of equity securities, we could dilute the interests of holders of shares of our current outstanding securities.

We are subject to risks associated with debt and capital stock issuances, and such issuances may have consequences to holders of shares of our securities.

Whenever we raise additional capital through the issuance of equity securities, we could dilute the interests of holders of shares of our current outstanding securities.

Further, we may incur indebtedness in the future to finance our operations.

Such indebtedness could result in important consequences to holders of our preferred shares, including

subjecting us to covenants restricting our operating flexibility, increasing our vulnerability to general adverse economic and industry conditions, limiting our ability to obtain additional financing to fund future working capital,

capital expenditures and other general corporate requirements, requiring the use of a portion of our cash flow from operations for the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash

flow to fund working capital, acquisitions, capital expenditures and general corporate requirements, and limiting our flexibility in planning for, or reacting to, changes in our business and our industry.

If we pay distributions from sources other than our cash flow from operations, we will have fewer funds available for investments and

stockholders’ overall return will be reduced.

Although our distribution policy is to use our cash flow from operations to make distributions, we are permitted to pay distributions from any source, including offering proceeds,

borrowings, or sales of assets.

Such indebtedness could result in important consequences to holders of our common and preferred shares, including subjecting

us to covenants restricting our operating flexibility, increasing our vulnerability to general adverse economic and industry conditions, limiting our ability to obtain additional financing to fund future working capital, capital

expenditures and other general corporate requirements, requiring the use of a portion of our cash flow from operations for the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to

fund working capital, acquisitions, capital expenditures, distributions to our stockholders and general corporate requirements, and limiting our flexibility in planning for, or reacting to, changes in our business and our industry.

If we pay distributions from sources other than our cash flow from operations, we will have fewer funds available for investments and stockholders’ overall return

will be reduced.

Although our distribution policy is to use our cash flow from operations to make distributions, we are permitted to pay distributions from any source, including offering proceeds, borrowings, or sales

We have not placed a cap on the use of proceeds to fund distributions.

Risks Related to Our Business Strategy

Many of the factors that can affect the availability and timing of cash distributions to stockholders are beyond our control, and a change in any

one factor could adversely affect our ability to pay future distributions.

There can be no assurance that future cash flow will support distributions at the rate that such distributions are paid in any particular distribution period.

To the extent that we make payments or reimburse certain expenses to our Adviser pursuant to our Advisory Agreements, our cash flow and therefore our ability to make distributions from

cash flow, as well as cash flow available for investment, will be negatively impacted.

Under Maryland law, we may issue our own securities as stock dividends in lieu of making cash distributions to stockholders.

We may issue securities as stock dividends in the future.

This may dilute current stockholders’ equity in us and may reduce the value of stockholders’ investment.

We may change our targeted investments without shareholder consent.

Our Adviser may change our targeted investments and asset allocation at any time without the consent of our shareholders, which could result in our making investments that are different

from, and possibly riskier than, the investments described in Item 1 hereof.

A change in our targeted investments may increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which could

adversely affect the value of our securities and our ability to make distributions to stockholders.

Furthermore, a change in our asset allocation could result in our making investments in asset categories different from those described in

this Annual Report.

The ability of our Board of Directors to revoke our REIT qualification without stockholder approval may cause adverse consequences to our

stockholders.

Our Charter provides that our Board of Directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in

our best interest to continue to qualify as a REIT.

We do not have guaranteed cash flow.

There can be no assurance that cash flow or profits will be generated by our investments.

If the investments do not generate the anticipated amount of cash flow, we may not be able to pay the

anticipated distributions to our stockholders without making such distributions from the net proceeds of any offerings of capital stock or from reserves.

While we are subject to minimum distribution requirements to maintain our status as a REIT, such distributions are not guaranteed and the availability and timing

of cash distributions is uncertain.

Our ability to pay dividends is dependent on our ability to purchase, develop, or operate our assets profitably, and there are many factors that can affect the availability and timing of cash

distributions to stockholders.

Because we may receive rents and income from our properties and liquidations of or distributions from our securities at various times during our fiscal year, distributions paid may not reflect our

income earned in that particular distribution period.

The amount of cash available for distribution will be affected by many factors, including without limitation, the amount of income we will earn from investments in target assets,

the amount of our operating expenses and many other variables.

Actual cash available for distribution may vary substantially from our expectations.

While we intend to fund the payment of quarterly distributions to holders of our common and preferred shares entirely from distributable cash flows, we may fund quarterly distributions to our

stockholders from a combination of available net cash flows, equity capital and proceeds from borrowings.

In the event we are unable to consistently fund future quarterly distributions to stockholders entirely from distributable

cash flows, the value of our common and preferred shares may be negatively impacted.

We are generally required to distribute to our stockholders at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain, each

year to qualify as a REIT under the Code, which we intend to satisfy through quarterly cash distributions of all or substantially all of our REIT taxable income in such year, subject to certain adjustments.

Our Board of Directors will

determine the amount and timing of any distributions.

In making such determinations, our directors will consider all relevant factors, including the amount of cash available for distribution, capital expenditures, general operational

requirements and applicable law.

We intend over time to make regular quarterly distributions to holders of our preferred shares.

However, we bear all expenses incurred by our operations, and the funds generated by operations, after

deducting these expenses, may not be sufficient to cover desired levels of distributions to stockholders.

In addition, our Board of Directors, in its discretion, may retain any portion of such cash in excess of our REIT taxable income

for working capital.

We cannot predict the amount of distributions we may make over time.

We may in the future choose to pay dividends in our own stock, in which case you may be required to pay income taxes in excess of the cash dividends you receive.

We may in the future distribute taxable dividends that are payable in cash and our preferred shares at the election of each stockholder.

Taxable stockholders receiving such dividends will be required to

include the full amount of the dividend as ordinary income to the extent of our current and accumulated earnings and profits for United States federal income tax purposes.

As a result, a U.S.

stockholder may be required to pay income

taxes with respect to such dividends in excess of the cash dividends received.

stockholder sells the stock it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend.

Further, there

is likely to be no active trading market for our stock, and the shareholder will have find a buyer and negotiate with the found buyer as to the purchase price of the stock.

Furthermore, with respect to non-U.S.

stockholders, we may

be required to withhold U.S.

tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock.

In addition, if a significant number of our stockholders determine to sell our preferred shares in order to pay taxes owed on dividends, it may put downward pressure on the trading price of our preferred shares.

Risks Related to Our Business Operations and Strategy

We may change our targeted investment and operational policies without stockholder consent.

We may change our investment and operational policies, including our policies with respect to investments (including changes to our Advisers’ targeted assets and asset allocation), acquisitions, growth,

operations, indebtedness, capitalization and distributions, at any time without the consent of our stockholders, which could result in our making investments that are different from, and possibly riskier than, the types of investments

described in this filing.

Any such changes may increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which could adversely affect our ability to make distributions.

Furthermore, a change

in our asset allocation could result in our making investments in asset categories different from those described in this Annual Report.

The ability of our Board of Directors to revoke our REIT qualification without stockholder approval may cause adverse consequences to our stockholders.

Our Charter provides that our Board of Directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interest

to continue to qualify as a REIT.

If we cease to qualify as a REIT, we would become subject to U.S.

federal income tax on our taxable income and would no longer be required to distribute most of our taxable income to our

stockholders, which may have adverse consequences on our total return to our stockholders.

Our Business Strategy has, as of yet, had limited testing.

Our Business Strategy may not produce the results expected.

As a consequence, the value

of your shares may decrease over time and you may lose your entire investment.

Our strategy now focuses more on the acquisition of real property assets as opposed to securities, which strategy has had limited testing by us and may not produce profitable or

favorable results.

If our strategy fails to produce sufficient income and/or returns to cover our expenses, we could lose invested capital.

Due diligence by our Adviser may not reveal all of the liabilities associated with such investments and may not reveal other weaknesses in such

investments, which could lead to investment losses.

Because we intends to purchase real estate at below-market-prices, there may not be enough time to investigate the condition of any particular investment.

Before making an investment, our Adviser will assess the strengths and weaknesses of a target investment property.

The Adviser will also consider other factors and characteristics that

are material to the performance of the investment.

federal income tax on our taxable income and would no longer be required to distribute most of our taxable income to our stockholders,

which may have adverse consequences on our total return to our stockholders.

Our future growth will depend upon our ability to acquire real estate investments in several competitive real estate markets.

Our future growth will depend, in large part, upon our initial and continued ability to acquire properties.

We face significant competition with respect to our acquisition and origination of assets

from many other companies, including other REITs, insurance companies, private investment funds, hedge funds, specialty finance companies and other investors.

Some competitors may have a lower cost of funds and access to funding sources that are not available to us.

In addition, some of our competitors may have higher risk tolerances or different risk

assessments, which could allow them to consider a wider variety of investments and establish more relationships than us.

Some of our competitors also may have greater financial and operational resources, larger customer bases, and

more established relationships with their customers and suppliers than we do.

The competitive pressures we face, if not effectively managed, may have a material adverse effect on our business, financial condition, liquidity and

results of operations.

Competition may limit the number of suitable investment opportunities offered to us and may result in higher prices, lower yields and a narrower spread of yields over our borrowing costs, making it

more difficult for us to identify and pursue opportunities consistent with our objectives and to acquire new investments on attractive terms.

This could delay our investment in desirable assets.

Any failure to identify or consummate

investments on satisfactory terms, or at all, may impede our growth, reduce our earnings per share and negatively affect our cash available for distribution to our stockholders.

Due diligence by our Advisers may not reveal all of the liabilities associated with the investments being evaluated and may not reveal other weaknesses in such investments, which could

lead to investment losses.

Because we intend to purchase real estate at below-market-prices, there may not be enough time to investigate the condition of any particular investment.

Before making an investment, our Advisers will assess the strengths and weaknesses of a target investment property.

The Advisers will also consider other factors and characteristics that are material to

the performance of the investment.

Such other factors may include the pricing trends for similar properties in the area where the target investment property is located.

In making such assessments and otherwise conducting customary due diligence, our Adviser relies on resources available to it and, in some cases, an investigation by third parties.

can be no assurance that our Adviser’s due diligence process will uncover all relevant facts or that any investment will be successful.

Our investments may include rehabilitating distressed real estate and such rehabilitation may not result in higher asset values.

In many of our intended but yet unidentified real estate acquisitions, the property value is diminished, and real estate may require significant rehabilitation.

We intend to perform

such rehabilitation from time to time to increase the rental rates for an acquired property.

When coupled with the limited time to perform due diligence on any particular investment, cash may be used to rehabilitate a property where the cost of rehabilitation is not justified

and will not result in increased asset valuation.

In making such assessments and otherwise conducting customary due

diligence, our Advisers relies on resources available to them and, in some cases, an investigation by third parties.

There can be no assurance that our Advisers’ due diligence process will uncover all relevant facts or that any

investment will be successful.

We may experience difficulty in ultimately selling any property or groups of properties which no longer fit our investment criteria or are

impractical to lease and maintain, which could force us to sell a property at a price that reduces the return to our investors.

The real estate market is affected by many factors that are out of our control, including the availability of financing, interest rates and other factors, as well as supply and demand for real estate

As a result, we cannot predict whether we will be able to sell any property or groups of properties which no longer fit our investment criteria or are impractical to lease and maintain on favorable terms, or whether

such sale could be made at a favorable price or on terms acceptable to us.

We also cannot predict the length of time which will be needed to obtain a purchaser or to complete the sale of any property.

In addition, the terms of our leases and the laws regulating REITs could impact our ability to sell any property or groups of properties.

To qualify as a REIT for federal income tax purposes, we must

continually satisfy various tests, including tests regarding the nature of our assets which could restrict our disposition strategy.

Lack of diversification in numbers or types of investments increases our dependence on individual investments.

Our investment strategy depends in large part on acquiring a diversified portfolio based on the number of properties or investments we acquire relative to our total assets.

diversification reduces the risk that a default or other problem with any single property or investment will have a material negative impact on our earnings.

If, due to factors such as lack of adequate capital, or the unavailability of suitable investment opportunities, we acquire relatively few properties or acquire properties or

investments that are significant (in terms of capital invested) to our overall asset size, our portfolio could become concentrated, increasing the risk of loss to stockholders if a default or other problem arises.

Alternatively, property sales may reduce the aggregate amount of our property investment portfolio in value or number.

As a result, our portfolio could become more concentrated, thereby

reducing the benefits of diversification by factors such as geography, property type, tenancy, or other measures.

While we intend to endeavor to grow and diversify our portfolio through additional property acquisitions, we may never reach

a significant size to achieve true portfolio diversity.

Our Board of Directors has approved very broad investment guidelines for our Adviser and will not approve each investment and financing decision

made by our Adviser unless required by our investment guidelines.

Our Adviser is authorized to follow very broad investment guidelines established by our Board of Directors.

Our Board of Directors will periodically review our investment guidelines and

our portfolio of assets but will not, and will not be required to, review all of our proposed investments, except in limited circumstances as set forth in our investment policies.

Our Adviser has great latitude within the broad parameters of our investment guidelines in determining the types and amounts of assets in which to invest on our behalf, including making

investments that may result in returns that are substantially below expectations or result in losses, which would materially and adversely affect our business and results of operations, or may otherwise not be in the best interests of our

Such diversification reduces

the risk that a default or other problem with any single property or investment will have a material negative impact on our earnings.

Currently, our investments are concentrated in five commercial real estate properties and four multi-family residential apartment properties, located primarily in the Oakland-San Francisco Bay area in

If, due to factors such as lack of adequate capital, or the unavailability of suitable investment opportunities, we acquire relatively few properties or acquire properties or investments that are significant (in terms of

capital invested) to our overall asset size, we may be unable to reduce the degree of concentration of our portfolio, which could increase the risk of loss to stockholders if a default or other problem arises.

Additionally, property sales may reduce the aggregate amount of our property investment portfolio in value or number.

As a result, our portfolio could become more concentrated, thereby further reducing

the benefits of diversification by factors such as geography, property type, tenancy, or other measures.

While we intend to endeavor to grow and diversify our portfolio through additional property acquisitions, we may never reach a

significant size to achieve true portfolio diversity.

Our success is materially dependent on the financial stability of our tenants.

The success of our business is dependent on the financial stability of the tenants occupying our properties.

A default of a tenant on its lease payments may cause us to lose some of the anticipated

revenue from an investment property.

Since our portfolio is relatively small, our exposure to each tenant may be more significant than we expect.

We believe that this exposure will diminish (but not entirely) as we acquire more

In the event of a material default, we may experience delays in enforcing our rights as landlords and we may incur substantial costs in protecting our investment and possibly re-letting the property, as the case may be.

If a lease is terminated, we cannot assure our investors that the property could be leased for the same amount of rent previously received or that we could sell the property without incurring a loss.

We are dependent on our Advisers and their key personnel for our success.

We are, and will continue to be, advised by our Advisers and, pursuant to the Advisory Agreement, our Advisers is not obligated to dedicate any specific personnel exclusively to us, nor is its

personnel obligated to dedicate any specific portion of their time to the management of our business.

As a result, we cannot provide any assurances regarding the amount of time our Advisers will dedicate to the management of our business.

Moreover, each of our officers and non-independent directors is

also an employee of our Advisers or one of its affiliates, and has significant responsibilities for other investment vehicles currently managed by affiliates, and may not always be able to devote sufficient time to the management of

our business.

Consequently, we may not receive the level of support and assistance that we otherwise might receive if we were internally managed.

In addition, we offer no assurance that our Advisers will remain our Advisers or that we will continue to have access to our Advisers’ principals and professionals.

The initial term of our Agreements

with our Advisers only extends until December 31, 2022, with automatic one-year renewals thereafter, and may be terminated earlier under certain circumstances.

If the Agreement is terminated or not renewed and no suitable replacement

is found to manage us, we may not be able to execute our business plan, which could have a material adverse effect on our results of operations and our ability to make distributions to our stockholders.

Our Board of Directors has approved very broad investment guidelines for our Advisers and will not approve each investment and financing decision made by our

Advisers unless required by our investment guidelines.

Our Advisers are authorized to follow very broad investment guidelines established by our Board of Directors.

Our Board of Directors will periodically review our investment guidelines and our portfolio

of assets but will not, and will not be required to, review all of our proposed investments, except in limited circumstances as set forth in our investment policies.

Our Advisers have great latitude within the broad parameters of our investment guidelines in determining the types and amounts of assets in which to invest on our behalf, including making investments

that may result in returns that are substantially below expectations or result in losses, which would materially and adversely affect our business and results of operations, or may otherwise not be in the best interests of our

stockholders.

Transactions entered into by our Adviser may be costly, difficult or impossible to unwind by the time they are reviewed by our Board of Directors.

Because stockholders will be unable to evaluate the merits of these operational and investment guidelines, they will have to rely entirely on the ability of our Adviser and Board of

Directors to formulate and follow these operational and investment guidelines.

Even though our Adviser will be providing real estate advisory services, our Adviser is not a licensed asset manager nor is our Adviser a licensed

real estate advisor.

Our Adviser provides real estate advisory services on a best-effort basis.

Because our Adviser is not a licensed professional advisor and is not a licensed real estate manager, our

Adviser does not maintain errors and omissions insurance that we could turn to in the event our Adviser provides improper investing advice.

Should improper investment actions be taken by our Adviser, the value of our shares will likely

Our investments will be carried at estimated fair value as determined by our Adviser and there may be uncertainty as to the value of these

Substantially all of our investments are illiquid and not publicly traded.

To determine our net asset value, our Adviser estimates the fair value of our assets in conjunction with our

external valuation experts.

Because such valuations are inherently uncertain, our value may fluctuate over short periods of time, and may be based on numerous estimates and assumptions, our determinations of fair

value of our investments are inherently speculative and subject to errors.

The value of our shares could be adversely affected if our determinations regarding the fair value of these investments are materially higher than the values that

we ultimately realize upon their disposal.

We, through our Adviser, are often required to make a number of judgments in applying accounting policies, and different estimates and assumptions

in the application of these policies could result in changes to our reporting of financial condition and results of operations.

Various valuation estimates are used in the preparation of our consolidated financial statements, including estimates related to asset and liability valuations (or potential

impairments) and various receivables.

Often these estimates require the use of market data values that may be difficult to assess, as well as estimates of future performance or receivables collectability that may be difficult to

accurately predict.

While we have identified those accounting policies that are considered critical and have procedures in place to facilitate the associated judgments, different assumptions in the application of these policies could

result in material changes to our consolidated financial condition and results of operations.

Transactions entered into by our Advisers may be costly, difficult or impossible to unwind by the time they are reviewed by our Board of Directors.

Because stockholders will be unable to evaluate the merits of these operational and investment guidelines, they will have to rely entirely on the ability of our Advisers and Board of Directors to

formulate and follow these operational and investment guidelines.

Because we are dependent upon our Advisers and its affiliates to conduct our operations, any adverse changes in the financial or operational condition of our

Advisers or its affiliates, or our relationship with them, could hinder our operating performance and the return on your investment.

We are dependent on our Advisers and their affiliates to manage our operations and acquire and manage our portfolio of real estate assets.

Under the direction of our Board of Directors, and subject to

our investment guidelines, our Advisers makes all decisions with respect to the management of our company.

Our Advisers depend upon the fees and other compensation they receive from us, and upon their ability to attract and retain

skilled personnel, in carrying out these functions.

Any adverse changes in the financial or operational condition of our Advisers and their affiliates, or in our relationship with our Advisers, could hinder its ability to successfully

manage our operations and our portfolio of investments, which would adversely affect us and our stockholders.

Our investments will be carried at estimated fair value as determined by our Investment Adviser and there may be uncertainty as to the value of these investments.

Substantially all of our investments are illiquid, and the securities in which we invest are not publicly traded.

To determine our net asset value, our Investment Adviser estimates the fair value of our

assets in conjunction with our external valuation experts.

Because such valuations are inherently uncertain, our value may fluctuate over short periods of time, and may be based on numerous estimates and assumptions, our determinations of fair value of our

investments are inherently speculative and subject to errors.

The value of our shares could be adversely affected if our determinations regarding the fair value of these investments are materially higher than the values that we

ultimately realize upon their disposal.

We, through our Advisers, are often required to make a number of judgments in applying accounting policies, and different estimates and assumptions in the

application of these policies could result in changes to our reporting of financial condition and results of operations.

Various valuation estimates are used in the preparation of our consolidated financial statements, including estimates related to asset and liability valuations (or potential impairments) and various

Often these estimates require the use of market data values that may be difficult to assess, as well as estimates of future performance or receivables collectability that may be difficult to accurately predict.

have identified those accounting policies that are considered critical and have procedures in place to facilitate the associated judgments, different assumptions in the application of these policies could result in material changes to

our consolidated financial condition and results of operations.

The occurrence of cyber incidents, or a deficiency in our cybersecurity, could negatively impact our business by causing a disruption to our operations, a

compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results.

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

More specifically, a cyber incident is an intentional

attack or an unintentional event that can include gaining unauthorized access to systems to disrupt operations, corrupt data, or steal confidential information.

As reliance on technology by the Company, as well as the Advisers and

tenants, has increased, so have the risks posed to our systems, both internal and those we have outsourced.

Our three primary risks that could directly result from the occurrence of a cyber incident include operational interruption,

damage to our relationship with our tenants, and private data exposure.

We have implemented processes, procedures and controls to help mitigate these risks, but these measures, as well as our increased awareness of a risk of a cyber

incident, do not guarantee that our financial results will not be negatively impacted by such an incident.

Risks Related to Our Organization and Corporate Structure

Our Charter permits our Board of Directors to issue stock with terms that may subordinate the rights of common stockholders or preferred

shareholders or discourage a third party from acquiring us in a manner that might result in a premium price to our stockholders.

Our Charter permits our Board of Directors to issue stock with terms that may subordinate the rights of common stockholders or preferred shareholders or discourage

a third party from acquiring us in a manner that might result in a premium price to our stockholders.

Our Charter permits our Board of Directors to issue up to 80,000,000 shares of common stock and 20,000,000 preferred shares.

Our Board of Directors is permitted, subject to certain

restrictions set forth in our Charter, to authorize the issuance of shares of common stock and preferred stock without stockholder approval.

Further, our Board of Directors may classify or reclassify any unissued shares of common or

preferred stock into other classes or series of stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, and terms or conditions of

redemption of the stock and may amend our Charter from time to time to increase or decrease the aggregate number of shares or the number of shares of any class or series that we have authority to issue without stockholder approval.

our Board of Directors could authorize us to issue shares of preferred stock ranking senior to our common stock with respect to distribution rights upon our liquidation, dissolution or winding up or with terms and conditions that could

have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction such as a merger, tender offer or sale of all or substantially all of our assets, that might provide a premium price

for holders of our common stock.

Our Board of Directors is permitted, subject to certain restrictions set

forth in our Charter, to authorize the issuance of shares of common stock and preferred stock without stockholder approval.

Further, our Board of Directors may classify or reclassify any unissued shares of common or preferred stock

into other classes or series of stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, and terms or conditions of redemption

of the stock and may amend our Charter from time to time to increase or decrease the aggregate number of shares or the number of shares of any class or series that we have authority to issue without stockholder approval.

Board of Directors could authorize us to issue shares of preferred stock ranking senior to our common stock with respect to distribution rights upon our liquidation, dissolution or winding up or with terms and conditions that could

price for holders of our common stock.

Our rights and the rights of our shareholders to recover claims against our officers, directors and our Advisers are limited.

Maryland law provides that a director has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in the corporation’s best

interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances.

Our Charter, in the case of our directors, officers, employees and agents, and the advisory agreements, in the

case of the Advisers, require us to indemnify our directors, officers, employees and agents and the Advisers and its affiliates for actions taken by them in good faith and without negligence or misconduct.

Additionally, our Charter limits the liability of our directors and officers for monetary damages to the fullest extent permitted under Maryland law.

Although our Charter does not allow us to exonerate

and indemnify our directors and officers to a greater extent than permitted under Maryland law, we and our stockholders may have more limited rights against our directors, officers, employees and agents, and our Advisers and its

affiliates, than might otherwise exist under common law, which could reduce our investor’s and our recovery against them.

In addition, we may be obligated to fund the defense costs incurred by our directors, officers, employees and

agents or the Advisers in some cases which would reduce the cash available for distributions.

Risks Related to Conflicts of Interest

The Advisory Agreements with our Adviser and MacKenzie were not negotiated on an arm’s-length basis and may not be as favorable to us as if it had

been negotiated with an unaffiliated third party.

Our executive officers, including one of our directors, are executives of our Adviser and MacKenzie.

Our Advisory Agreements were negotiated between related parties and their terms,

including fees payable to our Adviser, may not be as favorable to us as if it had been negotiated with an unaffiliated third party.

In addition, we may choose not to enforce, or to enforce less vigorously, our rights under the Advisory

Agreements because of our desire to maintain our ongoing relationship with the Adviser and its affiliates.

We may have conflicts of interest with our Adviser and other affiliates, which could result in investment decisions that are not in the best

interests of our stockholders.

There are numerous conflicts of interest between our interests and the interests of our Adviser and its respective affiliates, including conflicts arising out of allocation of personnel

to our activities, allocation of investment opportunities between us and investment vehicles affiliated with our Adviser, purchase or sale of properties, including from or to investment entities affiliated with our Adviser, and fee

arrangements with our Adviser that might induce our Adviser to make investment decisions that are not in our best interests.

Examples of these potential conflicts of interest include, but are not limited

The Advisory Agreements with our Advisers were not negotiated on an arm’s-length basis and may not be as favorable to us as if they had been negotiated with an

unaffiliated third party.

Our executive officers, including one of our directors, are executives of our Advisers.

Our Advisory Agreements were negotiated between related parties and their terms, including fees payable to our

Advisers, may not be as favorable to us as if it had been negotiated with an unaffiliated third party.

In addition, we may choose not to enforce, or to enforce less vigorously, our rights under the Advisory Agreements because of our

desire to maintain our ongoing relationship with the Advisers and its affiliates.

We may have conflicts of interest with our Advisers and other affiliates, which could result in investment decisions that are not in the best interests of our

stockholders.

There are numerous conflicts of interest between our interests and the interests of our Advisers and its respective affiliates, including conflicts arising out of allocation of personnel to our

activities, allocation of investment opportunities between us and investment vehicles affiliated with our Advisers, purchase or sale of properties, including from or to investment entities affiliated with our Advisers, and fee

arrangements with our Advisers that might induce our Advisers to make investment decisions that are not in our best interests.

Examples of these potential conflicts of interest include, but are not

Competition for the time and services of personnel that work for us and our affiliates;

Compensation payable by us to our Adviser and its affiliates for their various services, which may not be on market terms and is payable, in some cases, whether or not our stockholders receive

distributions;

The possibility that our Adviser, its officers and their respective affiliates will face conflicts of interest relating to the purchase and leasing of properties and other investments, and that such

conflicts may not be resolved in our favor, thus potentially limiting our investment opportunities, impairing our ability to make distributions and adversely affecting the trading price of our stock;

The possibility that if we acquire properties from investment entities affiliated with our Adviser or its affiliates, the price may be higher than we would pay if the transaction were the result of

arm’s-length negotiations with a third party;

The possibility that our Adviser will face conflicts of interest, some of whose officers are also our officers and two of whom are directors of ours, resulting in actions that may not be in the

long-term best interests of our stockholders;

Our Adviser has considerable discretion with respect to the terms and timing of our acquisition, disposition and leasing transactions;

The possibility that we may acquire or merge with our Adviser, resulting in an internalization of our management functions;

The possibility that the competing demands for the time of our Adviser, its affiliates and our officers may result in them spending insufficient time on our business, which may result in our missing

investment opportunities or having less efficient operations, which could reduce our profitability and result in lower distributions to stockholders.

Any of these and other conflicts of interest between us and our Adviser could have a material adverse effect on the returns on our investments, our ability to make distributions to

stockholders and the trading price of our stock.

Our Adviser, its officers and their respective affiliates will face conflicts of interest relating to the purchase and leasing of real estate

investments, and such conflicts may not be resolved in our favor.

Conflicts caused by our Adviser may severely curtail our investment opportunities, impair our ability to make distributions and reduce the value of stockholders’ investment in us.

Adviser also advises other clients and such clients may compete with us for investments.

Our Advisers have policies in place to deal with such potential conflicts, but such policies may result in other clients buying assets that may be in

our best interest to purchase.

Our Adviser, and the personnel it provides are not exclusively dedicated to management of our business.

If the competing demands for the time of our Adviser, its key personnel, its affiliates and our officers result in them spending insufficient time on our business, we may miss

investment opportunities or have less efficient operations, which could reduce our profitability and result in lower distributions to stockholders.

We have not adopted any specific conflicts of interest policies, and, therefore, other than in respect of the restrictions placed on our Advisers

in the Advisory Agreements, we will be reliant upon the good faith of our Adviser, officers and directors in the resolution of any conflict.

We do not have a policy that expressly restricts any of our directors, officers, stockholders or affiliates, including our Advisers and their officers and employees, from having a

pecuniary interest in an investment in or from conducting, for their own account, business activities of the type we conduct.

This may mean that our ability to access the best investments may be curtailed, which could result in greater

than expected operating expense, losses and reduced distributions to our shareholders.

Compensation payable by us to our Advisers and their affiliates for their various services, which may not be on market terms and is payable, in some cases, whether or not our stockholders receive distributions;

The possibility that our Advisers, their officers and their respective affiliates will face conflicts of interest relating to the purchase and leasing of properties and other investments, and that such conflicts may not be

resolved in our favor, thus potentially limiting our investment opportunities, impairing our ability to make distributions and adversely affecting the trading price of our stock;

The possibility that if we acquire properties from investment entities affiliated with our Advisers or their affiliates, the price may be higher than we would pay if the transaction were the result of arm’s-length

negotiations with a third party;

The possibility that our Advisers will face conflicts of interest, since some of their officers are also our officers and two serve as directors of ours, resulting in actions that may not be in the long-term best interests

of our stockholders;

Our Advisers have considerable discretion with respect to the terms and timing of our acquisition, disposition and leasing transactions;

The possibility that we may acquire or merge with our Advisers, resulting in an internalization of our management functions;

The possibility that the competing demands for the time of our Advisers, their affiliates and our officers may result in them spending insufficient time on our business, which may result in our missing investment

opportunities or having less efficient operations, which could reduce our profitability and result in lower distributions to stockholders.

Any of these and other conflicts of interest between us and our Advisers could have a material adverse effect on the returns on our investments, our ability to make distributions to stockholders and the

trading price of our stock.

Our Advisers, their officers and their respective affiliates will face conflicts of interest relating to the purchase and leasing of real estate investments, and

such conflicts may not be resolved in our favor.

Conflicts created by our Advisers’ relationships with us and with other investment entities affiliated with our Advisers or their affiliates, as described above, may severely curtail our investment

opportunities, impair our ability to make distributions and reduce the value of stockholders’ investment in us.

Our Advisers also advises other clients and such clients may compete with us for investments.

Our Advisers have policies

in place to deal with such potential conflicts, but such policies may result in other clients buying assets that may be in our best interest to purchase.

Our Advisers, and the personnel they provide are not exclusively dedicated to management of our business.

If the competing demands for the time of our Advisers, its key personnel, its affiliates and our officers result in them spending insufficient time on our business, we may miss investment opportunities

or have less efficient operations, which could reduce our profitability and result in lower distributions to stockholders.

We have not adopted any specific conflicts of interest policies, and, therefore, other than in respect of the restrictions placed on our Advisers in the Advisory

Agreements, we will be reliant upon the good faith of our Advisers, officers and directors in the resolution of any conflict.

We do not have a policy that expressly restricts any of our directors, officers, stockholders or affiliates, including our Advisers and their officers and employees, from having a pecuniary interest in

an investment in or from conducting, for their own account, business activities of the type we conduct.

This may mean that our ability to access the best investments may be curtailed, which could result in greater than expected

operating expense, losses and reduced distributions to our shareholders.

Risks Associated with Debt Financing

We expect to use mortgage and other debt financing to acquire properties or interests in properties and otherwise incur other indebtedness, which

increases our expenses and could subject us to the risk of losing properties in foreclosure if our cash flow is insufficient to make loan payments.

We are permitted to acquire real properties and other real estate-related investments, including entity acquisitions, by assuming either existing financing secured by the asset or by

borrowing new funds.

We expect to use mortgage and other debt financing to acquire properties or interests in properties and otherwise incur other indebtedness, which increases our

expenses and could subject us to the risk of losing properties in foreclosure if our cash flow is insufficient to make loan payments.

We are permitted to acquire real properties and other real estate-related investments, including entity acquisitions, by either assuming existing financing secured by the asset or borrowing new funds.

In addition, we may incur or increase our mortgage debt by obtaining loans secured by some or all of our assets to obtain funds to acquire additional investments or to pay distributions to our stockholders.

may borrow funds if necessary to satisfy the requirement that we distribute at least 90% of our annual “REIT taxable income,” or otherwise as is necessary or advisable to assure that we maintain our qualification as a REIT for federal

income tax purposes.

We also may borrow funds if

necessary to satisfy the requirement that we distribute at least 90% of our annual “REIT taxable income” (determined without regard to the dividends paid deduction and excluding any net capital gain), or otherwise as is necessary or

advisable to assure that we maintain our qualification as a REIT for federal income tax purposes.

There is no limit on the amount we may invest in any single property or other asset or on the amount we can borrow to purchase any individual property or other investment.

mortgage a property and have insufficient cash flow to service the debt, we risk an event of default which may result in our lenders foreclosing on the properties securing the mortgage.

If we cannot repay or refinance loans incurred to purchase our properties, or interests therein, then we may lose our interests in the properties secured by the loans we are unable to

If we mortgage a property and

have insufficient cash flow to service the debt, we risk an event of default which may result in our lenders foreclosing on the properties securing the mortgage and the loss of our interests in such properties if we are unable to

repay or refinance.

High mortgage rates may make it difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire,

our cash flow from operations and the amount of cash distributions we can make.

To qualify as a REIT, we will be required to distribute at least 90% of our annual taxable income (excluding net capital gains) to our stockholders in each taxable year, and thus our

ability to retain internally generated cash is limited.

Accordingly, our ability to acquire properties or to make capital improvements to or remodel properties will depend on our ability to obtain debt or equity financing from third parties

or the sellers of properties.

High levels of debt or increases in interest rates could increase the amount of our loan payments, which could reduce the cash available for distribution to

stockholders.

Our policies do not limit us from incurring debt.

For purposes of calculating our leverage, we assume full consolidation of all of our real estate investments, whether or not they would be

consolidated under GAAP.

High debt levels will cause us to incur higher interest charges, resulting in higher debt service payments, and may be accompanied by restrictive covenants.

Interest we pay reduces cash available for

distribution to stockholders.

Additionally, with respect to our variable rate debt, increases in interest rates increase our interest costs, which reduces our cash flow and our ability to make distributions to you.

In addition, if

we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments at times which may not permit realization of the maximum return on such investments and could

result in a loss.

In addition, if we are unable to service our debt, our lenders may foreclose on our interests in the real property that secures such debt.

High mortgage rates may make it difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire, our cash flow from

operations and the amount of cash distributions we can make.

To qualify as a REIT, we generally will be required to distribute at least 90% of our annual taxable income (determined without regard to the dividends paid deduction and excluding any net capital gain)

to our stockholders in each taxable year, limiting our ability to retain internally generated cash.

Accordingly, our ability to acquire properties or to make capital improvements to or remodel properties will depend on our ability to

obtain debt or equity financing from third parties or the sellers of properties.

If mortgage debt is unavailable at reasonable rates, we may not be able to finance the purchase of properties.

If we place mortgage debt on properties, we run the risk of being unable to refinance the

properties when the debt becomes due or of being unable to refinance on favorable terms.

If we place mortgage debt on properties,

we run the risk of being unable to refinance the properties when the debt becomes due or of being unable to refinance on favorable terms.

If interest rates are higher when we refinance the properties, our income could be reduced.

We may be unable to refinance properties.

In the case of

some of our fixed-rate debt, after the initial fixed rate period, the interest rate may increase.

interest rate may increase on some of our fixed-rate debt after the initial fixed rate period.

If any of these events occurs, our cash flow would be reduced.

This, in turn, would reduce cash available for distribution to stockholders

and may hinder our ability to raise capital by issuing more stock or borrowing more money.

Some of our mortgage loans may have “due-on-sale” provisions, which may impact the manner in which we acquire, sell and/or finance our properties.

In purchasing properties subject to financing, we may obtain financing with “due-on-sale” and/or “due-on-encumbrance” clauses.

Due-on-sale clauses in mortgages allow a mortgage lender

to demand full repayment of the mortgage loan if the borrower sells the mortgaged property.

Similarly, due-on-encumbrance clauses allow a mortgage lender to demand full repayment if the borrower uses the real estate securing the mortgage

loan as security for another loan.

In such event, we may be required to sell our properties on an all-cash basis, which may make it more difficult to sell the property or reduce the selling price.

If we are required to make payments under any “bad boy” carve-out guaranties that we may provide in connection with certain mortgages and related

loans, our business and financial results could be materially adversely affected.

and may hinder our ability to raise additional capital.

Our ability to obtain financing on reasonable terms would be impacted by negative capital market conditions.

Recently, domestic and international financial markets have experienced unusual volatility and uncertainty.

Liquidity has tightened in overall financial markets, including the investment grade debt and

equity capital markets.

Consequently, there is greater uncertainty regarding our ability to access the credit market in order to attract financing on reasonable terms.

Investment returns on our assets and our ability to make

acquisitions could be adversely affected by our inability to secure financing on reasonable terms, if at all.

If we are required to make payments under any “bad boy” carve-out guaranties that we may provide in connection with certain mortgages and related loans, our

business and financial results could be materially adversely affected.

In obtaining certain nonrecourse loans, we may provide standard carve-out guaranties.

These guaranties are only applicable if and when the borrower directly, or indirectly through

agreement with an affiliate, joint venture partner or other third party, voluntarily files a bankruptcy or similar liquidation or reorganization action or takes other actions that are fraudulent or improper (commonly referred to as “bad

boy” guaranties).

Although we believe that “bad boy” carve-out guaranties are not guaranties of payment in the event of foreclosure or other actions of the foreclosing lender that are beyond the borrower’s control, some lenders in the

real estate industry have recently sought to make claims for payment under such guaranties.

These guaranties are only applicable if and when the borrower directly, or indirectly through agreement with an

affiliate, joint venture partner or other third party, voluntarily files a bankruptcy or similar liquidation or reorganization action or takes other actions that are fraudulent or improper (commonly referred to as “bad boy”

estate industry have recently sought to make claims for payment under such guaranties.

In the event such a claim were made against us under a “bad boy” carve-out guaranty following foreclosure on mortgages or related loan, and such

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We may finance our property acquisitions using interest-only mortgage indebtedness.

During the interest-only period, the amount of each scheduled payment will be less than that of a

traditional amortizing mortgage loan.

During the interest-only period, the amount of each scheduled payment will be less than that of a traditional

amortizing mortgage loan.

The principal balance of the mortgage loan will not be reduced (except in the case of prepayments) because there are no scheduled monthly payments of principal during this period.

interest-only period, we will be required either to make scheduled payments of amortized principal and interest or to make a lump-sum or “balloon” payment at maturity.

These required principal or balloon payments will increase the amount

of our scheduled payments and may increase our risk of default under the related mortgage loan.

If the mortgage loan has an adjustable interest rate, the amount of our scheduled payments also may increase at a time of rising interest

Increased payments and substantial principal or balloon maturity payments will reduce the funds available for distribution to our stockholders because cash otherwise available for distribution will be required to pay principal and

interest associated with these mortgage loans.

Leveraging an investment allows a lender to foreclose on that investment.

Lenders to an investment, even non-recourse lenders, are expected in all instances to retain the right to foreclose on that investment if there is a default in the loan terms.

were to occur, we would likely lose our entire investment in that investment.

Availability of financing and market conditions will affect the success of the company.

Market fluctuations in real estate financing may affect the availability and cost of funds needed in the future for investments.

In addition, credit availability has been restricted in

the past and may become restricted again in the future.

Restrictions upon the availability of real estate financing or high interest rates for real estate loans could adversely affect the investments and our ability to execute its

investment goals.

Risks Related to Compliance and Regulation

We may not be successful in availing ourselves of the Investment Company Act exclusion, and even if we are successful, the exclusion would impose

limits on our operations, which could adversely affect our operations.

The Investment Company Act requires that any issuer that is beneficially owned by 100 or more persons and that is engaged “primarily… in the business of investing, reinvesting, or

trading in securities” or “in the business of investing, reinvesting, owning, holding, or trading in securities, and owns or proposes to acquire investment securities having a value exceeding 40 per centum of the value of such issuer’s

total assets” to be registered as required under the Investment Company Act.

We believe that, because we are primarily purchasing the real estate assets directly or through wholly owned subsidiaries, the ownership of these assets will not

be deemed to be investment securities for purposes of the Investment Company Act.

We anticipate that the assets will either qualify as “real estate assets” for purposes of the Investment Company Act, not be considered investment

securities for purposes of the Investment Company Act, or will comprise less than 40% of our portfolio of assets (in fact, intended to be less than 20%).

As a result, we expect to be exempt from the Investment Company Act’s requirements,

and does not intend to register under the Investment Company Act.

If we do not qualify for the real estate exemption, we will attempt to qualify for a different exemption from the Investment Company Act.

Even though we intend to conduct our operations so that we will not be required to register as an investment company under the Investment Company Act, the SEC may disagree with our

Consequently, the SEC may require us to register under the Investment Company Act thus requiring us to adjust our investment strategy.

Any such adjustment in our strategy could have a material adverse effect on us.

asked the staff of the SEC for confirmation of our analysis under the Investment Company Act, although we did disclose our plan to withdraw our election to be treated as a BDC (and therefore to no longer be an investment company) and to

lower our portfolio of investment securities to below 20% of our total assets.

In the event we are required to register under the Investment Company Act, the returns to the stockholders will likely be significantly reduced.

After the interest-only

period, we will be required either to make scheduled payments of amortized principal and interest or to make a lump-sum or “balloon” payment at maturity.

These required principal or balloon payments will increase the amount of our

scheduled payments and may increase our risk of default under the related mortgage loan.

If the mortgage loan has an adjustable interest rate, the amount of our scheduled payments also may increase at a time of rising interest rates.

Increased payments and substantial principal or balloon maturity payments would reduce the funds available for distribution to our stockholders.

We may use floating rate, interest-only or short-term loans to acquire investments.

The Real Estate Adviser has the right, in its sole discretion, to negotiate any debt financing, including obtaining (i) interest-only, (ii) floating rate and/or (iii) short-term loans to acquire

If the Real Estate Adviser obtains floating rate loans, the interest rate would not be fixed but would float with an established index (probably at higher interest rates in the future).

No principal would be repaid on

interest-only loans.

Finally, we would be required to refinance short term loans at the end of a relatively short period.

The credit markets have recently been in flux and are experiencing a malaise.

No assurance can be given that

the Real Estate Adviser would be able to refinance with fixed-rate permanent loans in the future, on favorable terms or at all, to refinance the short-term loans.

In addition, no assurance can be given that the terms of such future

loans to refinance the short-term loans would be favorable to us.

Risks Related to Our Taxation as a REIT

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federal income tax purposes.

Our initial and continued qualification as a REIT depends on our

satisfaction of certain asset, income, organizational, distribution, and stockholder ownership requirements on a continuing basis.

Our ability to satisfy some of the asset tests depends upon the fair market values of our assets, some of

which are not able to be precisely determined and for which we will not obtain independent appraisals.

Our initial and continued qualification as a REIT depends on our satisfaction of certain

asset, income, organizational, distribution, and stockholder ownership requirements on a continuing basis.

Our ability to satisfy some of the asset tests depends upon the fair market values of our assets, some of which are not able to

be precisely determined and for which we will not obtain independent appraisals.

If we were to fail to qualify as a REIT in any taxable year, and certain statutory relief provisions were not available, we would be subject to U.S.

federal income tax, including any

applicable alternative minimum tax, on our taxable income at regular corporate rates, and distributions to stockholders would not be deductible by us in computing our taxable income.

Any such corporate tax liability could be substantial

and would reduce the amount of cash available for distribution.

Unless entitled to relief under certain Internal Revenue Code provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year during

which we ceased to qualify as a REIT.

federal income tax, including any applicable

alternative minimum tax, on our taxable income at regular corporate rates, and distributions to stockholders would not be deductible by us in computing our taxable income.

Any such corporate tax liability could be substantial and

would reduce the amount of cash available for distribution.

Unless entitled to relief under certain Internal Revenue Code provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year during which we ceased to

qualify as a REIT.

In addition, if we fail to qualify as a REIT, we will no longer be required to make distributions.

As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand

our business and raise capital, and it would adversely affect the value of our securities.

Failure to remain qualified as a REIT would cause us to be taxed as a regular corporation, which would substantially reduce funds available for

distributions to our stockholders.

As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business

and raise capital, and it would adversely affect the value of our securities.

Failure to remain qualified as a REIT would cause us to be taxed as a regular corporation, which would substantially reduce funds available for distributions to

our stockholders.

We have elected to be taxed as a REIT under the federal income tax laws commencing with our taxable year ended December 31, 2014.

We believe that we have and will continue to operate in

a manner qualifying us as a REIT for our taxable year ended December 31, 2021 and intend to continue to so operate.

We believe that we have and will continue to operate in a manner

qualifying us as a REIT for our taxable year ended December 31, 2023 and intend to continue to so operate.

However, we cannot assure the stockholders that we will remain qualified as a REIT.

Moreover, our qualification and taxation as a REIT depend upon our ability to meet on a continuing

basis, through actual annual operating results, certain qualification tests set forth in the federal tax laws.

Moreover, our qualification and taxation as a REIT depend upon our ability to meet on a continuing basis, through

actual annual operating results, certain qualification tests set forth in the federal tax laws.

Tax counsel will not review our compliance with those tests on a continuing basis.

Accordingly, no assurance can be given that

our actual results of operations for any particular taxable year will satisfy such requirements.

If we fail to qualify as a REIT in any taxable year, we will face serious tax consequences that will substantially reduce the funds available for distributions to our stockholders

we would not be able to deduct distributions paid to stockholders in computing our taxable income and would be subject to U.S.

federal income tax at regular corporate rates;

Accordingly, no assurance can be given that our actual

results of operations for any particular taxable year will satisfy such requirements.

If we fail to qualify as a REIT in any taxable year, we will face serious tax consequences that will substantially reduce the funds available for distributions to our stockholders because:

we would be taxed as a regular domestic corporation, which under current law, among other things, means being unable to deduct distributions paid to stockholders in computing our taxable income and being subject to U.S.

federal income tax on our taxable income at corporate income tax rates;

we could be subject to the federal alternative minimum tax and possibly increased state and local taxes;

we would be required to pay taxes and, therefore, our cash available for distribution to stockholders would be reduced for each of the years during which we did not qualify as a REIT and for which we had taxable income;

unless we are entitled to relief under certain U.S.

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In addition, if we fail to qualify as a REIT, we will no longer be required to make distributions.

As a result of all these factors, our failure to qualify as a REIT could impair our

ability to expand our business and raise capital, and it would adversely affect the value of our securities.

As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand

our business and raise capital, and it would adversely affect the value of our securities.

REIT distribution requirements could adversely affect our liquidity.

In order to maintain our REIT status and to meet the REIT distribution requirements, we may need to borrow funds on a short-term basis or sell assets, even if the then-prevailing market conditions are

not favorable for these borrowings or sales.

To qualify as a REIT, we generally must distribute to our stockholders at least 90% of our REIT taxable income each year, determined without regard to the deduction for dividends paid

and excluding any net capital gain.

In addition, we will be subject to corporate income tax to the extent we distribute less than 100% of our net taxable income including any realized net

capital gain.

We intend to make distributions to our stockholders to comply with the requirements of the Internal Revenue Code for REITs and to minimize or eliminate our corporate income tax obligation to the extent consistent with

our business objectives.

Our cash flows from operations may be insufficient to fund required distributions as a result of differences in timing between the actual receipt of income and the recognition of income for federal

income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required debt service or amortization payments.

The insufficiency of our cash flows to cover our distribution requirements could

have an adverse impact on our ability to raise short- and long-term debt or sell equity securities in order to fund distributions required to maintain our REIT status.

We will be subject to regular corporate income taxes on any

undistributed REIT taxable income each year.

In addition, we will be subject to a 4% non-deductible excise tax on the amount, if any, by which distributions paid by us in any calendar year are less than the sum of 85% of our

ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.

Further, amounts distributed will not be available to fund investment activities.

We expect to fund our investments by raising equity capital and through borrowings from financial institutions and the

debt capital markets.

If we fail to obtain debt or equity capital in the future, it could limit our ability to grow, which could have a material adverse effect on the value of our preferred shares.

Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments.

To maintain our qualification as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and

diversification of our assets, the amounts we distribute to our stockholders and the ownership of our capital stock.

To maintain our qualification as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of

our assets, the amounts we distribute to our stockholders and the ownership of our capital stock.

In order to meet these tests, we may be required to forego investments we might otherwise make.

Thus, compliance with the

REIT requirements may hinder our performance.

In particular, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified real

estate assets.

The remainder of our investment in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than

10% of the total value of the outstanding securities of any one issuer.

In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer.

If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT

qualification and suffering adverse tax consequences.

As a result, we may be required to liquidate otherwise attractive investments.

These actions could have the effect of reducing our income and amounts available for distribution to our

stockholders.

Thus, compliance with the REIT

requirements may hinder our performance.

In particular, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified real estate assets.

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

more than 10% of the total value of the outstanding securities of any one issuer, among other limitations.

In addition, in general, no more than 5% of the value of our assets (other than government securities, qualified real estate assets and taxable REIT subsidiaries) can consist of the securities of any

one issuer, and no more than 20% of the value of our assets can consist of the securities of one or more taxable REIT subsidiaries.

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

correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences.

As a result, we may be required

to liquidate otherwise attractive investments.

These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.

The tax status of the Operating Partnership and other partnerships could impact our qualification as a REIT.

If the IRS were to successfully challenge the status of the Operating Partnership or any other partnership in which we invest as a

partnership or disregarded entity for U.S.

federal income tax purposes, such partnerships could be subject to an entity level tax and could, depending on the circumstances, jeopardize our ability to qualify as a REIT.

Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flows.

Even if we remain qualified as a REIT, we may be subject to certain federal, state and local taxes on our income and assets, including taxes on any undistributed income, tax on income

from some activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes.

The stock ownership limit imposed by the Internal Revenue Code for REITs and our Charter may inhibit market activity in our stock and may restrict

our business combination opportunities.

In order for us to maintain our qualification as a REIT under the Internal Revenue Code, not more than 50% in value of our outstanding stock may be owned, directly or indirectly, by

five or fewer individuals (as defined in the Internal Revenue Code to include certain entities) at any time during the last half of each taxable year.

Additionally, at least 100 persons must beneficially own our capital stock during at

least 335 days of a taxable year for each taxable year.

Even if we remain qualified as a REIT, we may be subject to certain federal, state and local taxes on our income and assets, including taxes on any undistributed income, tax on income from some

activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes.

The stock ownership limit imposed by the Internal Revenue Code for REITs and in our Charter may inhibit market activity in our stock and may restrict our business

combination opportunities.

In order for us to maintain our qualification as a REIT under the Internal Revenue Code, not more than 50% in value of our outstanding stock may be owned, directly or indirectly, by five or fewer

individuals (as defined in the Internal Revenue Code to include certain entities) at any time during the last half of each taxable year.

Additionally, at least 100 persons must beneficially own our capital stock during at least 335

days of each taxable year.

Our Charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT.

Unless exempted by the Board of Directors, no person may own more than 9.8% of the aggregate value of the outstanding shares of our stock or more than 9.8% in value or in number of

shares, whichever is more restrictive, of the outstanding our preferred shares.

The Board of Directors may not grant such an exemption to any proposed transferee whose ownership in excess of 9.8% of the value of our outstanding shares or

more than 9.8% in value or in number of shares, whichever is more restrictive, of the outstanding our preferred shares, would result in the termination of our status as a REIT.

These ownership limits could delay or prevent a transaction

or a change in our control that might be in the best interest of our stockholders.

Distributions payable by REITs do not qualify for the reduced tax rates available for some distributions.

The maximum tax rate applicable to “qualified distribution income” payable to U.S.

Unless exempted by the Board of Directors, no person may own more than 9.8% of the aggregate value of the outstanding shares of our stock or more than 9.8% in value or in number of shares, whichever is

more restrictive, of the aggregate outstanding common or preferred shares of the Company.

The Board of Directors may not grant such an exemption to any proposed transferee whose ownership in excess of 9.8% of the value of our

outstanding shares or more than 9.8% in value or in number of shares, whichever is more restrictive, would result in the termination of our status as a REIT.

These ownership limits could delay or prevent a transaction or a change in

our control that might be in the best interest of our stockholders.

Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.

The maximum tax rate applicable to “qualified dividend income” payable to U.S.

stockholders that are taxed at individual rates is 20%.

Distributions payable by REITs, however,

generally are not eligible for the reduced rates on qualified distribution income.

The more favorable rates applicable to regular corporate qualified distributions could cause investors who are taxed at individual rates to perceive

investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay distributions, which could adversely affect the value of the shares of REITs.

Dividends payable by REITs, however, generally are not eligible

for the reduced rates on qualified dividend income.

The more favorable rates applicable to regular corporate qualified dividends could cause investors who are taxed at individual rates to perceive investments in REITs to be relatively

less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our preferred shares.

However, under current law, continuing through 2025.

individual taxpayers may be entitled to claim a deduction in determining their taxable income of 20% of ordinary REIT dividends (dividends other than

capital gain dividends and dividends attributable to certain qualified dividend income received by us), which temporarily reduces the effective tax rate on such dividends.

You are urged to consult with your tax advisor regarding the

effect of this change on your effective tax rate with respect to REIT dividends.

The prohibited transactions tax may subject us to tax on our gain from sales of property and limit our ability to dispose of our properties.

A REIT’s net income from prohibited transactions is subject to a 100% tax.

In general, prohibited transactions are sales or other dispositions of property other than foreclosure

property, held primarily for sale to customers in the ordinary course of business.

Although we intend to acquire and hold all of our assets as investments and not for sale to customers in the ordinary course of business, the IRS may assert that we are subject to the

prohibited transaction tax equal to 100% of net gain upon a disposition of real property.

Although a safe harbor to the characterization of the sale of real property by a REIT as a prohibited transaction is available, not all of our prior property dispositions qualified for

the safe harbor and we cannot assure the stockholders that we can comply with the safe harbor in the future or that we have avoided, or will avoid, owning property that may be characterized as held primarily for sale to customers in the

ordinary course of business.

In general, prohibited transactions are sales or other dispositions of property other than foreclosure property, held primarily

for sale to customers in the ordinary course of business.

Although we intend to acquire and hold all of our assets as investments and not for sale to customers in the ordinary course of business, the IRS may assert that we are subject to the prohibited

transaction tax equal to 100% of net gain upon a disposition of real property.

Although a safe harbor to the characterization of the sale of real property by a REIT as a prohibited transaction is available, not all of our prior property dispositions qualified for the safe harbor

and we cannot assure the stockholders that we can comply with the safe harbor in the future or that we have avoided, or will avoid, owning property that may be characterized as held primarily for sale to customers in the ordinary

course of business.

Failure to make required distributions would subject us to U.S.

2 unchanged sentences

federal income tax purposes.

In order to remain qualified as a REIT, we generally are required to

distribute at least 90% of our REIT taxable income, determined without regard to the distributions paid deduction and excluding any net capital gain, each year to our stockholders.

To the extent that we satisfy this distribution

requirement, but distribute less than 100% of our REIT taxable income, we will be subject to U.S.

In order to remain qualified as a REIT, we generally are required to distribute at least 90%

of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain, each year to our stockholders.

To the extent that we satisfy this distribution requirement, but distribute less

than 100% of our REIT taxable income, we will be subject to U.S.

federal corporate income tax on our undistributed taxable income.

In addition, we will be subject to a 4% nondeductible excise tax if the

actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under the Code.

We may be unable to generate sufficient revenue from operations, operating cash flow or portfolio income to pay our operating expenses, and our

operating expenses could rise, diminishing our ability and to pay distributions to our stockholders.

As a REIT, we are generally required to distribute at least 90% of our REIT taxable income, determined without regard to the distributions paid deduction and not including net capital

gains, each year to our stockholders.

To qualify for the tax benefits accorded to REITs, we intend to continue to make distributions to our stockholders in amounts such that we distribute all or substantially all our net taxable income

each year, subject to certain adjustments.

In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay to

our stockholders in a calendar year is less than a minimum amount specified under the Code.

We may be unable to generate sufficient revenue from operations, operating cash flow or portfolio income to pay our operating expenses, and our operating expenses

could rise, diminishing our ability and to pay distributions to our stockholders.

As a REIT, we are generally required to distribute at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain, each year to our

stockholders.

To qualify for the tax benefits accorded to REITs, we intend to continue to make distributions to our stockholders in amounts such that we distribute all or substantially all our REIT taxable income each year, subject to

certain adjustments.

However, our ability to make distributions may be adversely affected by the risk factors described herein.

Our ability to make and sustain cash distributions is based on many factors,

including the return on our investments, the size of our investment portfolio, operating expense levels, and certain restrictions imposed by Maryland law.

Our ability to make and sustain cash distributions is based on many factors, including the

return on our investments, the size of our investment portfolio, operating expense levels, and certain restrictions imposed by Maryland law.

Some of the factors are beyond our control and a change in any such factor could affect our ability to pay future distributions.

No assurance can be given as to our ability to pay

distributions to our stockholders.

In the event of a downturn in our operating results and financial performance or unanticipated declines in the value of our asset portfolio, we may be unable to declare or pay annual distributions or

make distributions to our stockholders.

The timing and amount of distributions are in the sole discretion of our Board of Directors, which considers, among other factors, our earnings, financial condition, debt service obligations and

applicable debt covenants, REIT qualification requirements and other tax considerations and capital expenditure requirements as our Board of Directors may deem relevant from time to time.

Risk Related to the Current COVID-19 Pandemic

The current COVID-19 pandemic, or the future outbreak of other highly infectious or contagious diseases, has and could continue to materially and

adversely impact or disrupt our financial condition, results of operations, cash flows and performance.

Our operating results depend, in large part, on generating revenues from leases to residential or commercial tenants, which in turn requires tenants to generate sufficient income to pay

their rents in a timely manner.

The market and economic challenges created by the COVID-19 pandemic, and measures implemented to prevent its spread, may adversely affect our operations and, as a result, our ability to make distributions

to our stockholders or to realize appreciation in the value of our investments.

The spread of COVID-19 could result in further increases in unemployment, and tenants that experience deteriorating financial conditions as a result of the

pandemic may be unwilling or unable to pay rent in full on a timely basis.

In some cases, the companies in which we have invested may have to restructure tenants’ rent obligations, and they may not be able to do so on terms as favorable

to us as those currently in place.

No assurance can be given as to our ability to pay distributions to our

stockholders.

In the event of a downturn in our operating results and financial performance or unanticipated declines in the value of our asset portfolio, we may be unable to declare or pay annual distributions or make distributions

to our stockholders.

The timing and amount of distributions are in the sole discretion of our Board of Directors, which considers, among other factors, our earnings, financial condition, debt service obligations and applicable debt

covenants, REIT qualification requirements and other tax considerations and capital expenditure requirements as our Board of Directors may deem relevant from time to time.

We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our shares.

At any time, the U.S.

federal income tax laws governing REITs or the administrative interpretations of those laws may be amended.

We cannot predict when or if any new U.S.

federal income tax law,

regulation or administrative interpretation, or any amendment to any existing U.S.

federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation,

or interpretation may take effect retroactively.

We and our stockholders could be adversely affected by any such change in the U.S.

federal income tax laws, regulations or administrative interpretations.

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the “IRA”), The IRA includes numerous tax provisions that impact corporations, including the implementation of

a corporate alternative minimum tax as well as a 1% excise tax on certain stock repurchases and economically similar transactions.

REITs are excluded from the definition of an “applicable corporation” and therefore are not

subject to the corporate alternative minimum tax.

Additionally, stock repurchases by REITs are specifically excepted from the 1% excise tax.

The impact of tax reform and any potential tax changes on our shares is uncertain.

Investors should consult their own tax advisors regarding changes in tax laws.

Risk Related to COVID-19 and Other Infectious Diseases

COVID-19, or the future outbreak of other highly infectious or contagious diseases, has and could continue to materially and adversely impact or disrupt our

financial condition, results of operations, cash flows and performance, as well as adversely affect our and our tenants’ financial condition and results of operations.

Our operating results depend, in large part, on generating revenues from leases to residential or commercial tenants, which in turn requires tenants to generate sufficient income to pay their rents in a

timely manner.

stockholders or to realize appreciation in the value of our investments.

Any future local, regional, national or international outbreak of a contagious disease, including COVID-19 and its variants, MERS, SARS, H1N1 influenza virus,

avian flu or any other similar illness, could result in further increases in unemployment, decrease the willingness of customers to patronize our tenants’ retail facilities, discourage residents from renting in our multi-family

communities, cause shortages of employees to staff our tenants’ operations, interrupt supplies from third parties upon which our tenants rely, cause us or our tenants to temporarily close one or more of our properties, result in

governmental regulation adversely impacting our or our tenants’ businesses and otherwise have a material adverse effect on our business, financial condition and results of operations, especially where a tenant may be unwilling or

unable to pay rent in full on a timely basis.

In some cases, the companies in which we have invested may have to restructure tenants’ rent obligations, and they may not be able to do so on terms as favorable to us as those currently

Numerous state, local, federal, and industry-initiated efforts may also affect property owners’ ability to collect rent or enforce remedies for the failure to pay rent.

This may lead to reduction or

cancellation of distributions, which will in turn effect our ability to pay our expenses and to pay distributions to our shareholders.

We may continue to experience material reductions in our operating revenue due to the current pandemic

or future outbreaks or variants.

An outbreak of disease or similar public health threat, such as the coronavirus, could adversely affect our and our tenants’ financial condition

and operations.

A local, regional, national or international outbreak of a contagious disease, including COVID-19, MERS, SARS, H1N1 influenza virus, avian flu or any other similar illness, could

decrease the willingness of customers to patronize our tenants’ retail facilities, discourage residents from renting in our multi-family communities, cause shortages of employees to staff our tenants’ operations, interrupt supplies from

third parties upon which our tenants rely, cause us or our tenants to temporarily close one or more of our properties, result in governmental regulation adversely impacting our or our tenants’ businesses and otherwise have a material

adverse effect on our business, financial condition and results of operations.

Such adverse effect could be rapid and unexpected.

This may lead to reduction or cancellation of

distributions, which will in turn effect our ability to pay our expenses and to pay distributions to our shareholders.

UNRESOLVED STAFF COMMENTS

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What changed 10-K

Item 1A. Risk Factors