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Financial report summary
?Risks
- Risks related to real estate ownership could reduce the value of our properties, which could materially and adversely affect us.
- We are dependent on Darden to make payments to us and fulfill its obligations under its leases, as well as to provide services to us under the Franchise Agreements, and an event that materially and adversely affects Darden’s business, financial
- position or results of operations could materially and adversely affect our business, financial position or results of operations.
- We are dependent on our major tenants successfully operating their businesses, and a failure to do so could have a material adverse effect on our business, financial position or results of operations.
- Actual or perceived threats associated with epidemics, pandemics or public health crises could have a material adverse effect on our and our tenants’ businesses, financial condition, results of operations, cash flow, liquidity and ability to access the capital markets and satisfy debt service obligations and make distributions to our stockholders.
- A significant portion of our restaurant properties are Olive Garden properties. Therefore, we are subject to risks associated with having a highly concentrated property brand base.
- We are dependent on the restaurant industry and may be susceptible to the risks associated with it, which could materially adversely affect our business, financial position or results of operations.
- Our portfolio has some geographic concentration, which makes us more susceptible to adverse events in these areas.
- We intend to continue to pursue acquisitions of additional properties and seek other strategic opportunities, which may result in the use of a significant amount of management resources or significant costs, including the cost of accessing debt or equity markets, and we may not fully realize the potential benefits of such transactions.
- Our pursuit of investments in, and acquisitions or development of, additional properties may be unsuccessful or fail to meet our expectations.
- Inflation may materially and adversely affect us and our tenants.
- If we are not able to hire, or if we lose, key management personnel, we may not be able to successfully manage our business and achieve our objectives.
- Failure by our tenants to make rental payments to us, because of a deterioration of their financial condition or otherwise, would have a material adverse effect on us.
- Bankruptcy laws will limit our remedies if a tenant becomes bankrupt and rejects its leases.
- The failure of any of our tenants to fulfill their maintenance obligations may have a materially adverse effect on our ability to operate and grow our business.
- We or our tenants may experience uninsured or underinsured losses, which could result in a significant loss of the capital we have invested in a property, decrease anticipated future revenues or cause us to incur unanticipated expense.
- Our tenants’ businesses and our business through the operation of Kerrow are subject to government regulations and changes in current or future laws or regulations could restrict their ability to operate both their and our business in the manner currently contemplated.
- Environmental compliance costs and liabilities associated with real estate properties owned by us may materially impair the value of those investments.
- Our relationship with Darden may adversely affect our ability to do business with third-party restaurant operators and other tenants.
- Real estate investments are relatively illiquid and provisions in our lease agreements may adversely impact our ability to sell properties and could adversely impact the price at which we can sell the properties.
- We may be subject to liabilities and costs associated with the impacts of climate change.
- Compliance with the Americans with Disabilities Act and fire, safety and other regulations may require us to make unanticipated expenditures that materially adversely impact our cash flow.
- Our active management and operation of a restaurant business may expose us to potential liabilities beyond those traditionally associated with REITs.
- We may be vulnerable to security breaches or cyber-attacks which could disrupt our operations and have a material adverse effect on our financial performance and operating results.
- Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could materially and adversely affect our business and the market price of our common stock.
- If our reputation or our tenants’ reputation are damaged, our business and operating results may be harmed.
- Third-party expectations relating to environmental, social and governance factors may impose additional costs and expose us to new risks.
- Our level of indebtedness could materially and adversely affect our financial position, including reducing funds available for other business purposes and reducing our operational flexibility, and we may have future capital needs and may not be able to obtain additional financing on acceptable terms.
- Covenants in our debt agreements may limit our operational flexibility, and a covenant breach or default could materially and adversely affect our business, financial position or results of operations.
- An increase in market interest rates would increase our interest costs on existing and future debt and could adversely affect our stock price, as well as our ability to refinance existing debt and conduct acquisition activity.
- Hedging transactions could have a negative effect on our results of operations.
- Our charter restricts the ownership and transfer of our outstanding stock, which may have the effect of delaying, deferring or preventing a transaction or change of control of our company.
- Maryland law and provisions in our charter and bylaws may delay or prevent takeover attempts by third parties and therefore inhibit our stockholders from realizing a premium on their stock.
- The market price and trading volume of our common stock may be volatile and may face negative pressure including as a result of future sales or distributions of our common stock.
- We cannot assure shareholders of our ability to pay dividends in the future.
- If we do not qualify as a REIT, or fail to remain qualified as a REIT, we will be subject to U.S. federal income tax as a regular corporation and could face a substantial tax liability, which would reduce the amount of cash available for distribution to our stockholders.
- We could fail to qualify as a REIT if income we receive from Darden and other tenants is not treated as qualifying income.
- Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.
- REIT distribution requirements could adversely affect our ability to execute our business plan.
- Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flow.
- Complying with the REIT requirements may cause us to forego otherwise attractive acquisition and business opportunities or liquidate otherwise attractive investments.
- We may acquire properties or portfolios of properties through tax deferred contribution transactions, which could result in stockholder dilution and limit our ability to sell or refinance such assets.
- We may pay dividends on our common stock in common stock and/or cash. Our stockholders may sell shares of our common stock to pay tax on such dividends, placing downward pressure on the market price of our common stock.
- The ability of our Board of Directors to revoke our REIT election without stockholder approval may cause adverse consequences to our stockholders.
- Our tax protection agreement could limit our ability to sell or otherwise dispose of certain properties.
- Legislative or other actions affecting REITs could have a negative effect on us.
Management Discussion
- We operate in two segments, real estate operations and restaurant operations. Our real estate operations generate rental income from leases primarily with restaurant brands, which we recognize on a straight-line basis to include the effect of base rent escalators. Our restaurant operations generate restaurant revenue from operating seven LongHorn Steakhouse restaurants.
- In this section, we discuss the results of our operations for the year ended December 31, 2023 compared to the year ended December 31, 2022. For a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022.
- Rental revenue increased $26.3 million during the year ended December 31, 2023 compared to the year ended December 31, 2022. This increase is due to recognizing a full year of revenue in 2023 from the 112 properties acquired in 2022, and the acquisition of 92 properties and ground leaseholds in 2023. During the year ended December 31, 2023, we recognized costs paid by the lessor and reimbursed by the lessees within rental revenue of $9.4 million, compared to $6.6 million during the year ended December 31, 2022 due to the increase in the number of mall outparcel and multi-tenant property acquisitions. These amounts are also recognized in property expenses.