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Risk Disclosure

INVESTMENT RISKS

Before purchasing shares in any REIT, you should consider the following high risk factors

  • The REITs are initial public offerings; neither has any prior operating history, and the prior performance of real estate programs sponsored by affiliates of our sponsor may not be indicative of our future results.
  • The REITs are “best efforts” offerings. If we are unable to raise substantial funds, we may not be able to invest in a diverse portfolio of real estate and real estate-related investments, and the value of your investment may fluctuate more widely with the performance of relatively few specific investments.
  • The REITs are “blind pool” investments because the REITs have not identified any properties to acquire with the net proceeds from the REITs’ offerings. As a result, you will not be able to evaluate the economic merits of future investments prior to their purchase. The REITs may be unable to invest the net proceeds from their offerings on acceptable terms to investors, or at all.
  • The REITs have not yet qualified as REITs, and may fail to qualify as REITs, which could adversely affect operations and the ability to make distributions.

A description of some pertinent risk factors is below. A complete review of all risk factors is contained in the offering documents for each REIT offering, including the prospectus or the PPM (Private Placement Memorandum), and should be carefully reviewed before making any investment in any REIT.

Investing in the REITs involves certain risks. You should carefully consider the following risk factors. If any of the following risks were to occur, a REIT’s business, financial condition or results of operations could be materially and adversely affected. In these circumstances, the value of the common stock may decline, and you could lose some or all of your investment.

High Risks Related to the Start-up Nature of our Business

As newly established businesses, investing in the REITs involves high risks that are not present in other companies, including other real estate investment trusts, that have an established investment portfolio and operating history. These high risk factors include the following:

The REITs have no prior operating history or established financing sources, and the prior performance of real estate investment programs sponsored by affiliates of our sponsor may not be an indication of our future results.

The REITs are initial public offerings; the REITs have no prior operating history, and you should not rely upon the past performance of other real estate investment programs sponsored by affiliates of the REITs’ sponsors to predict our future results. The prior performance of real estate investment programs sponsored by affiliates of the REITs’ sponsors may not be indicative of our future results.

You should consider prospects in light of the risks, uncertainties and difficulties frequently encountered by companies that are, like the REITs, in their early stage of development. To be successful in this market, the REITs must, among other things:

  • identify and acquire investments that further their investment objectives;
  • increase awareness of the REITs’ names within the investment products market;
  • attract, integrate, motivate and retain qualified personnel to manage the REITs’ day-to-day operations;
  • respond to competition for the REITs’ targeted real estate properties and other investments as well as for potential investors; and
  • continue to build and expand the REITs’ operational structure to support our business.

The REITs do not and cannot guarantee that they will succeed in achieving these goals, and a failure to do so could cause you to lose all or a portion of your investment.

The REITs are “best efforts” offerings. If the REITs are unable to raise substantial funds, the REITs will be limited in the number and type of investments, and the value of your investment will fluctuate with the performance of the specific properties acquired. The REITs’ offerings are being made on a “best efforts” basis, meaning that the REITs are only required to use best efforts to sell REIT shares and have no firm commitment or obligation to purchase any of the shares. As a result, the amount of proceeds raised in the offerings may be substantially less than the amount the REITs need to achieve a broadly diversified property portfolio. The REITs may be unable to raise even the minimum offering amount. If the REITs are unable to raise substantially more than the minimum offering amount, the REITs will make fewer investments resulting in less diversification in terms of the number of investments owned, the types of investments that the REITs make, and the geographic regions in which the investments are located. In such event, the likelihood of the REITs’ profitability being affected by the performance of any one of their investments will increase. Additionally, the REITs are not limited in the number or size of our investments or the percentage of net proceeds the REITs may dedicate to a single investment. Your investment in any REIT shares will be subject to greater risk to the extent that the REITs lack a diversified portfolio of investments. Further, the REITs will have certain relatively fixed third party expenses such as legal, tax and audit, regardless of whether the REITs are able to raise substantial funds in this offering. The REITs inability to raise substantial funds could increase fixed third party expenses as a percentage of gross income, potentially reducing net income and cash flow and potentially limiting the REITs’ ability to make distributions.

Because stockholders will not have the opportunity to evaluate the investments the REITs may make before they make them, they are considered to be a blind pool. The REITs may make investments with which stockholders do not agree. The REITs have not identified any real estate investments that are reasonably probable to be acquired or originated with the proceeds from these offerings. As a result, the REITs are not able to provide you with any information to assist you in evaluating the merits of any specific assets that the REITs may acquire.

The REITs’ boards of directors and advisors have broad discretion when identifying, evaluating and making such investments. You will have no opportunity to evaluate the transaction terms or other financial or operational data concerning specific investments before the REITs invest. Furthermore, the REITs’ boards of directors will have broad discretion in implementing policies regarding tenant creditworthiness and you will likewise have no opportunity to evaluate potential tenants. As a result, you must rely on the REITs’ boards of directors and advisors to identify and evaluate investment opportunities, and they may not be able to achieve the business objectives, may make unwise decisions or may make investments with which you do not agree.

Failure to qualify as a REIT would reduce net earnings available for investment or distribution.

Qualification as a REIT will depend upon the ability to meet requirements regarding organization and ownership, distributions of income, the nature and diversification of income and assets and other tests imposed by the Internal Revenue Code. If there is a failure to qualify as a REIT for any taxable year after electing REIT status, there will be federal income tax on taxable income at corporate rates. In addition, the REITs would generally be disqualified from treatment as a REIT for the four taxable years following the year in which they lost REIT status. Losing REIT status would reduce net earnings available for investment or distribution to stockholders because of the additional tax liability. In addition, distributions would no longer qualify for the dividends-paid deduction and there would no longer be a requirement to make distributions. If this occurs, the REITs might be required to borrow funds or liquidate some investments in order to pay the applicable tax.

Risks Related to an Investment in Common Stock

The REITs may be unable to pay or maintain cash distributions or increase distributions over time.

There are many factors that can affect the availability and timing of cash distributions to stockholders. Distributions will be based principally on cash available from operations. The amount of cash available for distribution will be affected by many factors, such as the REITs’ ability to buy properties as offering proceeds become available and operating expense levels, as well as many other variables. Actual cash available for distribution may vary substantially from estimates. It cannot be assured that the REITs will be able to pay or maintain distributions or that distributions will increase over time, nor can the REITs give any assurance that rents from the properties will increase, or that future acquisitions of real properties will increase cash available for distribution to stockholders. The REITs face significant competition for real estate investment opportunities, which may limit the REITs’ ability to acquire suitable investments and achieve investment objectives or pay distributions.

The REITs face competition from various entities for real estate investment opportunities, including other REITs, pension funds, banks and insurance companies, investment funds and companies, partnerships and developers. Many of these entities have substantially greater financial resources than the REITs do and may be able to accept more risk than the REITs can prudently manage, including risks with respect to the creditworthiness of tenants or the geographic location of the investments. Competition from these entities may reduce the number of suitable investment opportunities offered to the REITs or increase the bargaining power of property owners seeking to sell. Additionally, disruptions and dislocations in the credit markets could impact the cost and availability of debt to finance real estate investments, which is a key component of the REITs’ acquisition strategy. A downturn in the credit markets and a potential lack of available debt could result in a further reduction of suitable investment opportunities and create a competitive advantage for other entities that have greater financial resources than the REITs do. In addition, the number of entities and the amount of funds competing for suitable investments may increase. If the REITs acquire investments at higher prices and/or by using less-than-ideal capital structures, the returns will be lower and the value of assets may not appreciate or may decrease significantly below the amount paid for such assets. If such events occur, stockholders may experience a lower return on their investment.

If the REITs are unable to find suitable investments, they may not be able to achieve investment objectives or pay distributions.

The REITs’ ability to achieve investment objectives and to pay distributions depends upon the performance of their advisors in the acquisition of investments, including the determination of any financing arrangements. The REITs are also subject to competition in seeking to acquire real estate-related investments. The more shares sold, the greater a challenge it will be to invest the net offering proceeds on attractive terms. The REITs’ investors must rely entirely on the management abilities of each REITs’ advisors and boards of directors. The REITs can give no assurance that advisors will be successful in obtaining suitable investments on financially attractive terms or that, if advisors make investments on the REITs’ behalf, the investment objectives will be achieved. In the event the REITs are unable to timely locate suitable investments, the REITs may be unable or limited in ability to pay distributions and may not be able to meet investment objectives.

If the REITs raise substantial offering proceeds in a short period of time, they may not be able to invest all of the net offering proceeds promptly, which may cause distributions and the long-term returns to our stockholders to be lower than they otherwise would.

The REITs could suffer from delays in locating suitable investments. The more shares sold in a offering, the more difficult it will be to invest the net offering proceeds promptly and on attractive terms. Therefore, the large size of the REITs’ offerings increases the risk of delays in investing net offering proceeds. The REITs’ reliance on their advisors and the real estate and debt finance professionals that the advisors retain to identify suitable investments at times when such persons are simultaneously seeking to identify suitable investments for other A-List Group Holdings-affiliated programs, investors could also delay the investment of the proceeds of this offering. Delays the REITs’ encounter in the selection, acquisition and development of income-producing properties or the acquisition of other real estate investments would likely limit the REITs’ ability to pay distributions to you and reduce your overall returns.

Disruptions in the financial markets and uncertain economic conditions could adversely affect market rental rates, commercial real estate values and the REITs’ ability to secure debt financing, service future debt obligations, or pay distributions to stockholders.

Currently, both the investing and leasing environments are highly competitive. While there has been some increase in the amount of capital flowing into the S.A, U.S and European real estate markets, the uncertainty regarding the economic environment has made businesses reluctant to make long-term commitments or changes in their business plans.

The REITs’ plan to rely on debt financing to finance real estate properties and may have difficulty refinancing some of the debt obligations prior to or at maturity or may not be able to refinance these obligations at terms as favorable as the terms of the initial indebtedness. Or the REITs may be unable to obtain additional debt financing at all. If the REITs are not able to refinance initial indebtedness on attractive terms at the various maturity dates, the REITs may be forced to dispose of assets. Recent financial market conditions have improved from the bottom of the economic cycle, but material risks are still present. Market conditions can change quickly, which could negatively impact the value of the REITs’ assets.

Disruptions in the financial markets and continued uncertain economic conditions could adversely affect the values of the REITs’ investments. Furthermore, declining economic conditions could negatively impact commercial real estate fundamentals and result in lower occupancy, lower rental rates and declining values in any real estate portfolio and in the collateral securing loan investments, which could have the following negative effects on the REITs:

  • the values of the REITs’ investments in commercial properties could decrease below the amounts paid for such investments;
  • revenues from the REITs’ properties could decrease due to fewer tenants and/or lower rental rates, making it more difficult for the REITs to pay distributions or meet debt service obligations on debt financing; and
  • These factors could reduce stockholders’ return and decrease the value of an investment in either REIT.

If the REITs fail to diversify their investment portfolios, downturns relating to certain geographic regions, industries or business sectors may have a more significant adverse impact on the assets and effect the ability to pay distributions than if the REITs had a diversified investment portfolio.

The REITs investments may at times be concentrated in a limited number of geographic locations. To the extent that the portfolios may be concentrated in limited geographic regions, industries or business sectors, downturns relating generally to such region, industry or business sector may result in defaults on a number of REIT investments within a short time period, which may reduce net income and the value of the common stock and accordingly limit the REITs’ ability to pay distributions to stockholders.

Any adverse economic or real estate developments in the REITs’ target markets could adversely affect operating results and the ability to pay distributions to stockholders.

Because the REITs depend upon advisors and affiliates to conduct REIT operations, adverse changes in the financial health of an advisor or its affiliates could cause the REITs’ operations to suffer.

The REITs depend on advisors to manage operations and the portfolio of assets. The advisors depend upon the fees and other compensation that they receive from the REITs. Any adverse changes to the REITs’ relationship with, or the financial condition of, its advisors and affiliates, could hinder their ability to successfully manage the REITs’ operations and portfolio of investments.

The REITs may not be successful in conducting offerings, which would adversely impact the REITs’ ability to implement an investment strategy.

The success of a offering, and the REITs’ ability to implement a business strategy, depends upon the ability to sell the REITs’ shares to investors. All investors have a choice of numerous competing real estate investment trust offerings, which may make selling the REITs’ shares to investors more difficult. If the REITs are not successful in growing, operating and managing this process, the REITs’ abilities to raise proceeds through offerings will be limited and there may not be adequate capital to implement the REITs’ investment strategy.

The loss of or the inability to retain or obtain key real estate professionals at the REITs’ advisors could delay or hinder implementation of investment strategies, which could limit the ability to make distributions and decrease the value of an investment in the REITs’ shares.

The offering price per share of the REITs’ common stock, which after December 31, 2017 will be NAV (Net Asset Value), may not reflect the value of the stockholders’ investment.

As with any valuation methodology, the methodologies we use are based upon a number of estimates and assumptions that may not be accurate or complete. Different parties using different assumptions and estimates could derive a different estimated NAV per share of the REITs’ common stock, and these differences could be significant. The estimated NAV per share is not audited and does not represent the fair value of assets less the fair value of liabilities according to JSE/GAAP, nor does it represent a liquidation value of assets and liabilities or the price at which shares of common stock would trade on a national securities exchange.

Accordingly, the REITs can give no assurance that:

  • a stockholder would ultimately realize distributions per share equal to our estimated NAV per share upon a sale of the REITs;
  • the shares of common stock would trade at the estimated NAV per share on a national securities exchange;
  • a third party would offer the estimated NAV per share in an arm’s-length transaction to purchase all or substantially all of the shares of common stock; and
  • another independent third-party appraiser or third-party valuation firm would agree with our estimated NAV per share

Risks Related to Conflicts of Interest

The REITs’ advisors, sponsors and their affiliates, including all executive officers and affiliated directors and other key real estate professionals, face conflicts of interest caused by their compensation arrangements with the REITs and with other A-List Group Holdings -affiliated programs, which could result in actions that are not in the long-term best interests of the REITs’ stockholders.

Our executive officer and our affiliated directors and other key real estate professionals are also officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisors, sponsors and/or other A-List Group Holdings -affiliated entities. The REITs’ advisors, sponsors and their affiliates receive substantial fees from the REITs. These fees could influence the advisors’ advice as well as the judgment of its affiliates.

The REITs advisors, sponsors and their affiliates face conflicts of interest relating to the acquisition of assets due to their relationship with other A-List Group Holdings-affiliated programs, which could result in decisions that are not in the REITs’ best interest or the best interests of the REITs’ stockholders.

The REITs rely on our advisors, sponsors and other key real estate professionals at our advisors, to identify suitable investment opportunities for us. The REITs are advised by our sponsors and rely on many of the same real estate professionals as will future A-List Group Holdings-affiliated programs advised by advisors. As such, we and the other A-List Group Holdings-affiliated programs, rely on many of the same real estate professionals, as will future A-List Group Holdings-affiliated programs. Many investment opportunities that are suitable for the REITs may also be suitable for other A-List Group Holdings-affiliated programs. When these real estate professionals direct an investment opportunity to any A-List Group Holdings-affiliated program, they, in their sole discretion, will offer the opportunity to the program or investor for which the investment opportunity is most suitable based on the investment objectives, portfolio and criteria of each program or investor. Our acquisition stage may overlap with future A-List Group Holdings-affiliated programs.

The REITs and other A-List Group Holdings-affiliated programs also rely on these real estate professionals to supervise the management of investments. If the A-List Group Holdings team of real estate professionals direct creditworthy prospective tenants to properties owned by another A-List Group Holdings when it could direct such tenants to the REITs’ properties, our tenant base may have more inherent risk and the properties’ occupancy may be lower than might otherwise be the case.

Further, existing and future A-List Group Holdings-affiliated programs generally are not and will not be prohibited from engaging, directly or indirectly, in any business or from possessing interests in any other business venture or ventures, including businesses and ventures involved in the acquisition, development, ownership, leasing or sale of real estate-related investments.

The REITs’ officers, advisors, sponsors, and the real estate, debt finance, management and accounting professionals assembled by the REITs’ advisors face competing demands on their time and this may cause operations and our stockholders’ investment in the REITs to suffer.

The REITs rely on officers, advisors, sponsors and the real estate, debt finance, management and accounting professionals that the advisors retain, to provide services for the day-to-day operation of the REITs’ businesses. Each REIT is also advised by A-List Group Holdings and relies on sponsors and many of the same real estate, debt finance, management and accounting professionals, as will future A-List Group Holdings-affiliated programs. Further, our officers and affiliated directors are also officers and/or affiliated directors of some or all of the other A-List Group Holdings-affiliated programs. As a result of the REITs’ executive officer interests in other A-List Group Holdings-affiliated programs, their obligations to A-List Group Holdings-affiliated programs and the fact that they engage in and will continue to engage in other business activities on behalf of themselves and others, Luqmaan Samie face conflicts of interest in allocating his time among the REITs and other A-List Group Holdings-affiliated programs as well as other business activities in which he is involved. During times of intense activity in other programs and ventures, this individual may devote less time and fewer resources to the REITs’ businesses than is necessary or appropriate to manage the businesses. Furthermore, some A-List Group Holdings individuals may become employees of another A-List Group Holdings-affiliated program in an internalization transaction or, if the REITs internalize their advisors, may not become the REITs’ employees as a result of their relationship with other A-List Group Holdings-affiliated programs. If these events occur, the returns on investment, and the value of your investment in REITs, may decline.

Because other A-List Group Holdings programs may conduct offerings concurrently with the REITs’ offerings, advisors and sponsors may face potential conflicts of interest arising from competition among the REITs and these other programs for investors and investment capital, and such conflicts may not be resolved in the REITs’ favor.

Our stockholders may not be able to immediately sell their shares under our share repurchase program.

We do not expect that a secondary market for resale of the REITs’ stock will develop, but the REITs’ intend to provide monthly share repurchase programs for shareholders who wish to sell their shares. The REITs’ ability to repurchase shares depends the levels of cash reserves (including distribution reinvestment proceeds), availability under any line of credit that the REITs might have, the pace of new share sales, and the REITs’ ability to sell properties. If the REITs must sell properties in order to honor repurchase requests, the repurchase of shares tendered for repurchase could be delayed until they have sold sufficient properties to honor such requests. The REITs expect that the property sale process, if required to honor repurchase requests, could take several months, and the REITs cannot determine how long it might take to raise sufficient capital from property sales and other sources to honor all such requests. The REITs intend to honor such repurchase requests in the order they are received.

The boards of the REITs may amend, suspend or terminate the REITs’ share repurchase programs.

The REITs may, at some future date, seek to list their shares on a national securities exchange to create a secondary market for their stock, but the REITs have no current plan to do so, and for the foreseeable future shareholders should assume that the only available avenue to sell their shares will be the share repurchase programs offered by each REIT.

Because the REITs are selling their shares directly to the public, our stockholders will not have the benefit of an independent due diligence review of the REITs, which is customarily performed in underwritten offerings; the absence of an independent due diligence review increases the risks and uncertainty stockholders of the REITs face.

There will be no outside independent review of the REITs’ finances and operations. Therefore, REIT stockholders must rely on the information in the offering materials and will not have the benefit of an independent review and investigation of this offering of the type normally performed by an unaffiliated, independent underwriter in a public securities offering.

The REITs’ investors’ interest in each REIT could be diluted if a REIT issues additional shares, which could reduce the overall value of a stockholder’s investment.

Payment of fees to the REITs’ advisors, sponsors and their affiliates reduces cash available for investment and distribution to stockholders and increases the risk that stockholders will not be able to recover the amount of their investment in the REITs’ shares.

The REITs’ advisors, sponsors and their affiliates perform services for the REITs in connection with the selection and acquisition of real estate investments, the management and leasing of real estate properties, the administration of real estate-related investments and the disposition of real estate investments. The REITs pay them substantial fees for these services, which results in immediate dilution of the value of stockholders’ investments and reduces the amount of cash available for investment or distribution to stockholders.

If the REITs are unable to obtain funding for future capital needs, cash distributions to the REITs’ stockholders and the value of the investments could decline.

When tenants do not renew their leases or otherwise vacate their space, the REITs will often need to expend substantial funds for improvements to the vacated space in order to attract replacement tenants. Even when tenants do renew their leases the REITs may agree to make improvements to their space as part of negotiations. If the REITs need additional capital in the future to improve or maintain properties or for any other reason, the REITs may have to obtain funding from sources other than cash flow from operations or proceeds from any distribution reinvestment plan, such as borrowings or future equity offerings. These sources of funding may not be available on attractive terms or at all. If the REITs cannot procure additional funding for capital improvements, the investments may generate lower cash flows or decline in value, or both, which would limit the REITs’ ability to make distributions to stockholders and could reduce the value of stockholders’ investments in in the REITs.

General Risks Related to Investments in Real Estate

Economic, market and regulatory changes that impact the real estate market generally may decrease the value of investments in the REITs and weaken operating results.

The REITs’ operating results and the performance of the properties acquired by each REIT are subject to the risks typically associated with real estate, any of which could decrease the value of REIT investments and could weaken operating results, including:

  • downturns in national, regional and local economic conditions;
  • competition;
  • adverse local conditions, such as oversupply or reduction in demand for buildings and changes in real estate zoning laws that may reduce the desirability of real estate in an area;
  • vacancies, changes in market rental rates and the need to periodically repair, renovate and re-let space;
  • changes in interest rates and the availability of permanent mortgage financing, which may render the sale of a property or loan difficult or unattractive;
  • changes in tax (including real and personal property tax), real estate, environmental and zoning laws;
  • natural disasters such as hurricanes, earthquakes and floods;
  • acts of war or terrorism, including the consequences of terrorist attacks, such as those that occurred on September 11, 2001;
  • the potential for uninsured or underinsured property losses; and
  • periods of high interest rates and tight money supply.

Any of the above factors, or a combination thereof, could result in a decrease in the REITs’ cash flow from operations and a decrease in the value of the REITs’ investments, which would have an adverse effect on operations, on the REITs’ ability to pay distributions to stockholders and on the value of stockholders’ investments.

The REITs may obtain only limited warranties when purchasing a property.

The seller of a property will often sell such property in its “as is” condition on a “where is” basis and “with all faults,” without any warranties of merchantability or fitness for a particular use or purpose. In addition, purchase agreements may contain only limited warranties, representations and indemnifications that will only survive for a limited period after the closing. Also, most sellers of large commercial properties are special purpose entities without significant assets other than the property itself. The purchase of properties with limited warranties or from undercapitalized sellers increases the risk that the REITs may lose some or all of their invested capital in the property as well as the loss of rental income from that property.

The REITs may finance properties with lock-out provisions, which may prohibit them from selling a property, or may require them to maintain specified debt levels for a period of years on some properties.

Properties that become vacant could be difficult to re-lease or sell, which could diminish the return on these properties and adversely affect the REITs’ cash flow and ability to pay distributions to stockholders. Properties may incur vacancies either by the expiration and non-renewal of tenant leases or the default of tenants under their leases. If vacancies continue for a long period of time, the REITs may suffer reduced revenues resulting in less cash available for distribution to stockholders.

The REITs depend on tenants for their revenue generated by real estate investments and, accordingly, the revenue generated by our real estate investments and the ability to make distributions to stockholders are dependent upon the success and economic viability of the tenants and the REITs ability to retain and attract tenants. Non-renewals, terminations or lease defaults could reduce net income and limit the ability of the REITs to make distributions to stockholders.

The bankruptcy or insolvency of the REITs’ tenants or delays by tenants in making rental payments could seriously harm the REITs’ operating results and financial condition.

Costs imposed pursuant to laws and governmental regulations may reduce the REITs’ net income and the cash available for distribution to stockholders

Uninsured losses relating to real property could reduce the REITs’ cash flow from operations and the return on stockholder investments.

Risks Associated with Debt Financing

The REITs obtain lines of credit, mortgage indebtedness and other borrowings, which increases risk of loss due to potential foreclosure.

The REITs may use leverage in connection with any real estate investments made, which increases the risk of loss associated with this type of investment.

The REITs may not be able to access financing sources on attractive terms, which could adversely affect their ability to execute their business plans.

Increases in interest rates would increase the amount of the REITs’ debt payments and limit their ability to pay distributions to stockholders.

Failure to qualify as a REIT would subject us to federal income tax, which would reduce the cash available for distribution to stockholders.

The REITs expect to operate in a manner that will allow them to qualify as a REIT for federal income tax purposes. However, the federal income tax laws governing REITs are extremely complex, and interpretations of the federal income tax laws governing qualification as a REIT are limited. Qualifying as a REIT requires meeting various tests regarding the nature of assets and income, the ownership of outstanding stock, and the amount of distributions on an ongoing basis. While the REITs intend to continue to operate so that they will qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, including the tax treatment of certain investments they may make, and the possibility of future changes in circumstances, no assurance can be given that they will so qualify as a REIT for any particular year. If either REIT fails to qualify in any calendar year and do not qualify for certain statutory relief provisions, it would be required to pay federal income tax on its taxable income. It might need to borrow money or sell assets to pay that tax. The payment of income tax would decrease the amount of income available for distribution to stockholders. Furthermore, if the REITs fail to maintain a qualification as a REIT and do not qualify for certain statutory relief provisions, they no longer would be required to distribute substantially all of REIT taxable income to stockholders. Unless the REITs’ failure to qualify as a REIT were excused under federal tax laws, they would be disqualified from taxation as a REIT for the four taxable years following the year during which qualification was lost.

The REITs’ stockholders may have current tax liability on distributions they elect to reinvest in the REITs’ common stock.

If the REITs’ stockholders participate in our distribution reinvestment plan, they will be deemed to have received, and for income tax purposes will be taxed on, the amount reinvested in shares of common stock to the extent the amount reinvested was not a tax-free return of capital. In addition, the REITs’ stockholders will be treated for tax purposes as having received an additional distribution to the extent the shares are purchased at a discount to fair market value, if any. As a result, unless the REITs’ stockholders are tax-exempt entities, they may have to use funds from other sources to pay their tax liability on the value of the shares of common stock received. Even if the REITs qualify as a REIT for federal income tax purposes, they may be subject to other tax liabilities that reduce cash flow and their ability to make distributions to stockholders. Even if the REITs qualify as a REIT for federal income tax purposes, they may be subject to some federal, state and local taxes on income or property.

REIT distribution requirements could adversely affect the REITs’ ability to execute their business plan.

The REITs generally must distribute annually at least 90% of taxable income, subject to certain adjustments and excluding any net capital gain, in order for federal corporate income tax not to apply to earnings that they distribute. To the extent that the REITs satisfy this distribution requirement, but distribute less than 100% of their taxable income, they will be subject to federal corporate income tax on undistributed REIT taxable income. In addition, the REITs will be subject to a 4% nondeductible excise tax if the actual amount that they pay out to our stockholders in a calendar year is less than a minimum amount specified under federal tax laws. The REITs intend to make distributions to stockholders to comply with the REIT requirements of the Internal Revenue Code.

To maintain REIT status, the REITs may be forced to forego otherwise attractive business or investment opportunities, which may delay or hinder their ability to meet investment objectives and reduce stockholders’ overall return.

To qualify as a REIT, the REITs must satisfy certain tests on an ongoing basis concerning, among other things, the sources of income, nature of assets and the amounts they distribute to their stockholders. The REITs may be required to make distributions to stockholders at times when it would be more advantageous to reinvest cash in the REITs’ business or when they do not have funds readily available for distribution. Compliance with the REIT requirements may hinder their ability to operate solely on the basis of maximizing profits and reduce the value of stockholders’ investment. Complying with REIT requirements may force the REITs to liquidate otherwise attractive investments.

Liquidation of assets may jeopardize REIT qualification.

To qualify as a REIT, the REITs must comply with requirements regarding assets and sources of income. If the REITs are compelled to liquidate investments to repay obligations to lenders, the REITs may be unable to comply with these requirements, ultimately jeopardizing their qualification as a REIT, or they may be subject to a 100% tax on any resultant gain if they sell assets that are treated as dealer property or inventory.

The REITs’ may be subject to adverse legislative or regulatory tax changes.

Above we provided description of some but not all of the pertinent risk factors. For a complete discussion of all risk factors, and before making any investment in any A-LIST GROUP HOLDINGS REIT, you should carefully review the offering documents, including the prospectus or the offering.

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