UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2021

Commission File No. 001-34995

Preferred Apartment Communities, Inc.

(Exact name of registrant as specified in its charter)

Maryland	27-1712193
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3284 Northside Parkway NW, Suite 150, Atlanta, GA 30327

(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (770) 818-4100

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

Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock, par value $.01 per share	APTS	NYSE

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

Title of each class

Series A Redeemable Preferred Stock, par value $0.01 per share

Warrant to Purchase Common Stock, par value $0.01 per share

Series M Redeemable Preferred Stock, par value $0.01 per share

Series A1 Redeemable Preferred Stock, par value $0.01 per share

Series M1 Redeemable Preferred 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 x

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 x

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  x    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  x     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 (as defined in Exchange Act Rule 12b-2).

Large accelerated filer  ¨    Accelerated filer   x    Non-accelerated filer  ¨  Smaller reporting company  ¨ Emerging growth company   ¨

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).    Yes ¨ No x

The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2021, the last business day of the registrant's most recently completed second fiscal quarter, was $499,414,208 based on the closing price of the common stock on the NYSE on such date. The number of shares outstanding of the registrant’s common stock, as of February 22, 2022 was 55,734,724.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information to be included in the registrant's definitive Proxy Statement, for the registrant's 2022 Annual Meeting of Stockholders, or in an amendment to this Annual Report on Form 10-K, either of which will be filed not later than 120 days after our fiscal year ended December 31, 2021, is incorporated by reference into PART III of this Annual Report on Form 10-K.

	TABLE OF CONTENTS
		FINANCIAL INFORMATION	Page No.
PART I
1.		Business	1
1A.		Risk Factors	9
1B.		Unresolved Staff Comments	29
2.		Properties	30
3.		Legal Proceedings	36
4.		Mine Safety Disclosures	36
PART II
5.		Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	36
6.		Reserved	38
7.		Management's Discussion and Analysis of Financial Condition and Results of Operations	38
7A.		Quantitative and Qualitative Disclosures about Market Risk	72
8.		Financial Statements and Supplementary Data	72
9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	73
9A.		Controls and Procedures	73
9B.		Other Information	74
9C.		Disclosure Regarding Foreign Jurisdictions That Prevent Inspections	74
PART III
10.		Directors, Executive Officers and Corporate Governance	75
11.		Executive Compensation	75
12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	75
13.		Certain Relationships and Related Transactions, and Director Independence	75
14.		Principal Accountant Fees and Services	75
PART IV
15.		Exhibits and Financial Statement Schedules	76
16.		Form 10-K Summary	130

PART I

This Annual Report on Form 10-K contains 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. Our actual results could differ materially from those set forth in each forward-looking statement. Certain factors that might cause such a difference are discussed in this report, including in the section entitled “Forward-Looking Statements” included elsewhere in this Annual Report on Form 10-K. You should also review the section entitled "Risk Factors" in Item 1A of this Annual Report on Form 10-K for a discussion of various risks that could adversely affect us. Unless the context otherwise requires or indicates, references to the "Company", "we", "our" or "us" refers to Preferred Apartment Communities, Inc., a Maryland corporation, together with its consolidated subsidiaries, including Preferred Apartment Communities Operating Partnership, L.P., or our Operating Partnership, and PAC Carveout, LLC.

Item  1.    Business

Development of the Company

    Preferred Apartment Communities, Inc. (NYSE: APTS), or the Company, is a real estate investment trust ("REIT") engaged primarily in the ownership and operation of Class A multifamily properties, with select investments in grocery-anchored shopping centers. Preferred Apartment Communities’ investment objective is to generate attractive, stable returns for stockholders by investing in income-producing properties and acquiring or originating real estate loans. As of December 31, 2021, we owned or were invested in 109 properties in 13 states, predominantly in the Southeast region of the United States. The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, (the "Code") commencing with its tax year ended December 31, 2011.

    On January 31, 2020, we internalized the functions performed by Preferred Apartment Advisors, LLC, or our Former Manager, and NMP Advisors, LLC, or our Former Sub-Manager, by acquiring NELL Partners, Inc. ("NELL") and NMA Holdings, Inc. ("NMA"), the entities that owned the Former Manager and the Former Sub-Manager (such transactions, collectively, the "Internalization"). The Internalization resulted in the elimination of the previous fee structure between us and the Former Manager, including acquisition and other fees. All managerial and administrative personnel our Former Manager and Former Sub-Manager provided to us pursuant to the Sixth Amended and Restated Management Agreement, effective as of June 3, 2016, or Management Agreement, became employees of the Company effective with the closing of the Internalization. Trusts established, or entities owned, by the family of John A. Williams, the Company’s former Chairman of the Board and Chief Executive Officer, Daniel M. DuPree, the Company’s former Executive Chairman of the Board and former Chief Executive Officer of the Company, and Leonard A. Silverstein, the Company’s former Vice Chairman of the Board, and Former President and Chief Operating Officer, were the owners of NELL. Trusts established, or entities owned, by Joel T. Murphy, the Company’s Chairman of the Board and Chief Executive Officer, the family of Mr. Williams, Mr. DuPree and Mr. Silverstein were the owners of the Former Sub-Manager.

On November 3, 2020, we sold all eight of our student housing communities and one real estate loan investment to an unrelated third party. This achievement of our strategic objective to exit the student housing space provided capital to focus on acquisitions or real estate loans in support of suburban multifamily communities in the Sunbelt region, redeem shares of our Preferred Stock, and for other corporate purposes.

During the second half of 2021, we sold an aggregate of eight office properties and one office real estate loan investment to unrelated third parties.

On February 16, 2022, we entered into an Agreement and Plan of Merger, by and among Pike Parent LLC ("Parent"), Pike Merger Sub I LLC, Pike Merger Sub II LLC, Pike Merger Sub III LLC, Preferred Apartment Communities Operating Partnership, L.P. and PAC Operations, LLC (the "Merger Agreement"), pursuant to which, following a series of transactions (the "Mergers"), if closed, we will become a wholly-owned subsidiary of Parent, which is affiliated with Blackstone Real Estate Income Trust, Inc. ("BREIT"). If the Mergers are completed, each share of our common stock, par value $0.01 per share ("Common Stock"), issued and outstanding immediately prior to closing will be automatically canceled and converted into the right to receive $25.00 in cash, and the Company will cease to be a publicly traded company on the New York Stock Exchange. The holders of each series of our Preferred Stock (as defined in the section entitled "Financing Strategy", following) will receive the $1,000 per share liquidation preference for each share plus accrued but unpaid dividends. The transaction has been unanimously approved by our Board of Directors and is expected to close in the second quarter of 2022, although there is no

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guarantee that it will occur by that date, or at all, and the transaction is subject to approval by our stockholders and other customary closing conditions.

    Our consolidated financial statements include the accounts of the Company and Preferred Apartment Communities Operating Partnership, L.P., or the Operating Partnership. The Company controls the Operating Partnership through its sole general partnership interest, and prior to the Internalization, conducted substantially all its business through the Operating Partnership. Following the Internalization, the Company conducts substantially all of its business through PAC Carveout, LLC, or Carveout, a subsidiary of the Operating Partnership. PAC Carveout elected to be taxed as a REIT under the Code commencing with its tax year ended December 31, 2020. On January 27, 2022 PAC Carveout, LLC was legally renamed PAC Operations, LLC. For the year ended December 31, 2021, the Company held an approximate 99.0% weighted average ownership percentage in the Operating Partnership.

Our Operating Partnership and Carveout are related parties to us.

    At December 31, 2021, our portfolio of owned real estate assets and potential additions from our real estate loan investments consisted of:

	Owned as of December 31, 2021 (1)	Potential additions from real estate loan investment portfolio (2) (3)		Potential total
Residential properties:
Properties	41	9		50
Units	12,052	2,859		14,911
Grocery-anchored shopping centers:
Properties	54	1		55
Gross leasable area (square feet)	6,210,778	85,500	( 4)	6,296,278
Office buildings:
Properties	2	—		2
Rentable square feet	1,072,000	—		1,072,000
Land	1	—		1
(1) One multifamily community and two grocery-anchored shopping centers are owned through consolidated joint ventures. One grocery-anchored shopping center is an investment in an unconsolidated joint venture.
(2) We evaluate each project individually and we make no assurance that we will acquire any of the underlying properties from our real estate loan investment portfolio.
(3) Eight of our office properties and a real estate loan investment supporting the 8West office building were sold during 2021.
(4) Estimated square footage of Nexton Shopping Center development.

We completed our initial public offering, or the IPO, on April 5, 2011. Our common stock, par value $.01 per share, or our Common Stock, is traded on the NYSE exchange under the symbol "APTS."

We operate within the following four operating segments:

Residential Properties - consists of the Company's portfolio of residential multifamily communities and also included the Company's portfolio of owned student housing properties. Preferred Campus Communities, LLC owned and conducted the business of our portfolio of off-campus student housing communities until the sale of all our student housing communities on November 3, 2020. As of and for the year ended December 31, 2021, the Residential Properties segment only consists of the Company's multifamily communities.

Financing - consists of the Company's portfolio of real estate loans, bridge loans, and other instruments deployed by the Company to partially finance the development, construction, and prestabilization carrying costs of new multifamily communities and other real estate and real estate related assets.

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New Market Properties - consists of our portfolio of grocery-anchored shopping centers, which are owned by New Market Properties, LLC, a wholly-owned subsidiary of the Company.

Preferred Office Properties - consists of the Company's portfolio of office buildings, which are owned by Preferred Office Properties, LLC, a wholly-owned subsidiary of the Company.

Investment Strategy

    We seek to maximize returns for our stockholders by investing in assets that we believe will allow us to grow income and asset value.

Our investment strategies may include, without limitation, the following:

•Acquiring Class “A” multifamily assets in performing and stable markets throughout the United States. These properties, we believe, should generate sustainable and growing cash flow from operations. We believe they will also have the potential for capital appreciation. These multifamily assets will generally be located in metropolitan statistical areas, or MSAs, which we expect will generate job growth from a diverse group of business sectors and where we believe new multifamily development of comparable properties is able to be absorbed at attractive rental rates.

•Acquiring Class “A” multifamily assets that are intended to be, or currently are, financed with longer-term, assumable, fixed-rate debt typically provided by the Federal Housing Administration ("FHA"), a unit of the Department of Housing and Urban Development ("HUD") programs.

•Acquiring Class “A” multifamily assets that present an opportunity to implement a value-add program whereby the properties can be upgraded or improved physically to better take advantage of the market.

•Acquiring grocery-anchored shopping centers, typically anchored by one of the market-dominant grocers in that particular market.

•Originating real estate loan investments secured by interests in multifamily communities, membership or partnership interests in multifamily communities, other multifamily related assets and grocery-anchored shopping centers.

It is our policy to acquire any of our target assets primarily for income, and only secondarily for possible capital gain. As part of our business strategy, we may enter into forward purchase contracts or purchase options for to-be-built multifamily communities and retail centers, and we may make real estate related loans, provide deposit arrangements, or provide performance assurances, as may be necessary or appropriate, in connection with the construction of multifamily communities and other properties.

We also may invest in real estate related debt, including, but not limited to, newly or previously originated first mortgage loans on multifamily properties and retail centers that meet our investment criteria, which are performing or non-performing, newly or previously originated real estate related loans on multifamily properties that meet our investment criteria (second or subsequent mortgages), which are performing or non-performing. In connection with our investments in real estate related debt, we may negotiate the inclusion of exclusive purchase options on the to-be-developed properties. These purchase options may include a fixed purchase price set at the time we enter into the loan, or a purchase price which is calculated as a certain discount, or not discount, from market capitalization rates at the date of exercise of such purchase option. Certain of the purchase options we hold may be settled by cash payments to us in the event we elect not to acquire the underlying property.

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Financing Strategy

    We intend to finance the acquisition of investments using various sources of capital, as described in the section entitled “Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” included in this Annual Report on Form 10-K. Included in this discussion are details regarding (i) our offering of up to a maximum of 1,000,000 shares of Series A1 Redeemable Preferred Stock, Series M1 Redeemable Preferred Stock or a combination of both (the "Series A1/M1 Offering") and (ii) our ability to offer up to $400 million of equity or debt securities (the "2019 Shelf Offering"), including an offering of up to $125 million of Common Stock from time to time in an "at the market" offering (the "2019 ATM Offering"). The Series A Preferred Stock, par value $0.01 per share, or Series A Preferred Stock, Series M Preferred Stock, par value $0.01 per share, or mShares, Series A1 Preferred Stock, par value $0.01 per share, or Series A1 Preferred Stock, and Series M1 Preferred Stock, par value $0.01 per share, or Series M1 Preferred Stock are collectively referred to as our Preferred Stock.

    We intend to utilize leverage in making our investments. The number of different investments we will acquire will be affected by numerous factors, including the amount of funds available to us. By operating on a leveraged basis, we will have more funds available for our investments. This will allow us to make more investments than would otherwise be possible, resulting in a larger and more diversified portfolio. See the section entitled "Risk Factors" in Item 1A of this Annual Report on Form 10-K for more information about the risks related to operating on a leveraged basis.

    We generally intend to target leverage levels (secured and unsecured) between 50% and 65% of the fair market value of our tangible assets (including our real estate assets, real estate loans, notes receivable, accounts receivable and cash and cash equivalents) on a portfolio basis. Neither our charter nor our by-laws contain any limitation on the amount of leverage we may use. These targets, however, will not apply to individual real estate assets or investments. The amount of leverage we will place on particular investments will depend on our assessment of a variety of factors which may include:

•the anticipated liquidity and price volatility of the assets in our investment portfolio;

•the potential for losses and extension risk in the portfolio;

•the availability and cost of financing an asset;

•our opinion of the creditworthiness of our financing counterparties; and

•the health of the U.S. economy and the health of the commercial real estate market in general.

In addition, factors such as our outlook on interest rates, changes in the yield curve slope, the level and volatility of interest rates and their associated credit spreads, the underlying collateral of our assets and our outlook on credit spreads relative to our outlook on interest rate and economic performance could all impact our decision and strategy for financing the target assets. At the date of acquisition of each asset, we anticipate that the investment cost for such asset will be substantially similar to its fair market value. However, subsequent events, including changes in the fair market value of our assets, could result in our exceeding these limits. Finally, we intend to acquire all our properties through separate single purpose entities and intend to finance each of these properties using debt financing techniques for that property alone, without any cross-collateralization to our other real estate assets or any guarantees by us or our Operating Partnership. We have an Amended and Restated Credit Agreement, or Credit Facility, with Key Bank, N.A., or Key Bank. The Credit Facility provides for our $200.0 million revolving credit facility, or the Revolving Line of Credit. The Credit Facility requires that we adhere to certain covenants regarding our revolving line of credit, as described in note 9 to our consolidated financial statements. Other than with regard to our Credit Facility, as of December 31, 2021, we held no debt at the Company or Operating Partnership levels, had no cross-collateralization of our real estate mortgages, and had no contingent liabilities at the Company or Operating Partnership levels with regard to our secured mortgage debt on our properties.

    Leverage may be obtained from a variety of sources, including the Federal Home Loan Mortgage Corporation ("Freddie Mac"), the Federal National Mortgage Association ("Fannie Mae"), commercial banks, credit companies, the FHA, HUD, insurance companies, pension funds, endowments, financial services companies and other institutions who wish to provide debt financing for our assets.

    Our secured and unsecured aggregate borrowings are intended by us to be reasonable in relation to our net assets and will be reviewed by our board of directors at least quarterly. In determining whether our borrowings are reasonable in relation to our net assets, we expect that our board of directors will consider many factors, including the lending standards of government-sponsored enterprises, such as Fannie Mae, Freddie Mac and other companies for loans in connection with the financing of multifamily properties, the leverage ratios of publicly traded and non-traded REITs with similar investment strategies, whether we have positive leverage (in that, the board of directors will compare the capitalization rates of our properties to the interest rates on the indebtedness of such properties) and general market and economic conditions. There is no

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limitation on the amount that we may borrow for any single investment or the number of mortgages that may be placed on any one property.

Branding Strategy

We brand, and intend to brand, all multifamily communities owned by us as “A Preferred Apartment Community” which we believe signifies outstanding brand and management standards, and have obtained all rights to the trademarks, including federal registration of the trademarks with the United States Patent and Trademark Office, to secure such brand in connection with such branding. We believe these campaigns will enhance each individual property's presence in relation to other properties within that marketplace.

We acquired all the trademarks owned by our Former Manager in connection with the closing of the Internalization transaction on January 31, 2020.

Human Capital Resources

As of December 31, 2021, we employed 366 people through Preferred Apartment Advisors, LLC, an indirect subsidiary. The success of our company is largely due to the character and quality of our employees, their dedication, experience and work ethic. The success of the following initiatives is reflected in PAC’s recognition as one of the Top Places to Work in Atlanta by the Atlanta Journal-Constitution for the past three years.

Diversity. We believe that diversity of backgrounds, experiences and perspectives makes us stronger and healthier as a company and a community. PAC is an equal opportunity employer and considers qualified applicants regardless of race, color, religion, sexual orientation, gender, gender identity or expression, national origin, age, disability, military or veteran status, genetic information, or other statuses protected by applicable federal, state, and local law. In 2020, we launched our Diversity, Equity & Inclusion initiative, which is designed to facilitate conversations around race, sexual orientation and gender identity, national origin, creeds, and other important topics. These conversations, led by our Diversity, Equity & Inclusion Committee comprised of employees, senior management and a member of our Board of Directors, provide a forum for us to translate our positions as a company into action in both our internal and external communities. As of December 31, 2021, our employees were:

• 44% female; 56% male

• 39% ethnically diverse (i.e., Asian, African American, Hispanic or Latino and other (Native Hawaiian/Pacific Islander and two or more))

Training and Education. We have educational training programs known as our Soaring Series that trains our employees to help strengthen their management skills and build camaraderie, and to assist them in understanding and implementing management-level responsibilities.

Recognition. We emphasize recognizing our employees for their achievements and rewarding them for their successes. Each year, we identify a select group of employees who demonstrate outstanding achievements during the year with our Eagle Club and Commitment to Excellence awards. Additionally, we have a spotlight employee of the month award initiative that recognizes a particular employee for her or his achievements.

Employee Health. We have focused on the health and well-being of our employees by organizing a PAC Gets Fit program to encourage a healthy lifestyle. Activities have included fitness challenges and organized 5Ks and 10Ks to promote physical and mental health and wellness. We evaluate our group health and ancillary benefits annually to ensure our benefits package is robust. We also created our Eagle’s Perch, a café-style environment, to promote increased social interactions among our property support center employees.

Compensation and Benefits. In 2020, we revamped our compensation program to provide a mix of base salary, short-term cash incentive compensation, and long-term equity incentive compensation that includes objective benchmarking, time-based and performance-based vesting, and peer comparisons where appropriate. We believe this new design will retain and motivate key contributors to the Company’s profitability and growth; align employee and investor interests; provide incentive compensation that places a strong emphasis on financial performance with the flexibility to assess operational and individual performance; provide a means to reward for strong performance; and to foster an ownership mentality among program participants. We also provide a competitive benefits package, including a 401(k) plan with a company match, flexible spending

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and health saving accounts, medical, dental and vision insurance plans, a paid parental leave policy, and company-paid short-term disability and long-term disability programs.

PAC Gives Back. We value and continue to emphasize culture and giving back to the community. We started a PAC Gives Back community philanthropic initiative. As a part of this initiative, our employees have volunteered hours and have participated in fund raising efforts for a number of charities, including the Atlanta Community Food Bank. We are proud to make these communities better places to live and work through our volunteerism and philanthropy initiatives.

Fostering Company Culture and Providing Support to Employees During COVID-19 Pandemic. At PAC, we are focused on the continued health and safety of our employees, residents and tenants. We effectively implemented our business continuity plans, including a temporary, mandatory remote work order from March 2020 to July 2020. Following our return to the office, we maintained compliance with local, state and federal mandates. To protect and foster the Company’s culture during the COVID-19 pandemic, we formed a COVID-19 taskforce that organized surveys, virtual hangout events and other remote programming to keep our employees connected while working from home. Following the installation of hand sanitizer stations as well as supplying our employees with personal protective equipment, or PPE, we have now reopened our corporate headquarters and all of our multifamily leasing offices while promoting social distancing practices in accordance with state and local mandates and restrictions. We also halted all non-essential business travel, introduced video call technology and self-guided tour options to provide uninterrupted customer service for our residents and visitors. The health and safety of our employees and tenants remains a top priority so we continue to maintain a flexible approach as we navigate the COVID-19 pandemic.

Environmental Matters

As a part of our standard property acquisition processes, we generally obtain environmental studies of the sites from outside environmental engineering firms. The purpose of these studies is to identify potential sources of contamination at the site and to assess the status of environmental regulatory compliance. These studies generally include historical reviews of the site, reviews of certain public records, preliminary investigations of the site and surrounding properties, inspection for the presence of asbestos, poly-chlorinated biphenyls and underground storage tanks and the preparation and issuance of written reports. Depending on the results of these studies, more invasive procedures, such as soil sampling or ground water analysis, may be performed to investigate potential sources of contamination. These studies must be satisfactorily completed before we take ownership of a property; however, no assurance can be given that the studies or additional documents reviewed identify all significant environmental risks. See “Risk Factors – Risks Relating to Investments In Real Estate - The costs of compliance with environmental laws and regulations and other governmental laws and regulations may adversely affect our income and the cash available for any distributions” and “Risk Factors – Risks Relating to Investments In Real Estate - Discovery of previously undetected environmentally hazardous conditions may adversely affect our operating results” in this Annual Report on Form 10-K.

The environmental studies we received on properties that we have acquired have not revealed any material environmental liabilities. Should any potential environmental risks or conditions be discovered during our due diligence process, the potential costs of remediation will be assessed carefully and factored into the cost of acquisition, assuming the identified risks and factors are deemed to be manageable and within reason. We are not aware of any existing conditions that we believe would be considered a material environmental liability. Nevertheless, it is possible that the studies do not reveal all environmental risks or that there are material environmental liabilities of which we are not aware. Moreover, no assurance can be given concerning future laws, ordinances or regulations, or the potential introduction of hazardous or toxic substances by neighboring properties or residents.

Government Regulations

We must own, operate, manage, acquire and redevelop our properties in compliance with the laws and regulations of the United States, as well as state and local laws and regulations in the markets where our properties are located, which may differ among jurisdictions. In response to the COVID-19 pandemic, federal governmental authorities, as well as state and local governmental authorities in jurisdictions where our properties are located, implemented laws and regulations which impact our ability to operate our business in the ordinary course, including our ability to charge certain fees, increase rents and evict residents who violate their lease. We are complying with these COVID-19 related governmental requirements, and they, along with the COVID-19 pandemic, had a material impact on our business in 2020 and 2021. Ongoing compliance with such COVID-19 related governmental requirements may materially affect our results of operations for the year ending December 31, 2022. Otherwise, we do not expect that compliance with the various non-COVID-19 laws and regulations we are subject to will have a material effect on our capital expenditures, results of operations and competitive position for the year ending December 31, 2022, as compared to prior periods.

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For additional information, see “Risk Factors – Risks Related to the COVID-19 Pandemic - The ongoing COVID-19 pandemic and restrictions intended to prevent its spread could adversely impact our business, results from operations, cash flows, liquidity and capital resources and the market value of our assets,” “Risk Factors – Risk Factors – Risks Relating to Investments In Real Estate - Compliance with the governmental laws, regulations and covenants that are applicable to our properties, including permit, license and zoning requirements, may adversely affect our ability to make future acquisitions or renovations, result in significant costs or delays and adversely affect our growth strategy”, “Risk Factors – Risks Relating to Investments In Real Estate - The costs of compliance with environmental laws and regulations and other governmental laws and regulations may adversely affect our income and the cash available for any distributions” and “Risk Factors – Risks Relating to Investments In Real Estate - Discovery of previously undetected environmentally hazardous conditions may adversely affect our operating results” in this Annual Report on Form 10-K.

Competition

The multifamily housing industry is highly fragmented and we compete for residents with a large number of other quality multifamily communities in our target markets which are owned by public and private companies, pension funds, high net worth individuals and family offices, including other REITs, many of which are larger and have more resources than our Company. The number of competitive multifamily properties in a particular market could adversely affect our ability to lease our multifamily communities, as well as the rents we are able to charge. In addition, other forms of residential properties, including single family housing and town homes, provide housing alternatives to potential residents of quality apartment communities. The factors on which we focus to compete for residents in our multifamily communities include our high level of resident service, the quality of our apartment communities (including our landscaping and amenity offerings), and the desirability of our locations. Resident leases at our apartment communities are priced competitively based on levels of supply and demand within our target markets and we believe our communities offer a compelling value to prospective residents.

    Similarly, competition for tenants and acquisition of existing centers in the grocery-anchored shopping center sector in our target markets is considerable, consisting of public and private companies, pension funds, high net worth individuals and family offices, including other REITs, many of which are larger and have more resources than our Company. In addition, a significant competitor in this sector are some of the grocery anchors themselves as they acquire land and build their own stores or acquire the entire center where they are the anchor. We are faced with the challenge of maintaining high occupancy rates with a financially stable tenant base. In order to attract quality prospective tenants and retain current tenants upon expiration of their leases, we focus on improving the design and visibility of our centers, building strong relationships with our tenants, and reducing excess operating costs and increasing tenant satisfaction through proactive asset and property management. We target acquisitions in markets with solid surrounding demographics, quality underlying real estate locations, and centers where our asset management approach can provide an environment conducive to creating sales productivity for our tenants.

    We also compete with other primarily institutional-quality owners and investors in the business of leasing and operating our remaining office properties. We leverage relationships, track record, and the high quality of our physical assets and locations to compete successfully. Additional principal factors of competition are the leasing terms (including rental rates and concessions or allowances offered) and the terms of any other investment activity such as real estate loan investments in new developments. Our ability to compete depends upon, among other factors, trends of the national and local economies, investment alternatives, financial condition and operating results of current and prospective tenants, availability and cost of capital, construction and renovation costs, taxes, utilities, governmental regulations, legislation and population trends. 

Available Information

The Company makes available all reports which are filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material has been filed with, or furnished to, the SEC for viewing or download free of charge at the Company's website: www.pacapts.com. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.

Risk Factor Summary

The following section sets forth a summary of material factors that may adversely affect our business and operations. For a more extensive discussion of these factors, see “1A. Risk Factors” contained in this Annual Report on Form 10-K.

•The ongoing COVID-19 pandemic and restrictions intended to prevent its spread could adversely impact our business, results from operations, cash flows, liquidity and capital resources and the market value of our assets.

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•General real estate investment risks may adversely affect property income and values.

•Compliance with governmental laws, regulations and covenants that are applicable to our properties, including permit, license and zoning requirements and the American with Disabilities Act, may adversely affect our ability to make future acquisitions or renovations, result in significant costs or delays and adversely affect our growth strategy.

•Compliance or failure to comply with the Americans with Disabilities Act or other safety regulations and requirements could result in substantial costs.

•Failure to generate sufficient revenue or other liquidity needs could limit cash flow available for distributions to our stockholders.

•There are significant risks with respect to property acquisition, disposition and capital improvement.

•We face potential adverse effects from major tenants’ bankruptcies or insolvencies.

•Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on co-venturers' financial condition, and disputes between us and our co-venturers and could expose us to potential liabilities and losses.

•We are subject to geographic concentrations that make us more susceptible to adverse events with respect to certain geographic areas.

•Acquiring or attempting to acquire multiple properties in a single transaction may adversely affect our operations.

•We must comply with government regulations and rules and failure to comply may affect cash available for distributions.

•Short-term apartment leases expose us to the effects of declining market rents, which could adversely impact our ability to make distributions to our stockholders.

•Competition in the apartment community market and other housing alternatives may adversely affect operations and the rental demand for our multifamily communities.

•Downturns in the retail industry likely will have an adverse impact on our grocery-anchored revenues and cash flow.

•Loss of revenues from significant tenants and our in-line tenants could reduce distributions to our stockholders.

•Our Common Area Maintenance (“CAM”) contributions may not allow us to recover the majority of our operating expenses from retail tenants.

•Increased competition to traditional grocery chains from new market participants, Amazon, online supermarket retailers and food delivery services could adversely affect our grocery-anchored revenues and cash flow.

•We face considerable competition in the office leasing market and may be unable to renew existing office leases or re-let office space on terms similar to the existing leases, or we may expend significant capital in our efforts to re-let office space, which may adversely affect our operating results.

•Office space demand for office tenants could be reduced following the COVID-19 pandemic due to increased work from home capabilities adopted by businesses during the COVID-19 pandemic which may affect rental demand and rental rates for office buildings that could have an adverse affect on our operating results.

•Our investments in, or originations of, senior debt or subordinate debt and our investments in membership or partnership interests in entities that own real estate assets will be subject to the specific risks relating to the particular company and to the general risks of investing in real estate-related loans and securities, which may result in significant losses.

•Our real estate loan assets will involve greater risks of loss than senior loans secured by income-producing properties.

•We may rely significantly on repayment guarantors of our real estate loan investments and, therefore, could be subject to credit concentration that makes us more susceptible to adverse events with respect to such guarantors.

•We have significant debt, which could have important adverse consequences.

•We may incur additional indebtedness, which may harm our financial position and cash flow and potentially impact our ability to pay dividends.

•If mortgage debt is unavailable at reasonable rates or reasonable amounts, it may make it difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire, our cash flows from operations and the amount of cash distributions we can make.

•Volatility in and regulation of the commercial mortgage-backed securities market has limited and may continue to impact the pricing of secured debt.

•We depend on our key personnel, whose continued service is not guaranteed.

•Our ability to grow the Company and execute our business strategy may be impaired if we are unable to secure adequate financing.

•Distributions paid from sources other than our net cash provided by operating activities, particularly from proceeds of any offerings of our securities, will result in us having fewer funds available for the acquisition of properties and other real estate-related investments, which may adversely affect our ability to fund future distributions with net cash provided by operating activities and may adversely affect our stockholders' overall return.

•The cash distributions our stockholders receive may be less frequent or lower in amount than our stockholders expect.

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•Stockholders have limited control over changes in our policies and operations.

•Our authorized but unissued shares of Common Stock and Preferred Stock may prevent a change in our control.

•Because of our holding company structure, we depend on our Operating Partnership subsidiary and its subsidiaries for cash flow and we will be structurally subordinated in right of payment to the obligations of such Operating Partnership subsidiary and its subsidiaries.

•Our rights and the rights of our stockholders to recover on claims against our directors and officers are limited, which could reduce our stockholders, and our recovery against them if they negligently cause us to incur losses.

•We may change our operational policies (including our investment guidelines, strategies and policies and the targeted assets in which we invest) with the approval of our board of directors but without stockholder consent or notice at any time, which may adversely affect the market value of our Common Stock, our results of operations and cash flows and our ability to pay dividends to our stockholders.

•Upon the sale of any individual property or a portfolio of properties, holders of our Preferred Stock do not have a priority over holders of our Common Stock regarding return of capital.

•Breaches of our data security could materially harm our business and reputation.

•There is no public market for our Preferred Stock or warrants to purchase up to 20 shares of Common Stock, or Warrants, and we do not expect one to develop.

•We will be required to terminate the Series A1/M1 Offering if our Common Stock is no longer listed on the NYSE or another national securities exchange.

•Our ability to redeem shares of Preferred Stock for cash may be limited by Maryland law.

•The Preferred Stock are senior securities, and rank senior to our Common Stock with respect to dividends and payments upon liquidation.

•The Preferred Stock will be subordinate in right of payment to any corporate level debt that we incur in the future, therefore our stockholders' interests could be diluted by the issuance of additional preferred stock, and by other transactions.

•We will be able to call our shares of Preferred Stock for redemption under certain circumstances without our stockholders' consent.

•The announcement and pendency of the Mergers could adversely affect our business, financial condition and results of operations.

•The proposed Mergers may not be completed within the timeframe we anticipate, or at all, and the failure to complete or delays in completing the Mergers could adversely affect our business, financial results and stock price.

•Loss of our REIT status would have significant adverse consequences to us, the value of Common Stock and our ability to make distributions to our Stockholders.

Item 1A.    Risk Factors

In addition to the other information contained in this Annual Report on Form 10-K, the following risk factors should be considered carefully in evaluating us and our business. Our business, operating results, prospects and financial condition could be materially adversely affected by any of these risks. The risks and uncertainties described below are not the only ones we face, but do represent those risks and uncertainties that we believe are material to us. Additional risks and uncertainties not presently known to us or that, as of the date of this Annual Report on Form 10-K, we deem immaterial also may harm our business. This “Risk Factors” section contains references to our “capital stock” and to our “stockholders.”  Unless expressly stated otherwise, the references to our “capital stock” represent our common stock and any class or series of our preferred stock, while the references to our “stockholders” represent holders of our common stock and any class or series of our preferred stock. Unless expressly stated otherwise, the references to our Preferred Stock refer to our Series A Preferred Stock, mShares, Series A1 Preferred Stock and Series M1 Preferred Stock.

Risks Related to the COVID-19 Pandemic

The ongoing COVID-19 pandemic and restrictions intended to prevent its spread could adversely impact our business, results from operations, cash flows, liquidity and capital resources and the market value of our assets. Our operating results depend, in large part, on revenues derived from leasing apartment homes in our communities to residential tenants, the ability of our residents to earn sufficient income to pay their rents in a timely manner, the extent to which we waive late and other customary fees associated with the apartment rental process, and our ability to limit bad debt and maintain operating results by evicting and re-leasing apartment homes when residents remain delinquent in their payment of rent. Additionally, a prolonged imposition of mandated closures or other social-distancing guidelines may adversely impact our retail and office tenants’ ability to generate sufficient revenues, and could force tenants to default on their leases, or result in a tenant’s bankruptcy or insolvency, which would diminish the Company’s ability to receive rental revenue it is owed under their leases. 

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Across our property types, our average recurring rental revenue collections before and after any effect of rent deferrals for the fourth quarter 2021 were approximately 99.0% and 99.0% for multifamily communities, 99.0% and 99.0% for grocery-anchored retail properties, respectively. Rent deferments provided to our residents and tenants are limited and are primarily related to a change of timing of rent payments with no significant changes to total payments or term. While we are and will continue to be actively engaged in rent collection efforts, as well as working with certain tenants who have requested rent deferrals, we can provide no assurance that our efforts in future periods will be successful in collecting rent.

The ongoing COVID-19 pandemic continues to evolve, and the restrictions intended to prevent its spread have impacted the markets where our properties operate. COVID-19 (or a future pandemic) could have a material and adverse effect on or cause disruption to our business or financial condition, results from operations, cash flows, liquidity and capital resources and the market value or our assets, all of which can impact the trading price of our common stock due to, among other factors:

•A complete or partial closure of, or other operational issues at the Company’s properties as a result of government or tenant action;

•In the event of resident nonpayment, default or bankruptcy, the uncollectibility of rent could increase and we may not be able to re-lease apartment homes at current or projected rents. Our occupancy levels and pricing across our portfolio may decline due to changes in demand or logistical challenges in showing or leasing apartment homes to prospective residents, including restrictions inhibiting our employees’ ability to meet with existing or potential residents;

•Our properties may incur significant costs or losses related to shelter-in-place orders, quarantines, infection, clean-up costs or other related factors;

•Federal, state, local and industry-initiated efforts that may adversely affect the ability of landlords, including us, to collect rent and customary fees, adjust rental rates and enforce remedies for the failure to pay rent, such as the order issued by the U.S. Centers for Disease Control and Prevention, or CDC, to temporarily halt residential evictions to prevent further spread of COVID-19;

•The declines in or instability of the economy or financial markets may result in a recession or negatively impact consumer discretionary spending, which could adversely affect retailers and consumers;

•The reduction of economic activity has impacted our office and retail tenants' business operations, financial condition, liquidity and access to capital resources that resulted in us agreeing to rent deferrals and/or lease modifications and caused tenant bankruptcies and may cause these and others tenants to be unable to meet their obligations to us in full, or at all, to default on their lease, or to otherwise seek modifications of such obligations;

•Severe and prolonged disruption and instability in the financial markets, including the debt and equity capital markets, which have already experienced and may continue to experience significant volatility, or deterioration in credit and financing conditions (or a refusal or failure of one or more lenders under our unsecured revolving credit facility to fund their respective financing commitment to us), which may affect our ability to access capital necessary to fund our business operations or refinance maturing debt on a timely basis, on attractive terms or at all, which would adversely affect our ability to meet liquidity and capital expenditure requirements;

•A general decline in business activity and demand for real estate transactions would adversely affect the Company’s ability to successfully execute investment strategies or expand its portfolio; and

•The potential negative impact on the health of the Company’s associates or Board of Directors, particularly if a significant number are impacted, or the impact of government actions or restrictions, including stay-at-home orders, restricting access to our headquarters located in Atlanta, Georgia, could result in a deterioration in our ability to ensure business continuity during a disruption.

The extent to which COVID-19 impacts our operations and those of our residents and tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the outbreak, the actions taken to contain the outbreak or mitigate its impact, and the direct and indirect economic effects of the outbreak and containment measures, among others. COVID-19 presents material uncertainty and risk with respect to our performance, business or financial condition, results from operations and cash flows.

The impact of COVID-19 may also heighten other risks discussed herein, which could adversely affect our business, financial condition, results of operations, cash flows and estimated share value.

Risks Related to Investments in Real Estate

General real estate investment risks may adversely affect property income and values. Real estate investments are subject to a variety of risks. If the communities and other real estate investments do not generate sufficient income to meet operating

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expenses, including debt service and capital expenditures, cash flow and the ability to make distributions to our stockholders will be adversely affected. Income from the properties may be further adversely affected by, among other things, the following factors:

•changes in the general or local economic climate, including layoffs, plant closings, industry slowdowns, relocations of significant local employers and other events negatively impacting local employment rates and wages and the local economy and occupancy rates in retail shopping centers and office buildings;

•inflationary environments in which the costs to operate and maintain communities increase at a rate greater than our ability to increase rents, or deflationary environments where we may be exposed to declining rents more quickly under our short-term leases;

•local real estate market conditions, such as oversupply or reduction in demand for our properties;

•competition from other available alternatives properties in our markets for our tenants;

•changes in space utilization by our tenants due to technology, economic conditions and business culture;

•the Company’s ability to provide for adequate maintenance and insurance;

•a pandemic or other health crisis, such as the outbreak and global spread of COVID-19;

•tenants' perceptions of the safety, convenience and attractiveness of our properties and the neighborhoods where they are located;

•declines in the financial condition of our tenants and residents, which may make it more difficult for us to collect rent;

•increased operating costs, including insurance expense, utilities, real estate taxes, state and local taxes and heightened

security costs; and

•changes in interest rates and availability of financing.

As leases at the communities expire, tenants may enter into new leases on terms that are less favorable to us. Income and real estate values also may be adversely affected by such factors as applicable laws, including, without limitation, the Americans with Disabilities Act of 1990 (the "Disabilities Act"), Fair Housing Amendment Act of 1988 (the "FHAA"), laws and regulations regarding evictions, other laws regulating housing that may prevent the Company from raising rents to offset increased operating expenses, and tax laws.

Natural disasters could significantly reduce the value of our properties and our stockholders' investment. Natural disasters, including hurricanes, tornadoes, earthquakes, wildfires and floods, could significantly reduce the value of our properties. While we will attempt to obtain adequate insurance coverage for natural disasters, insurance may be too expensive, may have significant deductibles, or may not properly compensate us for the long-term loss in value or rent loss that a property may suffer if the area around it suffers a significant natural disaster. As a result, we may not be compensated for the loss in value. Any diminution in the value of our properties or properties underlying an investment that is not fully reimbursed will reduce our profitability and adversely affect the value of our stockholders' investment.

We face possible risks associated with the physical effects of climate change. The physical effects of climate change could have a material adverse effect on our properties, operations and business, particularly our properties along the East Coast and in Texas. To the extent climate change causes changes in weather patterns, our markets could experience increases in storm intensity and rising sea-levels. Over time, these conditions could result in declining demand for apartments or our inability to operate the affected properties at all. Climate change may also have indirect effects on our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptable. There can be no assurance that climate change will not have a material adverse effect on our properties, operations or business.

We may suffer losses that are not covered by insurance. If we suffer losses that are not covered by insurance or that are in excess of insurance coverage, we could lose invested capital and anticipated profits. We intend to obtain comprehensive insurance for our properties, including casualty, liability, fire, extended coverage and rental loss customarily, that is of the type obtained for similar properties and in amounts which we determine are sufficient to cover reasonably foreseeable losses, and with policy specifications and insured limits that we believe are adequate and appropriate under the circumstances. Material losses may occur in excess of insurance proceeds with respect to any property as insurance proceeds may not provide sufficient resources to fund the losses. However, there are types of losses, generally of a catastrophic nature, such as losses due to acts of war, earthquakes, floods, wind, pollution, environmental matters or terrorism which are either uninsurable, not economically insurable, or may be insured subject to material limitations, such as large deductibles or co-payments. If an uninsured loss or a loss in excess of insured limits occurs on a property, we could lose our capital invested in the property, as well as the anticipated future revenues from the property and, in the case of debt that is recourse to us, would remain obligated for any mortgage debt or other financial obligations related to the property. Any loss of this nature would adversely affect us. Although we intend to adequately insure our properties, we can offer no assurance that we will successfully do so.

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Compliance with the governmental laws, regulations and covenants that are applicable to our properties, including permit, license and zoning requirements, may adversely affect our ability to make future acquisitions or renovations, result in significant costs or delays and adversely affect our growth strategy. Our properties are subject to various covenants and local laws and regulatory requirements, including permitting and licensing requirements. Local regulations, including municipal or local ordinances, zoning restrictions and restrictive covenants (some of which may be imposed by community developers), may restrict the use of our properties and may require us to obtain approval from local officials or community standards organizations at any time with respect to our properties, including prior to acquiring a property or when undertaking renovations of any of our existing properties. Among other things, these restrictions may relate to fire and safety, seismic, asbestos-containing materials abatement or management or hazardous material abatement requirements. We cannot assure our stockholders that existing regulatory policies will not adversely affect us or the timing or cost of any future acquisitions or renovations, or that additional regulations will not be adopted that would increase such delays or result in additional costs. Our growth strategy may be materially and adversely affected by our ability to obtain permits, licenses and zoning approvals. Our failure to obtain such permits, licenses and zoning approvals could have a material adverse effect on our business, financial condition and results of operations.

Compliance or failure to comply with the Americans with Disabilities Act or other safety regulations and requirements could result in substantial costs. The Disabilities Act generally requires that public buildings, including “public accommodations," be made accessible to disabled persons. Noncompliance could result in the imposition of fines by the federal government or the award of damages to private litigants. If, under the Americans with Disabilities Act, we are required to make substantial alterations and capital expenditures in one or more of our properties or in properties we acquire, including the removal of access barriers, it could adversely affect our financial condition and results of operations, as well as the amount of cash available for distribution to our stockholders. Our properties are subject to various federal, state and local regulatory requirements, such as state and local fire and life safety requirements. If we fail to comply with these requirements, we could incur fines or private damage awards. We do not know whether existing requirements will change or whether compliance with future requirements will require significant unanticipated expenditures that will affect our cash flow and results of operations.

If we purchase assets at a time when the real estate market is experiencing substantial influxes of capital investment and competition for properties, the real estate we purchase may not appreciate or may decrease in value. The real estate market may experience substantial influxes of capital from investors. This substantial flow of capital, combined with significant competition for the acquisition of real estate, may result in inflated purchase prices for such assets and compression of capitalization rates. To the extent we purchase real estate in such an environment, we are subject to the risk that, if the real estate market subsequently ceases to attract the same level of capital investment, or if the number of companies seeking to acquire such assets decreases, our returns will be lower and the value of our assets may not appreciate or may decrease significantly below the amount we paid for such assets.

We may be unable to sell a property if or when we decide to do so, or we may not make a profit if we sell a property, which could adversely impact our ability to make distributions to our stockholders. In connection with the acquisition of a property, we may agree on 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 or agreeing to significant debt prepayment costs if a property is sold and the debt is repaid before maturity. Even absent such restrictions, the real estate market is affected by many factors that are beyond our control, including general economic conditions, availability of financing, interest rates and supply and demand. We cannot predict whether we will be able to 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 or real estate-related asset. If we are unable to sell a property or real estate-related asset when we determine to do so or we sell and fail to recover all or a portion of our investment, it could have a significant adverse effect on our cash flow and results of operations. As a result, we may not have funds to make distributions to our stockholders.

Our ability to sell our properties also may be limited by our need to avoid a 100% penalty tax that is imposed on gain recognized by a REIT from the sale of property characterized as dealer property. In order to ensure that we avoid such characterization we may be required to hold our properties for a minimum period of time and comply with certain other requirements in the Code, or possibly hold some properties through taxable REIT subsidiaries, or TRSs, that must pay full corporate-level income taxes.

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We may have difficulty selling real estate investments, and our ability to distribute all or a portion of the net proceeds from such sale to our stockholders may be limited. Real estate investments are relatively illiquid, and as a result, we will have a limited ability to vary our portfolio in response to changes in economic or other conditions. We also will have a limited ability to sell assets in order to fund working capital and similar capital needs. When we sell any of our properties, we may not realize a gain on such sale. We may elect not to distribute any proceeds from the sale of properties to our stockholders and we may use such proceeds to:

•purchase additional properties;

•repay debt, if any;

•redeem shares of Preferred Stock or repurchase our Common Stock;

•buy out the interests of any co-venturers or other partners in any joint venture in which we are a party;

•create working capital reserves; or

•make repairs, maintenance, tenant improvements or other capital improvements or expenditures to our remaining properties.

We face potential adverse effects from major tenants’ bankruptcies or insolvencies. The bankruptcy or insolvency of a major tenant may adversely affect the income produced by our retail and/or office properties. Our tenants could file for bankruptcy protection or become insolvent in the future. We cannot evict a tenant solely because of its bankruptcy. On the other hand, a bankrupt tenant may reject and terminate its lease with us. In such case, our claim against the bankrupt tenant for unpaid and future rent would be subject to a statutory cap that might be substantially less than the remaining rent actually owed under the lease, and, even so, our claim for unpaid rent would likely not be paid in full. This shortfall could adversely affect our cash flow and results of operations.

We may incur foreseen or unforeseen liabilities in connection with properties we acquire. Our anticipated acquisition activities are subject to many risks. We may acquire properties that are subject to liabilities or that have problems relating to their environmental condition, state of title, physical condition or compliance with zoning laws, building codes or other legal requirements. In each case, our acquisition may be without any, or with only limited, recourse with respect to unknown liabilities or conditions. As a result, if any liability were asserted against us relating to those properties or entities, or if any adverse condition existed with respect to the properties or entities, we might have to pay substantial sums to settle or cure it, which could adversely affect our cash flow and operating results.

The costs of compliance with environmental laws and regulations and other governmental laws and regulations may adversely affect our income and the cash available for any distributions. All real property and the operations conducted on real property are subject to certain federal, state and local laws and regulations relating to environmental protection and human health and safety. Such federal laws might include: the National Environmental Policy Act; the Comprehensive Environmental Response, Compensation, and Liability Act; the Solid Waste Disposal Act as amended by the Resource Conservation and Recovery Act; the Federal Water Pollution Control Act; the Federal Clean Air Act; the Toxic Substances Control Act, the Emergency Planning and Community Right to Know Act; and the Hazard Communication Act. These laws and regulations generally govern wastewater discharges, air emissions, the regulation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials, and the remediation of contamination, including of off-site third party owned disposal sites. As is the case with community and neighborhood shopping centers, some of our centers had on-site dry cleaning and/or on-site gasoline retail facilities and these prior uses could potentially increase our environmental liability exposure. Some of these laws and regulations may impose joint and several liability on residents, owners or operators for the costs of investigation or remediation of contaminated properties, regardless of fault or the legality of the original disposal. In addition, the presence of certain regulated substances, or the failure to properly remediate these substances, may adversely affect our ability to sell or rent the property or to use the property as collateral for future borrowing.

We could incur losses from claims relating to the presence of, or exposure of tenants to, indoor air quality issues, including the presence of mold in warmer climates or other microbial organisms, particularly if we are unable to maintain adequate insurance to cover such losses. We also may incur unexpected expenses relating to the abatement of mold on properties that we acquire.

Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require material expenditures by us. We cannot assure our stockholders that future laws, ordinances or regulations will not impose any material environmental liability, or that the current environmental condition of our properties will not be affected by the activities of residents, existing conditions of the land, operations in the vicinity of the properties, or the activities of unrelated third parties. In addition, there are various local, state and federal fire, health, life-safety and similar regulations with which we may be

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required to comply. Failure to comply with applicable laws and regulations could result in fines and/or damages, suspension of personnel of our Manager and/or other sanctions.

Discovery of previously undetected environmentally hazardous conditions may adversely affect our operating results. Under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the cost of removal or remediation of hazardous or regulated substances on, under, in or about such property. The costs of investigation, removal or remediation of such substances could be substantial. Those laws may impose liability whether or not the owner or operator knew of, or was responsible for, the presence of the substances.

Environmental laws also may impose restrictions on the manner in which property may be used or businesses may be operated, and compliance with those restrictions may require substantial expenditures. Environmental laws provide for sanctions in the event of noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles govern the presence, maintenance, removal and disposal of certain building materials, including mold, asbestos and lead-based paint.

The cost of defending against such claims of liability, of compliance with environmental requirements, of remediating any contaminated property, or of paying personal injury claims could materially adversely affect our business, assets or results of operations and, consequently, the amounts available for distribution to our stockholders.

We cannot assure our stockholders that properties which we acquire will not have any material environmental conditions, liabilities or compliance concerns. Accordingly, we have no way of determining at this time the magnitude of any potential liability to which we may be subject arising out of environmental conditions or violations with respect to the properties we may purchase.

The profitability of our acquisitions is uncertain. We intend to acquire properties selectively. Acquisition of properties entails risks that investments will fail to perform in accordance with expectations. In undertaking these acquisitions, we will incur certain risks, including the expenditure of funds on, and the devotion of management's time to, transactions that may not come to fruition. Additional risks inherent in acquisitions include risks that the properties will not achieve anticipated occupancy levels and that estimates of the costs of improvements to bring an acquired property up to our standards may prove inaccurate.

Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on co-venturers' financial condition, and disputes between us and our co-venturers and could expose us to potential liabilities and losses. In addition to our existing joint ventures, we may make investments in other joint ventures or other partnership arrangements between us, our affiliates or with unaffiliated third parties. We also may purchase properties in partnerships, co-tenancies or other co-ownership arrangements. Such investments may involve risks not otherwise present when acquiring real estate directly, including, for example:

•joint venturers may share certain approval rights over major decisions, including sale and refinancing;

•a co-venturer, co-owner or partner may at any time have economic or business interests or goals which are or which become inconsistent with our business interests or goals, including inconsistent goals relating to the sale of properties held in the joint venture or the timing of termination or liquidation of the joint venture;

•a co-venturer, co-owner or partner in an investment might become insolvent or bankrupt;

•we may incur liabilities as a result of an action taken by our co-venturer, co-owner or partner;

•a co-venturer, co-owner or partner may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives, including our policy with respect to maintaining our qualification as a REIT;

•disputes between us and our joint venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our business and result in subjecting the properties owned by the applicable joint venture to additional risk; or

•under certain joint venture arrangements, neither venture partner may have the power to control the venture, and an impasse could be reached which might have a negative influence on the joint venture.

We are subject to geographic concentrations that make us more susceptible to adverse events with respect to certain geographic areas. We are subject to geographic concentrations, the carrying values of which are as follows as of December 31, 2021:

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(in millions)	Carrying value of real estate assets and real estate-related loans		Percentage
Florida	$	1,096.3	33.0	%
Georgia	745.8		22.4	%
Texas	291.5		8.8	%
North Carolina	271.8		8.2	%
Virginia	232.9		7.0	%
Tennessee	216.4		6.5	%
California	129.8		3.9	%
Alabama	99.0		3.0	%
South Carolina	80.3		2.4	%
Maryland	61.2		1.8	%
Pennsylvania	36.2		1.1	%
Kansas	33.1		1.0	%
Kentucky	30.8		0.9	%
Total	$	3,325.1	100.0	%

Any economic downturn or other adverse condition in one or more of these states, or in any other state in which we may have a significant concentration in the future, could result in a material reduction of our cash flows or material losses to us.

Failure to succeed in new markets or sectors may have adverse consequences on our performance. We may make acquisitions outside of our existing market areas if appropriate opportunities arise. We may be exposed to a variety of risks if we choose to enter new markets, including an inability to accurately evaluate local market conditions, to identify appropriate acquisition opportunities, to hire and retain key personnel, and a lack of familiarity with local governmental and permitting procedures. In addition, we may abandon opportunities to enter new markets that we have begun to explore for any reason and may, as a result, fail to recover expenses already incurred.

Acquiring or attempting to acquire multiple properties in a single transaction may adversely affect our operations. We are likely to acquire multiple properties in a single transaction. Such portfolio acquisitions are more complex and expensive than single-property acquisitions, and the risk that a multiple-property acquisition does not close may be greater than in a single-property acquisition. Portfolio acquisitions also may result in us owning investments in geographically dispersed markets, placing additional demands on our ability to manage the properties in the portfolio. In addition, a seller may require that a group of properties be purchased as a package even though we may not want to purchase one or more properties in the portfolio. In these situations, if we are unable to identify another person or entity to acquire the unwanted properties, we may be required to operate, or attempt to dispose of, these properties. We may be required to accumulate a large amount of cash in order to acquire multiple properties in a single transaction. We would expect that the returns that we can earn on such cash will be less than the ultimate returns on real property, and therefore, accumulating such cash could reduce our funds available for distributions. Any of the foregoing events may have an adverse effect on our operations.

Risks Related to our Investments in Multifamily Communities

We must comply with the FHAA and failure to comply may affect cash available for distributions. We must comply with the FHAA, which requires that apartment communities first occupied after March 13, 1991 be accessible to handicapped residents and visitors. Compliance with the FHAA could require removal of structural barriers to handicapped access in a community, including the interiors of apartment units covered under the FHAA. Recently there has been heightened scrutiny of multifamily housing communities for compliance with the requirements of the FHAA and the ADA and an increasing number of substantial enforcement actions and private lawsuits have been brought against apartment communities to ensure compliance with these requirements. Noncompliance with the FHAA could result in the imposition of fines, awards of damages to private litigants, payment of attorneys' fees and other costs to plaintiffs, substantial litigation costs and substantial costs of remediation that may affect cash available for distributions.

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Short-term apartment leases expose us to the effects of declining market rents, which could adversely impact our ability to make distributions to our stockholders. We expect that most of our apartment leases will be for terms of thirteen months or less. Because these leases generally permit the residents to leave at the end of the lease term without any penalty, our rental revenues may be impacted by declines in market rents more quickly than if our leases were for longer terms.

Competition in the apartment community market and other housing alternatives may adversely affect operations and the rental demand for our multifamily communities. There are numerous housing alternatives that compete with our communities in attracting tenants. These include other apartment communities, condominiums and single-family homes that are available for rent or for sale in the markets in which our communities are located. Competitive housing in a particular area and fluctuations in cost of owner-occupied single- and multifamily homes caused by a decrease in housing prices, mortgage interest rates and/or government programs to promote home ownership or create additional rental and/or other types of housing, could adversely affect our ability to retain tenants, lease apartment homes and increase or maintain rents. If the demand for our communities is reduced or if competitors develop and/or acquire competing apartment communities, rental rates may drop, which may have a material adverse effect on the Company’s financial condition and results of operations. We also face competition from other companies, REITs, businesses and other entities in the acquisition and operation of apartment communities. This competition may result in an increase in prices and costs of apartment communities that we intend to acquire.

Risks Related to our Grocery-Anchored Shopping Center Investments

Downturns in the retail industry likely will have a direct adverse impact on our grocery-anchored revenues and cash flow. Our retail properties currently owned and planned for acquisition consist primarily of grocery-anchored shopping centers. Our retail performance therefore is generally linked to economic conditions in the market for retail space. The market for retail space could be adversely affected by any of the following:

•weakness in the national, regional and local economies, and declines in consumer confidence which could adversely impact consumer spending and retail sales and in turn tenant demand for space and could lead to increased store closings;

•changes in market rental rates;

•changes in demographics (including the number of households and average household income) surrounding our shopping centers;

•adverse financial conditions for grocery anchors and other retail, service, medical or restaurant tenants;

•continued consolidation in the retail and grocery sector;

•excess amount of retail space in our markets;

•reduction in the demand by tenants to occupy our shopping centers as a result of reduced consumer demand for certain retail formats;

•increased diversification of product offerings by grocery anchors can lead to increased competition, declining same store sales and store closings;

•increases in e-commerce and alternative distribution channels may negatively affect our tenant sales or decrease the square footage our tenants require and could lead to margin pressure on our grocery anchors, which could lead to store closures;

•the impact of an increase in energy costs on consumers and its consequential effect on the number of shopping visits to our centers;

•a pandemic or other health crisis, such as the recent outbreak of novel coronavirus (COVID-19); and

•consequences of any armed conflict involving, or terrorist attack against, the United States.

To the extent that any of these conditions occur, they are likely to impact market rents for retail space, occupancy in our retail properties, our ability to sell, acquire or develop retail properties, and our cash available for distributions to stockholders.

Loss of revenues from significant tenants and our in-line tenants could reduce distributions to our stockholders. For our currently owned and planned acquisitions of grocery-anchored shopping centers, we derive or will derive significant revenues from anchor tenants such as Publix, Kroger, Harris Teeter, Wal-Mart, Food Lion, Giant, Randall's, Sprouts, BJ's Wholesale Club and The Fresh Market, in addition to our in-line tenants.

Distributions to our stockholders could be adversely affected by the loss of revenues in the event our tenants:

•become bankrupt or insolvent;

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•experience a downturn in their business;

•materially default on their leases;

•do not renew their leases as they expire; or

•renew at lower rental rates.

Vacated anchor space, including space owned by the anchor, can also reduce rental revenues generated by the shopping center because of the loss of the departed anchor tenant's customer drawing power. The closing of one or more anchor stores at a center or occupancy falling below a certain percentage could adversely affect the financial performance of the center, adversely affect the operations of other tenants and result in lease terminations by, or reductions in rent from, other tenants whose leases may permit such actions.

Our Common Area Maintenance (“CAM”) contributions may not allow us to recover the majority of our operating expenses from retail tenants. CAM costs typically include allocable energy costs, repairs, maintenance and capital improvements to common areas, janitorial services, administrative, property and liability insurance costs and security costs. The amount of CAM charges we bill to our retail tenants may not allow us to recover or pass on all these operating expenses to tenants, which may reduce operating cash flow from our retail properties.

Increased competition to traditional grocery chains from new market participants, Amazon, online supermarket retailers and food delivery services could adversely affect our grocery-anchored revenues and cash flow.    As a result of consumers' growing desire to shop online, traditional grocery chains are subject to increasing competition from new market participants and food retailers who have incorporated the Internet as a direct-to-consumer channel and Internet-only retailers that sell grocery products. Additionally, online food delivery services are increasingly competing with traditional grocery chains in the food sales market. Competition from these new market participants and selling channels could negatively impact traditional grocery chains, which could adversely affect our grocery-anchored revenues and cash flow. In addition, changing dynamics in the food sales space could result in increased competition, declining same-store sales and store closings in the retail and grocery sector.

Risks Related to our Office Building Investments

We face considerable competition in the office leasing market and may be unable to renew existing office leases or re-let office space on terms similar to the existing leases, or we may expend significant capital in our efforts to re-let office space, which may adversely affect our operating results. Every year, we compete with a number of other developers, owners, and operators of office and office-oriented properties to renew office leases with our existing tenants and to attract new office tenants. To the extent that we are able to renew office leases that are scheduled to expire in the short-term or re-let such office space to new tenants, heightened competition resulting from adverse market conditions may require us to utilize rent concessions and tenant improvements to a greater extent than we historically have. In addition, competition for credit worthy office tenants is intense and we may have difficulty competing with competitors, especially those who have purchased office properties at discounted prices allowing them to offer office space at reduced rental rates.

If our competitors offer office accommodations at rental rates below current market rates or below the rental rates we currently charge our tenants, we may lose potential tenants, and we may be pressured to reduce our rental rates below those we currently charge in order to retain tenants upon expiration of their existing office leases. These competitors could include our own tenants who may be offering to sublease at lower rates some or all of the space we have leased to them. Even if our tenants renew their leases or we are able to re-let the office space, the terms and other costs of renewal or re-letting, including the cost of required renovations, increased tenant improvement allowances, leasing commissions, declining rental rates, and other potential concessions, may be less favorable than the terms of our current leases and could require significant capital expenditures. If we are unable to renew office leases or re-let office space in a reasonable time, or if rental rates decline or tenant improvement, leasing commissions, or other costs increase, our financial condition, cash flows, ability to pay distributions to our stockholders, and ability to satisfy our debt service obligations could be adversely affected.

Demand for office space could be reduced following the COVID-19 pandemic due to increased work from home capabilities adopted by businesses during the COVID-19 pandemic which may affect rental demand and rental rates for office buildings that could have an adverse affect on our operating results. During the COVID-19 pandemic, many businesses have adapted by implementing extensive work from home technologies and capabilities for their workforce. Many of these solutions will be available following the end of the COVID-19 pandemic and could reduce the need for office space for many businesses. A reduction in demand for office space could reduce the rental rates and/or increase vacancies at our office properties. If we have a reduction in rental rates at renewal or when we re-let the space or longer vacancies at our office properties, our financial

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condition, cash flows, ability to pay distributions to our stockholders, and ability to satisfy our debt service obligations could be adversely affected.

Risks Related to Our Real Estate Loan Investments

Our investments in, or originations of, senior debt or subordinate debt and our investments in membership or partnership interests in entities that own real estate assets will be subject to the specific risks relating to the particular company and to the general risks of investing in real estate-related loans and securities, which may result in significant losses. We may invest in, or originate, senior debt or subordinate debt and invest in membership or partnership interests in entities that own real estate assets. These investments will involve special risks relating to the particular company, including its financial condition, liquidity, results of operations, business and prospects. In particular, the debt securities may not be collateralized and also may be subordinated to the entity's other obligations. We are likely to invest in debt securities of companies that are not rated or are rated non-investment grade by one or more rating agencies. Investments that are not rated or are rated non-investment grade have a higher risk of default than investment grade rated assets and therefore may result in losses to us. We have not adopted any limit on such investments.

These investments also will subject us to the risks inherent with real estate investments referred to previously, including the risks described with respect to multifamily, retail and office properties and other real estate-related investments and similar risks, including:

•risks of delinquency and foreclosure, and risks of loss in the event thereof;

•the dependence upon the successful operation of, and net income from, real property;

•risks generally incident to interests in real property;

•risks related to rising construction costs; and

•risks specific to the type and use of a particular property.

These risks may adversely affect the value of our investments in entities that own real estate assets and the ability of our borrowers thereof to make principal and interest payments in a timely manner, or at all, and could result in significant losses.

Our real estate loan assets will involve greater risks of loss than senior loans secured by income-producing properties. We may originate (in connection with a forward purchase or option to purchase contract or otherwise) or acquire real estate loans in entities that own or are developing multifamily properties or other real estate-related investments which take the form of subordinated loans secured by second mortgages on the underlying property or loans secured by a pledge of the ownership interests of either the entity owning the property or a pledge of the ownership interests of the entity that owns the interest in the entity owning the property. These types of assets involve a higher degree of risk than long-term senior mortgage lending secured by income-producing real property because the loan may become unsecured as a result of foreclosure by the senior lender and because it is in second position and there may not be adequate equity in the property. In the event of a bankruptcy of the entity providing the pledge of its ownership interests as security, we may not have full recourse to the assets of such entity, or the assets of the entity may not be sufficient to satisfy our real estate loan. If a borrower defaults on our real estate loan or debt senior to our loan, or in the event of a borrower bankruptcy, our real estate loan will be satisfied only after the senior debt. We may be unable to enforce guaranties of payment and/or performance given as security for some real estate loans. As a result, we may not recover some or all of our initial expenditure. Our real estate loans partially finance the construction of real estate projects and so involve additional risks inherent in the construction process, such as adherence to budgets and construction schedules. In addition, subordinate loans may have higher loan-to-value ratios than conventional mortgage loans, resulting in less equity in the property and increasing the risk of loss of principal. Significant losses related to our real estate loans would result in operating losses for us and may limit our ability to make distributions to our stockholders.

We may rely significantly on repayment guarantors of our real estate loan investments and, therefore, could be subject to credit concentration that makes us more susceptible to adverse events with respect to such guarantors. The repayment of amounts owed to us under certain of our real estate loan investments may be partially guaranteed by the principals of the borrowers. If it were necessary to enforce a guaranty of completion or a guaranty of repayment, our rights under such enforcement are limited by rights held by the senior lender pursuant to intercreditor agreements we have in place. Therefore, the failure to perform by the borrowers and such guarantors is likely to have a material adverse effect on our results of operations and financial condition.

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Risks Associated with Debt Financing

We have significant debt, which could have important adverse consequences. As of December 31, 2021, we had outstanding debt of approximately $2.4 billion. This indebtedness could have important consequences, including:

•if a property is mortgaged to secure payment of indebtedness, and if we are unable to meet our mortgage obligations, we could sustain a loss as a result of foreclosure on the mortgaged property;