Netstreit (NTST) risk factors, FY2024 10-K

Other

1. 01Our operations and financial results are subject to various risks and uncertainties, including those described below. You should

Risks Related to Our Business and Properties

1. 02Global market and economic conditions may materially and adversely affect us and our tenants
2. 03We are subject to risks related to commercial real estate ownership that could reduce the value of our properties
3. 04We may not be able to successfully execute our acquisition or development strategies
4. 05Our business is dependent upon our tenants successfully operating their businesses and their failure to do so could materially and adversely affect us
5. 06Single-tenant leases involve significant risks of tenant default
6. 07Our assessment that certain businesses are e-commerce resistant and recession-resilient may prove to be incorrect
7. 08The tools we use to determine the creditworthiness of our tenants may not be accurate
8. 09Our portfolio has geographic market concentrations that make us especially susceptible to adverse developments in those geographic markets
9. 10We are subject to risks related to tenant concentration, and an adverse development with respect to a large tenant could materially and adversely affect us
10. 11We may be unable to renew leases, lease vacant space, or re-lease space as leases expire on favorable terms or at all
11. 12Defaults by borrowers on loans we originate could lead to losses
12. 13Some of our tenants operate under franchise or license agreements, which, if terminated or not renewed prior to the expiration of their leases with us, would likely impair their ability to pay us rent
13. 14The bankruptcy or insolvency of any of our tenants could result in the termination of such tenants’ lease and material losses to us
14. 15Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties and harm our financial condition
15. 16We face significant competition for tenants, which may decrease or prevent increases of the occupancy and rental rates of our properties, and competition for acquisitions may reduce the number of acquisitions we are able to complete and increase the costs of these acquisitions
16. 17A loss of key management personnel could adversely affect our performance
17. 18Any material failure, weakness, interruption, or breach in security of our information systems or data, or those of the third parties with whom we work, could prevent us from effectively operating our business
18. 19Data privacy risks, including evolving laws, regulations, and other obligations and compliance efforts, may result in business interruption and increased costs and liabilities
19. 20Insurance on our properties may not adequately cover losses, and uninsured losses could materially and adversely affect us
20. 21We may acquire properties or portfolios of properties through tax deferred contribution transactions, which could result in stockholder dilution and limit our ability to sell such assets
21. 22We may experience a decline in the fair value of our assets, which may have a material impact on our financial condition, liquidity, and results of operations and adversely impact the market value of our common stock
22. 23The form, timing, and/or amount of dividend distributions in future periods may vary and be affected by economic and other considerations

Risks Related to Financing our Business

1. 24Our growth depends on external sources of capital that are outside of our control and may not be available to us on commercially reasonable terms or at all
2. 25Our level of indebtedness could materially and adversely affect our financial position, including reducing funds available for other business purposes and reducing our operational flexibility
3. 26Failure to hedge effectively against interest rate changes may materially and adversely affect us
4. 27Our debt financing agreements contain or may contain restrictions and covenants which may limit our ability to enter into or obtain funding for certain transactions, operate our business, or make distributions to our common stockholders

Risks Related to Government Regulation and Tax Matters

1. 28Our failure to qualify or maintain our qualification as a REIT for U.S. federal income tax purposes would reduce the amount of funds we have available for distribution and limit our ability to make distributions to our stockholders
2. 29purposes, we would cease to qualify as a REIT
3. 30Even if we qualify as a REIT for U.S. federal income tax purposes, we may be subject to other tax liabilities that reduce our cash flow and our ability to make distributions to stockholders
4. 31Dividends payable by REITs generally do not qualify for the reduced tax rates available for some dividends
5. 32The share ownership restrictions of the Code for REITs and the 9.8% share ownership limit in our charter may inhibit market activity in shares of our stock and restrict our business combination opportunities
6. 33The ability of our board of directors to revoke our REIT qualification without stockholder approval may cause adverse consequences to our stockholders
7. 34If a transaction intended to qualify as a 1031 Exchange is later determined to be taxable, we may face adverse consequences, and if the laws applicable to such transactions are amended or repealed, we may not be able to dispose of properties on a tax-deferred basis
8. 35Complying with REIT requirements may limit our ability to hedge our liabilities effectively and may cause us to incur tax liabilities
9. 36The U.S. federal income tax treatment of the cash that we might receive from cash settlement of our forward sale agreements is unclear and could jeopardize our ability to meet the REIT qualification requirements
10. 37Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments
11. 38Our ownership of and relationship with our TRSs will be limited, and a failure to comply with the limits would jeopardize our REIT status and may result in the application of a 100% excise tax
12. 39New legislation or administrative or judicial action, in each instance potentially with retroactive effect, could make it more difficult or impossible for us to qualify or remain qualified as a REIT
13. 40We and our subsidiaries and stockholders may be subject to state, local, or foreign tax filing and payment obligations taxation in various jurisdictions, including those in which we or they transact business, own property, or reside
14. 41Liabilities arising under environmental laws may materially and adversely affect us
15. 42Our properties may contain or develop harmful mold, which could lead to liability for adverse health effects and costs of remediation
16. 43Compliance with the Americans with Disabilities Act and fire, safety, and other regulations may require us to make unanticipated expenditures that materially and adversely affect us

Risks Related to Our Organizational Structure and Ownership of Our Common Stock

1. 44Our rights and the rights of our stockholders to take action against our directors and officers are limited
2. 45We are a holding company with no direct operations and we rely on funds received from our operating partnership to pay liabilities
3. 46The market price of shares of our common stock may be volatile, which could cause the value of your investment to decline
4. 47Conflicts of interest could arise in the future between the interests of our stockholders and the interests of holders of OP units, which may impede business decisions that could benefit our stockholders
5. 48If we fail to maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud. As a result, our investors could lose confidence in our reported financial information, which could harm our business and the value of our shares