CNSREIT-AR-2024 Final - Flipbook - Page 44
Generally, under U.S. bankruptcy law, a debtor tenant has 120 days to exercise the option of assuming or rejecting the
obligations under any unexpired lease for nonresidential real property, which period may be extended once by the
bankruptcy court for an additional 90 days. If the tenant assumes its lease, the tenant must cure all defaults under the lease
and may be required to provide adequate assurance of its future performance under the lease. If the tenant rejects the lease,
we will have a claim against the tenant9s bankruptcy estate. Although rent owing for the period between filing for
bankruptcy and rejection of the lease may be afforded administrative expense priority and paid in full, pre-bankruptcy
arrears and amounts owing under the remaining term of the lease will be afforded general unsecured claim status (absent
collateral securing the claim). Moreover, amounts owing under the remaining term of the lease will be capped. Other than
equity and subordinated claims, general unsecured claims are the last claims paid in a bankruptcy and therefore funds may
not be available to pay such claims in full.
Some of our properties may be leased to a single or significant tenant and, accordingly, may be suited to the particular
or unique needs of such tenant. We may have difficulty replacing such a tenant if the floor plan of the vacant space limits
the types of businesses that can use the space without major renovation. In addition, the resale value of the property could
be diminished because the market value of a particular property will depend principally upon the value of the leases of such
property.
E-commerce may have an adverse impact on our tenants and business.
E-commerce has been broadly embraced by the public and growth in the e-commerce share of overall consumer sales
is likely to continue in the future. Some of our tenants have been negatively impacted by increasing competition from
internet retailers, and this trend could affect the way current and future tenants lease space. We cannot predict with
certainty how continuing growth in e-commerce will impact the demand for space at our properties or how much revenue
will be generated at traditional store locations in the future. If we are unable to anticipate and respond promptly to trends in
retailer and consumer behavior, or if demand for traditional retail space significantly decreases, our occupancy levels and
operating results could be materially and adversely affected.
A significant percentage of our revenues may be derived from our investments in community shopping centers, and our
net income and ability to make distributions to stockholders may be adversely affected if the underlying tenants in these
centers are not successful.
A significant percentage of our revenues from investments in community shopping centers is derived from both anchor
and non-anchor tenants. Anchor tenants occupy large stores and pay a significant portion of the total rent at a property and
contribute to the success of other tenants by attracting shoppers to the property. Our revenues and cash flows may be
adversely affected by the loss of revenues and additional costs if a significant anchor tenant becomes bankrupt or insolvent,
experiences a downturn in its business, defaults on its lease, or decides not to renew its lease. Vacant anchor space can
reduce rental revenues generated by the community shopping center in other spaces because of the loss of the departed
anchor9s customer drawing power.
A related risk associated with non-anchor tenants is that they may be more vulnerable to negative economic
conditions, as they typically have more limited resources than anchor tenants. Significant distress across community
shopping centers could adversely affect our financial condition, results of operations, cash flows and our ability to service a
property9s debt, all of which will negatively impact our distributions to stockholders.
Whether with respect to an anchor or non-anchor tenant, we may face competition in the leasing market and may be
unable to renew leases or re-lease space as leases expire. Consequently, we may be required to make rent or other
concessions or incur significant capital expenditures to retain and attract tenants. Competition that leads to such
concessions or expenditures could adversely affect the financial condition of our shopping centers and our ability to make
distributions.
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