CNSREIT-AR-2024 Final - Flipbook - Page 52
Manufactured home loans may be subject to greater credit risk.
We may hold loans secured by manufactured homes, which generally have higher delinquency and default rates than
standard residential mortgage loans due to various factors, including the manner in which borrowers have handled previous
credit, the absence or limited extent of borrowers9 prior credit history, limited financial resources, frequent changes in or
loss of employment and changes in borrowers9 personal or domestic situations that affect their ability to repay loans. Any
substantial economic slowdown could increase delinquencies, defaults, repossessions and foreclosures with respect to
manufactured homes. Also, the value of manufactured homes may depreciate over time, which can negatively impact the
manufactured home industry and lead to increased defaults and delinquencies and lower recovery rates upon default.
We may invest in commercial properties subject to net leases, which could subject us to losses.
We may invest in commercial properties subject to net leases. Typically, net leases require the tenants to pay
substantially all of the operating costs associated with the properties. As a result, the value of, and income from,
investments in commercial properties subject to net leases will depend, in part, upon the ability of the applicable tenant to
meet its obligations to maintain the property under the terms of the net lease. If a tenant fails or becomes unable to so
maintain a property, we will be subject to all risks associated with owning the underlying real estate. In addition, we may
have limited oversight into the operations or the managers of these properties, subject to the terms of the net leases.
Certain commercial properties subject to net leases in which we may invest are occupied by a single tenant and,
therefore, the success of such investments largely depends on the financial stability of each such tenant. A default of any
such tenant on its lease payments to us would cause us to lose the revenue from the property and cause us to have to find an
alternative source of revenue to meet any mortgage payment and prevent a foreclosure if the property is subject to a
mortgage. In the event of a default, we may experience delays in enforcing our rights as landlord and may incur substantial
costs in protecting our investment and re-letting our property. If a lease is terminated, we may also incur significant losses
to make the leased premises ready for another tenant and experience difficulty or a significant delay in re-leasing such
property.
In addition, net leases typically have longer lease terms and, thus, there is an increased risk that contractual rental
increases in future years will fail to result in fair market rental rates during those years. We may acquire these investments
through sale-leaseback transactions, which involve the purchase of a property and the leasing of such property back to the
seller thereof. If we enter into a sale-leaseback transaction, we will seek to structure any such sale-leaseback transaction
such that the lease will be characterized as a
