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Item 1A. Risk Factors

2025-09-29 compared with 2024-09-27 · 289 added, 266 removed, 521 unchanged (52% of the section changed)

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

our common or preferred stock.

RISK FACTORS SUMMARY

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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.

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

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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 reduced.

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.

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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

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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.

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

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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 Code for REITs and in our Charter may inhibit market activity in our stock and may restrict our business combination opportunities.

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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

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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.

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 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.

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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.

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.

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 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.

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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.

or toxic substances or chemical releases at a property.

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

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laws 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

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

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.

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.

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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.

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

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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.

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.

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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.

Our Hollywood Apartments 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.

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

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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.

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

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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.

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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.

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.

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.

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.

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

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.

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.

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

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.

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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 may be

otherwise advantageous for us to do so.

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

be otherwise advantageous for us to do so.

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.

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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.

To the extent we do not obtain such

other reports or reliance letters before making an investment, the risk of such investment may be increased.

To the 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.

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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.

respect to your investment in our securities.

We face possible risks associated with climate change.

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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 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

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 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

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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.

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

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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.

particular distribution period.

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.

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

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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 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 a combination of cash and shares of our equity securities at the election of each stockholder.

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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 may be required to

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

The IRS has issued guidance authorizing elective cash/stock dividends to be made by public REITs where a cap of at least 20% is placed on the amount of cash that may be paid as part of the dividend, provided that

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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.

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.

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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 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

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

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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 eight commercial real estate properties and four multi-family residential apartment properties, located primarily in the Oakland-San Francisco Bay area

in California.

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.

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

area in California.

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.

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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.

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, 2024, 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.

The term of our Agreements with

our Advisers only extends until the end of each calendar year, with automatic one-year renewals, 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

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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.

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

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.

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

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.

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

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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.

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

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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.

Thus, 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.

Thus, 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 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.

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.

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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.

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 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.

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.

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

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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.

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.

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 advise 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 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.

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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.

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 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

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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.

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.

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

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

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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.

consolidated under the accounting principles generally accepted in the United States of America (“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.

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.

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.

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 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.

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.

The interest rate may increase on

some of our fixed-rate debt after the initial fixed rate period.

The 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

additional capital.

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

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.

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

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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).

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.

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 claim were successful, our business and

financial results could be materially adversely affected.

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.

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

business and financial results could be materially adversely affected.

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

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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.

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.

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.

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.

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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

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.

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.

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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.

Any such corporate tax liability could be substantial and would reduce

the amount of cash available for distribution.

Unless entitled to relief under certain 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

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.

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

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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.

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:

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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 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.

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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, 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 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

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.

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.

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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 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.

Unless exempted by the Board of Directors, no person may own more than 9.80% of the aggregate value of the outstanding shares of our stock or more than 9.80% 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 9.80% of the value of our

outstanding shares or more than 9.80% 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.

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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.

However, under current law, individual taxpayers are 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 reduces the effective tax rate on such dividends.

You are urged to consult with your tax advisor regarding the effect of this rule 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.

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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

Failure to make required distributions would subject us to U.S.

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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 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.

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 to our stockholders in

a calendar year is less than a minimum amount specified under the Code.

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

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.

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.

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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, 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

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However, 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.

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.

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.

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 in place.

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.

Investors should consult their own tax advisors regarding changes in

Risk Related to Outbreaks of Infectious Diseases

Any future pandemic or similar threat, and governmental responses thereto, could once again 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.

The market and economic challenges created by the COVID-19 pandemic, and measures implemented to prevent its spread, adversely affected our operations and, as a result, our ability to make distributions to our

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 in place.

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.

Risks Relating to Potential Rescission Claims

Previous issuances of common shares under our dividend reinvestment program may have violated certain federal and/or state securities laws, and shareholders

could file suit to seek rescission of such securities.

During the period beginning June 2021 and ending December 2021, in an offering pursuant to our registration statement on Form N-2, we made sales of securities under our dividend reinvestment

program pursuant to a deficient registration statement (which registrant statement became deficient by virtue of our inadvertently failing to amend the registration statement to include the then-current audit report of our auditors).

Consequently, the offer and sale of securities pursuant to the Form N-2 may have failed to comply fully with Section 5 of the Securities Act which may trigger a right of rescission under the Securities Act for investors that purchased shares of

our common stock during this period under our dividend reinvestment program.

Accordingly, we may have liability to purchasers of such securities if they were to file suit against us;

the remedy could be to repurchase such securities at their purchase price plus statutory

interest, less the amount of any income received with respect to such shares.

There may be claims relating to our possible non-compliance with federal and/or state securities laws relating to the deficient Form N-2 referenced above,

and we may continue to be contingently liable for rescission or damages of an indeterminate amount.

It is possible that regulators could pursue enforcement actions or impose penalties and fines against us with respect to any violations of securities laws relating to the issuance of dividend

reinvestment program shares under the deficient Form N-2 referenced above.

If we have to repurchase shares as discussed above, it may affect our cash balances.

If we have to repurchase shares of our common stock issued under the deficient registration statement referenced above, such rescission payments will be funded from our existing cash balances.

rescission payments would reduce funds available to us for our operations.

If all persons issued shares without registration were to successfully file suit and force rescission, we could need to pay a total of approximately $865,000 and our

results of operations, cash balances or financial condition will be negatively affected.

Risks Relating to Issuance of Warrants

There are unresolved issues related to rights of the warrant holder.

In February 2025, we issued pre-funded and unfunded warrants to a single institutional investor pursuant to warrant agreements that granted the investor the right to share in dividends.

dividend right is undisputed with respect to pre-funded warrants to purchase up to 129,226.50 shares of common stock (although after August 2025, this issue became moot when the investor exercised all its prefunded warrants).

Company did not agree to pay dividends on unfunded warrants to purchase 423,944.85 shares of common stock.

Nonetheless, the investor has taken the position that dividends are payable on its unfunded warrants.

The Company attempted to resolve

this misunderstanding with the investor, but no resolution has been reached.

The holder of unfunded warrants could assert claims for dividends on the unfunded warrants.

The unfunded warrants became exercisable at the end of August 2025, six months after issuance of the warrants.

From and after that time, the holder of the unfunded warrants could bring claims

for participation rights in any dividends declared by the Company on its common stock.

While the Company has suspended the payment of dividends on its common stock while experiencing negative cash flow, such potential claims by the holder of

the unfunded warrants could be material if and when the Company re-starts dividend payments.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors