What changed in this filing

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Item 1A. Risk Factors

2025-02-05 compared with 2024-02-07 · 62 added, 48 removed, 371 unchanged (23% of the section changed)

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In addition to general regional, national and international economic conditions that may materially adversely affect our business and financial results, our operating performance may be materially adversely impacted by adverse economic conditions in the specific markets in which we operate and particularly in the markets in which we have significant concentrations of properties.

For example, as of December 31, 2023, approximately 16.3% of our rentable square feet and approximately 44.6% of our improved land parcels were located in Northern New Jersey/New York City, representing a combined percentage of approximately 24.6% of our total annualized base rent.

For example, as of December 31, 2024, approximately 19.9% of our rentable square feet and approximately 41.4% of our improved land parcels were located in New York City/Northern New Jersey, representing a combined percentage of approximately 27.9% of our total annualized base rent.

See “Item 2 - Properties” in this Annual Report on Form 10-K for additional information regarding our ownership of properties in our markets.

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Our tenants, particularly those that are highly leveraged, could file for bankruptcy protection or become insolvent in the future.

On October 16, 2023, DirectBuy Home Improvement, one of our top 20 customers, filed for Chapter 11 bankruptcy.

We had fully reserved for all of their receivables as of December 31, 2023 and any ultimate recovery of past due rent is undetermined at this time.

Under bankruptcy law, a tenant cannot be evicted solely because of its bankruptcy but the bankrupt tenant may be authorized to reject and terminate its lease with us.

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In the future, we will rely on equity and debt financing, including issuances of common and perpetual preferred stock, borrowings under our revolving credit facility, term loans, issuances of unsecured debt securities and debt secured by individual properties or pools of properties, and recycling of capital to finance our acquisition, development, redevelopment, renovation and expansion activities and for working capital.

If we are unable to obtain equity or debt financing from these or other sources,

or to refinance existing indebtedness upon maturity, our financial condition and results of operations would likely be adversely affected.

If we are unable to obtain equity or debt financing from these or other sources, or to refinance existing indebtedness upon maturity, our financial condition and results of operations would likely be adversely affected.

Any additional debt we incur will increase our leverage and likelihood of default.

Market conditions may make it difficult to obtain additional financing, and we cannot assure you that we will be able to obtain additional debt or equity financing or that we will be able to obtain it on favorable terms.

Market conditions may make it

difficult to obtain additional financing, and we cannot assure you that we will be able to obtain additional debt or equity financing or that we will be able to obtain it on favorable terms.

In addition, to qualify as a REIT, we are required to distribute at least 90% of our taxable income (determined before the deduction for dividends paid and excluding any net capital gains) each year to our stockholders, and we generally expect to make distributions in excess of such amount.

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Our business strategy contemplates the use of both non-recourse secured debt and unsecured debt to finance long-term growth.

As of December 31, 2023, we had total debt, net of deferred financing costs, of approximately $771.6 million, which consisted of revolving credit facility borrowings, term loan borrowings and senior unsecured note borrowings.

As of December 31, 2024, we had total debt, net of deferred financing costs and unamortized fair value adjustment, of approximately $823.4 million, which consisted of revolving credit facility borrowings, term loan borrowings, senior unsecured note borrowings and a mortgage loan payable.

While over the long term we intend to limit the sum of the outstanding principal amount of our consolidated indebtedness and the liquidation preference of any outstanding shares of preferred stock to less than 35% of our total enterprise value, our governing documents contain no limitations on the amount of debt that we may incur, and our board of directors may change our financing policy at any time without stockholder approval.

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• the use of leverage could adversely affect our ability to make distributions to our stockholders and the market price of our shares of common stock.

Certain of our debt, such as our term loans and senior unsecured notes, require that the principal be repaid at the maturity of the loan in a “balloon payment.” As of December 31, 2023, the financing arrangements of our outstanding indebtedness could require us to make lump-sum or “balloon” payments of approximately $775.0 million at maturity dates that range from 2024 to 2031.

Certain of our debt, such as our term loans, senior unsecured notes and mortgage loan, require that the principal be repaid at the maturity of the loan in a “balloon payment.” As of December 31, 2024, the financing arrangements of our outstanding indebtedness could require us to make lump-sum or “balloon” payments of approximately $829.9 million at maturity dates that range from 2026 to 2031.

If we do not have sufficient funds to repay existing or future debt at maturity, including debt under our credit facility, term loans and senior unsecured notes, it may be necessary to refinance the debt through additional debt or raise additional funds through equity financings.

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The agreements relating to our existing debt contain, and we expect that agreements relating to our future indebtedness will contain, covenants that could limit our operations and our ability to make distributions to our stockholders .

We have a credit facility, which consists of a $100.0 million term loan that matures in January 2027, a $100.0 million term loan that matures in January 2028 and a revolving credit facility with $400.0 million in borrowing capacity that matures in August 2025.

We also have $575.0 million of senior unsecured notes outstanding.

We have a credit facility, which consists of a $100.0 million term loan that matures in January 2027, a $100.0 million term loan that matures in January 2028 and a revolving credit facility with $600.0 million in borrowing capacity that matures in January 2029.

As of December 31, 2024, the revolving credit facility had an outstanding balance of approximately $82.0 million.

We also have $475.0 million of senior unsecured notes outstanding as well as an outstanding mortgage loan with a total contractual principal amount of approximately $72.9 million.

We have agreed to guarantee the obligations of the borrower (a wholly-owned subsidiary) under our revolving credit facility, our term loans and our senior unsecured notes.

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Adverse changes in our credit rating could negatively affect our financing activity.

Fitch Ratings assigned us an issuer rating of BBB with a positive outlook.

Fitch Ratings assigned us an issuer rating of BBB+ with a stable outlook.

A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency.

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• changes in operating costs and expenses and our ability to control rents, including periods of high and persistent inflation;

• changes in, or increased costs of compliance with, governmental rules, regulations and fiscal policies, including changes in tax, real estate, environmental and zoning laws, and our potential liability thereunder;

• changes in, or increased costs of compliance with, governmental rules, regulations and fiscal policies, including changes in tax, tariff, real estate, environmental and zoning laws, and our potential liability thereunder;

• increasing costs of maintaining, insuring, renovating and making improvements to our properties;

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• the effects of deflation, including credit market dislocation, weakened consumer demand and a decline in general price levels.

In addition, throughout 2023, we observed economic and geopolitical uncertainty in the United States and abroad.

In addition, throughout 2023 and 2024, we observed economic and geopolitical uncertainty in the United States and abroad.

If such uncertainty continues or is heightened, it could lead to sustained periods of economic slowdown or recession, continued inflation and higher interest rates or declining demand for real estate, and the occurrence of such events or public perception that any of these events may occur, would result in a general decrease in rents or an increased occurrence of defaults under existing leases, which would materially adversely affect our financial condition and results of operations.

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We will attempt to ensure that all of our properties are adequately insured to cover casualty losses.

We carry property and rental loss, liability and terrorism insurance resulting from certain perils such as fire, windstorm, flood, earthquake and terrorism;

commercial general liability insurance;

and environmental insurance, as appropriate where each of our properties are located.

However, there are certain losses, including losses from floods, hurricanes, fires, earthquakes and other natural disasters, acts of war, acts of terrorism or riots, that are not generally insured against or that are not generally fully insured against because it is not deemed economically feasible or prudent to do so.

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Under those circumstances, the insurance proceeds we receive might be inadequate to restore our economic position on the damaged or destroyed property and we may not have access to an alternative source of funding to repair or reconstruct the damaged property.

In the event that any of our properties incurs a casualty loss that is not fully covered by insurance, the value of our assets will be reduced by the amount of any such uninsured loss, and we could experience a significant loss of capital invested and potential revenues in these properties and could potentially remain obligated under any recourse debt associated with the property.

Inflation, changes in building codes and ordinances, environmental considerations

and other factors might also keep us from using insurance proceeds to replace or renovate a property after it has been damaged or destroyed.

In the event that any of our properties incurs a casualty loss that is not fully covered by insurance, the value of our assets will be reduced by the amount of any such uninsured loss, and we

could experience a significant loss of capital invested and potential revenues in these properties and could potentially remain obligated under any recourse debt associated with the property.

Inflation, changes in building codes and ordinances, environmental considerations and other factors might also keep us from using insurance proceeds to replace or renovate a property after it has been damaged or destroyed.

Any such losses could adversely affect our financial condition, results of operations, cash flows and ability to pay distributions on, and the market price of, our common stock.

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Phase I assessments are intended to discover and evaluate information regarding the environmental condition of the surveyed property and surrounding properties.

Phase I assessments generally include a historical review, a public records review, an investigation of the surveyed site and surrounding properties, and preparation and issuance of a written report, but do not include soil sampling or subsurface investigations and typically do not include an asbestos survey.

as a whole, we cannot give any assurance that such conditions do not exist or may not arise in the future.

not include an asbestos survey.

Even if none of our environmental assessments of our properties reveal an environmental liability that we believe would have a material adverse effect on our business, financial condition or results of operations taken as a whole, we cannot give any assurance that such conditions do not exist or may not arise in the future.

Material environmental conditions, liabilities or compliance concerns may go undetected by the environmental assessment or arise after the environmental assessment has been completed.

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We may also incur costs to bring a property into legal compliance even though the tenant may have been contractually required to comply and pay for the cost of compliance.

We are exposed to the potential impacts of future climate change and climate-change related risks, which may result in unanticipated losses that could affect our business and financial condition.

We are exposed to the potential impacts of climate change and climate-change related risks, which may result in unanticipated losses that could affect our business and financial condition.

Government authorities and various interest groups are promoting laws and regulations relating to climate change, including regulations aimed at limiting greenhouse gas emissions and the implementation of “green” building codes, due to concerns over contributions to climate change.

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We may be exposed to physical risks from possible future changes in climate, which could increase our operating costs, impact our tenants’ ability to pay rent and adversely affect our ability to lease, develop or dispose of our properties.

Our properties may be exposed to rare catastrophic weather events, such as severe storms or floods.

Our properties may be exposed to rare catastrophic weather events, such as severe storms, wildfires or floods, which may result in uninsured or underinsured losses.

If the frequency of extreme weather events increases, our exposure to these events could increase.

Some of our properties may be subject to risks from rising sea levels.

Some of our properties may also be subject to risks from rising sea levels.

In addition, many state and local governments are adopting or considering adopting regulations requiring that property owners and developers include in their development or redevelopment plans resiliency measures to address climate-change related risks.

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Compliance or failure to comply with regulatory requirements could result in substantial costs.

The Energy Efficiency Standards for Residential and Nonresidential Buildings, Title 24, and/or other similar regulations.

We are required to comply with many regulations made by various regulatory entities, including (but not limited to) the Americans with Disabilities Act, The Fair Housing Amendment of 1988, various California energy efficiency standards such as The Energy Efficiency Standards for Residential and Nonresidential Buildings, Title 24, and/or other similar regulations.

Noncompliance could result in the imposition of fines or the award of damages to private litigants.

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• “ Business Combination ” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (as defined under the MGCL) or an affiliate of an interested stockholder for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter may impose special stockholder voting requirements unless certain minimum price conditions are satisfied;

stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.

• “ Control Share ” provisions that provide that “control shares” of our company acquired in a “control share acquisition” (each as defined under the MGCL) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.

We have opted out of the business combination and control share provisions of the MGCL by resolution of our board of directors and pursuant to a provision in our bylaws, respectively.

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This is because qualification as a REIT involves the application of highly technical and complex provisions of the Code as to which there are only limited judicial and administrative interpretations and involves the determination of facts and circumstances not entirely within our control.

Future legislation, new regulations, administrative interpretations or court decisions may significantly change the tax laws or the application of the tax laws with respect to qualification as a REIT for federal income tax purposes or the federal income tax consequences of such qualification.

federal income tax purposes or the U.S.

federal income tax consequences of such qualification.

If we fail to qualify as a REIT in any taxable year, and are unable to obtain relief under certain statutory provisions, we will face serious tax consequences that will substantially reduce the funds available for distributions to our stockholders because:

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As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it could adversely affect the value of our common stock.

In addition, we currently hold certain of our properties indirectly through subsidiaries that intend to qualify as REITs for federal income tax purposes, and we may in the future hold other properties through REIT subsidiaries.

Failure of any of these REIT subsidiaries to qualify as a REIT for U.S.

federal income tax purposes could jeopardize our status as a REIT for U.S.

federal income tax purposes.

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

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

Our cash flows from operations may be insufficient to fund required distributions as a result of differences in timing between the actual receipt of income and the recognition of income for federal income tax purposes, the effect of non-deductible capital expenditures, the creation of reserves, required debt service or amortization payments.

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

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

The insufficiency of our cash flows to cover our distribution requirements could have an adverse impact on our ability to raise short- and long-term debt or sell equity securities in order to fund distributions required to maintain our REIT status.

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Dividends payable by REITs generally do not qualify for reduced tax rates.

Currently, the maximum tax rate for qualified dividends payable to individual U.S.

stockholders is 20%.

Dividends payable by REITs, however, are generally not eligible for such reduced rates.

Currently, the maximum tax rate for certain qualified dividends payable to U.S.

stockholders that are individuals, trusts and estates generally is 20%.

Ordinary dividends payable by REITs, however, are generally not eligible for such reduced rates and therefore are taxable as ordinary income when paid to such stockholders.

However, for taxable years beginning before January 1, 2026, a deduction of up to 20% (subject to certain limitations) is available on most ordinary REIT dividends and certain trade or business income of non-corporate taxpayers.

Additionally, to the extent such dividends are attributable to certain dividends that we receive from a TRS, such dividends generally will be eligible for the reduced rates that apply to qualified dividend income.

While we currently do not own an interest in a TRS, we may own such an interest in the future.

The more favorable rates applicable to regular corporate dividends could cause investors who are individuals to perceive investments in REITs to be relatively less attractive than investments in the stock of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common stock.

The more favorable rates applicable to regular corporate dividends could cause investors who are individuals, trusts and estates or are otherwise sensitive to these lower rates to perceive investments in REITs to be relatively

less attractive than investments in the stock of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common stock.

We may choose to pay dividends in our stock instead of cash, in which case stockholders may be required to pay income taxes in excess of any cash dividends they receive.

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As a result, stockholders may be required to pay income taxes with respect to such dividends in excess of any cash dividends received.

stockholder sells the stock 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 stock at the time of the sale.

stockholder sells the stock 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 stock at the time of the sale.

Furthermore, with respect to certain non-U.S.

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

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

To qualify as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of our capital stock.

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

To qualify as a REIT for U.S.

federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of our capital stock.

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

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The remainder of our investments in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the total voting power or more than 10% of the total value, in each case, of the outstanding securities of any one issuer.

In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer, no more than 20% of the value of our total assets can be represented by the securities of one or more TRSs and no more than 25% of the value of our assets can be represented by unsecured debt of publicly offered REITs, in each case, at the close of each calendar quarter.

In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer, no more than 20% of the value of our total assets can be represented by the securities of one or more TRSs and no more than 25% of the value of our total assets can be represented by unsecured debt of publicly offered REITs, in each case, at the close of each calendar quarter.

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

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

Our relationship with any TRS will be limited, and a failure to comply with the limits would jeopardize our REIT qualification and may result in the imposition of certain taxes.

While we currently do not own an interest in a TRS, we may own such an interest in the future.

A failure to comply with the limits relating to TRSs would jeopardize our REIT qualification and may result in the imposition of certain taxes.

As a REIT, we are subject to a variety of limitations on our ownership of TRSs and operations with respect to any TRSs that we own, and failure to comply with these limitations may subject us to additional taxes, the amount of which could be substantial, or, potentially, loss of REIT status.

While we anticipate that we will comply with these limitations in the event we acquire an interest in a TRS, we can provide no assurances in this regard.

The ability of our board of directors to revoke our REIT qualification without stockholder approval may subject us to federal income tax and reduce distributions to our stockholders.

While we anticipate that we will comply with these limitations, we can provide no assurances in this regard.

The ability of our board of directors to revoke our REIT qualification without stockholder approval may subject us to U.S.

federal income tax and reduce distributions to our stockholders.

Our charter provides that our board of directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interest to continue to be qualified as a REIT.

If we cease to be a REIT, we would become subject to federal and state corporate income tax on our taxable income and would no longer be required to distribute most of our taxable income to our stockholders, which may have adverse consequences on our total return to our stockholders and on the market price of our common stock.

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

federal and state corporate income tax on our taxable income and would no longer be required to distribute most of our taxable income to our stockholders, which may have adverse consequences on our total return to our stockholders and on the market price of our common stock.

We may face risks in connection with Section 1031 Exchanges.

We may engage in one or more real estate transactions intended to qualify for federal income tax deferral as a “like-kind exchange” under Section 1031 of the Code.

If a transaction that is intended to qualify for deferral under Section 1031 is later determined to have been taxable, we may face adverse consequences.

We may engage in one or more real estate transactions intended to qualify for U.S.

federal income tax deferral as a “like-kind exchange” under Section 1031 of the Code.

If a transaction that is intended to qualify for deferral under Section 1031 is

later determined to have been taxable, we may face adverse consequences.

Additionally, if the laws applicable to such transactions are amended or repealed, we may not be able to dispose of properties on a tax-deferred basis.

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

At any time, the federal income tax laws governing REITs (or otherwise affecting our business or affecting our stockholders) or the administrative interpretations of those laws may be amended.

We cannot predict when or if any new federal income tax law, regulation, or administrative interpretation, or any amendment to any existing federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation, or interpretation may take effect retroactively.

We and our stockholders could be adversely affected by any such change in, or any new, federal income tax law, regulation or administrative interpretation.

At any time, the U.S.

federal income tax laws governing REITs (or otherwise affecting our business or affecting our stockholders) or the administrative interpretations of those laws may be amended.

We cannot predict when or if any new U.S.

federal income tax law, regulation, or administrative interpretation, or any amendment to any existing U.S.

federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation, or interpretation may take effect retroactively.

We and our stockholders could be adversely affected by any such change in, or any new, U.S.

federal income tax law, regulation or administrative interpretation.

General Risks

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

What changed 10-K

Item 1A. Risk Factors