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Consistent with the foregoing, the risks we face include, but are not limited to, the following:
−Removed: • the COVID-19 pandemic and its resulting economic impact may materially adversely affect our business, operations, financial results and liquidity;
−Removed: • we operate in a highly competitive market for investment opportunities, may not obtain sufficient additional capital, and may be adversely affected by the loss of loan investments, our Manager’s diligence processes, our borrowers’ prepayment rates, or changes in market interest rates, including as a result of the expected phase out of LIBOR;
+Added: • we operate in a highly competitive market for investment opportunities, may not obtain sufficient additional capital, and may be adversely affected by Tremont's diligence processes, any defaults on our loan investments, the rate of prepayments on our loan investments, changes in interest rates, including as a result of the expected phase out of LIBOR, or changes in credit spreads due to the size of our loan portfolio;
+Added: • unfavorable market, economic, CRE and capital market conditions may have a material adverse effect on our investment returns, ability to grow our investment portfolio, results of operations, financial condition and ability to pay distributions to our shareholders;
• the lack of liquidity of our loan investments may make it difficult for us to sell our investments if the need or desire arises;
• loans secured by properties in transition or requiring significant renovation involve a greater risk of loss than loans secured by stabilized properties;
−Removed: • the CRE loans that we originate or acquire are subject to the ability of the property owner to generate net operating income from the underlying property, as well as the risks of delinquency and foreclosure, which may be impacted by current economic conditions including, inflation, labor shortages and supply chain constraints, among other factors;
−Removed: • third party expectations relating to environmental, social and governance, or ESG, factors may impose additional costs on us and expose us, our borrowers and their tenants to new risks;
−Removed: • any material failure, inadequacy, interruption or security breach of our, RMR LLC’s or TRC’s technology systems could materially and adversely affect us;
−Removed: • we may be unable to obtain additional capital sufficient to grow our portfolio;
+Added: • the CRE loans that we originate or acquire are subject to the ability of the property owner to generate net operating income from the underlying property, as well as the risks of defaults and foreclosure, which may be impacted by current economic conditions, including inflation, rising or sustained high interest rates, supply chain challenges, labor availability, geopolitical instability and economic downturn, among other factors;
• we are subject to the covenants and conditions contained in our Master Repurchase Agreements and in our facility loan agreement and security agreement with BMO Harris Bank N.A., or BMO, or the BMO Loan Program Agreement, which may restrict our operations and ability to make investments and distributions.
We may enter into one or more alternative or additional repurchase facilities in the future and expect any such facility to contain covenants and conditions that may restrict our operations and ability to make investments and distributions;
−Removed: • our management structure and management agreement with TRC and its relationships with related parties may create conflicts of interest;
+Added: • third party expectations relating to ESG factors may impose additional costs on us and expose us, our borrowers and their tenants to new risks;
+Added: • any material failure, inadequacy, interruption or security breach of our, RMR’s or Tremont’s technology systems could materially and adversely affect us;
+Added: • our management structure and management agreement with Tremont and its relationships with related parties may create conflicts of interest;
• ownership limitations and certain provisions in our declaration of trust and bylaws, as well as certain provisions of Maryland law, may deter, delay or prevent a change in control of us or an unsolicited acquisition proposal and could limit shareholders’ ability to obtain a judicial forum they deem favorable for certain disputes;
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• if we own assets or conduct operations that generate “excess inclusion income” outside a TRS, doing so could adversely affect shareholders’ taxation;
−Removed: • we may incur adverse tax consequences if TRMT failed to qualify for taxation as a REIT for U.S.
−Removed: federal income tax purposes prior to the Merger;
• we may change our operational, financing and investment policies without shareholder approval and may become highly leveraged.
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Other risks of which we are not yet aware, or that we currently believe are not material, may also materially and adversely impact our business operations or financial results.
−Removed: If any of the events or circumstances described below occurs, our business, financial condition, results of operations or ability to make distributions to our shareholders could be adversely affected and the value of an investment in our securities could decline.
+Added: If any of the events or circumstances described below occurs, our business, financial condition, results of operations or ability to pay distributions to our shareholders could be adversely affected and the value of an investment in our securities could decline.
Investors and prospective investors should consider the risks described below and the information contained under the caption “Warning Concerning Forward-Looking Statements” and elsewhere in this Annual Report on Form 10-K before deciding whether to invest in our securities.
Risks Relating to our Business
−Removed: The duration of the COVID-19 pandemic and the extent of its continued and ultimate impact on the economy and public health is unknown, but it may have a long term negative affect on our business, operations, financial results and liquidity.
−Removed: The COVID-19 pandemic has had a substantial adverse impact on the global economy, including the U.S.
−Removed: economy, during various stages of the pandemic.
−Removed: Government requirements to stay in place and temporarily close businesses had a substantial negative impact on the economy.
−Removed: Government spending during the pandemic, and subsequent easing of the government restrictions, has since helped avert extended negative economic impact to the economy and is believed to have helped foster a
−Removed: return to economic growth.
−Removed: However, the progression of the pandemic has been unpredictable with periods of high rates of infection, followed by periods of reduced infection rates later followed again by periods of high infection rates.
−Removed: In addition, variants of the virus have emerged and additional variants may emerge in the future.
−Removed: Those variants may have negative impacts on public health, including possibly being more transmissible to persons, including persons who have been otherwise immunized due to natural immunity as a result of being previously infected with COVID-19 or vaccination.
−Removed: Any future variants of COVID-19 could have similar or worse impacts on the economy and public health.
−Removed: The COVID-19 pandemic has caused supply chain challenges in the global economy, which has impacted the U.S.
−Removed: The challenges have resulted, at times, in reduced availability of goods and inflation, including with respect to construction materials.
−Removed: In addition, as a result of the COVID-19 pandemic and restrictions implemented in response, there have been, at times during the pendency of the pandemic, construction moratoriums and decreases in available construction workers and construction activity, including required inspectors and governmental personnel for permitting and other requirements.
−Removed: These conditions, if they should continue or return, may prevent our borrowers from completing ongoing and planned construction projects and improving their properties that secure our loans.
−Removed: As a result, our borrowers may be unable to generate sufficient cash flows to make payments on or refinance our loans, and we may not recover some or all of our investment.
−Removed: During the first several months of the COVID-19 pandemic in the United States, CRE transaction volume and finance activity significantly declined.
−Removed: If those conditions are experienced again, our ability to make and fund loan investments will be materially adversely affected.
−Removed: The ultimate duration and severity of the COVID-19 pandemic is unknown, but it may have a long term negative affect on business, operations, financial results and liquidity.
−Removed: We operate in a highly competitive market for investment opportunities and competition may limit our ability to originate or acquire our target investments on attractive terms or at all and could also affect the pricing of any investment opportunities.
+Added: We operate in a highly competitive market for investment opportunities and competition may limit our ability to originate or acquire target investments on attractive terms or at all.
We operate in a highly competitive market for investment opportunities.
−Removed: We compete with a variety of institutional investors, including other mortgage REITs, specialty finance companies, public and private funds (including mortgage REITs, funds or investors that TRC, RMR LLC or their subsidiaries currently, or may in the future, sponsor, advise or manage), banks, and insurance companies and other financial institutions.
−Removed: Some of our competitors, including other mortgage REITs and alternative CRE lenders, have raised, or are expected to raise, significant amounts of capital, and may have investment objectives that overlap with our investment objectives, which may create additional competition for lending and other investment opportunities.
+Added: We compete with a variety of institutional investors, including other mortgage REITs, specialty finance companies, public and private funds (including mortgage REITs, funds or investors that Tremont, RMR or their subsidiaries currently, or may in the future, sponsor, advise or manage), banks, and insurance companies and other financial institutions.
Many of our competitors are significantly larger than we are and have considerably greater financial, technical, marketing and other resources than we have.
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Government, or are only available to us on substantially less attractive terms.
−Removed: In addition, some of our competitors may have higher risk tolerances or make different risk assessments than us, which could lead them to consider a wider variety of investments, offer more attractive pricing or other terms, for example, higher LTV, ratios or lower interest rates than we are willing to offer or accept, or establish more relationships than we do.
−Removed: Furthermore, competition for our target investments may lead to the return for these investments decreasing, which may further limit our ability to generate desired returns.
−Removed: The competitive pressures we face may have a material adverse effect on our business, financial condition and results of operations, and we cannot be sure that we will be able to identify and originate or acquire our target investments.
+Added: In addition, some of our competitors may have higher risk tolerances or make different risk assessments than us, which could lead them to consider a wider variety of investments, offer more attractive pricing or other terms, for example, higher LTV ratios or lower interest rates than we are willing to offer or accept.
+Added: Furthermore, competition for our target investments may result in less attractive terms for us and lower returns on our investments or our failing to make investments.
+Added: Unfavorable market, economic, CRE and capital market conditions may have a material adverse effect on our investment returns, ability to grow our investment portfolio, results of operations, financial condition and ability to pay distributions to our shareholders.
+Added: Our business may be adversely affected by market and economic volatility experienced by the U.S.
+Added: and global economies, the CRE industry and/or the local economies in the markets in which the properties relating to our investments are located.
+Added: Unfavorable market, economic and CRE industry conditions may be due to, among other things, rising or sustained high interest rates and inflation, labor market challenges, supply chain disruptions, volatility in the capital markets, pandemics (such as the COVID-19 pandemic) or other public health safety concerns, geopolitical instability (such as the war in Ukraine), and other conditions beyond our control.
+Added: Current and future economic conditions in the United States may affect the demand for real estate and real estate financing, real estate values, CRE transaction and leasing activity, rents, capital market stability and liquidity and capital costs.
+Added: Current economic conditions, including rising interest rates, inflation, reduced availability of financing or financing on favorable terms and increased CRE financing costs, have resulted in a reduction in CRE transaction volume and adversely impacted CRE lending, including alternative CRE lenders like us.
+Added: If these conditions continue or worsen, or if other adverse market conditions arise, CRE transaction activity, capital market stability, financing availability and financing costs for CRE lending may be further negatively impacted.
+Added: In addition, these conditions may result in a prolonged economic slowdown or recession, which may negatively impact our borrowers’ ability to pay their debt obligations owed to us.
+Added: Further, these conditions may reduce the value of the properties relating to our investments, which may increase the likelihood that we incur losses if our borrowers default on our loans.
+Added: If these risks are realized, they may have a material adverse effect on our investment returns, ability to grow our investment portfolio, results of operations, financial condition and ability to pay distributions to our shareholders.
We have a limited operating history investing in mortgage loans and have made a limited number of target investments to date.
We have a limited operating history investing in mortgage loans and have made a limited number of target investments to date.
−Removed: Our ability to achieve our investment objectives depends on our ability to make investments that generate attractive, risk adjusted returns, as well as on our access to financing on terms that permit us to realize net interest income from our investments.
+Added: Our ability to achieve our investment objectives depends on our ability to make investments that generate attractive, risk adjusted returns, as well as on our ongoing access to capital and financing on terms that permit us to realize net interest income from our investments.
In general, the availability of favorable investment opportunities will be affected by the level and volatility of interest rates in the market generally, the availability of adequate short and long term real estate financing and the competition for investment opportunities.
−Removed: We cannot be sure that we will be successful in obtaining additional capital to enable us to make new investments, that any investments we have made or may make will satisfy our targeted rate of return or other investment objectives, or that we will be able to successfully operate our business, or implement our operating policies and investment strategies.
−Removed: If we fail to make additional investments within a reasonable time or on acceptable terms, such failure may have a material adverse effect on our business, financial condition, results of operations, ability to maintain our qualification for taxation as a REIT under the IRC, and ability to make or sustain distributions to our shareholders, and could cause the value of our securities to decline.
−Removed: A loss with respect to any one of our loan investments may be significant due to the limited number of investments within our loan portfolio.
+Added: We cannot be sure that we will be successful in obtaining additional capital to enable us to make additional investments after we invest our existing capital, that any investments we make will achieve our targeted rate of return or other investment objectives, or that we will be able to successfully operate our business, or implement our operating policies and investment strategies.
+Added: Our loan portfolio consists of a limited number of investments, and losses, repayments or other changes with respect to any of those investments may significantly impact us.
As of December 31, 2022, our portfolio consisted of 27 first mortgage loans.
−Removed: A consequence of this limited number of investments is that the aggregate returns we realize may be adversely affected if any of our investments performs poorly or we need to write down the value of any of our investments or if any of our investments is repaid prior to maturity and we are not able to promptly redeploy the proceeds in a manner that provides us with comparable returns.
−Removed: A loss with respect to any one of these loan investments may be significant.
+Added: As a result, the aggregate returns we realize may be adversely affected if any of our investments performs poorly, we need to write down the value of any of our investments or any of our investments is repaid prior to maturity and we are not able to timely redeploy the proceeds in a manner that provides us with comparable returns.
+Added: The impact of these adverse effects on our aggregate returns may be greater than if our portfolio consisted of a larger number of loans because an impacted loan may comprise a larger proportion of our loan portfolio.
The lack of liquidity of our loan investments may adversely affect our business.
The lack of liquidity of our loan investments may make it difficult for us to sell our investments if the need or desire arises.
−Removed: Certain investments such as mortgages, in particular, are relatively illiquid investments due to their short life, their potential unsuitability for securitization and the difficulty of recovery in the event of a borrower’s default.
−Removed: In addition, our loan investments may become less liquid as a result of delinquencies or defaults, turbulent market conditions or the unavailability to borrowers of refinancing capital, which may make it more difficult for us to dispose of our investments at advantageous prices or in a timely manner.
−Removed: Moreover, the investments we make are not registered under relevant securities laws, resulting in limitations or prohibitions against their transfer, sale, pledge or disposition except in transactions that are exempt from registration requirements or are otherwise in accordance with such laws.
−Removed: As a result, our loan investments are illiquid, and if we are required to liquidate all or a portion of our loan portfolio quickly, we may realize significantly less than the value at which we have previously recorded those investments.
−Removed: As a result, our ability to adjust our loan portfolio in response to changes in economic and other conditions may be relatively limited, which could adversely affect our financial condition and results of operations.
+Added: Our investments in CRE mortgage loans are relatively illiquid due to their short life, their potential unsuitability for securitization and the difficulty of recovery in the event of a borrower’s default.
+Added: In addition, our loan investments may become less liquid as a result of actual or anticipated defaults by our borrowers, turbulent market conditions or the unavailability to borrowers of refinancing capital.
+Added: Moreover, the investments we make are not registered under relevant securities laws, resulting in limitations on their transfer, sale, pledge or disposition except in transactions that are exempt from registration requirements or are otherwise in accordance with such laws.
+Added: As a result, our loan investments are illiquid, and if we are required to liquidate a loan investment, we may realize significantly less than the amount we invested or our carrying value.
+Added: The risk of such a loss may be greater if we need to liquidate it quickly.
+Added: As a result, our ability to adjust our loan portfolio in response to changes in economic and other conditions may be limited, which could adversely affect our financial condition and results of operations.
Loans secured by properties in transition or requiring significant renovation involve a greater risk of loss than loans secured by stabilized properties.
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In a typical transitional loan, the borrower has usually identified a property that the borrower believes has been under-managed, is located in a recovering market or requires renovation.
−Removed: The renovation, refurbishment or expansion of a property by a borrower involves risks of cost overruns, construction risks and noncompletion risks, among others.
−Removed: Estimates of the costs of property improvements may be inaccurate.
−Removed: Other risks may include rehabilitation costs exceeding original estimates, possibly making a project uneconomical, environmental risks, delays in legal and other approvals and rehabilitation and subsequent leasing of the property not being completed on schedule.
−Removed: If the borrower fails to improve the quality of the property’s management or the market in which the property is located fails to improve as expected, or the renovation is not completed in a timely manner or such costs are more than expected, then the borrower may not generate sufficient cash flows to make payments on or refinance the transitional loan, and we may not recover some or all of our investment.
−Removed: In addition, borrowers often use the proceeds of a conventional mortgage loan to repay a transitional loan.
−Removed: Transitional loans therefore are subject to the risk of the borrowers’ inability to obtain financing to repay the loan.
−Removed: Losses we incur with respect to our transitional loans could be material.
−Removed: TRC’s diligence process for investment opportunities may not reveal all facts that may be relevant for an investment, and if we incorrectly evaluate the risks of our investments, we may experience losses.
−Removed: Prior to our making any investment, TRC conducts diligence that it considers reasonable based upon the facts and circumstances of the investment.
−Removed: When conducting diligence on our behalf, TRC may be required to evaluate important and complex business, financial, tax, accounting, environmental and legal issues.
+Added: The renovation, refurbishment or expansion of a property by a borrower involves risks of cost overruns, construction risks and non-completion risks, among others.
+Added: Estimates of the costs of and timing for completing property improvements may be inaccurate.
+Added: For instance, during the COVID-19 pandemic, costs of construction materials increased due to inflation relating to supply chain issues and labor availability.
+Added: In addition, subsequent leasing of the property may take longer to complete and cost more than expected.
+Added: If the borrower experiences any of these or other risks, the borrower may not generate sufficient cash flows from the property to make payments on or refinance the transitional loan, and we may not recover some or all of our investment.
+Added: Tremont’s diligence process for investment opportunities may not reveal all facts that may be relevant for an investment, and if we incorrectly evaluate the risks of our investments, we may experience losses.
+Added: Prior to our making any investment, Tremont conducts diligence that it considers reasonable based upon the facts and circumstances of the investment.
+Added: When conducting diligence on our behalf, Tremont may be required to evaluate important and complex business, financial, tax, accounting, environmental and legal issues.
Outside consultants, legal advisors, accountants and investment banks may be involved in the diligence process to varying degrees depending on the type of potential investment.
−Removed: Nonetheless, TRC's diligence may not reveal all of the risks associated with our investments.
−Removed: We evaluate our potential investments based upon criteria TRC deems appropriate for the relevant investment.
+Added: Nonetheless, Tremont’s diligence may not reveal all of the risks associated with our investments.
+Added: We evaluate our potential investments based upon criteria Tremont deems appropriate for the relevant investment.
Our underwriting assumptions and loss estimates may not prove accurate, and actual results may vary from estimates.
+Added: Moreover, investment analyses and decisions by Tremont may frequently be required to be undertaken on an expedited basis to take advantage of investment opportunities.
+Added: In such cases, the information available to Tremont at the time of making an investment decision may be limited.
+Added: Therefore, we cannot be sure that Tremont will have knowledge of all circumstances that may adversely affect such investment.
If we underestimate the risks and potential losses associated with an investment we originate or acquire, we may experience losses from the investment.
−Removed: Moreover, investment analyses and decisions by TRC may frequently be required to be undertaken on an expedited basis to take advantage of investment opportunities.
−Removed: In such cases, the information available to TRC at the time of making an investment decision may be limited.
−Removed: Therefore, we cannot be sure that TRC will have knowledge of all circumstances that may adversely affect such investment.
−Removed: Prepayment rates may adversely affect the value of certain of our investments which could negatively impact our ability to make or sustain distributions to our shareholders.
−Removed: The rates at which our borrowers prepay our investments, where contractually permitted, will be influenced by changes in current interest rates, significant changes in the performance of underlying real estate assets and a variety of economic and other factors beyond our control.
−Removed: Prepayment rates cannot be predicted with certainty and no strategy can completely insulate us from increases in such rates.
−Removed: In periods of declining interest rates, prepayments on investments generally increase and the proceeds of prepayments received during these periods are likely to be reinvested by us in comparable assets at reduced yields.
−Removed: Conversely, in periods of rising interest rates, prepayments on investments, where contractually permitted, generally decrease, in which case we would not have the prepayment proceeds available to invest in comparable assets at higher yields.
−Removed: We may invest in loans and other assets secured or supported by transitional real estate assets;
−Removed: significant improvement in the performance of such assets may result in prepayments as other financing alternatives become available to the borrower.
−Removed: In addition, it may take an extended period for us to reinvest any repayments we may receive, and any reinvestments we may be able to make may not provide us with similar returns or comparable risks as those of our current investments.
+Added: We may be unable to obtain additional capital sufficient to enable us to grow our loan portfolio.
+Added: As of December 31, 2022, our primary sources of capital were the facilities governed by our Master Repurchase Agreements, including our master repurchase facility with Wells Fargo, or the Wells Fargo Master Repurchase Facility;
+Added: our master repurchase facility with Citibank, or the Citibank Master Repurchase Facility and our master repurchase facility with UBS, or the UBS Master Repurchase Facility;
+Added: and our facility loan program with BMO, or the BMO Facility.
+Added: We refer to the Wells Fargo Master Repurchase Facility, Citibank Master Repurchase Facility and UBS Master Repurchase Facility, collectively, as our Master Repurchase Facilities.
+Added: We refer to the Master Repurchase Facilities and the BMO Facility, collectively, as our Secured Financing Facilities.
+Added: As of December 31, 2022, we had $255.8 million of available liquidity from cash and amounts available under our Secured Financing Facilities to fund future loan originations and advances.
+Added: After we invest these sources, we may not be able to obtain additional capital to make investments that we determine are attractive.
+Added: If so, this could limit our ability to grow our loan portfolio in the future, including by pursuing opportunities that may be available in our loan origination pipeline, and adversely affect our ability to make or sustain distributions to our shareholders.
+Added: Our ability to further grow our loan portfolio over time will depend, to a significant degree, upon our ability to obtain additional capital.
+Added: Our access to additional capital depends upon a number of factors, some of which we have little or no control over, including:
+Added: • general economic, market or industry conditions;
+Added: • the market’s view of the quality of our assets;
+Added: • the market’s perception of our growth potential;
+Added: • our current and potential future earnings and distributions to our shareholders;
+Added: • the market value of our securities.
+Added: If regulatory capital requirements imposed on our lenders change, they may be required to limit, or increase the cost of, financing they provide to us.
+Added: This could potentially increase our financing costs and reduce our liquidity or require us to sell assets at an inopportune time or price.
+Added: If we cannot obtain additional capital after we invest our current available cash and borrowing availability under our Secured Financing Facilities, our future investable funds may be limited to proceeds we receive from repayments of our loan investments, and from interest payments we receive, from borrowers or from other investments we may make.
+Added: Therefore, in order to grow our business, we may have to rely on additional equity issuances, which may be dilutive to our shareholders, or on debt financings which may require us to use a large portion of our cash flow from operations to fund our debt service obligations, thereby reducing funds available for our operations, future business opportunities, distributions to our shareholders or other purposes.
+Added: We cannot be sure that we will have access to such debt or equity capital on favorable terms at the desired times, or at all, which may cause us to reduce or suspend our investment activities or dispose of assets at an inopportune time or price, which could negatively affect our financial condition, results of operations and ability to make or sustain our distributions to our shareholders.
+Added: If the market value of our common shares does not increase or declines, our cost of equity capital will remain high or further increase, and we may not be able to practically or otherwise raise equity capital by issuing additional equity securities.
+Added: Prepayment rates may adversely affect our ability to generate returns, which could negatively impact our ability to make or sustain distributions to our shareholders.
+Added: The rates at which our borrowers prepay our investments, where contractually permitted, will be influenced by changes in the then-current level of interest rates, significant changes in the performance or possible sale of underlying real estate assets and a variety of economic factors, availability of alternative financing the borrower desires and other factors beyond our control.
+Added: In addition, it may take an extended period for us to reinvest the proceeds from any repayments we may receive, and any reinvestments we may be able to make may not provide us with similar returns or comparable risks as those of our current investments.
We expect to be entitled to fees upon the prepayment of our investments, although we cannot be sure that such fees will adequately compensate us as the functional equivalent of a “make whole” payment.
Furthermore, we may not be able to structure future investments to impose a make whole obligation upon a borrower in the case of an early prepayment.
−Removed: As a result, our income will be reduced, which will have a negative impact on our ability to make or sustain distributions to our shareholders.
+Added: As a result, our income may decline as a result of borrower prepayments, which would have a negative impact on our ability to make or sustain distributions to our shareholders.
Difficulty or delays in redeploying the proceeds from repayments of our existing loan investments may cause our financial performance and returns to shareholders to decline.
−Removed: As our loan investments are repaid, we intend to redeploy the proceeds we receive into new loan investments, repay borrowings under our repurchase and credit facilities and pay distributions to our shareholders.
−Removed: It is possible that we will fail to identify and complete reinvestments that would provide returns or a risk profile that is comparable to the loan investment that was repaid.
−Removed: If we fail to redeploy, or experience any delays in redeploying, the proceeds we receive from repayment of a loan investment in equivalent or better alternatives, our financial performance and returns to shareholders could decline.
−Removed: A prolonged economic slowdown, a recession or declining real estate values could materially and adversely affect us.
−Removed: We believe that the risks associated with our investments will be more severe during periods of economic slowdown or recession, especially if these periods are accompanied by declining real estate values.
−Removed: Significant portions of the CRE markets in the United States were significantly negatively impacted during the recession that occurred during the early stages of the COVID-19 pandemic, and certain aspects of that market continue to be challenged by the pandemic and the changes to market and workplace practices in response to the pandemic, such as remote work for many office based workers and a reduction in travel.
−Removed: Our investment strategy may be adversely affected by prolonged economic downturns or recessions where declining real estate values would likely reduce the level of new mortgage and other real estate related loan originations since borrowers often use the appreciation in the value of their existing properties to support the purchase or investment in additional properties.
−Removed: Borrowers may also be less able to pay principal and interest on our loans if the value of their real estate declines.
−Removed: Further, declining real estate values significantly increase the likelihood that we will incur losses on our loans in the event of default because the value of our collateral may be insufficient to cover our cost on the loan.
−Removed: Any sustained period of increased payment delinquencies, foreclosures or losses could adversely affect our ability to originate or acquire loans, which would materially and adversely affect our results of operations, financial condition, liquidity and business and our ability to make or sustain distributions to our shareholders.
−Removed: The CRE loans that we originate or acquire are subject to the ability of the property owner to generate net operating income from operating the property, as well as the risks of delinquency and foreclosure.
−Removed: CRE loans that we originate or acquire are subject to the ability of the property owner to generate net operating income from operating the property.
−Removed: The impact from the COVID-19 pandemic has negatively impacted some of our borrowers’ business operations or tenants, particularly in the cases of our retail and hospitality collateral, which are some of the types of properties that have been most negatively impacted by the pandemic.
+Added: As our loan investments are repaid, we intend to redeploy the proceeds we receive into new loan investments and repay borrowings under our repurchase and credit facilities.
+Added: It is possible that we will fail to identify and complete reinvestments that would provide returns or a risk profile that are comparable to the loan investment that was repaid.
+Added: If we fail to redeploy, or experience any delays in redeploying, the proceeds we receive from repayment of a loan investment in equivalent or better investments, our financial performance and returns to shareholders could decline.
+Added: Earning returns on the CRE loans that we originate or acquire is subject to the ability of the property owner to generate net operating income from operating the property.
+Added: Our ability to earn positive returns on CRE loans that we originate or acquire is subject to the ability of the property owner to generate net operating income from operating the property.
The ability of a borrower to repay a loan secured by an income producing property typically is dependent primarily upon the successful operation of the property rather than upon the existence of independent income or assets of the borrower.
−Removed: If the net operating income of the property is reduced, the borrower’s ability to repay the loan may be impaired and the risks of delinquency and foreclosure may increase.
+Added: If the net operating income of the property is below amounts expected when we made our loan investment, the borrower’s ability to repay the loan may be impaired and the risks of default and foreclosure may increase.
Net operating income of an income producing property can be affected by, among other things:
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• competition from comparable properties;
−Removed: • changes in national, regional or local economic conditions and/or specific industry segments, including current and future economic conditions caused by the COVID-19 pandemic and its aftermath;
+Added: • changes in market practice, such as those that arose or were intensified in response to the COVID-19 pandemic;
+Added: • changes in national, regional or local economic conditions and/or specific industry segments, including current and future economic conditions caused by pandemics, such as the COVID-19 pandemic;
• rising inflationary pressures and effects of inflation on borrower and tenant businesses;
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• changes in laws and regulations, including fiscal policies, zoning ordinances and environmental legislation and the related costs of compliance;
−Removed: • acts of God, earthquakes, hurricanes, health epidemics, pandemics and similar outbreaks, such as the COVID-19 pandemic, and other natural disasters, or acts of war, terrorism, social unrest or civil disturbances, in each case which may result in uninsured or underinsured losses.
−Removed: In the event of any default under any CRE loan held by us, we will bear a risk of loss of principal to the extent of any deficiency between the value of the collateral (net of our costs to enforce our rights with respect to that collateral) and the principal and accrued interest of the loan or investment, which could have a material adverse effect on our cash flow from operations and limit amounts available for distribution to our shareholders.
−Removed: Further, if borrowers do not repay our loans or we realize amounts that are less than the amount of the investment plus our costs, our loan portfolio will reduce in size.
−Removed: In addition, if a borrower defaults on our loan and we take actions related to the collateral securing that loan, we may be delayed for an extended period of time on converting that collateral to investable cash, which would impair our ability to redeploy that capital and grow our portfolio.
−Removed: In the event of the bankruptcy of a mortgage loan borrower, the mortgage loan to such borrower will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under applicable law.
−Removed: Foreclosure of a mortgage loan can be an expensive and lengthy process, which could have a substantial negative effect on our anticipated return on the foreclosed mortgage loan.
+Added: • acts of God, earthquakes, hurricanes, health epidemics, pandemics and other public health safety events or concerns, such as the COVID-19 pandemic, and other natural disasters, or acts of war, terrorism, social unrest or civil disturbances, in each case which may result in uninsured or underinsured losses.
We may need to foreclose on loans that are in default, which could result in losses.
3 unchanged sentences
Borrowers may resist foreclosure actions by asserting numerous claims, counterclaims and defenses against us, including, without limitation, lender liability claims and defenses, even when the assertions may have no merit, in an effort to prolong the foreclosure action and seek to force us into a modification of the loan or a buy-out of the loan for less than we are owed.
−Removed: At any time prior to or during the foreclosure
−Removed: proceedings, the borrower may file for bankruptcy, which would have the effect of staying the foreclosure actions and delaying the foreclosure processes and potentially result in reductions or discharges of borrower’s debt.
+Added: At any time prior to or during the foreclosure proceedings, the borrower may file for bankruptcy, which would have the effect of staying the foreclosure actions and delaying the foreclosure processes and potentially result in reductions or discharges of the borrower’s debt.
Foreclosure may create a negative public perception of the collateral property, resulting in a diminution of its value.
16 unchanged sentences
• adverse weather, natural disasters and adverse impacts from climate change;
−Removed: • acts of God, earthquakes, hurricanes, pandemics, such as the COVID-19 pandemic, and other natural disasters, climate change, or acts of war, terrorism, social unrest and civil disturbances, in each case which may result in uninsured or underinsured losses;
+Added: • acts of God, earthquakes, hurricanes, pandemics or other public health safety events or concerns, such as the COVID-19 pandemic, and other natural disasters, climate change, or acts of war, terrorism, social unrest and civil disturbances, in each case which may result in uninsured or underinsured losses;
• changes in government regulations, such as rent control;
• changes in the availability of debt financing and/or mortgage funds, which may render the sale or refinancing of properties difficult or impracticable.
−Removed: • increases in mortgage defaults.
−Removed: We cannot predict the degree to which economic conditions generally, and the conditions for CRE debt financing in particular, will improve or decline, particularly as a result of the COVID-19 pandemic and its aftermath.
−Removed: Any declines in the performance of the U.S.
−Removed: or global economies or in real estate debt markets could have a material adverse effect on us.
+Added: We cannot predict the degree to which economic conditions generally, and the conditions for CRE and CRE debt financing in particular, will improve or decline.
+Added: Current economic conditions, including inflation, rising interest rates, supply chain challenges, labor availability, geopolitical instability and economic downturn, have materially adversely impacted CRE transaction activity and valuations and have caused disruptions in the CRE lending market.
+Added: If these conditions continue or worsen, or if further declines in the performance of the U.S.
+Added: or global economies or in real estate debt markets are realized, we may experience a material adverse effect on us and our business, results of operations and financial condition.
REIT distribution requirements may adversely impact our ability to carry out our business plan.
2 unchanged sentences
Accordingly, we may not be able to retain sufficient cash to fund our operations, repay our debts or make investments.
+Added: We may be unable to raise reasonably priced capital because of reasons related to our business, market perceptions of our prospects, the terms of our debt, the extent of our leverage or for reasons beyond our control, such as capital market volatility, rising interest rates and other market conditions.
Because the earnings we are permitted to retain are limited by the rules governing REIT qualification and taxation, if we are unable to raise reasonably priced capital, we may not be able to carry out our business plan.
−Removed: Changes in market interest rates may significantly reduce our revenues or impede our growth.
−Removed: Changes in market interest rates may be sudden and may significantly reduce our revenues or impede our growth.
−Removed: Interest rates have remained at relatively low levels on a historical basis, but the U.S.
−Removed: Federal Reserve recently indicated that, in light of the economic recovery and higher than anticipated inflation, it expects to raise interest rates as early as March 2022.
−Removed: However, the timing, number and amount of any such future interest rate increases are uncertain.
−Removed: If market interest rates increase, those increases may materially and negatively affect us in various ways, including:
−Removed: • changes in interest rates may affect our net interest income from our investments, which is the difference between the interest income we earn on our interest earning investments and the interest expense we incur in financing our investments;
+Added: Changes in interest rates and credit spreads may significantly reduce our revenues or impede our growth.
+Added: Changes in interest rates may be sudden and may significantly reduce our revenues or impede our growth.
+Added: In efforts to combat rising inflation, the Federal Open Market Committee of the U.S.
+Added: Federal Reserve (the “FOMC”) has raised interest rates multiple times since March 2022 and has indicated an expectation that it will continue to raise interest rates in 2023.
+Added: Changes in interest rates may materially and negatively affect us in several ways, including:
+Added: • Changes in interest rates and credit spreads will affect our net interest income from our investments, which is the difference between the interest income we earn on our interest earning investments and the interest expense we incur in financing our investments;
• Changes in interest rates may affect our ability to make investments as well as borrower default rates.
−Removed: In a period of rising interest rates, our interest expense could increase, while the interest we earn on any fixed rate debt investments would not change, adversely affecting our profitability.
−Removed: Our operating results depend in large part on differences between the income from our investments, net of credit losses and its financing costs.
+Added: In a period of rising interest rates, our interest income on our loan investments will increase;
+Added: however, defaults on our loan investments may also increase.
+Added: Our loan agreements typically require our borrowers to obtain interest rate caps to mitigate the risk of default caused by rising financing costs;
+Added: however, there can be no assurance that these interest rate caps will prevent us from experiencing losses nor that such mechanisms will continue to be employed.
+Added: Also, as interest rates increase, the cost of interest rate caps could also increase, which may limit borrowers’ ability to afford the loan or increase the risk of default.
+Added: Additionally, rising interest rates may reduce our ability to make investments, as fixed rate financing may be more attractive to potential borrowers or they may forgo or delay obtaining financing.
+Added: Our operating results depend in large part on differences between the income from our investments, net of credit losses and financing costs.
Even when our investments and borrowings are match funded, the income from our investments may respond more slowly to interest rate fluctuations than the cost of our borrowings;
−Removed: • amounts outstanding under our repurchase and credit facilities will require interest to be paid by us at floating interest rates.
+Added: • Amounts outstanding under our Secured Financing Facilities will require interest to be paid by us at floating interest rates.
When interest rates increase, our interest costs will increase.
−Removed: Additionally, if we choose to hedge our interest rate risk, we cannot be sure that the hedge will be effective or that our hedging counterparty will meet its obligations to us;
−Removed: • investors may consider whether to buy or sell our common shares based upon the then distribution rate on our common shares relative to the then prevailing market interest rates.
−Removed: If market interest rates go up, investors may expect a higher distribution rate than we are able to pay, which may increase our cost of capital, or they may sell our common shares, if any, and seek alternative investments that offer higher distribution rates.
−Removed: Sales of our common shares may cause a decline in the value of our common shares.
+Added: In a period of decreasing interest rates, our interest income on our loan investments may decrease.
+Added: We typically structure our loan investments with benchmark interest rate floors to mitigate this risk;
+Added: however, there can be no assurance that such floors will be sufficient to prevent material declines in interest income or that we will continue to structure our loan agreements with such floors;
+Added: • Changes in credit spreads may negatively impact our net interest income from investments.
+Added: Even when our investments and borrowings are match funded, our net interest income may decline if we are not able to price new investments and borrowings with terms that result in the same or more favorable differences between the credit spreads we charge to our borrowers and the credit spreads we are charged by our lenders;
+Added: • Investors may consider whether to buy or sell our common shares based upon the then distribution rate on our common shares relative to the then prevailing interest rates.
+Added: If interest rates go up, investors may expect a higher distribution rate than we are able to pay, which may increase our cost of capital, or they may sell our common shares and seek alternative investments that offer higher distribution rates.
+Added: Sales of our common shares may cause a decline in the market value of our common shares.
The phase out or transitioning of LIBOR may negatively impact our business, financial results and cash flows.
−Removed: Our loan agreements entered into prior to January 1, 2022 require the borrowers to pay us interest at floating rates based upon LIBOR.
−Removed: In addition, the agreements governing our master repurchase facility with UBS, or our UBS Master Repurchase Facility, and our master repurchase facility with Citibank, or our Citibank Master Repurchase Facility, or collectively, our Master Repurchase Facilities, require us to pay interest on amounts borrowed under those facilities at floating rates based upon LIBOR plus a premium.
−Removed: LIBOR was phased out for new contracts as of December 31, 2021 and is expected to be phased out for pre-existing contracts by June 30, 2023.
−Removed: Our Master Repurchase Facilities provide that at such time as LIBOR shall no longer be made available or used for determining the interest rate of amounts outstanding under those facilities, the replacement base rate shall be an alternative benchmark rate (including any mathematical or other adjustments to the benchmark rate (if any) incorporated therein so that the resulting rate approximates LIBOR as close as reasonably possible) as determined by UBS and Citibank under similar facilities for the financing of similar assets and is consistent with the pricing index of similarly situated counterparties.
−Removed: Our loan agreements with our borrowers generally provide that if LIBOR is not able to be determined, the interest rates under our loan agreements with borrowers would be amended to replace LIBOR with an alternative benchmark rate (which may include SOFR or another rate based on SOFR) that will approximate the existing interest rate as calculated in accordance with LIBOR.
+Added: Certain of our loan agreements entered into prior to January 1, 2022 require the borrowers to pay us interest at floating rates based upon LIBOR.
+Added: LIBOR was phased out for new contracts as of December 31, 2021.
+Added: Our pre-existing contracts have been or are expected to be amended to replace LIBOR with SOFR prior to June 30, 2023, the date LIBOR is expected to no longer be available.
+Added: Our loan agreements entered into with our borrowers prior to January 1, 2022 generally provide that if LIBOR is not able to be determined, the interest rates under our loan agreements with borrowers would be amended to replace LIBOR with an alternative benchmark rate (which may include SOFR or another rate based on SOFR) that will approximate the existing interest rate as calculated in accordance with LIBOR.
Certain of TRMT’s loan agreements with its borrowers that we assumed upon consummation of the Merger generally provide that if LIBOR is not able to be determined, interest will be calculated using a floating base rate equal to the greater of the Federal Funds Rate plus 50 basis points or the Prime Rate.
We expect that for then existing loan agreements that we entered into prior to January 1, 2022, we and our borrowers will amend our loan agreements by the time LIBOR is no longer available to replace LIBOR with an alternative benchmark rate (which may include SOFR or another rate based on SOFR) that will approximate the existing interest rate as calculated in accordance with LIBOR.
+Added: Our Citibank Master Repurchase Agreement and UBS Master Repurchase Agreement were amended and restated effective March 2022 to, among other things, replace LIBOR with SOFR for interest rate calculations on new advances.
+Added: Interest rates on advances under our BMO Facility and Wells Fargo Master Repurchase Facility have been based on SOFR since we entered into the agreements governing these facilities.
Despite our current expectations, we cannot be sure that the changes to the determination of interest under our agreements would approximate LIBOR.
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There are significant differences between LIBOR and SOFR, such as LIBOR being an unsecured lending rate while SOFR is a secured lending rate, and SOFR is an overnight rate while LIBOR reflects term rates at different maturities.
−Removed: If our LIBOR-based borrowings are converted to SOFR, the differences between LIBOR and SOFR, plus the recommended spread adjustment, could result in higher interest costs for us, which could have a material adverse effect on our operating results.
+Added: If our LIBOR-based borrowings are converted to SOFR, the differences between LIBOR and SOFR, plus the recommended spread adjustment, could result in higher interest costs for us, which may have a negative impact on our operating results.
Although SOFR is the ARRC’s recommended replacement rate, it is also possible that lenders may instead choose alternative replacement rates that may differ from LIBOR in ways similar to SOFR or in other ways that would result in higher interest costs for us.
−Removed: In addition, the elimination of LIBOR and/or changes to another index could result in mismatches with the interest rate of investments that we are financing, and the overall financial markets may be disrupted as a result of the phase-out or replacement of LIBOR; however, we cannot reasonably estimate the impact of the transition at this time.
−Removed: If the determination of interest does not, or if we cannot forecast with sufficient confidence that it will, approximate the current calculation in accordance with LIBOR, we may incur additional costs, our investment income, net of interest expense, may decline, we may lose investment opportunities or make unsuccessful investments because we are not able to accurately price our proposed investments and our cash flows may be negatively affected.
−Removed: We may be unable to obtain additional capital sufficient to enable us to grow our loan portfolio.
−Removed: As of December 31, 2021, we had $173.7 million of available liquidity from cash and amounts available under our Master Repurchase Facilities and the facility under our BMO Loan Program Agreement, or our BMO Facility, or our Secured Financing Facilities, to fund future loan originations and advances.
−Removed: After we invest these sources, we may not be able to obtain additional capital to make investments that we determine are attractive.
−Removed: If so, this could limit our ability to grow our loan portfolio in the future, including by pursuing opportunities that may from time to time be available in our loan origination pipeline, and adversely affect our ability to make or sustain distributions to our shareholders.
−Removed: Our ability to further grow our loan portfolio over time will depend, to a significant degree, upon our ability to obtain additional capital.
−Removed: Our access to additional capital depends upon a number of factors, some of which we have little or no control over, including:
−Removed: • general economic, market or industry conditions;
−Removed: • the market’s view of the quality of our assets;
−Removed: • the market’s perception of our growth potential;
−Removed: • our current and potential future earnings and distributions to our shareholders;
−Removed: • the value of our securities.
−Removed: If regulatory capital requirements imposed on our lenders change, they may be required to limit, or increase the cost of, financing they provide to us.
−Removed: This could potentially increase our financing costs and reduce our liquidity or require us to sell assets at an inopportune time or price.
−Removed: If we cannot obtain additional capital after we invest our current available cash and borrowing availability under our Secured Financing Facilities, our future investable funds may be limited to proceeds we receive from repayments of our loan investments, and from interest payments we receive, from borrowers or from other investments we may make.
−Removed: Therefore, in order to grow our business, we may have to rely on additional equity issuances, which may be dilutive to our shareholders, or on debt financings which may require us to use a large portion of our cash flow from operations to fund our debt service obligations, thereby reducing funds available for our operations, future business opportunities, distributions to our shareholders or other purposes.
−Removed: We cannot be sure that we will have access to such debt or equity capital on favorable terms at the desired times, or at all, which may cause us to reduce or suspend our investment activities or dispose of assets at an inopportune time or price, which could negatively affect our financial condition, results of operations and ability to make or sustain its distributions to our shareholders.
−Removed: If the market value of our common shares does not increase or declines, our cost of equity capital will increase, and we may not be able to practically or otherwise raise equity capital by issuing additional equity securities.
+Added: In addition, the elimination of LIBOR and/or changes to another index could result in mismatches with the interest rate of investments that we are financing, and the overall financial markets may be disrupted as a result of the phase-out or replacement of LIBOR.
Third party expectations relating to ESG factors may impose additional costs and expose us to new risks.
−Removed: There is an increasing focus from certain investors, borrowers, tenants, and their customers, employees, and other stakeholders concerning corporate responsibility, specifically related to ESG factors.
−Removed: Some investors may use these factors to guide their investment strategies and, in some cases, may choose not to invest in us or borrowers, tenants and their customers may choose not to do business with us, our borrowers or their tenants, if they believe our or their policies relating to corporate responsibility are inadequate.
−Removed: Third party providers of corporate responsibility ratings and reports on companies have increased in number, resulting in varied and in some cases inconsistent standards.
−Removed: In addition, the criteria by which companies' corporate responsibility practices are assessed are evolving, which could result in greater expectations of us, our borrowers and their tenants and cause us, our borrowers and their tenants to undertake costly initiatives to satisfy such new criteria.
−Removed: Alternatively, if we, our borrowers or their tenants elect not to or are unable to satisfy such new criteria or do not meet the criteria of a specific third party provider, some investors may conclude that our or their policies with respect to corporate responsibility are inadequate.
−Removed: We and our borrowers and their tenants may face reputational damage in the event that our or their corporate responsibility procedures or standards do not meet the standards set by various constituencies.
−Removed: If we fail to satisfy the expectations of investors or if our borrowers or their tenants fail to satisfy expectations their customers, employees and other stakeholders or our borrowers' or their tenants’ initiatives are not executed as planned, our and their reputations and financial results could be adversely affected, net operating income from operations of our borrowers’ and their tenants’ businesses may decrease, our borrowers’ ability to repay our loans may be impaired, risks of delinquency and foreclosure may increase and our results of operations, financial condition, liquidity and business and our ability to make or sustain distribution to our shareholders may be materially adversely impacted.
+Added: There is an increasing focus from investors, borrowers, tenants, and their customers, employees, other stakeholders and regulators concerning corporate sustainability, specifically related to ESG factors.
+Added: Some investors may use these factors to guide their investment strategies and, in some cases, may choose not to invest in us and/or potential borrowers may choose not to do business with us if they believe our policies relating to corporate sustainability are inadequate.
+Added: Third party providers of corporate sustainability ratings and reports on companies have increased in number, resulting in varied and in some cases inconsistent standards.
+Added: In addition, the criteria by which companies’ corporate sustainability practices are assessed are evolving, which could result in greater expectations of us, our borrowers and their tenants and cause us, our borrowers and their tenants to undertake costly initiatives to satisfy such new criteria.
+Added: Alternatively, if we, our borrowers or their tenants elect not to or are unable to satisfy such new criteria or do not meet the criteria of a specific third party provider, some investors may conclude that our or their policies with respect to corporate sustainability are inadequate.
+Added: We and our borrowers and their tenants may face reputational damage in the event that our or their corporate sustainability procedures or standards do not meet the goals we or they have set or the standards set by various constituencies.
+Added: If we fail to satisfy the expectations of investors or if our borrowers or their tenants fail to satisfy expectations of their customers, employees and other stakeholders or if any goals or initiatives we or they announce are not executed as planned, our and their reputations and financial results could be adversely affected, net operating income from operations of our borrowers’ and their tenants’ businesses may decrease, our borrowers’ ability to repay our loans may be impaired, risks of default and foreclosure may increase and our results of operations, financial condition, liquidity and our ability to make or sustain distribution to our shareholders may be materially adversely impacted.
We, our borrowers and their tenants are subject to risks from adverse weather, natural disasters and climate events, and costs associated with future legislation designed to address climate change could increase our, our borrowers’ and their tenants’ costs.
We, our borrowers and their tenants are subject to risks and could be exposed to additional costs from adverse weather, natural disasters and climate events.
−Removed: For example, our borrowers’ properties could be severely damaged or destroyed by physical climate risks that could materialize as either singular extreme weather events (for example, floods, storms and wildfires) or through long term impacts of climatic conditions (such as precipitation frequency, weather instability and rise of sea levels).
+Added: For example, our borrowers’ properties could be severely damaged or destroyed by physical climate risks that could materialize as either singular extreme weather events (such as floods, storms and wildfires) or through long term impacts of climatic conditions (such as precipitation frequency, weather instability and rise of sea levels).
Such events could also adversely impact our borrowers and their tenants and cause significant losses if the businesses at our collateral properties cannot be operated due to damage resulting from such events.
Further, legislation to address climate change could increase utility costs and other costs of operating properties which, if not offset by rising rental income, could reduce the net operating income at our borrowers’ properties and impact their ability to repay our loans.
−Removed: If we, our borrowers or their tenants fail to adequately prepare for adverse weather, natural disasters and climate events, or costs at properties increase as a result of future legislation designed to address climate change, net operating income from operations of properties’ businesses may decrease, our borrowers’ ability to repay our loans may be impaired, risks of delinquency and foreclosure may increase and our results of operations and financial condition may be materially adversely impacted.
−Removed: We and TRC are subject to state licensing requirements and our or TRC's failure to be properly licensed may have a material adverse effect on our operations.
−Removed: We or TRC are required to hold licenses in certain U.S.
−Removed: states to conduct lending activities, and we or TRC may be required to hold licenses from additional U.S.
+Added: If we, our borrowers or their tenants fail to adequately prepare for adverse weather, natural disasters and climate events, or costs at our borrowers’ properties increase as a result of future legislation designed to address climate change, net operating income from operations of our borrowers’ properties’ businesses may decrease, our borrowers’ ability to repay our loans may be impaired, risks of default and foreclosure may increase and our results of operations and financial condition may be materially adversely impacted.
+Added: We and Tremont are subject to state licensing requirements and our or Tremont’s failure to be properly licensed may have a material adverse effect on our operations.
+Added: We or Tremont are required to hold licenses in certain U.S.
+Added: states to conduct lending activities, and we or Tremont may be required to hold licenses from additional U.S.
states in the future.
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• requirements that loan forms be submitted for review.
−Removed: There is no guarantee that we or TRC will be able to obtain these licenses, and efforts to obtain and maintain such licenses may cause us to incur significant expenses.
+Added: There is no guarantee that we or Tremont will be able to obtain these licenses, and efforts to obtain and maintain such licenses may cause us to incur significant expenses.
Any failure to be properly licensed under state law or otherwise may have a material adverse effect on us and our operations.
12 unchanged sentences
In an extreme eventuality, it is possible that such regulations could cause us to cease operations.
−Removed: In addition, the Biden Administration, along with the Democratic Congress, is taking a more active approach to economic and financial regulation than the Trump Administration, particularly to promote policy goals involving climate change, racial equity, ESG matters, cybersecurity, consumer financial protection and infrastructure.
+Added: In addition, the Biden Administration is taking a more active approach to economic and financial regulation than the Trump Administration, particularly to promote policy goals involving climate change, racial equity, ESG matters, cybersecurity, consumer financial protection and infrastructure.
We cannot predict the ultimate content, timing or effect of legislative and/or regulatory action under the Biden Administration nor the impact of such changes on our business and operations.
2 unchanged sentences
Real estate lenders and borrowers may be responsible for compliance with a wide range of laws intended to protect the public interest, including, without limitation, the Americans with Disabilities Act and local zoning laws.
−Removed: If we or TRC fail to comply with such laws in relation to a loan that we have originated or acquired, legal penalties may be imposed, which could materially and adversely affect us.
−Removed: Jurisdictions with “one action,” “security first” and/or “antideficiency rules” may limit our ability to foreclose on a collateral property or to realize on obligations secured by a collateral property.
+Added: If we or Tremont fail to comply with such laws in relation to a loan that we have originated or acquired, legal penalties may be imposed, which could materially and adversely affect us.
+Added: Jurisdictions with “one action,” “security first” and/or “anti-deficiency rules” may limit our ability to foreclose on a collateral property or to realize on obligations secured by a collateral property.
In the future, new laws may be enacted or imposed by U.S.
3 unchanged sentences
federal, state and local taxation are constantly under review by persons involved in the legislative process and by the IRS, the U.S.
−Removed: Department of the Treasury and other taxation authorities.
+Added: Department of the Treasury, or the Treasury, and other taxation authorities.
We cannot predict with certainty how any changes in the tax laws might affect us, our shareholders, or our borrowers.
3 unchanged sentences
A number of judicial decisions have recognized the rights of borrowers to sue lending institutions on the basis of various evolving legal theories, collectively termed “lender liability”.
−Removed: Generally, lender liability is founded on the premise that a lender has either violated a duty, whether implied or contractual, of good faith and fair dealing owed to the borrower or has assumed a degree of control over the borrower resulting in the creation of a fiduciary duty owed to the borrower or its other creditors or
−Removed: shareholders.
+Added: Generally, lender liability is founded on the premise that a lender has either violated a duty, whether implied or contractual, of good faith and fair dealing owed to the borrower or has assumed a degree of control over the borrower resulting in the creation of a fiduciary duty owed to the borrower or its other creditors or shareholders.
We cannot be sure that such claims will not arise or that we will not be subject to significant liability and losses if claims of this type arise.
−Removed: Insurance proceeds on a property may not cover all losses, which could result in the corresponding non-performance of or loss on our investment related to such property.
−Removed: Losses of a catastrophic nature, such as those caused by hurricanes, flooding, climate change, volcanic eruptions and earthquakes, among other things, losses as a result of outbreaks of pandemics, including the COVID-19 pandemic, or losses from terrorism, may be uninsurable or not commercially insurable.
+Added: Insurance proceeds with respect to a property may not cover all losses, which could result in the corresponding non-performance of or loss on our investment related to such property.
+Added: We generally require that each of the borrowers under our CRE debt investments obtain comprehensive insurance covering the collateral, including liability, fire and extended coverage.
+Added: We also generally obtain insurance directly on any property we acquire.
+Added: However, there are certain types of losses, generally losses of a catastrophic nature, such as those caused by hurricanes, flooding, climate change, volcanic eruptions and earthquakes, among other things, losses as a result of outbreaks of pandemics, or losses from terrorism or acts of war, that may be uninsurable or not commercially insurable.
+Added: We may not obtain, or require borrowers to obtain, certain types of insurance if it is deemed commercially unreasonable.
Inflation, changes in zoning and building codes and ordinances, environmental considerations and other factors also might result in insurance proceeds being inadequate to restore an affected property to its condition prior to a loss or to compensate for related losses.
−Removed: The insurance proceeds we receive as a result of losses to our collateral properties may not be adequate to restore our economic position after losses affecting our investments.
+Added: The insurance proceeds we receive as a result of losses to the properties that are collateral for our loan investments may not be adequate to restore our economic position after losses affecting our investments.
Any uninsured or underinsured loss could result in the loss of cash flow from, and reduce the value of, our investments related to such properties and the ability of the borrowers under such investments to satisfy their obligations to us.
18 unchanged sentences
In addition, in certain circumstances we may be liable for the actions of our partners or co-venturers.
−Removed: RMR LLC and our Manager, TRC, rely on information technology and systems in their respective operations, and any material failure, inadequacy, interruption or security breach of that technology or those systems could materially and adversely affect us.
−Removed: RMR LLC and TRC rely on information technology and systems, including the Internet and cloud-based infrastructures, commercially available software and their internally developed applications, to process, transmit, store and safeguard information and to manage or support a variety of their business processes, including financial transactions and maintenance of records, which may include personal identifying information of employees and borrower, guarantor, sponsor and investment data.
−Removed: If these systems experience material security or other breaches, inadequacies or interruptions of their information technology, we could incur material costs and losses and our operations could be disrupted as a result.
−Removed: Further, third party vendors could experience similar events with respect to their information technology and systems that impact the products and services they provide to RMR LLC, TRC or us.
−Removed: RMR LLC and TRC rely on commercially available systems, software, tools and monitoring, as well as their internally developed applications and internal procedures and personnel, to provide security for
−Removed: processing, transmitting, storing and safeguarding confidential borrower, guarantor, sponsor and vendor information, such as personally identifiable information related to our borrowers, tenants and others and information regarding their and our financial accounts.
−Removed: RMR LLC and TRC take various actions, and incur significant costs, to maintain and protect the operation and security of their information technology and systems, including the data maintained in those systems and to continuously monitor cybersecurity protections and disclosure controls.
−Removed: However, it is possible that these measures will not prevent the systems’ improper functioning or a compromise in security, such as in the event of a cyberattack or the improper disclosure of personally identifiable information.
−Removed: Security breaches, computer viruses, attacks by hackers, online fraud schemes and similar breaches can create significant system disruptions, shutdowns, fraudulent transfer of assets or unauthorized disclosure of confidential information.
−Removed: The risk of a security breach or disruption, particularly through cyberattack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.
−Removed: Our cybersecurity risks are heightened by, among other things, the evolving nature of the threats faced, advances in computer capabilities, new discoveries in the field of cryptography and new and increasingly sophisticated methods used to perpetrate illegal or fraudulent activities against RMR LLC or TRC, including cyberattacks, email or wire fraud and other attacks exploiting security vulnerabilities in RMR LLC’s, TRC’s or other third parties’ information technology networks and systems or operations.
−Removed: Any failure to maintain the security, proper function and availability of RMR LLC’s or TRC’s information technology and systems, or certain third party vendors’ failure to similarly protect their information technology and systems that are relevant to RMR LLC’s, TRC’s or our operations, or to safeguard RMR LLC’s, TRC or our business processes, assets and information could result in financial losses, interrupt our operations, damage our reputation, cause us to be in default of material contracts and subject us to liability claims or regulatory penalties, any of which could materially and adversely affect our business and the value of our securities.
−Removed: We may be unable to realize the anticipated benefits or expected expense savings from the Merger.
−Removed: We may be unable to realize the anticipated benefits or expected expense savings from the Merger as well as other efficiencies related to the integration of TRMT following the Merger.
−Removed: If we fail to effectively integrate the TRMT business, manage our expanded portfolio and obtain additional cost-effective capital to make additional investments, we may not realize the expected benefits to our business, financial condition and results of operations.
−Removed: In addition, we currently expect to realize annual general and administrative expense savings compared to what we and TRMT incurred in the aggregate prior to the Merger or would have incurred if the Merger had not occurred resulting from reduced corporate and administrative costs, reduced SEC filing requirements and other cost savings due to maintaining one public company rather than two public companies.
−Removed: In fact, we may realize less or no savings and any annual general and administrative expenses incurred may be higher than the aggregate amounts we and TRMT incurred prior to the Merger or would have incurred if the Merger had not occurred.
−Removed: Our failure to realize the anticipated benefits and expected expense savings from the Merger could materially adversely affect our business, financial results and stock price.
+Added: RMR and Tremont rely on information technology and systems in their respective operations, and any material failure, inadequacy, interruption or security breach of that technology or those systems could materially and adversely affect us.
+Added: RMR and Tremont rely on information technology and systems, including the Internet and cloud-based infrastructures, commercially available software and their internally developed applications, to process, transmit, store and safeguard information and to manage or support a variety of their business processes, including financial transactions and maintenance of records, which may include personal identifying information of employees and borrower, guarantor, sponsor and investment data.
+Added: If we, RMR, Tremont or our or their third party vendors experience material security or other failures, inadequacies or interruptions in our or their information technology systems, we could incur material costs and losses and our operations could be disrupted.
+Added: RMR takes various actions, and incurs significant costs, to maintain and protect the operation and security of its information technology and systems, including the data maintained in those systems.
+Added: However, these measures may not prevent the systems’ improper functioning or a compromise in security, such as in the event of a cyberattack or the improper disclosure of personally identifiable information.
+Added: Security breaches, computer viruses, attacks by hackers, online fraud schemes and similar breaches have created and can create significant system disruptions, shutdowns, fraudulent transfer of assets or unauthorized disclosure of confidential information.
+Added: The risk of a security breach or disruption, particularly through cyberattack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the intensity and sophistication of attempted attacks and intrusions from around the world have increased.
+Added: The cybersecurity risks to us, RMR, Tremont and third party vendors are heightened by, among other things, the evolving nature of the threats faced, advances in computer capabilities, new discoveries in the field of cryptography and new and increasingly sophisticated methods used to perpetrate illegal or fraudulent activities, including cyberattacks, email or wire fraud and other attacks exploiting security vulnerabilities in RMR’s, Tremont’s or other third parties’ information technology networks and systems or operations.
+Added: Although much of RMR’s and Tremont’s staff returned to RMR’s offices during the COVID-19 pandemic, flexible working arrangements have resulted in a higher extent of remote working than they experienced prior to the pandemic.
+Added: This and other possible changing work practices have adversely impacted, and may in the future adversely impact, RMR’s and Tremont’s ability to maintain the security, proper function and availability of RMR’s and Tremont’s information technology and systems since remote working by their employees could strain RMR’s and Tremont’s technology resources and introduce operational risk, including heightened cybersecurity risk.
+Added: Remote working environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts that have sought, and may seek, to exploit remote working environments.
+Added: In addition, RMR’s or Tremont’s data security, data privacy, investor reporting and business continuity processes could be impacted by a third party’s inability to perform in a remote work environment or by the failure of, or attack on, its information systems and technology.
+Added: Any failure by RMR, Tremont or other third party vendors to maintain the security, proper function and availability of their information technology and systems could result in financial losses, interrupt our operations, damage our reputation, cause us to be in default of material contracts and subject us to liability claims or regulatory penalties, any of which could materially and adversely affect our business and the market value of our securities.
Risks Relating to our Financing
−Removed: We have significant debt and expect to incur additional debt, and our governing documents contain no limit on the amount of debt we may incur.
+Added: We have debt and expect to incur additional debt, and our governing documents contain no limit on the amount of debt we may incur.
As of December 31, 2022, our debt under our Secured Financing Facilities represented 63.1% of our total assets.
7 unchanged sentences
(1) acceleration of such debt (and any other debt arrangements containing a cross default or cross acceleration provision) that we may be unable to repay from internal funds or to refinance on favorable terms, or at all;
−Removed: (2) our inability to borrow unused or undrawn amounts under our Secured Financing Facilities, even if we are current in
−Removed: payments on borrowings under those arrangements;
+Added: (2) our inability to borrow unused or undrawn amounts under our Secured Financing Facilities, even if we are current in payments on borrowings under those arrangements;
and/or (3) the loss of some or all of our assets to foreclosures or forced sales;
7 unchanged sentences
In the event that our leverage is for a shorter term than our investments, we may not be able to extend or find appropriate replacement leverage, which could require us to sell certain investments before we otherwise might.
−Removed: In the event that our leverage is for a longer term than our investments, we may not be able to replace our investments as they mature with new investments or at all, which could negatively impact our earnings.
−Removed: We intend to structure our leverage so that we minimize the difference between the index of our investments and the index of our debt leverage, by financing floating rate investments with floating rate leverage and fixed rate investments with fixed rate leverage.
−Removed: If such a floating rate or fixed rate product is not available to us on reasonable terms, we may use hedging instruments to create such a match.
−Removed: Our attempts to mitigate the risk of a mismatch with the duration or index of our investments and leverage will be subject to factors outside of our control, such as the availability to us of favorable financing and hedging options, and we may not be successful.
The risks of duration mismatches are magnified by the potential for the extension of loans in order to maximize the likelihood and magnitude of their recovery value in the event the loans experience credit or performance challenges;
use of these asset management practices would effectively extend the duration of our investments, while our liabilities may have set maturity dates.
−Removed: A failure to comply with restrictive covenants in our Secured Financing Facilities would have a material adverse effect on us, and any future financings may require us to provide additional collateral or pay down debt.
−Removed: We are subject to various restrictive covenants contained in our Secured Financing Facilities and we may be subject to additional covenants in connection with future financing arrangements.
+Added: We intend to structure our leverage so that we minimize the difference between the index of our investments and the index of our debt leverage, by financing floating rate investments with floating rate leverage.
+Added: Our attempts to mitigate the risk of a mismatch with the duration or index of our investments and leverage will be subject to factors outside of our control, such as the availability to us of favorable financing and hedging options, and we may not be successful.
+Added: Our Secured Financing Facilities require us to comply with restrictive covenants and any future financings may require us to comply with similar or more restrictive covenants.
+Added: We are subject to various restrictive covenants contained in our Secured Financing Facilities and we may be subject to similar or additional covenants in connection with future financing arrangements.
Our Secured Financing Facilities require us to maintain compliance with various financial covenants, including a minimum tangible net worth and cash liquidity, and specified financial ratios, such as total debt to tangible net worth and a minimum interest coverage ratio.
6 unchanged sentences
Our Secured Financing Facilities and any additional repurchase or bank credit facilities or debt arrangements that we may enter into to finance future investments may involve the risk that the value of the investments sold by us or pledged to the provider of such repurchase or bank credit facilities or debt arrangements may decline, and, in such circumstances, we would likely be required to provide additional collateral or to repay all or a portion of the funds advanced thereunder.
−Removed: With respect to our Master Repurchase Facilities, UBS and Citibank, respectively, have sole discretion to determine the market value of the
−Removed: investments that serve as collateral under these facilities for purposes of determining whether we are required to pay margin to UBS and Citibank, respectively.
−Removed: Where a decline in the value of collateral, including as a result of the impact of the COVID-19 pandemic and its aftermath, results in a margin deficit, UBS and Citibank, respectively, may require us to eliminate that margin deficit through a combination of purchased asset repurchases and cash transfers to UBS and Citibank, respectively, subject to UBS’s or Citibank’s respective approval.
+Added: With respect to our Master Repurchase Facilities, UBS, Citibank and Wells Fargo have sole discretion to determine the market value of the investments that serve as collateral under these facilities for purposes of determining whether we are required to pay margin to UBS, Citibank and Wells Fargo.
+Added: Where a decline in the value of collateral results in a margin deficit, UBS, Citibank and Wells Fargo may require us to eliminate that margin deficit through a combination of purchased asset repurchases and cash transfers to UBS, Citibank and Wells Fargo, respectively, subject to UBS’s, Citibank’s or Wells Fargo’s respective approval.
We may not have funds available to eliminate any such margin deficit and may be unable to raise funds from alternative sources on favorable terms or at all, which would likely result in a default under any such master repurchase agreement.
−Removed: In the event of any such default, UBS and Citibank could accelerate our outstanding debts and terminate our ability to obtain additional advancements under the applicable master repurchase facility, and our financial condition and prospects would be materially and adversely affected.
−Removed: Any debt arrangements that we may enter into in the future would likely contain similar provisions.
+Added: In the event of any such default, UBS, Citibank and Wells Fargo could accelerate our outstanding debts and terminate our ability to obtain additional advancements under the applicable master repurchase facility, and our financial condition and prospects would be materially and adversely affected.
+Added: Any repurchase facility arrangements that we may enter into in the future would likely contain similar provisions.
In addition, if any of our current or future lenders file for bankruptcy or become insolvent, our investments that serve as collateral under the applicable repurchase or bank credit facility or debt arrangement may become subject to bankruptcy or insolvency proceedings, thus depriving us, at least temporarily, of the benefit of those assets.
1 unchanged sentence
Lenders under any future repurchase or bank credit facilities or debt arrangements may also require us to maintain a certain amount of cash or set aside assets sufficient to maintain a specified liquidity position that would allow us to satisfy our collateral obligations.
−Removed: As a result, we may not be able to leverage our assets to maximum capacity, which could reduce our return on assets.
If we are unable to meet any such collateral obligations, our financial condition and prospects could deteriorate rapidly.
Any default in a repurchase agreement may cause us to experience a loss.
−Removed: If any counterparty to a repurchase transaction under a repurchase agreement or the counterparty to any other repurchase financing arrangement we may enter defaults on its obligation to resell the underlying asset back to us at the end of the transaction term, or if the value of the underlying asset has declined as of the end of that term, or if we default on our obligations under such repurchase agreement, we may incur a loss on such repurchase transactions.
−Removed: Risks Relating to our Relationships with TRC and RMR LLC
−Removed: We are dependent upon our Manager, TRC, and its personnel.
+Added: If any counterparty to a repurchase transaction under a repurchase agreement or the counterparty to any other repurchase financing arrangement we may enter defaults on its obligation to resell the underlying asset back to us at the end of the transaction term, or if the value of the underlying asset has declined as of the end of that term, or if we default on our obligations under such repurchase agreement, we may incur a loss on such repurchase transaction.
+Added: Risks Relating to our Relationships with Tremont and RMR
+Added: We are dependent upon Tremont and its personnel.
We may be unable to find suitable replacements if our management agreement is terminated.
−Removed: We do not have an office separate from TRC and do not have any employees.
−Removed: Our executive officers also serve as officers of TRC and of RMR LLC.
−Removed: TRC itself has limited resources and is dependent upon facilities and services available to TRC under its shared services agreement with RMR LLC.
−Removed: TRC is not obligated to dedicate any specific personnel exclusively to us, and RMR LLC is not obligated to dedicate any specific personnel to TRC for services for us or otherwise.
−Removed: Although TRC is not currently providing management services to any other mortgage REIT, it may in the future provide management services to other mortgage REITs or to other clients that compete with us.
+Added: We do not have an office separate from Tremont and do not have any employees.
+Added: Our executive officers also serve as officers of Tremont and of RMR.
+Added: Tremont itself has limited resources and is dependent upon facilities and services available to Tremont under its shared services agreement with RMR.
+Added: Tremont is not obligated to dedicate any specific personnel exclusively to us, and RMR is not obligated to dedicate any specific personnel to Tremont for services for us or otherwise.
+Added: Although Tremont is not currently providing management services to any other mortgage REIT, it may in the future provide management services to other mortgage REITs or to other clients that compete with us.
Our officers are not obligated to dedicate any specific portion of their time to our business.
−Removed: Our officers have responsibilities for other companies to which RMR LLC provides management services and may in the future have responsibilities for other companies to which TRC may provide management services.
+Added: Our officers have responsibilities for other companies to which RMR provides management services and may in the future have responsibilities for other companies to which Tremont may provide management services.
As a result, our officers may not always be able to devote sufficient time to the management of our business, and we may not receive the level of support and assistance that we would receive if we were internally managed or if we had different management arrangements.
The term of our management agreement renews for successive one-year periods, subject to non-renewal in accordance with the agreement.
−Removed: If our management agreement or TRC’s shared services agreement with RMR LLC is terminated and no suitable replacement is found, we may not be able to continue in business.
−Removed: TRC has broad discretion in operating our day to day business.
−Removed: TRC is authorized to follow broad operating and investment guidelines and, therefore, has discretion in identifying investments that will be appropriate for us, as well as our individual operating and investment decisions.
−Removed: Our Board of Trustees periodically reviews our operating and investment guidelines and our operating activities, investments and financing arrangements, but our Board of Trustees does not review or approve each decision made by TRC on our behalf.
−Removed: In addition, in conducting periodic reviews, our Board of Trustees relies primarily on information provided to it by TRC.
−Removed: TRC may exercise its discretion in a manner that results in investment returns that are substantially below expectations or that results in losses.
−Removed: Our management structure and agreements and relationships with TRC and RMR LLC and RMR LLC’s and its controlling shareholder’s relationships with others may create conflicts of interest, or the perception of such conflicts, and may restrict our investment activities.
−Removed: We are subject to conflicts of interest arising out of our relationship with TRC, RMR LLC, their affiliates and entities to which they provide management services.
−Removed: TRC is a subsidiary of RMR LLC, which is the majority owned operating subsidiary of RMR Inc.
−Removed: One of our Managing Trustees, Adam Portnoy, as the sole trustee of ABP Trust, is the controlling shareholder of RMR Inc., a managing director and the president and chief executive officer of RMR Inc., an officer and employee of RMR LLC and a director of TRC.
−Removed: He is also a managing director or managing trustee of all the other public companies to which RMR LLC or its subsidiaries provide management services, including us.
−Removed: Jordan, our other Managing Trustee, is a director and the president and chief executive officer of TRC and an officer of RMR LLC and RMR Inc.
−Removed: Lorenzini, our President, and G.
−Removed: Douglas Lanois, our Chief Financial Officer and Treasurer, are each an officer of RMR LLC and an officer and employee of TRC.
−Removed: Prior to the Merger, Messrs.
−Removed: Portnoy and Jordan were also TRMT’s managing trustees, and Messrs.
−Removed: Lorenzini and Lanois also served as president and chief financial officer and treasurer, respectively, of TRMT.
−Removed: Portnoy, Jordan, Lorenzini and Lanois have duties to RMR LLC and to TRC, as well as to us, and we do not have their undivided attention.
−Removed: They and other RMR LLC personnel may have conflicts in allocating their time and resources between us and RMR LLC and other companies to which RMR LLC or its subsidiaries provide services.
−Removed: Our Independent Trustees also serve as independent directors or independent trustees of other public companies to which RMR LLC or its subsidiaries provide management services.
−Removed: Morea and Jeffrey P.
−Removed: Somers, two of our Independent Trustees, previously served as independent trustees of TRMT.
−Removed: In addition, John L.
−Removed: Harrington, who resigned from our Board of Trustees at the Effective Time of the Merger, previously served as an independent trustee of TRMT.
−Removed: TRC, RMR LLC, their affiliates and the entities to which they provide management services are generally not prohibited from competing with us.
−Removed: In addition, TRC, RMR LLC and their subsidiaries may sponsor or manage other funds, REITs or other entities, including entities that make investments similar to the investments we make, and including entities in which TRC or its affiliates or personnel may have a controlling, sole or substantial economic interest.
−Removed: TRC regularly provides mortgage brokerage services, originating and arranging CRE loans between borrowers and other lenders.
−Removed: As a result, conflicts of interests may exist for TRC, RMR LLC and their affiliates with respect to the allocation of investment opportunities.
−Removed: In our management agreement, we specifically acknowledge these conflicts of interest and agree that TRC, RMR LLC and their affiliates may resolve such conflicts in good faith and in their fair and reasonable discretion and may allocate investments, including those within our investment objectives, to RMR LLC and its other clients, including clients in which TRC, its affiliates or their personnel may have a controlling, substantial economic or other interest.
−Removed: Accordingly, we may lose investment opportunities to, and may compete for investment opportunities with, other businesses managed by TRC, RMR LLC or their subsidiaries.
−Removed: In addition to the fees payable to TRC under our management agreement, TRC and its affiliates may benefit from other fees paid to it in respect of our investments.
−Removed: For example, if we securitize some of our CRE loans, TRC or its affiliates may act as the collateral manager for such securitizations.
−Removed: In any of these or other capacities, TRC and its affiliates may receive fees for their services if approved by a majority of our Independent Trustees.
−Removed: In the case of a conflict involving the allocation of investment opportunities among advisory clients of TRC, TRC will endeavor to allocate such investment opportunities in a fair and equitable manner, consistent with TRC’s allocation policies, taking into account such factors as it deems appropriate.
−Removed: With respect to mortgage loan investments, which are the only types of investment opportunity that may be appropriate for more than one advisory client of TRC, TRC has established an investment committee that is responsible for evaluating mortgage loan origination opportunities and making determinations as to whether to move forward with funding a loan, taking into account advisory clients’ investment considerations.
−Removed: In circumstances in which an investment opportunity, after taking into account advisory clients’ investment considerations, is deemed appropriate for more than one advisory client, TRC will generally allocate such opportunity on a rotational basis.
−Removed: Prior to the Merger, TRC provided management services to TRMT.
−Removed: Since the consummation of the Merger, we are the only mortgage REIT to which TRC is providing management services, but TRC may provide management services to other mortgage REITs in the future.
−Removed: In addition, we may in the future enter into additional transactions with TRC, RMR LLC, their affiliates or entities managed by them or their subsidiaries.
−Removed: In particular, we may provide financing to entities managed by TRC, RMR LLC or their subsidiaries, or co-invest with, purchase assets from, sell assets to or arrange financing from any such entities.
+Added: If our management agreement or Tremont’s shared services agreement with RMR is terminated and no suitable replacement is found, we may not be able to continue in our business.
+Added: Tremont has broad discretion in operating our day to day business.
+Added: Tremont is authorized to follow broad operating and investment guidelines and, therefore, has discretion in identifying investments that will be appropriate for us, as well as our individual operating and investment decisions.
+Added: Our Board of Trustees periodically reviews our operating and investment guidelines and our operating activities, investments and financing arrangements, but our Board of Trustees does not review or approve each decision made by Tremont on our behalf.
+Added: In addition, in conducting periodic reviews, our Board of Trustees relies primarily on information provided to it by Tremont.
+Added: Tremont may exercise its discretion in a manner that results in investment returns that are substantially below expectations or that results in losses.
+Added: Our management structure and agreements and relationships with Tremont and RMR and RMR’s and its controlling shareholder’s relationships with others may create conflicts of interest, or the perception of such conflicts, and may restrict our investment activities.
+Added: We are subject to conflicts of interest arising out of our relationship with Tremont, RMR, their affiliates and entities to which they provide management services.
+Added: Tremont is a subsidiary of RMR, which is the majority owned operating subsidiary of RMR Inc.
+Added: One of our Managing Trustees and Chair of our Board of Trustees, Adam D.
+Added: Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., and he is also a director of Tremont, the chair of the board of directors, a managing director and the president and chief executive officer of RMR Inc., and an officer and employee of RMR.
+Added: He is also a managing director or managing trustee of all the other public companies to which RMR or its subsidiaries provide management services, including us.
+Added: Jordan, our other Managing Trustee, is a director and the president and chief executive officer of Tremont and an officer of RMR Inc.
+Added: Lorenzini, our President, is an officer of RMR and an officer and employee of Tremont.
+Added: Sy, our Chief Financial Officer and Treasurer, is an officer and employee of RMR and an officer of Tremont.
+Added: Portnoy, Jordan and Lorenzini and Ms.
+Added: Sy have duties to RMR and to Tremont, as well as to us, and we do not have their undivided attention.
+Added: They and other RMR personnel may have conflicts in allocating their time and resources between us and RMR and other companies to which RMR or its subsidiaries provide services.
+Added: Our Independent Trustees also serve as independent directors or independent trustees of other public companies to which RMR or its subsidiaries provide management services.
+Added: Tremont, RMR, their affiliates and the entities to which they provide management services are generally not prohibited from competing with us.
+Added: In addition, Tremont, RMR and their subsidiaries may sponsor or manage other funds, REITs or other entities, including entities that make investments similar to the investments we make, and including entities in which Tremont or its affiliates or personnel may have a controlling, sole or substantial economic interest.
+Added: As a result, conflicts of interests may exist for Tremont, RMR and their affiliates with respect to the allocation of investment opportunities.
+Added: In our management agreement, we specifically acknowledge these conflicts of interest and agree that Tremont, RMR and their affiliates may resolve such conflicts in good faith and in their fair and reasonable discretion and may allocate investments, including those within our investment objectives, to RMR and its other clients, including clients in which Tremont, its affiliates or their personnel may have a controlling, substantial economic or other interest.
+Added: Accordingly, we may lose investment opportunities to, and may compete for investment opportunities with, other businesses managed by Tremont, RMR or their subsidiaries.
+Added: In addition to the fees payable to Tremont under our management agreement, Tremont and its affiliates may benefit from other fees paid to it in respect of our investments.
+Added: For example, if we securitize some of our CRE loans, Tremont or its affiliates may act as the collateral manager for such securitization.
+Added: In any of these or other capacities, Tremont and its affiliates may receive fees for their services if approved by a majority of our Independent Trustees.
+Added: In the case of a conflict involving the allocation of investment opportunities among advisory clients of Tremont, Tremont will endeavor to allocate such investment opportunities in a fair and equitable manner, consistent with Tremont’s allocation policies, taking into account such factors as it deems appropriate.
+Added: With respect to mortgage loan investments, which are the only types of investment opportunity that may be appropriate for more than one advisory client of Tremont, Tremont has established an investment committee that is responsible for evaluating mortgage loan origination opportunities and making determinations as to whether to move forward with funding a loan, taking into account advisory clients’ investment considerations.
+Added: In circumstances in which an investment opportunity, after taking into account advisory clients’ investment considerations, is deemed appropriate for more than one advisory client, Tremont will generally allocate such opportunity on a rotational basis.
+Added: We are currently the only mortgage REIT to which Tremont is providing management services, but Tremont may provide management services to other mortgage REITs in the future.
+Added: In addition, we may in the future enter into additional transactions with Tremont, RMR, their affiliates or entities managed by them or their subsidiaries.
+Added: In particular, we may provide financing to entities managed by Tremont, RMR or their subsidiaries, or co-invest with, purchase assets from, sell assets to or arrange financing from any such entities.
In addition to his investments in RMR Inc.
−Removed: and RMR LLC, Adam Portnoy holds equity investments in other companies to which RMR LLC or its subsidiaries provide management services and some of these companies have significant cross ownership interests, including, for example:
+Added: and RMR, Adam D.
+Added: Portnoy holds equity investments in other companies to which RMR or its subsidiaries provide management services and some of these companies have significant cross ownership interests, including, for example:
as of December 31, 2022, Mr.
−Removed: Portnoy beneficially owned, in aggregate, 6.9% of our outstanding common shares (including through our Manager), 6.2% of AlerisLife Inc.'s (formerly known as Five Star Senior Living Inc.) outstanding common stock (including through ABP Trust), 1.2% of Industrial Logistics Properties Trust’s outstanding common shares, 1.5% of Office Properties Income Trust’s outstanding common shares, 1.1% of Diversified Healthcare Trust’s outstanding common shares, 1.1% of Service Properties Trust’s outstanding common shares and 4.4% of TravelCenters of America Inc.’s outstanding common shares (including through RMR LLC).
−Removed: Our executive officers may also own equity investments in other companies to which TRC, RMR LLC or their subsidiaries provide management services.
−Removed: These multiple responsibilities, relationships and cross ownerships may give rise to conflicts of interest or the perception of such conflicts of interest with respect to matters involving us, RMR Inc., RMR LLC, our Managing Trustees, the other companies to which
−Removed: RMR LLC or its subsidiaries provide management services and their related parties.
−Removed: Conflicts of interest or the perception of conflicts of interest could have a material adverse impact on our reputation, business and the market price of our common shares and other securities and we may be subject to increased risk of litigation as a result.
+Added: Portnoy beneficially owned, in aggregate, 13.4% of our outstanding common shares (including through Tremont and ABP Trust), 6.1% of AlerisLife Inc.’s outstanding common stock (including through ABP Trust), 1.1% of Diversified Healthcare Trust’s outstanding common shares, 1.2% of Industrial Logistics Properties Trust’s outstanding common shares, 1.5% of Office Properties Income Trust’s outstanding common shares, 1.1% of Service Properties Trust’s outstanding common shares and 4.4% of TravelCenters of America Inc.’s outstanding common shares (including through RMR).
+Added: Our executive officers may also own equity investments in other companies to which Tremont, RMR or their subsidiaries provide management services.
+Added: These multiple responsibilities, relationships and cross ownerships may give rise to conflicts of interest or the perception of such conflicts of interest with respect to matters involving us, RMR Inc., RMR, our Managing Trustees, the other companies to which RMR or its subsidiaries provide management services and their related parties.
+Added: Conflicts of interest or the perception of conflicts of interest could have a material adverse impact on our reputation, business and the market value of our common shares and other securities and we may be subject to increased risk of litigation as a result.
We cannot be sure that our Code of Conduct, governance guidelines, investment allocation policy or other procedural protections we adopt will be sufficient to enable us to identify, adequately address or mitigate actual or alleged conflicts of interest or ensure that our transactions with related persons are made on terms that are at least as favorable to us as those that would have been obtained with an unrelated person.
−Removed: Our management agreement’s fee and expense structure may not create proper incentives for TRC, our Manager.
−Removed: We are required to pay TRC base management fees regardless of the performance of our loan portfolio.
−Removed: TRC’s entitlement to a base management fee that is not based upon our performance or results might reduce its incentive to devote its time and effort to seeking investments that provide attractive, risk adjusted returns for us.
−Removed: Because the base management fees are also based in part on our outstanding equity, TRC may be incentivized to advance strategies that increase our equity capital.
+Added: Our management agreement’s fee and expense structure may not create proper incentives for Tremont.
+Added: We are required to pay Tremont base management fees regardless of the performance of our loan portfolio.
+Added: Tremont’s entitlement to a base management fee is based only in part upon our performance or results, which might reduce its incentive to devote its time and effort to seeking investments that provide attractive, risk adjusted returns for us.
+Added: Because the base management fees are also based in part on our outstanding equity, Tremont may be incentivized to advance strategies that increase our equity capital.
Increasing our equity capital through the sale of our common shares will likely be dilutive to our existing shareholders and may not improve returns for those shareholders or the market price of our common shares.
−Removed: In addition, TRC may earn incentive fees each quarter based on our Distributable Earnings in a specified period in excess of a specified return.
−Removed: This may create an incentive for TRC to invest in assets with higher yield potential, which are generally riskier or more speculative, or to sell assets prematurely for a gain in an effort to increase our near term net income and thereby increase the incentive fees to which TRC is entitled.
−Removed: This incentive fee formula may encourage TRC to recommend investments or take other actions which result in losses to us.
−Removed: In addition, we are required to pay or to reimburse TRC for all costs and expenses of our operations (other than the costs of TRC’s employees who provide services to us), including, but not limited to, the costs of rent, utilities, office furniture, equipment, machinery, facilities and other overhead type expenses, the costs of legal, accounting, auditing, tax planning and tax return preparation, consulting services, diligence costs related to our investments, investor relations expenses and other professional services, personnel and support shared by TRC and other costs and expenses not specifically required under our management agreement to be borne by TRC, and other costs our Independent Trustees may agree to.
−Removed: Some of these overhead, professional and other services are provided by RMR LLC pursuant to a shared services agreement between TRC and RMR LLC.
−Removed: We are also obligated to pay our pro rata share of RMR LLC’s costs for providing our internal audit function.
−Removed: Our obligation to reimburse TRC for certain shared services costs may reduce TRC’s incentive to efficiently manage those costs, which may increase our costs.
+Added: In addition, Tremont may earn incentive fees each quarter based on our Distributable Earnings in a specified period in excess of a specified return.
+Added: This may create an incentive for Tremont to invest in assets with higher yield potential, which are generally riskier or more speculative, or to sell assets prematurely for a gain in an effort to increase our near term net income and thereby increase the incentive fees to which Tremont is entitled.
+Added: This incentive fee formula may encourage Tremont to recommend investments or take other actions which result in losses to us.
+Added: In addition, we are required to pay or to reimburse Tremont for all costs and expenses of our operations (other than the costs of Tremont’s employees who provide services to us), including, but not limited to, the costs of rent, utilities, office furniture, equipment, machinery, facilities and other overhead type expenses, the costs of legal, accounting, auditing, tax planning and tax return preparation, consulting services, diligence costs related to our investments, investor relations expenses and other professional services, personnel and support shared by Tremont and other costs and expenses not specifically required under our management agreement to be borne by Tremont, and other costs our Independent Trustees may agree to.
+Added: Some of these overhead, professional and other services are provided by RMR pursuant to a shared services agreement between Tremont and RMR.
+Added: We are also obligated to pay our pro rata share of RMR’s costs for providing our internal audit function.
+Added: Our obligation to reimburse Tremont for certain shared services costs may reduce Tremont’s incentive to efficiently manage those costs, which may increase our costs.
Our management agreement is between related parties and its terms may be less favorable to us than if they had been negotiated on an arm’s length basis with an unrelated party.
−Removed: Our management agreement is between related parties and its terms, including the fees payable to TRC, may be less favorable to us than if they had been negotiated on an arm’s length basis with an unrelated party.
−Removed: Pursuant to the terms of our management agreement, we are required to reimburse TRC for the fees and other costs it pays to RMR LLC for shared services RMR LLC provides with respect to us.
−Removed: Because of the relationships among TRC and RMR LLC and us, the terms of our management agreement were not negotiated on an arm’s length basis, and we cannot be sure that these terms are as favorable to us as they would have been if they had been negotiated on an arm’s length basis with an unrelated party.
+Added: Our management agreement is between related parties and its terms, including the fees payable to Tremont, may be less favorable to us than if they had been negotiated on an arm’s length basis with an unrelated party.
+Added: Pursuant to the terms of our management agreement, we are required to reimburse Tremont for the fees and other costs it pays to RMR for shared services RMR provides with respect to us.
+Added: Because of the relationships among Tremont and RMR and us, the terms of our management agreement were not negotiated on an arm’s length basis, and we cannot be sure that these terms are as favorable to us as they would have been if they had been negotiated on an arm’s length basis with an unrelated party.
Terminating our management agreement without a cause event may be difficult and will require our payment of a substantial termination fee.
Termination of our management agreement without a cause event will be difficult and costly.
−Removed: We may not terminate our management agreement during its initial term through December 31, 2023.
−Removed: Our Independent Trustees will review TRC's performance and the management fees annually and, following the initial term ending December 31, 2023, our management agreement may be terminated annually without a cause event upon the affirmative vote of at least two-thirds of our Independent Trustees based upon a determination that:
−Removed: (1) TRC’s performance is unsatisfactory and materially detrimental to us;
−Removed: or (2) the base management fee and incentive fee, taken as a whole, payable to TRC are not fair to us (in the case of (2), provided that TRC will be afforded the opportunity to renegotiate the base management fee and incentive fee prior to termination).
−Removed: We will be required to provide TRC with 180 days’ prior written notice of any such termination.
−Removed: Additionally, in the event our management agreement is terminated by us without a cause event or by TRC for a material breach, we will be required to pay TRC a termination fee equal to (i) three times the sum of (a) the average annual base management fee and (b) the average annual incentive fee, in each case paid or payable to TRC during the twenty-four (24) month period immediately preceding the most recently completed calendar quarter prior to the date of termination or, if such termination occurs within 24 months of its initial commencement, the base management fee and the incentive fee will be
−Removed: annualized for such two year period based on such fees earned by TRC during such period, plus (ii) $1.6 million.
−Removed: Additionally, in connection with the Merger and the termination of TRMT’s management agreement with TRC, we agreed that certain of the expenses TRC had paid pursuant to such management agreement will be included in the “Termination Fee” under and as defined in our existing management agreement with TRC.
−Removed: These provisions increase the cost to us of terminating our management agreement and adversely affect our ability to terminate TRC or not renew our management agreement without a cause event.
−Removed: These terms of our management agreement may discourage a change in our control, including a change of control of us, which might result in payment of a premium for our common shares.
−Removed: TRC does not guaranty our performance;
−Removed: moreover, we could experience poor performance or losses for which TRC would not be liable.
−Removed: TRC’s liability is limited under our management agreement, and we have agreed to indemnify TRC against certain liabilities.
−Removed: TRC maintains a contractual as opposed to a fiduciary relationship with us.
−Removed: TRC does not guaranty our performance.
−Removed: Pursuant to our management agreement, TRC does not assume any responsibility other than to render the services called for thereunder in good faith and is not responsible for any action of our Board of Trustees in following or declining to follow its advice or recommendations.
−Removed: We could experience poor performance or losses for which TRC would not be liable.
−Removed: Under the terms of our management agreement, TRC and its affiliates, including RMR LLC, and their respective directors, trustees, officers, shareholders, owners, members, managers, employees and personnel will not be liable to us or any of our Trustees, shareholders or subsidiaries for any acts or omissions related to the provision of services to us under our management agreement, except by reason of acts or omissions that are proved to constitute bad faith, fraud, intentional misconduct, gross negligence or reckless disregard of the duties of TRC under our management agreement.
−Removed: In addition, under the terms of our management agreement, we agree to indemnify, hold harmless and advance expenses to TRC and its affiliates, including RMR LLC, and their respective directors, trustees, officers, shareholders, owners, members, managers, employees and personnel from and against all expenses, losses, damages, liabilities, demands, charges and claims of any nature whatsoever, including all reasonable attorneys’, accountants’, and experts’ fees and expenses, arising from acts or omissions related to the provision of services to us or the performance of any matter pursuant to an instruction by our Board of Trustees, except to the extent it is proved that such acts or omissions constituted bad faith, fraud, intentional misconduct, gross negligence or reckless disregard of the duties of TRC under our management agreement.
+Added: We may not terminate our management agreement without a cause event during its initial term through December 31, 2023.
+Added: Our Independent Trustees will review Tremont’s performance and the management fees annually and, following the initial term ending December 31, 2023, our management agreement may be terminated annually without a cause event upon the affirmative vote of at least two-thirds of our Independent Trustees based upon a determination that:
+Added: (1) Tremont’s performance is unsatisfactory and materially detrimental to us;
+Added: or (2) the base management fee and incentive fee, taken as a whole, payable to Tremont are not fair to us (in the case of (2), provided that Tremont will be afforded the opportunity to renegotiate the base management fee and incentive fee prior to termination).
+Added: We will be required to provide Tremont with prior written notice of any such termination by not later than 180 days prior to the expiration of the term of the agreement.
+Added: Additionally, in the event our management agreement is terminated by us without a cause event or by Tremont for a material breach, we will be required to pay Tremont a termination fee equal to (i) three times the sum of (a) the average annual base management fee and (b) the average annual incentive fee, in each case paid or payable to Tremont during the twenty-four (24) month period immediately preceding the most recently completed calendar quarter prior to the date of termination or, if such termination occurs prior to December 31, 2023, the base management fee and the incentive fee will be annualized for such two year period based on such fees earned by Tremont from January 5, 2021 through the most recently completed calendar quarter prior to the termination date, plus (ii) $1.6 million.
+Added: Additionally, in connection with the Merger and the termination of TRMT’s management agreement with Tremont, we agreed that certain of the expenses Tremont had paid pursuant to such management agreement will be included in the “Termination Fee” under and as defined in our existing management agreement with Tremont.
+Added: These provisions increase the cost to us of terminating our management agreement and adversely affect our ability to terminate Tremont or not renew our management agreement without a cause event.
+Added: These terms of our management agreement may discourage a change of control of us, including a change of control which might result in payment of a premium for our common shares.
+Added: Tremont does not guaranty our performance;
+Added: moreover, we could experience poor performance or losses for which Tremont would not be liable.
+Added: Tremont’s liability is limited under our management agreement, and we have agreed to indemnify Tremont against certain liabilities.
+Added: Tremont maintains a contractual as opposed to a fiduciary relationship with us.
+Added: Tremont does not guaranty our performance.
+Added: Pursuant to our management agreement, Tremont does not assume any responsibility other than to render the services called for thereunder in good faith and is not responsible for any action of our Board of Trustees in following or declining to follow its advice or recommendations.
+Added: We could experience poor performance or losses for which Tremont would not be liable.
+Added: Under the terms of our management agreement, Tremont and its affiliates, including RMR, and their respective directors, trustees, officers, shareholders, owners, members, managers, employees and personnel will not be liable to us or any of our Trustees, shareholders or subsidiaries for any acts or omissions related to the provision of services to us under our management agreement, except by reason of acts or omissions that are proved to constitute bad faith, fraud, intentional misconduct, gross negligence or reckless disregard of the duties of Tremont under our management agreement.
+Added: In addition, under the terms of our management agreement, we agree to indemnify, hold harmless and advance expenses to Tremont and its affiliates, including RMR, and their respective directors, trustees, officers, shareholders, owners, members, managers, employees and personnel from and against all expenses, losses, damages, liabilities, demands, charges and claims of any nature whatsoever, including all reasonable attorneys’, accountants’, and experts’ fees and expenses, arising from acts or omissions related to the provision of services to us or the performance of any matter pursuant to an instruction by our Board of Trustees, except to the extent it is proved that such acts or omissions constituted bad faith, fraud, intentional misconduct, gross negligence or reckless disregard of the duties of Tremont under our management agreement.
Such persons will also not be liable for trade errors that may result from ordinary negligence, including errors in the investment decision making or trade process.
−Removed: TRC may change its processes for identifying, evaluating and managing investments and the personnel performing those functions for us without our or our shareholders’ consent at any time.
−Removed: TRC may change its personnel and processes for identifying, evaluating and managing investments for us without our or our shareholders’ consent at any time.
−Removed: In addition, we cannot be sure that TRC will follow its processes.
−Removed: Changes in TRC’s personnel and processes may result in fewer investment opportunities for us, inferior diligence and underwriting standards or adversely affect the collection of payments on, and the preservation of our rights with respect to, our investments, any of which may adversely affect our operating results.
−Removed: Our management agreement permits our Trustees and officers, TRC and its affiliates, including RMR LLC, and their respective directors, trustees, officers, agents and employees to retain business opportunities for their own benefit and to compete with us.
−Removed: In recognition of the fact that our Trustees and officers, TRC and its affiliates, including RMR LLC, and their respective directors, trustees, officers, agents and employees may engage in other activities or lines of business similar to those in which we engage, our management agreement provides that if such a person acquires knowledge of a potential business opportunity, we renounce, on our behalf and on behalf of our subsidiaries, any potential interest or expectation in, or right to be offered or to participate in, such business opportunity to the maximum extent permitted by Maryland law.
+Added: Tremont may change its processes for identifying, evaluating and managing investments and the personnel performing those functions for us without our or our shareholders’ consent at any time.
+Added: Tremont may change its personnel and processes for identifying, evaluating and managing investments for us without our or our shareholders’ consent at any time.
+Added: In addition, we cannot be sure that Tremont will follow its processes.
+Added: Changes in Tremont’s personnel and processes may result in fewer investment opportunities for us, inferior diligence and underwriting standards or adversely affect the collection of payments on, and the preservation of our rights with respect to, our investments, any of which may adversely affect our operating results.
+Added: Our management agreement permits our Trustees and officers, Tremont and its affiliates, including RMR, and their respective directors, trustees, officers, agents and employees to retain business opportunities for their own benefit and to compete with us.
+Added: In recognition of the fact that our Trustees and officers, Tremont and its affiliates, including RMR, and their respective directors, trustees, officers, agents and employees may engage in other activities or lines of business similar to those in which we engage, our management agreement provides that if such a person acquires knowledge of a potential business opportunity, we renounce, on our behalf and on behalf of our subsidiaries, any potential interest or expectation in, or right to be offered or to participate in, such business opportunity to the maximum extent permitted by Maryland law.
Accordingly, to the maximum extent permitted by Maryland law:
(1) no such person is required to present, communicate or offer any business opportunity to us or any subsidiaries;
−Removed: and (2) such persons, on their own behalf and on behalf of TRC, any affiliate of such person or TRC and any other person to which such person, RMR LLC or any of their subsidiaries provide management services, will have the right to hold and exploit any business opportunity, or to direct, recommend, offer, sell, assign or otherwise transfer such business opportunity to any person other than us.
−Removed: Consequently, our management agreement permits our Trustees and officers and TRC and its affiliates, including RMR LLC, to engage in activities that compete with us.
−Removed: Disputes with TRC may be referred to binding arbitration, which follow different procedures from in-court litigation and may be more restrictive to shareholders asserting claims than in-court litigation.
−Removed: Our management agreement with TRC provides that any dispute arising thereunder will be referred to mandatory, binding and final arbitration proceedings if we, or any other party to such dispute, unilaterally so demands.
−Removed: As a result, we and our shareholders would not be able to pursue litigation in state or federal court against TRC, if we or any other parties against whom the claim is made unilaterally demand the matter be resolved by arbitration.
+Added: and (2) such persons, on their own behalf and on behalf of Tremont, any affiliate of such person or Tremont and any other person to which such person, RMR or any of their subsidiaries provide management services, will have the right to hold and exploit any business opportunity, or to direct, recommend, offer, sell, assign or otherwise transfer such business opportunity to any person other than us.
+Added: Consequently, our management agreement permits our Trustees and officers and Tremont and its affiliates, including RMR, to engage in activities that compete with us.
+Added: Disputes with Tremont may be referred to binding arbitration, which follow different procedures from in-court litigation and may be more restrictive to shareholders asserting claims than in-court litigation.
+Added: Our management agreement with Tremont provides that any dispute arising thereunder will be referred to mandatory, binding and final arbitration proceedings if we, or any other party to such dispute, unilaterally so demands.
+Added: As a result, we and our shareholders would not be able to pursue litigation in state or federal court against Tremont, if we or any other parties against whom the claim is made unilaterally demand the matter be resolved by arbitration.
In addition, the ability to collect attorneys’ fees or other damages may be limited in the arbitration proceedings, which may discourage attorneys from agreeing to represent parties wishing to bring such litigation.
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Companies with business dealings with related persons and entities may more often be the target of dissident shareholder trustee nominations, dissident shareholder proposals and shareholder litigation alleging conflicts of interest in their business dealings.
−Removed: Our relationships with TRC, RMR LLC, their affiliates and entities to which they provide management services, Adam D.
−Removed: Portnoy and other related persons of RMR LLC may precipitate such activities.
+Added: Our relationships with Tremont, RMR, their affiliates and entities to which they provide management services, Adam D.
+Added: Portnoy and other related persons of RMR may precipitate such activities.
Shareholder litigation and dissident shareholder activities, if instituted against us, could result in substantial costs, and diversion of our management’s attention and could have a material adverse impact on our reputation and business.
−Removed: TRC is subject to extensive regulation as an investment adviser, which could adversely affect its ability to manage our business.
−Removed: TRC is subject to regulation as an investment adviser by various regulatory authorities that are charged with protecting the interests of its clients, including us.
−Removed: TRC could be subject to civil liability, criminal liability or sanction, including revocation of its registration as an investment adviser, censures, fines or temporary suspension or permanent bar from conducting business, if it is found to have violated any of the laws or regulations governing investment advisers.
−Removed: Any such liability or sanction could adversely affect TRC’s ability to manage our business.
−Removed: TRC must continually address conflicts between its interests and those of its clients, including us.
+Added: Tremont is subject to extensive regulation as an investment adviser, which could adversely affect its ability to manage our business.
+Added: Tremont is subject to regulation as an investment adviser by various regulatory authorities that are charged with protecting the interests of its clients, including us.
+Added: Tremont could be subject to civil liability, criminal liability or sanction, including revocation of its registration as an investment adviser, censures, fines or temporary suspension or permanent bar from conducting business, if it is found to have violated any of the laws or regulations governing investment advisers.
+Added: Any such liability or sanction could adversely affect Tremont’s ability to manage our business.
+Added: Tremont must continually address conflicts between its interests and those of its clients, including us.
In addition, the SEC and other regulators have increased their scrutiny of conflicts of interest.
−Removed: TRC has procedures and controls that are reasonably designed to address these issues.
−Removed: However, appropriately dealing with conflicts of interest is complex and difficult and if TRC fails, or appears to fail, to deal appropriately with conflicts of interest, it could face litigation or regulatory proceedings or penalties, any of which could adversely affect its ability to manage our business.
+Added: Tremont has procedures and controls that are reasonably designed to address these issues.
+Added: However, appropriately dealing with conflicts of interest is complex and difficult and if Tremont fails, or appears to fail, to deal appropriately with conflicts of interest, it could face litigation or regulatory proceedings or penalties, any of which could adversely affect its ability to manage our business.
Risks Relating to our Organization and Structure
Ownership limitations and certain provisions in our declaration of trust and bylaws, as well as certain provisions of Maryland law, may deter, delay or prevent a change in our control or unsolicited acquisition proposals.
−Removed: Our declaration of trust prohibits any shareholder, other than TRC, RMR LLC and their respective affiliates (as defined) and certain persons who have been exempted by our Board of Trustees, from owning, directly and by attribution, more than 9.8% (in value or number of shares, whichever is more restrictive) of any class or series of our outstanding shares of beneficial interest, including our common shares.
+Added: Our declaration of trust prohibits any shareholder, other than Tremont, RMR and their respective affiliates (as defined) and certain persons who have been exempted by our Board of Trustees, from owning, directly and by attribution, more than 9.8% (in value or number of shares, whichever is more restrictive) of any class or series of our outstanding shares of beneficial interest, including our common shares.
This provision of our declaration of trust is intended to, among other purposes, assist with our REIT compliance under the IRC and otherwise promote our orderly governance.
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In addition, we may be obligated to pay or reimburse the expenses incurred by our present and former Trustees and officers without requiring a preliminary determination of their ultimate entitlement to indemnification.
−Removed: As a result, we and our shareholders may have more limited rights against our present and former Trustees and officers than might otherwise exist absent the provisions in our declaration of trust and indemnification agreements or that might exist with other companies, which could limit our shareholders’ recourse in the event of actions not in their best interest.
−Removed: Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain actions and proceedings that may be initiated by our shareholders, which could limit our shareholders’ ability to obtain a judicial forum they deem favorable for disputes with us or our Trustees, officers, manager, agents or employees.
+Added: As a result of these limitations on liability and indemnification, we and our shareholders may have more limited rights against our present and former Trustees and officers than might exist with other companies, which could limit shareholder recourse in the event of actions that some shareholders may believe are not in our best interest.
+Added: Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain actions and proceedings that may be initiated by our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us or our Trustees, officers, manager or agents.
Our bylaws currently provide that, unless the dispute has been referred to binding arbitration, the Circuit Court for Baltimore City, Maryland will be the sole and exclusive forum for:
(1) any derivative action or proceeding brought on our behalf;
−Removed: (2) any action asserting a claim for breach of a duty owed by any Trustee, officer, manager, agent or employee of ours to us or our shareholders;
−Removed: (3) any action asserting a claim against us or any Trustee, officer, manager, agent or employee of ours arising pursuant to Maryland law, our declaration of trust or bylaws brought by or on behalf of a shareholder, either on his, her or its own behalf, on our behalf or on behalf of any series or class of our shareholders or shareholders against us or any Trustee, officer, manager, agent or employee of ours, including any claims relating to the meaning, interpretation, effect, validity, performance or enforcement of our declaration of trust or bylaws;
−Removed: or (4) any action asserting a claim against us or any Trustee, officer, manager, agent or employee of ours that is governed by the internal affairs doctrine.
+Added: (2) any action asserting a claim for breach of a fiduciary duty owed by any of our Trustees, officers, manager or other agents to us or our shareholders;
+Added: (3) any action asserting a claim against us or any of our Trustees, officers, manager or other agents arising pursuant to Maryland law, our declaration of trust or bylaws brought by or on behalf of a shareholder, either on his, her or its own behalf, on our behalf or on behalf of any series or class of our shareholders or shareholders against us or any of our Trustees, officers, manager or other agents, including any claims relating to the meaning, interpretation, effect, validity, performance or enforcement of our declaration of trust or bylaws;
+Added: or (4) any action asserting a claim against us or any of our Trustees, officers, manager or other agents that is governed by the internal affairs doctrine of the State of Maryland.
The exclusive forum provision of our bylaws does not apply to any action for which the Circuit Court for Baltimore City, Maryland does not have jurisdiction.
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Our Board of Trustees determines our operational, financing and investment policies and may amend or revise our policies, including our policies with respect to our intention to maintain our qualification for taxation as a REIT, investments, growth, operations, indebtedness, capitalization and distributions, or approve transactions that deviate from these policies, without a vote of, or notice to, our shareholders.
−Removed: Policy changes could adversely affect the market price of our common shares and our ability to make distributions to our shareholders.
+Added: Policy changes could adversely affect the market value of our common shares and our ability to pay distributions to our shareholders.
Further, our organizational documents do not limit the amount or percentage of indebtedness, funded or otherwise, that we may incur.
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(1) substantially change the manner in which we conduct our operations to avoid being required to register as an investment company under the 1940 Act;
−Removed: or (2) register as an investment company under the 1940 Act, either of which could have an adverse effect on us and the market price of our common shares.
+Added: or (2) register as an investment company under the 1940 Act, either of which could have an adverse effect on us and the market value of our common shares.
If we or any of our subsidiaries were required to register as an investment company under the 1940 Act, the registered entity would become subject to substantial regulation with respect to capital structure (including the ability to use leverage), management, operations, transactions with affiliated persons (as defined in the 1940 Act), portfolio composition, including restrictions with respect to diversification and industry concentration and compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly change our operations.
Failure to maintain our exemption from registration under the 1940 Act also would require us to significantly restructure our investment strategy.
−Removed: For example, because affiliate transactions are generally prohibited under the 1940 Act, we would not be able to enter into transactions with any of our affiliates if we were required to register as an investment company under the 1940 Act, and we might be required to terminate our management agreement with TRC and any other agreements with affiliates, which could have a material adverse effect on our ability to operate our business and pay distributions.
+Added: For example, because affiliate transactions are generally prohibited under the 1940 Act, we would not be able to enter into transactions with any of our affiliates if we were required to register as an investment company under the 1940 Act, and we might be required to terminate our management agreement with Tremont and any other agreements with affiliates, which could have a material adverse effect on our ability to operate our business and pay distributions.
If we were required to register as an investment company but failed to do so, we would be prohibited from engaging in our business, and criminal and civil actions could be brought against us.
26 unchanged sentences
(2) sell our assets in a manner that, or at a time when, we would not otherwise choose to do so;
−Removed: or (3) register as an investment company, any of which could negatively affect the value of our common shares, the sustainability of our business, and our ability to make distributions, which could have an adverse effect on our business and the market price for our common shares.
+Added: or (3) register as an investment company, any of which could negatively affect the sustainability of our business and our ability to pay distributions, which could have an adverse effect on our business and the market value for our common shares.
Risks Relating to Taxation
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In order to meet these requirements, it may be necessary for us to sell or forgo attractive investments.
−Removed: If we cease to qualify for taxation as a REIT under the IRC, then our ability to raise capital might be adversely affected, we may be subject to material amounts of federal and state income taxes, our cash available for distribution to our shareholders
−Removed: could be reduced and the market price of our common shares could decline.
+Added: If we cease to qualify for taxation as a REIT under the IRC, then our ability to raise capital might be adversely affected, we may be subject to material amounts of federal and state income taxes, our cash available for distribution to our shareholders could be reduced, and the market value of our common shares could decline.
In addition, if we lose or revoke our qualification for taxation as a REIT under the IRC for a taxable year, we will generally be prevented from requalifying for taxation as a REIT for the next four taxable years.
2 unchanged sentences
To the extent that we satisfy this distribution requirement, federal corporate income tax will not apply to the earnings that we distribute, but if we distribute less than 100% of our REIT taxable income, then we will be subject to federal corporate income tax on our undistributed taxable income.
−Removed: We intend to make distributions to our shareholders to comply with the REIT requirements of the IRC.
−Removed: In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our shareholders in a calendar year is less than a minimum amount specified under federal tax laws.
+Added: We intend to pay distributions to our shareholders to comply with the REIT requirements of the IRC.
+Added: In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we distribute to our shareholders in a calendar year is less than a minimum amount specified under federal tax laws.
From time to time, we may experience timing and other differences, for example on account of income and expense accrual principles under U.S.
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These alternatives could increase our costs or reduce our shareholders’ equity.
−Removed: Thus, compliance with the REIT distribution requirements may hinder our ability to grow, which could cause the market price of our common shares to decline.
+Added: Thus, compliance with the REIT distribution requirements may hinder our ability to grow, which could cause the market value of our common shares to decline.
We may in the future choose to pay dividends in our common shares, in which case shareholders may be required to pay income taxes in excess of the cash dividends that they receive.
3 unchanged sentences
As a result, shareholders may be required to pay income taxes with respect to these dividends in excess of the cash dividends received.
−Removed: If a shareholder sells our common shares that 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, depending on the market price of our common shares at the time of the sale.
+Added: If a shareholder sells our common shares that 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, depending on the market value of our common shares at the time of the sale.
Furthermore, with respect to some non-U.S.
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However, for tax years beginning before 2026, REIT dividends paid to noncorporate shareholders are generally taxed at an effective tax rate lower than applicable ordinary income tax rates due to the availability of a deduction under the IRC for specified forms of income from passthrough entities.
−Removed: More favorable rates will nevertheless continue to apply to regular corporate “qualified” dividends, which may cause some investors to perceive that an investment in a REIT is less attractive than an investment in a non-REIT entity that pays dividends, thereby reducing the demand and market price of our common shares.
+Added: More favorable rates will nevertheless continue to apply to regular corporate “qualified” dividends, which may cause some investors to perceive that an investment in a REIT is less attractive than an investment in a non-REIT entity that pays dividends, thereby reducing the demand and market value of our common shares.
Even if we remain qualified for taxation as a REIT under the IRC, we may face other tax liabilities that reduce our cash flow.
1 unchanged sentence
Also, some jurisdictions may in the future limit or eliminate favorable income tax deductions, including the dividends paid deduction, which could increase our income tax expense.
−Removed: In addition, in
−Removed: order to meet the requirements for qualification and taxation as a REIT under the IRC, prevent the recognition of particular types of non-cash income, or avert the imposition of a 100% tax that applies to specified gains derived by a REIT from dealer property or inventory, we may hold or dispose of some of our assets and conduct some of our operations through TRSs or other subsidiary corporations that will be subject to corporate level income tax at regular rates.
+Added: In addition, in order to meet the requirements for qualification and taxation as a REIT under the IRC, prevent the recognition of particular types of non-cash income, or avert the imposition of a 100% tax that applies to specified gains derived by a REIT from dealer property or inventory, we may hold or dispose of some of our assets and conduct some of our operations through our TRSs or other subsidiary corporations that will be subject to corporate level income tax at regular rates.
In addition, while we intend that our transactions with our TRSs will be conducted on arm’s length bases, we may be subject to a 100% excise tax on a transaction that the IRS or a court determines was not conducted at arm’s length.
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There is limited case law or administrative guidance addressing the treatment of mezzanine loans and preferred equity investments as debt or equity for federal income tax purposes.
−Removed: We expect that mezzanine loans that we may originate or acquire generally will be treated as debt for federal income tax purposes, and preferred equity investments that we may make generally will be treated as equity for federal income tax purposes, but we do not anticipate obtaining private letter rulings from the IRS or opinions of counsel on the characterization of those investments for federal income tax purposes.
+Added: We expect that any mezzanine loans that we may originate or acquire generally will be treated as debt for federal income tax purposes, and preferred equity investments that we may make generally will be treated as equity for federal income tax purposes, but we do not anticipate obtaining private letter rulings from the IRS or opinions of counsel on the characterization of those investments for federal income tax purposes.
If a mezzanine loan is treated as equity for federal income tax purposes, we will be treated as owning the assets held by the partnership or limited liability company that issued the mezzanine loan and we will be treated as receiving our proportionate share of the income of that entity.
If that partnership or limited liability company owns nonqualifying assets or earns nonqualifying income, we may not be able to satisfy all of the REIT gross income and asset tests.
−Removed: Alternatively, if the IRS successfully asserts a preferred equity investment is debt for federal income tax purposes, then that investment may be treated as a nonqualifying asset for purposes of the 75% asset test and as producing nonqualifying income for the 75% gross income test.
+Added: Alternatively, if the IRS successfully asserts that any preferred equity investment that we may make is debt for federal income tax purposes, then that investment may be treated as a nonqualifying asset for purposes of the 75% asset test and as producing nonqualifying income for the 75% gross income test.
In addition, such an investment may be subject to the 10% value test and the 5% asset test, and it is possible that a preferred equity investment that is treated as debt for federal income tax purposes could cause us to fail one or more of the foregoing tests.
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The REIT provisions of the IRC substantially limit our ability to hedge our assets and liabilities.
−Removed: Any income from a hedging transaction that we enter into to manage risk of interest rate changes with respect to borrowings made or to be made to acquire or carry real estate assets does not constitute “gross income” for purposes of the 75% or 95% gross income tests that we must satisfy in order to maintain our qualification for taxation as a REIT under the IRC.
+Added: Any income from a qualifying hedging transaction that we enter into to manage risk of interest rate changes with respect to borrowings made or to be made to acquire or carry real estate assets does not constitute “gross income” for purposes of the 75% or 95% gross income tests that we must satisfy in order to maintain our qualification for taxation as a REIT under the IRC.
As a result, a qualifying hedge transaction will neither assist nor hinder our compliance with the 75% and 95% gross income tests.
−Removed: To the extent that we enter into other types of hedging transactions, the income from those transactions is likely to be treated as nonqualifying income for
−Removed: purposes of both of these gross income tests.
+Added: To the extent that we enter into other types of hedging transactions, the income from those transactions is likely to be treated as nonqualifying income for purposes of both of these gross income tests.
As a result of these rules, we may limit our use of advantageous hedging techniques or implement some hedges through a TRS.
3 unchanged sentences
We may acquire debt instruments in the secondary market for less than their face amount.
−Removed: Though the discount at which such debt instruments are acquired may reflect doubts about their ultimate collectability rather than current market interest rates, the amount of such discount will nevertheless generally be treated as “market discount” for U.S.
+Added: Though the discount at which such debt instruments are acquired may reflect doubts about their ultimate collectability rather than current interest rates, the amount of such discount will nevertheless generally be treated as “market discount” for U.S.
federal income tax purposes.
20 unchanged sentences
In either case, our shareholders could suffer adverse tax consequences through the recognition of UBTI or the other adverse consequences that flow from excess inclusion income.
−Removed: Furthermore, in such an event, our common shares could become ineligible for inclusion in those market indexes that exclude UBTI-generating stock, which could adversely affect demand for our common shares and their market price.
+Added: Furthermore, in such an event, our common shares could become ineligible for inclusion in those market indexes that exclude UBTI-generating stock, which could adversely affect demand for our common shares and the market value of our common shares.
The tax on prohibited transactions limits our ability to engage in transactions, including some methods of securitizing mortgage loans that would be treated as sales for U.S.
3 unchanged sentences
If we were to dispose of or securitize loans in a manner that was treated as a sale of the loans for U.S.
−Removed: federal income tax purposes, those sales could be viewed as sales to customers in the ordinary course of
−Removed: business and to that extent subject to the 100% tax.
+Added: federal income tax purposes, those sales could be viewed as sales to customers in the ordinary course of business and to that extent subject to the 100% tax.
Therefore, in order to avoid the prohibited transactions tax, we may choose not to engage in particular sales of loans or we may limit the structures used for dispositions or securitization transactions, even though the sales or structures might otherwise be beneficial to us.
−Removed: We may incur adverse tax consequences if TRMT failed to qualify for taxation as a REIT under the IRC prior to the Merger.
−Removed: We received an opinion from TRMT’s counsel that TRMT was organized and operated in conformity with the requirements for qualification and taxation as a REIT under the IRC prior to the Merger.
−Removed: If, contrary to that opinion, TRMT failed to qualify for taxation as a REIT under the IRC, then we may inherit significant tax liabilities as a result of the Merger because, as the successor by merger to TRMT, we would generally inherit any corporate income tax liabilities of TRMT, including penalties and interest.
−Removed: If it is determined that TRMT failed to satisfy one or more of the REIT qualification requirements prior to the Merger, the IRS might allow us, as successor, to utilize remedial provisions under the IRC to remediate the REIT compliance failure.
−Removed: However, if and to the extent remedial provisions are available to us to address any REIT qualification matter stemming from the periods prior to the Merger, we may have to expend significant resources in connection with such remediation, including, among other things:
−Removed: (a) required distribution payments to shareholders and associated interest payments to the IRS;
−Removed: and (b) tax and interest payments to the IRS and state and local tax authorities.
−Removed: TRMT’s failure to qualify for taxation as a REIT under the IRC for the period prior to or including the Merger and our efforts to remedy any such failure could have a material adverse effect on our financial condition and results of operations.
+Added: We may incur adverse tax consequences as a result of our acquisition of TRMT.
+Added: As a successor to TRMT, we may face liability stemming from the tax liabilities (including penalties and interest) of TRMT and its subsidiaries.
+Added: These liabilities and our efforts to remedy any tax dispute relating to these acquired entities could have a material adverse effect on our financial condition and results of operations.
Risks Relating to our Securities
Our distributions to our shareholders may be reduced or eliminated and the form of payment could change.
−Removed: In January 2022, our Board of Trustees declared a quarterly distribution of $0.25 per common share.
We intend to continue to make regular quarterly distributions to our shareholders, but we may not be able to increase or maintain such a distribution rate for various reasons, including:
−Removed: • our ability to sustain or increase the rate of distributions may be adversely affected if any of the risks described in our Annual Report on Form 10-K occur, including the negative impact of the COVID-19 pandemic and its aftermath on our business, results of operations and liquidity;
+Added: • our ability to sustain or increase the rate of distributions may be adversely affected if any of the risks described in our Annual Report on Form 10-K occur;
• we may not have enough cash to pay such distributions as a result of changes in our cash requirements, cash flow or financial position;
−Removed: • our making of distributions is subject to restrictions contained in the agreements governing our debt and may be subject to restrictions in future debt obligations we may incur;
−Removed: during the continuance of any event of default under the agreements governing our debt, we may be limited or in some cases prohibited from making distributions to our shareholders;
−Removed: • the timing, amount and form of any distributions will be determined at the discretion of our Board of Trustees and will depend on various factors that our Board of Trustees deems relevant, including, but not limited to our historical and projected income, our Distributable Earnings and Adjusted Distributable Earnings, our expectations of future capital requirements and operating performance and our expected needs for cash to pay our obligations and fund our investments, requirements to maintain our qualification for taxation as a REIT and limitations in our Secured Financing Facilities.
−Removed: For these reasons, among others, our distribution rate may decline or we may cease making distributions to our shareholders.
+Added: • our payment of distributions is subject to restrictions contained in the agreements governing our debt and may be subject to restrictions in future debt obligations we may incur;
+Added: during the continuance of any event of default under the agreements governing our debt, we may be limited or in some cases prohibited from paying distributions to our shareholders;
+Added: • the timing, amount and form of any distributions will be determined at the discretion of our Board of Trustees and will depend on various factors that our Board of Trustees deems relevant, including, but not limited to our historical and projected income, our Distributable Earnings, Distributable Earnings per common share, Adjusted Distributable Earnings and Adjusted Distributable Earnings per common share, our expectations of future capital requirements and operating performance and our expected needs for cash to pay our obligations and fund our investments, requirements to maintain our qualification for taxation as a REIT and limitations in our Secured Financing Facilities.
+Added: For these reasons, among others, our distribution rate may decline, or we may cease paying distributions to our shareholders.
Further, in order to preserve liquidity, we may elect to pay distributions to our shareholders in part in a form other than cash, such as issuing additional common shares to our shareholders, as permitted by the applicable tax rules.
−Removed: Changes in market conditions could adversely affect the value of our securities.
−Removed: As with other publicly traded equity securities and REIT securities, the value of our common shares and other securities depends on various market conditions that are subject to change from time to time.
−Removed: We believe that one of the factors that investors consider important in deciding whether to buy or sell equity securities of a REIT is the distribution rate, considered as a percentage of the price of the equity securities, relative to market interest rates.
−Removed: Interest rates have been at historically low levels for an extended period of time.
+Added: Changes in market conditions could adversely affect the market value of our securities.
+Added: As with other publicly traded equity securities and REIT securities, the market value of our common shares and other securities depends on various market conditions that are subject to change from time to time.
+Added: We believe that one of the factors that investors consider important in deciding whether to buy or sell equity securities of a REIT is the distribution rate, considered as a percentage of the market price of the equity securities, relative to interest rates.
There is a general market perception that REIT shares outperform in low interest rate environments and underperform in rising interest rate environments when compared to the broader market.
−Removed: Federal Reserve had indicated that it did not expect to raise interest rates in response to the COVID-19 pandemic and current market conditions until at least the end of 2023.
−Removed: However, the U.S.
−Removed: Federal Reserve has indicated that, in light of the economic recovery and higher than anticipated inflation, it expects to raise interest rates as early as March 2022.
−Removed: The timing, number and amount of any future interest rate increases are uncertain.
−Removed: Federal Reserve increases interest rates or if there is a market expectation of such increases, prospective purchasers of REIT equity securities may want to achieve a higher distribution rate.
−Removed: Thus, higher market interest rates, or the expectation of higher interest rates, could cause the value of our securities to decline.
−Removed: We may use future debt leverage to pay distributions to our shareholders.
−Removed: If our earnings are at any time insufficient to fund distributions to our shareholders at the level which may in the future be established by our Board of Trustees, we may pay distributions to our shareholders with the proceeds of borrowings or other leverage or from sales of our assets.
−Removed: The use of borrowings or sale proceeds for distributions may dilute our shareholders’ ownership interests in us.
−Removed: In addition, funding distributions to our shareholders from our future borrowings or asset sales may constitute a return of capital to our investors, which would have the effect of reducing our shareholders’ bases in our common shares.
+Added: In efforts to combat rising inflation, the FOMC raised interest rates multiple times since March 2022 and has indicated an expectation that it will continue to raise interest rates in 2023.
+Added: In addition, the U.S.
+Added: and global economies have been experiencing high inflation, constrained labor availability, supply chain challenges, global instability and economic downturn.
+Added: These conditions have negatively impacted REIT share prices and, if they continue or worsen, may have further adverse impacts on the market value of our securities.
+Added: We may use debt leverage or sell assets to pay distributions to our shareholders in the future.
+Added: If our earnings are at any time insufficient to fund distributions to our shareholders at the level that may in the future be established by our Board of Trustees, we may pay distributions to our shareholders with the proceeds of borrowings or other leverage or from sales of our assets.
+Added: Funding distributions to our shareholders from our future borrowings or asset sales may constitute a return of capital to our investors, which would have the effect of reducing our shareholders’ bases in our common shares.
Unresolved Staff Comments
−Removed: We lease our principal executive and administrative offices which are located at Two Newton Place, 255 Washington Street, Newton, MA 02458-1634.
+Added: Our principal executive and administrative offices are located in leased space at Two Newton Place, 255 Washington Street, Newton, MA 02458-1634.
We do not own any real property.
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.