UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year endedSeptember 30 2018, 2021

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period ___________________ to ____________________

Commission File Number:001-33177

MONMOUTH REAL ESTATE INVESTMENT CORPORATION

(Exact name ofregistrant as specified in its charter)

3499 Route 9 North, 101 Crawfords Corner Road, Suite 3-D, Freehold, 1405, Holmdel, NJ   0772807733

(Address of Principal Executive Offices)            (Zip Code)

Registrant’s telephone number, including area code:732-577-9996732-577-9996

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $0.01 par value per share

6.125% Series C Cumulative Redeemable Preferred Stock, $0.01 par value per share, $25 liquidation value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

[X] ☒ Yes [  ] ☐ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

[  ] ☐ Yes [X] ☒ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[X] ☒ Yes [  ] ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). [X] Yes [  ] No

☒ Yes ☐ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). [  ]☐ Yes [X] ☒ No

The aggregate market value of the voting and non-voting common equity of the registrant held by non-affiliates of the registrant at March 31, 20182021 was approximately $1,138,940,000$1.7 billion (based on the $15.04$17.69 closing price per share of the registrant’s common stock on the New York Stock Exchange on March 29, 2018)31, 2021).

There were 91,587,71398,339,416 shares of common stock outstanding as of November 15, 2018.1, 2021.

TABLE OF CONTENTS

PART I

ITEM 1 – BUSINESS

General Development of the Business

In this 10-K, “we”, “us”, “our”, “MREIC” or “the Company”, refers to Monmouth Real Estate Investment Corporation, together with its predecessors and subsidiaries, unless the context requires otherwise.

We are a Maryland corporation that qualifies as a real estate investment trust (REIT) under Sections 856-860 of the Internal Revenue Code of 1986, as amended (the Code). Our investment focus is to own well-located, modern, single tenant,single-tenant, industrial buildings, leased primarily to investment-grade tenants or their subsidiaries on long-term net leases. We were founded in 1968 and arehave been publicly owned since that time, making us one of the oldest public equity REITs in the world. We intend to maintain our qualification as a REIT in the future. As a REIT, with limited exceptions, we will not be taxed under Federal and certain state income tax laws at the corporate level on taxable income that we distribute to our shareholders. For special tax provisions applicable to REITs, refer to Sections 856-860 of the Code. We are subject to franchise taxes in several of the states in which we own properties.

In December 2017, as part of the Tax Cuts and Jobs Act of 2017 (the TCJA), Code Section 199A was added to the Code and became effective for tax years beginning after December 31, 2017 and before January 1, 2026. Under the TCJA, subject to certain income limitations, an individual taxpayer and estates and trusts may deduct 20% of the aggregate amount of qualified REIT dividends they receive from their taxable income. Qualified REIT dividends do not include any portion of a dividend received from a REIT that is classified as a capital gain dividend or qualified dividend income.

We were established in 1968 as a New Jersey Business Trust (NJBT). In 1990, the NJBT merged into a newly formed Delaware corporation. On May 15, 2003, we changed our state of incorporation from Delaware to Maryland by merging with and into a Maryland corporation.

Narrative As previously announced, on November 5, 2021, we entered into a definitive merger agreement with Industrial Logistics Properties Trust, a Maryland real estate investment trust (“ILPT”), under which, on the terms and subject to the conditions set forth in the merger agreement, ILPT will acquire us in an all-cash transaction, with our common stockholders receiving $21.00 in cash for each outstanding share of our common stock in connection with consummation of the transaction. ILPT’s acquisition of us is subject to obtaining the requisite approval of our common stockholders and the satisfaction of other customary closing conditions. Upon closing of the merger with ILPT, holders of our outstanding 6.125% Series C Cumulative Redeemable Preferred Stock (“Series C Preferred Stock”) will receive the amount of $25 per share plus any accrued and unpaid dividends. We plan to continue to pay our regular quarterly common stock dividend and our Series C Cumulative Redeemable Preferred Stock dividend for each full quarterly dividend period completed prior to the closing of the transaction. This transaction with ILPT represents the culmination of the publicly announced comprehensive strategic alternatives review processes conducted by our Board of Directors during 2021. Our Board re-initiated its strategic alternatives review process in September 2021 after a previous agreement for a merger that we entered into with another party, following a strategic alternatives review process earlier this year, did not receive the requisite approval of our stockholders.

Description of Business

Our primary business is the ownership and management of industrial real estate.estate properties. Our investment focus is to own well-located, modern, single tenant,single-tenant, industrial buildings, leased primarily to investment-grade tenants or their subsidiaries on long-term net leases. In addition, we own a portfolio of REIT investment securities which we generally limit to no more than approximately 10% of our undepreciated assets (which is our total assets excluding accumulated depreciation).

As of September 30, 2018, we had 14 full-time employees and one part-time employee.

At September 30, 2018,2021, we held investments in 111122 properties totaling approximately 21,174,00024.9 million square feet with an overall occupancy rate of 99.6%99.7% (See Item 2 for a detailed description of the properties). As of the fiscal yearend, our weighted average lease expiration was 7.0 years, our annualized average base rent per occupied square foot was $6.61 and the weighted average building age, based on the square footage of our buildings, was 10.2 years. These properties are located in 3032 states: Alabama, Arizona, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington and Wisconsin. All of these properties are 100% owned by us, directly or through wholly-owned subsidiaries, with the exception of the two propertiesone property in New Jersey in which we own a majority interest. All of our investment properties which we have investments are leased on a net basis except for an industrial park in Monaca (Pittsburgh), Pennsylvania and theour only non-industrial asset, which is a shopping center, located in Somerset, New Jersey. Our investments are primarily located in strategic locations and, in many cases our buildings are highly automated in order to serve the omni-channel distribution networks that have become essential today. Approximately 83% of our revenue is derived from investment-grade tenants, or their subsidiaries as defined by S&P Global Ratings (www.standardandpoors.com) and by Moody’s (www.moodys.com). The references in this report to S&P Global Ratings and Moody’s are not intended to and do not include, or incorporate by reference into this report, the information of S&P Global Ratings or Moody’s on such websites.

Our portfolio of modern, net-leased industrial properties continues to provide shareholders with reliable and predictable income streams. Our resilient high occupancy rates and rent collection results highlight the mission-critical nature of our assets and underscore the essential need for our tenants’ operations. Furthermore, because our weighted average lease term is 7.0 years and our weighted average fixed rate mortgage debt maturity is 10.9 years, we expect our cash flow to remain resilient over long periods of time. Throughout the COVID-19 Pandemic, our overall occupancy rate has been over 99% and is currently 99.7%. Our base rent collections remained strong, averaging 99.9% throughout the COVID-19 Pandemic and we expect future months to be consistent with this trend.

US industrial real estate market conditions are as strong as they have ever been with record high asking rents, a robust development pipeline, and an all-time high occupancy rate of 96%. Companies are leasing space at record levels to handle the large increase in ecommerce sales as well as the need for safety stock to counter supply chain disruptions. Construction costs are rising dramatically due to the long lead times for sourcing materials. The amount of new construction for US industrial real estate has been increasing for several years as more industrial space is needed to handle direct-to-consumer distribution. It is estimated that ecommerce sales require three times the amount of warehouse space relative to brick and mortar retail sales. These new buildings are often highly automated and have much larger truck courts and parking requirements. Because modern industrial buildings are built to handle both wholesale distribution as well as direct to consumer distribution, they are known as omni-channel facilities. The West coast ports are continuing to experience severe bottlenecks in processing imports and as a result much container traffic is being diverted towards the Gulf and East coast ports. Given our geographic footprint, this trend is a very favorable one for us. For further discussion of potential impact of competitive conditions on our business, see Item 1A: Risk Factors below.

During fiscal 2018,2021, we purchased sevenfour industrial properties totaling approximately 2,655,0001.6 million square feet situated on 316.2 acres resulting in a very expansive land to building ratio of 8.8 to 1. All four properties are leased to investment-grade tenants or their subsidiaries, with net-leased terms ranging from 1015 to 1520 years, resulting in a weighted average lease maturity of 11.417.1 years. Approximately 2,255,000Three of the four properties, consisting of 903,000 square feet, or 85%58% of the total square footage of the four properties, purchased, are leased to investment-grade tenants or their subsidiaries, of which, approximately 761,000 square feet, or 29%, is leased to FedEx Corporation (FDX) or FedEx Ground Package System, Inc., a subsidiary of FDX.FedEx Corporation (FDX). The aggregate purchase price for the sevenfour properties was approximately $282,332,000.$258.4 million. These four properties are located in Alabama, Florida, Georgia, Oklahomathe following Metropolitan Statistical Areas (MSAs): Columbus, OH, Atlanta, GA, Burlington, VT and South Carolina.Knoxville, TN. These sevenfour properties are expected to generate annualized rental income over the life of their leases of approximately $17,414,000.$15.2 million. In connection with two of the sevenfour properties acquired during the 20182021 fiscal year, we entered into fourone 17 year, fully-amortizing mortgage loan and one 15 year, fully-amortizing mortgage loan. In connection with the remaining two properties acquired during the 2021 fiscal year, we entered into commitments for two, 15 year, fully-amortizing mortgage loans, two 14 yearwhich have not yet closed. These four fully-amortizing mortgage loans and one 10 year loan amortizing over 18have a weighted average term of 15.7 years. The sevenprincipal amount of the four mortgage loans originally totaled $175,160,000$161.8 million with an original weighted average mortgage loan maturity of 14.1 years andfixed interest rates ranging from 2.50% to 3.25%, resulting in a weighted average fixed interest rate of 3.91%2.89%.

During fiscal 2021, we completed the first phase of a two-phase parking expansion project for FedEx Ground Package System, Inc. at our property located in Olathe (Kansas City), KS. The first phase of this parking expansion project was completed for a total cost of $3.4 million, resulting in an initial increase in annual rent effective November 5, 2020 of approximately $340,000 from approximately $2.1 million, or $6.83 per square foot, to approximately $2.5 million, or $7.91 per square foot. Furthermore, annual rent increased by 2.1% on June 1, 2021 and will continue to increase 2.1% every five years, resulting in an annualized rent from November 5, 2021 through the remaining term of the lease of approximately $2.6 million, or $8.15 per square foot. We recently began construction on the second phase of this parking expansion project at this location, which upon completion will further increase the rental rate and extend the lease term. In addition, effective June 4, 2021, we completed a parking lot expansion for UPS at our property located in Halfmoon (Albany), NY for a cost of approximately $835,000, resulting in an initial increase in annual rent effective on the date of completion of approximately $52,000 from approximately $510,000, or $6.80 per square foot, to approximately $562,000, or $7.50 per square foot. Furthermore, annual rent will continue to increase each year by 2.0% resulting in an annualized rent from June 4, 2021 through the remaining term of the lease of approximately $622,000, or $8.29 per square foot. Due to the proliferation of ecommerce sales and last mile deliveries, it is important to take into account the large amounts of real estate utilized for trailer, van, and car parking at many of our properties in determining how our in-place rental rates compare to market rental rates for properties being used in a similar manner. Rents per square foot on properties that may be nearby, but have only limited acreage devoted to parking, are poor comparisons as they cannot accommodate the same tenant needs.

Subsequent to fiscal yearend, on October 27, 2021, we purchased a newly constructed 291,000 square foot industrial building, situated on 46.0 acres, located in the Birmingham, AL MSA. The building is 100% net-leased to FedEx Ground Package System, Inc. for 15 years through July 2036. The purchase price was $30.2 million. We obtained a mortgage loan commitment for a 15 year, fully-amortizing mortgage loan of $19.3 million at a fixed interest rate of 2.40%, which has not yet closed. Annual rental revenue over the remaining term of the lease averages $1.7 million.

In addition to the $30.2 million property purchased in October 2021, we have entered into agreements to purchase three new build-to-suit, industrial buildings that are currently being developed in Alabama, Georgia and Texas, totaling 1.1 million square feet. These future acquisitions have net-leased terms ranging from 10 to 15 years with a weighted average lease term of 12.6 years. The total purchase price for these three properties is $126.8 million. All three properties are leased to companies, or subsidiaries of companies, that are considered Investment Grade by S&P Global Ratings (www.standardandpoors.com) and by Moody’s (www.moodys.com). Two of these three properties, consisting of an aggregate of 563,000 square feet, or 52% of the total leasable area, are leased to FedEx Ground Package System, Inc. Subject to satisfactory due diligence and other customary closing conditions and requirements, we anticipate closing all three of these transactions during fiscal 2022.

We have several FedEx Ground parking expansion projects in progress with more under discussion. Currently there are nine parking expansion projects underway, which we expect to cost approximately $42.6 million. These parking expansion projects will enable us to capture additional rent while lengthening the terms of these leases. We are also in discussions to expand the parking at eight additional locations bringing the total recently completed and likely future parking lot expansion projects to 18 currently.

We may have additional acquisitions and expansions in fiscal 2022 and fiscal 2023, and the funds for these acquisitions are expected to come from funds generated from operations, mortgages, draws on our unsecured line of credit facility, cash on hand, sales of marketable securities, other bank borrowings, proceeds from the Dividend Reinvestment and Stock Purchase Plan (DRIP), proceeds from the sale of common stock in a possible future at-the-market public offering (similar to our previous common stock at-the-market offering) and proceeds from private placements and other public offerings of additional common or preferred stock or other securities. To the extent that funds or appropriate properties are not available, fewer acquisitions will be made.

On January 14, 2021, our Board of Directors approved a 5.9% increase in our quarterly common stock dividend, raising it to $0.18 per share from $0.17 per share representing an annualized dividend rate of $0.72 per share. This increase was the third dividend increase in the past five years, representing a total increase of 20%. We have maintained or increased our common stock cash dividend for 30 consecutive years. We are also one of the few REITs that maintained its dividend throughout the Global Financial Crisis.

On October 1, 2018,2021, our Board of Directors approved a cash dividend on our common stock of $0.17$0.18 per share, to be paid on December 17, 2018,15, 2021, to common shareholders of record at the close of business on November 15, 2018,2021, which represents an annualized common dividend rate of $0.68$0.72 per share. We intend to pay these distributions from cash flows from operations.

We have maintained or increased our common stock cash dividend for 27 consecutive years. On October 1, 2015, our Board of Directors approved an increase in our quarterly common stock cash dividend from $0.15 per share to $0.16 per share representing a 6.7% increase in our quarterly cash dividend. Then again, most recently, on October 2, 2017, our Board of Directors approved an increase in our quarterly common stock cash dividend and from $0.16 per share to $0.17 per share on October 2, 2017, representing a 6.3% increase in our quarterly cash dividend. These two dividend raises represent a total increase of 13%.

Our common stock dividend policy is dependent upon our earnings, capital requirements, financial condition, availability and cost of bank financing and other factors considered relevant by the Board of Directors. It is our intention to continue making comparable quarterly distributions in the future and to grow our distributions over time.

Subsequent to fiscal yearend, on October 19, 2018, we purchased a newly constructed 347,145 square foot industrial building, situated on 62.0 acres, located in Trenton, NJ. The building is 100% net-leased to FedEx Ground Package System, Inc. for 15 years through June 2032. The purchase price was $85,248,352. We obtained a 15 year, fully-amortizing mortgage loan of $55,000,000 at a fixed interest rate of 4.13%. Annual rental revenue over the remaining term of the lease averages approximately $5,328,000.

The industrial property purchased thus far during fiscal 2019 increased our current total leasable square feet to approximately 21,521,000.

In addition to the property purchased subsequent to our fiscal yearend, as described above, we have entered into agreements to purchase two new build-to-suit, industrial buildings that are currently being developed in Georgia and North Carolina, consisting of approximately 398,000 square feet, with net-leased terms ranging from 10 to 15 years, with a weighted average lease term of 13.4 years.  The purchase price for these properties is approximately $68,747,000 and both are leased to FedEx Ground Package System, Inc.  Subject to satisfactory due diligence and other customary closing conditions and requirements, we anticipate closing these transactions during the first quarter of fiscal 2019 and fiscal 2020.  In connection with one of these properties, we have entered into a commitment to obtain a 15 year, fully-amortizing mortgage loan of $17,500,000 with a fixed interest rate of 4.40%. We currently have one 154,800 square foot property expansion in progress at our property located in Monroe, OH which is expected to be completed in fiscal year 2019 for a total project cost of approximately $9,072,000. The expansion will result in a new 15 year lease which will extend the prior lease expiration date from February 2030 to January 2034. In addition, the expansion will result in an increase in initial annual rent effective from the date of completion by approximately $862,000 from approximately $961,000 to approximately $1,823,000. In addition, the annual rent will increase 2% per annum. We may have additional acquisitions and expansions in fiscal 2019 and fiscal 2020, and the funds for these acquisitions may come from funds generated from operations, mortgages, draws on our unsecured line of credit facility, cash on hand, sale of marketable securities, other bank borrowings, proceeds from the Dividend Reinvestment and Stock Purchase Plan (DRIP), proceeds from the At-The-Market Preferred Equity Program (Preferred Stock ATM Program), and proceeds from private placements and public offerings of additional common or preferred stock or other securities. To the extent that funds or appropriate properties are not available, fewer acquisitions will be made.

Currently, we derive our income primarily from real estate rental operations. Rental and Reimbursement Revenue (excluding Lease Termination Income in fiscal 2018, 20172021, 2020 and 20162019 of $210,261,$377,000, $-0-, and $-0-, respectively) was $139,161,849, $116,385,305$182.8 million, $167.8 million and $97,755,433$154.8 million for the years ended September 30, 2018, 20172021, 2020 and 2016,2019, respectively. Total undepreciated assets (which is our total assets excluding accumulated depreciation) were $1,925,443,520$2.6 billion and $1,614,123,838$2.2 billion as of September 30, 20182021 and 2017,2020, respectively.

As of September 30, 2018,2021, we had approximately 21,174,00024.9 million leasable square feet, of property, of which approximately 10,083,00011.6 million square feet, or 48%47%, consisting of 6065 separate stand-alone leases, were leased to FDX and its subsidiaries (7%(5% to FDX and 41%42% to FDX subsidiaries). These properties are located in 2427 different states. As of September 30, 2018,2021, the 6065 separate stand-alone leases that are leased to FDX and FDX subsidiaries had a weighted average lease maturity of 9.47.5 years. As of September 30, 2018,2021, in addition to FDX and its subsidiaries, the only tenantother tenants that leased 5% or more of our total square footage was FDX (including its subsidiaries).

During fiscal 2018, the only tenant that accountedwere subsidiaries of Amazon.com, Inc. (Amazon), which are parties to five separate stand-alone leases for 5% or moreproperties located in four different states, containing 1.5 million total square feet, comprising 6% of our rentaltotal leasable square feet. None of our properties are subject to a master lease or any cross-collateralization agreements.

Our Rental and reimbursement revenue was FDX (including its subsidiaries). Our rental and reimbursement revenueReimbursement Revenue from FDX and its subsidiaries for the fiscal years ended September 30, 2018, 20172021, 2020 and 2016,2019, respectively, totaled approximately $80,726,000, $68,151,000$104.3 million, $96.4 million and $52,793,000,$93.3 million, or 58% (7% from FDXcalculated as a percentage of total rent and 51% from FDX subsidiaries), 59% (7%reimbursement revenues were, 57% (5% from FDX and 52% from FDX subsidiaries) and 55% (9%, 58% (5% from FDX and 46%53% from FDX subsidiaries), and 60% (5% from FDX and 55% from FDX subsidiaries). In addition to FDX and its subsidiaries, the only tenants to comprise 5% or more of our total rentRental and reimbursement revenues.Reimbursement Revenue were subsidiaries of Amazon, which represented 6% of our Rental and Reimbursement Revenue for the fiscal years ended September 30, 2021 and 2020. Rental and Reimbursement Revenue from subsidiaries of Amazon for the fiscal year ended September 30, 2019 was less than 5% of our Rental and Reimbursement Revenue.

FDX is a publicly-owned companyand Amazon are publicly-listed companies and financial information related to this entity isthese entities are available at the SEC’s website,www.sec.gov. FDX isand Amazon are rated “BBB” and “AA”, respectively by S&P Global Ratings (www.standardandpoors.com) and isare rated “Baa2” and “A1”, respectively by Moody’s (www.moodys.com), which are both considered “Investment Grade” ratings. The references in this report to the SEC’s website, S&P Global Ratings’ website and Moody’s website are not intended to and do not include, or incorporate by reference into this report, the information of FDX, Amazon, S&P Global Ratings or Moody’s on such websites.

In addition to real estate property holdings, we held $154,920,545 in marketable REIT securities at September 30, 2018, representing 8.0% of our undepreciated assets (which is our total assets excluding accumulated depreciation). These liquid real estate holdings are not included in calculating the tenant concentration ratios above and therefore further increase our diversification. The securities portfolio provides us with additional diversification, liquidity, and income, and serves as a proxy for real estate when more favorable risk adjusted returns are not available.

Our weighted-averageweighted average lease expiration was 8.17.0 years and 7.97.1 years as of September 30, 20182021 and 2017,2020, respectively, and our average annualized rent per occupied square foot as of September 30, 20182021 and 20172020 was $6.01$6.61 and $5.93,$6.36, respectively. Our overall occupancy rate as of September 30, 20182021 and 20172020 was 99.6%99.7% and 99.3%99.4%, respectively. Our weighted average lease expiration has been 7.0 years or greater for over seven consecutive years. Our overall occupancy rate has been 98.9% or above for over six consecutive years.

We compete with other investors in real estate for attractive investment opportunities. These investors include other equity real estate investment trusts, limited partnerships, syndications and private investors, among others. Competition in the market areas in which we operate is significant and affects our ability to acquire or expand properties,acquisitions, occupancy levels, rental rates and operating expenses of certain properties. We have built long-term relationships within our tenant base as well as within the merchant builder community. These relationships have historically provided us with investment opportunities that fit our investment policy. The amount of new construction of industrial properties on the national level has been increasing the past six years following several years of historically low levels of new supply. These levels of new supply, although increasing, continue to be below historical norms. Driven to a large extent by the continued growth in ecommerce sales, demand for industrial space remains very strong, driving national occupancy rates to an all-time high of 95% currently. For further discussion of potential impact of competitive conditions on our business, see Item 1A: Risk Factors below.

Industrial space demand is very closely correlated to Gross Domestic Product (GDP) growth. Despite nine years of unprecedented monetary stimulus, real annual GDP growth averaged less than 2.0% over this period. Economic growth has been strong this past year further increasing demand for industrial space. The most significant demand driver for modern industrial real estate continues to be ecommerce. Every year since the turn of the century, the percentage of goods purchased on-line has increased at an average 16% annual growth rate. Today, excluding food, fuel, and autos, approximately 19% of total retail sales have migrated from traditional store sales to on-line sales and we expect this growth in market share to continue. We expect these favorable trends for the industrial real estate sector to be a leading demand driver for the foreseeable future, as consumers continue to embrace the added efficiencies of on-line consumption. The strong financial position of our tenants, together with the long duration of our leases, provides for high quality, reliable income streams throughout the business cycle.

Information about our Executive Officers

We continue

The following table sets forth information with respect to invest in marketable securities of other REITs, which we generally limit to no more than approximately 10% of our undepreciated assets (which is our total assets excluding accumulated depreciation). Our investments in equity securities of other REITs provide us with additional diversification, liquidity, and income, and serves as a proxy for real estate when more favorable risk adjusted returns are not available. From time to time, we may purchase these securities on margin when the interest and dividend yields exceed the cost of funds. In general, we may borrow up to 50% of the value of the marketable securities, which was $154,920,545executive officers as of September 30, 2018. 2021:

Human Capital Resources

As of September 30, 2018,2021, we had borrowings of $26,608,676 under our margin line, bearing interest at 2.75%. Subsequent to fiscal yearend, on October 9, 2018, we paid off the margin loan. As of September 30, 2017, we had borrowings of $10,091,417 under our margin line, bearing interest at 2.05%. The REIT securities portfolio provides us with additional income, and to the extent not pledged to secure borrowings, provides us with additional liquidity. Such securities are subject to risks arising from adverse changes in market rates and prices, primarily market price risk relating to equity securities and interest rate risk relating to debt securities. From time to time, we may use derivative instruments to mitigate interest rate risk, however, this has not occurred during any periods presented. At September 30, 2018 and 2017, we had $154,920,545 and $123,764,770, respectively, of securities available for sale. The unrealized net gain (loss) on securities available for sale at September 30, 2018 and 2017 was $(24,744,579) and $6,570,565, respectively, resulting in a decrease for the fiscal year of $31,315,144. For the fiscal years ended September 30, 2018, 2017 and 2016, our net realized gains from the sale of securities were $111,387, $2,311,714 and $4,398,599, respectively.

On June 29, 2017, we entered into a Preferred Stock At-The-Market Sales Agreement Program with B. Riley FBR, Inc., or B. Riley (formerly FBR Capital Markets & Co.), that provided for the offer and sale of shares14 full-time employees. Women represent 57% of our 6.125% Series C Cumulative Redeemable Preferred Stock, $0.01 par value per share,employees with 37.5% holding management level/leadership roles. Employees are offered great flexibility to meet personal and family needs. We endeavor to maintain workplaces that are free from discrimination or harassment on the basis of color, race, sex, national origin, ethnicity, religion, age, disability, sexual orientation, gender identification or expression or any other status protected by applicable law. We conduct training to prevent harassment and discrimination and monitor employee conduct year-round. Recruitment, hiring, development, training, compensation and advancement at the Company are based on the individual’s qualifications, performance, skills and experience. Our employees are fairly compensated, without regard to gender, race and ethnicity, and routinely recognized for outstanding performance. Our compensation program is designed to attract and retain talent. We continually assess and strive to enhance employee satisfaction and engagement. Our employees, many of whom have a liquidation preference of $25.00 per share, or our 6.125% Series C preferred stock, having an aggregate sales price of uplong tenure with the Company, frequently express satisfaction with management. Our employees are offered regular opportunities to $100,000,000. On August 2, 2018, we replaced this program with a new Preferred Stock At-The-Market Sales Agreement Program (Preferred Stock ATM Program) with B. Riley that provides for the offer and sale from time to time of $125,000,000 of our 6.125% Series C preferred stock. We began selling shares through these programs on July 3, 2017. Since inception through September 30, 2018, we sold 3,088,001 shares under these programs at a weighted average price of $25.06 per share, and generated net proceeds, after offering expenses, of approximately $75,828,000, of which 1,648,556 shares were sold during the fiscal year ended 2018 at a weighted average price of $24.84 per share, and generated net proceeds, after offering expenses, of approximately $40,094,000. As of September 30, 2018, there is approximately $119,096,000 remaining that may be sold under the Preferred Stock ATM Program.participate in professional development programs.

As of September 30, 2018, 11,488,001 shares of the 6.125% Series C Preferred Stock were issued and outstanding.

Subsequent to fiscal yearend, in October 2018, we completed a public offering of 9,200,000 shares of our Common Stock (including the underwriters’ option to purchase 1,200,000 additional shares) at a price of $15.00 per share, before underwriting discounts. We received net proceeds from the offering, after deducting underwriting discounts and all other transaction costs, of approximately $132,339,000.

Investment and Other Policies

Our investment policy is to concentrate our investments in well-located, modern, single-tenant, industrial buildings, leased primarily to investment-grade tenants or their subsidiaries on long-term net leases. Our strategy is to obtain a favorable yield spread between the income from the net-leased industrial properties and interest costs. In addition, we believe that investments in well-located, modern industrial properties provide a potential for long-term capital appreciation. There is the risk that, upon expiration of leases, the properties will become vacant or will be re-leased at lower rents. The results obtained from re-leasing the properties will depend on the market for industrial properties at that time.

In fiscal 2018,2021, approximately 8%5% of our gross leasable area, representing 16ten leases totaling 1,546,6371.2 million square feet, was set to expire. WeAll ten of these leases have been renewed, 11 of the 16 leases that were set to expire. One of the 11 leases, which is with FedEx Ground Package System, Inc.resulting in a 100% retention rate for a property located in Hanahan (Charleston), SC, renewed for only four months because the tenant moved its operations from our 91,776 square foot facility to a newly constructed, much larger, 265,318 square foot facility, which is also located in Charleston, SC. We purchased this new facility on August 15, 2018. Excluding this four month lease renewal, the ten leases that have renewed, represent 972,048 square feet, or 63% of the expiring square footage, and have a weighted average lease term of 6.84.2 years. These ten lease renewals resultresulted in a U.S. GAAP straight-line weighted average lease rate of $5.87$4.77 per square foot. The renewed weighted average initial cash rent per square foot also results in ais $4.66. This compares to the former weighted average lease raterent of $5.87$4.49 per square foot. This representsfoot on a U.S. GAAP straight-line basis and the former weighted average cash rent of $4.64 per square foot, resulting in an increase in the weighted average lease rate of 4.08%6.2% on a U.S. GAAP straight-line basis and an increase in the weighted average lease rate of 2.80%0.4% on a cash basis. Five of the sixteen leases, representing 482,813 square feet or 31% of the expiring square footage, did not renew. Three of these five buildings, representing 183,837 square feet or 12% of the expiring square footage, have been sold and one of the remaining five properties, representing 218,120 square or 14% of the expiring square footage, has been re-tenanted.

We seek to invest in well-located, modern, single tenant,single-tenant, industrial buildings, leased primarily to investment-grade tenants or their subsidiaries on long-term net leases. In management’s opinion, the recently acquired facilities meet these criteria. We have a concentration of properties leased to FDX and FDX subsidiaries.subsidiaries and to subsidiaries of Amazon. This is a risk that shareholders should consider. FDX is a publicly-owned companyand Amazon are publicly-listed companies and financial information related to this entity isthese entities are available at the SEC’s website,www.sec.gov. FDX isand Amazon are rated “BBB” and “AA”, respectively by S&P Global Ratings (www.standardandpoors.com) and isare rated “Baa2” and “A1”, respectively by Moody’s (www.moodys.com), which are both considered “Investment Grade” ratings. The references in this report to the SEC’s website, S&P Global Ratings’ website and Moody’s website are not intended to and do not include, or incorporate by reference into this report, the information of FDX, Amazon, S&P Global Ratings or Moody’s on such websites.

We may issuehave considered issuing securities for property; however, this has not occurred to date. We may repurchase or reacquire our shares from time to time if, in the opinion of the Board of Directors, such acquisition is in our best interest. NoOn September 14, 2021, our Board of Directors reaffirmed our Common Stock Repurchase Program (the “Program”) that authorizes us to purchase up to $50.0 million of shares were repurchased or reacquired during fiscal 2018 and, as of September 30, 2018, we do not own any of our own shares.common stock. The timing, manner, price and amount of any repurchase will be determined by us at our discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The Program does not have a termination date and may be suspended or discontinued at our discretion without prior notice. During fiscal 2020, we repurchased 400,000 shares of our common stock for $4.3 million at an average price of $10.69 per share. These were the only repurchases made under the Program thus far.

Property Management

With the exception of threetwo properties, all of our 111122 properties are self-managed by us.

WeFor the properties we self-manage, we paid fees directly to local property management subagents of approximately $437,000, $394,000$518,000, $482,000 and $356,000$468,000 for fiscal years ended September 30, 2018, 20172021, 2020 and 2016,2019, respectively.

Governmental Regulations

Our industrial properties are subject to various federal, state and local regulatory laws and requirements, including, but not limited to, the Americans with Disabilities Act, zoning regulations, building codes and land use laws, and building, occupancy and other permit requirements. Noncompliance could result in Stow, OHthe imposition of governmental fines or the award of damages to private litigants. While we believe that we are currently in material compliance with these regulatory requirements, the requirements may change or new requirements may be imposed that could require significant unanticipated expenditures by us. Additionally, local zoning and Streetsboro, OH are managed by GEIS Companies (GEIS). Management fees we paidland use laws, environmental statutes and other governmental requirements may restrict, or negatively impact, our property operations, or expansion, rehabilitation and reconstruction activities and such regulations may prevent us from taking advantage of economic opportunities. Future changes in federal, state or local tax regulations applicable to GEIS forREITs, real property or income derived from our real estate, which may be retroactive, could impact the fiscal yearsfinancial performance, operations, and value of our properties and the Company.

Tax Regulation

We have elected to be taxed as a REIT under Sections 856 through 860 of the Code, commencing with our taxable year which ended September 30, 2018, 20171968. Our qualification and 2016 were approximately $78,000, $52,000taxation as a REIT depends upon our ability to meet on a continuing basis, through actual annual operating results, distribution levels and $50,000, respectively. These management fees were reimburseddiversity of stock ownership, the various qualification tests and organizational requirements imposed under the Code, as discussed below. We believe that we are organized and have operated in such a manner as to qualify under the Code for taxation as a REIT since our inception, and we intend to continue to operate in such a manner.

To maintain our qualification as a REIT, two separate percentage tests relating to the source of our gross income must be satisfied annually. First, at least 75% of our gross income (excluding gross income from prohibited transactions) for each taxable year generally must be derived directly or indirectly from investments relating to real property (including dividends paid by other REITs, mortgages on real property, “rents from real property,” gain, and, in certain circumstances, interest) or from certain types of temporary investments. Second, at least 95% of our gross income (excluding gross income from prohibited transactions) for each taxable year must be derived from such real property investments described above, dividends, interest and gain from the sale or disposition of stock or securities, or from any combination of the foregoing. Rents received by us will qualify as “rents from real property” in satisfying the above gross income tests only if several conditions are met. First, the amount of rent generally must not be based in whole or in part on the income or profits of any person. However, amounts received or accrued generally will not be excluded from “rents from real property” solely by the tenants.

Our industrialreason of being based on a fixed percentage or percentages of gross receipts or sales. Second, rents received from a tenant will not qualify as “rents from real property” if we, or a direct or indirect owner of 10% or more of our stock, actually or constructively own 10% or more of such tenant. Third, if rent attributable to personal property that is leased in Carlstadt, NJ is owned by Palmer Terrace Realty Associates, LLC. We own 51%connection with a lease of Palmer Terrace Realty Associates, LLC. Thisreal property is managed by Marcus Associates, an entity affiliatedgreater than 15% of the total rent received under the lease, then the portion of rent attributable to such personal property will not qualify as “rents from real property.” This 15% test is based on relative fair market values of the real and personal property. Generally, for rents to qualify as “rents from real property” for the purposes of the gross income tests, we are only allowed to provide services that are both “usually or customarily rendered” in connection with the ownerrental of real property and not otherwise considered “rendered to the occupant.” Further, for the rent paid pursuant to our leases to qualify for purposes of the 49% non-controlling interest. Management fees paid by Palmer Terrace Realty Associates, LLCgross income tests, the leases must be respected as true leases for federal income tax purposes and not be treated as service contracts, joint ventures or some other type of arrangement. We structure our leases to Marcus Associates were approximately $17,000, $16,000generate qualifying income.

In addition to the income tests discussed above, to maintain our qualification as a REIT, at the close of each quarter of our taxable year, we must satisfy seven tests relating to the nature of our assets. We limit our investments to assets that will allow us to meet these requirements:

Finally, in order to qualify as a REIT, we must, among other requirements, distribute, each year, to our shareholders at least 90 percent of our taxable income, excluding net capital gains. To the extent that we satisfy the 90 percent distribution requirement, but distribute less than 100 percent of our taxable income, we will be subject to federal corporate income tax on our undistributed income and $16,000 formay incur a 4 percent nondeductible excise tax on the fiscal years ended September 30, 2018, 2017amount not distributed. As a result, we distribute substantially all of our taxable income in each year, and 2016, respectively.must seek other sources of capital to fund our operations and growth.

Environmental Matters

Under various federal, state and local environmental laws, statutes, ordinances, rules and regulations, an owner of real property may be liable for the costs of removal or remediation of certain hazardous or toxic substances at, on, in or under such property as well as certain other potential costs relating to hazardous or toxic substances. These liabilities may include government fines and penalties and damages for injuries to persons and adjacent property. Such laws often impose liability without regard to whether the owner knew of, or was responsible for, the presence or disposal of such substances. Although generally our tenants are primarily responsible for any environmental damages and claims related to the leased premises, in the event of the bankruptcy or inability of a tenant of such premises to satisfy any obligations with respect to such environmental liability, we may be required to satisfy such obligations. In addition, as the owner of such properties, we may be held directly liable for any such damages or claims irrespective of the provisions of any lease.

From time to time, in connection with managing the properties or upon acquisition of a property, we authorize the preparation of Phase I and, when necessary, Phase II environmental reports with respect to our properties. Based upon such environmental reports and our ongoing review of our properties, as of the date of this Annual Report, we are not aware of any environmental condition with respect to any of our properties which we believe would be reasonably likely to have a material adverse effect on our financial condition and/or results of operations. There can be no assurance, however, that (1) the discovery of environmental conditions, the existence or severity of which were previously unknown; (2) changes in law; (3) the conduct of tenants; or (4) activities relating to properties in the vicinity of our properties, will not expose us to material liability in the future.

Contact Information

Additional information about us can be found on our website which is located atwww.mreic.reit. Information contained on or hyperlinked from our Website is not incorporated by reference into and should not be considered part of this Annual Report on Form 10-K or our other filings with the Securities and Exchange Commission (SEC). We make available, free of charge, on or through our website, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The SEC maintains an internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

ITEM 1A – RISK FACTORS

The following risk factors address the material risks concerning our business. If any of the risks discussed in this report were to occur, our business, prospects, financial condition, results of operation and our ability to service our debt and make distributions to our shareholders could be materially and adversely affected and the market price per share of our stock could decline significantly. Some statements in this report, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section entitled “Cautionary Statement Regarding Forward-Looking Statements.”

Risks Relating to our Proposed Merger with ILPT

ILPT’s acquisition of us pursuant to the Merger Agreement is subject to various closing conditions and other risks which may cause the merger to be delayed or not completed at all or have other adverse consequences. Our proposed merger with ILPT is subject to various closing conditions that must be satisfied or waived to complete the merger, including approval by the holders of two-thirds of our outstanding common stock. There can be no assurance that these conditions will be satisfied or waived or that the merger will be completed in a timely manner or at all. Failure to satisfy or obtain waivers of any closing conditions may jeopardize or delay the completion of the merger and result in additional expenditures of money and resources. There is no assurance that our stockholders will approve the merger with ILPT by the affirmative vote of holders of two-thirds of our outstanding common stock, as required by Maryland law and our charter. If the merger is not completed for any reason, the price of our Common Stock may decline to the extent that the current market price reflects an assumption that the merger will be consummated and our stockholders will not receive any payment for their shares in connection with the merger. Legal proceedings instituted against us and others relating to the Merger Agreement with ILPT also could delay or prevent the merger from becoming effective within the agreed upon timeframe. In addition, we or ILPT may elect to terminate the Merger Agreement in certain circumstances, and the parties can mutually decide to terminate the Merger Agreement at any time prior to the consummation of the merger, either before or after stockholder approval. Further, uncertainty among our employees about their future roles after the completion of the proposed merger may impair our ability to attract, retain and motivate key personnel, and the proposed merger may disrupt our business relationships with our existing and potential tenants, suppliers, financing sources and other business partners, who may attempt to negotiate changes in existing business relationships or consider entering into business relationships with parties other than us. Any adverse consequence of the merger could be exacerbated by any delays in completion of the merger or termination of the Merger Agreement. Termination of the Merger Agreement could materially adversely affect our business operations and financial results, which in turn would materially and adversely affect the price of our common stock.

We have incurred, and will continue to incur, significant transaction and related costs in connection with the proposed merger, our Board of Directors’ review of strategic alternatives, and related matters. We have incurred and expect to continue to incur substantial costs associated with our strategic review processes, the proposed merger with ILPT and our previous merger agreement with Equity Commonwealth, which was terminated after it did not receive the requisite approval of our stockholders. Such costs include the payment of certain fees and expenses incurred in connection with the proposed merger with ILPT and the terminated merger agreement with Equity Commonwealth, including legal and other professional advisory fees as well as the reimbursement of approximately $10 million of transaction expenses incurred by Equity Commonwealth and, in the event our common stockholders do not approve the merger agreement with ILPT and as a result the merger agreement is terminated, a similar reimbursement of up to $10 million of ILPT’s expenses. We have also incurred significant expenses in connection with litigation and potential litigation involving one of our shareholders, Blackwells Capital LLC, and our former general counsel, and in settling such litigation and potential litigation in November 2021. Additional unanticipated costs also may be incurred.

Under the Merger Agreement with ILPT, we are subject to restrictions on our business activities. The Merger Agreement contains numerous restrictions on our business activities while the merger is pending, including, among other things, restrictions on our ability to acquire other businesses and assets, dispose of our assets, make investments, enter into certain contracts, repurchase or issue securities, pay dividends, make capital expenditures, amend our organizational documents, incur indebtedness and settle litigation. These restrictions could prevent us from pursuing strategic business opportunities, taking actions with respect to our business that we may consider advantageous and responding effectively and/or timely to competitive pressures and industry developments, which may as a result materially adversely affect our business, results of operations and financial condition.

Real Estate Industry Risks

Our business and financial results are affected by local real estate conditions in areas where we own properties.We may be affected adversely by general economic conditions and local real estate conditions. For example, an oversupply of industrial properties in a local area or a decline in the attractiveness of our properties to tenants and potential tenants could have a negative effect on us.

Other factors that may affect general economic conditions or local real estate conditions include but are not limited to:

We may be unable to compete with our larger competitors and other alternatives available to tenants or potential tenants of our properties. The real estate business is highly competitive. We compete for properties with other real estate investors and purchasers, including other real estate investment trusts, limited partnerships, syndications and private investors, some of whom may have greater financial resources, revenues and geographical diversity than we have. Furthermore, we compete for tenants with other property owners. All of our industrial properties are subject to significant local competition. We also compete with a wide variety of institutions and other investors for capital funds necessary to support our investment activities and asset growth. To the extent that we are unable to effectively compete in the marketplace, our business may be adversely affected.

We are subject to significant regulation that inhibits our activities and may increase our costs.Local zoning and use laws, environmental statutes and other governmental requirements may restrict expansion, rehabilitation and reconstruction activities. These regulations may prevent us from taking advantage of economic opportunities. Legislation such as the Americans with Disabilities Act may require us to modify our properties at a substantial cost and noncompliance could result in the imposition of fines or an award of damages to private litigants. Future legislation may impose additional requirements. We may incur additional costs to comply with any future requirements.

Our investments are concentrated in the industrial distribution sector and our business would be adversely affected by an economic downturn in that sector.Our investments in real estate assets are primarily concentrated in the industrial distribution sector. This concentration may expose us to the risk of economic downturns in this sector to a greater extent than if our business activities included a more significant portion of other sectors of the real estate industry.

Risks Associated with Our Properties

We may be unable to renew or extend leases or re-let space as leases expire.While we seek to invest in well-located, modern, single tenant,single-tenant, industrial buildings, leased to investment-grade tenants or their subsidiaries on long-term net leases, a number of our properties are subject to short-term leases. When a lease expires, a tenant may elect not to renew or extend it. We may not be able to re-let the property on similar terms, if we are able to re-let the property at all. The terms of renewal, extension or re-lease (including the cost of required renovations and/or concessions to tenants) may be less favorable to us than the prior lease. If we are unable to re-let all or a substantial portion of our properties, or if the rental rates upon such re-letting are significantly lower than expected rates, our cash generated before debt repayments and capital expenditures and our ability to make expected distributions, may be adversely affected. We have established an annual budget for renovation and re-letting expenses that we believe is reasonable in light of each property’s operating history and local market characteristics. However, this budget may not be sufficient to cover these expenses.

Our business is substantially dependent on FedEx Corporationcertain tenants.FDX, together with its subsidiaries, is our largest tenant, consisting of 6065 separate stand-alone leases located in 2427 different states as of September 30, 2018.2021. As of September 30, 2018,2021, we had approximately 21,174,00024.9 million square feet of property, of which approximately 10,083,00011.6 million square feet, or 48%47%, were leased to FDX and its subsidiaries (7%(5% from FDX and 41%42% from FDX subsidiaries). As of September 30, 2021, in addition to FDX and its subsidiaries, the only tenants that leased 5% or more of our total square footage were subsidiaries of Amazon, which are parties to five separate stand-alone leases for properties located in four different states, containing 1.5 million total square feet, comprising 6% of our total leasable square feet. Rental and reimbursement revenue from FDX and its subsidiaries is approximately 58% (7%was 57% (5% from FDX and 51%52% from FDX subsidiaries) of total rental and reimbursement revenue for fiscal 2018. No other tenant accounted for2021. In addition to FDX and its subsidiaries, the only tenants to comprise 5% or more of our total Rental and Reimbursement revenueRevenue were subsidiaries of Amazon, which represented 6% of our Rental and Reimbursement Revenue for the fiscal 2018. year ended September 30, 2021. None of our properties are subject to a master lease or any cross-collateralization agreements.

As a result of this concentration with FDX and its subsidiaries and with subsidiaries of Amazon, our business, financial condition and results of operations, including the amount of cash available for distribution to our stockholders, could be adversely affected if we are unable to do business with FDXthem or FDX reduces itsif they reduced their business with us or FDX and its subsidiariesif they were to become unable to make lease payments because of a downturn in itstheir business or otherwise.

FDX is a publicly-owned companyand Amazon are publicly-listed companies and financial information related to this entity isthese entities are available at the SEC’s website,www.sec.gov. FDX is rated “BBB” by S&P Global Ratings (www.standardandpoors.com) and is rated “Baa2” by Moody’s (www.moodys.com), which are both considered “Investment Grade” ratings. The references in this report to the SEC’s website, S&P Global Ratings’ website and Moody’s website are not intended to and do not include or incorporate by reference into this report the information of FDX, S&P Global Ratings or Moody’s on such websites.

We are subject to risks involved in single tenant leases.single-tenant leases. We focus our acquisition activities on real properties that are net-leased to single tenants.single-tenants. Therefore, the financial failure of, or other default by, a single tenantsingle-tenant under its lease is likely to cause a significant reduction in the operating cash flow generated by the property leased to that tenant and might decrease the value of that property. In addition, we will be responsible for 100% of the operating costs following a vacancy at a single tenantsingle-tenant building.

We may be affected negatively by tenant financial difficulties and leasing delays.At any time, a tenant may experience a downturn in its business that may weaken its financial condition. Similarly, a general decline in the economy may result in a decline in the demand for space at our industrial properties. As a result, our tenants may delay lease commencement, fail to make rental payments when due, or declare bankruptcy. Any such event could result in the termination of that tenant’s lease and losses to us.

We receive a substantial portion of our income as rents under long-term leases.If tenants are unable to comply with the terms of their leases because of rising costs or falling revenues, we in our sole discretion, may deem it advisable to modify lease terms to allow tenants to pay a lower rental rate or a smaller share of operating costs, taxes and insurance. If a tenant becomes insolvent or bankrupt, we cannot be sure that we could recover the premises from the tenant promptly or from a trustee or debtor-in-possession in any bankruptcy proceeding relating to the tenant. We also cannot be sure that we would receive rent in the proceeding sufficient to cover our expenses with respect to the premises. If a tenant becomes bankrupt, the federal bankruptcy code will apply and, in some instances, may restrict the amount and recoverability of our claims against the tenant. A tenant’s default on its obligations to us for any reason could adversely affect our financial condition and the cash we have available for distribution.

We may be unable to sell properties when appropriate because real estate investments are illiquid.Real estate investments generally cannot be sold quickly and, therefore, will tend to limit our ability to vary our property portfolio promptly in response to changes in economic or other conditions. In addition, the Code may limit our ability to sell our properties. The inability to respond promptly to changes in the performance of our property portfolio could adversely affect our financial condition and ability to service debt and make distributions to our shareholders.

Environmental liabilities could affect our profitability.We face possible environmental liabilities. Environmental laws today can impose liability on a previous owner or operator of a property that owned or operated the property at a time when hazardous or toxic substances were disposed on, or released from, the property. A conveyance of the property, therefore, does not relieve the owner or operator from liability. As a current or former owner and operator of real estate, we may be required by law to investigate and clean up hazardous substances released at or from the properties we currently own or operate or have in the past owned or operated. We may also be liable to the government or to third parties for property damage, investigation costs and cleanup costs. In addition, some environmental laws create a lien on the contaminated site in favor of the government for damages and costs the government incurs in connection with the contamination. Contamination may adversely affect our ability to sell or lease real estate or to borrow using the real estate as collateral. We are not aware of any environmental liabilities relating to our investment properties which would have a material adverse effect on our business, assets, or results of operations. However, we cannot assure you that environmental liabilities will not arise in the future and that such liabilities will not have a material adverse effect on our business, assets or results of operation.

Actions by our competitors may decrease or prevent increases in the occupancy and rental rates of our properties.We compete with other owners and operators of real estate, some of which own properties similar to ours in the same submarkets in which our properties are located. If our competitors offer space at rental rates below current market rates or below the rental rates we currently charge our tenants, we may lose potential tenants, and we may be pressured to reduce our rental rates below those we currently charge in order to retain tenants when our tenants’ leases expire. As a result, our financial condition, cash flow and cash available for distribution, the market price of our preferred and common stock and our ability to satisfy our debt service obligations could be materially and adversely affected.

Coverage under our existing insurance policies may be inadequate to cover losses. Weather conditions and natural disasters such as hurricanes, tornadoes, earthquakes, floods, droughts, fires and other environmental conditions can harm our business operations. We generally maintain insurance policies related to our business, including casualty, general liability and other policies, covering our business operations, employees and assets. However, we would be required to bear all losses that are not adequately covered by insurance. In addition, there are certain losses that are not generally insured because it is not economically feasible to insure against them, including losses due to riots or acts of war. If an uninsured loss or a loss in excess of insured limits were to occur with respect to one or more of our properties, then we could lose the capital we invested in the properties, as well as the anticipated future revenue from the properties and, in the case of debt, which is with recourse to us, we would remain obligated for any mortgage debt or other financial obligations related to the properties. Although we believe that our insurance programs are adequate, we cannot assure you that we will not incur losses in excess of our insurance coverage, or that we will be able to obtain insurance in the future at acceptable levels and reasonable costs.

We may be unable to acquire properties on advantageous terms or acquisitions may not perform as we expect.We have acquired individual properties and intend to continue to do so. However, we may be unable to acquire any of the properties that we may identify as potential acquisition opportunities in the future. Our acquisition activities and their success are subject to the following risks:

Financing Risks

We face inherent risks associated with our debt incurrence.We finance a portion of our investments in properties and marketable securities through the incurrence of debt. We are subject to the risks normally associated with debt financing, including the risk that our cash flow will be insufficient to meet required payments of principal and interest. In addition, debt creates other risks, including:

We mortgage many of our properties, which subjects us to the risk of foreclosure in the event of non-payment.We mortgage many of our properties to secure payment of indebtedness and, if we are unable to meet mortgage payments, the property could be foreclosed upon or transferred to the mortgagee with a consequent loss of income and asset value. A foreclosure of one or more of our properties could adversely affect our financial condition, results of operations, cash flow, and ability to service debt and make distributions and the market price of our preferred and common stock.

We face risks related to “balloon payments” and refinancings.Certain mortgages will have significant outstanding principal balances on their maturity dates, commonly known as “balloon payments.” There can be no assurance that we will have the funds available to fund the balloon payment or that we will be able to refinance the debt on favorable terms or at all. To the extent we cannot either pay off or refinance this debt on favorable terms or at all, we may be forced to dispose of properties on disadvantageous terms or pay higher interest rates, either of which could have an adverse impact on our financial performance and ability to service debt and make distributions.

We face risks associated with our dependence on external sources of capital.In order to qualify as a REIT, we are required each year to distribute to our shareholders at least 90% of our REIT taxable income, and we are subject to tax on our income to the extent it is not distributed. Because of this distribution requirement, we may not be able to fund all future capital needs from cash retained from operations. As a result, to fund capital needs, we rely on third-party sources of capital, which we may not be able to obtain on favorable terms, if at all. Our access to third-party sources of capital depends upon a number of factors, including (i) general market conditions; (ii) the market’s perception of our growth potential; (iii) our current and potential future earnings and cash distributions; and (iv) the market price of our capital stock. Additional debt financing may substantially increase our debt-to-total capitalization ratio. Additional equity issuances may dilute the holdings of our current shareholders.

We may become more highly leveraged, resulting in increased risk of default on our obligations and an increase in debt service requirements which could adversely affect our financial condition and results of operations and our ability to pay distributions.We have incurred, and may continue to incur, indebtedness in furtherance of our activities.activities. Our governing documents do not limit the amount of indebtedness we may incur. Accordingly, our Board of Directors may authorize us to incur additional debt and would do so, for example, if it were necessary to maintain our status as a REIT.debt. We could therefore become more highly leveraged, resulting in an increased risk of default on our obligations and an increase in debt service requirements which could adversely affect our financial condition and results of operations and our ability to pay distributions to shareholders.

Fluctuations in interest rates could materially affect our financial results.Because a portion of our debt bears interest at variable rates, increases in interest rates could materially increase our interest expense. If the United States Federal Reserve increases short-term interest rates, this may have a significant upward impact on shorter-term interest rates, including the interest rates that our variable rate debt is based upon. Potential future increases in interest rates and credit spreads may increase our interest expense and affect our ability to obtain fixed rate debt at favorable interest rates and therefore negatively affect our financial condition and results of operations, and reduce our access to the debt or equity capital markets.

The interest rate on our unsecured line of credit facility is based on the London Interbank Offered Rate (“LIBOR”) or Bank of Montreal’s (BMO’s) prime lending rate. All indications are that the LIBOR reference rate will be phased out completely by June 30, 2023. At that point in time, our unsecured line of credit facility will no longer have the LIBOR reference rate available and the reference rate will need to be replaced or we will be required to use BMO’s prime lending rate as a reference rate, which historically has resulted in higher effective interest rates than the LIBOR reference rate. We have very good working relationships with our lenders and all indications we have received from our lenders is that their goal is to have a replacement reference rate for our unsecured line of credit facility. However, because this is the first time a reference rate for our unsecured line of credit facility will stop being published, we cannot be sure how a replacement rate event will conclude. Until we have more clarity from our lenders on how they plan on dealing with a replacement rate event, we cannot be certain of the impact to us.

Covenants in our loan documents could limit our flexibility and adversely affect our financial condition.The terms of our various credit agreements and other indebtedness require us to comply with a number of customary financial and other covenants, such as maintaining debt service coverage and leverage ratios and maintaining insurance coverage. These covenants may limit our flexibility in our operations, and breaches of these covenants could result in defaults under the instruments governing the applicable indebtedness even if we had satisfied our payment obligations. If we were to default under credit agreements or other debt instruments, our financial condition could be adversely affected.

Risks Related to our Status as a REIT

If our leases are not respected as true leases for federal income tax purposes, we would fail to qualify as a REIT.To qualify as a REIT, we must, among other things, satisfy two gross income tests, under which specified percentages of our gross income must be passive income, such as rent. For the rent paid pursuant to our leases to qualify for purposes of the gross income tests, the leases must be respected as true leases for federal income tax purposes and not be treated as service contracts, joint ventures or some other type of arrangement. The determination of whether a lease is a true lease depends upon an analysis of all the surrounding facts and circumstances. We believe that our leases will be respected as true leases for federal income tax purposes. However, there can be no assurance that the Internal Revenue Service (IRS) will agree with this view. If the leases are not respected as true leases for federal income tax purposes, we would not be able to satisfy either of the two gross income tests applicable to REITs, and we could lose our REIT status.

Failure to make required distributions would subject us to additional tax.In order to qualify as a REIT, we must, among other requirements, distribute, each year, to our shareholders at least 90 percent of our taxable income, excluding net capital gains. To the extent that we satisfy the 90 percent distribution requirement, but distribute less than 100 percent of our taxable income, we will be subject to federal corporate income tax on our undistributed income. In addition, we will incur a 4 percent nondeductible excise tax on the amount, if any, by which our distributions (or deemed distributions) and the amounts of income retained on which we have paid corporate income tax in any year are less than the sum of:

To the extent we pay out in excess of 100 percent of our taxable income for any tax year, we may be able to carry forward such excess to subsequent years to reduce our required distributions for purposes of the 4 percent excise tax in such subsequent years. We intend to pay out our income to our shareholders in a manner intended to satisfy the 90 percent distribution requirement. Differences in timing between the recognition of income and the related cash receipts, the effects of non-deductible capital expenditures, the creation of reserves or the effect of required debt amortization payments could require us to borrow money or sell assets (potentially during unfavorable market conditions) to pay out enough of our taxable income to satisfy the 90 percent distribution requirement and to avoid corporate income tax.

We may not have sufficient cash available from operations to pay distributions, and, therefore, distributions may be made from borrowings.The actual amount and timing of distributions will be determined by our Board of Directors in its discretion and typically will depend on the amount of cash available for distribution, which will depend on items such as current and projected cash requirements, limitations on distributions imposed by law or our financing arrangements and tax considerations. As a result, we may not have sufficient cash available from operations to pay distributions as required to maintain our status as a REIT. Therefore, we may need to borrow funds to make sufficient cash distributions in order to maintain our status as a REIT, which may cause us to incur additional interest expense as a result of an increase in borrowed funds for the purpose of paying distributions.

We may be required to pay a penalty tax upon the sale of a property.The federal income tax provisions applicable to REITs provide that any gain realized by a REIT on the sale of property, other than foreclosure property, held as inventory or other property held primarily for sale to customers in the ordinary course of business is treated as income from a “prohibited transaction” that is subject to a 100 percent penalty tax. Under current law, unless a sale of real property qualifies for a safe harbor, the question of whether the sale of real estate or other property constitutes the sale of property held primarily for sale to customers is generally a question of the facts and circumstances regarding a particular transaction. It is our intent that we and our subsidiaries will hold the interests in the real estate for investment with a view to long-term appreciation, engage in the business of acquiring and owning real estate, and make occasional sales as are consistent with our investment objectives. We do not intend to engage in prohibited transactions. We cannot assure you, however, that we will only make sales that satisfy the requirements of the safe harbors or that the IRS will not successfully assert that one or more of such sales are prohibited transactions. The 100% tax will not apply to gains from the sale of property that is held through a taxable REIT subsidiary or other taxable corporation, although such income will be subject to tax in the hands of the corporation at regular U.S. federal income tax rates.

There is a risk of changes in the tax law applicable to real estate investment trusts. Because the IRS, the United States Treasury Department and Congress frequently review federal income tax legislation, we cannot predict whether, when or to what extent new federal tax laws, regulations, interpretations or rulings will be adopted. Any of such legislative actions may prospectively or retroactively modify our tax treatment and, therefore, may adversely affect taxation of us and/or our investors.

The recently enacted Tax Cuts and Jobs Act of 2017, or the TCJA, as amended by the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, has significantly changed the U.S. federal income taxation of U.S. businesses and their owners, including REITs and their shareholders. Changes made by the TCJA and the CARES Act that could affect us and our shareholders include:

You are urged to consult with your tax advisor with respect to the status of legislative, regulatory, judicial or administrative developments and proposals and their potential effect on an investment in our securities.

To qualify as a REIT, we must comply with certain highly technical and complex requirements.We cannot be certain we have complied, and will always be able to comply, with the requirements to qualify as a REIT because there are few judicial and administrative interpretations of these provisions. In addition, facts and circumstances that may be beyond our control may affect our ability to continue to qualify as a REIT. We cannot assure you that new legislation, regulations, administrative interpretations or court decisions will not change the tax laws significantly with respect to our qualification as a REIT or with respect to the federal income tax consequences of qualification. We believe that we have qualified as a REIT since our inception and intend to continue to qualify as a REIT. However, we cannot assure you that we are qualified or will remain qualified.

We may be unable to comply with the strict income distribution requirement applicable to REITs.As noted above, to maintain qualification as a REIT under the Code, a REIT must annually distribute to its shareholders at least 90% of its REIT taxable income, excluding the dividends paid deduction and net capital gains. This requirement limits our ability to accumulate capital. We may not have sufficient cash or other liquid assets to meet the 90% distribution requirements. Difficulties in meeting the 90% distribution requirement might arise due to competing demands for our funds or to timing differences between tax reporting and cash receipts and disbursements, because income may have to be reported before cash is received, because expenses may have to be paid before a deduction is allowed, because deductions may be disallowed or limited or because the IRS may make a determination that adjusts reported income. In those situations, we might be required to borrow funds or sell properties on adverse terms in order to meet the 90% distribution requirement and interest and penalties could apply which could adversely affect our financial condition. If we fail to satisfy the 90% distribution requirement, we would cease to be taxed as a REIT.

Notwithstanding our status as a REIT, we are subject to various federal, state and local taxes on our income and property.For example, we will be taxed at regular corporate rates on any undistributed taxable income, including undistributed net capital gains; provided, however, that properly designated undistributed capital gains will effectively avoid taxation at the shareholder level. We may be subject to other federal income taxes and may also have to pay some state income or franchise taxes because not all states treat REITs in the same manner as they are treated for federal income tax purposes. In addition, any taxable REIT subsidiary that we may form will be subject to regular corporate federal, state and local taxes. Any of these taxes would decrease cash available for distributions to stockholders.

Other Risks

We may not be able to access adequate cash to fund our business.Our business requires access to adequate cash to finance our operations, distributions, capital expenditures, debt service obligations, development and redevelopment costs and property acquisition costs, if any. We expect to generate the cash to be used for these purposes primarily with operating cash flow, borrowings under secured and unsecured term loans, proceeds from sales of strategically identified assets and, when market conditions permit, through the issuance of debt and equity securities from time to time. We may not be able to generate sufficient cash to fund our business, particularly if we are unable to renew or extend leases, lease vacant space or re-lease space as leases expire according to expectations.

We are dependent on key personnel.Our executive and other senior officers have a significant role in our success. Our ability to retain our management group or to attract suitable replacements should any members of the management group leave is dependent on the competitive nature of the employment market. The loss of services from key members of the management group or a limitation in their availability could adversely affect our financial condition and cash flow. Further, such a loss could be negatively perceived in the capital markets.

We may amend our business policies without shareholder approval.Our Board of Directors determines our growth, investment, financing, capitalization, borrowing, operations and distributions policies. In addition, our charter provides that our Board of Directors may revoke or otherwise terminate our REIT election, without the approval of our shareholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT. Although our Board of Directors has no present intention to amend or reverse any of these policies, they may be amended or revised without notice to shareholders. Accordingly, shareholders may not have control over changes in our policies. We cannot assure you that changes in our policies will serve fully the interests of all shareholders.

The market value of our preferred and common stock could decrease based on our performance and market perception and conditions.The market value of our preferred and common stock may be based primarily upon the market’s perception of our growth potential and current and future cash dividends, and may be secondarily based upon the real estate market value of our underlying assets. The market price of our preferred and common stock is influenced by their respective distributions relative to market interest rates. Rising interest rates may lead potential buyers of our stock to expect a higher distribution rate, which could adversely affect the market price of our stock. In addition, rising interest rates could result in increased expense, thereby adversely affecting cash flow and our ability to service our indebtedness and pay distributions.

There are restrictions on the ownership and transfer of our capital stock.To maintain our qualification as a REIT under the Code, no more than 50% in value of our outstanding capital stock may be owned, actually or by attribution, by five or fewer individuals, as defined in the Code to also include certain entities, during the last half of a taxable year. Accordingly, our charter contains provisions restricting the ownership and transfer of our capital stock. These restrictions may discourage a tender offer or other transaction, or a change in management or of control of us that might involve a premium price for our common stock or preferred stock or that our shareholders otherwise believe to be in their best interests, and may result in the transfer of shares acquired in excess of the restrictions to a trust for the benefit of a charitable beneficiary and, as a result, the forfeiture by the acquirer of the benefits of owning the additional shares.

Our earnings are dependent, in part, upon the performance of our investment portfolio.As permitted by the Code, we opportunistically invest in and own marketable securities of other REITs, which we generallyREITs. We intend to limit the size of this portfolio to no more than approximately 10%5% of our undepreciated assets, (which is ourwhich we define as total assets excluding accumulated depreciation).depreciation. We continue to believe that our REIT securities portfolio provides us with diversification, income, a source of potential liquidity when needed and also serves as a proxy for real estate when more favorable risk adjusted returns are not available in the private real estate markets. Our decision to reduce this threshold mainly stems from the implementation of accounting rule ASU 2016-01, “Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities”, which took effect at the beginning of our fiscal year ended September 30, 2019. This rule requires that quarterly changes in the market value of our marketable securities flow through our Consolidated Statements of Income. The implementation of this accounting rule has resulted in increased volatility in our reported earnings and some of our key performance metrics. To the extent that the fair value of those investments declinesdecline or those investments do not provide an attractive return, our earnings and cash flow could be adversely affected. BeginningAs mentioned above, beginning with our fiscal year endingended September 30, 2019, all changes in the fair value of the equity securities of other REITs that we own, whether realized or unrealized, will bewere recognized as gains or losses in our consolidated statement of income. As a result, fluctuations in the fair value of those investments will in the future, impact our earnings even if we have not sold the underlying investments.

We areIf our proposed merger with ILPT is not consummated, we will remain subject to restrictions that may impede our ability to effect a future change in control.Certain provisions contained in our charter and bylaws and certain provisions of Maryland law may have the effect of discouraging a third party from making an acquisition proposal for us and thereby inhibit a change in control. These provisions include the following:

We cannot assure you that we will be able to pay distributions regularly.Our ability to pay distributions in the future is dependent on our ability to operate profitably and to generate cash from our operations and the operations of our subsidiaries and is subject to limitations under our financing arrangements and Maryland law. Under the Maryland General Corporation Law, or the MGCL, a Maryland corporation generally may not make a distribution if, after giving effect to the distribution, the corporation would not be able to pay its debts as the debts became due in the usual course of business, or the corporation’s total assets would be less than the sum of its total liabilities plus, unless the charter permits otherwise, the amount that would be needed if the corporation were to be dissolved at the time of the distribution to satisfy the preferential rights upon dissolution of stockholders whose preferential rights on dissolution are superior to those receiving the distribution. Accordingly, we cannot guarantee that we will be able to pay distributions on a regular quarterly basis in the future.

Dividends on our capital stock do not qualify for the reduced tax rates available for some dividends. Income from “qualified dividends” payable to U.S. stockholders that are individuals, trusts and estates are generally subject to tax at preferential rates. Dividends payable by REITs, however, generally are not eligible for the preferential tax rates applicable to qualified dividend income. Although these rules do not adversely affect our taxation or the dividends payable by us, to the extent that the preferential rates continue to apply to regular corporate qualified dividends, investors who are individuals, trusts and estates may perceive an investment in us to be relatively less attractive than an investment in the stock of a non-REIT corporation that pays dividends, which could materially and adversely affect the value of the shares of, and per share trading price of, our capital stock. It should be noted that the TCJA provides for a deduction from income for individuals, trusts and estates up to 20% of certain REIT dividends, which reduces the effective tax rate on such dividends below the effective tax rate on interest, though the deduction is generally not as favorable as the preferential rate on qualified dividends. The deduction for certain REIT dividends, unlike the favorable rate for qualified dividends, expires for taxable years beginning after December 31, 2025.

General Risk Factors

Coverage under our existing insurance policies may be inadequate to cover losses. Weather conditions and natural disasters such as hurricanes, tornadoes, earthquakes, floods, droughts, fires and other environmental conditions can harm our business operations. We generally maintain insurance policies related to our business, including casualty, general liability and other policies, covering our business operations, employees and assets. However, we would be required to bear all losses that are not adequately covered by insurance. In addition, there are certain losses that are not generally insured because it is not economically feasible to insure against them, including losses due to riots or acts of war. If an uninsured loss or a loss in excess of insured limits were to occur with respect to one or more of our properties, then we could lose the capital we invested in the properties, as well as the anticipated future revenue from the properties and, in the case of debt, which is with recourse to us, we would remain obligated for any mortgage debt or other financial obligations related to the properties. Although we believe that our insurance programs are adequate, we cannot assure you that we will not incur losses in excess of our insurance coverage, or that we will be able to obtain insurance in the future at acceptable levels and reasonable costs.

Future terrorist attacks and military conflicts could have a material adverse effect on general economic conditions, consumer confidence and market liquidity.Among other things, it is possible that interest rates may be affected by these events. An increase in interest rates may increase our costs of borrowing, leading to a reduction in our earnings. Terrorist acts could also result in significant damages to, or loss of, our properties. We and our tenants may be unable to obtain adequate insurance coverage on acceptable economic terms for losses resulting from acts of terrorism. Our lenders may require that we carry terrorism insurance even if we do not believe this insurance is necessary or cost effective. We may also be prohibited under the applicable lease from passing all or a portion of the cost of such insurance through to the tenant. Should an act of terrorism result in an uninsured loss or a loss in excess of insured limits, we could lose capital invested in a property, as well as the anticipated future revenues from a property, while remaining obligated for any mortgage indebtedness or other financial obligations related to the property. Any loss of these types could adversely affect our financial condition.

Disruptions in the financial markets could affect our ability to obtain financing on reasonable terms and have other adverse effects on us and the market price of our capital stock.Over the last several years, the United States stock and credit markets have experienced significant price volatility, dislocations and liquidity disruptions, which have caused market prices of many stocks and debt securities to fluctuate substantially and the spreads on prospective debt financing to widen considerably. Continued uncertainty in the stock and credit markets may negatively impact our ability to access additional financing at reasonable terms, which may negatively affect our ability to acquire properties and otherwise pursue our investment strategy. A prolonged downturn in the stock or credit markets may cause us to seek alternative sources of potentially less attractive financing, and may require us to adjust our investment strategy accordingly. These types of events in the stock and credit markets may make it more difficult or costly for us to raise capital through the issuance of the common stock, preferred stock or debt securities. The potential disruptions in the financial markets may have a material adverse effect on the market value of the common stock and preferred stock and the return we receive on our properties and investments, as well as other unknown adverse effects on us or the economy in general.

We are subject to risks arising from litigationlitigation..We may become involved in litigation. Litigation can be costly, and the results of litigation are often difficult to predict. We may not have adequate insurance coverage or contractual protection to cover costs and liability in the event we are sued, and to the extent we resort to litigation to enforce our rights, we may incur significant costs and ultimately be unsuccessful or unable to recover amounts we believe are owed to us. We may have little or no control of the timing of litigation, which presents challenges to our strategic planning.

DividendsWe are subject to risks relating to cybersecurity. An information security or operational technology incident, including a cybersecurity breach, could have a material adverse impact on our capital stock do not qualify for the reduced tax rates available for some dividends.Income from “qualified dividends” payablebusiness or reputation. As part of our regular review of potential risks, we have an Information Technology (“IT”) Manager who works with our IT service providers to U.S. stockholders that are individuals, trustsidentify and estates are generally subjectmitigate any such risks. We have established a Cybersecurity Subcommittee of our Board’s Audit Committee to tax at preferential rates. Dividends payable by REITs, however, generally are not eligible for the preferential tax rates applicable to qualified dividend income. Although these rules do not adversely affect our taxation or the dividends payable by us,review and provide high level guidance on cybersecurity related issues of importance to the extent thatCompany. We purchase cyber liability insurance in amounts deemed reasonable by our insurance advisors.

We face various risks and uncertainties related to public health crises, including the preferential ratesrecent and ongoing global outbreak of the novel coronavirus (COVID-19). The COVID-19 Pandemic and its impacts are uncertain and hard to measure, but may have a material adverse effect on us. We face various risks and uncertainties related to public health crises, including ongoing global COVID-19 Pandemic, which has disrupted financial markets and significantly impacted worldwide economic activity to date and is likely to continue to applydo so. The future effects of the evolving impact of the COVID-19 Pandemic as well as mandatory and voluntary actions taken to regular corporate qualified dividends, investors whomitigate the public health impact of the Pandemic may have a material adverse effect on our financial condition. The COVID-19 Pandemic and social and governmental responses to the Pandemic have caused, and are individuals, trustslikely to continue to cause, severe economic, market and estatesother disruptions worldwide. Although the COVID-19 Pandemic and related societal and government responses have not, to date, had a material impact on our business or financial results, the extent to which COVID-19 and related actions may, perceive an investment in us to be relatively less attractive than an investment in the stockfuture, impact our operations cannot be predicted with any degree of confidence. As a non-REIT corporation that pays dividends, which could materially and adversely affectresult, we cannot at this time predict the valueimpact of the sharesCOVID-19 Pandemic, but it could have a material adverse effect on our business, financial condition, liquidity, results of operations and per share trading price of, our capital stock.prospects.

ITEM 1B – UNRESOLVED STAFF COMMENTS

None.

ITEM 2 - PROPERTIES

We operate as a REIT. Our portfolio is primarily comprised of real estate holdings, some of which have been long-term holdings carried on our financial statements at depreciated cost. We believe that their current market values exceed both the original cost and the depreciated cost.

The following table sets forth certain information concerning our real estate investments as of September 30, 2018:2021: