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EX-99.1 - EXHIBIT 99.1 - Sila Realty Trust, Inc.a2019q410kexhibit991reitii.htm
EX-32.2 - EXHIBIT 32.2 - Sila Realty Trust, Inc.a2019q410kexhibit322reitii.htm
EX-32.1 - EXHIBIT 32.1 - Sila Realty Trust, Inc.a2019q410kexhibit321reitii.htm
EX-31.2 - EXHIBIT 31.2 - Sila Realty Trust, Inc.a2019q410kexhibit312reitii.htm
EX-31.1 - EXHIBIT 31.1 - Sila Realty Trust, Inc.a2019q410kexhibit311reitii.htm
EX-23.1 - EXHIBIT 23.1 - Sila Realty Trust, Inc.a2019q410kexhibit231reitii.htm
EX-4.7 - EXHIBIT 4.7 - Sila Realty Trust, Inc.a2019q410kexhibit47reitii1.htm
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________
FORM 10-K
(Mark One)
þ
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
OR 
¨
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 000-55435
cvmcriilogob55.jpg
CARTER VALIDUS MISSION CRITICAL REIT II, INC.
(Exact name of registrant as specified in its charter)
Maryland
 
46-1854011
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
4890 West Kennedy Blvd., Suite 650
Tampa, FL 33609
 
(813) 287-0101
(Address of Principal Executive Offices; Zip Code)
 
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
N/A
 
N/A
 
N/A
Securities registered pursuant to Section 12(g) of the Act:
Common stock, par value $0.01 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  þ
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  ¨    No  þ
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.    Yes  þ    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).    Yes  þ    No  ¨
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.
Large accelerated filer
 
¨
  
Accelerated filer
 
¨
Non-accelerated filer
 
þ
  
Smaller reporting company
 
¨
 
 
 
 
Emerging growth company
 
þ
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. þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  þ
There is no established market for the Registrant’s shares of common stock.
As of June 30, 2019, the last business day of the Registrant's most recently completed second fiscal quarter, there were approximately 82,124,000 shares of Class A common stock, 12,490,000 shares of Class I common stock, 38,305,000 shares of Class T common stock and 3,449,000 shares of Class T2 common stock held by non-affiliates, for an aggregate market value of approximately $759,644,000, $115,530,000, $354,325,000 and $31,899,000, respectively, assuming a market value of $9.25 per share of our Class A common stock, Class I common stock, Class T common stock and Class T2 common stock, based on the Registrant's estimated per share net asset value as of June 30, 2019, the most recent estimated per share net asset value of the Registrant's common stock established by the Registrant's board of directors at that time.
As of March 24, 2020, there were approximately 166,408,000 shares of Class A common stock, 12,544,000 shares of Class I common stock, 38,939,000 shares of Class T common stock and 3,496,000 shares of Class T2 common stock of Carter Validus Mission Critical REIT II, Inc. outstanding.
Documents Incorporated by Reference
Portions of Registrant’s proxy statement for the 2020 annual stockholders meeting, which is expected to be filed no later than April 29, 2020, are incorporated by reference in Part III. Items 10, 11, 12, 13 and 14.
 



CARTER VALIDUS MISSION CRITICAL REIT II, INC.
(A Maryland Corporation)
TABLE OF CONTENTS
 
 
Page
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 
 
 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
 
 
 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 
 
 
Item 15.
Item 16.
 
 
 
 



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report on Form 10-K of Carter Validus Mission Critical REIT II, Inc., other than historical facts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We intend for all such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Securities Act and the Exchange Act, as applicable by law. Such statements include, in particular, statements about our plans, strategies and prospects, and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “would,” “could,” “should,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this Annual Report on Form 10-K is filed with the U.S. Securities and Exchange Commission, or SEC. We make no representation or warranty (express or implied) about the accuracy of any such forward-looking statements contained in this Annual Report on Form 10-K, and we do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. We caution investors not to place undue reliance on forward-looking statements, which reflect our management’s view only as of the date of this Annual Report on Form 10-K. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results. The forward-looking statements should be read in light of the risk factors identified in the Item 1A. Risk Factors section of this Annual Report on Form 10-K.

1


PART I
Item 1. Business.
General Description of Business and Operations
Carter Validus Mission Critical REIT II, Inc., or the Company, or we, is a Maryland corporation that was formed on January 11, 2013, and has elected, and currently qualifies, to be taxed as a real estate investment trust, or a REIT, under the Internal Revenue Code of 1986, as amended, or the Code, for federal income tax purposes commencing with its taxable year ended December 31, 2014. Substantially all of our business is conducted through Carter Validus Operating Partnership II, LP, a Delaware limited partnership, or the Operating Partnership, formed on January 10, 2013. The Company is the sole general partner of the Operating Partnership and Carter Validus Advisors II, LLC, or our Advisor, is the special limited partner of the Operating Partnership.
We were formed to invest primarily in quality income-producing commercial real estate, with a focus on data centers and healthcare properties, preferably with long-term leases to creditworthy tenants, as well as to make other real estate-related investments in such property types, which may include equity or debt interests, including securities, in other real estate entities. We also may originate or invest in real estate-related debt.
We raised the equity capital for our real estate investments through two public offerings, or the Offerings, from May 2014 through November 2018, and we have offered shares pursuant to our distribution reinvestment plan, or the DRIP, pursuant to two Registration Statements on Form S-3 (each, a “DRIP Offering” and together the "DRIP Offerings") since November 2017. As of December 31, 2019, we had accepted investors’ subscriptions for and issued approximately 147,707,000 shares of Class A, Class I, Class T and Class T2 common stock in our Offerings, resulting in receipt of gross proceeds of approximately $1,437,115,000, before share repurchases of $87,469,000, selling commissions and dealer manager fees of approximately $96,734,000 and other offering costs of approximately $27,578,000.
As of December 31, 2019, we owned 152 real estate properties, comprising of approximately 8,681,000 rentable square feet of single-tenant and multi-tenant commercial space located in 67 metropolitan statistical areas, or MSA, and two micropolitan statistical areas, or µSA. As of December 31, 2019, the rentable space of these real estate properties was 95.1% leased.
We intend to establish an estimated per share net asset value, or Estimated Per Share NAV on at least an annual basis. Each Estimated Per Share NAV was determined by our board of directors after consultation with our Advisor, and an independent third-party valuation firm. The Estimated Per Share NAV is not subject to audit by our independent registered public accounting firm. The following table outlines the established Estimated Per Share NAV as determined by our board of directors for the last three years as of each valuation date presented below:
Valuation Date
 
Effective Date
 
Estimated Per Share NAV
June 30, 2017
 
October 1, 2017
 
$9.18
June 30, 2018
 
October 1, 2018
 
$9.25
October 31, 2019
 
December 18, 2019
 
$8.65
Substantially all of our business is managed by our Advisor. Our Advisor is managed by, and is a subsidiary of, our sponsor, Carter Validus REIT Management Company II, LLC, or our Sponsor. Carter Validus Real Estate Management Services II, LLC, or our Property Manager, a wholly-owned subsidiary of our Sponsor, serves as our property manager. Our Advisor and our Property Manager received, and will continue to receive, fees during the acquisition and operational stages and our Advisor may be eligible to receive fees during our liquidation stage. SC Distributors, LLC, an affiliate of our Advisor, or our Dealer Manager, served as the dealer manager of our Offerings. The Dealer Manager received fees for services related to our Offerings. We continue to pay the Dealer Manager a distribution and servicing fee with respect to Class T and Class T2 shares that were sold in our Offerings.
Our shares of common stock are not currently listed on a national securities exchange. We may seek to list our shares of common stock for trading on a national securities exchange only if a majority of our independent directors believe listing would be in the best interest of the stockholders. In the event we do not begin the process of achieving a liquidity event on or before the seventh anniversary of the completion or termination of the primary offering of our initial public offering, our charter requires either (a) an amendment to our charter to extend the deadline to begin the process of achieving a liquidity event or (b) the holding of a stockholders meeting to vote on a proposal for an orderly liquidation of our portfolio. A liquidity event could include a sale of all or substantially all our assets, a sale or merger of our company, a listing of our common stock on a national securities exchange (provided we meet the then applicable listing requirements), or other similar transaction.



Except as the context otherwise requires, “we,” “our,” “us,” and the “Company” refer to Carter Validus Mission Critical REIT II, Inc., our Operating Partnership and all wholly-owned subsidiaries.
Our principal executive offices are located at 4890 West Kennedy Blvd., Suite 650, Tampa, Florida 33609. Our telephone number is (813) 287-0101 and our website is www.cvmissioncriticalreit2.com.
Merger with Carter Validus Mission Critical REIT, Inc.
On April 11, 2019, we, along with Carter Validus Mission Critical REIT, Inc., or REIT I, our Operating Partnership, Carter/Validus Operating Partnership, LP, the operating partnership of REIT I, or the REIT I Operating Partnership, and Lightning Merger Sub, LLC, our wholly-owned subsidiary, or Merger Sub, entered into an Agreement and Plan of Merger, or the Merger Agreement.
On October 4, 2019, pursuant to the terms and conditions of the Merger Agreement, REIT I merged with and into Merger Sub, with Merger Sub surviving the REIT Merger, or the Surviving Entity, such that following the REIT Merger, the Surviving Entity continued as our wholly-owned subsidiary. In accordance with the applicable provisions of the Maryland General Corporation Law, the separate existence of REIT I ceased. The combined company after the REIT Merger, or the Combined Company, retained the name “Carter Validus Mission Critical REIT II, Inc.”
The total consideration to REIT I stockholders was $952,768,000, consisting of $178,758,000 in cash and $774,010,000 in equity. Additionally, we paid off REIT I's outstanding debt related to the credit facility in the amount of $248,580,000 at the time of closing of the REIT Merger. In connection with the REIT Merger, we acquired 60 REIT I healthcare properties located in 32 metropolitan statistical areas, or MSAs, encompassing approximately 2,573,000 rentable square feet.
In connection with the REIT Merger, we paid our Advisor an acquisition fee of approximately $24,023,000, which equaled 2.0% of the value of REIT I in the REIT Merger.
Other Key Developments during 2019 and Subsequent
On August 7, 2019, in anticipation of the REIT Merger, we and certain of our subsidiaries amended our credit facility with KeyBank National Association as Administrative Agent for the lenders, or the KeyBank Credit Facility, to amend the borrower to us from the Operating Partnership and to increase the maximum commitments available under the KeyBank Credit Facility, or our credit facility, from $700,000,000 to an aggregate of up to $780,000,000, consisting of a $500,000,000 revolving line of credit, with a maturity date of April 27, 2022, subject to our right to one, 12-month extension period, and a $280,000,000 term loan, with a maturity date of April 27, 2023. During the year ended December 31, 2019, we increased the borrowing base availability under our credit facility by $603,675,000, by adding 64 healthcare properties and one data center property to the aggregate pool availability.
On August 7, 2019, we and certain of our subsidiaries entered into an agreement with KeyBank National Association as Administrative Agent for the lenders, to obtain a senior unsecured term loan, or the Term Loan, for the maximum commitment available of up to $520,000,000 with a maturity date of December 31, 2024. Subject to certain conditions, the Term Loan can be increased to $600,000,000 any time before December 31, 2023. The Term Loan was funded upon the consummation of the REIT Merger on October 4, 2019.
In connection with the REIT Merger, on October 2, 2019, our board of directors approved an amended share repurchase program, or the Amended SRP. The Amended SRP applies to all eligible stockholders, beginning with repurchases made on the first quarter repurchase date of 2020, which was January 30, 2020. For purposes of determining whether any former REIT I stockholder qualifies for participation under the Amended SRP, former REIT I stockholders received full credit for the time they held REIT I common stock prior to the closing of the REIT Merger.
On December 17, 2019, our board of directors established the Estimated Per Share NAV of $8.65, effective December 18, 2019.
During the year ended December 31, 2019, we repurchased 2,557,298 Class A shares, Class I shares, Class T shares and Class T2 shares of common stock (1,910,894 Class A shares, 189,947 Class I shares, 451,058 Class T shares and 5,399 Class T2 shares), or 1.87% of shares outstanding as of December 31, 2018, for an aggregate purchase price of approximately $23,655,000 (an average of $9.25 per share).
During the year ended December 31, 2019, we purchased 67 properties, inclusive of 60 properties acquired in the REIT Merger, comprising approximately 2,874,000 of rentable square feet for an aggregate purchase price of approximately $1,301,630,000.
During the year ended December 31, 2019, we sold one of three buildings and a portion of land related to one healthcare property for an aggregate sale price of $3,106,000 and generated net proceeds of $2,882,000.



As of March 24, 2020, we, through our wholly-owned subsidiaries, owned 153 real estate properties, for an aggregate purchase price of $3,134,875,000 and comprising of approximately 8,696,000 rentable square feet of commercial space.
As of March 24, 2020, we had a $1,003,000,000 outstanding principal balance under our credit facility.
Investment Objectives and Policies
Our primary investment objectives are to:
acquire well-maintained and strategically-located, quality, mission critical real estate investments in high-growth sectors of the U.S. economy, including the data center and healthcare sectors, which provide current cash flow from operations;
pay regular cash distributions to stockholders;
preserve, protect and return capital contributions to stockholders;
realize appreciated growth in the value of our investments upon the sale of such investments in whole or in part; and
be prudent, patient and deliberate with respect to the purchase and sale of our investments considering current and future real estate markets.
We cannot assure stockholders that we will attain these objectives or that the value of our assets will not decrease. Furthermore, within our investment objectives and policies, our Advisor has substantial discretion with respect to the selection of specific investments and the purchase and sale of our assets, subject to the approval of our board of directors. Our board of directors may revise our investment objectives and policies if it determines it is advisable and in the best interest of our stockholders.
Investment Strategy
We focus our investment activities on acquiring mission critical net-leased properties that are primarily in the data center and healthcare sectors. We expect that most of our properties will continue to be located throughout the continental United States; however, we may purchase properties in other jurisdictions. We may also invest in real estate-related debt and securities that meet our investment strategy and return criteria, provided that we do not intend for such investments to constitute a significant portion of our assets, and we will evaluate our assets to ensure that any such investments do not cause us to fail to maintain our REIT status, cause us or any of our subsidiaries to be an investment company under the Investment Company Act of 1940, as amended, or the Investment Company Act, or cause our Advisor to have assets under management that would require our Advisor to register as an investment adviser under the Investment Advisers Act of 1940, as amended, or the Advisers Act.
We seek to obtain investments that are (i) essential to the successful business operations of the tenant, or “mission critical”; (ii) leased to creditworthy and investment grade tenants, preferably on a net-leased basis; long-term leases, preferably with terms of six years or longer, which typically include annual or periodic fixed rental increases; and located in geographically diverse, established markets with superior access and visibility.
As determined appropriate by our Advisor, we may acquire properties in various stages of development or that require substantial refurbishment or renovation. Our Advisor will make this determination based upon a variety of factors, including the available risk-adjusted returns for such properties when compared with other available properties, the effect such properties would have on the diversification of our portfolio, and our investment objectives of realizing both current income and capital appreciation upon the sale of such properties.
To the extent feasible, we will continue to seek to achieve a well-balanced portfolio of real estate investments that is diversified by geographic location, age and lease maturities. We also will focus on acquiring properties in the high-growth data center and healthcare sectors. We expect that tenants of our properties will be diversified between national, regional and local companies.
Creditworthy Tenants
We expect many of the tenants of our properties to be creditworthy national or regional companies with high net worth and high operating income.
A tenant is considered creditworthy if it has a financial profile that our Advisor believes meets our criteria. In evaluating the creditworthiness of a tenant or prospective tenant, our Advisor will not use specific quantifiable standards, but will consider many factors, including, but not limited to, the proposed terms of the property acquisition, the financial condition of the tenant and/or guarantor, the operating history of the property with the tenant, the tenant’s market share and track record within its



industry segment, the general health and outlook of the tenant’s industry segment, and the lease length and other lease terms at the time of the property acquisition.
We monitor the credit of our tenants to stay abreast of any material changes in credit quality. We monitor tenant credit by (1) reviewing the credit ratings of tenants (or their parent companies) that are rated by nationally recognized rating agencies, (2) reviewing financial statements that are publicly available or that are required to be delivered to us under the applicable lease, (3) monitoring news reports and other available information regarding our tenants and their underlying businesses, (4) monitoring the timeliness of rent collections, and (5) conducting periodic inspections of our properties to ascertain proper maintenance, repair and upkeep. As of December 31, 2019, we had two tenants that experienced a deterioration in their creditworthiness since December 31, 2018.
Description of Leases
We generally acquire properties subject to existing tenant leases. When spaces in properties become vacant, existing leases expire, or we acquire properties under development or requiring substantial refurbishment or renovation, we anticipate entering into net leases. Net leases typically require tenants to pay, in addition to a fixed rent, all or a majority of the costs relating to the three broad expense categories of real estate taxes (including special assessments and sales and use taxes), insurance and common area maintenance (including repair and maintenance, utilities, cleaning and other operating expenses related to the property), excluding the roof and structure of the property. Generally, the leases require each tenant to procure, at its own expense, commercial general liability insurance, as well as property insurance covering the building for the full replacement value and naming the ownership entity and the lender, if applicable, as the additional insured on the policy. As a precautionary measure, we may obtain, to the extent available, secondary liability insurance, as well as loss of rents insurance. Tenants will be required to provide proof of insurance by furnishing a certificate of insurance to our Advisor on an annual basis. With respect to multi-tenant properties, we expect to have a variety of lease arrangements with the tenants of these properties. Since each lease is an individually negotiated contract between two or more parties, each lease will have different obligations of both the landlord and tenant. Many large national tenants have standard lease forms that generally do not vary from property to property. We will have limited ability to revise the terms of leases to those tenants. We expect that multi-tenant properties may be subject to "gross" or "modified gross" leases. "Gross" leases require the tenant to pay a fixed rental amount inclusive of all of the tenant's operating expenses. Any operating expenses not covered by the tenant's rental amount are the responsibility of the landlord (including any operating expense increases in subsequent years). "Modified gross" leases typically require the tenant to pay, in addition to a fixed rental, a portion of the operating expenses of the property.
A majority of our acquisitions generally have lease terms of six years or longer at the time of the property acquisition. As of December 31, 2019, the weighted average remaining lease term of our properties was 10.1 years. Under most commercial leases, tenants are obligated to pay a predetermined annual base rent. Some of the leases also will contain provisions that increase the amount of base rent at points during the lease term.
Investment Decisions
Our Advisor may purchase on our account, without the specific prior approval of our board of directors, properties with a purchase price of less than $15,000,000, so long as the investment in the property would not, if consummated, violate our investment guidelines or any restrictions on indebtedness and the consideration to be paid for such properties does not exceed the fair market value of such properties. Where the purchase price is equal to or greater than $15,000,000, investment decisions will be made by our board of directors upon the recommendation of our Advisor.
In evaluating and presenting investments for approval, our Advisor, to the extent such information is available, considers and provides to our board of directors, with respect to each property, the following:
proposed purchase price, terms and conditions;
physical condition, age, curb appeal and environmental reports;
location, visibility and access;
historical financial performance;
tenant rent roll and tenant creditworthiness;
lease terms, including rent, rent increases, length of lease term, specific tenant and landlord responsibilities, renewal, expansion, termination, purchase options, exclusive and permitted uses provisions, assignment and sublease provisions, and co-tenancy requirements;
local market economic conditions, demographics and population growth patterns;
neighboring properties; and
potential for new property construction in the area.



Investing in and Originating Loans
Our criteria for originating or acquiring loans are substantially the same as those involved in our investment in properties. We may invest in mortgage, bridge or mezzanine loans. Further, we may invest in unsecured loans or loans secured by assets other than real estate; however, we will not make unsecured loans or loans not secured by mortgages unless such loans are approved by a majority of our independent directors.
Our underwriting process typically involves comprehensive financial, structural, operational and legal due diligence. We do not require an appraisal of the underlying property from a certified independent appraiser for an investment in mortgage, bridge or mezzanine loans, except for investments in transactions with our directors, our Advisor or any of their affiliates.
We will not make or invest in mortgage, bridge or mezzanine loans on any one property if the aggregate amount of all mortgage, bridge or mezzanine loans outstanding on the property, including our borrowings, would exceed an amount equal to 85% of the appraised value of the property, as determined by our board of directors, including a majority of our independent directors, unless substantial justification exists, as determined by our board of directors, including a majority of our independent directors. Our board of directors may find such justification in connection with the purchase of mortgage, bridge or mezzanine loans in cases in which it believes there is a high probability of our foreclosure upon the property or we intend to foreclose upon the property in order to acquire the underlying assets and, in respect of transactions with our affiliates, in which the cost of the mortgage loan investment does not exceed the appraised value of the underlying property.
We may originate loans from mortgage brokers or personal solicitations of suitable borrowers, or we may purchase existing loans that were originated by other lenders. Our Advisor will evaluate all potential loan investments to determine if the term of the loan, the security for the loan and the loan-to-value ratio meet our investment criteria and objectives.
Investing in Real Estate Securities
We may invest in non-majority owned securities of both publicly-traded and private companies primarily engaged in real estate businesses, including REITs and other real estate operating companies, and securities issued by pass-through entities of which substantially all of the assets consist of qualifying assets or real estate-related assets. We may purchase the common stock, preferred stock, debt, or other securities of these entities or options to acquire such securities. However, any investment in equity securities (including any preferred equity securities) must be approved by a majority of our directors, including a majority of our independent directors, not otherwise interested in the transaction, as being fair, competitive and commercially reasonable.
Acquisition Structure
We have and expect to continue to acquire fee interests in properties (a fee interest is the absolute, legal possession and ownership of land, property, or rights), although other methods of acquiring a property may be utilized if we deem them to be advantageous.
To achieve our investment objectives, and to further diversify our portfolio, we have invested and will continue to invest in properties using a number of acquisition structures, which could include direct and indirect acquisitions, joint ventures, leveraged investments, issuing units in our Operating Partnership in exchange for properties and making mortgages or other loans secured by the same types of properties which we may acquire. Further, our Advisor and its affiliates may purchase properties in their own name, assume loans in connection with the purchase or loan and temporarily hold title to the properties for the purpose of facilitating acquisition or financing by us or any other purpose related to our business.
Joint Ventures
We may enter into joint ventures, partnerships and other co-ownership partnerships for the purpose of making investments. Some of the potential reasons to enter into a joint venture would be to acquire assets we could not otherwise acquire, to reduce our capital commitment to a particular asset, or to benefit from certain expertise a partner might have. In determining whether to invest in a particular joint venture, we evaluate the assets of the joint venture under the same criteria described elsewhere in this Annual Report on Form 10-K for the selection of our investments. In the case of a joint venture, we also evaluate the terms of the joint venture as well as the financial condition, operating capabilities and integrity of our partner or partners. We may enter into joint ventures with our directors and our Advisor (or its affiliates) only if a majority of our board of directors, including a majority of our independent directors, not otherwise interested in the transaction, approves the transaction as being fair and reasonable to us and on substantially the same terms and conditions as those received by the other joint venturers.
Disposition Policy
We intend to hold each asset we acquire for an extended period of time, generally five to seven years, or for the life of the Company. However, circumstances may arise that could result in the earlier sale of some assets. The determination of whether an asset will be sold or otherwise disposed of will be made after consideration of relevant factors, including prevailing



economic conditions, specific real estate market conditions, tax implications for our stockholders, and other factors. The requirements for qualification as a REIT for federal income tax purposes also will put some limits on our ability to sell assets after short holding periods.
The sale price of a property that is net-leased will be determined in large part by the amount of rent payable under the lease and the capitalization rate applied to that rent. If a tenant has a repurchase option at a formula price, we may be limited in realizing any appreciation. In connection with our sales of properties, we may lend the purchaser all or a portion of the purchase price. In these instances, our taxable income may exceed the cash received in the sale. The terms of payment will be affected by custom in the area in which the property being sold is located and the then-prevailing economic conditions.
Qualification as a REIT
We elected, and currently qualify, to be taxed as a REIT under Sections 856 through 860 of the Code commencing with the taxable year ended December 31, 2014. To maintain our qualification as a REIT, we must meet certain organizational and operational requirements, including a requirement to currently distribute at least 90.0% of our REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gain, to our stockholders. As a REIT, we generally will not be subject to federal income tax on taxable income that we distribute to our stockholders.
If we fail to maintain our qualification as a REIT in any taxable year, we would then be subject to federal income taxes on our taxable income at regular corporate rates and would not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could have a material adverse effect on our net income and net cash available for distribution to our stockholders.
Financing Strategy and Policies
We believe that utilizing borrowing is consistent with our investment objectives and has the potential to maximize returns to our stockholders. Financing for acquisitions and investments may be obtained at the time an asset is acquired or an investment is made or at a later time. In addition, debt financing may be used from time to time for property improvements, tenant improvements, leasing commissions and other working capital needs. The form of our indebtedness will vary and could be long-term or short-term, secured or unsecured, or fixed-rate or floating rate. We will not enter into interest rate swaps or caps, or similar hedging transactions or derivative arrangements for speculative purposes, but may do so in order to manage or mitigate our interest rate risk on variable rate debt. We intend to limit our aggregate borrowings to 50% of the fair market value of our assets, unless excess borrowing is approved by a majority of our board of directors, including a majority of our independent directors.
Distribution Policy
The amount of distributions we pay to our stockholders is determined by our board of directors and is dependent on a number of factors, including funds available for payment of distributions, our financial condition, capital expenditure requirements, annual distribution requirements needed to maintain our status as a REIT under the Code and restrictions imposed by our organizational documents and Maryland law.
We currently pay, and intend to continue to pay, monthly distributions to our stockholders. Because all of our operations are performed indirectly through our Operating Partnership, our ability to continue to pay distributions depends on our Operating Partnership’s ability to pay distributions to its partners, including to us. If we do not have enough cash from operations to fund distributions, we may borrow, issue additional securities or sell assets in order to fund distributions, or make distributions out of net proceeds from our Offerings. We have paid, and may continue to pay, distributions from sources other than from our cash flows from operations. Subject to certain exceptions, there is no limit to the amount of distributions that we may pay from our Offering proceeds.
In accordance with our organizational documents and Maryland law, we may not make distributions that would: (1) cause us to be unable to pay our debts as they become due in the usual course of business; (2) cause our total assets to be less than the sum of our total liabilities plus senior liquidation preferences, if any; or (3) jeopardize our ability to maintain our qualification as a REIT.
To the extent that distributions to our stockholders are paid out of our current or accumulated earnings and profits, such distributions are taxable as ordinary income. To the extent that our distributions exceed our current and accumulated earnings and profits, such amounts constitute a return of capital to our stockholders for federal income tax purposes, to the extent of their basis in their stock, and thereafter will constitute capital gain. All or a portion of a distribution to stockholders may be paid from net offering proceeds and thus, will constitute a return of capital to our stockholders.



See Part II, Item 5. "Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Distributions," for further discussion on distribution rates approved by our board of directors.
Conflicts of Interest
We are subject to various conflicts of interest arising out of our relationship with our Advisor, and its affiliates, including conflicts related to the arrangements pursuant to which our Advisor and its affiliates will be compensated by us. See Item 1A- “Risk Factors - Risks Related to Conflicts of Interest.”
Employees
We have no direct employees. The employees of our Advisor and its affiliates provide services for us related to acquisition, property management, asset management, accounting, investor relations, and all other administrative services.
We are dependent on our Advisor and its affiliates for services that are essential to us, including asset acquisition decisions, property management and other general and administrative responsibilities. In the event that these companies are unable to provide these services to us, we would be required to obtain such services from other sources.
Reportable Segments
We operate through two reportable business segments – commercial real estate investments in data centers and healthcare. See Note 12—"Segment Reporting" to the consolidated financial statements that are a part of this Annual Report on Form 10-K.
Insurance
See the section captioned “—Description of Leases” above.
Competition
As we continue to purchase properties for our portfolio, we are in competition with other potential buyers for the same properties, and may have to pay more to purchase the property than if there were no other potential acquirers or we may have to locate another property that meets our investment criteria. Although we generally acquire properties subject to existing leases, the leasing of real estate is highly competitive in the current market, and we may experience competition for tenants from owners and managers of competing projects. As a result, we may have to provide free rent, incur charges for tenant improvements, or offer other inducements, or we might not be able to timely lease the space, all of which may have an adverse impact on our results of operations. At the time we elect to dispose of our properties, we will also be in competition with sellers of similar properties to locate suitable purchasers for our properties.
Concentration of Credit Risk and Significant Leases
As of December 31, 2019, we had cash on deposit, including restricted cash and escrowed funds, in certain financial institutions that had deposits in excess of current federally insured levels. We limit cash investments to financial institutions with high credit standing; therefore, we believe we are not exposed to any significant credit risk on our cash deposits. To date, we have not experienced any loss of or lack of access to cash in our accounts.
The following table shows the segment diversification of our real estate properties based on rental revenue for the year ended December 31, 2019:
Industry
 
Total Number
of Leases
 
Leased Sq Ft
 
2019 Rental Revenue
(in thousands)
(1)
 
Percentage of
2019 Rental Revenue
Data Centers
 
69

 
3,160,184

 
$
109,689

 
52.0
%
Healthcare
 
136

 
5,097,731

 
101,212

 
48.0
%
 
 
205

 
8,257,915

 
$
210,901

 
100.0
%
 
(1)
Based on the total rental revenue recognized and reported in the accompanying consolidated statements of comprehensive (loss) income.



Based on leases of our properties in effect as of December 31, 2019, the following table shows the geographic diversification of our real estate properties that accounted for 10% or more of our rental revenue as of December 31, 2019:
Location
 
Total Number
of Leases
 
Leased Sq Ft
 
2019 Rental Revenue
(in thousands)
(1)
 
Percentage of
2019 Rental Revenue
Atlanta-Sandy Springs-Roswell, GA
 
32

 
964,062

 
$
31,595

 
15.0
%
 
(1)
Based on the total rental revenue recognized and reported in the accompanying consolidated statements of comprehensive (loss) income.
As of December 31, 2019, we had no exposure to tenant concentration that accounted for 10.0% or more of rental revenue for the year ended December 31, 2019.
Environmental Matters
All real properties and the operations conducted on real properties are subject to federal, state and local laws and regulations relating to environmental protection and human health and safety. In connection with ownership and operation of real estate, we may be potentially liable for costs and damages related to environmental matters. We intend to take commercially reasonable steps to protect ourselves from the impact of these laws, including obtaining environmental assessments of all properties that we acquire. We also carry environmental liability insurance on our properties, which provides coverage for pollution liability, for third-party bodily injury and property damage claims.
Available Information
We electronically file our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports with the SEC. We have also filed our Registration Statement on Form S-11, amendments to our Registration Statement and supplements to our prospectus in connection with our Offerings with the SEC. Copies of our filings with the SEC may be obtained from the SEC’s website, http://www.sec.gov. Access to these filings is free of charge. In addition, we make certain materials that are electronically filed with the SEC available at www.cvmissioncriticalreit2.com as soon as reasonably practicable. They are also available for printing by any stockholder upon request.
Item 1A. Risk Factors.
The factors described below represent our principal risks. Other factors may exist that we do not consider to be significant based on information that is currently available or that we are not currently able to anticipate.
Risks Related to an Investment in Carter Validus Mission Critical REIT II, Inc.
The prior performance of real estate investment programs sponsored by affiliates of our Advisor may not be an indication of our future results.
Our stockholders should not rely upon the past performance of other real estate investment programs sponsored by affiliates of our Advisor to predict our future results. Although members of our Advisor’s management have significant experience in the acquisition, finance, management and development of commercial real estate, the prior performance of real estate investment programs sponsored by the members of our advisor's management team and other affiliates of our Advisor may not be indicative of our future results.
We may not succeed in achieving our goals, and our failure to do so could cause our stockholders to lose all or a portion of their investment.
We currently have not identified all of the properties we may purchase with net proceeds from our Offerings. For this and other reasons, an investment in our shares is speculative.
We have not identified all of the properties we may purchase. Additionally, we will not provide stockholders with information to evaluate our investments prior to our acquisition of properties. We have established policies relating to the types of assets we will acquire and the creditworthiness of tenants of our properties, but our advisor has wide discretion in implementing these policies, subject to the oversight of our board of directors. As a result, you will not be able to evaluate the economic merit of our future acquisitions until after such acquisitions have been made. Therefore, an investment in our shares is speculative.



Our shares of common stock will not be listed on an exchange for the foreseeable future, if ever, and we are not required to provide for a liquidity event. Therefore, it may be difficult for stockholders to sell their shares and, if stockholders are able to sell their shares, they will likely sell them at a substantial discount. Our stockholders are also limited in their ability to sell their shares pursuant to our share repurchase program and may have to hold their shares for an indefinite period of time.
There is currently no public market for our shares and there may never be one. In addition, although we presently intend to consider alternatives for providing liquidity to our stockholders no later than five to seven years after the termination of the primary offering of our initial public offering, we do not have a fixed date or method for providing stockholders with liquidity, and our completion of a liquidity event is not guaranteed. If we do not pursue a liquidity transaction, or delay such a transaction due to market conditions, shares may continue to be illiquid and stockholders may, for an indefinite period of time, be unable to convert their investment to cash easily and could suffer losses on their investment.
If our stockholders are able to find a buyer for their shares, our stockholders likely will have to sell them at a substantial discount to their purchase price. Moreover, investors should not rely on our share repurchase program as a method to sell shares promptly because our share repurchase program includes numerous restrictions that limit stockholders' ability to sell shares to us, and our board of directors may suspend (in whole or in part) the share repurchase program at any time, and may amend, reduce or terminate our share repurchase program upon 30 days' prior notice to our stockholders for any reason it deems appropriate. The restrictions of our share repurchase program limit our stockholders’ ability to sell their shares should they require liquidity and limit our stockholders’ ability to recover the value they invested. We limited our share repurchase program to only death, disability and exigent circumstance effective May 11, 2019 in connection with the announcement of the then-pending REIT Merger. On October 2, 2019 our board of directors amended and restated our share repurchase program so that all eligible stockholders may request their shares be repurchased in accordance with the share repurchase program. See Part II, Item 5. "Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities" for more information on the limitations of our share repurchase program.
We may suffer from delays in locating suitable investments, which could adversely affect our ability to make distributions and the value of our stockholders’ investment.
We may suffer from delays in locating suitable investments. Delays we encounter in the selection, acquisition and, if we develop properties, development of income-producing properties, likely would adversely affect our NAV, our ability to make distributions and the value of our stockholders’ overall returns.
The Estimated Per Share NAV of each of our Class A common stock, Class I common stock, Class T common stock and Class T2 common stock is an estimate as of a given point in time and may not reflect the value that stockholders will receive for their investment.
The Estimated Per Share NAV of each of our Class A common stock, Class I common stock, Class T common stock and Class T2 common stock as of October 31, 2019, was determined by our board of directors on December 17, 2019.
The Estimated Per Share NAV was determined after consultation with the Advisor and Robert A. Stanger & Co, Inc., an independent third-party valuation firm, the engagement of which was approved by the Audit Committee. The Financial Industry Regulatory Authority, or FINRA, rules provide no guidance on the methodology an issuer must use to determine its estimated value per share. As with any valuation methodology, our independent valuation firm's methodology is based upon a number of estimates and assumptions that may not be accurate or complete. Different parties with different assumptions and estimates could derive a different estimated value per share, and these differences could be significant. The Estimated Per Share NAV is not audited and does not represent the fair value of our assets or liabilities according to generally accepted accounting principles in the United States on America, or GAAP. Accordingly, with respect to the Estimated Per Share NAV, we can give no assurance that:
a stockholder would be able to resell his or her shares at the Estimated Per Share NAV;
a stockholder would ultimately realize distributions per share equal to the Estimated Per Share NAV upon liquidation of our assets and settlement of our liabilities or a sale of the company;
our shares of common stock would trade at the Estimated Per Share NAV on a national securities exchange;
an independent third-party appraiser or other third-party valuation firm would agree with the Estimated Per Share NAV; or
the methodology used to estimate our NAV per share would be acceptable to FINRA or comply with ERISA reporting requirements.
Further, the Estimated Per Share NAV is based on the estimated value of our assets less the estimated value of our liabilities divided by the number of shares outstanding, calculated as of October 31, 2019. The value of our shares will fluctuate over time in response to developments related to individual assets in the portfolio and the management of those assets and in

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response to the real estate and finance markets. We expect to engage an independent valuation firm to update the Estimated Per Share NAV at least annually.
For a full description of the methodologies used to value our assets and liabilities in connection with the calculation of the Estimated Per Share NAV, see our Current Report on Form 8-K filed with the SEC on December 19, 2019.
It may be difficult to accurately reflect material events that may impact our Estimated Per Share NAV between valuations, and accordingly we may be selling and repurchasing shares at too high or too low a price.
Our independent third-party valuation expert will calculate estimates of the market value of our principal real estate and real estate-related assets, and our board of directors will determine the net value of our real estate and real estate-related assets and liabilities taking into consideration such estimates provided by the independent third-party valuation expert. Our board of directors is ultimately responsible for determining the Estimated Per Share NAV. Since our board of directors will determine our Estimated per share NAV at least annually, there may be changes in the value of our properties that are not fully reflected in the most recent Estimated Per Share NAV. As a result, the published Estimated Per Share NAV may not fully reflect changes in value that may have occurred since the prior valuation. Furthermore, our advisor will monitor our portfolio, but it may be difficult to reflect changing market conditions or material events that may impact the value of our portfolio between valuations, or to obtain timely or complete information regarding any such events. Therefore, the Estimated Per Share NAV published before the announcement of an extraordinary event may differ significantly from our actual per share NAV until such time as sufficient information is available and analyzed, the financial impact is fully evaluated, and the appropriate adjustment is made to our Estimated Per Share NAV, as determined by our board of directors. Any resulting potential disparity in our NAV may inure to the benefit of redeeming stockholders or non-redeeming stockholders and purchasers of our common stock, depending on whether our published Estimated Per Share NAV for such class is overstated or understated.
We expect that most of our properties will continue to be located in the continental United States and would be affected by economic downturns, as well as economic cycles and risks inherent to that area.
We expect to continue to acquire commercial real estate located in the continental United States; however, we may purchase properties in other jurisdictions. Real estate markets are subject to economic downturns, as they have been in the past, and we cannot predict how economic conditions will impact this market in both the short and long term. Declines in the economy or a decline in the real estate market in the continental United States could hurt our financial performance and the value of our properties. The factors affecting economic conditions in the continental United States include, but are not limited to:
financial performance and productivity of the publishing, advertising, financial, technology, retail, insurance and real estate industries;
business layoffs or downsizing;
industry slowdowns;
relocations of businesses;
changing demographics;
increased telecommuting and use of alternative workplaces;
infrastructure quality;
any oversupply of, or reduced demand for, real estate;
concessions or reduced rental rates under new leases for properties where tenants defaulted;
increased insurance premiums; and
increased interest rates.
Distributions paid from sources other than our cash flows from operations, including from the proceeds of our Offerings, will result in us having fewer funds available for the acquisition of properties and real estate-related investments, which may adversely affect our ability to fund future distributions with cash flows from operations and may adversely affect a stockholder's overall return.
We have paid, and may continue to pay, distributions from sources other than from our cash flows from operations. For the year ended December 31, 2019, our cash flows provided by operations of approximately $80.1 million was a shortfall of approximately $9.3 million, or 10.4%, of our distributions paid (total distributions were approximately $89.4 million, of which $49.5 million was cash and $39.9 million was reinvested in shares of our common stock pursuant to the DRIP) during such period and such shortfall was paid from proceeds from our DRIP Offering. For the year ended December 31, 2018, our cash flows provided by operations of approximately $74.2 million was a shortfall of approximately $7.0 million, or 8.6% of our

11


distributions paid (total distributions were approximately $81.2 million, of which $40.3 million was cash and $40.9 million was reinvested in shares of our common stock pursuant to the DRIP) during such period and such shortfall was paid from proceeds from our DRIP Offering.
We may pay, and have no limits on the amounts we may pay, distributions from any source, such as from borrowings, the sale of assets, the sale of additional securities, advances from our Advisor, our Advisor’s deferral, suspension and/or waiver of its fees and expense reimbursements. Funding distributions from borrowings could restrict the amount we can borrow for investments, which may affect our profitability. Funding distributions from the sale of assets may affect our ability to generate cash flows. Funding distributions from the sale of additional securities could dilute stockholders' interest in us if we sell shares of our common stock to third party investors. As a result, the return investors may realize on their investment may be reduced and investors who invested in us before we generated significant cash flow may realize a lower rate of return than later investors. Payment of distributions from any of the aforementioned sources could restrict our ability to generate sufficient cash flows from operations, affect our profitability and/or affect the distributions payable upon a liquidity event, any or all of which may have an adverse effect on an investment in us.
We have experienced losses in the past, and we may experience additional losses in the future.
Historically, we have experienced net losses and we may not be profitable or realize growth in the value of our investments. Many of our losses can be attributed to operating costs incurred prior to purchasing properties or making other investments that generate revenue and impairment related expenses. For further discussion of our operational history and the factors affecting our losses, see the “Selected Financial Data” section of the Annual Report on Form 10-K, as well as the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and our consolidated financial statements and the notes included in this Annual Report on Form 10-K for a discussion of our operational history and the factors for our losses.
A high concentration of our properties in a particular geographic area, or of tenants in a similar industry, would magnify the effects of downturns in that geographic area or industry.
As of December 31, 2019, we owned 152 properties, located in 67 MSAs, and two µSAs, one of which accounted for 10.0% or more of our revenue for the year ended December 31, 2019. Properties located in the Atlanta-Sandy Springs-Roswell, Georgia MSA accounted for 15.0% of our rental revenue for the year ended December 31, 2019. There is a geographic concentration of risk subject to fluctuations in each MSA’s economy. Geographic concentration of our properties exposes us to economic downturns in the areas where our properties are located. A regional or local recession in any of these areas could adversely affect our ability to generate or increase operating revenues, attract new tenants or dispose of unproductive properties. Similarly, if tenants of our properties become concentrated in a certain industry or industries, any adverse effect to that industry generally would have a disproportionately adverse effect on our portfolio.
As of December 31, 2019, we had no exposure to tenant concentration that accounted for 10.0% or more of rental revenue for the year ended December 31, 2019.
If our Advisor loses or is unable to obtain key personnel, our ability to implement our investment strategies could be delayed or hindered, which could adversely affect our ability to make distributions and the value of our stockholders’ investment.
Our success depends to a significant degree upon the contributions of certain of our executive officers and other key personnel of our Advisor, including Michael A. Seton and Kay C. Neely, who would be difficult to replace. Our Advisor does not have an employment agreement with any of these key personnel and we cannot guarantee that all, or any particular one, will remain affiliated with us and/or our Advisor. If any of our key personnel were to cease their affiliation with our Advisor, our operating results could suffer. Further, we do not currently intend to separately maintain key person life insurance on Michael A. Seton and Kay C. Neely or any other person. We believe that our future success depends, in large part, upon our Advisor’s ability to hire and retain highly skilled managerial, operational and marketing personnel. Competition for such personnel is intense, and we cannot assure our stockholders that our Advisor will be successful in attracting and retaining such skilled personnel. If our Advisor loses or is unable to obtain the services of key personnel, our ability to implement our investment strategies could be delayed or hindered, and the value of our stockholders’ investment may decline.
Our rights and the rights of our stockholders to recover claims against our officers, directors and our Advisor are limited, which could reduce our stockholders’ and our recovery against them if they cause us to incur losses.
Maryland law provides that a director has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in the corporation’s best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. In addition, subject to certain limitations set forth therein or under Maryland law, our charter provides that no director or officer will be liable to us or our stockholders for money damages, requires us to indemnify and advance expenses to our directors, officers and Advisor and our Advisor’s affiliates and permits us, with approval of our board of directors or a committee of the board of directors' to indemnify our employees and agents. Although our charter does not allow us to indemnify or hold harmless an indemnitee to a greater extent than permitted under

12


Maryland law and the North American Securities Administrators Association REIT Guidelines, or the NASAA REIT Guidelines, we and our stockholders may have more limited rights against our directors, officers, employees and agents, and our Advisor and its affiliates than might otherwise exist under common law, which could reduce our stockholders’ and our ability to recover against them. In addition, we may be obligated to fund the defense costs incurred by our directors, officers, employees and agents or our Advisor and its affiliates in some cases, which would decrease the cash otherwise available for distribution to stockholders.
The failure of any bank in which we deposit our funds could reduce the amount of cash we have available to pay distributions, make additional investments and service our debt.
We currently have cash and cash equivalents and restricted cash deposited in certain financial institutions in excess of federally insurable levels. The Federal Deposit Insurance Corporation only insures interest-bearing accounts in amounts up to $250,000 per depositor per insured bank. While we monitor our cash balance in our operating accounts, if any of the banking institutions in which we deposit funds ultimately fails, we may lose our deposits over $250,000. The loss of our deposits may have a material adverse effect on our financial condition.
Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results.
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources. These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption. The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our tenant and investor relationships. As our reliance on technology has increased, so have the risks posed to our information systems, both internal and those we have outsourced. There is no guarantee that any processes, procedures and internal controls we have implemented or will implement will prevent cyber intrusions, which could have a negative impact on our financial results, operations, business relationships or confidential information.
Risks Related to Conflicts of Interest
We are subject to conflicts of interest arising out of our relationships with our Advisor and its affiliates, including the material conflicts discussed below. See the “Conflicts of Interest” section of Part I, Item I. of this Annual Report on Form 10-K.
Our Advisor and its affiliates, including officers and some of our directors, face conflicts of interest caused by compensation arrangements, which could result in actions that are not in the best interest of our stockholders.
Our Advisor and its affiliates receive substantial fees from us in return for their services and these fees could influence the advice provided to us. Among other matters, the compensation arrangements could affect our Advisor’s judgment with respect to, but not limited to, the following: (i) real estate acquisitions, which allow our Advisor to earn acquisition fees upon repurchases of assets and to increase asset management fees; (ii) real estate asset sales, since the asset management fees payable to our Advisor would decrease and our Advisor would be entitled to a disposition fee upon sales; and (iii) whether and when we seek to list our common stock on a national securities exchange, which would entitle our Advisor, as a special limited partner of our Operating Partnership, to have its interests in our Operating Partnership redeemed. These fees may incentive our Advisor to recommend transactions that may not be in our best interest at the time, and our Advisor will have considerable discretion with respect to the terms of any acquisition, disposition or leasing transaction.
The fees we pay our Advisor and its affiliates were not determined on an arm’s-length basis; therefore, we do not have the benefit of arm’s-length negotiations of the type normally conducted between unrelated parties.
The fees to be paid to our Advisor, our Property Manager and other affiliates for services they provide for us were not determined on an arm’s-length basis. As a result, the fees have been determined without the benefit of arm’s-length negotiations of the type normally conducted between unrelated parties and could be in excess of amounts that we would otherwise pay to third parties for such services.
The time and resources that affiliates of our Sponsor devote to us may be diverted, and we may face additional competition due to the fact that affiliates of our Sponsor are not prohibited from raising money for, or managing, another entity that makes the same types of investments we target.
Affiliates of our Sponsor are not prohibited from raising money for, or managing, another investment entity that makes the same types of investments as those we target. As a result, the time and resources they could devote to us may be diverted to other investment activities. We could compete with affiliates of our Advisor for the same investment opportunities and

13


investors. We may also co-invest with any such affiliate. Even though all co-investments are subject to approval by our independent directors, they could be on terms not as favorable to us as those we could achieve co-investing with a third-party.
Our officers and directors face conflicts of interest related to the positions they hold with affiliated entities, which could hinder our ability to successfully implement our business strategy and generate returns to our stockholders.
Certain of our executive officers and directors, including Michael A. Seton, Kay C. Neely and John E. Carter, who serves as the chairman of our board of directors, also are officers and/or directors of our Advisor, our Property Manager, and/or other affiliated entities. As a result, these individuals owe fiduciary duties to these other entities and their stockholders and limited partners, which fiduciary duties may conflict with the duties that they owe to us and our stockholders. Their loyalties to these other entities could result in actions or inactions that are detrimental to our business, which could harm the implementation of our business strategy and our investment and leasing opportunities. Conflicts with our business and interests are most likely to arise from involvement in activities related to:
allocation of management time and services between us and the other entities,
the timing and terms of the investment in or sale of an asset,
development of our properties by affiliates,
investments with affiliates of our Advisor,
compensation to our Advisor, and
our relationship with our Property Manager.
If we do not successfully implement our business strategy, we may be unable to generate cash needed to continue to make distributions to our stockholders and to maintain or increase the value of our assets.
There is no separate counsel for us and our affiliates, which could result in conflicts of interest.
Morrison & Foerster LLP acts as legal counsel to us and also represents our Advisor and some of its affiliates. There is a possibility in the future that the interests of the various parties may become adverse and, under the Code of Professional Responsibility of the legal profession, Morrison & Foerster LLP may be precluded from representing any one or all such parties. If any situation arises in which our interests appear to be in conflict with those of our Advisor or its affiliates, additional counsel may be retained by one or more of the parties to assure that their interests are adequately protected. Moreover, should a conflict of interest not be readily apparent, Morrison & Foerster LLP may inadvertently act in derogation of the interest of the parties, which could affect our ability to meet our investment objectives.
Risks Related to Our Corporate Structure
The limit on the number of shares a person may own may discourage a takeover that could otherwise result in a premium price to our stockholders and may hinder a stockholder's ability to dispose of his or her shares.
Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT. In this respect, among other things, unless exempted (prospectively or retroactively) by our board of directors, no person may own more than 9.8% in value of the aggregate of our outstanding shares of stock or more than 9.8% (in value or number, whichever is more restrictive) of the aggregate of the outstanding shares of our common stock. This restriction may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all our assets) that might provide a premium price for holders of our common stock, and may make it more difficult for a stockholder to sell or dispose of his or her shares.
Our charter permits our board of directors to issue stock with terms that may subordinate the rights of common stockholders or discourage a third party from acquiring us in a manner that might result in a premium price to our stockholders.
Our charter permits our board of directors to issue up to 510,000,000 shares of common stock, of which 185,000,000 are designated as Class A shares, 75,000,000 are designated as Class I shares, 175,000,000 are designated as Class T shares, and 75,000,000 are designated as Class T2 shares, and 100,000,000 shares of preferred stock. In addition, our board of directors, without any action by our stockholders, may amend our charter from time to time to increase or decrease the aggregate number of shares or the number of shares of any class or series of stock that we have authority to issue. Our board of directors may classify or reclassify any unissued common stock or preferred stock into other classes or series of stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of repurchase of any such stock. Thus, if also approved by a majority of our independent directors not otherwise interested in the transaction, who will have access, at our expense, to our legal counsel or independent legal counsel, our board of directors could authorize the issuance of additional preferred stock with terms and

14


conditions that could have a priority as to distributions and amounts payable upon liquidation over the rights of the holders of our common stock. Preferred stock could also have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all our assets) that might provide a premium price for holders of our common stock.
Although we are not currently afforded the full protection of the Maryland General Corporation Law relating to deterring or defending hostile takeovers, our board of directors could opt into these provisions of Maryland law in the future, which may discourage others from trying to acquire control of us and may prevent stockholders from receiving a premium price for their stock in connection with a business combination.
Under Maryland law, “business combinations” between a Maryland corporation and certain interested stockholders or affiliates of interested stockholders are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. Also under Maryland law, control shares of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquirer, an officer of the corporation or an employee of the corporation who is also a director of the corporation are excluded from the vote on whether to accord voting rights to the control shares. Should our board of directors opt into these provisions of Maryland law, it may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer. Similarly, Title 3, Subtitle 8 of the Maryland General Corporation Law could provide similar anti-takeover protection.
Our stockholders’ investment return may be reduced if we were to be required to register as an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). If we lose our exemption from registration under the 1940 Act, we would not be able to continue its business unless and until we register under the 1940 Act.
We do not intend to register as an investment company under the 1940 Act. As of December 31, 2019, we owned 152 properties, and investments in real estate will represent the substantial majority of our total asset mix, which would not subject us to the 1940 Act. In order to maintain an exemption from regulation under the 1940 Act, we must engage primarily in the business of buying real estate.
To maintain compliance with our 1940 Act exemption, we may be unable to sell assets we would otherwise want to sell and may need to sell assets we would otherwise wish to retain. In addition, we may be required to acquire additional income- or loss-generating assets that we might not otherwise acquire or forego opportunities to acquire interests in companies that we would otherwise want to acquire. If we are required to register as an investment company but fail to do so, we would be prohibited from engaging in our business, and criminal and civil actions could be brought against us. In addition, our contracts would be unenforceable unless a court required enforcement, and a court could appoint a receiver to take control of us and liquidate our business.
If our stockholders do not agree with the decisions of our board of directors, our stockholders will only have limited control over changes in our policies and operations and may not be able to change such policies and operations.
Our board of directors determines our major policies, including our policies regarding investments, financing, growth, debt capitalization, REIT qualification and distributions. Our board of directors may amend or revise these and other policies without a vote of the stockholders except to the extent that such policies are set forth in our charter. Under the Maryland General Corporation Law and our charter, our stockholders have a right to vote only on the following:
the election or removal of directors;
the amendment of our charter (including a change in our investment objectives), except that our board of directors may amend our charter without stockholder approval to (a) increase or decrease the aggregate number of our shares or the number of shares of any class or series that we have the authority to issue, (b) effect certain reverse stock splits, and (c) change our name or the name or other designation or the par value of any class or series of our stock and the aggregate par value of our stock;
our liquidation or dissolution; and
certain mergers, reorganizations of our company (including statutory share exchanges), consolidations or sales or other dispositions of all or substantially all our assets, as provided in our charter and under Maryland law.
All other matters are subject to the discretion of our board of directors.
Our board of directors may change our investment policies without stockholder approval, which could alter the nature of our stockholders' investments.
Our charter requires that our independent directors review our investment policies at least annually to determine that the policies we are following are in the best interest of the stockholders. These policies may change over time. The methods of

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implementing our investment objectives and strategies also may vary, as new real estate development trends emerge and new investment techniques are developed. Except to the extent that policies and investment limitations are included in our charter, our investment policies, the methods for their implementation, and our other objectives, policies and procedures may be altered by our board of directors without the approval of our stockholders. As a result, the nature of our stockholders' investment could change without their consent.
Because of our holding company structure, we depend on our operating subsidiary and its subsidiaries for cash flow and we will be structurally subordinated in right of payment to the obligations of such operating subsidiary and its subsidiaries.
We are a holding company with no business operations of our own. Our only significant asset is and will be the general partnership interests of our Operating Partnership. We intend to conduct substantially all of our business operations through our Operating Partnership. Accordingly, our only source of cash to pay our obligations will be distributions from our Operating Partnership and its subsidiaries of their net earnings and cash flows. We cannot give assurance that our Operating Partnership or its subsidiaries will be able to, or be permitted to, make distributions to us that will enable us to make distributions to our stockholders from cash flows from operations. Each of our Operating Partnership’s subsidiaries will be a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from such entities. In addition, because we are a holding company, stockholders’ claims as stockholders will be structurally subordinated to all existing and future liabilities and obligations of our Operating Partnership and its subsidiaries. Therefore, in the event of our bankruptcy, liquidation or reorganization, our assets and those of our Operating Partnership and its subsidiaries will be able to satisfy our stockholders’ claims as stockholders only after all of our and our Operating Partnership’s and its subsidiaries’ liabilities and obligations have been paid in full.
Our stockholders’ interest in us will be diluted if we issue additional shares.
Existing stockholders do not have preemptive rights to any shares issued by us in the future. Our charter authorizes 610,000,000 shares of stock, of which 510,000,000 shares are classified as common stock and 100,000,000 are classified as preferred stock. Of the 510,000,000 shares of common stock, 185,000,000 shares are designated as Class A shares, 75,000,000 shares are designated as Class I shares, 175,000,000 shares are designated as Class T shares and 75,000,000 shares are designated as Class T2 shares. Subject to any limitations set forth under Maryland law, our board of directors may increase the number of authorized shares of stock, increase or decrease the number of shares of any class or series of stock designated, or reclassify any unissued shares without the necessity of obtaining stockholder approval. All such shares may be issued in the discretion of our board of directors. Therefore, existing stockholders would experience dilution of their equity investment in us if we (i) sell additional shares in the future, including those issued pursuant to our DRIP Offering, (2) sell securities that are convertible into shares of our common stock, (3) issue shares of our common stock in a private offering of securities to institutional investors, (4) issue restricted shares of our common stock to our independent directors, (5) issue shares of our common stock in a merger or to sellers of properties acquired by us in connection with an exchange of limited partnership interests of our Operating Partnership. Because the limited partnership interests of our Operating Partnership may, in the discretion of our board of directors, be exchanged for shares of our common stock, any merger, exchange or conversion between our Operating Partnership and another entity ultimately could result in the issuance of a substantial number of shares of our common stock, thereby diluting the percentage ownership interest of other stockholders. Because of these and other reasons, our stockholders may experience substantial dilution in their percentage ownership of our shares.
If we internalize our management functions, the percentage of our outstanding common stock owned by our stockholders could be reduced, and we could incur other significant costs associated with being self-administered.
In the future, our board of directors may consider internalizing the functions performed for us by our Advisor. The method by which we could internalize these functions could take many forms, including without limitation, acquiring our Advisor. There is no assurance that internalizing our management functions would be beneficial to us and our stockholders. Any internalization transaction could result in significant payments to the owners of our Advisor, including in the form of our stock, which could reduce the percentage ownership of our then existing stockholders and concentrate ownership in the owner of our Advisor. Additionally, we may not realize the perceived benefits, we may not be able to properly integrate a new staff of managers and employees or we may not be able to effectively replicate the services provided previously by our Advisor, Property Manager or their affiliates. Internalization transactions involving the acquisition of advisors or property managers affiliated with entity sponsors have also, in some cases, been the subject of litigation. Even if these claims are without merit, we could be forced to spend significant amounts of money defending claims, which would reduce the amount of funds available for us to invest in properties or other investments and to pay distributions. All of these factors could have a material adverse effect on our results of operations, financial condition and ability to pay distributions to our stockholders.
Payment of fees and expenses to our Advisor and our Property Manager will reduce the cash available for distribution and will increase the risk that our stockholders will not be able to recover the amount of their investment in our shares.
Our Advisor and our Property Manager perform services for us, including, among other things, the selection and acquisition of our investments, the management of our assets, dispositions of assets, financing of our assets and certain

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administrative services. We pay our Advisor and our Property Manager fees and expense reimbursements for these services, which will reduce the amount of cash available for further investments or distribution to our stockholders.
We may be unable to maintain cash distributions or increase distributions over time.
There are many factors that can affect the availability and timing of cash distributions to stockholders. The amount of cash available for distributions is affected by many factors, such as our ability to buy properties, rental income from such properties and our operating expense levels, as well as many other variables. Actual cash available for distributions may vary substantially from estimates. We cannot assure our stockholders that we will be able to maintain our current level of distributions or that distributions will increase over time. We also cannot give any assurance that rents from our properties will increase, that the securities we buy will increase in value or provide constant or increased distributions over time, or that future acquisitions of real properties or any investments in securities will increase our cash available for distributions to stockholders. Our actual results may differ significantly from the assumptions used by our board of directors in establishing the distribution rate to stockholders. We may not have sufficient cash from operations to make a distribution required to maintain our REIT status. We may make distributions from the proceeds of our Offerings or from borrowings in anticipation of future cash flow. Any such distributions will constitute a return of capital and may reduce the amount of capital we ultimately invest in properties and negatively impact the value of our stockholders’ investment.
General Risks Related to Investments in Real Estate
Our operating results will be affected by economic and regulatory changes that have an adverse impact on the real estate market in general, which may prevent us from being profitable or from realizing growth in the value of our real estate properties.
Our operating results are subject to risks generally incident to the ownership of real estate, including:
changes in general economic or local conditions;
changes in supply of or demand for similar or competing properties in an area;
changes in interest rates and availability of permanent mortgage funds that may render the sale of a property difficult or unattractive;
changes in tax, real estate, environmental and zoning laws; and
periods of high interest rates and tight money supply.
These and other reasons may prevent us from being profitable or from realizing growth or maintaining the value of our real estate properties.
If a tenant declares bankruptcy, we may be unable to collect balances due under relevant leases, which would reduce our cash flow from operations and the amount available for distributions to our stockholders.
Any of our tenants, or any guarantor of a tenant’s lease obligations, could be subject to a bankruptcy proceeding pursuant to Title 11 of the bankruptcy laws of the United States. Such a bankruptcy filing would bar all efforts by us to collect pre-bankruptcy debts from these entities or their properties, unless we receive an enabling order from the bankruptcy court. Post-bankruptcy debts would be paid currently. If a lease is assumed, all pre-bankruptcy balances owing under it must be paid in full. If a lease is rejected by a tenant in bankruptcy, we would have a general unsecured claim for damages. If a lease is rejected, it is unlikely we would receive any payments from the tenant because our claim is capped at the rent reserved under the lease, without acceleration, for the greater of one year or 15% of the remaining term of the lease, but not greater than three years, plus rent already due but unpaid. This claim could be paid only if funds were available, and then only in the same percentage as that realized on other unsecured claims.
A tenant or lease guarantor bankruptcy could delay efforts to collect past due balances under the relevant leases, and could ultimately preclude full collection of these sums. Such an event could cause a decrease or cessation of rental payments that would mean a reduction in our cash flow and the amount available for distributions to our stockholders. In the event of a bankruptcy, we cannot give assurance that the tenant or its trustee will assume our lease. If a given lease, or guaranty of a lease, is not assumed, our cash flow and the amounts available for distributions to our stockholders may be adversely affected.
Our investments in properties where the underlying tenant has a below investment grade credit rating, as determined by major credit rating agencies, or unrated tenants, may have a greater risk of default and therefore may have an adverse impact on our returns on that asset and our operating results.
During the year ended December 31, 2019, approximately 14.5% of our total rental revenue was derived from tenants that had an investment grade credit rating from a major ratings agency, 24.0% of our total rental revenue was derived from tenants that were rated but did not have an investment grade credit rating from a major ratings agency and 61.5% of our total rental

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revenue was derived from tenants that were not rated. Approximately 18.8% of our total rental revenue was derived from non-rated tenants that were affiliates of companies having an investment grade credit rating. Our investments with tenants that do not have an investment grade credit rating from a major ratings agency or were not rated and are not affiliated with companies having an investment grade credit rating may have a greater risk of default and bankruptcy than investments in properties leased exclusively to investment grade tenants. When we invest in properties where the tenant does not have a publicly available credit rating, we use certain credit assessment tools as well as rely on our own estimates of the tenant’s credit rating which include but are not limited to reviewing the tenant’s financial information (i.e., financial ratios, net worth, revenue, cash flows, leverage and liquidity) and monitoring local market conditions. If our lender or a credit rating agency disagrees with our ratings estimates, or our ratings estimates are otherwise inaccurate, we may not be able to obtain our desired level of leverage or our financing costs may exceed those that we projected. This outcome could have an adverse impact on our returns on that asset and hence our operating results.
If a sale-leaseback transaction is re-characterized in a tenant’s bankruptcy proceeding, our financial condition could be adversely affected.
We have entered and may continue to enter into sale-leaseback transactions, whereby we would purchase a property and then lease the same property back to the person from whom we purchased it. In the event of the bankruptcy of a tenant, a transaction structured as a sale-leaseback may be re-characterized as either a financing or a joint venture, either of which outcome could adversely affect our business. If the sale-leaseback were re-characterized as a financing, we might not be considered the owner of the property, and as a result would have the status of a creditor in relation to the tenant. In that event, we would no longer have the right to sell or encumber our ownership interest in the property. Instead, we would have a claim against the tenant for the amounts owed under the lease, with the claim arguably secured by the property. The tenant/debtor might have the ability to propose a plan restructuring the term, interest rate and amortization schedule of its outstanding balance. If confirmed by the bankruptcy court, we could be bound by the new terms, and prevented from foreclosing our lien on the property. If the sale-leaseback were re-characterized as a joint venture, our lessee and we could be treated as co-venturers with regard to the property. As a result, we could be held liable, under some circumstances, for debts incurred by the lessee relating to the property. Either of these outcomes could adversely affect our cash flow and the amount available for distributions to our stockholders.
Properties that have vacancies for a significant period of time could be difficult to sell, which could diminish the return on our stockholders’ investment.
A property may incur vacancies either by the continued default of tenants under their leases or the expiration of tenant leases. If vacancies continue for a long period of time, we may suffer reduced revenues, resulting in less cash to be distributed to stockholders. In addition, because properties’ market values depend principally upon the value of the properties’ leases, the resale value of properties with prolonged vacancies could suffer, which could further reduce our stockholders’ return.
We may obtain only limited warranties when we purchase a property and would have only limited recourse if our due diligence did not identify any issues that lower the value of our property.
The seller of a property often sells such property in its “as is” condition on a “where is” basis and “with all faults,” without any warranties of merchantability or fitness for a particular use or purpose. In addition, purchase agreements may contain only limited warranties, representations and indemnifications that will only survive for a limited period after the closing. The purchase of properties with limited warranties increases the risk that we may lose some or all of our invested capital in the property as well as the loss of rental income from that property.
We may be unable to secure funds for future tenant improvements or capital needs, which could adversely impact our ability to pay cash distributions to our stockholders.
When tenants do not renew their leases or otherwise vacate their space, it is usual that, in order to attract replacement tenants, we will be required to expend substantial funds for tenant improvements and tenant refurbishments to the vacated space. In addition, although we expect that our leases with tenants will require tenants to pay routine property maintenance costs, we will likely be responsible for any major structural repairs, such as repairs to the foundation, exterior walls and rooftops. We will use substantially all of our gross offering proceeds to buy real estate and pay various fees and expenses. Accordingly, if we need additional capital in the future to improve or maintain our properties or for any other reason, we will have to obtain financing from other sources, such as cash flow from operations, borrowings, property sales or future equity offerings. These sources of funding may not be available on attractive terms or at all. If we cannot procure additional funding for capital improvements, our investments may generate lower cash flows or decline in value, or both.
Our inability to sell a property when we desire to do so could adversely impact our ability to pay cash distributions to our stockholders.
The real estate market is affected by many factors, such as general economic conditions, availability of financing, interest rates and other factors, including supply and demand, that are beyond our control. We cannot predict whether we will be able to

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sell any property for the price or on the terms set by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We cannot predict the length of time needed to find a willing purchaser and to close the sale of a property.
We may be required to expend funds to correct defects or to make improvements before a property can be sold. We cannot give assurance that we will have funds available to correct such defects or to make such improvements. Moreover, in acquiring a property, we may agree to restrictions that prohibit the sale of that property for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that property. These provisions would restrict our ability to sell a property.
We may not be able to sell a property at a price equal to, or greater than, the price for which we purchased such property, which may lead to a decrease in the value of our assets and a reduction in the value of shares held by our stockholders.
Some of our leases will not contain rental increases over time, or the rental increases may be less than the fair market rate at a future point in time. Therefore, the value of the property to a potential purchaser may not increase over time, which may restrict our ability to sell a property, or if we are able to sell such property, may lead to a sale price less than the price that we paid to purchase the property.
We may acquire or finance properties with lock-out provisions, which may prohibit us from selling a property, or may require us to maintain specified debt levels for a period of years on some properties.
A lock-out provision is a provision that prohibits the prepayment of a loan during a specified period of time. Lock-out provisions could materially restrict us from selling or otherwise disposing of or refinancing properties. These provisions would affect our ability to turn our investments into cash and thus affect cash available for distributions to our stockholders. Lock-out provisions may prohibit us from reducing the outstanding indebtedness with respect to any properties, refinancing such indebtedness on a non-recourse basis at maturity, or increasing the amount of indebtedness with respect to such properties. Lock-out provisions could impair our ability to take other actions during the lock-out period that could be in the best interests of our stockholders and, therefore, may have an adverse impact on the value of the shares, relative to the value that would result if the lock-out provisions did not exist. In particular, lock-out provisions could preclude us from participating in major transactions that could result in a disposition of our assets or a change in control even though that disposition or change in control might be in the best interests of our stockholders.
Rising expenses could reduce cash flow and funds available for future acquisitions or distributions to our stockholders.
Our properties and any other properties that we buy in the future will be subject to operating risks common to real estate in general, any or all of which may negatively affect us. If any property is not fully occupied or if rents are being paid in an amount that is insufficient to cover operating expenses, we could be required to expend funds with respect to that property for operating expenses. The properties will be subject to increases in tax rates, utility costs, operating expenses, insurance costs, repairs and maintenance and administrative expenses. While we expect that many of our properties will continue to be leased on a net lease basis or require the tenants to pay all or a portion of such expenses, renewals of leases or future leases may not be negotiated on that basis, in which event we may have to pay those costs. If we are unable to lease properties on a net lease basis or on a basis requiring the tenants to pay all or some of such expenses, or if tenants fail to pay required tax, utility and other impositions, we could be required to pay those costs, which could adversely affect funds available for future acquisitions or cash available for distributions.
The outbreak of widespread contagious disease, such as the Coronavirus, could adversely impact the value of our investments, the ability to meet our capital and operating needs or make cash distributions to our stockholders.
The widespread outbreak of infectious or contagious disease, such as H1N1 influenza (swine flu), avian bird flu, SARS, the Coronavirus (COVID-19) and Zika virus, could adversely impact our ability to generate income sufficient to meet operating expenses or generate income and capital appreciation, if any, at rates lower than those anticipated or available through investments in comparable real estate or other investments.
We also may depend on access to third-party sources to continue our investing activities and pay distributions to our stockholders. Our access to third-party sources depends on, in part, general market conditions, including conditions that are out of our control, such as the impact of health and safety concerns like the COVID-19 outbreak.
As of the date of this Annual Report on Form 10-K, COVID-19 has affected more than 100 countries and has significantly disrupted the day-to-day activities of individuals and businesses.
Further, as it relates to our healthcare properties, such a crisis could diminish the public trust in healthcare facilities, especially hospitals or facilities that fail to accurately or timely diagnose, or other facilities such as medical office buildings that are treating (or have treated) patients affected by contagious diseases. If any of our facilities were involved in treating patients for such a contagious disease, other patients might cancel elective procedures or fail to seek needed care from our tenants’ facilities. In addition, a flu pandemic or other widespread illness such as coronavirus could significantly increase the cost

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burdens faced by our tenants, including if they are required to increase staffing and/or implement quarantines. Further, a pandemic might adversely impact our tenants’ businesses by causing a temporary shutdown or diversion of patients, by disrupting or delaying production and delivery of materials and products in the supply chain or by causing staffing shortages in those facilities, which could have a material adverse impact on our business, financial condition, results of operations and our ability to pay distributions.
The extent to which our business may be affected by COVID-19 will largely depend on future developments with respect to the continued spread and treatment of the virus, which we cannot accurately predict. New information and developments may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact. Our business and financial results could be materially and adversely impacted.
Terrorist attacks, acts of violence or war or public health crises may affect the markets in which we operate and have a material adverse effect on our financial condition, results of operations and ability to pay distributions to our stockholders.
Terrorist attacks, acts of war and public health crises (including the recent COVID-19 outbreak) may negatively affect our operations and our stockholders’ investments. We may acquire real estate assets located in areas that are susceptible to terrorist attacks, acts of war, or public health crises. These events may directly impact the value of our assets through damage, destruction, loss or increased security costs. Although we may obtain terrorism insurance, we may not be able to obtain sufficient coverage to fund any losses we may incur. Risks associated with potential acts of terrorism could sharply increase the premiums we pay for coverage against property and casualty claims. Further, certain losses resulting from these types of events are uninsurable or not insurable at reasonable costs.
More generally, any terrorist attack, other act of violence or war, or public health crisis (such as the COVID-19 outbreak) could result in increased volatility in, or damage to, the U.S. and worldwide financial markets and economy, all of which could adversely affect our tenants’ ability to pay rent on their leases or our ability to borrow money at acceptable prices, which could have a material adverse effect on our financial condition, results of operations and ability to pay distributions to our stockholders.
Real estate-related taxes may increase and if these increases are not passed on to tenants, our income will be reduced.
Some local real property tax assessors may seek to reassess some of our properties as a result of our acquisition of such properties. From time to time our property taxes may increase as property values or assessment rates change or for other reasons deemed relevant by the assessors. An increase in the assessed valuation of a property for real estate tax purposes will result in an increase in the related real estate taxes on that property. Although some tenant leases may permit us to pass through such tax increases to the tenants for payment, there is no assurance that renewal leases or future leases will be negotiated on the same basis. Increases not passed through to tenants will adversely affect our income, cash available for distributions, and the amount of distributions to our stockholders.
Covenants, conditions and restrictions may restrict our ability to operate our properties.
Some of our properties may be contiguous to other parcels of real property, comprising part of the same commercial center. In connection with such properties, there are significant covenants, conditions and restrictions, or "CC&Rs," restricting the operation of such properties and any improvements on such properties, and related to granting easements on such properties. Moreover, the operation and management of the contiguous properties may impact such properties. Compliance with CC&Rs may adversely affect our operating costs and reduce the amount of funds that we have available to pay distributions.
Our operating results may be negatively affected by potential development and construction delays and result in increased costs and risks.
We may use proceeds from our Offerings to acquire and develop properties upon which we will construct improvements. We will be subject to uncertainties associated with re-zoning for development, environmental concerns of governmental entities and/or community groups, and our builder’s ability to build in conformity with plans, specifications, budgeted costs, and timetables. A builder’s performance also may be affected or delayed by conditions beyond the builder’s control. Delays in completion of construction could also give tenants the right to terminate preconstruction leases. We may incur additional risks when we make periodic progress payments or other advances to builders before they complete construction. These and other such factors can result in increased costs of a project or loss of our investment. In addition, we will be subject to normal lease-up risks relating to newly constructed projects. We also must rely on rental income and expense projections and estimates of the fair market value of property upon completion of construction when agreeing upon a price at the time we acquire the property. If our projections are inaccurate, we may pay too much for a property, and our return on our investment could suffer.
We may invest in unimproved real property, subject to the limitations on investments in unimproved real property contained in our charter, which complies with the NASAA REIT Guidelines limitation restricting us from investing more than 10% of our total assets in unimproved real property. For purposes of this paragraph, "unimproved real property" is real property

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which has not been acquired for the purpose of producing rental or other operating income, has no development or construction in process and on which no construction or development is planned in good faith to commence within one year. Returns from development of unimproved properties are also subject to risks associated with re-zoning the land for development and environmental concerns of governmental entities and/or community groups. Although we intend to limit any investment in unimproved property to property we intend to develop, our stockholders’ investment nevertheless is subject to the risks associated with investments in unimproved real property.
Competition with third parties in acquiring properties and other investments may impede our ability to make future acquisitions or may increase the cost of these acquisitions and reduce our profitability and the return on our stockholders’ investment.
We compete with many other entities engaged in real estate investment activities, including individuals, corporations, bank and insurance company investment accounts, other REITs, real estate limited partnerships, other entities engaged in real estate investment activities and private equity firms, many of which have greater resources than we do. Competition for properties may significantly increase the price we must pay for properties or other assets we seek to acquire and our competitors may succeed in acquiring those properties or assets themselves. In addition, our potential acquisition targets may find our competitors to be more attractive because they may have greater resources, may be willing to pay more for the properties or may have a more compatible operating philosophy. Larger entities may enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. Further, the number of entities and the amount of funds competing for suitable investments may increase. This competition will result in increased demand for these assets and therefore increased prices paid for them. Because of an increased interest in single-property acquisitions among tax-motivated individual purchasers, we may pay higher prices if we purchase single properties in comparison with portfolio acquisitions. If we pay higher prices for properties and other investments, our profitability will be reduced and our stockholders may experience a lower return on their investment.
We will be subject to additional risks of our joint venture partner or partners when we enter into a joint venture, which could reduce the value of our investment.
We may enter into joint ventures with other real estate groups. The success of a particular joint venture may be limited if our joint venture partner becomes bankrupt or otherwise is unable to perform its obligations in accordance with the terms of the particular joint venture arrangement. The joint venture partner may have economic or business interests or goals that are or may become inconsistent with our business interests or goals. In addition, a dispute with our joint venture partners may result in litigation, which may cause us to incur additional expenses, require additional time and resources from our Advisor and result in liability, each of which could adversely affect our operating results and the value of our stockholders’ investment. In addition, we may assume liabilities related to the joint venture that exceed the percentage of our investment in the joint venture.
Our properties face competition that may affect tenants’ willingness to pay the amount of rent requested by us and the amount of rent paid to us may affect the cash available for distributions and the amount of distributions.
There will be numerous other properties within the market area of each of our properties that will compete with us for tenants. The number of competitive properties could have a material effect on our ability to rent space at our properties and the amount of rents charged. We could be adversely affected if additional properties are built in locations competitive with our properties, causing increased competition for customer traffic and creditworthy tenants. This could result in decreased cash flow from tenants and may require us to make capital improvements to properties that we would not have otherwise made, thus affecting cash available for distributions and the amount available for distributions to our stockholders.
Delays in acquisitions of properties may have an adverse effect on the value of our stockholders’ investment.
There may be a substantial period of time before all of the proceeds of our Offering are invested. Delays we encounter in the selection, acquisition and/or development of properties could adversely affect our stockholders’ returns. When properties are acquired prior to the start of construction or during the early stages of construction, it will typically take several months to complete construction and rent available space. Therefore, our stockholders could suffer delays in the payment of cash distributions attributable to those particular properties.
Costs of complying with governmental laws and regulations, including those relating to environmental protection and human health and safety, may adversely affect our income and the cash available for any distributions.
All real property investments and the operations conducted in connection with such investments are subject to federal, state and local laws and regulations relating to environmental protection and human health and safety. Some of these laws and regulations may impose joint and several liability on customers, owners or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal.
Under various federal, state and local environmental laws, a current or previous owner or operator of real property may be liable for the cost of removing or remediating hazardous or toxic substances on such real property. Such laws often impose

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liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. In addition, the presence of hazardous substances, or the failure to properly remediate these substances, may adversely affect our ability to sell, rent or pledge such real property as collateral for future borrowings. Environmental laws also may impose restrictions on the manner in which real property may be used or businesses may be operated. Some of these laws and regulations have been amended so as to require compliance with new or more stringent standards as of future dates. Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require us to incur material expenditures. Future laws, ordinances or regulations may impose material environmental liability. Additionally, our tenants’ operations, the existing condition of land when we buy it, operations in the vicinity of our real properties, such as the presence of underground storage tanks, or activities of unrelated third parties may affect our real properties. There are also various local, state and federal fire, health, life-safety and similar regulations with which we may be required to comply and which may subject us to liability in the form of fines or damages for noncompliance. In connection with the acquisition and ownership of our real properties, we may be exposed to such costs in connection with such regulations. The cost of defending against environmental claims, of any damages or fines we must pay, of compliance with environmental regulatory requirements or of remediating any contaminated real property could materially and adversely affect our business, lower the value of our assets or results of operations and, consequently, lower the amounts available for distribution to our stockholders.
If we sell properties by providing financing to purchasers, defaults by the purchasers would adversely affect our cash flows.
In some instances we may sell our properties by providing financing to purchasers. When we provide financing to purchasers, we will bear the risk that the purchaser may default, which could negatively impact our cash distributions to stockholders. Even in the absence of a purchaser default, the distribution of the proceeds of sales to our stockholders, or their reinvestment in other assets, will be delayed until the promissory notes or other property we may accept upon the sale are actually paid, sold, refinanced or otherwise disposed of. In some cases, we may receive initial down payments in cash and other property in the year of sale in an amount less than the selling price, and subsequent payments will be spread over a number of years. If any purchaser defaults under a financing arrangement with us, it could negatively impact our ability to pay cash distributions to our stockholders.
Our recovery of an investment in a mortgage loan that has defaulted may be limited.
There is no guarantee that the mortgage, loan or deed of trust securing an investment will, following a default, permit us to recover the original investment and interest that would have been received absent a default. The security provided by a mortgage, deed of trust or loan is directly related to the difference between the amount owed and the appraised market value of the property. Although we intend to rely on a current real estate appraisal when we make the investment, the value of the property is affected by factors outside our control, including general fluctuations in the real estate market, rezoning, neighborhood changes, highway relocations and failure by the borrower to maintain the property. In addition, we may incur the costs of litigation in our efforts to enforce our rights under defaulted loans.
Our costs associated with complying with the Americans with Disabilities Act may affect cash available for distributions.
Our properties are subject to the Americans with Disabilities Act of 1990, or the Disabilities Act. Under the Disabilities Act, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. The Disabilities Act has separate compliance requirements for "public accommodations" and "commercial facilities" that generally require that buildings and services, including restaurants and retail stores, be made accessible and available to people with disabilities. The Disabilities Act’s requirements could require removal of access barriers and could result in the imposition of injunctive relief, monetary penalties, or, in some cases, an award of damages. We will attempt to acquire properties that comply with the Disabilities Act or place the burden on the seller or other third party, such as a tenant, to ensure compliance with the Disabilities Act. However, we cannot give assurance that we will be able to acquire properties or allocate responsibilities in this manner. If we cannot, our funds used for Disabilities Act compliance may affect cash available for distributions and the amount of distributions to our stockholders.
Risks Associated with Investments in the Healthcare Property Sector
Our real estate investments may become concentrated in healthcare properties, making us more vulnerable economically than if our investments were diversified.
We are subject to risks inherent in concentrating investments in real estate. These risks resulting from a lack of diversification are even greater as a result of our business strategy to invest to a substantial degree in healthcare properties. A downturn in the commercial real estate industry generally could significantly adversely affect the value of our properties. A downturn in the healthcare industry could negatively affect our lessees’ ability to make lease payments to us and our ability to make distributions to our stockholders. These adverse effects could be more pronounced than if we diversified our investments outside of real estate or if our portfolio does not include a concentration in healthcare properties. Our investments in healthcare properties accounted for 48.0% of our total rental revenue for the year ended December 31, 2019.

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Certain of our properties may not have efficient alternative uses, so the loss of a tenant may cause us to not be able to find a replacement or cause us to spend considerable capital to adapt the property to an alternative use.
Some of the properties we have acquired and seek to acquire are healthcare properties that may only be suitable for similar healthcare-related tenants. If we or our tenants terminate the leases for these properties or our tenants lose their regulatory authority to operate such properties, we may not be able to locate suitable replacement tenants to lease the properties for their specialized uses. Alternatively, we may be required to spend substantial amounts to adapt the properties to other uses. Any loss of revenues or additional capital expenditures required as a result may have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to our stockholders.
Our healthcare properties and tenants may be unable to compete successfully, which could result in lower rent payments, reduce our cash flows from operations and amount available for distributions to our stockholders.
The healthcare properties we have acquired or seek to acquire in the future may face competition from nearby hospitals and other healthcare properties that provide comparable services. Some of those competing facilities are owned by governmental agencies and therefore are supported by tax revenues, and others are owned by non-profit corporations and therefore are supported to a large extent by endowments and charitable contributions. Not all of our properties will be affiliated with non-profit corporations and receive such support. Similarly, our tenants will face competition from other healthcare practices in nearby hospitals and other healthcare properties. Our tenants’ failure to compete successfully with these other practices could adversely affect their ability to make rental payments, which could adversely affect our rental revenues. Further, from time to time and for reasons beyond our control, referral sources, including physicians and managed care organizations, may change their lists of hospitals or physicians that are permitted to participate in the payer program. This could adversely affect our tenants’ ability to make rental payments, which could adversely affect our rental revenues. Any reduction in rental revenues resulting from the inability of our healthcare properties and our tenants to compete successfully may have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to our stockholders.
Reductions in reimbursement from third party payors, including Medicare and Medicaid, could adversely affect the profitability of our tenants and hinder their ability to make rental payments to us.
Sources of revenue for our tenants may include the federal Medicare program, state Medicaid programs, private insurance carriers and health maintenance organizations, among others. Healthcare providers continue to face increased government and private payor pressure to control or reduce healthcare costs and significant reductions in healthcare reimbursement, including reduced reimbursements and changes to payment methodologies under the Patient Protection and Affordable Care Act of 2010 ("Affordable Care Act"). In some cases, private insurers rely upon all or portions of the Medicare payment systems to determine payment rates that may result in decreased reimbursement from private insurers.
A slowdown in the United States economy could negatively affect state budgets, thereby putting pressure on states to decrease spending on state programs including Medicaid. Potential reductions to Medicaid program spending in response to state budgetary pressures could negatively impact the ability of our tenants to successfully operate their businesses.
Efforts by payors to reduce healthcare costs will likely continue which may result in reductions or slower growth in reimbursement for certain services provided by some of our tenants. A reduction in reimbursements to our tenants from third party payors for any reason could adversely affect our tenants’ ability to make rent payments to us which may have a material adverse effect on our businesses, financial condition and results of operations, and our ability to make distributions to our stockholders.
The healthcare industry is heavily regulated, and new laws or regulations, changes to existing laws or regulations, loss of licensure or failure to obtain licensure could result in the inability of our tenants to make rent payments to us.
The healthcare industry is heavily regulated by U.S. federal, state and local governmental authorities. Our tenants generally are subject to laws and regulations covering, among other things, licensure, certification for participation in government programs, billing for services, privacy and security of health information, and relationships with physicians and other referral sources. In addition, new laws and regulations, changes in existing laws and regulations or changes in the interpretation of such laws or regulations could negatively affect our financial condition and the financial condition of our tenants. These changes, in some cases, could apply retroactively. The enactment, timing, or effect of legislative or regulatory changes cannot be predicted.
The Affordable Care Act is changing how healthcare services are covered, delivered, and reimbursed through expanded coverage of uninsured individuals and reduced Medicare program spending. In addition, it reforms certain aspects of health insurance, expands existing efforts to tie Medicare and Medicaid payments to performance and quality, and contains provisions intended to strengthen fraud and abuse enforcement. The complexities and ramifications of the Affordable Care Act are significant and are being implemented in a phased approach which began in 2010.

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It is possible that Congress will continue to consider other legislation to repeal the Affordable Care Act or repeal and replace some or all elements of the Affordable Care Act.
We cannot predict how the Affordable Care Act might be amended or modified, either through the legislative or judicial process, and how any such modification might impact our tenants’ operations or the net effect of this law on us. If the operations, cash flows, or financial condition of our operators and tenants are materially adversely impacted by any repeal or modification of the law, our revenue and operations may be materially adversely affected as well.
Recent changes to healthcare laws and regulations could have a material adverse effect on the financial condition of our tenants and, consequently, their ability to meet obligations to us.
Statutory and regulatory policy changes and decisions may impact one or more specific providers that lease space in any of our properties. In addition, many states also regulate the establishment and construction of healthcare facilities and services, and the expansion of existing healthcare facilities and services through certificate of need, or CON, laws, which may include regulation of certain types of beds, medical equipment, and capital expenditures. Under such laws, the applicable state regulatory body must determine a need exists for a project before the project can be undertaken. If any of our tenants seeks to undertake a CON-regulated project, but are not authorized by the applicable regulatory body to proceed with the project, these tenants could be prevented from operating in their intended manner and could be materially adversely affected.
The application of lower reimbursement rates to our tenants or failure to qualify for existing rates under certain exceptions, the failure to comply with these laws and regulations, or the failure to secure CON approval to undertake a desired project could adversely affect our tenants’ ability to make rent payments to us which may have an adverse effect on our business, financial condition, and results of operations, our ability to make distributions to our stockholders.
Tenants of our healthcare properties are subject to anti-fraud and abuse laws, the violation of which by a tenant may jeopardize the tenant’s ability to make rent payments to us.
There are various federal and state laws prohibiting fraudulent and abusive business practices by healthcare providers who participate in, receive payments from, or are in a position to make referrals in connection with government-sponsored healthcare programs, including the Medicare and Medicaid programs. Our lease arrangements with certain tenants may also be subject to these fraud and abuse laws.
Violations of these laws may result in criminal and/or civil penalties that range from punitive sanctions, damage assessments, penalties, imprisonment, denial of Medicare and Medicaid payments, and/or exclusion from the Medicare and Medicaid programs. Imposition of any of these penalties upon one of our tenants or strategic partners could jeopardize that tenant’s ability to operate or to make rent payments or affect the level of occupancy in our healthcare properties, which may have a material adverse effect on our business, financial condition, and results of operations, and our ability to make distributions to our stockholders.
Adverse trends in healthcare provider operations may negatively affect our lease revenues and our ability to make distributions to our stockholders.
The healthcare industry is currently experiencing, among other things:
changes in the demand for and methods of delivering healthcare services;
changes in third party reimbursement methods and policies;
consolidation and pressure to integrate within the healthcare industry through acquisitions, joint ventures and managed service organizations; and
increased scrutiny of billing, referral, and other practices by U.S. federal and state authorities.
These factors may adversely affect the economic performance of some or all of our tenants and, in turn, our lease revenues and our ability to make distributions to our stockholders.
Tenants of our healthcare properties may be subject to significant legal actions that could subject them to increased operating costs and substantial uninsured liabilities, which may affect their ability to pay their rent payments to us.
As is typical in the healthcare industry, certain types of tenants of our healthcare properties may often become subject to claims that their services have resulted in patient injury or other adverse effects. Many of these tenants may have experienced an increasing trend in the frequency and severity of professional liability and general liability insurance claims and litigation asserted against them. The insurance coverage maintained by these tenants may not cover all claims made against them nor continue to be available at a reasonable cost, if at all. In some states, insurance coverage for the risk of punitive damages arising from professional liability and general liability claims and/or litigation may not, in certain cases, be available to these tenants due to state law prohibitions or limitations of availability. As a result, these types of tenants of our healthcare properties

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operating in these states may be liable for punitive damage awards that are either not covered or are in excess of their insurance policy limits.
Further, the Health Insurance Portability and Accountability Act, commonly referred to as HIPAA, was established in 1996 to set national standards for the confidentiality, security, and transmission of personal health information (PHI). Healthcare providers are required, under HIPAA and its implementing regulations, to protect and keep confidential any PHI. HIPAA also sets limits and conditions on use and disclosure of PHI without patient authorization. The law gives patients specific rights to their health information, including rights to obtain a copy of or request corrections to their medical records. The physician or the medical practice can be liable if there are improper disclosures of PHI, including from employee mishandling of PHI, medical records security breaches, lost or stolen electronic devices, hacking, social media breaches or failure to get patient authorizations. Violations could result in multi-million dollar penalties. Actual or potential violations of HIPAA could subject our tenants to government investigations, litigation or other enforcement actions which could adversely affect our tenants’ ability to pay rent and could have a material adverse effect on our business, financial condition, and results of operations, our ability to pay distributions to our stockholders.
Risks Associated with Investments in the Data Center Property Sector
Our data center properties depend upon the technology industry and a reduction in the demand for technology-related real estate could adversely impact our ability to find or keep tenants for our data center properties, which would adversely affect our results of operations.
A portion of our portfolio of properties consists of data center properties. A decline in the technology industry or a decrease in the adoption of data center space for corporate enterprises could lead to a decrease in the demand for technology-related real estate, which may have a greater adverse effect on our business and financial condition than if we owned a portfolio with a more diversified tenant base. We are susceptible to adverse developments in the corporate and institutional data center and broader technology industries (such as business layoffs or downsizing, industry slowdowns, relocations of businesses, costs of complying with government regulations or increased regulation and other factors) and the technology-related real estate market (such as oversupply of or reduced demand for space). In addition, the rapid development of new technologies or the adoption of new industry standards could render many of our tenants’ current products and services obsolete or unmarketable and contribute to a downturn in their businesses, thereby increasing the likelihood that they default under their leases, become insolvent or file for bankruptcy. Our investments in data center properties accounted for 52.0% of our total rental revenue for the year ended December 31, 2019.
Our data center properties may not be suitable for lease to certain data center, technology or office tenants without significant expenditures or renovations.
Because many of our data center properties will contain extensive tenant improvements installed at our tenants’ expense, they may be better suited for a specific corporate enterprise data center user or technology industry tenant and could require modification in order for us to re-lease vacant space to another corporate enterprise data center user or technology industry tenant. For the same reason, our properties also may not be suitable for lease to traditional office tenants without significant expenditures or renovations.
Our tenants may choose to develop new data centers or expand their existing data centers, which could result in the loss of one or more key tenants or reduce demand for our newly developed data centers.
Our larger tenants may choose to develop new data centers or expand any existing data centers of their own. In the event that any of our key tenants were to do so, it could result in a loss of business to us or put pressure on our pricing. If we lose a tenant, there is no guarantee that we would be able to replace that tenant at a competitive rate or at all.
Our data center infrastructure may become obsolete or less marketable and we may not be able to upgrade our power, cooling, security or connectivity systems cost-effectively or at all.
The markets for data centers, as well as the industries in which data center tenants operate, are characterized by rapidly changing technology, evolving industry standards, frequent new service introductions, shifting distribution channels and changing tenant demands. The data center infrastructure in some of the data centers that we have acquired or may acquire in the future may become obsolete or less marketable due to demand for new processes and/or technologies, including, without limitation: (i) new processes to deliver power to, or eliminate heat from, computer systems; (ii) demand for additional redundancy capacity; or (iii) new technology that permits lower levels of critical load and heat removal than our data centers are currently designed to provide. In addition, the systems that connect our data centers to the Internet and other external networks may become outdated, including with respect to latency, reliability and diversity of connectivity. When tenants demand new processes or technologies, we may not be able to upgrade our data centers on a cost effective basis, or at all, due to, among other things, increased expenses to us that cannot be passed on to the tenant or insufficient revenue to fund the necessary capital expenditures. The obsolescence of the power and cooling systems in such data centers and/or our inability to

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upgrade our data centers, including associated connectivity, could have a material negative impact on our business. Furthermore, potential future regulations that apply to industries we serve may require users in those industries to seek specific requirements from their data centers that we are unable to provide. These may include physical security regulations applicable to the defense industry and government contractors and privacy and security requirements applicable to the financial services and health care industries. Such regulations could have a material adverse effect on us. If our competitors offer data center space that our existing or potential data center users perceive to be superior to ours based on numerous factors, including power, security considerations, location or network connectivity, or if they offer rental rates below our or current market rates, we may lose existing or potential tenants, incur costs to improve our properties or be forced to reduce our rental rates.
Risks Associated with Debt Financing and Investments
We have broad authority to incur debt, and high debt levels could hinder our ability to make distributions and could decrease the value of our stockholders’ investments.
Although, technically, our board of directors may approve unlimited levels of debt, our charter generally limits our ability to incur debt to no greater than 300% of our net assets before deducting depreciation, reserves for bad debts or other non-cash reserves (equivalent to approximately 75% leverage), unless any excess borrowing is approved by a majority of our independent directors and disclosed to our stockholders in its next quarterly report, along with a justification for such excess borrowing. High debt levels would cause us to incur higher interest charges, would result in higher debt service payments, and could be accompanied by restrictive covenants. These factors could limit the amount of cash we have available to distribute and could result in a decline in the value of our stockholders’ investments.
We incur mortgage indebtedness and other borrowings, which may increase our business risks, and could hinder our ability to make distributions to our stockholders.
We have placed, and intend to continue to place, permanent financing on our properties or obtain a credit facility or other similar financing arrangement in order to acquire properties. We may also decide to later further leverage our properties. We may incur mortgage debt and pledge all or some of our real properties as security for that debt to obtain funds to acquire real properties. We may borrow if we need funds to pay a desired distribution rate to our stockholders. We may also borrow if we deem it necessary or advisable to assure that we qualify and maintain our qualification as a REIT for federal income tax purposes. If there is a shortfall between the cash flow from our properties and the cash flow needed to service mortgage debt, then the amount available for distribution to our stockholders may be reduced. In addition, incurring mortgage debt increases the risk of loss since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default, thus reducing the value of our stockholders’ investment. For U.S. federal income tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but would not receive any cash proceeds. In such event, we may be unable to pay the amount of distributions required in order to maintain our REIT status. We may give full or partial guarantees to lenders of mortgage debt by the entities that own our properties. When we provide a guaranty on behalf of an entity that owns one of our properties, we will be responsible to the lender for satisfaction of the debt if it is not paid by such entity. If any mortgages contain cross-collateralization or cross-default provisions, a default on a single property could affect multiple properties. If any of our properties are foreclosed upon due to a default, our ability to pay cash distributions to our stockholders will be adversely affected which could result in the loss of our REIT status and would result in a decrease in the value of our stockholders’ investment.
High interest rates may make it difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire and the amount of cash distributions we can make.
If we place mortgage debt on properties, we run the risk of being unable to refinance the properties when the loans come due, or of being unable to refinance at cost effective rates. If interest rates are higher when the properties are refinanced, we may not be able to finance the properties and our income could be reduced. If any of these events occur, our cash flow would be reduced. This, in turn, would reduce cash available for distribution to our stockholders and may hinder our ability to raise more capital by issuing more stock or by borrowing more money.
Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to make distributions to stockholders at our current level.
When providing financing, a lender could impose restrictions on us that affect our distribution and operating policies, and our ability to incur additional debt. Loan documents we enter into may contain covenants that limit our ability to further mortgage the property, discontinue insurance coverage or replace our Advisor. These or other limitations may adversely affect our flexibility and limit our ability to make distributions to stockholders at our current level.

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Increases in interest rates could increase the amount of our debt payments and adversely affect our ability to make distributions to stockholders at our current level.
With exposure to variable rate debt, increases in interest rates would increase our interest costs, which could reduce our cash flows and our ability to make distributions to stockholders at our current level. In addition, if we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments in properties at times that may not permit realization of the maximum return on such investments.
The London Inter-bank Offered Rate (“LIBOR”) and certain other interest “benchmarks” may be subject to regulatory guidance and/or reform that could cause interest rates under our current or future debt agreements to perform differently than in the past or cause other unanticipated consequences. Additionally, LIBOR may cease to be published and could be replaced by alternative benchmarks, which could impact interest rates under our debt agreements.
The Financial Conduct Authority, which regulates LIBOR, has announced that it intends to stop encouraging or requiring banks to submit LIBOR rates after 2021. If LIBOR ceases to exist or if the methods of calculating LIBOR change from their current form, interest rates on our current or future debt obligations may be adversely affected.
Disruptions in the credit markets could have a material adverse effect on our results of operations, financial condition and ability to pay distributions to stockholders at our current level.
In the past, domestic and international financial markets experienced significant disruptions which were brought about in large part by failures in the U.S. banking system. These disruptions severely impacted the availability of credit and contributed to rising costs associated with obtaining credit. If debt financing is not available on terms and conditions we find acceptable, we may not be able to obtain financing for investments. If these disruptions in the credit markets resurface, our ability to borrow monies to finance the purchase of, or other activities related to, real estate assets will be negatively impacted. If we are unable to borrow monies on terms and conditions that we find acceptable, we may be forced to use a greater proportion of our Offering proceeds to finance acquisitions, reduce the number of properties we can purchase, and/or dispose of some of our assets. These disruptions could also adversely affect the return on the properties we purchase. In addition, if we pay fees to lock in a favorable interest rate, falling interest rates or other factors could require us to forfeit these fees. All of these events would have a material adverse effect on our results of operations, financial condition and ability to pay distributions to stockholders at our current level.
We may invest in collateralized mortgage-backed securities, which may increase our exposure to credit and interest rate risk.
We may invest in collateralized mortgage-backed securities, or CMBS, which may increase our exposure to credit and interest rate risk. We have not adopted, and do not expect to adopt, any formal policies or procedures designed to manage risks associated with our investments in CMBS. In this context, credit risk is the risk that borrowers will default on the mortgages underlying the CMBS. We intend to manage this risk by investing in CMBS guaranteed by U.S. government agencies, such as the Government National Mortgage Association, or GNMA, or U.S. government sponsored enterprises, such as the Federal National Mortgage Association, or FNMA, or the Federal Home Loan Mortgage Corporation, or FHLMC. Interest rate risk occurs as prevailing market interest rates change relative to the current yield on the CMBS. For example, when interest rates fall, borrowers are more likely to prepay their existing mortgages to take advantage of the lower cost of financing. As prepayments occur, principal is returned to the holders of the CMBS sooner than expected, thereby lowering the effective yield on the investment. On the other hand, when interest rates rise, borrowers are more likely to maintain their existing mortgages. As a result, prepayments decrease, thereby extending the average maturity of the mortgages underlying the CMBS. We intend to manage interest rate risk by purchasing CMBS offered in tranches, or with sinking fund features, that are designed to match our investment objectives. If we are unable to manage these risks effectively, our results of operations, financial condition and ability to pay distributions to our stockholders will be adversely affected.
Any real estate debt security that we originate or purchase is subject to the risks of delinquency and foreclosure.
We may originate and purchase real estate debt securities, which are subject to risks of delinquency and foreclosure and risks of loss. Typically, we will not have recourse to the personal assets of our borrowers. The ability of a borrower to repay a real estate debt security secured by an income-producing property depends primarily upon the successful operation of the property, rather than upon the existence of independent income or assets of the borrower. If the net operating income of the property is reduced, the borrower’s ability to repay the real estate debt security may be impaired. We bear the risks of loss of principal to the extent of any deficiency between the value of the collateral and the principal and accrued interest of the real estate debt security, which could have a material adverse effect on our cash flow from operations and limit amounts available for distribution to our stockholders. In the event of the bankruptcy of a real estate debt security borrower, the real estate debt security to that borrower will be deemed to be collateralized only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the real estate debt security will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law. Foreclosure of a real estate debt security can be an expensive and lengthy process that could have a substantial negative effect

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on our anticipated return on the foreclosed real estate debt security. We also may be forced to foreclose on certain properties, be unable to sell these properties and be forced to incur substantial expenses to improve operations at the property.
U.S. Federal Income Tax Risks
Failure to maintain our qualification as a REIT would adversely affect our operations and our ability to make distributions.
In order for us to maintain our qualification as a REIT, we must satisfy certain requirements set forth in the Code and Treasury Regulations and various factual matters and circumstances that are not entirely within our control. We intend to structure our activities in a manner designed to satisfy all of these requirements. However, if certain of our operations were to be recharacterized by the Internal Revenue Service, or IRS, such recharacterization could jeopardize our ability to satisfy all of the requirements for qualification as a REIT.
If we fail to maintain our qualification as a REIT for any taxable year and we do not qualify for certain statutory relief provisions, we will be subject to U.S. federal income tax on our taxable income at corporate rates. In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the taxable year in which we lost our REIT status. Losing our REIT status would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability. In addition, distributions to stockholders would no longer qualify for the dividends-paid deduction, and we would no longer be required to make distributions. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable tax. Our failure to qualify as a REIT would adversely affect the return of a stockholder's investment.
To maintain our qualification as a REIT, we must meet annual distribution requirements, which may result in us distributing amounts that may otherwise be used for our operations and which could result in our forgoing otherwise attractive investment opportunities.
To maintain the favorable tax treatment afforded to REITs under the Code, we generally will be required each year to distribute to our stockholders at least 90% of our REIT taxable income determined without regard to the dividends-paid deduction and excluding net capital gain. To the extent that we do not distribute all of our net capital gains or distribute at least 90% of our REIT taxable income, as adjusted, we will have to pay tax on those amounts at regular ordinary and capital gains corporate tax rates. Furthermore, if we fail to distribute during each calendar year at least the sum of (a) 85% of our ordinary income for that year, (b) 95% of our capital gain net income for that year, and (c) any undistributed taxable income from prior periods, we would have to pay a 4% nondeductible excise tax on the excess of the required distribution over the sum of (a) the amounts that we actually distributed and (b) the amounts we retained and upon which we paid income tax at the corporate level. These requirements could cause us to distribute amounts that otherwise would be spent on investments in real estate assets, and it is possible that we might be required to borrow funds, possibly at unfavorable rates, or sell assets to fund these distributions. In addition, we could pay part of these required distributions in shares of our common stock, which would result in shareholders having tax liabilities from such distributions in excess of the cash they receive. The treatment of such taxable share distributions is not clear, and it is possible the taxable share distribution will not count towards our distribution requirement, in which case adverse consequences could apply. Although we intend to continue to make distributions sufficient to meet the annual distribution requirements and to avoid U.S. federal income and excise taxes, it is possible that we might not always be able to do so.
If the REIT Merger does not qualify as a tax-free reorganization, there may be adverse tax consequences. 
The REIT Merger is intended to qualify as a tax-free reorganization within the meaning of Section 368(a) of the Code. The closing of the REIT Merger was conditioned on the receipt by each of REIT I and the Company of an opinion of its counsel to the effect that the REIT Merger will qualify as a tax-free reorganization within the meaning of Section 368(a) of the Code. However, these legal opinions will not be binding on the IRS or on the courts. If, for any reason, the REIT Merger were to fail to qualify as a tax-free reorganization, then each former stockholder of REIT I (“Former REIT I stockholder”) generally would recognize gain or loss, as applicable, equal to the difference between (i) the merger consideration (i.e. the sum of the cash plus the fair market value of the shares of the Company’s Class A common stock) received by the Former REIT I stockholder in the REIT Merger; and (ii) the Former REIT I stockholder’s adjusted tax basis in its shares of REIT I common stock.
Our stockholders may have current tax liability on distributions they elect to reinvest in our common stock, and therefore our stockholders would need to use funds from another source to pay such tax liability.
If our stockholders participate in our distribution reinvestment plan, they will be deemed to have received, and for U.S. federal income tax purposes recognize taxable income in the amount reinvested in our shares, to the extent such amount does not exceed our earnings and profits. As a result, unless stockholders are tax-exempt entities, they may have to use funds from other sources to pay their tax liability on distributions reinvested in our shares.

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Certain of our business activities are potentially subject to the prohibited transaction tax, which could reduce the return on our stockholders’ investment.
Our ability to dispose of a property during the first few years following its acquisition may be restricted to a substantial extent as a result of our REIT status. Under applicable provisions of the Code regarding "prohibited transactions" by REITs, we would be subject to a 100% tax on any gain recognized on the sale or other disposition of any property (other than foreclosure property) that we own, directly or through any subsidiary entity, including our Operating Partnership, that is deemed to be inventory or property held primarily for sale to customers in the ordinary course of trade or business. Whether property is inventory or otherwise held primarily for sale to customers in the ordinary course of a trade or business depends on the particular facts and circumstances surrounding each property. Properties we own, directly or through any subsidiary entity, including our Operating Partnership, may, depending on how we conduct our operations, be treated as inventory or property held primarily for sale to customers in the ordinary course of a trade or business. Any such taxes we pay would reduce our cash available for distribution to our stockholders. Our desire to avoid the prohibited transactions tax may cause us to forego disposition opportunities that would otherwise be advantageous if we were not a REIT.
In certain circumstances, we may be subject to U.S. federal, state and local income taxes as a REIT, which would reduce our cash available for distribution to our stockholders.
Even if we maintain our qualification as a REIT, we may be subject to U.S. federal, state and local income taxes. For example, we may be subject to the prohibited transactions tax and/or the excise tax for failing to make (or be deemed to have made) sufficient distributions, as described above. We also may decide to retain net capital gain we earn from the sale or other disposition of our property and pay income tax directly on such income. In that event, our stockholders would be treated as if they earned that income and paid the tax on it directly. However, stockholders that are tax-exempt, such as charities or qualified pension plans, would have no benefit from their deemed payment of such tax liability unless they file U.S. federal income tax returns and thereon seek a refund of such tax. We also may be subject to state and local taxes on our income or property, either directly or indirectly through our Operating Partnership or other companies through which we indirectly own assets. Any taxes we pay would reduce our cash available for distribution to our stockholders.
The use of taxable REIT subsidiaries, which may be required for REIT qualification purposes, would increase our overall tax liability and thereby reduce our cash available for distribution to our stockholders.
Some of our assets may need to be owned by, or operations may need to be conducted through, one or more taxable REIT subsidiaries. Any of our taxable REIT subsidiaries would be subject to U.S. federal, state and local income tax on its taxable income. The after-tax net income of our taxable REIT subsidiaries would be available for distribution to us. Further, we would incur a 100% excise tax on transactions with our taxable REIT subsidiaries that are not conducted on an arm’s-length basis. For example, to the extent that the rent paid by one of our taxable REIT subsidiaries exceeds an arm’s-length rental amount, such amount would be potentially subject to a 100% excise tax. While we intend that all transactions between us and our taxable REIT subsidiaries would be conducted on an arm’s-length basis, and therefore, any amounts paid by our taxable REIT subsidiaries to us would not be subject to the excise tax, no assurance can be given that no excise tax would arise from such transactions.
Complying with REIT requirements may force us to forgo and/or liquidate otherwise attractive investment opportunities.
To qualify as a REIT for U.S. federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of shares of our common stock. We may be required to forego otherwise attractive investments or make distributions to stockholders at disadvantageous times or when we do not have funds readily available for distribution. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.
Complying with the REIT asset test requirements may force us to liquidate otherwise attractive investments.
To maintain our qualification as a REIT, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified real estate assets, including certain mortgage loans and certain kinds of mortgage-related securities. The remainder of our investment in securities (other than government securities, taxable REIT subsidiaries and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets can consist of the securities (other than government securities, taxable REIT subsidiaries, and qualified real estate assets) of any one issuer. No more than 20% of the value of our total assets can be represented by securities of one or more taxable REIT subsidiaries, and no more than 25% of the value of our assets may consist of "non-qualified publicly offered REIT instruments." If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be

29


required to liquidate from our portfolio or not make otherwise attractive investments in order to maintain our qualification as a REIT. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.
If we fail to invest a sufficient amount of the net proceeds from selling our common stock in real estate assets within one year from the receipt of the proceeds, we could fail to qualify as a REIT.
Temporary investment of the net proceeds from sales of our common stock in short-term securities and income from such investment will generally be qualifying assets and produce qualifying income for purposes of the various REIT income and asset requirements, but only during the one-year period beginning on the date we receive such net proceeds. If we are unable to invest a sufficient amount of the net proceeds from sales of our common stock in qualifying real estate assets within such one-year period, we could fail to satisfy one or more of the gross income or asset tests and/or we could be limited to investing all or a portion of any remaining funds in cash or cash equivalents. If we fail to satisfy any such income or asset test, unless we are entitled to relief under certain provisions of the Code, we could fail to qualify as a REIT.
Recharacterization of sale-leaseback transactions may cause us to lose our REIT status, which would subject us to U.S. federal income tax at corporate rates, which would reduce the amounts available for distribution to our stockholders and threaten our ability to remain qualified as a REIT.
We have and may continue to purchase properties and lease them back to the sellers of such properties. While we will use our best efforts to structure any such sale-leaseback transaction such that the lease will be characterized as a true lease, thereby allowing us to be treated as the owner of the property for U.S. federal income tax purposes, the IRS could challenge such characterization. In the event that any such sale-leaseback is challenged and recharacterized as a financing transaction or loan for U.S. federal income tax purposes, deductions for depreciation and cost recovery relating to such property would be disallowed. If a sale-leaseback transaction were so recharacterized, we might fail to satisfy the REIT qualification asset tests or income tests and, consequently, lose our REIT status effective with the year of recharacterization. Alternatively, the amount of our REIT taxable income could be recalculated, which also might cause us to fail to meet the annual distribution requirement for a taxable year in the event we cannot make a sufficient deficiency dividend.
If our leases are not considered as true leases for U.S. federal income tax purposes, we would fail to qualify as a REIT.
To qualify as a REIT, we must satisfy two gross income tests, under which specified percentages of our gross income must be derived from certain sources, such as “rents from real property.” In order for rent paid to us to qualify as “rents from real property” for purposes of the REIT gross income tests, the leases must be respected as true leases for U.S. federal income tax purposes and not be treated as service contracts, joint ventures, or some other type of arrangement. If our leases are not respected as true leases for U.S. federal income tax purposes, we could fail to qualify as a REIT, which would materially adversely impact the value of an investment in our shares and in our ability to pay dividends to our stockholders.
Legislative or regulatory action could adversely affect the returns to our investors.
In recent years, numerous legislative, judicial and administrative changes have been made in the provisions of U.S. federal income tax laws applicable to investments similar to an investment in shares of our common stock. Additional changes to the tax laws are likely to continue to occur, and we cannot assure you that any such changes will not adversely affect our taxation and our ability to continue to qualify as a REIT or the taxation of a stockholder. Any such changes could have an adverse effect on an investment in our shares or on the market value or the resale potential of our assets. Our stockholders are urged to consult with their own tax advisors with respect to the impact of recent legislation on their investment in our shares and the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our shares.
Although REITs generally receive better tax treatment than entities taxed as regular corporations, it is possible that future legislation would result in a REIT having fewer tax advantages, and it could become more advantageous for a company that invests in real estate to elect to be treated for U.S. federal income tax purposes as a regular corporation. As a result, our charter provides our board of directors with the power, under certain circumstances, to revoke or otherwise terminate our REIT election and cause us to be taxed as a regular corporation, without the vote of our stockholders. Our board of directors has fiduciary duties to us and our stockholders and could only cause such changes in our tax treatment if it determines in good faith that such changes are in the best interests of our stockholders.
In addition, the Tax Cuts and Jobs Act made significant changes to the U.S. federal income tax rules for taxation of individuals and businesses. In addition to reducing corporate and individual tax rates, the Tax Cuts and Jobs Act eliminates or restricts various deductions. Most of the changes applicable to individuals are temporary and apply only to taxable years beginning after December 31, 2017 and before January 1, 2026. The Tax Cuts and Jobs Act made numerous changes to the tax rules that do not affect the REIT qualification rules directly, but may otherwise affect us or our stockholders.
While the changes in the Tax Cuts and Jobs Act generally appear to be favorable with respect to REITs, the extensive changes to non-REIT provisions in the Internal Revenue Code may have unanticipated effects on us or our stockholders.

30


We urge you to consult with your own tax advisor with respect to the status of the Tax Cuts and Jobs Act and other legislative, regulatory or administrative developments and proposals and their potential effect on an investment in shares of our common stock.
Dividends payable by REITs generally are subject to a higher tax rate than regular corporate dividends under current law.
The maximum U.S. federal income tax rate for “qualified dividends” payable to U.S. stockholders that are individuals, trusts and estates generally is 20%. Dividends payable by REITs, however, are generally not eligible for the reduced rates for qualified dividends and are taxed at ordinary income rates. However, for taxable years beginning after December 31, 2017, and before January 1, 2026, U.S. stockholders that are individuals, trusts and estates generally may deduct 20% of ordinary dividends from a REIT resulting in an effective maximum U.S. federal income tax rate of 29.6% on such income. Although these rules do not adversely affect the taxation of REITs or dividends payable by REITs, to the extent that the reduced rates continue to apply to regular corporate qualified dividends, investors that are individuals, trusts and estates may perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could materially and adversely affect the value of the shares of REITs, including our common stock.
If our Operating Partnership fails to maintain its status as a partnership, its income may be subject to taxation, which would reduce the cash available for distribution to our stockholders.
We intend to maintain the status of our Operating Partnership as a partnership for U.S. federal income tax purposes. However, if the IRS were to successfully challenge the status of our Operating Partnership as a partnership or disregarded entity for such purposes, it would be taxable as a corporation. In such event, this would reduce the amount of distributions that our Operating Partnership could make to us. This would also result in our losing REIT status, and becoming subject to a corporate level tax on our own income. This would substantially reduce our cash available to pay distributions and the yield on our stockholders’ investment. In addition, if any of the partnerships or limited liability companies through which our Operating Partnership owns its properties, in whole or in part, loses its characterization as a partnership and is otherwise not disregarded for U.S. federal income tax purposes, it would be subject to taxation as a corporation, thereby reducing distributions to our Operating Partnership. Such a recharacterization of an underlying property owner could also threaten our ability to maintain REIT status.
Foreign purchasers of our shares may be subject to FIRPTA tax upon the sale of their shares or upon the payment of a capital gain dividend, which would reduce the net amount they would otherwise realize on their investment in our shares.
A foreign person (other than certain foreign pension plans and certain foreign publicly traded entities) disposing of a U.S. real property interest, including shares of a U.S. corporation whose assets consist principally of U.S. real property interests, is generally subject to the Foreign Investment in Real Property Tax Act of 1980, as amended, or FIRPTA, on the gain recognized on the disposition. Such FIRPTA tax does not apply to the disposition of stock in a REIT if the REIT is “domestically controlled.” A REIT is "domestically controlled" if less than 50% of the REIT’s stock, by value, has been owned directly or indirectly by persons who are not qualifying U.S. persons during a continuous five-year period ending on the date of disposition or, if shorter, during the entire period of the REIT’s existence. We cannot assure our stockholders that we will qualify as a "domestically controlled" REIT. If we were to fail to so qualify, any gain realized by foreign investors on a sale of our shares would be subject to FIRPTA tax, unless our shares were traded on an established securities market and the foreign investor did not at any time during a specified testing period directly or indirectly own more than 10% of the value of our outstanding common stock.
A foreign investor also may be subject to FIRPTA tax upon the payment of any capital gain dividend by us, which dividend is attributable to gain from sales or exchanges of U.S. real property interests. We encourage our stockholders to consult their own tax advisor to determine the tax consequences applicable to them if they are a foreign investor.
ERISA Risks
If our assets are deemed to be ERISA plan assets, the Advisor and we may be exposed to liabilities under Title I of ERISA and the Internal Revenue Code.
In some circumstances where an Employee Retirement Income Security Act of 1974, as amended, or ERISA, plan holds an interest in an entity, the assets of the entire entity are deemed to be ERISA plan assets unless an exception applies. This is known as the "look-through rule." Under those circumstances, the obligations and other responsibilities of plan sponsors, plan fiduciaries and plan administrators, and of parties in interest and disqualified persons, under Title I of ERISA and Section 4975 of the Code, as applicable, may be applicable, and there may be liability under these and other provisions of ERISA and the Code. We believe that our assets should not be treated as plan assets because the shares should qualify as "publicly-offered securities" that are exempt from the look-through rules under applicable Treasury Regulations. We note, however, that because certain limitations are imposed upon the transferability of shares so that we may qualify as a REIT, and perhaps for other reasons, it is possible that this exemption may not apply. If that is the case, and if the Advisor or we are exposed to liability

31


under ERISA or the Code, our performance and results of operations could be adversely affected. Prior to making an investment in us, you should consult with your legal and other advisors concerning the impact of ERISA and the Code on your investment and our performance.
Item 1B. Unresolved Staff Comments.
None.

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Item 2. Properties.
Our principal executive offices are located at 4890 West Kennedy Blvd., Suite 650, Tampa, Florida 33609. We do not have an address separate from our Advisor or our Sponsor.
As of December 31, 2019, we owned a portfolio of 152 properties, located in 67 MSAs and two µSAs, comprised of approximately 8,681,000 rentable square feet of commercial space. As of December 31, 2019, 133 of our real estate properties were single-tenant, 18 of our real estate properties were multi-tenant and one of our real estate properties was vacant. As of December 31, 2019, 95.1% of our rentable square feet was leased, with a weighted average remaining lease term of 10.1 years.
Property Statistics
The following table shows the property statistics of our real estate portfolio as of December 31, 2019:
Property Name
 
MSA/µSA
 
Segment
 
Date Acquired
 
Year Constructed
 
Year Renovated
 
Physical Occupancy
 
Leased Sq Ft
 
Encumbrances,
$ (in thousands)
Houston Healthcare Facility, f.k.a. Cy Fair Surgical Center
 
Houston-The Woodlands-Sugar Land, TX
 
Healthcare
 
07/31/2014
 
1993
 
 
100%
 
13,645

 
(1) 
Cincinnati Healthcare Facility, f.k.a. Mercy Healthcare Facility
 
Cincinnati, OH-KY-IN
 
Healthcare
 
10/29/2014
 
2001
 
 
100%
 
14,868

 
(1) 
Winston-Salem Healthcare Facility, f.k.a. Winston-Salem, NC IMF
 
Winston-Salem, NC
 
Healthcare
 
12/17/2014
 
2004
 
 
100%
 
22,200

 
(1) 
Stoughton Healthcare Facility, f.k.a. New England Sinai Medical Center
 
Boston-Cambridge-Newton, MA-NH
 
Healthcare
 
12/23/2014
 
1973
 
1997
 
100%
 
180,744

 
(1) 
Fort Worth Healthcare Facility, f.k.a. Baylor Surgical Hospital at Fort Worth
 
Dallas-Fort Worth-Arlington, TX
 
Healthcare
 
12/31/2014
 
2014
 
 
100%
 
83,464

 
(1) 
Fort Worth Healthcare Facility II, f.k.a. Baylor Surgical Hospital Integrated Medical Facility
 
Dallas-Fort Worth-Arlington, TX
 
Healthcare
 
12/31/2014
 
2014
 
 
87%
 
7,219

 
(1) 
Winter Haven Healthcare Facility
 
Lakeland-Winter Haven, FL
 
Healthcare
 
01/27/2015
 
2009
 
 
100%
 
7,560

 
(1) 
Overland Park Healthcare Facility, f.k.a. Heartland Rehabilitation Hospital
 
Kansas City, MO-KS
 
Healthcare
 
02/17/2015
 
2014
 
 
100%
 
54,568

 
(1) 
Indianapolis Data Center
 
Indianapolis-Carmel-Anderson, IN
 
Data Center
 
04/01/2015
 
2000
 
2014
 
100%
 
43,724

 
(1) 
Clarion Healthcare Facility, f.k.a. Clarion IMF
 
Pittsburgh, PA
 
Healthcare
 
06/01/2015
 
2012
 
 
100%
 
33,000

 
(1) 
Webster Healthcare Facility, f.k.a. Post Acute Webster Rehabilitation Hospital
 
Houston-The Woodlands-Sugar Land, TX
 
Healthcare
 
06/05/2015
 
2015
 
 
100%
 
53,514

 
(1) 
Eagan Data Center
 
Minneapolis-St. Paul-Bloomington, MN-WI
 
Data Center
 
06/29/2015
 
1998
 
2015
 
100%
 
87,402

 
(1) 
Houston Healthcare Facility II, f.k.a. Houston Surgical Hospital and LTACH
 
Houston-The Woodlands-Sugar Land, TX
 
Healthcare
 
06/30/2015
 
1950
 
2005/2008
 
44%
 
45,509

 
Augusta Healthcare Facility, f.k.a. KMO IMF - Augusta
 
Augusta-Waterville, ME (µSA)
 
Healthcare
 
07/22/2015
 
2010
 
 
100%
 
51,000

 
(1) 
Cincinnati Healthcare Facility II, f.k.a. KMO IMF - Cincinnati I
 
Cincinnati, OH-KY-IN
 
Healthcare
 
07/22/2015
 
1960
 
2014
 
100%
 
139,428

 
(1) 
Cincinnati Healthcare Facility III, f.k.a. KMO IMF - Cincinnati II
 
Cincinnati, OH-KY-IN
 
Healthcare
 
07/22/2015
 
2014
 
 
100%
 
41,600

 
(1) 
Florence Healthcare Facility, f.k.a. KMO IMF - Florence
 
Cincinnati, OH-KY-IN
 
Healthcare
 
07/22/2015
 
2014
 
 
100%
 
41,600

 
(1) 
Oakland Healthcare Facility, f.k.a. KMO IMF - Oakland
 
Augusta-Waterville, ME (µSA)
 
Healthcare
 
07/22/2015
 
2014
 
 
100%
 
20,000

 
(1) 
Wyomissing Healthcare Facility, f.k.a. Reading Surgical Hospital
 
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
 
Healthcare
 
07/24/2015
 
2007
 
 
100%
 
33,217

 
(1) 
Luling Healthcare Facility, f.k.a. Post Acute Warm Springs Specialty Hospital of Luling
 
Austin-Round Rock, TX
 
Healthcare
 
07/30/2015
 
2002
 
 
100%
 
40,901

 
(1) 
Minnetonka Data Center
 
Minneapolis-St. Paul-Bloomington, MN-WI
 
Data Center
 
08/28/2015
 
1985
 
2001/2006
/2012/2015
 
100%
 
135,240

 
(1) 
Omaha Healthcare Facility, f.k.a. Nebraska Healthcare Facility
 
Omaha-Council Bluffs, NE-IA
 
Healthcare
 
10/14/2015
 
2014
 
 
100%
 
40,402

 
(1) 
Sherman Healthcare Facility, f.k.a. Heritage Park - Sherman I
 
Sherman-Denison, TX
 
Healthcare
 
11/20/2015
 
2005
 
2010
 
100%
 
57,576

 
(1) 
Sherman Healthcare Facility II, f.k.a. Heritage Park - Sherman II
 
Sherman-Denison, TX
 
Healthcare
 
11/20/2015
 
2005
 
 
100%
 
8,055

 
(1) 

33


Property Name
 
MSA/µSA
 
Segment
 
Date Acquired
 
Year Constructed
 
Year Renovated
 
Physical Occupancy
 
Leased Sq Ft
 
Encumbrances,
$ (in thousands)
Fort Worth Healthcare Facility III, f.k.a. Baylor Surgery Center at Fort Worth
 
Dallas-Fort Worth-Arlington, TX
 
Healthcare
 
12/23/2015
 
1998
 
2007/2015
 
100%
 
36,800

 
(1) 
Oklahoma City Healthcare Facility, f.k.a. HPI - Oklahoma City I
 
Oklahoma City, OK
 
Healthcare
 
12/29/2015
 
1985
 
1998/2003
 
100%
 
94,076

 
22,259
Oklahoma City Healthcare Facility II, f.k.a. HPI - Oklahoma City II
 
Oklahoma City, OK
 
Healthcare
 
12/29/2015
 
1994
 
1999
 
100%
 
41,394

 
(1) 
Waco Data Center
 
Waco, TX
 
Data Center
 
12/30/2015
 
1956
 
2009
 
100%
 
43,596

 
(1) 
Edmond Healthcare Facility, f.k.a. HPI - Edmond
 
Oklahoma City, OK
 
Healthcare
 
01/20/2016
 
2002
 
 
100%
 
17,700

 
(1) 
Oklahoma City Healthcare Facility III, f.k.a. HPI - Oklahoma City IV
 
Oklahoma City, OK
 
Healthcare
 
01/27/2016
 
2006
 
 
100%
 
5,000

 
(1) 
Oklahoma City Healthcare Facility IV, f.k.a. HPI - Oklahoma City III
 
Oklahoma City, OK
 
Healthcare
 
01/27/2016
 
2007
 
 
100%
 
8,762

 
(1) 
Alpharetta Data Center, f.k.a. Alpharetta Data Center III
 
Atlanta-Sandy Springs-Roswell, GA
 
Data Center
 
02/02/2016
 
1999
 
 
100%
 
77,322

 
(1) 
Flint Data Center
 
Flint, MI
 
Data Center
 
02/02/2016
 
1989
 
2016
 
100%
 
32,500

 
(1) 
Newcastle Healthcare Facility, f.k.a. HPI - Newcastle
 
Oklahoma City, OK
 
Healthcare
 
02/03/2016
 
1995
 
1999
 
100%
 
7,424

 
(1) 
Oklahoma City Healthcare Facility V, f.k.a. HPI - Oklahoma City V
 
Oklahoma City, OK
 
Healthcare
 
02/11/2016
 
2008
 
 
100%
 
43,676

 
(1) 
Rancho Mirage Healthcare Facility, f.k.a. Vibra Rehabilitation Hospital
 
Riverside-San Bernardino-Ontario, CA
 
Healthcare
 
03/01/2016
 
2018
 
 
100%
 
47,008

 
Oklahoma City Healthcare Facility VI, f.k.a. HPI - Oklahoma City VI
 
Oklahoma City, OK
 
Healthcare
 
03/07/2016
 
2007
 
 
100%
 
14,676

 
(1) 
Franklin Data Center, f.k.a. Tennessee Data Center
 
Nashville-Davidson-Murfreesboro-Franklin, TN
 
Data Center
 
03/31/2016
 
2016
 
2019
 
100%
 
71,726

 
(1) 
Oklahoma City Healthcare Facility VII, f.k.a. HPI - Oklahoma City VII
 
Oklahoma City, OK
 
Healthcare
 
06/22/2016
 
2016
 
 
100%
 
102,978

 
24,547
Las Vegas Healthcare Facility, f.k.a. Post Acute Las Vegas Rehabilitation Hospital
 
Las Vegas-Henderson-Paradise, NV
 
Healthcare
 
06/24/2016
 
2017
 
 
100%
 
56,220

 
(1) 
Somerset Data Center
 
New York-Newark-Jersey City, NY-NJ-PA
 
Data Center
 
06/29/2016
 
1978
 
2016
 
100%
 
36,118

 
(1) 
Oklahoma City Healthcare Facility VIII, f.k.a. Integris Lakeside Women's Hospital
 
Oklahoma City, OK
 
Healthcare
 
06/30/2016
 
1997
 
2008
 
100%
 
62,857

 
(1) 
Hawthorne Data Center, f.k.a. AT&T Hawthorne Data Center
 
Los Angeles-Long Beach-Anaheim, CA
 
Data Center
 
09/27/2016
 
1963
 
1983/2001
 
100%
 
288,000

 
39,749
McLean Data Center, f.k.a. McLean I
 
Washington-Arlington-Alexandria, DC-VA-MD-WV
 
Data Center
 
10/17/2016
 
1966
 
1998
 
95%
 
65,794

 
23,460
McLean Data Center II, f.k.a. McLean II
 
Washington-Arlington-Alexandria, DC-VA-MD-WV
 
Data Center
 
10/17/2016
 
1991
 
2019
 
100%
 
62,002

 
27,540
Marlton Healthcare Facility, f.k.a. Select Medical Rehabilitation Facility
 
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
 
Healthcare
 
11/01/2016
 
1995
 
 
100%
 
89,139

 
31,145
Andover Data Center, f.k.a. Andover Data Center II
 
Boston-Cambridge-Newton, MA-NH
 
Data Center
 
11/08/2016
 
2000
 
 
100%
 
153,000

 
(1) 
Grand Rapids Healthcare Facility
 
Grand Rapids-Wyoming, MI
 
Healthcare
 
12/07/2016
 
2008
 
 
83%
 
88,821

 
21,766
Corpus Christi Healthcare Facility, f.k.a. Corpus Christi Surgery Center
 
Corpus Christi, TX
 
Healthcare
 
12/22/2016
 
1992
 
 
100%
 
25,102

 
(1) 
Chicago Data Center, f.k.a. Chicago Data Center II
 
Chicago-Naperville-Elgin, IL-IN-WI
 
Data Center
 
12/28/2016
 
1987
 
2016
 
100%
 
115,352

 
(1) 
Blythewood Data Center
 
Columbia, SC
 
Data Center
 
12/29/2016
 
1983
 
 
100%
 
64,637

 
(1) 
Tempe Data Center
 
Phoenix-Mesa-Scottsdale, AZ
 
Data Center
 
01/26/2017
 
1977
 
2016
 
100%
 
44,244

 
(1) 
Aurora Healthcare Facility
 
Chicago-Naperville-Elgin, IL-IN-WI
 
Healthcare
 
03/30/2017
 
2002
 
 
100%
 
24,722

 
(1) 
Norwalk Data Center
 
Bridgeport-Stamford-Norwalk, CT
 
Data Center
 
03/30/2017
 
2013
 
 
100%
 
167,691

 
34,200

34


Property Name
 
MSA/µSA
 
Segment
 
Date Acquired
 
Year Constructed
 
Year Renovated
 
Physical Occupancy
 
Leased Sq Ft
 
Encumbrances,
$ (in thousands)
Allen Healthcare Facility, f.k.a. Texas Rehab - Allen
 
Dallas-Fort Worth-Arlington, TX
 
Healthcare
 
03/31/2017
 
2007
 
 
100%
 
42,627

 
13,136
Austin Healthcare Facility, f.k.a. Texas Rehab - Austin
 
Austin-Round Rock, TX
 
Healthcare
 
03/31/2017
 
2012
 
 
100%
 
66,095

 
20,861
Beaumont Healthcare Facility, f.k.a. Texas Rehab - Beaumont
 
Beaumont-Port Arthur, TX
 
Healthcare
 
03/31/2017
 
1991
 
 
100%
 
61,000

 
5,863
Charlotte Data Center, f.k.a. Charlotte Data Center II
 
Charlotte-Concord-Gastonia, NC-SC
 
Data Center
 
05/15/2017
 
1989
 
2016
 
100%
 
52,924

 
(1) 
Atlanta Data Center, f.k.a. 250 Williams Atlanta Data Center
 
Atlanta-Sandy Springs-Roswell, GA
 
Data Center
 
06/15/2017
 
1989
 
2007
 
89%
 
886,740

 
116,200
Sunnyvale Data Center
 
San Jose-Sunnyvale-Santa Clara, CA
 
Data Center
 
06/28/2017
 
1992
 
1998
 
100%
 
76,573

 
(1) 
San Antonio Healthcare Facility, f.k.a. Texas Rehab - San Antonio
 
San Antonio-New Braunfels, TX
 
Healthcare
 
06/29/2017
 
2012
 
 
100%
 
44,746

 
10,490
Cincinnati Data Center
 
Cincinnati, OH-KY-IN
 
Data Center
 
06/30/2017
 
1985
 
2010
 
100%
 
69,826

 
(1) 
Silverdale Healthcare Facility
 
Bremerton-Silverdale, WA
 
Healthcare
 
08/25/2017
 
2005
 
 
100%
 
25,892

 
(1) 
Silverdale Healthcare Facility II
 
Bremerton-Silverdale, WA
 
Healthcare
 
09/20/2017
 
2007
 
 
100%
 
19,184

 
(1) 
King of Prussia Data Center
 
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
 
Data Center
 
09/28/2017
 
1960
 
1997
 
100%
 
50,000

 
11,961
Tempe Data Center II
 
Phoenix-Mesa-Scottsdale, AZ
 
Data Center
 
09/29/2017
 
1998
 
 
100%
 
58,560

 
(1) 
Houston Data Center
 
Houston-The Woodlands-Sugar Land, TX
 
Data Center
 
11/16/2017
 
2013
 
 
100%
 
103,200

 
48,607
Saginaw Healthcare Facility
 
Saginaw, MI
 
Healthcare
 
12/21/2017
 
2002
 
 
100%
 
87,843

 
(1) 
Elgin Data Center
 
Chicago-Naperville-Elgin, IL-IN-WI
 
Data Center
 
12/22/2017
 
2000
 
 
100%
 
65,745

 
5,561
Oklahoma City Data Center
 
Oklahoma City, OK
 
Data Center
 
12/27/2017
 
2008/2016
 
 
100%
 
92,456

 
(1) 
Rancho Cordova Data Center, f.k.a. Rancho Cordova Data Center I
 
Sacramento–Roseville–Arden-Arcade, CA
 
Data Center
 
03/14/2018
 
1982
 
2008/2010
 
100%
 
69,048

 
(1) 
Rancho Cordova Data Center II
 
Sacramento–Roseville–Arden-Arcade, CA
 
Data Center
 
03/14/2018
 
1984
 
2012
 
63%
 
40,394

 
(1) 
Carrollton Healthcare Facility
 
Dallas-Fort Worth-Arlington, TX
 
Healthcare
 
04/27/2018
 
2015
 
 
100%
 
21,990

 
(1) 
Katy Healthcare Facility, f.k.a. Oceans Katy Behavioral Health Hospital
 
Houston-The Woodlands-Sugar Land, TX
 
Healthcare
 
06/08/2018
 
2015
 
 
100%
 
34,296

 
(1) 
San Jose Data Center
 
San Jose-Sunnyvale-Santa Clara, CA
 
Data Center
 
06/13/2018
 
1999
 
2009
 
100%
 
76,410

 
(1) 
Indianola Healthcare Facility, f.k.a. Indianola Healthcare I
 
Des Moines-West Des Moines, IA
 
Healthcare
 
09/26/2018
 
2014
 
 
100%
 
18,116

 
(1) 
Indianola Healthcare Facility II, f.k.a. Indianola Healthcare II
 
Des Moines-West Des Moines, IA
 
Healthcare
 
09/26/2018
 
2011
 
 
100%
 
20,990

 
(1) 
Canton Data Center
 
Canton-Massillon, OH
 
Data Center
 
10/03/2018
 
2008
 
 
100%
 
29,960

 
(1) 
Benton Healthcare Facility, f.k.a. Benton Healthcare I (Benton)
 
Little Rock-North Little Rock-Conway, AR
 
Healthcare
 
10/17/2018
 
1992/1999
 
 
100%
 
104,419

 
(1) 
Benton Healthcare Facility II, f.k.a. Benton Healthcare III (Benton)
 
Little Rock-North Little Rock-Conway, AR
 
Healthcare
 
10/17/2018
 
1983
 
 
100%
 
11,350

 
(1) 
Bryant Healthcare Facility, f.k.a. Benton Healthcare II (Bryant)
 
Little Rock-North Little Rock-Conway, AR
 
Healthcare
 
10/17/2018
 
1995
 
 
100%
 
23,450

 
(1) 
Hot Springs Healthcare Facility, f.k.a. Benton Healthcare IV (Hot Springs)
 
Little Rock-North Little Rock-Conway, AR
 
Healthcare
 
10/17/2018
 
2009
 
 
100%
 
8,573

 
(1) 
Clive Healthcare Facility
 
Des Moines-West Des Moines, IA
 
Healthcare
 
11/26/2018
 
2008
 
 
100%
 
58,156

 
(1) 
Valdosta Healthcare Facility, f.k.a. Valdosta Healthcare I
 
Valdosta, GA
 
Healthcare
 
11/28/2018
 
2004
 
 
100%
 
24,750

 
(1) 
Valdosta Healthcare Facility II, f.k.a. Valdosta Healthcare II
 
Valdosta, GA
 
Healthcare
 
11/28/2018
 
1992
 
 
100%
 
12,745

 
(1) 
Bryant Healthcare Facility II, f.k.a. Bryant Healthcare Facility
 
Little Rock-North Little Rock-Conway, AR
 
Healthcare
 
08/16/2019
 
2016
 
 
100%
 
16,154

 
(1) 
Laredo Healthcare Facility
 
Laredo, TX
 
Healthcare
 
09/19/2019
 
1998
 
 
100%
 
61,677

 
(1) 
Laredo Healthcare Facility II
 
Laredo, TX
 
Healthcare
 
09/19/2019
 
1998
 
 
100%
 
118,132

 
(1) 
Poplar Bluff Healthcare Facility
 
Poplar Bluff, MO (µSA)
 
Healthcare
 
09/19/2019
 
2013
 
 
100%
 
71,519

 
(1) 
Tucson Healthcare Facility
 
Tucson, AZ
 
Healthcare
 
09/19/2019
 
1998
 
 
100%
 
34,009

 
(1) 
Akron Healthcare Facility
 
Akron, OH
 
Healthcare
 
10/04/2019
 
2012
 
 
100%
 
98,705

 
(1) 
Akron Healthcare Facility II
 
Akron, OH
 
Healthcare
 
10/04/2019
 
2013
 
 
100%
 
38,564

 
(1) 

35


Property Name
 
MSA/µSA
 
Segment
 
Date Acquired
 
Year Constructed
 
Year Renovated
 
Physical Occupancy
 
Leased Sq Ft
 
Encumbrances,
$ (in thousands)
Akron Healthcare Facility III
 
Akron, OH
 
Healthcare
 
10/04/2019
 
2008
 
 
100%
 
54,000

 
(1) 
Alexandria Healthcare Facility
 
Alexandria, LA
 
Healthcare
 
10/04/2019
 
2007
 
 
100%
 
15,600

 
(1) 
Appleton Healthcare Facility
 
Appleton, WI
 
Healthcare
 
10/04/2019
 
2011
 
 
100%
 
7,552

 
(1) 
Austin Healthcare Facility II
 
Austin-Round Rock, TX
 
Healthcare
 
10/04/2019
 
2006
 
 
100%
 
18,275

 
(1) 
Bellevue Healthcare Facility
 
Green Bay, WI
 
Healthcare
 
10/04/2019
 
2010
 
 
100%
 
5,838

 
(1) 
Bonita Springs Healthcare Facility
 
Cape Coral-Fort Myers, FL
 
Healthcare
 
10/04/2019
 
2002
 
2005
 
100%
 
9,800

 
(1) 
Bridgeton Healthcare Facility
 
St. Louis, MO-IL
 
Healthcare
 
10/04/2019
 
2012
 
 
100%
 
66,914

 
(1) 
Covington Healthcare Facility
 
New Orleans-Metairie, LA
 
Healthcare
 
10/04/2019
 
1984
 
 
100%
 
43,250

 
(1) 
Crestview Healthcare Facility
 
Crestview-Fort Walton Beach-Destin, FL
 
Healthcare
 
10/04/2019
 
2004
 
2010
 
100%
 
5,685

 
(1) 
Dallas Healthcare Facility
 
Dallas-Fort Worth-Arlington, TX
 
Healthcare
 
10/04/2019
 
2010
 
 
100%
 
62,390

 
(1) 
Dallas Healthcare Facility II
 
Dallas-Fort Worth-Arlington, TX
 
Healthcare
 
10/04/2019
 
1983
 
2013
 
—%
 

 
De Pere Healthcare Facility
 
Green Bay, WI
 
Healthcare
 
10/04/2019
 
2005
 
 
100%
 
7,100

 
(1) 
Denver Healthcare Facility
 
Denver-Aurora-Lakewood, CO
 
Healthcare
 
10/04/2019
 
1962
 
2018
 
100%
 
131,210

 
(1) 
El Segundo Healthcare Facility
 
Los Angeles-Long Beach-Anaheim, CA
 
Healthcare
 
10/04/2019
 
2009
 
 
100%
 
12,163

 
(1) 
Fairlea Healthcare Facility
 
Hagerstown-Martinsburg, MD-WV
 
Healthcare
 
10/04/2019
 
1999
 
 
100%
 
5,200

 
(1) 
Fayetteville Healthcare Facility
 
Fayetteville-Springdale-Rogers, AR-MO
 
Healthcare
 
10/04/2019
 
1994
 
2009
 
100%
 
55,740

 
(1) 
Fort Myers Healthcare Facility
 
Cape Coral-Fort Myers, FL
 
Healthcare
 
10/04/2019
 
1999
 
 
100%
 
32,148

 
(1) 
Fort Myers Healthcare Facility II
 
Cape Coral-Fort Myers, FL
 
Healthcare
 
10/04/2019
 
2010
 
 
100%
 
47,089

 
(1) 
Fort Walton Beach Healthcare Facility
 
Crestview-Fort Walton Beach-Destin, FL
 
Healthcare
 
10/04/2019
 
2005
 
 
100%
 
9,017

 
(1) 
Frankfort Healthcare Facility
 
Lexington-Fayette, KY
 
Healthcare
 
10/04/2019
 
1993
 
 
100%
 
4,000

 
(1) 
Frisco Healthcare Facility
 
Dallas-Fort Worth-Arlington, TX
 
Healthcare
 
10/04/2019
 
2010
 
 
100%
 
45,500

 
(1) 
Goshen Healthcare Facility
 
Elkhart-Goshen, IN
 
Healthcare
 
10/04/2019
 
2010
 
 
100%
 
15,462

 
(1) 
Grapevine Healthcare Facility
 
Dallas-Fort Worth-Arlington, TX
 
Healthcare
 
10/04/2019
 
2007
 
 
100%
 
61,400

 
Hammond Healthcare Facility
 
Hammond, LA
 
Healthcare
 
10/04/2019
 
2006
 
 
100%
 
63,000

 
(1) 
Hammond Healthcare Facility II
 
Hammond, LA
 
Healthcare
 
10/04/2019
 
2004
 
 
100%
 
23,835

 
(1) 
Harlingen Healthcare Facility
 
Brownsville-Harlingen, TX
 
Healthcare
 
10/04/2019
 
2007
 
 
100%
 
38,111

 
Henderson Healthcare Facility
 
Las Vegas-Henderson-Paradise, NV
 
Healthcare
 
10/04/2019
 
2000
 
 
100%
 
6,685

 
(1) 
Houston Healthcare Facility III
 
Houston-The Woodlands-Sugar Land, TX
 
Healthcare
 
10/04/2019
 
1998
 
2018
 
100%
 
16,217

 
(1) 
Howard Healthcare Facility
 
Green Bay, WI
 
Healthcare
 
10/04/2019
 
2011
 
 
100%
 
7,552

 
(1) 
Jacksonville Healthcare Facility
 
Jacksonville, FL
 
Healthcare
 
10/04/2019
 
2009
 
 
100%
 
13,082

 
(1) 
Lafayette Healthcare Facility
 
Lafayette, LA
 
Healthcare
 
10/04/2019
 
2004
 
 
100%
 
73,824

 
(1) 
Lakewood Ranch Healthcare Facility
 
North Port-Sarasota-Bradenton, FL
 
Healthcare
 
10/04/2019
 
2008
 
 
100%
 
10,919

 
(1) 
Las Vegas Healthcare Facility II
 
Las Vegas-Henderson-Paradise, NV
 
Healthcare
 
10/04/2019
 
2007
 
 
100%
 
6,963

 
(1) 
Lehigh Acres Healthcare Facility
 
Cape Coral-Fort Myers, FL
 
Healthcare
 
10/04/2019
 
2002
 
 
100%
 
5,746

 
(1) 
Lubbock Healthcare Facility
 
Lubbock, TX
 
Healthcare
 
10/04/2019
 
2003
 
 
100%
 
102,143

 
(1) 
Manitowoc Healthcare Facility
 
Green Bay, WI
 
Healthcare
 
10/04/2019
 
2003
 
 
100%
 
7,987

 
(1) 
Manitowoc Healthcare Facility II
 
Green Bay, WI
 
Healthcare
 
10/04/2019
 
1964
 
2010
 
100%
 
36,090

 
(1) 
Marinette Healthcare Facility
 
Green Bay, WI
 
Healthcare
 
10/04/2019
 
2008
 
 
100%
 
4,178

 
(1) 
New Bedford Healthcare Facility
 
Providence-Warwick, RI-MA
 
Healthcare
 
10/04/2019
 
1942
 
1995
 
100%
 
70,657

 
(1) 
New Braunfels Healthcare Facility
 
San Antonio-New Braunfels, TX
 
Healthcare
 
10/04/2019
 
2007
 
 
100%
 
27,971

 
(1) 
North Smithfield Healthcare Facility
 
Providence-Warwick, RI-MA
 
Healthcare
 
10/04/2019
 
1965
 
2000
 
100%
 
92,944

 
(1) 
Oklahoma City Healthcare Facility IX
 
Oklahoma City, OK
 
Healthcare
 
10/04/2019
 
2007
 
 
100%
 
34,970

 
(1) 
Oshkosh Healthcare Facility
 
Oshkosh-Neenah, WI
 
Healthcare
 
10/04/2019
 
2010
 
 
100%
 
8,717

 
(1) 
Palm Desert Healthcare Facility
 
Riverside-San Bernardino-Ontario, CA
 
Healthcare
 
10/04/2019
 
2005
 
 
100%
 
6,963

 
(1) 

36


Property Name
 
MSA/µSA
 
Segment
 
Date Acquired
 
Year Constructed
 
Year Renovated
 
Physical Occupancy
 
Leased Sq Ft
 
Encumbrances,
$ (in thousands)
Rancho Mirage Healthcare Facility II
 
Riverside-San Bernardino-Ontario, CA
 
Healthcare
 
10/04/2019
 
2008
 
 
100%
 
7,432

 
(1) 
San Antonio Healthcare Facility II
 
San Antonio-New Braunfels, TX
 
Healthcare
 
10/04/2019
 
2013
 
 
100%
 
82,316

 
San Antonio Healthcare Facility III
 
San Antonio-New Braunfels, TX
 
Healthcare
 
10/04/2019
 
2012
 
 
100%
 
50,000

 
(1) 
San Antonio Healthcare Facility IV
 
San Antonio-New Braunfels, TX
 
Healthcare
 
10/04/2019
 
1987