CNSREIT-AR-2024 Final - Flipbook - Page 46
Our properties may face significant competition.
We may face significant competition from owners, operators and developers of properties. Substantially all of our
properties will face competition from similar properties in the same market. This competition may affect our ability to
attract and retain tenants and may reduce the rents we are able to charge. These competing properties may have vacancy
rates higher than our properties, which may result in their owners being willing to lease available space at lower prices than
the space in our properties. If one of our properties were to lose an anchor tenant, this could impact the leases of other
tenants, who may be able to modify or terminate their leases as a result.
Our properties may be leased at below-market rates under long-term leases.
We may seek to negotiate longer-term leases to reduce the cash flow volatility associated with lease rollovers;
provided, that contractual rent increases are included. In addition, where appropriate, we will seek leases that provide for
operating expenses, or expense increases, to be paid by the tenants. These leases may allow tenants to renew the lease with
pre-defined rate increases. If we do not accurately judge the potential for increases in market rental rates, we may set the
rental rates of these long-term leases at levels such that even after contractual rental increases, the resulting rental rates are
less than then-current market rental rates. Further, we may be unable to terminate those leases or adjust the rent to thenprevailing market rates. As a result, our income and distributions to our stockholders could be lower than if we had not
entered into long-term leases.
We may experience material losses or damage related to our properties and such losses may not be covered by
insurance.
We may experience material losses related to our properties arising from natural disasters, such as extreme weather
events, climate change, hurricanes, earthquakes, floods and acts of god, vandalism or other crime, faulty construction or
accidents, fire (including wildfires), outbreaks of an infectious disease, pandemic or any other serious public health
concern, war and military conflicts, acts of terrorism or other catastrophes. We will rely on our operating partners to carry
insurance covering our properties under policies the Advisor deems appropriate. The Advisor will select policy
specifications and insured limits that it believes to be appropriate and adequate given the relative risk of loss, the cost of the
coverage and industry practice. Insurance policies on our properties may include some coverage for losses that are
generally catastrophic in nature, such as losses due to terrorism, earthquakes and floods, but we cannot assure you that it
will be adequate to cover all losses and some of our policies will be insured subject to limitations involving large
deductibles or co-payments and policy limits that may not be sufficient to cover losses. In general, losses related to
terrorism are becoming harder and more expensive to insure against. In some cases, the insurers exclude terrorism, and in
others the coverage against terrorist acts is limited, or available only for a significant price. A similar dynamic has been
unfolding with respect to certain weather and fire events, with insurers excluding certain investments that have high risk of
weather, earthquake or fire events. As the effects of climate change increase, we expect the frequency and impact of
weather and climate related events and conditions could increase as well. As a result, not all investments may be insured
against terrorism, weather or fire. If we or one or more of our tenants experience a loss that is uninsured or that exceeds
policy limits, we could lose the capital invested in the damaged properties as well as the anticipated future cash flows from
those properties. In addition, if the damaged properties are subject to recourse indebtedness, we would continue to be liable
for the indebtedness, even if these properties were irreparably damaged. Certain of these events could have a broader
negative impact on the global or local economy, thereby affecting us or the Advisor.
We could become subject to liability for environmental violations, regardless of whether we caused such violations.
We could become subject to liability in the form of fines or damages for noncompliance with environmental laws and
regulations. These laws and regulations generally govern wastewater discharges, air emissions, the operation and removal
of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid hazardous
materials, the remediation of contaminated property associated with the disposal of solid and hazardous materials and other
health- and safety-related concerns. Some of these laws and regulations may impose joint and several liability on tenants,
owners or managers for the costs of investigation and remediation of contaminated properties, regardless of fault or the
legality of the original disposal. Under various federal, state and local environmental laws, ordinances and regulations, a
current or former owner or manager of real property may be liable for the cost to remove or remediate hazardous or toxic
substances, wastes or petroleum products on, under, from or in such property. These costs could be substantial and liability
under these laws may attach whether or not the owner or manager knew of, or was responsible for, the presence of such
contamination. Even if more than one person may have been responsible for the contamination, each liable party may be
held entirely responsible for all of the clean-up costs incurred.
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