Lineage (LINE) risk factors, FY2024 10-K

Risks Related to Our Business and Operations

1. 01Our investments are concentrated in the temperature-controlled warehouse industry, and our business would be materially and adversely affected by an economic downturn in that industry or the market for our customers’ products
2. 02for their products could cause our customers to reduce their inventory levels at and throughput through our warehouses, which could reduce the storage, handling and other fees payable to us and materially and adversely affect us
3. 03Global market and economic conditions may materially and adversely affect us
4. 04Many of our costs, such as operating expenses, interest expense, and real estate acquisition and construction costs could be adversely impacted by periods of heightened inflation
5. 05Labor shortages, increased turnover, and work stoppages have in the past, and may in the future, continue to disrupt our or our customers’ operations, increase costs, and negatively impact our profitability
6. 06Wage increases driven by competitive pressures or applicable legislation on employee wages and benefits could negatively affect our operating margins and our ability to attract qualified personnel
7. 07Supply chain disruptions may continue to negatively impact our business
8. 08We are exposed to risks associated with expansion and development, which could result in returns below expectations and unforeseen costs and liabilities
9. 09The actual initial full year stabilized NOI yields from our greenfield development and expansion projects may not be consistent with the targeted NOI yield ranges set forth in this Annual Report
10. 10Our future greenfield development and expansion activity may not be consistent with the estimates related to our future long-term pipeline set forth in this Annual Report
11. 11The short-term nature and lack of minimum storage guarantees in many of our customer contracts exposes us to certain risks that could have a material adverse effect on us
12. 12The storage and other fees we generate from customers with month-to-month warehouse rate agreements may be adversely affected by declines in market storage and other fee rates more quickly than with respect to our contracts that contain stated terms
13. 13Our integrated solutions business depends on the performance of our global warehousing business
14. 14Our growth may strain our management and resources, which may have a material adverse effect on us
15. 15A portion of our future growth depends upon acquisitions and we may be unable to identify, complete, and successfully integrate acquisitions, which may impede our growth, and our future acquisitions may not achieve their intended benefits or may disrupt our plans and operations
16. 16We may be unable to successfully expand our operations into new markets or new lines of business
17. 17We are dependent on Bay Grove to provide certain services to us pursuant to the transition services agreement, and it may be difficult to replace the services provided under such agreement
18. 18We can only terminate the transition services agreement with Bay Grove under limited circumstances and will be required to pay fees thereunder even if Bay Grove does not perform the services required
19. 19We will have uncapped expense payment and indemnification obligations with respect to various costs incurred by BGLH, Bay Grove, and their affiliates
20. 20Prior to our IPO, we had no experience operating as a publicly traded REIT
21. 21Pandemics or disease outbreaks, and associated responses, may disrupt our business, including among other things, increasing our costs, impacting our supply chain, and impacting demand for cold storage, which could have a material adverse impact on our business
22. 22We may be vulnerable to security breaches or cybersecurity incidents which could disrupt our operations and have a material adverse effect on our financial condition and operating results
23. 23We depend on IT systems to operate our business, and issues with maintaining, upgrading, or implementing these systems, could have a material adverse effect on our business
24. 24Additionally, if we are not able to accurately anticipate expenses and capitalized costs related to system upgrades and changes or if we are unable to realize the expected benefits from our technology initiatives, this may have an adverse impact on our financial condition and operating results
25. 25significant resources to develop, test, and maintain our platform, offerings, services, and features to help us implement AI ethically in order to minimize unintended, harmful impact
26. 26Privacy and data security concerns, and data collection and transfer restrictions and related regulations may adversely affect our business
27. 27We are subject to additional risks with respect to our current and potential international operations and properties
28. 28Competition in our markets may increase over time if our competitors open new warehouses or expand their logistics or integrated service offerings that compete with our offerings
29. 29Power costs may increase or be subject to volatility, which could result in increased costs that we may be unable to recover
30. 30We depend on certain customers for a substantial amount of our revenues
31. 31such customer as a warehouse customer would also impact our integrated solutions segment, thereby exacerbating the risks described above
32. 32Interest rate and hedging activity exposes us to risks, including the risks that a counterparty will not perform and that the hedge will not yield the economic benefits we anticipate
33. 33We may incur liabilities or harm our reputation as a result of quality-control issues associated with our global warehouse storage business and other services provided by our integrated solutions business
34. 34We are subject to risks related to corporate social and environmental responsibility and reputation
35. 35We may be unable to achieve or demonstrate progress on our goal of carbon neutrality, or face heightened scrutiny, for our global operations by calendar 2040
36. 36Our temperature-controlled warehouse infrastructure and systems may become obsolete or unmarketable and we may not be able to upgrade our equipment cost-effectively or at all
37. 37We use in-house trucking services to provide transportation services to our customers, and any increased severity or frequency of accidents or other claims, delays or disruptions in services or changes in regulations could have a material adverse effect on us
38. 38We also rely on third-party truckload carriers and rail services to transport customer inventory
39. 39We may be unable to maintain railcar assets on lease at satisfactory lease rates
40. 40We depend on key personnel and specialty personnel, and a deterioration of employee relations could harm our business and operating and financial results
41. 41We could experience power outages, disruptions in the supply of utilities, outbreak of fire or other calamity or breakdowns of our refrigeration equipment
42. 42We hold leasehold interests in over 100 of our warehouses, and we may be forced to vacate our warehouses if we default on our obligations thereunder and we will be forced to vacate our warehouses if we are unable to renew such leases upon their expiration
43. 43We are subject to risks related to the manufacture and sale of food products for human consumption
44. 44Our results of operations are affected by certain commodity markets
45. 45We face ongoing litigation risks which could result in material liabilities and harm to our business regardless of whether we prevail in any particular matter
46. 46We are a “controlled company” within the meaning of Nasdaq rules and, as a result, qualify for, and may rely on, exemptions from certain corporate governance requirements. You do not have the same protections afforded to stockholders of companies that are subject to such requirements
47. 47We have and expect to continue to incur significantly increased costs as a result of operating as a newly public company, and our management is required to devote substantial time and attention to compliance efforts
48. 48If we fail to implement and maintain an effective system of internal control over financial reporting, we may not be able to accurately determine or disclose our financial results. As a result, our stockholders could lose confidence in our financial results
49. 49investors to lose confidence in our reports filed with, or submitted to, the SEC, which would likely have a negative effect on the market price of our common stock
50. 50With the hiring of additional key internal resources and the engagement of third-party specialists, we were able to complete our risk assessment and design and implement and/or effectively operate controls throughout the period to remediate this material weakness. Thus, it has been remediated as of December 31, 2024
51. 51Our business could be adversely impacted if we have deficiencies in our disclosure controls and procedures or internal control over financial reporting, including as a result of the material weakness identified by management and discussed above
52. 52Charges for impairment of goodwill, long-lived assets, or finite lived intangible assets and declines in real estate valuations could adversely affect our financial condition and results of operations
53. 53Geopolitical conflicts, including the conflict between Russia and Ukraine and continued instability in the Middle East, including from the Houthi rebels in Yemen, may adversely affect our business and results of operations
54. 54Our performance and value are subject to economic conditions affecting the real estate market generally, and temperature-controlled warehouses in particular, as well as the broader economy
55. 55We could incur significant costs under environmental laws related to the presence and management of asbestos, anhydrous ammonia, and other chemicals and underground storage tanks
56. 56We could incur significant costs related to environmental conditions, liabilities, and regulations
57. 57climate change or new climate change regulations, and future changes in environmental laws or in the interpretation of those laws, including stricter requirements affecting our operations, could result in increased capital and operating costs

Risks related to climate change could have a material adverse effect on our results of operations

1. 58Our insurance coverage may be insufficient to cover potential environmental liabilities
2. 59Our properties may contain or develop harmful molds or have other air quality issues, which could lead to financial liability for adverse health effects to our employees or third parties, and costs of remediating the problem
3. 60Illiquidity of real estate investments, particularly our specialized temperature-controlled warehouses, could significantly impede our ability to respond to adverse changes in the performance of our business and properties
4. 61We could experience uninsured or under-insured losses related to our global warehousing business, including our real property, as well as our integrated solutions business
5. 62adversely affect us. In addition, we may have no source of funding to repair or reconstruct the damaged property, and we cannot assure you that any such sources of funding will be available to us for such purposes in the future on favorable terms or at all
6. 63Costs of complying with governmental laws and regulations could adversely affect us and our customers
7. 64customers or us could directly or indirectly have a material adverse effect on us. In addition, changes in these governmental laws and regulations, or their interpretation by agencies and courts, could occur
8. 65We are currently invested in various joint ventures and may invest in additional joint ventures in the future and face risks stemming from our partial ownership interests in such properties, which could materially and adversely affect the value of any such joint venture investments

Risks Related to Our Indebtedness

1. 66We have significant indebtedness outstanding, which may expose us to the risk of default under our debt obligations
2. 67Increases in interest rates could increase the amount of our debt payments
3. 68Market conditions could adversely affect our ability to refinance existing indebtedness or obtain additional financing for growth on acceptable terms or at all, which could materially and adversely affect us
4. 69Our existing indebtedness contains, and any future indebtedness is likely to contain, covenants that restrict our ability to engage in certain activities
5. 70Secured indebtedness exposes us to the possibility of foreclosure, which could result in the loss of our investment in certain of our subsidiaries or in a property or group of properties or other assets subject to indebtedness and limits our ability to raise future capital

Risks Related to Our Organizational Structure

1. 71Our Co-Executive Chairmen have substantial influence over our business, and our Co-Executive Chairmen’s interests, and the interests of certain members of our management, differ from our interests and those of our other stockholders in certain respects
2. 72Our rights and the rights of our stockholders to take action against our directors and officers are limited
3. 73Our charter and bylaws contain provisions that may delay, defer, or prevent an acquisition of our common stock or a change in control
4. 74Certain provisions of Maryland law may limit the ability of a third-party to acquire control of us
5. 75Termination of the employment of certain members of our senior management team could be costly and prevent a change in control of our company
6. 76Our board of directors may change our investment and financing policies without stockholder approval, and we may become more highly leveraged, which may increase our risk of default under our debt obligations
7. 77We are a holding company with no direct operations and rely on funds received from our operating partnership to pay liabilities and distributions to our stockholders
8. 78Conflicts of interest exist or could arise in the future with our operating partnership or its partners

Risks Related to Ownership of Shares of Our Common Stock

1. 79The market price and trading volume of shares of our common stock may be volatile
2. 80There can be no assurance that we will be able to make or maintain cash distributions, and certain agreements related to our indebtedness may, under certain circumstances, limit or eliminate our ability to make distributions to our common stockholders
3. 81Increases in market interest rates may result in a decrease in the value of shares of our common stock
4. 82Broad market fluctuations could negatively impact the market price of shares of our common stock
5. 83Future offerings of debt, which would be senior to shares of our common stock upon liquidation, and/or preferred equity securities that may be senior to shares of our common stock for purposes of distributions or upon liquidation, may materially and adversely affect the market price of shares of our common stock
6. 84Future contractual repurchase obligations may materially and adversely affect the market price of shares of our common stock and may reduce future distributions
7. 85Sales of substantial amounts of our common stock in the public market, or the perception that such sales could occur, could adversely affect the market price of our common stock and may make it more difficult for you to sell your common stock at a time and price that you deem appropriate
8. 86If research analysts do not publish research, or publish inaccurate or unfavorable research, about us, the price of our common stock could decline

Risks Related to Our REIT Status and Other Tax Risks

1. 87Failure to qualify as a REIT would cause us to be taxed as a regular C corporation, which would substantially reduce funds available for distributions to stockholders
2. 88failure of a Subsidiary REIT to qualify as a REIT could have an adverse effect on our ability to comply with the REIT income and asset tests, and thus our ability to qualify as a REIT
3. 89Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash available for distribution to our stockholders
4. 90If our operating partnership or any other subsidiary partnership or limited liability company fails to qualify as a partnership or disregarded entity for U.S. federal income tax purposes, we could fail to qualify as a REIT and would suffer adverse consequences
5. 91Our operating partnership has a carryover tax basis on certain of its assets as a result of certain transactions, and the amount that we have to distribute to stockholders therefore may be higher
6. 92Our property taxes could increase due to property tax rate changes or reassessment, which could impact our cash flow
7. 93We use TRSs, which may cause us to fail to qualify as a REIT
8. 94REIT distribution requirements could adversely affect our ability to execute our business plans, including because we may be required to borrow funds to make distributions to stockholders or otherwise depend on external sources of capital to fund such distributions
9. 95Complying with REIT requirements may cause us to forgo otherwise attractive opportunities or liquidate otherwise attractive investments
10. 96The prohibited transactions tax may limit our ability to engage in transactions, including disposition of assets, which would be treated as sales for U.S. federal income tax purposes
11. 97We may recognize substantial amounts of REIT taxable income, which we would be required to distribute to our stockholders, in a year in which we are not profitable under GAAP or other economic measures
12. 98Our qualification as a REIT could be jeopardized as a result of an interest in joint ventures
13. 99Dividends payable by REITs may be taxed at higher rates
14. 100In the event we acquire assets of C corporations (including by merger) in carry-over basis transactions, we may inherit material tax liabilities and other tax attributes from such acquired corporations, and we may be required to distribute earnings and profits
15. 101indirectly by the transferor partnership to a C corporation partner, if the property had been sold at fair market value on the date of the contribution of the property to us, would be subject to the sting tax. As a result, a sale of a portion of our assets may be subject to the sting tax
16. 102Legislative or regulatory tax changes could adversely affect us or our stockholders
17. 103We are subject to IRS tax audits that could adversely affect us