CNSREIT-AR-2024 Final - Flipbook - Page 92
General Risk Factors
We depend on the availability of public utilities and services, especially for water and electric power. Any reduction,
interruption or cancellation of these services may adversely affect us.
Public utilities, especially those that provide water and electric power, are fundamental for the sound operation of our
real estate assets. The delayed delivery or any material reduction or prolonged interruption of these services could allow
tenants to terminate their leases or result in an increase in our costs, as we may be forced to use backup generators or other
replacements for the reduced or interrupted utilities, which also could be insufficient to fully operate our facilities and
could result in our inability to provide services.
Certain properties may require permits or licenses.
A license, approval or permit may be required to acquire certain investments and their direct or indirect holding
companies (or registration may be required before an acquisition can be completed). There can be no guarantee of when
and if such a license, approval or permit will be obtained or if the registration will be effected.
We may face risks associated with short sales.
Our use of short sales for investment or risk management purposes subjects us to risks associated with selling short.
We may engage in short sales where we do not own or have the right to acquire the security sold short at no additional cost.
Our loss on a short sale theoretically could be unlimited in a case where we are unable, for whatever reason, to close out a
short position.
Our short selling strategies may limit our ability to benefit from increases in the markets. Short selling also involves a
form of financial leverage that may exaggerate any losses. Also, there is the risk that the counterparty to a short sale may
fail to honor its contractual terms, causing a loss to us. Finally, SEC, FINRA or other regulations relating to short selling
may restrict our ability to engage in short selling.
We may incur contingent liabilities in connection with the disposition of investments.
In connection with the disposition of an investment, we may be required to make certain representations about the
business, financial affairs and other aspects (such as environmental, property, tax, insurance, and litigation) of such
investment typical of those made in connection with the sale of a business or other investment comparable to the
investment being sold. We may also be required to indemnify the purchasers of such investment to the extent that any such
representations are inaccurate or with respect to certain potential liabilities. These arrangements may result in the
incurrence of contingent liabilities for which the Advisor may establish reserves or escrow accounts.
We will face risks associated with hedging transactions.
We may utilize a wide variety of derivative and other hedging instruments for risk management purposes, the use of
which is a highly specialized activity that may entail greater than ordinary investment risks. Any such derivatives and other
hedging transactions may not be effective in mitigating risk in all market conditions or against all types of risk (including
unidentified or unanticipated risks), thereby resulting in losses to us. Engaging in derivatives and other hedging
transactions may result in a poorer overall performance for us than if we had not engaged in any such transaction, and the
Advisor may not be able to effectively hedge against, or accurately anticipate, certain risks that may adversely affect our
investment portfolio. In addition, our investment portfolio will always be exposed to certain risks that cannot be fully or
effectively hedged, such as credit risk relating both to particular securities and counterparties as well as interest rate risks.
Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our
business strategy.
We are subject to regulation at the local, state and federal level. New legislation may be enacted or new interpretations,
ruling or regulations could be adopted, including those governing the types of investments we are permitted to make, any
of which could harm us and our stockholders, potentially with retroactive effect. Anticipating policy changes and reforms
may be particularly difficult during periods of heightened partisanship at the federal, state and local levels, including due to
the divisiveness surrounding populist movements, political disputes and socioeconomic issues. The failure to accurately
anticipate the possible outcome of such changes or reforms could have a material adverse effect on our performance.
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