As
filed with the Securities and Exchange Commission on October 23, 2023
Registration
No. 333-
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-3
REGISTRATION
STATEMENT UNDER
THE
SECURITIES ACT OF 1933
Postal
Realty Trust, Inc.
(Exact
Name of Registrant as specified in its charter)
| Maryland |
|
83-2586114 |
(State
or Other Jurisdiction of
Incorporation
or Organization) |
|
(I.R.S.
Employer
Identification
Number) |
75
Columbia Avenue
Cedarhurst,
NY 11516
Tel:
(516) 295-7820
(Address,
Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
Andrew
Spodek
Chief
Executive Officer
Postal
Realty Trust, Inc.
75
Columbia Avenue
Cedarhurst,
NY 11516
Tel:
(516) 295-7820
(Name,
Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)
Copy
to:
James
V. Davidson, Esq.
Kathryn
E. Saltz, Esq.
Hunton
Andrews Kurth LLP
600
Travis Street, Suite 4200
Houston,
TX 77002
Telephone:
(713) 220-3649
Approximate
date of commencement of proposed sale to the public: From time to time after this registration statement becomes effective.
If
the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check
the following box. ☐
If
any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following
box. ☒
If
this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the earlier effective registration statement for the same
offering. ☐
If
this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If
this form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective
upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. ☐
If
this form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional
securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large
accelerated filer |
☐ |
|
Accelerated
filer |
|
☐ |
| Non-accelerated
filer |
☒ |
|
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 7(a)(2)(B) of the Securities Act. ☐
| * | The
registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective
in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective
on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. |
EXPLANATORY
NOTE
We
are filing this registration statement solely to replace the registrant’s registration statement on Form S-3 (File No. 333-251079),
filed with the U.S. Securities and Exchange Commission on December 2, 2020 (the “Expiring Registration Statement”), that
is scheduled to expire on December 11, 2023 pursuant to Rule 415(a)(5) under the Securities Act of 1933, as amended (the “Securities
Act”). In accordance with Rule 415(a)(6) of the Securities Act, effectiveness of this registration statement will be deemed to
terminate the Expiring Registration Statement.
The
information in this prospectus is not complete and may be changed. No person may sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting
an offer to buy securities in any state where an offer or sale is not permitted.
Subject
to Completion, Dated October 23, 2023
PROSPECTUS
$500,000,000
Postal
Realty Trust, Inc.
Class
A Common Stock
Preferred
Stock
Warrants
Units
We
may offer, issue and sell from time to time: shares of our Class A common stock, par value $0.01 per share (“Class A common stock”),
or preferred stock, par value $0.01 per share (“preferred stock”); warrants to purchase shares of our Class A common stock,
preferred stock or other securities that may be registered hereunder and issued and sold from time to time; and units consisting of two
or more of the foregoing.
We
will provide the specific terms of any securities we may offer in supplements to this prospectus. You should read this prospectus and
any applicable prospectus supplement carefully before you invest. This prospectus may not be used to offer and sell any securities, unless
accompanied by a prospectus supplement describing the amount of securities being offered and terms of the offering of those securities.
We may offer and sell these securities to or through one or more underwriters, dealers or agents, or directly to purchasers on a continuous
or delayed basis. We reserve the sole right to accept, and together with any underwriters, dealers and agents, reserve the right to reject,
in whole or in part, any proposed purchase of securities. The names of any underwriters, dealers or agents involved in the sale of any
securities, the specific manner in which they may be offered and any applicable commissions or discounts will be set forth in the prospectus
supplement covering the sales of those securities.
We
elected to be taxed as a real estate investment trust for federal income tax purposes (“REIT”) commencing with our short
taxable year ended December 31, 2019. Shares of our Class A common stock and preferred stock are subject to limitations on ownership
and transfer that are primarily intended to assist us in qualifying as a REIT. Our charter generally prohibits any person from actually,
beneficially or constructively owning more than 8.5% in value or number of shares, whichever is more restrictive, of the outstanding
shares of our Class A common stock or more than 8.5% in value of the outstanding shares of any class or series of our preferred stock.
See the section entitled “Description of Capital Stock—Restrictions on Ownership and Transfer” included in this prospectus.
Our
Class A common stock is listed on The New York Stock Exchange (“NYSE”) under the symbol “PSTL.” We have not yet
determined whether any of the other securities that may be offered by this prospectus will be listed on any exchange, inter-dealer quotation
system or over-the-counter system. If we decide to seek a listing for any of those securities, that decision will be disclosed in a prospectus
supplement.
The
address of our principal executive office is: 75 Columbia Avenue, Cedarhurst, NY 11516. The telephone number of such office is: (516)
295-7820.
Investing
in our securities involves risks. Before making a decision to invest in our securities, you should carefully consider the risks described
under the heading entitled “Risk Factors” beginning on page 2 of this prospectus and those included under the same title
in our most recent Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q and other documents filed by us with the Securities
and Exchange Commission, including any risks described in any accompanying prospectus supplement.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed
upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The
date of this prospectus is , 20
TABLE
OF CONTENTS
Unless
the context otherwise requires, references in this prospectus to “we,” “our,” “us” and “our
company” refer to Postal Realty Trust, Inc., a Maryland corporation, together with our consolidated subsidiaries, including Postal
Realty LP, a Delaware limited partnership, which we refer to in this prospectus as our operating partnership. We are the sole general
partner of our operating partnership.
You
should rely only on the information contained in or incorporated by reference into this prospectus or any accompanying prospectus supplement.
We have not authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information,
you should not rely on it. You should assume that the information contained in this prospectus and any accompanying prospectus supplement,
as well as information that we have previously filed with the United States Securities and Exchange Commission (the “SEC”)
and incorporated by reference, is accurate only as of the date of the applicable document. Our business, financial condition, results
of operations and prospects may have changed since those dates.
The
distribution of this prospectus and any accompanying prospectus supplement and the offering of our securities in certain jurisdictions
may be restricted by law. If you possess this prospectus or any accompanying prospectus supplement, you should find out about and observe
these restrictions. This prospectus and any accompanying prospectus supplement are not an offer to sell our securities and are not soliciting
an offer to buy our securities in any jurisdiction where the offer or sale is not permitted or where the person making the offer or sale
is not qualified to do so or to any person to whom it is not permitted to make such offer or sale. See “Plan of Distribution”
in this prospectus.
ABOUT
THIS PROSPECTUS
This
prospectus is part of a “shelf” registration statement that we have filed with the SEC. By using a shelf registration statement,
we may sell, at any time and from time to time, in one or more offerings, any combination of the securities described in this prospectus.
The exhibits to our registration statement and documents incorporated by reference herein and therein contain the full text of certain
contracts and other important documents that we have summarized in this prospectus or that we may summarize in a prospectus supplement.
Since these summaries may not contain all the information that you may find important in deciding whether to purchase the securities
we offer, issue and sell from time to time, you should review the full text of these documents. The registration statement, the exhibits
and other documents can be obtained from the SEC as indicated under the sections in this prospectus entitled “Where You Can Find
More Information” and “Incorporation by Reference of Information Filed with the SEC.”
This
prospectus only provides you with a general description of the securities we may offer, issue and sell from time to time, which is not
meant to be a complete description of each security. Each time we sell securities, we will provide a prospectus supplement that contains
specific information about the terms of those securities. The prospectus supplement may also add, update or change information contained
in this prospectus. If there is any inconsistency between the information in this prospectus and any prospectus supplement, you should
rely on the information in such prospectus supplement. You should read carefully both this prospectus and any prospectus supplement together
with the additional information described under the sections in this prospectus and in such prospectus supplement entitled “Where
You Can Find More Information” and “Incorporation by Reference of Information Filed with the SEC.”
INCORPORATION
BY REFERENCE OF INFORMATION FILED WITH THE SEC
The
SEC allows us to “incorporate by reference” the information we file with the SEC, which means that we can disclose important
information to you by referring to those documents. The information incorporated by reference is an important part of this prospectus
and any accompanying prospectus supplement. Any statement contained in a document which is incorporated by reference into this prospectus
and any accompanying prospectus supplement is automatically updated and superseded if information contained in this prospectus or any
accompanying prospectus supplement, or information that we later file with the SEC, modifies or replaces this information. We incorporate
by reference the following documents we filed with the SEC:
| ● | our
Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March
7, 2023; |
| | | |
| ● | our Quarterly
Reports on Form 10-Q for the quarters ended March 31, 2023 and June 30, 2023, filed with
the SEC on May 4, 2023 and August 8, 2023, respectively; |
| | | |
| ● | the information
specifically incorporated by reference into our Annual Report on Form 10-K for the year ended
December 31, 2022 from our Definitive Proxy Statement on Schedule 14A, filed with the SEC
on April 25, 2023; |
| | | |
| ● | our Current Reports on Form 8-K, filed with the SEC on June
9, 2023, July 5, 2023, July
26, 2023, August 8,
2023 (only with respect to Item 1.01 therein) and October 20, 2023; and |
| | | |
| ● | the description
of our Class A common stock contained in our Registration Statement on Form 8-A filed with
the SEC on May 7, 2019, including all amendments and reports filed for the purpose of updating
such description. |
We
are also incorporating by reference additional documents that we file with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act: (i) after the date of the initial registration statement of which this prospectus is a part and prior to effectiveness
of the registration statement and (ii) after the date of this prospectus and prior to the termination of the offering of the securities
described in this prospectus. We are not, however, incorporating by reference any documents or portions thereof, whether specifically
listed above or filed in the future, that are not deemed “filed” with the SEC, including any information furnished pursuant
to Items 2.02 or 7.01 of Form 8-K or certain exhibits furnished pursuant to Item 9.01 of Form 8-K.
To
receive a free copy of any of the documents incorporated by reference into this prospectus, including exhibits, if they are specifically
incorporated by reference into the documents, call us at (516) 295-7820 or submit a written request Postal Realty Trust, Inc., 75 Columbia
Avenue, Cedarhurst, NY 11516, Attention: Investor Relations or by email at: ir@postalrealtytrust.com.
WHERE
YOU CAN FIND MORE INFORMATION
We
file annual, quarterly and current reports, proxy statements and other information with the SEC. The SEC maintains a website that contains
reports, proxy and information statements and other information regarding registrants that file electronically with the SEC at http://www.sec.gov.
In addition, we maintain a website that contains information about us at http://www.postalrealtytrust.com. The information found
on, or otherwise accessible through, our website is not incorporated by reference into, and does not form a part of, this prospectus
or any accompanying prospectus supplement or any other report or document we file with or furnish to the SEC.
We
have filed with the SEC a registration statement on Form S-3, of which this prospectus is a part, including exhibits, schedules and amendments
filed with, or incorporated by reference into, the registration statement, under the Securities Act of 1933, as amended (the “Securities
Act”), with respect to the securities registered hereby. This prospectus and any accompanying prospectus supplement do not contain
all of the information set forth in the registration statement and exhibits and schedules to the registration statement. For further
information with respect to our company and the securities registered hereby, reference is made to the registration statement, including
the exhibits to the registration statement. Statements contained in this prospectus and any accompanying prospectus supplement as to
the contents of any contract or other document referred to in, or incorporated by reference into, this prospectus and any accompanying
prospectus supplement are not necessarily complete and, where such contract or other document is an exhibit to the registration statement,
each statement is qualified in all respects by the exhibit to which the reference relates. The registration statement of which this prospectus
is a part is and the exhibits and schedules to the registration statement are available to you on the SEC’s website.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus and the documents that we incorporate by reference in each contain “forward-looking statements” within the meaning
of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). Also, documents we subsequently file with the SEC and incorporate
by reference will contain forward-looking statements. In particular, statements pertaining to our capital resources, property performance
and results of operations contain forward-looking statements. Likewise, all of our statements regarding anticipated growth in our funds
from operations and anticipated market conditions, demographics and results of operations are forward-looking statements. We are including
this cautionary statement to make applicable, and take advantage of, the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 for any such forward-looking statements. We caution investors that any forward-looking statements presented in this
prospectus and the documents that we incorporate by reference in each are based on management’s beliefs and assumptions made by,
and information currently available to, management. When used, the words “anticipate,” “believe,” “expect,”
“intend,” “may,” “might,” “plan,” “estimate,” “project,” “should,”
“will,” “seek,” “approximately,” “pro forma,” “result,” the negative of these
words and phrases and similar expressions that do not relate solely to historical matters are intended to identify forward-looking statements.
You can also identify forward-looking statements by discussions of strategy, plans or intentions.
Forward-looking
statements are subject to risks, uncertainties and assumptions and may be affected by known and unknown risks, trends, uncertainties
and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those anticipated, estimated or projected. We do not guarantee that the transactions
and events described will happen as described (or that they will happen at all).
The
following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated
in the forward-looking statements:
| ● | change
in the status of the United States Postal Service (“USPS”) as an independent agency of the executive branch of the U.S. federal
government; |
| ● | change
in the demand for postal services delivered by the USPS; |
| ● | our
ability to come to an agreement with the USPS regarding new leases or lease renewals on the terms and timing we expect, or at all; |
| ● | the
solvency and financial health of the USPS; |
| ● | defaults
on, early terminations of or non-renewal of leases or actual, potential or threatened relocation, closure or consolidation of postal
offices or delivery units by the USPS; |
| ● | the
competitive market in which we operate; |
| ● | changes
in the availability of acquisition opportunities; |
| ● | our
inability to successfully complete real estate acquisitions or dispositions on the terms and timing we expect, or at all; |
| ● | our
failure to successfully operate developed and acquired properties; |
| ● | adverse
economic or real estate developments, either nationally or in the markets in which our properties are located; |
| ● | decreased
rental rates or increased vacancy rates; |
| ● | change
in our business, financing or investment strategy or the markets in which we operate; |
| ● | fluctuations
in interest rates and increased operating costs; |
| ● | general
economic conditions (including inflation, rising interest rates, uncertainty regarding ongoing conflict between Russia and Ukraine and
their related impact on macroeconomic conditions); |
| ● | financial
market fluctuations; |
| ● | our
failure to generate sufficient cash flows to service our outstanding indebtedness; |
| ● | our
failure to obtain necessary outside financing on favorable terms or at all; |
| ● | failure
to hedge effectively against interest rate changes; |
| ● | our
reliance on key personnel whose continued service is not guaranteed; |
| ● | the
outcome of claims and litigation involving or affecting us; |
| ● | changes
in real estate, taxation, zoning laws and other legislation and government activity and changes to real property tax rates and REITs
in general; |
| ● | operations
through joint ventures and reliance on or disputes with co-venturers; |
| ● | uncertainties
and risks related to adverse weather conditions, natural disasters and climate change; |
| ● | exposure
to liability relating to environmental and health and safety matters; |
| ● | governmental
approvals, actions and initiatives, including the need for compliance with environmental requirements; |
| ● | lack
or insufficient amounts of insurance; |
| ● | limitations
imposed on our business in order to maintain our status as a REIT and our failure to maintain such status; and |
| ● | public
health threats such as the coronavirus (COVID-19) pandemic. |
All
forward-looking statements speak only as of the date on which they are made. New risks and uncertainties arise over time and it is not
possible to predict those events or how they may affect us. Except as required by law, we are not obligated to publicly update or revise
any forward-looking statements, whether as a result of new information, future events or otherwise.
While
forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We disclaim any obligation
to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You
should not place undue reliance on any forward-looking statements that are based on information currently available to us or the third
parties making the forward-looking statements. For a further discussion of these and other factors that could impact our future results,
performance, liquidity or transactions, see the section in this prospectus and in any prospectus supplement entitled “Risk Factors,”
and the sections captioned “Risk Factors” in our most recent Annual Report on Form 10-K, our subsequent Quarterly Reports
on Form 10-Q and other documents that we file with the SEC.
POSTAL
REALTY TRUST, INC.
We
are an internally-managed REIT with a focus on acquiring and managing properties primarily leased to the USPS, ranging from last-mile
post offices to larger industrial facilities. We believe the overall opportunity for consolidation that exists within the postal logistics
network is very attractive. We continue to execute our strategy to acquire and consolidate postal properties that we believe will generate
strong earnings for our stockholders.
We
elected to be taxed as a REIT commencing with our short taxable year ended December 31, 2019. We intend to continue to operate in a manner
that will maintain our qualification as a REIT for U.S. federal income tax purposes.
RISK
FACTORS
Before
purchasing any securities offered by this prospectus, you should carefully consider the risk factors incorporated by reference into this
prospectus from our most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q, the risks, uncertainties and
additional information set forth in our SEC reports on Forms 10-K, 10-Q and 8-K and in the other documents incorporated by reference
into this prospectus, and any risks described in any accompanying prospectus supplement. For a description of these reports and documents,
and information about where you can find them, see the sections in this prospectus entitled “Where You Can Find More Information”
and “Incorporation by Reference of Information Filed with the SEC.” Additional risks not presently known or that are currently
deemed immaterial could also materially and adversely affect our financial condition, results of operations, business and prospects.
USE
OF PROCEEDS
Unless
we indicate otherwise in the applicable prospectus supplement, we intend to contribute the net proceeds from any sale of the securities
pursuant to this prospectus to our operating partnership in exchange for common or preferred units of limited partnership interest in
our operating partnership (“OP units”). Our operating partnership will subsequently use the net proceeds received from us
to potentially acquire or develop additional properties and for general corporate purposes, which may include payment of dividends, capital
expenditures for improvements to the properties in our portfolio, working capital and the repayment of indebtedness. Pending application
of cash proceeds, we intend to invest the net proceeds in interest-bearing accounts, money market accounts and interest-bearing securities
in a manner that is consistent with our intention to maintain our qualification for taxation as a REIT. Such investments may include,
for example, government and government agency certificates, government bonds, certificates of deposit, interest-bearing bank deposits
and money market accounts. Further details regarding the use of the net proceeds from the sale of a specific series or class of the securities
will be set forth in the applicable prospectus supplement.
DESCRIPTION
OF CAPITAL STOCK
The
following is a summary of the material terms of the securities of our company and certain terms of our charter and bylaws, but it is
not a complete description of our charter and bylaws, copies of which are filed as exhibits to the registration statement of which this
prospectus is a part. See “Where You Can Find More Information”.
General
Our
charter provides that we may issue up to 500,000,000 shares of Class A common stock, $0.01 par value per share, up to
27,206 shares of Class B common stock, $0.01 par value per share (“Voting Equivalency stock”), and up to 100,000,000 shares
of preferred stock, $0.01 par value per share. Our charter authorizes our Board of Directors to amend our charter to increase or
decrease the aggregate number of authorized shares of common stock or preferred stock or the number of shares of stock of any class or
series without stockholder approval; provided that our Board of Directors may not increase the number of shares of Voting Equivalency
stock that we have authority to issue, classify or reclassify any shares of our capital stock as Voting Equivalency stock or amend our
charter to alter or repeal such provisions or adopt any provision inconsistent therewith without the approval of the holders of a majority
of the outstanding shares of Class A common stock (voting as a separate class).
References
in this prospectus to “common stock” refer either to our Class A common stock or to our Class A common stock and Voting Equivalency
stock collectively, as context requires, but does not refer solely to our Voting Equivalency stock.
All
shares of Class A common stock offered by this prospectus will be duly authorized, validly issued, fully paid and nonassessable.
Under
Maryland law, stockholders generally are not personally liable for our debts or obligations solely as a result of their status as stockholders.
Common
Stock
Voting
Rights of Common Stock
Subject
to the provisions of our charter regarding the restrictions on transfer and ownership of shares of our common stock and except as may
otherwise be specified in the terms of any class or series of common stock, each outstanding share of Class A common stock entitles
the holder to one vote and each outstanding share of Voting Equivalency stock entitles the holder to fifty (50) votes on all matters
which the holders of Class A common stock are entitled to vote, including the election of directors, and, except as provided with respect
to any other class or series of capital stock, the holders of shares of Class A common stock and Voting Equivalency stock vote together
as a single class, and possess the exclusive voting power, provided that the holders of Voting Equivalency stock have exclusive voting
power with respect to an amendment to the charter that would materially and adversely affect any right or voting power of the Voting
Equivalency stock. There is no cumulative voting in the election of our company’s directors, which means that the stockholders
entitled to cast a majority of the votes of the outstanding shares of common stock can elect all of the directors then standing for election,
and the holders of the remaining shares will not be able to elect any directors.
Under
the Maryland General Corporation Law (the “MGCL”), a Maryland corporation generally cannot dissolve, amend its charter, merge,
convert, sell all or substantially all of its assets, engage in a statutory share exchange or engage in similar transactions outside
the ordinary course of business unless declared advisable by a majority of its board of directors and approved by the affirmative vote
of stockholders holding at least two-thirds of the shares entitled to vote on the matter unless a lesser percentage (but not less
than a majority of all the votes entitled to be cast on the matter) is set forth in the corporation’s charter. Our charter provides
that these actions (other than certain amendments to the provisions of our charter related to the removal of directors and the restrictions
on ownership and transfer of our shares of stock and the vote required to amend those provisions, which will require two-thirds of
the votes entitled to be cast) may be taken if declared advisable by a majority of our Board of Directors and approved by the vote of
stockholders holding at least a majority of the votes entitled to be cast on the matter. However, Maryland law permits a corporation
to transfer all or substantially all of its assets without the approval of the stockholders of the corporation to one or more persons
if all of the equity interests of the person or persons are owned, directly or indirectly, by the corporation. In addition, because assets
may be held by a corporation’s subsidiaries, as is the case with our company, these subsidiaries may be able to transfer all or
substantially all of such assets without a vote of our stockholders.
Dividends,
Distributions, Liquidation and Other Rights
Subject
to the preferential rights of any other class or series of our stock and to the provisions of our charter regarding the restrictions
on transfer of shares of stock, holders of shares of common stock are entitled to receive dividends on such shares of common stock if,
as and when authorized by our Board of Directors and declared by us out of assets legally available therefor. Such holders are also entitled
to share ratably in the assets of our company legally available for distribution to our stockholders in the event of our liquidation,
dissolution or winding up after payment or establishment of reserves for all debts and liabilities of our company and any shares with
preferential rights thereto.
Holders
of shares of common stock have no preference, conversion (other than as described below with respect to the Voting Equivalency stock),
exchange, sinking fund or redemption rights, have no preemptive rights to subscribe for any securities of our company and have no appraisal
rights. Subject to the preferential rights of any other class or series of our stock and to the provisions of our charter regarding the
restrictions on transfer of shares of stock, shares of common stock have equal dividend, liquidation and other rights. The Voting Equivalency
stock is not transferable other than pursuant to the restrictions on ownership and transfer in our charter and to members of Mr. Spodek’s
immediate family or to entities beneficially owned by, controlled by, or for the charitable benefit of Mr. Spodek’s immediate
family. For these purposes, Class A common stock and Voting Equivalency stock have identical rights.
Conversion
Rights
Shares
of Voting Equivalency stock are convertible into shares of Class A common stock, on a one-for-one basis, at the election of
the holder at any time and will automatically convert into shares of Class A common stock on a one-for-one basis upon an attempted
transfer to anyone other than a permitted transferee in accordance with the terms of our charter. In addition, shares of Voting Equivalency
stock will automatically convert into shares of Class A common stock, upon certain direct or indirect transfers of beneficial ownership
of the 250,000 OP units issued to Mr. Spodek and his affiliates (the “Spodek Initial OP units”) in connection with our formation
transactions completed simultaneously with the closing of our initial public offering (the “formation transactions”) at a
ratio of one share of Voting Equivalency stock convertible to one share of Class A common stock for every 49 Spodek Initial OP units
transferred (including by the exercise of redemption rights afforded with respect to OP units) to a person other than a permitted transferee.
Preferred
Stock
Our
Board of Directors may authorize the issuance of preferred stock in one or more classes or series and may classify any unissued shares
of preferred stock and reclassify any previously classified but unissued shares of preferred stock into one or more classes or series
without stockholder approval; provided that our Board of Directors may not classify or reclassify any shares of our preferred stock as
Voting Equivalency stock without the approval of the holders of a majority of the outstanding shares of Class A common stock (voting
as a separate class). Prior to issuance of shares of each class or series, our Board of Directors is required by the MGCL and our
charter to establish the number of shares in each class or series and to set, subject to the provisions of our charter regarding the
restrictions on transfer of stock, the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends
or other distributions, qualifications and terms and conditions of redemption for each such class or series.
The
preferred stock we may offer from time to time under this prospectus, when issued in exchange for the consideration therefor, will be
duly authorized, fully paid and nonassessable, and holders of preferred stock will not have any preemptive rights.
The
issuance of preferred stock could have the effect of delaying, deferring or preventing a change in control or other transaction that
might involve a premium price for our common stock or otherwise be in the best interests of our stockholders. In addition, any preferred
stock that we issue could rank senior to our common stock with respect to the rights upon liquidation and the payment of distributions,
in which case we could not pay any distributions on our common stock until full distributions have been paid with respect to such preferred
stock.
The
preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions
of redemption of each class or series of preferred stock will be set forth in articles supplementary to our charter relating to the class
or series. We will describe the specific terms of the particular series of preferred stock in the prospectus supplement relating to that
series, which terms may include:
| ● | the
designation and par value of the preferred stock; |
| ● | the
voting rights, if any, of the preferred stock; |
| ● | the
number of shares of preferred stock offered, the liquidation preference per share of preferred stock and the offering price of the preferred
stock; |
| ● | the
distribution rate(s), period(s) and payment date(s) or method(s) of calculation applicable to the preferred stock; |
| ● | whether
distributions will be cumulative or non-cumulative and, if cumulative, the date(s) from which distributions on the preferred stock will
cumulate; |
| ● | the
procedures for any auction and remarketing for the preferred stock, if applicable; |
| ● | the
provision for a sinking fund, if any, for the preferred stock; |
| ● | the
provision for, and any restriction on, redemption, if applicable, of the preferred stock; |
| ● | the
provision for, and any restriction on, repurchase, if applicable, of the preferred stock; |
| ● | the
terms and provisions, if any, upon which the preferred stock will be convertible into Class A common stock, including the conversion
price (or manner or calculation) and conversion period; |
| ● | the
terms under which the rights of the preferred stock may be modified, if applicable; |
| ● | the
relative ranking and preferences of the preferred stock as to distribution rights and rights upon the liquidation, dissolution or winding
up of our affairs; |
| ● | any
limitation on issuance of any other series of preferred stock, including any series of preferred stock ranking senior to or on parity
with the series of preferred stock as to distribution rights and rights upon the liquidation, dissolution or winding up of our affairs; |
| ● | any
listing of the preferred stock on any securities exchange; |
| ● | if
appropriate, a discussion of any additional material federal income tax considerations applicable to the preferred stock; |
| ● | information
with respect to book-entry procedures, if applicable; |
| ● | in
addition to those restrictions described below, any other restrictions on the ownership and transfer of the preferred stock; and |
| ● | any
additional rights, preferences, privileges or restrictions of the preferred stock. |
No
shares of preferred stock are presently outstanding, and we have no present plans to issue any shares of preferred stock.
Power
to Reclassify Our Unissued Shares of Stock
Our
charter authorizes our Board of Directors to classify and reclassify any unissued shares of common or preferred stock into other classes
or series of shares of stock and to establish the number of shares in each class or series and to set the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions
of redemption for each such class or series; provided that our board may not classify or reclassify any shares of our capital stock as
Voting Equivalency stock without the approval of the holders of a majority of the outstanding shares of Class A common stock (voting
as a separate class). As indicated above, our Board of Directors could authorize the issuance of shares of preferred stock that have
priority over the shares of common stock (including shares of our outstanding Class A common stock) with respect to dividends, distributions
and rights upon liquidation and with other terms and conditions that could have the effect of delaying, deterring or preventing a transaction
or a change in control that might involve a premium price for holders of shares of our common stock or otherwise might be in their best
interest.
Power
to Increase or Decrease Authorized Stock and Issue Additional Shares of Our Common Stock and Preferred Stock
Our
charter authorizes our Board of Directors, with the approval of a majority of the entire Board of Directors, to amend our charter to
increase or decrease the aggregate number of authorized shares of stock or the number of authorized shares of stock of any class or series
without stockholder approval; provided that our Board of Directors may not increase the number of shares of Voting Equivalency stock
that we have the authority to issue without the approval of the holders of a majority of the outstanding shares of Class A common
stock (voting as a separate class). We believe that the power of our Board of Directors to increase or decrease the number of authorized
shares of stock and to classify or reclassify unissued shares of our common stock or preferred stock and thereafter to cause us to issue
such shares of stock will provide us with increased flexibility in structuring possible future financings and acquisitions and in meeting
other needs which might arise. The additional classes or series, as well as the additional shares of stock, will be available for future
issuance without further action by our stockholders, unless such action is required by applicable law, the terms of any other class or
series of stock or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded. Our
Board of Directors could authorize us to issue a class or series that could, depending upon the terms of the particular class or series,
delay, defer or prevent a transaction or a change in control of our company that might involve a premium price for our stockholders or
otherwise be in their best interests.
Restrictions
on Ownership and Transfer
In
order to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), our shares of stock must be
beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months (other than the first year
for which an election to be a REIT has been made) or during a proportionate part of a shorter taxable year. Also, not more than 50% of
the value of our outstanding shares of capital stock may be owned, directly or indirectly, by five or fewer individuals (as defined in
the Code to include certain entities) during the last half of a taxable year (other than the first year for which an election to be a
REIT has been made).
Because
our Board of Directors believes it is at present essential for us to qualify as a REIT, among other purposes, our charter, subject to
certain exceptions, contains restrictions on the number of our shares of stock that a person may own. Our charter provides that, subject
to certain exceptions, (i) no person, other than Mr. Spodek, may beneficially or constructively own more than 8.5%, in value
or in number of shares, whichever is more restrictive, of the aggregate outstanding shares of our common stock, and (ii) no person
may beneficially or constructively own more than 8.5%, in value of the outstanding shares of any class or series of our preferred stock,
collectively, the ownership limit. In addition, our charter provides an excepted holder limit that allows Mr. Spodek to beneficially
or constructively own up to 15%, in value or in number of shares, whichever is more restrictive, of the aggregate outstanding shares
of our common stock so long as we qualify as a REIT for federal income tax purposes.
Our
charter prohibits any person from:
| ● | beneficially
or constructively owning or transferring shares of our capital stock if such ownership or transfer would result in our being “closely
held” within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last
half of a year); |
| ● | transferring
shares of our capital stock if such transfer would result in our capital stock being owned by fewer than 100 persons (determined under
the principles of Section 856(a)(5) of the Code); |
| ● | beneficially
or constructively owning shares of our capital stock to the extent such beneficial or constructive ownership would cause us to constructively
own ten percent or more of the ownership interests in a tenant (other than a taxable REIT subsidiary (a “TRS”)) of our real
property within the meaning of Section 856(d)(2)(B) of the Code; or |
| ● | beneficially
or constructively owning or transferring shares of our capital stock if such beneficial or constructive ownership or transfer would otherwise
cause us to fail to qualify as a REIT under the Code. |
Our
Board of Directors, in its sole discretion, may prospectively or retroactively exempt a person from certain of the limits described in
the paragraph above and may establish or increase an excepted holder percentage limit for such person if our Board of Directors obtains
such representations and undertakings as it deems appropriate in order to conclude that granting the exemption and/or establishing or
increasing the excepted holder percentage limit will not result in our being “closely held” under Section 856(h) of
the Code (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwise failing to qualify
as a REIT. Our Board of Directors may require a ruling from the Internal Revenue Service (the “IRS”) or an opinion of counsel,
in either case in form and substance satisfactory to our Board of Directors, in its sole discretion, in order to determine or ensure
our status as a REIT.
Notwithstanding
the receipt of any ruling or opinion, our Board of Directors may impose such guidelines or restrictions as it deems appropriate in connection
with granting such exemption. In connection with granting a waiver of the ownership limit or creating an exempted holder limit or at
any other time, our Board of Directors from time to time may increase or decrease the ownership limit, subject to certain exceptions.
A decreased ownership limit will not apply to any person or entity whose percentage of ownership of our stock is in excess of the decreased
ownership limit until the person or entity’s ownership of our stock equals or falls below the decreased ownership limit, but any
further acquisition of our stock will be subject to the decreased ownership limit.
Any
attempted transfer of shares of our capital stock which, if effective, would violate any of the restrictions described above will result
in the number of shares of our capital stock causing the violation (rounded up to the nearest whole share) to be automatically transferred
to a trust for the exclusive benefit of one or more charitable beneficiaries and the purported owner or transferee (the “prohibited
owner”) will acquire no rights in such shares, except that any transfer that results in the violation of the restriction relating
to shares of our capital stock being beneficially owned by fewer than 100 persons will be void ab initio. In either case, the prohibited
owner will not acquire any rights in those shares. The automatic transfer will be deemed to be effective as of the close of business
on the business day prior to the date of the purported transfer or other event that results in the transfer to the trust. Shares held
in the trust will be issued and outstanding shares. The prohibited owner will not benefit economically from ownership of any shares held
in the trust, will have no rights to dividends or other distributions and will have no rights to vote or other rights attributable to
the shares held in the trust. The trustee of the trust will have all voting rights and rights to dividends or other distributions with
respect to shares held in the trust. These rights will be exercised for the exclusive benefit of the charitable beneficiary. Any dividend
or other distribution paid prior to our discovery that shares have been transferred to the trust will be paid by the recipient to the
trustee upon demand. Any dividend or other distribution authorized but unpaid will be paid when due to the trustee. Any dividend or other
distribution paid to the trustee will be held in trust for the charitable beneficiary. Subject to Maryland law, the trustee will have
the authority (i) to rescind as void any vote cast by the prohibited owner prior to our discovery that the shares have been transferred
to the trust and (ii) to recast the vote in accordance with the desires of the trustee acting for the benefit of the charitable
beneficiary. However, if we have already taken irreversible corporate action, then the trustee will not have the authority to rescind
and recast the vote.
Within
20 days of receiving notice from us that shares of our stock have been transferred to the trust, the trustee will sell the shares
to a person, designated by the trustee, whose ownership of the shares will not violate the above ownership and transfer limitations.
Upon the sale, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds
of the sale to the prohibited owner and to the charitable beneficiary as follows. The prohibited owner will receive the lesser of (i) the
price paid by the prohibited owner for the shares or, if the prohibited owner did not give value for the shares in connection with the
event causing the shares to be held in the trust (e.g., a gift, devise or other similar transaction), the market price (as defined in
our charter) of the shares on the day of the event causing the shares to be held in the trust and (ii) the price per share received
by the trustee (net of any commission and other expenses of sale) from the sale or other disposition of the shares. The trustee may reduce
the amount payable to the prohibited owner by the amount of dividends or other distributions paid to the prohibited owner and owed by
the prohibited owner to the trustee. Any net sale proceeds in excess of the amount payable to the prohibited owner will be paid immediately
to the charitable beneficiary. If, prior to our discovery that our shares of our stock have been transferred to the trust, the shares
are sold by the prohibited owner, then (i) the shares shall be deemed to have been sold on behalf of the trust and (ii) to
the extent that the prohibited owner received an amount for the shares that exceeds the amount he or she was entitled to receive, the
excess shall be paid to the trustee upon demand.
In
addition, shares of our stock held in the trust will be deemed to have been offered for sale to us, or our designee, at a price per share
equal to the lesser of (i) the price per share in the transaction that resulted in the transfer to the trust (or, in the case of
a devise or gift, the market price at the time of the devise or gift) and (ii) the market price on the date we, or our designee,
accept the offer, which we may reduce by the amount of dividends and distributions paid to the prohibited owner and owed by the prohibited
owner to the trustee. We will have the right to accept the offer until the trustee has sold the shares. Upon a sale to us, the interest
of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the prohibited
owner.
If
a transfer to a charitable trust, as described above, would be ineffective for any reason to prevent a violation of a restriction, the
transfer that would have resulted in a violation will be void ab initio, and the prohibited owner shall acquire no rights in those shares.
The
foregoing restrictions on transferability and ownership will not apply if our Board of Directors determines that it is no longer in our
best interests to attempt to qualify, or to continue to qualify, as a REIT.
Any
certificate representing shares of our capital stock, and any notices delivered in lieu of certificates with respect to the issuance
or transfer of uncertificated shares, will bear a legend referring to the restrictions described above.
Any
person who acquires or attempts or intends to acquire beneficial or constructive ownership of shares of our capital stock that will or
may violate any of the foregoing restrictions on transferability and ownership, or any person who would have owned shares of our capital
stock that resulted in a transfer of shares to a charitable trust, is required to give written notice immediately to us, or in the case
of a proposed or attempted transaction, to give at least 15 days’ prior written notice, and provide us with such other information
as we may request in order to determine the effect of the transfer on our status as a REIT.
Every
owner of 5% or more (or any lower percentage as required by the Code or the regulations promulgated thereunder) in number or value of
the outstanding shares of our capital stock, within 30 days after the end of each taxable year, is required to give us written notice,
stating his or her name and address, the number of shares of each class and series of shares of our capital stock that he or she
beneficially owns and a description of the manner in which the shares are held. Each of these owners must provide us with additional
information that we may request in order to determine the effect, if any, of his or her beneficial ownership on our status as a REIT
and to ensure compliance with the ownership limits. In addition, each stockholder will upon demand be required to provide us with information
that we may request in good faith in order to determine our status as a REIT and to comply with the requirements of any taxing authority
or governmental authority or to determine our compliance.
The
Voting Equivalency stock is not transferable other than pursuant to the ownership and transfer restrictions in our charter and to members
of Mr. Spodek’s immediate family or to entities beneficially owned by, controlled by, or for the charitable benefit of Mr. Spodek’s
immediate family.
These
ownership limitations could delay, defer or prevent a transaction or a change in control that might involve a premium price for shares
of our common stock or otherwise be in the best interests of our stockholders.
Exchange
Listing
Our
Class A common stock is listed on the NYSE under the symbol “PSTL.”
Transfer
Agent and Registrar
Equiniti
Trust Company, LLC is the transfer agent and registrar for the Class A common stock.
DESCRIPTION
OF WARRANTS
We
may issue warrants for the purchase of Class A common stock, preferred stock or other securities that may be registered hereunder and
issued and sold from time to time, and may issue warrants independently or together with, attached to, or separate from, such securities.
We will issue each series of warrants under a separate warrant agreement between us and a bank or trust company as warrant agent, as
specified in the applicable prospectus supplement. The following description of the terms of the warrants is only a summary. This description
is subject to, and qualified in its entirety by reference to, the provisions of the applicable warrant agreement.
The
warrant agent will act solely as our agent in connection with the warrants and will not act for or on behalf of warrant holders. The
following sets forth certain general terms and provisions of the warrants that may be offered under the registration statement of which
this prospectus is a part. Further terms of the warrants and the applicable warrant agreement will be set forth in the applicable prospectus
supplement.
Equity
Warrants
The
applicable prospectus supplement will describe the terms of the warrants to purchase Class A common stock, preferred stock or other equity
securities that may be registered hereunder and issued and sold from time to time, or equity warrants, in respect of which this prospectus
is being delivered, including, where applicable, the following:
| ● | the
title of the equity warrants; |
| ● | the
aggregate number of the equity warrants outstanding; |
| ● | the
price or prices at which the equity warrants will be issued; |
| ● | the
type and number of securities purchasable upon exercise of the equity warrants; |
| ● | the
date, if any, on and after which the equity warrants and the related securities will be separately transferable; |
| ● | the
price at which each security purchasable upon exercise of the equity warrants may be purchased; |
| ● | the
provisions, if any, for changes to or adjustments in the exercise price; |
| ● | the
date on which the right to exercise the equity warrants shall commence and the date on which such right shall expire; |
| ● | the
minimum or maximum amount of equity warrants that may be exercised at any one time; |
| ● | information
with respect to book-entry procedures, if any; |
| ● | any
anti-dilution protection; |
| ● | a
discussion of certain federal income tax considerations applicable to the equity warrants; and |
| ● | any
other terms of the equity warrants, including terms, procedures and limitations relating to the transferability, exercise and exchange
of such warrants. |
Equity
warrant certificates will be exchangeable for new equity warrant certificates of different denominations and warrants may be exercised
at the corporate trust office of the warrant agent or any other office indicated in the applicable prospectus supplement. Prior to the
exercise of their equity warrants, holders of equity warrants will not have any of the rights of holders of the securities purchasable
upon such exercise or to any dividend payments or voting rights as to which holders of the Class A common stock or preferred stock purchasable
upon such exercise may be entitled.
Except
as provided in the applicable prospectus supplement, the exercise price and the number of shares of Class A common stock or shares of
preferred stock purchasable upon the exercise of each equity warrant will be subject to adjustment in certain events, including the issuance
of a stock dividend to the holders of the underlying Class A common stock or preferred stock or a stock split, reverse stock split, combination,
subdivision or reclassification of the underlying Class A common stock or preferred stock, as the case may be. In lieu of adjusting the
number of shares purchasable upon exercise of each equity warrant, we may elect to adjust the number of equity warrants. Unless otherwise
provided in the applicable prospectus supplement, no adjustments in the number of shares purchasable upon exercise of the equity warrants
will be required until all cumulative adjustments require an adjustment of at least 1% thereof. We may, at our option, reduce the exercise
price at any time. No fractional shares will be issued upon exercise of equity warrants, but we will pay the cash value of any fractional
shares otherwise issuable. Notwithstanding the foregoing, except as otherwise provided in the applicable prospectus supplement, in case
of any consolidation, merger or sale or conveyance of our property as an entirety or substantially as an entirety, the holder of each
outstanding equity warrant will have the right to the kind and amount of shares of stock and other securities and property, including
cash, receivable by a holder of the number of shares of Class A common stock or shares of preferred stock into which each equity warrant
was exercisable immediately prior to the particular triggering event.
Exercise
of Warrants
Each
warrant will entitle the holder to purchase for cash such number of shares of Class A common stock, preferred stock or other securities
that may be registered hereunder and issued and sold from time to time, at such exercise price as shall, in each case, be set forth in,
or be determinable as set forth in, the applicable prospectus supplement relating to the warrants offered thereby. Unless otherwise specified
in the applicable prospectus supplement, warrants may be exercised at any time up to 5:00 p.m., New York City time on the expiration
date set forth in applicable prospectus supplement. After 5:00 p.m., New York City time on the expiration date, unexercised warrants
will be void.
Warrants
may be exercised as set forth in the applicable prospectus supplement relating to the warrants. Upon receipt of payment and the warrant
certificate properly completed and duly executed at the corporate trust office of the warrant agent or any other office indicated in
the applicable prospectus supplement, we will, as soon as practicable, forward the securities purchasable upon such exercise. If less
than all of the warrants that are represented by such warrant certificate are exercised, a new warrant certificate will be issued for
the remaining amount of warrants.
DESCRIPTION
OF UNITS
We
may issue units consisting of two or more other constituent securities. These units may be issuable as, and for a specified period of
time may be transferable as, a single security only, rather than as the separate constituent securities comprising such units. Each series
of units will be issued under a separate unit agreement to be entered into by our company and a unit agent specified in the applicable
prospectus supplement. The statements made in this section relating to the units are summaries only. These summaries are not complete
and are subject to, and qualified in their entirety by reference to, the provisions of the applicable unit agreement. When we issue units,
we will provide the specific terms of the units in a prospectus supplement. To the extent the information contained in the prospectus
supplement differs from this summary description, you should rely on the information in the prospectus supplement.
When
we issue units, we will provide in a prospectus supplement the following terms of the units being issued:
| ● | the
title of any series of units; |
| ● | identification
and description of the separate constituent securities comprising the units; |
| ● | the
price or prices at which the units will be issued; |
| ● | the
date, if any, on and after which the constituent securities comprising the units will be separately transferable; |
| ● | information
with respect to any book-entry procedures; |
| ● | a
discussion of certain federal income tax considerations applicable to the units; and |
| ● | any
other terms of the units and their constituent securities. |
LEGAL
OWNERSHIP OF SECURITIES
We
can issue securities in registered form or in the form of one or more global securities. We describe global securities in greater detail
below. We refer to those persons who have securities registered in their own names on the books that we or any applicable trustee maintain
for this purpose as the “holders” of those securities. These persons are the legal holders of the securities. We refer to
those persons who, indirectly through others, own beneficial interests in securities that are not registered in their own names, as “indirect
holders” of those securities. As we discuss below, indirect holders are not legal holders, and investors in securities issued in
book-entry form or in street name will be indirect holders.
Book-Entry
Holders
We
may issue securities in book-entry form only, as we will specify in the prospectus supplement pursuant to which securities are issued.
This means securities may be represented by one or more global securities registered in the name of a financial institution that holds
them as depositary on behalf of other financial institutions that participate in the depositary’s book-entry system. These participating
institutions, which are referred to as participants, in turn, hold beneficial interests in the securities on behalf of themselves or
their customers.
Only
the person in whose name a security is registered is recognized as the holder of that security. Securities issued in global form will
be registered in the name of the depositary or its participants. Consequently, for securities issued in global form, we will recognize
only the depositary as the holder of the securities, and we will make all payments on the securities to the depositary. The depositary
passes along the payments it receives to its participants, which in turn pass the payments along to their customers who are the beneficial
owners. The depositary and its participants do so under agreements they have made with one another or with their customers; they are
not obligated to do so under the terms of the securities.
As
a result, investors in a book-entry security will not own securities directly. Instead, they will own beneficial interests in a global
security, through a bank, broker or other financial institution that participates in the depositary’s book-entry system or holds
an interest through a participant. As long as the securities are issued in global form, investors will be indirect holders, and not holders,
of the securities.
Street
Name Holders
We
may terminate a global security or issue securities in non-global form. In these cases, investors may choose to hold their securities
in their own names or in “street name.” Securities held by an investor in street name would be registered in the name of
a bank, broker or other financial institution that the investor chooses, and the investor would hold only a beneficial interest in those
securities through an account he or she maintains at that institution.
For
securities held in street name, we will recognize only the intermediary banks, brokers and other financial institutions in whose names
the securities are registered as the holders of those securities, and we will make all payments on those securities to them. These institutions
pass along the payments they receive to their customers who are the beneficial owners, but only because they agree to do so in their
customer agreements or because they are legally required to do so. Investors who hold securities in street name will be indirect holders,
not holders, of those securities.
Legal
Holders
Our
obligations run only to the legal holders of the securities. We do not have obligations to investors who hold beneficial interests in
global securities, in street name or by any other indirect means. This will be the case whether an investor chooses to be an indirect
holder of a security or has no choice because we are issuing the securities only in global form. For example, once we make a payment
or give a notice to the holder, we have no further responsibility for the payment or notice even if that holder is required, under agreements
with depositary participants or customers or by law, to pass it along to the indirect holders but does not do so. Whether and how the
holders contact the indirect holders is up to the holders.
Special
Considerations for Indirect Holders
If
you hold securities through a bank, broker or other financial institution, either in book-entry form or in street name, you should check
with your own institution to find out:
| ● | how
it handles securities payments and notices; |
| ● | whether
it imposes fees or charges; |
| ● | how
it would handle a request for the holders’ consent, if ever required; |
| ● | whether
and how you can instruct it to send you securities registered in your own name so you can be a holder, if that is permitted in the future; |
| ● | how
it would exercise rights under the securities if there were a default or other event triggering the need for holders to act to protect
their interests; and |
| ● | if
the securities are in book-entry form, how the depositary’s rules and procedures will affect these matters. |
Global
Securities
A
global security is a security held by a depositary that represents one or any other number of individual securities. Generally, all securities
represented by the same global securities will have the same terms.
Each
security issued in book-entry form will be represented by a global security that we deposit with and register in the name of a financial
institution or its nominee that we select. The financial institution that we select for this purpose is called the depositary. Unless
we specify otherwise in a particular accompanying prospectus supplement, The Depository Trust Company, New York, New York (“DTC”)
will be the depositary for all securities issued in book-entry form.
A
global security may not be transferred to or registered in the name of anyone other than the depositary, its nominee or a successor depositary,
unless special termination situations arise. We describe those situations below under “—Special Situations When a Global
Security Will Be Terminated.” As a result of these arrangements, the depositary, or its nominee, will be the sole registered owner
and holder of all securities represented by a global security, and investors will be permitted to own only beneficial interests in a
global security. Beneficial interests must be held by means of an account with a broker, bank or other financial institution that in
turn has an account with the depositary or with another institution that does. Thus, an investor whose security is represented by a global
security will not be a holder of the security, but only an indirect holder of a beneficial interest in the global security.
If
the prospectus supplement for a particular security indicates that the security will be issued in global form only, then the security
will be represented by a global security at all times unless and until the global security is terminated. If termination occurs, we may
issue the securities through another book-entry clearing system or decide that the securities may no longer be held through any book-entry
clearing system.
Special
Considerations for Global Securities
As
an indirect holder, an investor’s rights relating to a global security will be governed by the account rules of the investor’s
financial institution and of the depositary, as well as general laws relating to securities transfers. We do not recognize an indirect
holder as a holder of securities and instead deal only with the depositary that holds the global security.
If
securities are issued only in the form of a global security, an investor should be aware of the following:
| ● | an
investor cannot cause the securities to be registered in his or her name, and cannot obtain non-global certificates for his or her interest
in the securities, except in the special situations we describe below; |
| ● | an
investor will be an indirect holder and must look to his or her own bank or broker for payments on the securities and protection of his
or her legal rights relating to the securities, as described above; |
| ● | an
investor may not be able to sell interests in the securities to some insurance companies and to other institutions that are required
by law to own their securities in non-book-entry form; |
| ● | an
investor may not be able to pledge his or her interest in a global security in circumstances where certificates representing the securities
must be delivered to the lender or other beneficiary of the pledge in order for the pledge to be effective; |
| ● | the
depositary’s policies, which may change from time to time, will govern payments, transfers, exchanges and other matters relating
to an investor’s interest in a global security. We and any applicable trustee have no responsibility for any aspect of the depositary’s
actions or for its records of ownership interests in a global security. We and the trustee also do not supervise the depositary in any
way; |
| ● | the
depositary may, and we understand that DTC will, require that those who purchase and sell interests in a global security within its book-entry
system use immediately available funds, and your broker or bank may require you to do so as well; and |
| ● | financial
institutions that participate in the depositary’s book-entry system, and through which an investor holds its interest in a global
security, may also have their own policies affecting payments, notices and other matters relating to the securities. There may be more
than one financial intermediary in the chain of ownership for an investor. We do not monitor and are not responsible for the actions
of any of those intermediaries. |
Special
Situations when a Global Security will be Terminated
In
a few special situations described below, the global security will terminate and interests in it will be exchanged for physical certificates
representing those interests. After that exchange, the choice of whether to hold securities directly or in street name will be up to
the investor. Investors must consult their own banks or brokers to find out how to have their interests in securities transferred to
their own name, so that they will be direct holders. We have described the rights of holders and street name investors above.
The
global security will terminate when any of the following special situations occur:
| ● | if
the depositary notifies us that it is unwilling, unable or no longer qualified to continue as depositary for that global security and
we do not appoint another institution to act as depositary within 90 days; |
| ● | if
we notify any applicable trustee that we wish to terminate that global security; or |
| ● | if
an event of default has occurred with regard to securities represented by that global security and has not been cured or waived. |
The
prospectus supplement may also list additional situations for terminating a global security that would apply only to the particular series
of securities covered by the prospectus supplement. When a global security terminates, the depositary, and not we or any applicable trustee,
is responsible for deciding the names of the institutions that will be the initial direct holders.
CERTAIN
PROVISIONS OF MARYLAND LAW AND OF OUR CHARTER AND BYLAWS
Although
the following summary describes certain provisions of Maryland law and the material provisions of our charter and bylaws, it is not a
complete description of our charter and bylaws, copies of which are filed as exhibits to the registration statement of which this prospectus
is a part, or of Maryland law. See “Where You Can Find More Information.”
Our
Board of Directors
Our
charter and bylaws provide that the number of directors of our company may be established, increased or decreased by our Board of Directors,
but may not be less than the minimum number required under the MGCL, which is one, or, unless our bylaws are amended, more than fifteen.
We have elected by a provision of our charter to be subject to a provision of Maryland law requiring that, subject to the rights of holders
of one or more classes or series of preferred stock, any vacancy may be filled only by a majority of the remaining directors, even if
the remaining directors do not constitute a quorum, and any director elected to fill a vacancy will serve for the full term of the directorship
in which such vacancy occurred and until his or her successor is duly elected and qualifies.
Each
member of our Board of Directors is elected by our stockholders to serve until the next annual meeting of stockholders and until his
or her successor is duly elected and qualifies. Holders of shares of our Class A common stock and Voting Equivalency stock will
have no right to cumulative voting in the election of directors, and directors will be elected by a plurality of the votes cast in the
election of directors. Consequently, at each annual meeting of stockholders, stockholders entitled to cast a majority of all the votes
entitled to be cast in the election of directors will be able to elect all of our directors.
Removal
of Directors
Our
charter provides that, subject to the rights of holders of one or more classes or series of preferred stock to elect or remove one or
more directors, a director may be removed only for cause (as defined in our charter) and then only by the affirmative vote of holders
of shares entitled to cast at least two-thirds of the votes entitled to be cast generally in the election of directors. This provision,
when coupled with the exclusive power of our Board of Directors to fill vacant directorships, may preclude stockholders from removing
incumbent directors except for cause and by a substantial affirmative vote and filling the vacancies created by such removal with their
own nominees.
Business
Combinations
Under
the MGCL, certain “business combinations” (including a merger, consolidation, share exchange or, in circumstances specified
in the statute, an asset transfer or issuance or reclassification of equity securities) between a Maryland corporation and an interested
stockholder (i.e., any person (other than the corporation or any subsidiary) who beneficially owns, directly or indirectly, 10% or more
of the voting power of the corporation’s outstanding voting stock after the date on which the corporation had 100 or more beneficial
owners of its stock, or an affiliate or associate of the corporation who, at any time within the two-year period immediately prior
to the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then outstanding
stock of the corporation after the date on which the corporation had 100 or more beneficial owners of its stock) or an affiliate of an
interested stockholder, are prohibited for five years after the most recent date on which the interested stockholder becomes an interested
stockholder. Thereafter, any such business combination between the Maryland corporation and an interested stockholder generally must
be recommended by the board of directors of such corporation and approved by the affirmative vote of at least (1) 80% of the votes
entitled to be cast by holders of outstanding shares of voting stock of the corporation and (2) two-thirds of the votes entitled
to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom (or with whose
affiliate) the business combination is to be effected or held by an affiliate or associate of the interested stockholder, unless, among
other conditions, the corporation’s common stockholders receive a minimum price (as defined in the MGCL) for their shares and the
consideration is received in cash or in the same form as previously paid by the interested stockholder for its shares. A person is not
an interested stockholder under the statute if the board of directors approved in advance the transaction by which the person otherwise
would have become an interested stockholder. The board of directors may provide that its approval is subject to compliance, at or after
the time of approval, with any terms and conditions determined by it.
The
statute permits various exemptions from its provisions, including business combinations that are exempted by the board of directors prior
to the time that the interested stockholder became an interested stockholder. As permitted by the MGCL, our Board of Directors has adopted
a resolution exempting any business combination between us and any other person from the provisions of this statute, provided that the
business combination is first approved by our Board of Directors (including a majority of directors who are not affiliates or associates
of such persons). However, our Board of Directors may repeal or modify this resolution at any time in the future, in which case the applicable
provisions of this statute will become applicable to business combinations between us and interested stockholders.
Control
Share Acquisitions
The
MGCL provides that holders of “control shares” of a Maryland corporation acquired in a “control share acquisition”
have no voting rights with respect to those shares except to the extent approved by the affirmative vote of stockholders entitled to
cast at least two-thirds of the votes entitled to be cast on the matter, excluding votes cast by (1) the person who makes or
proposes to make a control share acquisition, (2) an officer of the corporation or (3) an employee of the corporation who is
also a director of the corporation. “Control shares” are voting shares of stock which, if aggregated with all other such
shares of stock previously acquired by the acquirer or in respect of which the acquirer is able to exercise or direct the exercise of
voting power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise voting power in electing directors
within one of the following ranges of voting power: (1) one-tenth or more but less than one-third, (2) one-third or
more but less than a majority or (3) a majority or more of all voting power. Control shares do not include shares the acquiring
person is then entitled to vote as a result of having previously obtained stockholder approval or shares acquired directly from the corporation.
A “control share acquisition” means the acquisition of issued and outstanding control shares, subject to certain exceptions.
A
person who has made or proposes to make a control share acquisition, upon satisfaction of certain conditions (including an undertaking
to pay expenses), may compel the board of directors to call a special meeting of stockholders to be held within 50 days of demand
to consider the voting rights of the shares. If no request for a meeting is made, the corporation may itself present the question at
any stockholders meeting.
If
voting rights are not approved at the meeting or if the acquiring person does not deliver an acquiring person statement as required by
the statute, then, subject to certain conditions and limitations, the corporation may redeem any or all of the control shares (except
those for which voting rights have previously been approved) for fair value determined, without regard to the absence of voting rights
for the control shares, as of the date of the last control share acquisition by the acquirer or of any meeting of stockholders at which
the voting rights of such shares are considered and not approved. If voting rights for control shares are approved at a stockholders
meeting and the acquirer becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal
rights. The fair value of the shares as determined for purposes of such appraisal rights may not be less than the highest price per share
paid by the acquirer in the control share acquisition.
The
control share acquisition statute does not apply to, among other things, (1) shares acquired in a merger, consolidation or share
exchange if the corporation is a party to the transaction or (2) acquisitions approved or exempted by the charter or bylaws of the
corporation.
Our
bylaws contain a provision exempting from the control share acquisition statute any acquisition by any person of shares of our stock.
There can be no assurance that such provision will not be amended or eliminated at any time in the future by our Board of Directors.
Subtitle
8
Subtitle
8 of Title 3 of the MGCL permits a Maryland corporation with a class of equity securities registered under the Exchange Act and at least
three independent directors to elect to be subject, by provision in its charter or bylaws or a resolution of its board of directors,
without stockholder approval, and notwithstanding any contrary provision in the charter or bylaws, to any or all of five provisions of
the MGCL which provide, respectively, that:
| ● | the
corporation’s board of directors will be divided into three classes; |
| ● | the
affirmative vote of two-thirds of all the votes entitled to be cast by stockholders in the election of directors generally is required
to remove a director; |
| ● | the
number of directors may be fixed only by vote of the directors; |
| ● | a
vacancy on its board of directors be filled only by the remaining directors in office and that directors elected to fill a vacancy will
serve for the remainder of the full term of the class of directors in which the vacancy occurred; and |
| ● | the
request of stockholders entitled to cast at least a majority of all the votes entitled to be cast at the meeting is required for the
calling of a special meeting of stockholders. |
We
have elected by a provision in our charter to be subject to the provisions of Subtitle 8 relating to the filling of vacancies on our
Board of Directors. In addition, without our having elected to be subject to Subtitle 8, our charter and bylaws already (1) require
the affirmative vote of holders of shares entitled to cast at least two-thirds of all the votes entitled to be cast generally in
the election of directors to remove a director from our Board of Directors (which removal must be for cause), (2) vest in our Board of
Directors the exclusive power to fix the number of directors and (3) require, unless called by our chairman, our president and chief
executive officer or our Board of Directors, the request of stockholders entitled to cast not less than a majority of all the votes entitled
to be cast at the meeting to call a special meeting. Our Board of Directors is not currently classified. In the future, our Board of
Directors may elect, without stockholder approval, to classify our Board of Directors or elect to be subject to any of the other provisions
of Subtitle 8.
Meetings
of Stockholders
Pursuant
to our bylaws, an annual meeting of our stockholders for the purpose of the election of directors and the transaction of any other business
will be held on a date and at the time and place set by our Board of Directors. Each of our directors is elected by our stockholders
to serve until the next annual meeting or until his or her successor is duly elected and qualifies under Maryland law. In addition, our
chairman, our president and chief executive officer or our Board of Directors may call a special meeting of our stockholders. Subject
to the provisions of our bylaws, a special meeting of our stockholders to act on any matter that may properly be considered by our stockholders
will also be called by our secretary upon the written request of stockholders entitled to cast a majority of all the votes entitled to
be cast at the meeting on such matter, accompanied by the information required by our bylaws. Our secretary will inform the requesting
stockholders of the reasonably estimated cost of preparing and mailing or delivering the notice of meeting (including our proxy materials),
and the requesting stockholder must pay such estimated cost before our secretary may prepare and mail or deliver the notice of the special
meeting.
Amendments
to Our Charter and Bylaws
Under
the MGCL, a Maryland corporation generally cannot amend its charter unless approved by the affirmative vote of stockholders entitled
to cast at least two-thirds of the votes entitled to be cast on the matter unless a lesser percentage (but not less than a majority
of all of the votes entitled to be cast on the matter) is set forth in the corporation’s charter. Except for certain amendments
related to the removal of directors and the restrictions on ownership and transfer of our stock and the vote required to amend those
provisions (which must be declared advisable by our Board of Directors and approved by the affirmative vote of stockholders entitled
to cast not less than two-thirds of all the votes entitled to be cast on the matter), our charter generally may be amended only
if the amendment is declared advisable by our Board of Directors and approved by the affirmative vote of stockholders entitled to cast
a majority of all of the votes entitled to be cast on the matter. Our Board of Directors, with the approval of a majority of the entire
board, and without any action by our stockholders, may also amend our charter to increase or decrease the aggregate number of shares
of stock or the number of shares of stock of any class or series (other than Voting Equivalency stock) we are authorized to issue.
Our
Board of Directors has the exclusive power to adopt, alter or repeal any provision of our bylaws and to make new bylaws.
Extraordinary
Transactions
Under
the MGCL, a Maryland corporation generally cannot amend its charter, dissolve, merge, convert, sell all or substantially all of its assets,
engage in a statutory share exchange or engage in similar transactions outside the ordinary course of business unless approved by the
affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter unless a lesser
percentage (but not less than a majority of all of the votes entitled to be cast on the matter) is set forth in the corporation’s
charter. As permitted by the MGCL, our charter provides that, except for certain amendments to our charter discussed above, any of these
actions may be approved by the affirmative vote of stockholders entitled to cast a majority of all of the votes entitled to be cast on
the matter. Many of our operating assets will be held by our subsidiaries, and these subsidiaries may be able to merge or sell all or
substantially all of their assets without the approval of our stockholders.
Appraisal
Rights
Our
charter provides that our stockholders generally will not be entitled to exercise statutory appraisal rights.
Proxy
Access
Our
bylaws include provisions permitting, subject to certain eligibility, procedural and disclosure requirements, qualifying stockholders,
or a qualifying group of no more than 20 stockholders, who have maintained continuous ownership of at least three percent of our
outstanding shares of common stock for at least three years to require us to include in our proxy materials for an annual meeting
of stockholders a number of director nominees equal to the lesser of two nominees or 20 percent of the number of directors up for
election.
Advance
Notice of Director Nominations and New Business
Our
bylaws provide that, with respect to an annual meeting of stockholders, nominations of individuals for election to our Board of Directors
and the proposal of other business to be considered by our stockholders at an annual meeting of stockholders may be made only (1) pursuant
to our notice of the meeting, (2) by or at the direction of our Board of Directors or (3) by any stockholder who was a stockholder
of record at the record date set by our Board of Directors for the purposes of determining stockholders entitled to vote at the meeting,
at the time of giving of notice and at the time of the meeting (and any postponement or adjournment thereof), who is entitled to vote
at the meeting on the election of the individual so nominated or such other business and who has complied with the advance notice procedures
and, if applicable, the proxy access provisions of our bylaws.
With
respect to special meetings of stockholders, only the business specified in our notice of meeting may be brought before the meeting.
Nominations of individuals for election to our Board of Directors may be made at a special meeting of stockholders at which directors
are to be elected only (1) by or at the direction of our Board of Directors or (2) provided that the special meeting has been
properly called in accordance with our bylaws for the purpose of electing directors, by any stockholder who was a stockholder of record
at the record date set by our Board of Directors for the purposes of determining stockholders entitled to vote at the meeting, at the
time of giving of notice and at the time of the meeting (and any postponement or adjournment thereof), who is entitled to vote at the
meeting on the election of each individual so nominated and who has complied with the advance notice provisions set forth in our bylaws,
including a requirement to provide certain information about the stockholder and its affiliates and the nominee.
Anti-Takeover
Effect of Certain Provisions of Maryland Law and Our Charter and Bylaws
Our
charter and bylaws and Maryland law contain provisions that may delay, defer or prevent a change in control or other transaction that
might involve a premium price for our Class A common stock or otherwise be in the best interests of our stockholders, including:
| ● | supermajority
vote and cause requirements for the removal of directors; |
| ● | requirement
that stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting must act together to make a written
request before our stockholders can require us to call a special meeting of stockholders; |
| ● | provisions
that vacancies on our Board of Directors may be filled only by the remaining directors for the full term of the directorship in which
the vacancy occurred; |
| ● | the
power of our Board of Directors, without stockholder approval, to increase or decrease the aggregate number of authorized shares of stock
or the number of shares of any class or series of stock; provided that our board may not increase the number of shares of Voting Equivalency
stock that we have authority to issue, classify or reclassify any shares of our capital stock as Voting Equivalency stock or amend our
charter to alter or repeal such provisions or adopt any provision inconsistent therewith without the approval of the holders of a majority
of the outstanding shares of Class A common stock (voting as a separate class); |
| ● | the
power of our Board of Directors to cause us to issue additional shares of stock of any class or series and to fix the terms of one or
more classes or series of stock without stockholder approval; |
| ● | the
restrictions on ownership and transfer of our stock; and |
| ● | advance
notice requirements for director nominations and stockholder proposals. |
Likewise,
if the resolution opting out of the business combination provisions of the MGCL was repealed, or the business combination is not approved
by our Board of Directors, or the provision in the bylaws opting out of the control share acquisition provisions of the MGCL were rescinded,
these provisions of the MGCL could have similar anti-takeover effects.
Exclusive
Forum
Our
bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland,
or, if that court does not have jurisdiction, the United States District Court for the District of Maryland, Northern Division,
will be the sole and exclusive forum for (a) any Internal Corporate Claim, as such term is defined in the MGCL, (b) any derivative
action or proceeding brought on our behalf other than actions arising under the federal securities laws, (c) any action asserting
a claim of breach of any duty owed by any of our directors, officers or other employees to us or to our stockholders, (d) any action
asserting a claim against us or any of our directors, officers or other employees arising pursuant to any provision of the MGCL or our
charter or bylaws or (e) any other action asserting a claim against us or any of our directors, officers or other employees that
is governed by the internal affairs doctrine. In addition, our bylaws provide that none of the foregoing actions, claims or proceedings
may be brought in any court sitting outside the State of Maryland unless we consent in writing to such court.
Limitation
of Liability and Indemnification of Directors and Officers
Maryland
law permits a Maryland corporation to include in its charter a provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages, except for liability resulting from (1) actual receipt of an improper benefit
or profit in money, property or services or (2) active and deliberate dishonesty that is established by a final judgment and is
material to the cause of action. Our charter contains a provision that eliminates such liability of our directors and officers to the
maximum extent permitted by Maryland law.
The
MGCL requires a corporation (unless its charter provides otherwise, which our charter does not) to indemnify a director or officer who
has been successful, on the merits or otherwise, in the defense of any proceeding to which he or she is made, or threatened to be made,
a party by reason of his or her service in that capacity. The MGCL permits a corporation to indemnify its present and former directors
and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection
with any proceeding to which they may be made, or threatened to be made, a party to, or witness in, by reason of their service in those
or other capacities unless it is established that:
| ● | the
act or omission of the director or officer was material to the matter giving rise to the proceeding and (1) was committed in bad faith
or (2) was the result of active and deliberate dishonesty; |
| ● | the
director or officer actually received an improper personal benefit in money, property or services; or |
| ● | in
the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. |
However,
under the MGCL, a Maryland corporation may not indemnify a director or officer for an adverse judgment in a suit by or in the right of
the corporation or for a judgment of liability on the basis that personal benefit was improperly received, unless in either case a court
orders indemnification if it determines that the director or officer is fairly and reasonably entitled to indemnification, and then only
for expenses. In addition, the MGCL permits a Maryland corporation to advance reasonable expenses to a director or officer upon its receipt
of:
| ● | a
written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary
for indemnification by the corporation; and |
| ● | a
written undertaking by the director or officer or on the director’s or officer’s behalf to repay the amount paid or reimbursed
by the corporation if it is ultimately determined that the director or officer did not meet the standard of conduct. |
Our
charter obligates us, to the maximum extent permitted by Maryland law in effect from time to time, to indemnify and, without requiring
a preliminary determination of the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of final
disposition of such a proceeding to:
| ● | any
present or former director or officer of our company who is made, or threatened to be made, a party to, or witness in, the proceeding
by reason of his or her service in that capacity; or |
| ● | any
individual who, while a director or officer of our company and at our request, serves or has served as a director, officer, partner,
trustee, member, manager, employee or agent of another corporation, real estate investment trust, limited liability company, partnership,
joint venture, trust, employee benefit plan or other enterprise and who is made, or threatened to be made, a party to, or witness in,
the proceeding by reason of his or her service in that capacity. |
Our
charter also permits us to indemnify and advance expenses, with the approval of our Board of Directors, to any individual who served
our predecessor in any of the capacities described above and to any employee or agent of our company or our predecessor.
We
have entered into indemnification agreements with each of our directors and executive officers that provide for indemnification to the
maximum extent permitted by Maryland law.
REIT
Qualification
Our
charter provides that our Board of Directors may revoke or otherwise terminate our REIT election, without approval of our stockholders,
if it determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT.
MATERIAL
U.S. FEDERAL INCOME TAX CONSIDERATIONS
This
section summarizes the material U.S. federal income tax considerations that you, as a securityholder, may consider relevant in connection
with the acquisition, ownership and disposition of our securities. Hunton Andrews Kurth LLP has acted as our counsel, has reviewed this
summary, and is of the opinion that the discussion contained herein is accurate in all material respects. Because this section is a summary,
it does not address all aspects of taxation that may be relevant to particular securityholders in light of their personal investment
or tax circumstances, or to certain types of securityholders that are subject to special treatment under the U.S. federal income tax
laws, such as:
| ● | tax-exempt
organizations (except to the limited extent discussed in “—Taxation of Tax-Exempt Stockholders” below); |
| ● | financial
institutions or broker-dealers; |
| ● | non-U.S.
individuals and foreign corporations (except to the limited extent discussed in “—Taxation of Non-U.S. Stockholders”
below); |
| ● | persons
who mark-to-market our securities; |
| ● | subchapter
S corporations; |
| ● | U.S.
stockholders (as defined below) whose functional currency is not the U.S. dollar; |
| ● | regulated
investment companies and REITs; |
| ● | holders
who receive our securities through the exercise of employee stock options or otherwise as compensation; |
| ● | persons
holding our securities as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic
security” or other integrated investment; |
| ● | persons
subject to the alternative minimum tax provisions of the Code; |
| ● | persons
subject to special tax accounting rules as a result of their use of applicable financial statements within the meaning of Section 451(b)(3)
of the Code; and |
| ● | persons
holding our securities through a partnership or similar pass-through entity. |
This
summary assumes that securityholders hold our securities as capital assets for U.S. federal income tax purposes, which generally means
property held for investment.
The
statements in this section are not intended to be, and should not be construed as, tax advice. The statements in this section are based
on the Code, current, temporary and proposed U.S. Department of the Treasury (“Treasury”) regulations, the legislative history
of the Code, current administrative interpretations and practices of the IRS, and court decisions. The reference to IRS interpretations
and practices includes the IRS practices and policies endorsed in private letter rulings, which are not binding on the IRS except with
respect to the taxpayer that receives the ruling. In each case, these sources are relied upon as they exist on the date of this summary.
Future legislation, Treasury regulations, administrative interpretations and court decisions could change current law or adversely affect
existing interpretations of current law on which the information in this section is based. Any such change could apply retroactively.
We have not received any rulings from the IRS concerning our qualification as a REIT. Accordingly, even if there is no change in the
applicable law, no assurance can be provided that the statements made in the following discussion, which do not bind the IRS or the courts,
will not be challenged by the IRS or will be sustained by a court if so challenged.
WE
URGE YOU TO CONSULT YOUR TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO YOU OF THE PURCHASE, OWNERSHIP AND SALE OF OUR SECURITIES
AND OF OUR ELECTION TO BE TAXED AS A REIT. SPECIFICALLY, YOU SHOULD CONSULT YOUR TAX ADVISOR REGARDING THE FEDERAL, STATE, LOCAL, FOREIGN,
AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION, AND REGARDING POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
Taxation
of our Company
We
were initially organized as a subchapter S corporation, and we revoked our S corporation status effective as of May 14, 2019. We elected
to be taxed as a REIT for federal income tax purposes commencing with our short taxable year ended December 31, 2019. We believe that,
commencing with such short taxable year, we were organized and operated in such a manner as to qualify for taxation as a REIT under the
Code, and we intend to continue to operate in such a manner, but no assurances can be given that we will operate in a manner so as to
qualify as a REIT. This section discusses the laws governing the federal income tax treatment of a REIT and its stockholders. These laws
are highly technical and complex.
In
the opinion of Hunton Andrews Kurth LLP, we qualified to be taxed as a REIT pursuant to Sections 856-860 of the Code for our short taxable
year ended December 31, 2019, through our taxable year ended December 31, 2022, and our organization and current and proposed method
of operation will enable us to continue to satisfy the requirements for qualification and taxation as a REIT under the federal income
tax laws for our taxable year ending December 31, 2023 and subsequent taxable years. Investors should be aware that Hunton Andrews Kurth
LLP’s opinion is based upon customary assumptions, will be conditioned upon certain representations made by us as to factual matters,
including representations regarding the nature of our assets and the conduct of our business, is not binding upon the IRS or any court,
and speaks as of the date issued. In addition, Hunton Andrews Kurth LLP’s opinion will be based on existing federal income tax
law governing qualification as a REIT, which is subject to change either prospectively or retroactively. Moreover, our qualification
and taxation as a REIT will depend upon our ability to meet on a continuing basis, through actual annual and quarterly operating results,
certain qualification tests set forth in the federal income tax laws. Those qualification tests involve the percentage of income that
we earn from specified sources, the percentage of our assets that falls within specified categories, the diversity of our capital stock
ownership, and the percentage of our earnings that we distribute. Hunton Andrews Kurth LLP will not review our compliance with those
tests on a continuing basis. Accordingly, no assurance can be given that the actual results of our operations for any particular taxable
year will satisfy such requirements. Hunton Andrews Kurth LLP’s opinion does not foreclose the possibility that we may have to
use one or more of the REIT savings provisions described below, which would require us to pay an excise or penalty tax (which could be
material), in order for us to maintain our REIT qualification. For a discussion of the tax consequences of our failure to qualify as
a REIT, see “—Failure to Qualify.”
If
we qualify as a REIT, we generally will not be subject to federal income tax on the taxable income that we distribute to our stockholders.
The benefit of that tax treatment is that it avoids the “double taxation,” or taxation at both the corporate and stockholder
levels, that generally results from owning stock in a corporation. However, we will be subject to federal tax in the following circumstances:
| ● | We
will pay federal income tax on any taxable income, including undistributed net capital gain, that we do not distribute to stockholders
during, or within a specified time period after, the calendar year in which the income is earned. |
| ● | We
will pay income tax at the highest corporate rate on: |
| ● | net
income from the sale or other disposition of property acquired through foreclosure (“foreclosure property”) that we hold
primarily for sale to customers in the ordinary course of business, and |
| ● | other
non-qualifying income from foreclosure property. |
| ● | We
will pay a 100% tax on net income from sales or other dispositions of property, other than foreclosure property, that we hold primarily
for sale to customers in the ordinary course of business. |
| ● | If
we fail to satisfy one or both of the 75% gross income test (as defined below) or the 95% gross income test (as defined below), as described
below under “—Gross Income Tests,” and nonetheless continue to qualify as a REIT because we meet other requirements,
we will pay a 100% tax on: |
| ● | the
gross income attributable to the greater of the amount by which we fail the 75% gross income test or the 95% gross income test, in either
case, multiplied by |
| ● | a
fraction intended to reflect our profitability. |
| ● | If
we fail to distribute during a calendar year at least the sum of (i) 85% of our REIT ordinary income for the year, (ii) 95% of our REIT
capital gain net income for the year, and (iii) any undistributed taxable income required to be distributed from earlier periods, we
will pay a 4% nondeductible excise tax on the excess of the required distribution over the amount we actually distribute. |
| ● | We
may elect to retain and pay income tax on our net long-term capital gain. In that case, a stockholder would be taxed on its proportionate
share of our undistributed long-term capital gain (to the extent that we made a timely designation of such gain to the stockholders)
and would receive a credit or refund for its proportionate share of the tax we paid. |
| ● | We
will be subject to a 100% excise tax on transactions with any TRS that are not conducted on an arm’s-length basis. |
| ● | If
we fail any of the asset tests, other than a de minimis failure of the 5% asset test, the 10% vote test or 10% value test, as described
below under “—Asset Tests,” as long as the failure was due to reasonable cause and not to willful neglect, we file
a description of each asset that caused such failure with the IRS, and we dispose of the assets causing the failure or otherwise comply
with the asset tests within six months after the last day of the quarter in which we identify such failure, we will pay a tax equal to
the greater of $50,000 or the highest federal income tax rate then applicable to U.S. corporations on the net income from the non-qualifying
assets during the period in which we failed to satisfy the asset tests. |
| ● | If
we fail to satisfy one or more requirements for REIT qualification, other than the gross income tests and the asset tests, and such failure
is due to reasonable cause and not to willful neglect, we will be required to pay a penalty of $50,000 for each such failure. |
| ● | If
we acquire any asset from a subchapter C corporation, or a corporation that generally is subject to full corporate-level tax, in a merger
or other transaction in which we acquire a basis in the asset that is determined by reference either to the C corporation’s basis
in the asset or to another asset, including pursuant to the formation transactions, we will pay tax at the highest regular corporate
rate applicable if we recognize gain on the sale or disposition of the asset during the five-year period after we acquire the asset provided
no election is made for the transaction to be taxable on a current basis. The amount of gain on which we will pay tax is the lesser of: |
| ● | the
amount of gain that we recognize at the time of the sale or disposition, and |
| ● | the
amount of gain that we would have recognized if we had sold the asset at the time we acquired it. |
| ● | We
may be required to pay monetary penalties to the IRS in certain circumstances, including if we fail to meet record-keeping requirements
intended to monitor our compliance with rules relating to the composition of a REIT’s stockholders, as described below in “—Recordkeeping
Requirements.” |
| ● | The
earnings of our lower-tier entities that are subchapter C corporations, including our TRS and any other TRSs we form in the future, will
be subject to federal corporate income tax. |
In
addition, notwithstanding our qualification as a REIT, we also may have to pay certain state and local income taxes because not all states
and localities treat REITs in the same manner that they are treated for federal income tax purposes. Moreover, as further described below,
our TRS and any other TRSs we form in the future will be subject to federal, state and local corporate income tax on their taxable income.
Requirements
for Qualification
A
REIT is a corporation, trust, or association that meets each of the following requirements:
| 1. | It
is managed by one or more trustees or directors. |
| 2. | Its
beneficial ownership is evidenced by transferable shares, or by transferable certificates of beneficial interest. |
| 3. | It
would be taxable as a domestic corporation, but for the REIT provisions of the federal income tax laws. |
| 4. | It
is neither a financial institution nor an insurance company subject to special provisions of the federal income tax laws. |
| 5. | At
least 100 persons are beneficial owners of its shares or ownership certificates. |
| 6. | Not
more than 50% in value of its outstanding shares or ownership certificates is owned, directly or indirectly, by five or fewer individuals,
which the Code defines to include certain entities, during the last half of any taxable year. |
| 7. | It
elects to be a REIT, or has made such election for a previous taxable year, and satisfies all relevant filing and other administrative
requirements established by the IRS that must be met to elect and maintain REIT status. |
| 8. | It
meets certain other qualification tests, described below, regarding the nature of its income and assets and the amount of its distributions
to stockholders. |
| 9. | It
uses a calendar year for federal income tax purposes and complies with the recordkeeping requirements of the federal income tax laws. |
We
must meet requirements 1 through 4, 7, 8 and 9 during our entire taxable year and must meet requirement 5 during at least 335 days of
a taxable year of 12 months, or during a proportionate part of a taxable year of less than 12 months. Requirements 5 and 6 apply to us
beginning with our 2020 taxable year. If we comply with all the requirements for ascertaining the ownership of our outstanding stock
in a taxable year and have no reason to know that we violated requirement 6, we will be deemed to have satisfied requirement 6 for that
taxable year. For purposes of determining stock ownership under requirement 6, an “individual” generally includes a supplemental
unemployment compensation benefits plan, a private foundation, or a portion of a trust permanently set aside or used exclusively for
charitable purposes. An “individual,” however, generally does not include a trust that is a qualified employee pension or
profit sharing trust under the federal income tax laws, and beneficiaries of such a trust will be treated as holding our stock in proportion
to their actuarial interests in the trust for purposes of requirement 6.
Our
charter provides restrictions regarding the transfer and ownership of shares of our capital stock. See “Description of Capital
Stock—Restrictions on Ownership and Transfer.” We believe that we have issued sufficient stock with sufficient diversity
of ownership to allow us to satisfy requirements 5 and 6 above. The restrictions in our charter are intended (among other things) to
assist us in continuing to satisfy requirements 5 and 6 above. These restrictions, however, may not ensure that we will, in all cases,
be able to satisfy such share ownership requirements. If we fail to satisfy these share ownership requirements, our qualification as
a REIT may terminate. For purposes of requirement 9, we have adopted December 31 as our year end, and thereby satisfy this requirement.
Qualified
REIT Subsidiaries. A corporation that is a “qualified REIT subsidiary” is not treated as a corporation
separate from its parent REIT. All assets, liabilities, and items of income, deduction, and credit of a “qualified REIT subsidiary”
are treated as assets, liabilities, and items of income, deduction, and credit of the REIT. A “qualified REIT subsidiary”
is a corporation, other than a TRS, all of the stock of which is owned by the REIT. Thus, in applying the requirements described herein,
any “qualified REIT subsidiary” that we own will be ignored, and all assets, liabilities, and items of income, deduction,
and credit of such subsidiary will be treated as our assets, liabilities, and items of income, deduction, and credit.
Other
Disregarded Entities and Partnerships. An unincorporated domestic entity, such as a limited liability company,
that has a single owner for federal income tax purposes generally is not treated as an entity separate from its owner for federal income
tax purposes. An unincorporated domestic entity with two or more owners generally is treated as a partnership for federal income tax
purposes. In the case of a REIT that is a partner in a partnership that has other partners, the REIT is treated as owning its proportionate
share of the assets of the partnership and as earning its allocable share of the gross income of the partnership for purposes of the
applicable REIT qualification tests. Our proportionate share for purposes of the 10% value test (see “—Asset Tests”)
is based on our proportionate interest in the equity interests and certain debt securities issued by the partnership. For all of the
other asset and income tests, our proportionate share is based on our proportionate interest in the capital interests in the partnership.
Our proportionate share of the assets, liabilities, and items of income of any partnership, joint venture, or limited liability company
that is treated as a partnership for federal income tax purposes in which we acquire an equity interest, directly or indirectly, will
be treated as our assets and gross income for purposes of applying the various REIT qualification requirements.
We
have control of our operating partnership and intend to control any subsidiary partnerships and limited liability companies, and we intend
to operate them in a manner consistent with the requirements for our qualification as a REIT. We may from time to time be a limited partner
or non-managing member in some of our partnerships and limited liability companies. If a partnership or limited liability company in
which we own an interest takes or expects to take actions that could jeopardize our status as a REIT or require us to pay tax, we may
be forced to dispose of our interest in such entity. In addition, it is possible that a partnership or limited liability company could
take an action that could cause us to fail a gross income or asset test, and that we would not become aware of such action in time to
dispose of our interest in the partnership or limited liability company or take other corrective action on a timely basis. In that case,
we could fail to qualify as a REIT unless we were entitled to relief, as described below.
Taxable
REIT Subsidiaries. A REIT may own up to 100% of the shares of one or more TRSs. A TRS is a fully taxable corporation
that may earn income that would not be qualifying income if earned directly by the parent REIT. The subsidiary and the REIT must jointly
elect to treat the subsidiary as a TRS. A corporation (other than a REIT) of which a TRS directly or indirectly owns more than 35% of
the voting power or value of the outstanding securities will automatically be treated as a TRS. We are not treated as holding the assets
of a TRS or as receiving any income that the TRS earns. Rather, the stock issued by a TRS to us is an asset in our hands, and we treat
the distributions paid to us from such TRS, if any, as dividend income to the extent of the TRS’s current and accumulated earnings
and profits. This treatment may affect our compliance with the gross income and asset tests. Because we do not include the assets and
income of TRSs in determining our compliance with the REIT requirements, we may use such entities to undertake indirectly activities
that the REIT rules might otherwise preclude us from doing directly or through pass-through subsidiaries. Overall, no more than 20% of
the value of a REIT’s assets may consist of stock or securities of one or more TRSs.
A
TRS pays income tax at regular corporate rates on any income that it earns. In addition, the TRS rules limit the deductibility of interest
paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. In addition,
overall limitations on the deductibility of net interest expense by businesses could apply to our TRS. Further, the rules impose a 100%
excise tax on transactions between a TRS and its parent REIT or the REIT’s tenants that are not conducted on an arm’s-length
basis.
Rent
that we receive from a TRS will qualify as “rents from real property” as long as (1) at least 90% of the leased space in
the property is leased to persons other than TRSs and related-party tenants, and (2) the amount paid by the TRS to rent space at the
property is substantially comparable to rents paid by other tenants of the property for comparable space, as described in further detail
below under “—Gross Income Tests—Rents from Real Property.” If we lease space to a TRS in the future, we will
seek to comply with these requirements. We have elected with Postal Realty Management TRS, LLC (“PRM”) to treat PRM as a
TRS, and may elect to treat other entities as TRSs in the future. Such TRSs will be subject to corporate income tax on their taxable
income.
Gross
Income Tests
We
must satisfy two gross income tests annually to maintain our qualification as a REIT. First, at least 75% of our gross income for each
taxable year must consist of defined types of income that we derive, directly or indirectly, from investments relating to real property
or mortgages on real property or qualified temporary investment income (the “75% gross income test”). Qualifying income for
purposes of that 75% gross income test generally includes:
| ● | rents
from real property; |
| ● | interest
on debt secured by mortgages on real property, or on interests in real property, and interest
on debt secured by mortgages on both real and personal property if the fair market value
of such personal property does not exceed 15% of the total fair market value of all such
property; |
| ● | dividends
or other distributions on, and gain from the sale of, shares in other REITs; |
| ● | gain
from the sale of real estate assets; |
| ● | abatements
and refunds of taxes on real property; |
| ● | income
and gain derived from foreclosure property; |
| ● | amounts
(other than amounts the determination of which depends in whole or in part on the income
or profits of any person) received or accrued as consideration for entering into agreements
(i) to make loans secured by mortgages on real property or on interests in real property
or (ii) to purchase or lease real property (including interests in real property and interests
in mortgages on real property); and |
| ● | income
derived from the temporary investment of new capital that is attributable to the issuance
of our stock or a public offering of our debt with a maturity date of at least five years
and that we receive during the one-year period beginning on the date on which we received
such new capital. |
Although
a debt instrument issued by a “publicly offered REIT” (i.e., a REIT that is required to file annual and periodic reports
with the SEC under the Exchange Act) is treated as a “real estate asset” for the asset tests, neither the gain from the sale
of such debt instruments nor interest on such debt instruments is treated as qualifying income for the 75% gross income test unless the
debt instrument is secured by real property or an interest in real property.
Second,
in general, at least 95% of our gross income for each taxable year must consist of income that is qualifying income for purposes of the
75% gross income test, other types of interest and dividends, gain from the sale or disposition of stock or securities, or any combination
of these (the “95% gross income test”). Gross income from our sale of property that we hold primarily for sale to customers
in the ordinary course of business is excluded from both the numerator and the denominator in both gross income tests. In addition, income
and gain from “hedging transactions” (as defined in “—Hedging Transactions”) that we enter into to hedge
indebtedness incurred or to be incurred to acquire or carry real estate assets and that are clearly and timely identified as such will
be excluded from both the numerator and the denominator for purposes of the 75% and 95% gross income tests. In addition, certain foreign
currency gains will be excluded from gross income for purposes of one or both of the gross income tests. See “—Foreign Currency
Gain.” Finally, gross income attributable to cancellation of indebtedness income will be excluded from both the numerator and denominator
for purposes of both of the gross income tests. The following paragraphs discuss the specific application of the gross income tests to
us.
Rents
from Real Property. Rent that we receive from our real property will qualify as “rents from real property,” which is
qualifying income for purposes of the 75% and 95% gross income tests, only if the following conditions are met:
| ● | First,
the rent must not be based, in whole or in part, on the income or profits of any person,
but may be based on a fixed percentage or percentages of gross receipts or gross sales. |
| ● | Second,
neither we nor a direct or indirect owner of 10% or more of our stock may own, actually or
constructively, 10% or more of a tenant from whom we receive rent, other than a TRS. |
| ● | Third,
if the rent attributable to personal property leased in connection with a lease of real property
is 15% or less of the total rent received under the lease, then the rent attributable to
personal property will qualify as rents from real property. However, if the 15% threshold
is exceeded, the rent attributable to personal property will not qualify as rents from real
property. |
| ● | Fourth,
we generally must not operate or manage our real property or furnish or render services to
our sole tenant, other than through an “independent contractor” who is adequately
compensated and from whom we do not derive revenue. Furthermore, we may own up to 100% of
the stock of a TRS which may provide customary and noncustomary services to our sole tenant
without tainting our rental income for the related properties. However, we need not provide
services through an “independent contractor” or a TRS, but instead may provide
services directly to our sole tenant, if the services are “usually or customarily rendered”
in connection with the rental of space for occupancy only and are not considered to be provided
for the tenants’ convenience. In addition, we may provide a minimal amount of “noncustomary”
services to the tenants of a property, other than through an independent contractor or a
TRS, as long as our income from the services (valued at not less than 150% of our direct
cost of performing such services) does not exceed 1% of our income from the related property. |
As
described above, in order for the rent that we receive to constitute “rents from real property,” several other requirements
must be satisfied. First, rent must not be based in whole or in part on the income or profits of any person. Percentage rent, however,
will qualify as “rents from real property” if it is based on percentages of gross receipts or gross sales and the percentages:
| ● | are
fixed at the time the leases are entered into; |
| ● | are
not renegotiated during the term of the leases in a manner that has the effect of basing
rent on income or profits; and |
| ● | conform
with normal business practice. |
More
generally, rent will not qualify as “rents from real property” if, considering the leases and all the surrounding circumstances,
the arrangement does not conform with normal business practice, but is in reality used as a means of basing the rent on income or profits.
Second,
if we own, at any time during the taxable year, actually or constructively, 10% or more (measured by voting power or fair market value)
of the stock of a corporate lessee, or 10% or more of the assets or net profits of any non-corporate lessee (each a “related party
tenant”), other than a TRS, any income we receive from the lessee during the year will be non-qualifying income for purposes of
the 75% and 95% gross income tests. The constructive ownership rules generally provide that, if 10% or more in value of our stock is
owned, directly or indirectly, by or for any person, we are considered as owning the shares owned, directly or indirectly, by or for
such person. We believe that all of our properties are and will be leased to third parties that do not constitute related party tenants.
In addition, our charter prohibits transfers of our stock that would cause us to own actually or constructively, 10% or more of the ownership
interests in any non-TRS lessee. Based on the foregoing, we should never own, actually or constructively, 10% or more of any lessee other
than a TRS. However, because the constructive ownership rules are broad and it is not possible to monitor continually direct and indirect
transfers of our stock, no absolute assurance can be given that such transfers or other events of which we have no knowledge will not
cause us to own constructively 10% or more of a lessee (or a subtenant, in which case only rent attributable to the subtenant is disqualified)
other than a TRS at some future date.
As
described above, we may own up to 100% of the shares of one or more TRSs. Under an exception to the related-party tenant rule described
in the preceding paragraph, rent that we receive from a TRS will qualify as “rents from real property” as long as (i) at
least 90% of the leased space in the property is leased to persons other than TRSs and related-party tenants, and (ii) the amount paid
by the TRS to rent space at the property is substantially comparable to rents paid by other tenants of the property for comparable space.
The “substantially comparable” requirement must be satisfied when the lease is entered into, when it is extended, and when
the lease is modified, if the modification increases the rent paid by the TRS. If the requirement that at least 90% of the leased space
in the related property is rented to unrelated tenants is met when a lease is entered into, extended, or modified, such requirement will
continue to be met as long as there is no increase in the space leased to any TRS or related party tenant. Any increased rent attributable
to a modification of a lease with a TRS in which we own directly or indirectly more than 50% of the voting power or value of the stock
(a “controlled TRS”) will not be treated as “rents from real property.” If in the future we receive rent from
a TRS, we will seek to comply with this exception.
Third,
the rent attributable to the personal property leased in connection with the lease of a property must not be greater than 15% of the
total rent received under the lease. The rent attributable to the personal property contained in a property is the amount that bears
the same ratio to total rent for the taxable year as the average of the fair market values of the personal property at the beginning
and at the end of the taxable year bears to the average of the aggregate fair market values of both the real and personal property contained
in the property at the beginning and at the end of such taxable year (the “personal property ratio”). With respect to each
of our leases, we believe either that the personal property ratio is less than 15% or that any rent attributable to excess personal property,
when taken together with all of our other non-qualifying income, will not jeopardize our ability to qualify as a REIT. There can be no
assurance, however, that the IRS would not challenge our calculation of a personal property ratio, or that a court would not uphold such
assertion. If such a challenge were successfully asserted, we could fail to satisfy the 75% or 95% gross income test and thus potentially
lose our REIT status.
Fourth,
except as described below, we cannot furnish or render noncustomary services to the tenants of our properties, or manage or operate our
properties, other than through an independent contractor who is adequately compensated and from whom we do not derive or receive any
income. However, we need not provide services through an “independent contractor,” but instead may provide services directly
to our sole tenant, if the services are “usually or customarily rendered” in connection with the rental of space for occupancy
only and are not considered to be provided for the tenants’ convenience. In addition, we may provide a minimal amount of “noncustomary”
services to the tenants of a property, other than through an independent contractor, as long as our income from the services (valued
at not less than 150% of our direct cost for performing such services) does not exceed 1% of our income from the related property. Finally,
we may own up to 100% of the shares of one or more TRSs, which may provide noncustomary services to our sole tenant without tainting
our rents from the related properties. We believe that we do not perform any services other than customary ones for our lessees, other
than services that are provided through independent contractors or TRSs.
If
a portion of the rent that we receive from a property does not qualify as “rents from real property” because the rent attributable
to personal property exceeds 15% of the total rent for a taxable year, the portion of the rent that is attributable to personal property
will not be qualifying income for purposes of either the 75% or 95% gross income test. Thus, if such rent attributable to personal property,
plus any other income that is non-qualifying income for purposes of the 95% gross income test, during a taxable year exceeds 5% of our
gross income during the year, we would lose our REIT qualification. If, however, the rent from a particular property does not qualify
as “rents from real property” because either (i) the rent is considered based on the income or profits of the related lessee,
(ii) the lessee either is a related party tenant or fails to qualify for the exceptions to the related party tenant rule for qualifying
TRSs or (iii) we furnish more than de minimis noncustomary services to the tenants of the property, or manage or operate the property,
other than through a qualifying independent contractor or a TRS, none of the rent from that property would qualify as “rents from
real property.” In that case, we might lose our REIT qualification because we would be unable to satisfy either the 75% or 95%
gross income test. In addition to the rent, the lessees are required to pay certain additional charges. To the extent that such additional
charges represent either (i) reimbursement of amounts that we are obligated to pay to third parties, such as a lessee’s proportionate
share of a property’s operational or capital expenses, or (ii) penalties for nonpayment or late payment of such amounts, such charges
should qualify as “rents from real property.” However, to the extent that late charges do not qualify as “rents from
real property,” they instead will be treated as interest that qualifies for the 95% income test. We believe that our leases are
structured in a manner that will enable us to continue satisfy the REIT gross income tests.
Interest.
For purposes of the 75% and 95% gross income tests, the term “interest” generally does not include any amount received or
accrued, directly or indirectly, if the determination of such amount depends in whole or in part on the income or profits of any person.
However, interest generally includes the following:
| ● | an
amount that is based on a fixed percentage or percentages of gross receipts or gross sales;
and |
| ● | an
amount that is based on the income or profits of a debtor, as long as the debtor derives
substantially all of its income from the real property securing the debt from leasing substantially
all of its interest in the property, and only to the extent that the amounts received by
the debtor would be qualifying “rents from real property” if received directly
by a REIT. |
Interest
on debt secured by a mortgage on real property or on interests in real property, including, for this purpose, discount points, prepayment
penalties, loan assumption fees, and late payment charges that are not compensation for services, generally is qualifying income for
purposes of the 75% gross income test. However, if a loan is secured by real property and other property and the highest principal amount
of a loan outstanding during a taxable year exceeds the fair market value of the real property securing the loan as of the date the REIT
agreed to originate or acquire the loan or on the date the REIT modifies the loan (if the modification is treated as “significant”
for federal income tax purposes), a portion of the interest income from such loan will not be qualifying income for purposes of the 75%
gross income test, but will be qualifying income for purposes of the 95% gross income test. The portion of the interest income that will
not be qualifying income for purposes of the 75% gross income test will be equal to the portion of the principal amount of the loan that
is not secured by real property — that is, the amount by which the loan exceeds the value of the real estate that is security for
the loan. For purposes of this paragraph, however, we do not need to redetermine the fair market value of the real property securing
a loan in connection with a loan modification that is occasioned by a borrower default or made at a time when we reasonably believe that
the modification to the loan will substantially reduce a significant risk of default on the original loan. In addition, in the case of
a loan that is secured by both real property and personal property, if the fair market value of such personal property does not exceed
15% of the total fair market value of all such property securing the loan, then the personal property securing the loan will be treated
as real property for purposes of determining whether the interest on such loan is qualifying income for purposes of the 75% gross income
test.
If
a loan contains a provision that entitles a REIT to a percentage of the borrower’s gain upon the sale of the real property securing
the loan or a percentage of the appreciation in the property’s value as of a specific date, income attributable to that loan provision
will be treated as gain from the sale of the property securing the loan, which generally is qualifying income for purposes of both gross
income tests assuming the loan is held for investment.
We
may modify the terms of any mortgage loans we originate or acquire. Under the Code, if the terms of a loan are modified in a manner constituting
a “significant modification,” such modification triggers a deemed exchange of the original loan for the modified loan. IRS
Revenue Procedure 2014-51 provides a safe harbor pursuant to which we will not be required to redetermine the fair market value of the
real property securing a loan for purposes of the gross income and asset tests in connection with a loan modification that is (i) occasioned
by a borrower default or (ii) made at a time when we reasonably believe that the modification to the loan will substantially reduce a
significant risk of default on the original loan. To the extent we significantly modify loans in a manner that does not qualify for that
safe harbor, we will be required to redetermine the value of the real property securing the loan at the time it was significantly modified,
which could result in a portion of the interest income on the loan being treated as nonqualifying income for purposes of the 75% gross
income test. In determining the value of the real property securing such a loan, we generally will not obtain third party appraisals
but rather will rely on internal valuations.
We
expect that the interest, original issue discount, and market discount income that we receive from any mortgage related assets generally
will be qualifying income for purposes of both gross income tests.
Dividends.
Our share of any dividends received from any corporation (including any TRS, but excluding any REIT) in which we own an equity interest
will qualify for purposes of the 95% gross income test but not for purposes of the 75% gross income test. Our share of any dividends
received from any other REIT in which we own an equity interest, if any, will be qualifying income for purposes of both gross income
tests.
Fee
Income. We may receive various fees. Fee income generally will not be treated as qualifying income for purposes of the 75% and 95%
gross income tests. Any fees earned by a TRS are not included for purposes of the gross income tests. We do not expect such amounts,
if any, to be significant, or in any event, to negatively impact our compliance with REIT gross income tests.
Prohibited
Transactions. A REIT will incur a 100% tax on the net income (including foreign currency gain) derived from any sale or other disposition
of property, other than foreclosure property, that the REIT holds primarily for sale to customers in the ordinary course of a trade or
business. Net income derived from such prohibited transactions is excluded from gross income for purposes of the 75% and 95% gross income
tests. We believe that none of our assets will be held primarily for sale to customers and that a sale of any of our assets would not
be in the ordinary course of our business. Whether a REIT holds an asset “primarily for sale to customers in the ordinary course
of a trade or business” depends, however, on the facts and circumstances in effect from time to time, including those related to
a particular asset. A safe harbor to the characterization of the sale of property by a REIT as a prohibited transaction and the 100%
prohibited transaction tax is available if the following requirements are met:
| ● | the
REIT has held the property for not less than two years; |
| ● | the
aggregate expenditures made by the REIT, or any partner of the REIT, during the two-year
period preceding the date of the sale that are includable in the basis of the property do
not exceed 30% of the selling price of the property; |
| ● | either
(i) during the year in question, the REIT did not make more than seven sales of property
other than foreclosure property or sales to which Section 1031 or 1033 of the Code applies,
(ii) the aggregate adjusted bases of all such properties sold by the REIT during the year
did not exceed 10% of the aggregate bases of all of the assets of the REIT at the beginning
of the year, (iii) the aggregate fair market value of all such properties sold by the REIT
during the year did not exceed 10% of the aggregate fair market value of all of the assets
of the REIT at the beginning of the year, (iv) (a) the aggregate adjusted bases of all such
properties sold by the REIT during the year did not exceed 20% of the aggregate adjusted
bases of all property of the REIT at the beginning of the year and (b) the 3-year average
percentage of properties sold by the REIT compared to all the REIT’s properties (measured
by adjusted bases) taking into account the current and two prior years did not exceed 10%,
or (v) (a) the aggregate fair market value of all such properties sold by the REIT during
the year did not exceed 20% of the aggregate fair market value of all property of the REIT
at the beginning of the year and (b) the 3-year average percentage of properties sold by
the REIT compared to all the REIT’s properties (measured by fair market value) taking
into account the current and two prior years did not exceed 10%; |
| ● | in
the case of property not acquired through foreclosure or lease termination, the REIT has
held the property for at least two years for the production of rental income; and |
| ● | if
the REIT has made more than seven sales of non-foreclosure property during the taxable year,
substantially all of the marketing and development expenditures with respect to the property
were made through an independent contractor from whom the REIT derives no income or a TRS. |
We
will attempt to comply with the terms of the safe-harbor provisions in the federal income tax laws prescribing when an asset sale will
not be characterized as a prohibited transaction. We cannot assure you, however, that we can comply with the safe-harbor provisions or
that we will avoid owning property that may be characterized as property that we hold “primarily for sale to customers in the ordinary
course of a trade or business.” The 100% tax will not apply to gains from the sale of property that is held through a TRS or other
taxable corporation, although such income will be taxed to the corporation at regular corporate income tax rates.
Foreclosure
Property. We will be subject to U.S. federal income tax at the maximum corporate rate on any net income from foreclosure property,
which includes certain foreign currency gains and related deductions, other than income that otherwise would be qualifying income for
purposes of the 75% gross income test, less expenses directly connected with the production of that income. However, gross income from
foreclosure property will qualify under the 75% and 95% gross income tests. Foreclosure property is any real property, including interests
in real property, and any personal property incident to such real property:
| ● | that
is acquired by a REIT as the result of the REIT having bid on such property at foreclosure,
or having otherwise reduced such property to ownership or possession by agreement or process
of law, after there was a default or default was imminent on a lease of such property or
on indebtedness that such property secured; |
| ● | for
which the related loan was acquired by the REIT at a time when the default was not imminent
or anticipated; and |
| ● | for
which the REIT makes a proper election to treat the property as foreclosure property. |
A
REIT will not be considered to have foreclosed on a property where the REIT takes control of the property as a mortgagee-in-possession
and cannot receive any profit or sustain any loss except as a creditor of the mortgagor. Property generally ceases to be foreclosure
property at the end of the third taxable year (or, with respect to qualified health care property, the second taxable year) following
the taxable year in which the REIT acquired the property, or longer if an extension is granted by the Secretary of the Treasury. However,
this grace period terminates and foreclosure property ceases to be foreclosure property on the first day:
| ● | on
which a lease is entered into for the property that, by its terms, will give rise to income
that does not qualify for purposes of the 75% gross income test, or any amount is received
or accrued, directly or indirectly, pursuant to a lease entered into on or after such day
that will give rise to income that does not qualify for purposes of the 75% gross income
test; |
| ● | on
which any construction takes place on the property, other than completion of a building or
any other improvement, where more than 10% of the construction was completed before default
became imminent; or |
| ● | which
is more than 90 days after the day on which the REIT acquired the property and the property
is used in a trade or business which is conducted by the REIT, other than through an independent
contractor from whom the REIT itself does not derive or receive any income, or a TRS. |
We
may have the option to foreclose on mortgage loans when a borrower is in default. The foregoing rules could affect a decision by us to
foreclose on a particular mortgage loan and could affect whether we choose to foreclose with regard to a particular mortgage loan.
Hedging
Transactions. From time to time, we or our operating partnership may enter into hedging transactions with respect to one or more
of our assets or liabilities. Our hedging activities may include entering into interest rate swaps, caps, and floors, options to purchase
such items, and futures and forward contracts. Income and gain from “hedging transactions” will be excluded from gross income
for purposes of both the 75% and 95% gross income tests provided we satisfy the identification requirements discussed below. A “hedging
transaction” means (i) any transaction entered into in the normal course of our or our operating partnership’s trade or business
primarily to manage the risk of interest rate, price changes, or currency fluctuations with respect to borrowings made or to be made,
or ordinary obligations incurred or to be incurred, to acquire or carry real estate assets, (ii) any transaction entered into primarily
to manage the risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the 75%
or 95% gross income test (or any property which generates such income or gain), or (iii) any transaction entered into to “offset”
a transaction described in (i) or (ii) if a portion of the hedged indebtedness is extinguished or the related property is disposed of.
We are required to clearly identify any such hedging transaction before the close of the day on which it was acquired, originated, or
entered into and to satisfy other identification requirements. We intend to structure any hedging transactions in a manner that does
not jeopardize our qualification as a REIT.
Foreign
Currency Gain. Certain foreign currency gains will be excluded from gross income for purposes of one or both of the gross income
tests. “Real estate foreign exchange gain” will be excluded from gross income for purposes of the 75% and 95% gross income
tests. Real estate foreign exchange gain generally includes foreign currency gain attributable to any item of income or gain that is
qualifying income for purposes of the 75% gross income test, foreign currency gain attributable to the acquisition or ownership of (or
becoming or being the obligor under) obligations secured by mortgages on real property or an interest in real property and certain foreign
currency gain attributable to certain “qualified business units” of a REIT that would satisfy the 75% gross income test and
75% asset test (discussed below) on a stand-alone basis. “Passive foreign exchange gain” will be excluded from gross income
for purposes of the 95% gross income test. Passive foreign exchange gain generally includes real estate foreign exchange gain as described
above, and also includes foreign currency gain attributable to any item of income or gain that is qualifying income for purposes of the
95% gross income test and foreign currency gain attributable to the acquisition or ownership of (or becoming or being the obligor under)
obligations. These exclusions for real estate foreign exchange gain and passive foreign exchange gain do not apply to foreign currency
gain derived from dealing, or engaging in substantial and regular trading, in securities. Such gain is treated as non-qualifying income
for purposes of both the 75% and 95% gross income tests.
Phantom
income. Due to the nature of the assets in which we may invest, we may be required to recognize taxable income from certain
assets in advance of our receipt of cash flow from or proceeds from disposition of such assets, and may be required to report taxable
income that exceeds the economic income ultimately realized on such assets.
We
may originate loans with original issue discount. In general, we will be required to accrue original issue discount based on the constant
yield to maturity of the loan, and to treat it as taxable income in accordance with applicable federal income tax rules even though such
yield may exceed cash payments, if any, received on such loan.
We
generally will be required to take certain amounts in income no later than the time such amounts are reflected in our financial statements.
This rule may require the accrual of income with respect to any loans we may acquire earlier than would be the case under the general
tax rules.
In
addition, in the event that any loan is delinquent as to mandatory principal and interest payments, or in the event payments with respect
to a particular loan are not made when due, we may nonetheless be required to continue to recognize the unpaid interest as taxable income.
Finally,
we may be required under the terms of indebtedness that we incur to use cash received from interest payments to make principal payments
on that indebtedness, with the effect of recognizing income but not having a corresponding amount of cash available for distribution
to our stockholders.
As
a result of each of these potential timing differences between income recognition or expense deduction and cash receipts or disbursements,
there is a significant risk that we may have taxable income in excess of cash available for distribution. In that event, we may need
to borrow funds or take other action to satisfy the REIT distribution requirements for the taxable year in which this “phantom
income” is recognized. See “—Distribution Requirements.”
Failure
to Satisfy Gross Income Tests. We may have gross income that fails to constitute qualifying income for purposes of one or both of
the gross income tests. Taking into account our anticipated sources of nonqualifying income, however, we expect that our aggregate gross
income will allow us to continue to satisfy the 75% and 95% gross income tests applicable to REITs. If we fail to satisfy one or both
of the gross income tests for any taxable year, we nevertheless may qualify as a REIT for that year if we qualify for relief under certain
provisions of the federal income tax laws. Those relief provisions are available if:
| ● | our
failure to meet those tests is due to reasonable cause and not to willful neglect; and |
| ● | following
such failure for any taxable year, we file a schedule of the sources of our income in accordance
with regulations prescribed by the Secretary of the Treasury. |
We
cannot predict, however, whether in all circumstances we would qualify for the relief provisions. In addition, as discussed above in
“—Taxation of Our Company,” even if the relief provisions apply, we would incur a 100% tax on the gross income attributable
to the greater of the amount by which we fail the 75% gross income test or the 95% gross income test multiplied, in either case, by a
fraction intended to reflect our profitability.
Asset
Tests
To
maintain our qualification as a REIT, we also must satisfy the following asset tests at the end of each quarter of each taxable year.
First,
at least 75% of the value of our total assets must consist of:
| ● | cash
or cash items, including certain receivables and, in certain circumstances, foreign currencies; |
| ● | U.S.
government securities; |
| ● | interests
in real property, including leaseholds and options to acquire real property and leaseholds,
and personal property to the extent such personal property is leased in connection with real
property and rents attributable to such personal property are treated as “rents from
real property”; |
| ● | interests
in mortgage loans secured by real property; |
| ● | interests
in mortgage loans secured by both real property and personal property if the fair market
value of such personal property does not exceed 15% of the total fair market value of all
such property; |
| ● | stock
in other REITs and debt instruments issued by “publicly offered REITs”; and |
| ● | investments
in stock or debt instruments during the one-year period following our receipt of new capital
that we raise through equity offerings or public offerings of debt with at least a five-year
term. |
Second,
of our investments not included in the 75% asset class, the value of our interest in any one issuer’s securities (other than a
TRS) may not exceed 5% of the value of our total assets, or the 5% asset test.
Third,
of our investments not included in the 75% asset class, we may not own more than 10% of the voting power of any one issuer’s outstanding
securities or 10% of the value of any one issuer’s outstanding securities, or the 10% vote test or 10% value test, respectively.
Fourth,
no more than 20% of the value of our total assets may consist of the securities of one or more TRSs.
Fifth,
no more than 25% of the value of our total assets may consist of the securities of TRSs and other non-TRS taxable subsidiaries and other
assets that are not qualifying assets for purposes of the 75% asset test.
Sixth,
no more than 25% of the value of our total assets may consist of debt instruments issued by “publicly offered REITs” to the
extent such debt instruments are not secured by real property or interests in real property.
For
purposes of the 5% asset test, the 10% vote test and the 10% value test, the term “securities” does not include shares in
another REIT, debt of “publicly offered REITs,” equity or debt securities of a qualified REIT subsidiary or TRS, mortgage
loans that constitute real estate assets, or equity interests in a partnership. The term “securities,” however, generally
includes debt securities issued by a partnership or another REIT (other than a “publicly offered REIT”), except that for
purposes of the 10% value test, the term “securities” does not include:
| ● | “Straight
debt” securities, which is defined as a written unconditional promise to pay on demand
or on a specified date a sum certain in money if (i) the debt is not convertible, directly
or indirectly, into equity, and (ii) the interest rate and interest payment dates are not
contingent on profits, the borrower’s discretion, or similar factors. “Straight
debt” securities do not include any securities issued by a partnership or a corporation
in which we or any controlled TRS (i.e., a TRS in which we own directly or indirectly more
than 50% of the voting power or value of the stock) hold non-”straight debt”
securities that have an aggregate value of more than 1% of the issuer’s outstanding
securities. However, “straight debt” securities include debt subject to the following
contingencies: |
| ● | a
contingency relating to the time of payment of interest or principal, as long as either (i)
there is no change to the effective yield of the debt obligation, other than a change to
the annual yield that does not exceed the greater of 0.25% or 5% of the annual yield, or
(ii) neither the aggregate issue price nor the aggregate face amount of the issuer’s
debt obligations held by us exceeds $1 million and no more than 12 months of unaccrued interest
on the debt obligations can be required to be prepaid; and |
| ● | a
contingency relating to the time or amount of payment upon a default or prepayment of a debt
obligation, as long as the contingency is consistent with customary commercial practice; |
| ● | Any
loan to an individual or an estate; |
| ● | Any
“Section 467 rental agreement,” other than an agreement with a related party
tenant; |
| ● | Any
obligation to pay “rents from real property”; |
| ● | Certain
securities issued by governmental entities; |
| ● | Any
security issued by a REIT; |
| ● | Any
debt instrument issued by an entity treated as a partnership for federal income tax purposes
in which we are a partner to the extent of our proportionate interest in the equity and debt
securities of the partnership; and |
| ● | Any
debt instrument issued by an entity treated as a partnership for federal income tax purposes
not described in the preceding bullet points if at least 75% of the partnership’s gross
income, excluding income from prohibited transactions, is qualifying income for purposes
of the 75% gross income test described above in “—Gross Income Tests.” |
For
purposes of the 10% value test, our proportionate share of the assets of a partnership is our proportionate interest in any securities
issued by the partnership, without regard to the securities described in the last two bullet points above.
In
general, under the applicable Treasury regulations, if a loan is secured by real property and other property and the highest principal
amount of the loan outstanding during a taxable year exceeds the fair market value of the real property securing the loan as of: (1)
the date we agreed to acquire or originate the loan; or (2) in the event of a significant modification not covered by the IRS Revenue
Procedure described below, the date we modified the loan, then a portion of the interest income from such a loan will not be qualifying
income for purposes of the 75% gross income test, but will be qualifying income for purposes of the 95% gross income test. Although the
law is not entirely clear, a portion of the loan will also likely be a non-qualifying asset for purposes of the 75% asset test. The non-qualifying
portion of such a loan would be subject to, among other requirements, the 10% vote or value test. IRS Revenue Procedure 2014-51 provides
a safe harbor under which the IRS has stated that it will not challenge a REIT’s treatment of a loan as being, in part, a qualifying
real estate asset in an amount equal to the lesser of (1) the fair market value of the loan on the relevant quarterly REIT asset testing
date or (2) the greater of (a) the fair market value of the real property securing the loan on the relevant quarterly REIT testing date
or (b) the fair market value of the real property securing the loan on the date the REIT committed to originate or acquire the loan.
It is unclear how the safe harbor in Revenue Procedure 2014-51 is affected by the subsequent legislative changes regarding the treatment
of loans secured by both real property and personal property where the fair market value of the personal property does not exceed 15%
of the sum of the fair market values of the real property and personal property securing the loan. We intend to invest in mortgage loans,
if any, in a manner that will enable us to continue to satisfy the asset and gross income test requirements.
We
will monitor the status of our assets for purposes of the various asset tests and will manage our portfolio in order to comply at all
times with such tests. However, there is no assurance that we will not inadvertently fail to comply with such tests. If we fail to satisfy
the asset tests at the end of a calendar quarter, we will not lose our REIT qualification if:
| ● | we
satisfied the asset tests at the end of the preceding calendar quarter; and |
| ● | the
discrepancy between the value of our assets and the asset test requirements arose from changes
in the market values of our assets and was not wholly or partly caused by the acquisition
of one or more non-qualifying assets. |
If
we did not satisfy the condition described in the second item, above, we still could avoid disqualification by eliminating any discrepancy
within 30 days after the close of the calendar quarter in which it arose.
If
we violate the 5% asset test, the 10% vote test or the 10% value test described above, we will not lose our REIT qualification if (i)
the failure is de minimis (up to the lesser of 1% of our assets or $10 million) and (ii) we dispose of assets causing the failure
or otherwise comply with the asset tests within six months after the last day of the quarter in which we identify such failure. If we
fail any of the asset tests (other than de minimis failures described in the preceding sentence), as long as the failure was due
to reasonable cause and not to willful neglect, we will not lose our REIT qualification if we (i) dispose of assets causing the failure
or otherwise comply with the asset tests within six months after the last day of the quarter in which we identify the failure, (ii) file
a description of each asset causing the failure with the IRS and (iii) pay a tax equal to the greater of $50,000 or the highest federal
corporate income tax rate applicable to the net income from the assets causing the failure during the period in which we failed to satisfy
the asset tests.
We
believe that our existing investments comply with the foregoing asset tests, and we intend to monitor compliance on an ongoing basis.
We
believe that the assets that we hold, and that we will acquire in the future, will allow us to satisfy the foregoing asset test requirements.
However, we do not typically obtain independent appraisals to support our conclusions as to the value of our assets, and may not obtain
independent appraisals to support our conclusions as to the value of the real estate collateral for any senior loan that we may hold.
Moreover, the values of some assets may not be susceptible to a precise determination. As a result, there can be no assurance that the
IRS will not contend that our ownership of certain assets violates one or more of the asset tests applicable to REITs.
Distribution
Requirements
Each
taxable year, we must distribute dividends, other than capital gain dividends and deemed distributions of retained capital gain, to our
stockholders in an aggregate amount at least equal to:
| ● | 90%
of our “REIT taxable income,” computed without regard to the dividends paid deduction
and our net capital gain or loss, and |
| ● | 90%
of our after-tax net income, if any, from foreclosure property, minus |
| ● | the
excess of the sum of specified items of non-cash income (including original issue discount
on any loans) over 5% of our REIT taxable income, computed without regard to the dividends
paid deduction and our net capital gain. |
We
must pay such distributions in the taxable year to which they relate, or in the following taxable year if either (i) we declare
the distribution before we timely file our federal income tax return for the year and pay the distribution on or before the first regular
dividend payment date after such declaration or (ii) we declare the distribution in October, November or December of the taxable year,
payable to stockholders of record on a specified day in any such month, and we actually pay the dividend before the end of January of
the following year. The distributions under clause (i) are taxable to the stockholders in the year in which paid, and the distributions
in clause (ii) are treated as paid on December 31st of the prior taxable year. In both instances, these distributions relate to our prior
taxable year for purposes of the 90% distribution requirement to the extent of our earnings and profits for such prior tax year.
Further,
if we were not a “publicly offered REIT,” for our distributions to be counted as satisfying the annual distribution requirement
for REITs and to provide us with the dividends paid deduction, such distributions must not be “preferential dividends.” A
dividend is not a preferential dividend if that distribution is (i) pro rata among all outstanding shares within a particular class of
stock and (ii) in accordance with the preferences among different classes of stock as set forth in our charter. This preferential dividend
rule does not apply to us so long as we qualify and continue to qualify as a “publicly offered REIT.”
We
will pay federal income tax on taxable income, including net capital gain, that we do not distribute to stockholders. Furthermore, if
we fail to distribute during a calendar year, or by the end of January following the calendar year in the case of distributions with
declaration and record dates falling in the last three months of the calendar year, at least the sum of:
| ● | 85%
of our REIT ordinary income for such year, |
| ● | 95%
of our REIT capital gain income for such year, and |
| ● | any
undistributed taxable income from prior periods, |
we
will incur a 4% nondeductible excise tax on the excess of such required distribution over the sum of (x) the amounts actually distributed
(taking into account excess distributions from prior years) and (y) the amounts of income retained on which we have paid U.S. federal
corporate income tax.
We
may elect to retain and pay income tax on the net long-term capital gain we receive in a taxable year. If we so elect, we will be treated
as having distributed any such retained amount for purposes of the 4% nondeductible excise tax described above. We intend to make timely
distributions sufficient to satisfy the annual distribution requirements and to avoid corporate income tax and the 4% nondeductible excise
tax.
It
is possible that, from time to time, we may experience timing differences between the actual receipt of income and actual payment of
deductible expenses and the inclusion of that income and deduction of such expenses in arriving at our REIT taxable income. For example,
we may not deduct recognized capital losses from our “REIT taxable income.” Further, it is possible that, from time to time,
we may be allocated a share of net capital gain attributable to the sale of depreciated property that exceeds our allocable share of
cash attributable to that sale. As a result of the foregoing, we may have less cash than is necessary to distribute taxable income sufficient
to avoid corporate income tax and the excise tax imposed on certain undistributed income or even to meet the 90% distribution requirement.
In such a situation, we may need to borrow funds, issue additional common or preferred stock or, if possible, pay taxable dividends of
our capital stock or debt securities.
We
may satisfy the REIT annual distribution requirements by making taxable distributions of our stock or debt securities. The IRS has issued
a revenue procedure authorizing publicly offered REITs to treat certain distributions that are paid partly in cash and partly in stock
as dividends that would satisfy the REIT annual distribution requirement and qualify for the dividends paid deduction for federal income
tax purposes. We currently do not intend to pay taxable dividends payable in cash and stock.
Under
certain circumstances, we may be able to correct a failure to meet the distribution requirement for a year by paying “deficiency
dividends” to our stockholders in a later year. We may include such deficiency dividends in our deduction for dividends paid for
the earlier year. Although we may be able to avoid income tax on amounts distributed as deficiency dividends, we will be required to
pay interest to the IRS based upon the amount of any deduction we take for deficiency dividends.
Recordkeeping
Requirements
To
avoid a monetary penalty, we must request on an annual basis information from our stockholders designed to disclose the actual ownership
of our outstanding stock. We intend to comply with these requirements. A stockholder that fails or refuses to comply with such request
is required by the Treasury regulations to submit a statement with its tax return disclosing the actual ownership of our stock or other
information.
Failure
to Qualify
If
we fail to satisfy one or more requirements for REIT qualification, other than the gross income tests and the asset tests, we could avoid
disqualification if our failure is due to reasonable cause and not to willful neglect and we pay a penalty of $50,000 for each such failure.
In addition, there are relief provisions for a failure of the gross income tests and asset tests, as described in “—Gross
Income Tests” and “—Asset Tests.”
If
we fail to qualify as a REIT in any taxable year, and no relief provision applies, we would be subject to federal income tax on our taxable
income at regular corporate rates. In calculating our taxable income in a year in which we fail to qualify as a REIT, we would not be
able to deduct amounts paid out to stockholders. In fact, we would not be required to distribute any amounts to stockholders in that
year. In such event, to the extent of our current and accumulated earnings and profits, distributions to stockholders generally would
be taxable as ordinary income. Subject to certain limitations of the federal income tax laws, corporate stockholders may be eligible
for the dividends received deduction and stockholders taxed at individual rates may be eligible for the reduced federal income tax rate
of up to 20% on such dividends. Unless we qualified for relief under specific statutory provisions, we also would be disqualified from
taxation as a REIT for the four taxable years following the year during which we ceased to qualify as a REIT. We cannot predict whether
in all circumstances we would qualify for such statutory relief.
Taxation
of Taxable U.S. Stockholders
As
used herein, the term “U.S. stockholder” means a beneficial owner of our capital stock that for federal income tax purposes
is:
| ● | a
citizen or resident of the United States; |
| ● | a
corporation (including an entity treated as a corporation for federal income tax purposes)
created or organized in or under the laws of the United States, any of its states or the
District of Columbia; |
| ● | an
estate whose income is subject to federal income taxation regardless of its source; or |
| ● | any
trust if (i) a U.S. court is able to exercise primary supervision over the administration
of such trust and one or more U.S. persons have the authority to control all substantial
decisions of the trust or (ii) it has a valid election in place to be treated as a U.S. person. |
If
a partnership, entity or arrangement treated as a partnership for federal income tax purposes holds our capital stock, the federal income
tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership.
If you are a partner in a partnership holding our capital stock, you should consult your tax advisor regarding the consequences of the
ownership and disposition of our capital stock by the partnership.
Taxation
of U.S. Stockholders on Distributions on Capital Stock
As
long as we qualify as a REIT, a taxable U.S. stockholder must generally take into account as ordinary income distributions made out of
our current or accumulated earnings and profits that we do not designate as capital gain dividends or retained long-term capital gain.
For purposes of determining whether a distribution is made out of our current or accumulated earnings and profits, our earnings and profits
will be allocated first to our preferred stock dividends and then to our common stock dividends. Our dividends will not qualify for the
dividends received deduction generally available to corporations.
For
taxable years beginning before January 1, 2026, individuals, trusts and estates may deduct up to 20% of certain pass-through income,
including ordinary REIT dividends that are not “capital gain dividends” or “qualified dividend income,” subject
to certain limitations.
Dividends
paid to a U.S. stockholder generally will not qualify for the 20% tax rate for “qualified dividend income.” Qualified dividend
income generally includes dividends paid by domestic C corporations and certain qualified foreign corporations to U.S. stockholders that
are taxed at individual rates. Because we are not generally subject to federal income tax on the portion of our REIT taxable income distributed
to our stockholders (See “—Taxation of Our Company” above), our dividends generally will not be eligible for the 20%
rate on qualified dividend income. As a result, our ordinary REIT dividends generally will be taxed at a higher tax rate as described
above. However, the 20% tax rate for qualified dividend income will apply to our ordinary REIT dividends (i) attributable to dividends
received by us from non-REIT corporations during the taxable year, such as a TRS, and (ii) to the extent attributable to income upon
which we have paid corporate income tax (e.g., to the extent that we distribute less than 100% of our taxable income). In general, to
qualify for the reduced tax rate on qualified dividend income, a stockholder must hold our capital stock for more than 60 days during
the 121 day period beginning on the date that is 60 days before the date on which our capital stock becomes ex-dividend.
A
U.S. stockholder generally will take into account as long-term capital gain any distributions that we designate as capital gain dividends
without regard to the period for which the U.S. stockholder has held our stock. We generally will designate our capital gain dividends
as either 20% or 25% rate distributions. See “—Capital Gains and Losses.” A corporate U.S. stockholder, however, may
be required to treat up to 20% of certain capital gain dividends as ordinary income.
We
may elect to retain and pay income tax on the net long-term capital gain that we receive in a taxable year. In that case, to the extent
that we designate such amount in a timely notice to such stockholder, a U.S. stockholder would be taxed on its proportionate share of
our undistributed long-term capital gain. The U.S. stockholder would receive a credit for its proportionate share of the tax we paid.
The U.S. stockholder would increase the basis in its stock by the amount of its proportionate share of our undistributed long-term capital
gain, minus its share of the tax we paid.
A
U.S. stockholder will not incur tax on a distribution in excess of our current and accumulated earnings and profits if the distribution
does not exceed the adjusted basis of the U.S. stockholder in the shares of capital stock on which the distribution was paid. Instead,
the distribution will reduce the adjusted basis of such stock. A U.S. stockholder will recognize a distribution in excess of
both our current and accumulated earnings and profits and the U.S. stockholder’s adjusted basis in his or her stock as long-term
capital gain, or short-term capital gain if the shares of stock have been held for one year or less, assuming the shares of stock are
a capital asset in the hands of the U.S. stockholder. In addition, if we declare a distribution in October, November, or December
of any year that is payable to a U.S. stockholder of record on a specified date in any such month, such distribution shall be treated
as both paid by us and received by the U.S. stockholder on December 31 of such year, provided that we actually pay the distribution during
January of the following calendar year.
U.S.
stockholders may not include in their individual income tax returns any of our net operating losses or capital losses. Instead, these
losses are generally carried over by us for potential offset against our future income. Taxable distributions from us and gain from the
disposition of our capital stock will not be treated as passive activity income and, therefore, U.S. stockholders generally will not
be able to apply any “passive activity losses,” such as losses from certain types of limited partnerships in which the U.S.
stockholder is a limited partner, against such income. In addition, taxable distributions from us and gain from the disposition of our
capital stock generally will be treated as investment income for purposes of the investment interest limitations. We will notify U.S.
stockholders after the close of our taxable year as to the portions of the distributions attributable to that year that constitute ordinary
income, return of capital and capital gain.
Taxation
of U.S. Stockholders on the Disposition of Capital Stock
A
U.S. stockholder who is not a dealer in securities must generally treat any gain or loss realized upon a taxable disposition of our stock
as long-term capital gain or loss if the U.S. stockholder has held our stock for more than one year and otherwise as short-term capital
gain or loss. In general, a U.S. stockholder will realize gain or loss in an amount equal to the difference between the sum of the fair
market value of any property and the amount of cash received in such disposition and the U.S. stockholder’s adjusted tax basis.
A stockholder’s adjusted tax basis generally will equal the U.S. stockholder’s acquisition cost, increased by the excess
of net capital gains deemed distributed to the U.S. stockholder (discussed above) less tax deemed paid on such gains and reduced by any
returns of capital. However, a U.S. stockholder must treat any loss upon a sale or exchange of stock held by such stockholder for six
months or less as a long-term capital loss to the extent of capital gain dividends and any other actual or deemed distributions from
us that such U.S. stockholder treats as long-term capital gain. All or a portion of any loss that a U.S. stockholder realizes upon a
taxable disposition of shares of our stock may be disallowed if the U.S. stockholder purchases other stock within 30 days before or after
the disposition.
Taxation
of U.S. Stockholders on a Conversion of Preferred Stock
Except
as provided below, (i) a U.S. stockholder generally will not recognize gain or loss upon the conversion of preferred stock into our Class
A common stock, and (ii) a U.S. stockholder’s basis and holding period in our Class A common stock received upon conversion generally
will be the same as those of the converted preferred stock (but the basis will be reduced by the portion of adjusted tax basis allocated
to any fractional share exchanged for cash). Any of our shares of Class A common stock received in a conversion that are attributable
to accumulated and unpaid dividends on the converted preferred stock will be treated as a distribution that is potentially taxable as
a dividend. Cash received upon conversion in lieu of a fractional share generally will be treated as a payment in a taxable exchange
for such fractional share, and gain or loss will be recognized on the receipt of cash in an amount equal to the difference between the
amount of cash received and the adjusted tax basis allocable to the fractional share deemed exchanged. This gain or loss will be long-term
capital gain or loss if the U.S. stockholder has held the preferred stock for more than one year at the time of conversion. U.S. stockholders
are urged to consult with their tax advisors regarding the federal income tax consequences of any transaction by which such holder exchanges
shares of our Class A common stock received on a conversion of preferred stock for cash or other property.
Taxation
of U.S. Stockholders on a Redemption of Preferred Stock
A
redemption of preferred stock will be treated under Section 302 of the Code as a distribution that is taxable as dividend income (to
the extent of our current or accumulated earnings and profits), unless the redemption satisfies certain tests set forth in Section 302(b)
of the Code enabling the redemption to be treated as a sale of the preferred stock (in which case the redemption will be treated in the
same manner as a sale described above in “—Taxation of U.S. Stockholders on the Disposition of Capital Stock”). The
redemption will satisfy such tests if it (i) is “substantially disproportionate” with respect to the U.S. stockholder’s
interest in our stock, (ii) results in a “complete termination” of the U.S. stockholder’s interest in all of our classes
of stock or (iii) is “not essentially equivalent to a dividend” with respect to the stockholder, all within the meaning of
Section 302(b) of the Code. In determining whether any of these tests have been met, stock considered to be owned by the holder by reason
of certain constructive ownership rules set forth in the Code, as well as stock actually owned, generally must be taken into account.
Because the determination as to whether any of the three alternative tests of Section 302(b) of the Code described above will be satisfied
with respect to any particular U.S. stockholder of preferred stock depends upon the facts and circumstances at the time that the determination
must be made, prospective investors are urged to consult their tax advisors to determine such tax treatment. If a redemption of preferred
stock does not meet any of the three tests described above, the redemption proceeds will be taxable as a dividend, as described above
in “—Taxation of U.S. Stockholders on Distributions on Capital Stock.” In that case, a U.S. stockholder’s adjusted
tax basis in the redeemed preferred stock will be transferred to such U.S. stockholder’s remaining shareholdings in us. If the
U.S. stockholder does not retain any of our stock, such basis could be transferred to a related person that holds our stock or it may
be lost.
Capital
Gains and Losses
A
taxpayer generally must hold a capital asset for more than one year for gain or loss derived from its sale or exchange to be treated
as long-term capital gain or loss. For taxable years before January 1, 2026, the highest marginal individual income tax rate currently
is 37%. The maximum tax rate on long-term capital gain applicable to taxpayers taxed at individual rates is 20% for sales and exchanges
of assets held for more than one year. The maximum tax rate on long-term capital gain from the sale or exchange of “Section 1250
property,” or depreciable real property, is 25%, which applies to the lesser of the total amount of the gain or the accumulated
depreciation on the Section 1250 property. In addition, individuals, trusts and estates whose income exceeds certain thresholds are also
subject to a 3.8% Medicare tax on gain from the sale of our stock.
With
respect to distributions that we designate as capital gain dividends and any retained capital gain that we are deemed to distribute,
we generally may designate whether such a distribution is taxable to U.S. stockholders taxed at individual rates currently at a 20% or
25% rate. Thus, the tax rate differential between capital gain and ordinary income for those taxpayers may be significant. In addition,
the characterization of income as capital gain or ordinary income may affect the deductibility of capital losses. A non-corporate taxpayer
may deduct capital losses not offset by capital gains against its ordinary income only up to a maximum annual amount of $3,000. A non-corporate
taxpayer may carry forward unused capital losses indefinitely. A corporate taxpayer must pay tax on its net capital gain at ordinary
corporate rates. A corporate taxpayer may deduct capital losses only to the extent of capital gains, with unused losses being carried
back three years and forward five years.
FATCA
Withholding
Under
the Foreign Account Tax Compliance Act, or FATCA, a U.S. withholding tax at a 30% rate will be imposed on dividends paid to certain U.S.
stockholders who own our shares through foreign accounts or foreign intermediaries if certain disclosure requirements related to U.S.
accounts or ownership are not satisfied. We will not pay any additional amounts in respect of any amounts withheld.
Taxation
of Tax-Exempt Stockholders
Tax-exempt
entities, including qualified employee pension and profit sharing trusts and individual retirement accounts, generally are exempt from
federal income taxation. However, they are subject to taxation on their unrelated business taxable income (“UBTI”). Although
many investments in real estate generate UBTI, the IRS has issued a ruling that dividend distributions from a REIT to an exempt employee
pension trust do not constitute UBTI. Based on that ruling, amounts that we distribute to tax-exempt stockholders generally should not
constitute UBTI. However, if a tax-exempt stockholder were to finance (or be deemed to finance) its acquisition of capital stock with
debt, a portion of the income that it receives from us would constitute UBTI pursuant to the “debt-financed property” rules.
Moreover, social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and qualified group legal services
plans that are exempt from taxation under special provisions of the federal income tax laws are subject to different UBTI rules, which
generally will require them to characterize distributions that they receive from us as UBTI. Finally, in certain circumstances, a qualified
employee pension or profit sharing trust that owns more than 10% of our capital stock must treat a percentage of the dividends that it
receives from us as UBTI. Such percentage is equal to the gross income we derive from an unrelated trade or business, determined as if
we were a pension trust, divided by our total gross income for the year in which we pay the dividends. That rule applies to a pension
trust holding more than 10% of our capital stock only if:
| ● | the
percentage of our dividends that the tax-exempt trust must treat as UBTI is at least 5%;
|
| ● | we
qualify as a REIT by reason of the modification of the rule requiring that no more than 50%
of our capital stock be owned by five or fewer individuals that allows the beneficiaries
of the pension trust to be treated as holding our capital stock in proportion to their actuarial
interests in the pension trust; and |
| ● | one
pension trust owns more than 25% of the value of our capital stock; or |
| ● | a
group of pension trusts individually holding more than 10% of the value of our capital stock collectively owns more than 50% of the value
of our capital stock. |
Taxation
of Non-U.S. Stockholders
The
term “non-U.S. stockholder” means a beneficial owner of our capital stock that is not a U.S. stockholder, a partnership (or
entity treated as a partnership for federal income tax purposes) or a tax-exempt stockholder. The rules governing federal income taxation
of nonresident alien individuals, foreign corporations, foreign partnerships, and other foreign stockholders are complex. This section
is only a summary of such rules. We urge non-U.S. stockholders to consult their tax advisors to determine the impact of federal, state,
and local income tax laws on the purchase, ownership and sale of our capital stock, including any reporting requirements.
Taxation
of Non-U.S. Stockholders on Distributions on Capital Stock
A
non-U.S. stockholder that receives a distribution that is not attributable to gain from our sale or exchange of a “United States
real property interest” (“USRPI”), as defined below, and that we do not designate as a capital gain dividend or retained
capital gain will recognize ordinary income to the extent that we pay such distribution out of our current or accumulated earnings and
profits. A withholding tax equal to 30% of the gross amount of the distribution ordinarily will apply to such distribution unless an
applicable tax treaty reduces or eliminates the tax. However, if a distribution is treated as effectively connected with the non-U.S.
stockholder’s conduct of a U.S. trade or business, the non-U.S. stockholder generally will be subject to federal income tax on
the distribution at graduated rates, in the same manner as U.S. stockholders are taxed with respect to such distribution, and a non-U.S.
stockholder that is a corporation also may be subject to the 30% branch profits tax with respect to that distribution. We plan to withhold
U.S. income tax at the rate of 30% on the gross amount of any such distribution paid to a non-U.S. stockholder unless either:
| ● | a
lower treaty rate applies and the non-U.S. stockholder files an IRS Form W-8BEN or W-8BEN-E,
as applicable, evidencing eligibility for that reduced rate with us; |
| ● | the
non-U.S. stockholder files an IRS Form W-8ECI with us claiming that the distribution is effectively
connected income; or |
| ● | the
distribution is treated as attributable to a sale of a USRPI under FIRPTA (discussed below). |
A
non-U.S. stockholder will not incur tax on a distribution in excess of our current and accumulated earnings and profits if the excess
portion of such distribution does not exceed the adjusted basis of the non-U.S. stockholder in the shares of capital stock on which the
distribution was paid. Instead, the excess portion of such distribution will reduce the adjusted basis of such stock. A non-U.S. stockholder
will be subject to tax on a distribution that exceeds both our current and accumulated earnings and profits and the adjusted basis of
its capital stock, if the non-U.S. stockholder otherwise would be subject to tax on gain from the sale or disposition of its capital
stock, as described below. We may be required to withhold 15% of any distribution that exceeds our current and accumulated earnings and
profits. Consequently, although we intend to withhold at a rate of 30% on the entire amount of any distribution, to the extent that we
do not do so, we may withhold at a rate of 15% on any portion of a distribution not subject to withholding at a rate of 30%. Because
we generally cannot determine at the time we make a distribution whether the distribution will exceed our current and accumulated earnings
and profits, we normally will withhold tax on the entire amount of any distribution at the same rate as we would withhold on a dividend.
However, a non-U.S. stockholder may claim a refund of amounts that we withhold if we later determine that a distribution in fact exceeded
our current and accumulated earnings and profits.
For
any year in which we qualify as a REIT, a non-U.S. stockholder may incur tax on distributions that are attributable to gain from our
sale or exchange of a USRPI under the Foreign Investment in Real Property Act of 1980 (“FIRPTA”). A USRPI includes certain
interests in real property and stock in corporations at least 50% of whose assets consist of interests in real property. Under FIRPTA,
subject to the exceptions discussed below, a non-U.S. stockholder is taxed on distributions attributable to gain from sales of USRPIs
as if such gain were effectively connected with a U.S. trade or business of the non-U.S. stockholder. A non-U.S. stockholder thus would
be taxed on such a distribution at the normal capital gains rates applicable to U.S. stockholders, subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of a nonresident alien individual. A non-U.S. corporate stockholder not
entitled to treaty relief or exemption also may be subject to the 30% branch profits tax on such a distribution.
Capital
gain distributions to the holders of shares of a class of our capital stock that are attributable to our sale of a USRPI will be treated
as ordinary dividends rather than as gain from the sale of a USRPI, as long as (i) (a) such class of capital stock is treated
as being “regularly traded” on an established securities market in the United States, and (b) the non-U.S. stockholder
did not own more than 10% of such class of capital stock at any time during the one-year period preceding the distribution or (ii) the
non-U.S. stockholder was treated as a “qualified shareholder” or “qualified foreign pension fund,” as discussed
below. As a result, non-U.S. stockholders generally will be subject to withholding tax on such capital gain distributions in the same
manner as they are subject to withholding tax on ordinary dividends. We believe that our Class A common stock is regularly traded on
an established securities market in the United States. If a class of our capital stock is not regularly traded on an established securities
market in the United States or the non-U.S. stockholder owned more than 10% of the applicable class of our capital stock at any time
during the one-year period preceding the distribution, capital gain distributions that are attributable to our sale of USRPIs would be
subject to tax under FIRPTA, as described in the preceding paragraph. In such case, we must withhold 21% of any distribution that we
could designate as a capital gain dividend. A non-U.S. stockholder may receive a credit against its tax liability for the amount we withhold.
Moreover, if we are a “domestically controlled qualified investment entity,” and a non-U.S. stockholder disposes of shares
of our capital stock during the 30-day period preceding a dividend payment, and such non-U.S. stockholder (or a person related to such
non-U.S. stockholder) acquires or enters into a contract or option to acquire that capital stock within 61 days of the first day of the
30-day period described above, and any portion of such dividend payment would, but for the disposition, be treated as gain from the sale
or exchange of a USRPI to such non-U.S. stockholder, then such non-U.S. stockholder shall be treated as having gain from the sale or
exchange of a USRPI in an amount that, but for the disposition, would have been treated as gain from the sale or exchange of a USRPI.
Although
the law is not clear on the matter, it appears that amounts we designate as retained capital gains in respect of our capital stock held
by U.S. stockholders generally should be treated with respect to non-U.S. stockholders in the same manner as actual distributions by
us of capital gain dividends. Under this approach, a non-U.S. stockholder would be able to offset as a credit against its federal income
tax liability resulting from its proportionate share of the tax paid by us on such retained capital gains, and to receive from the IRS
a refund to the extent of the non-U.S. stockholder’s proportionate share of such tax paid by us exceeds its actual federal income
tax liability, provided that the non-U.S. stockholder furnishes required information to the IRS on a timely basis.
Taxation
of Non-U.S. Stockholders on the Disposition of Capital Stock
Non-U.S.
stockholders could incur tax under FIRPTA with respect to gain realized upon a disposition of our capital stock if we are a United States
real property holding corporation during a specified testing period. If at least 50% of a REIT’s assets are USRPIs, then the REIT
will be a United States real property holding corporation. We believe that we are and will continue to be a United States real property
holding corporation based on our investment strategy. However, despite our status as a United States real property holding corporation,
a non-U.S. stockholder generally would not incur tax under FIRPTA on gain from the sale of our capital stock if we are a “domestically
controlled qualified investment entity.” A domestically controlled qualified investment entity includes a REIT in which, at all
times during a specified testing period, less than 50% in value of its shares are held directly or indirectly by non-U.S. stockholders.
We cannot assure you that this test will be met. If a class of our capital stock is regularly traded on an established securities market,
an additional exception to the tax under FIRPTA will be available with respect to that class of our capital stock, even if we do not
qualify as a domestically controlled qualified investment entity at the time the non-U.S. stockholder sells shares of that class of our
capital stock. Under that exception, the gain from such a sale by such a non-U.S. stockholder will not be subject to tax under FIRPTA
if:
| ● | that
class of our capital stock is treated as being regularly traded under applicable Treasury
regulations on an established securities market; and |
| ● | the
non-U.S. stockholder owned, actually or constructively, 10% or less of that class of our
capital stock at all times during a specified testing period. |
As
noted above, we believe our Class A common stock is regularly traded on an established securities market.
If
the gain on the sale of shares of our capital stock were taxed under FIRPTA, a non-U.S. stockholder would be taxed on that gain in the
same manner as U.S. stockholders, subject to applicable alternative minimum tax and a special alternative minimum tax in the case of
nonresident alien individuals. Furthermore, a non-U.S. stockholder generally will incur tax on gain not subject to FIRPTA if:
| ● | the
gain is effectively connected with the non-U.S. stockholder’s U.S. trade or business,
in which case the non-U.S. stockholder will be subject to the same treatment as U.S. stockholders
with respect to such gain; or |
| ● | the
non-U.S. stockholder is a nonresident alien individual who was present in the United States
for 183 days or more during the taxable year and has a “tax home” in the United
States, in which case the non-U.S. stockholder will incur a 30% tax on his or her capital
gains. |
Taxation
of Non-U.S. Stockholders on a Conversion of Preferred Stock
The
conservation of our preferred stock into our Class A common stock may be a taxable exchange for a non-U.S. stockholder if our preferred
stock constitutes a USRPI. Even if our preferred stock constitutes a USRPI, provided our Class A common stock also constitutes a USRPI,
a non-U.S. stockholder generally will not recognize gain or loss upon a conversion of preferred stock into our Class A common stock so
long as certain FIRPTA-related reporting requirements are satisfied. If our preferred stock constitutes a USRPI and such requirements
are not satisfied, however, a conversion will be treated as a taxable exchange of preferred stock for our Class A common stock. Such
a deemed taxable exchange will be subject to tax under FIRPTA at the rate of tax, including any applicable capital gains rates, that
would apply to a U.S. stockholder of the same type (e.g., a corporate or non-corporate stockholder, as the case may be) on the excess,
if any, of the fair market value of such non-U.S. stockholder’s Class A common stock received over such non-U.S. stockholder’s
adjusted tax basis in its preferred stock. Collection of such tax will be enforced by a refundable withholding tax at a rate of 15% of
the value of the Class A common stock.
Any
of our shares of Class A common stock received in a conversion that are attributable to accumulated and unpaid dividends on the converted
preferred stock will be treated as a distribution that is potentially taxable as a dividend as described under “—Taxation
of Non-U.S. Stockholders” above. Cash received upon conversion in lieu of a fractional share generally will be treated as a payment
in a taxable exchange for such fractional share as described under “—Taxation of Non-U.S. Stockholders” above.
Non-U.S.
stockholders are urged to consult with their tax advisors regarding the federal income tax consequences of any transaction by which such
non-U.S. stockholder exchanges common stock received on a conversion of preferred stock for case or other property.
Taxation
of Non-U.S. Stockholders on a Redemption of Preferred Stock
As
described under “—Taxation of U.S. Stockholders on a Redemption of Preferred Stock” above, a redemption that satisfies
certain tests set forth in Section 302(b) of the Code will be treated as a taxable exchange and a redemption that does not satisfy certain
tests under Section 302(b) of the Code will be treated as a distribution that is taxable as dividend income (to the extent of our current
or accumulated earnings and profits). For a more detailed discussion of the treatment of a redemption of preferred stock, see “—Taxation
of U.S. Stockholders on a Redemption of Preferred Stock.”
Non-U.S.
stockholders are urged to consult with their tax advisors regarding the U.S. federal income tax consequences of any transaction by which
such non-U.S. stockholder redeems our preferred stock.
Qualified
Shareholders
Subject
to the exception discussed below, any distribution to a “qualified shareholder” who holds REIT stock directly or indirectly
(through one or more partnerships) will not be subject to federal income taxation under FIRPTA and thus will not be subject to the special
withholding rules under FIRPTA. While a “qualified shareholder” generally will not be subject to FIRPTA withholding on REIT
distributions, the portion of REIT distributions attributable to certain investors in a “qualified shareholder” (i.e., non-U.S.
persons who hold interests in the “qualified shareholder” (other than interests solely as a creditor), and directly or indirectly
hold more than 10% of the stock of such REIT (whether or not by reason of the investor’s ownership in the “qualified shareholder”))
may be subject to FIRPTA withholding. REIT distributions received by a “qualified shareholder” that are exempt from FIRPTA
withholding may still be subject to regular U.S. withholding tax.
In
addition, a sale of our stock by a “qualified shareholder” who holds such stock directly or indirectly (through one or more
partnerships) generally will not be subject to federal income taxation under FIRPTA. As with distributions, the portion of amounts realized
attributable to certain investors in a “qualified shareholder” (i.e., non-U.S. persons who hold interests in the “qualified
shareholder” (other than interests solely as a creditor), and directly or indirectly hold more than 10% of the stock of such REIT
(whether or not by reason of the investor’s ownership in the “qualified shareholder”)) may be subject to federal income
taxation and FIRPTA withholding on a sale of our stock.
A
“qualified shareholder” is a foreign person that (i) either is eligible for the benefits of a comprehensive income tax treaty
which includes an exchange of information program and whose principal class of interests is listed and regularly traded on one or more
recognized stock exchanges (as defined in such comprehensive income tax treaty), or is a foreign partnership that is created or organized
under foreign law as a limited partnership in a jurisdiction that has an agreement for the exchange of information with respect to taxes
with the United States and has a class of limited partnership units representing greater than 50% of the value of all the partnership
units that is regularly traded on the NYSE or Nasdaq markets, (ii) is a qualified collective investment vehicle (defined below), and
(iii) maintains records on the identity of each person who, at any time during the foreign person’s taxable year, is the direct
owner of 5% or more of the class of interests or units (as applicable) described in (i), above.
A
qualified collective investment vehicle is a foreign person that (i) would be eligible for a reduced rate of withholding under the comprehensive
income tax treaty described above, even if such entity holds more than 10% of the stock of such REIT, (ii) is publicly traded, is treated
as a partnership under the Code, is a withholding foreign partnership, and would be treated as a “United States real property holding
corporation” if it were a domestic corporation, or (iii) is designated as such by the Secretary of the Treasury and is either (a)
fiscally transparent within the meaning of Section 894 of the Code, or (b) required to include dividends in its gross income, but is
entitled to a deduction for distributions to its investors.
Qualified
Foreign Pension Funds
Any
distribution to a “qualified foreign pension fund” (or an entity all of the interests of which are held by a “qualified
foreign pension fund”) who holds REIT stock directly or indirectly (through one or more partnerships) will not be subject to federal
income taxation under FIRPTA and thus will not be subject to the special withholding rules under FIRPTA. REIT distributions received
by a “qualified foreign pension fund” that are exempt from FIRPTA withholding may still be subject to regular U.S. withholding
tax. In addition, a sale of our stock by a “qualified foreign pension fund” that holds such stock directly or indirectly
(through one or more partnerships) will not be subject to federal income taxation under FIRPTA.
A
qualified foreign pension fund is any trust, corporation, or other organization or arrangement (i) which is created or organized under
the law of a country other than the United States, (ii) which is established to provide retirement or pension benefits to participants
or beneficiaries that are current or former employees (or persons designated by such employees) of one or more employers in consideration
for services rendered, (iii) which does not have a single participant or beneficiary with a right to more than 5% of its assets or income,
(iv) which is subject to government regulation and provides annual information reporting about its beneficiaries to the relevant tax
authorities in the country in which it is established or operates, and (v) with respect to which, under the laws of the country in which
it is established or operates, (a) contributions to such organization or arrangement that would otherwise be subject to tax under such
laws are deductible or excluded from the gross income of such entity or taxed at a reduced rate, or (b) taxation of any investment income
of such organization or arrangement is deferred or such income is taxed at a reduced rate.
FATCA
Withholding
Under
FATCA, a U.S. withholding tax at a 30% rate will be imposed on dividends paid on our capital stock received by certain non-U.S. stockholders
if certain disclosure requirements related to U.S. accounts or ownership are not satisfied. If payment of withholding taxes is required,
non-U.S. stockholders that are otherwise eligible for an exemption from, or reduction of, U.S. withholding taxes with respect to such
dividends will be required to seek a refund from the IRS to obtain the benefit of such exemption or reduction. We will not pay any additional
amounts in respect of any amounts withheld.
Information
Reporting Requirements and Withholding
We
will report to our stockholders and to the IRS the amount of distributions we pay during each calendar year, and the amount of tax we
withhold, if any. Under the backup withholding rules, a stockholder may be subject to backup withholding with respect to distributions
unless the stockholder:
| ● | is
a corporation or qualifies for certain other exempt categories and, when required, demonstrates
this fact; or |
| ● | provides
a taxpayer identification number, certifies as to no loss of exemption from backup withholding,
and otherwise complies with the applicable requirements of the backup withholding rules. |
A
stockholder who does not provide us with its correct taxpayer identification number may also be subject to penalties imposed by the IRS.
Any amount paid as backup withholding will be creditable against the stockholder’s income tax liability. In addition, we may be
required to withhold a portion of capital gain distributions to any stockholders who fail to certify their non-foreign status to us.
Backup
withholding will generally not apply to payments of dividends made by us or our paying agents, in their capacities as such, to a non-U.S.
stockholder provided that the non-U.S. stockholder furnishes to us or our paying agent the required certification as to its non-U.S.
status, such as providing a valid IRS Form W-8BEN, W-8BEN-E or W-8ECI, or certain other requirements are met. Notwithstanding the foregoing,
backup withholding may apply if either we or our paying agent has actual knowledge, or reason to know, that the holder is a U.S. person
that is not an exempt recipient. Payments of the proceeds from a disposition or a redemption effected outside the U.S. by a non-U.S.
stockholder made by or through a foreign office of a broker generally will not be subject to information reporting or backup withholding.
However, information reporting (but not backup withholding) generally will apply to such a payment if the broker has certain connections
with the U.S. unless the broker has documentary evidence in its records that the beneficial owner is a non-U.S. stockholder and specified
conditions are met or an exemption is otherwise established. Payment of the proceeds from a disposition by a non-U.S. stockholder of
stock made by or through the U.S. office of a broker is generally subject to information reporting and backup withholding unless the
non-U.S. stockholder certifies under penalties of perjury that it is not a U.S. person and satisfies certain other requirements, or otherwise
establishes an exemption from information reporting and backup withholding.
Backup
withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against the
stockholder’s federal income tax liability if certain required information is furnished to the IRS. Stockholders should consult
their tax advisors regarding application of backup withholding to them and the availability of, and procedure for obtaining an exemption
from, backup withholding.
Other
Tax Consequences
Tax
Aspects of Our Investments in Our Operating Partnership and Subsidiary Partnerships
The
following discussion summarizes certain federal income tax considerations applicable to our direct or indirect investments in our operating
partnership and any subsidiary partnerships or limited liability companies that we form or acquire (each individually a “Partnership”
and, collectively, the “Partnerships”). The discussion does not cover state or local tax laws or any federal tax laws other
than income tax laws.
Classification
as Partnerships. We are required to include in our income our distributive share of each Partnership’s income and to deduct
our distributive share of each Partnership’s losses only if such Partnership is classified for federal income tax purposes as a
partnership (or an entity that is disregarded for federal income tax purposes if the entity is treated as having only one owner for federal
income tax purposes) rather than as a corporation or an association taxable as a corporation. An unincorporated entity with at least
two owners or members will be classified as a partnership, rather than as a corporation, for federal income tax purposes if it:
| ● | is
treated as a partnership under the Treasury regulations relating to entity classification
(the “check-the-box regulations”); and |
| ● | is
not a “publicly-traded partnership.” |
Under
the check-the-box regulations, an unincorporated entity with at least two owners or members may elect to be classified either as an association
taxable as a corporation or as a partnership. If such an entity is a U.S. entity and fails to make an election, it generally will be
treated as a partnership (or an entity that is disregarded for federal income tax purposes if the entity is treated as having only one
owner for federal income tax purposes) for federal income tax purposes. Our operating partnership intends to be classified as a partnership
for federal income tax purposes and will not elect to be treated as an association taxable as a corporation under the check-the-box regulations.
A
publicly-traded partnership is a partnership whose interests are traded on an established securities market or are readily tradable on
a secondary market or the substantial equivalent thereof. A publicly-traded partnership will not, however, be treated as a corporation
for any taxable year if, for each taxable year beginning after December 31, 1987 in which it was classified as a publicly-traded partnership,
90% or more of the partnership’s gross income for such year consists of certain passive-type income, including real property rents,
gains from the sale or other disposition of real property, interest, and dividends (the “90% passive income exception”).
Treasury regulations (the “PTP regulations”) provide limited safe harbors from the definition of a publicly-traded partnership.
Pursuant to one of those safe harbors (the “private placement exclusion”), interests in a partnership will not be treated
as readily tradable on a secondary market or the substantial equivalent thereof if (i) all interests in the partnership were issued in
a transaction or transactions that were not required to be registered under the Securities Act and (ii) the partnership does not have
more than 100 partners at any time during the partnership’s taxable year. In determining the number of partners in a partnership,
a person owning an interest in a partnership, grantor trust, or S corporation that owns an interest in the partnership is treated as
a partner in such partnership only if (i) substantially all of the value of the owner’s interest in the entity is attributable
to the entity’s direct or indirect interest in the partnership and (ii) a principal purpose of the use of the entity is to permit
the partnership to satisfy the 100-partner limitation. We believe our operating partnership will qualify for the private placement exclusion.
We expect that any other Partnership that we form in the future will qualify for the private placement exclusion. Our operating partnership’s
partnership agreement contains provisions enabling its general partner to take such steps as are necessary or appropriate to prevent
the issuance and transfers of interests in our operating partnership from causing our operating partnership to be treated as a publicly-traded
partnership under the PTP regulations.
We
have not requested, and do not intend to request, a ruling from the IRS that our operating partnership will be classified as a partnership
for federal income tax purposes. If for any reason our operating partnership were taxable as a corporation, rather than as a partnership,
for federal income tax purposes, we likely would not be able to qualify as a REIT unless we qualified for certain relief provisions.
See “—Gross Income Tests” and “—Asset Tests.” In addition, any change in a Partnership’s status
for tax purposes might be treated as a taxable event, in which case we might incur tax liability without any related cash distribution.
See “—Distribution Requirements.” Further, items of income and deduction of such Partnership would not pass through
to its partners, and its partners would be treated as stockholders for tax purposes. Consequently, such Partnership would be required
to pay income tax at corporate rates on its net income, and distributions to its partners would constitute dividends that would not be
deductible in computing such Partnership’s taxable income.
Income
Taxation of the Partnerships and their Partners
Partners,
Not the Partnerships, Subject to Tax. In general, a partnership is not a taxable entity for federal income
tax purposes. Rather, we are required to take into account our allocable share of each Partnership’s income, gains, losses, deductions,
and credits for any taxable year of such Partnership ending within or with our taxable year, without regard to whether we have received
or will receive any distribution from such Partnership. However, the tax liability for adjustments to a Partnership’s tax returns
made as a result of an audit by the IRS will be imposed on the Partnership itself in certain circumstances absent an election to the
contrary. See “—Partnership Audit Rules.”
Partnership
Allocations. Although a partnership agreement generally will determine the allocation of income and losses
among partners, such allocations will be disregarded for tax purposes if they do not comply with the provisions of the federal income
tax laws governing partnership allocations. If an allocation is not recognized for federal income tax purposes, the item subject to the
allocation will be reallocated in accordance with the partners’ interests in the partnership, which will be determined by taking
into account all of the facts and circumstances relating to the economic arrangement of the partners with respect to such item. Each
Partnership’s allocations of taxable income, gain, and loss are intended to comply with the requirements of the federal income
tax laws governing partnership allocations.
Tax
Allocations With Respect to Partnership Properties. Income, gain, loss, and deduction attributable to appreciated
or depreciated property that is contributed to a partnership in exchange for an interest in the partnership must be allocated in a manner
such that the contributing partner is charged with, or benefits from, respectively, the unrealized gain or unrealized loss associated
with the property at the time of the contribution. In the case of a contribution of property, the amount of the unrealized gain or unrealized
loss (“built-in gain” or “built-in loss”) is generally equal to the difference between the fair market value
of the contributed property at the time of contribution and the adjusted tax basis of such property at the time of contribution (a “book-tax
difference”). Any property purchased for cash initially will have an adjusted tax basis equal to its fair market value, resulting
in no book-tax difference. In connection with our initial public offering, we acquired a significant portion of our portfolio in exchange
for interests in our operating partnership, which resulted in book-tax differences. Furthermore, our operating partnership may admit
partners in the future in exchange for a contribution of property, which will result in book-tax differences.
Allocations
with respect to book-tax differences are solely for federal income tax purposes and do not affect the book capital accounts or other
economic or legal arrangements among the partners. The Treasury has issued regulations requiring partnerships to use a “reasonable
method” for allocating items with respect to which there is a book-tax difference and outlining several reasonable allocation methods.
Under certain available methods, the carryover basis in the hands of our operating partnership of properties contributed to us would
cause us to be allocated lower amounts of depreciation deductions for tax purposes than would be allocated to us if all our properties
were to have a tax basis equal to their fair market value at the time of contribution. We use the “traditional” method for
the book-tax difference caused by the contribution of our initial portfolio to our operating partnership in connection with our initial
public offering. The “traditional” method is generally the method that will result in the least favorable tax results for
us. We have not yet decided what method will be used to account for book-tax differences caused by our operating partnership admitting
partners in the future in exchange for contributions of property.
Partnership
Audit Rules
Under
the rules applicable to federal income tax audits of partnerships, subject to certain exceptions, any IRS audit adjustment to items of
income, gain, loss, deduction, or credit of a partnership (and any partner’s distributive share thereof) is determined, and taxes,
interest, or penalties attributable thereto are assessed and collected, at the partnership level, absent an election to the contrary.
It is possible that these rules could result in Partnerships in which we directly or indirectly invest being required to pay additional
taxes, interest and penalties as a result of an audit adjustment, and we, as a direct or indirect partner of these Partnerships, could
be required to bear the economic burden of those taxes, interest, and penalties. Stockholders are urged to consult their tax advisors
with respect to these partnership audit provisions and their potential impact on their investment in our stock.
Sale
of a Partnership’s Property
Generally,
any gain realized by a Partnership on the sale of property held by the Partnership for more than one year will be long-term capital gain,
except for any portion of such gain that is treated as depreciation or cost recovery recapture. Under Section 704(c) of the Code, any
gain or loss recognized by a Partnership on the disposition of contributed properties will be allocated first to the partners of the
Partnership who contributed such properties to the extent of their built-in gain or loss on those properties for federal income tax purposes.
The partners’ built-in gain or loss on such contributed properties will equal the difference between the partners’ proportionate
share of the book value of those properties and the partners’ tax basis allocable to those properties at the time of the contribution
as reduced for any decrease in the “book-tax difference.” See “—Income Taxation of the Partnerships and Their
Partners—Tax Allocations With Respect to Partnership Properties.” Any remaining gain or loss recognized by the Partnership
on the disposition of the contributed properties, and any gain or loss recognized by the Partnership on the disposition of the other
properties, will be allocated among the partners in accordance with their respective percentage interests in the Partnership.
Our
share of any gain realized by a Partnership on the sale of any property held by the Partnership as inventory or other property held primarily
for sale to customers in the ordinary course of the Partnership’s trade or business will be treated as income from a prohibited
transaction that is subject to a 100% penalty tax. Such prohibited transaction income also may have an adverse effect upon our ability
to satisfy the income tests for REIT status. See “—Gross Income Tests.” We do not presently intend to acquire or hold
or to allow any Partnership to acquire or hold any property that represents inventory or other property held primarily for sale to customers
in the ordinary course of our or such Partnership’s trade or business.
Legislative
or Other Actions Affecting REITs
The
present federal income tax treatment of REITs may be modified, possibly with retroactive effect, by legislative, judicial, or administrative
action at any time. The REIT rules are constantly under review by persons involved in the legislative process and by the IRS and the
Treasury which may result in statutory changes as well as revisions to regulations and interpretations. Additional changes to the tax
laws are likely to continue to occur. We cannot predict the long-term effect of any future law changes on REITs and their securityholders.
Prospective investors are urged to consult with their tax advisors regarding the effect of potential changes to the federal tax laws
on an investment in our securities.
State,
Local, and Foreign Taxes
We
and/or you may be subject to taxation by various states, localities, and foreign jurisdictions, including those in which we or a securityholder
transacts business, owns property or resides. The state, local and foreign tax treatment may differ from the federal income tax treatment
described above. Consequently, you should consult your tax advisors regarding the effect of state and local tax laws upon an investment
in our securities.
PLAN
OF DISTRIBUTION
We
may sell the securities being offered by this prospectus in one or more of the following ways from time to time:
| ● | through
agents to the public or to investors; |
| ● | to
underwriters or dealers for resale to the public or to investors; |
| ● | in
“at the market” offerings, within the meaning of Rule 415 of the Securities Act,
to or through a market maker or into an existing trading market on an exchange or otherwise;
|
| ● | through
a combination of any of these methods of sale; or |
| ● | in
any manner, as provided in the prospectus supplement accompanying the offering. |
We
may also effect a distribution of the securities offered by this prospectus through the issuance of derivative securities, including
without limitation, warrants, forward delivery contracts and the writing of options. In addition, the manner in which we may sell some
or all of the securities covered by this prospectus includes, without limitation, through:
| ● | a
block trade in which a broker-dealer will attempt to sell as agent, but may position or resell
a portion of the block, as principal, in order to facilitate the transaction; |
| ● | purchases
by a broker-dealer, as principal, and resale by the broker-dealer for its account; |
| ● | ordinary
brokerage transactions and transactions in which a broker solicits purchasers; or |
| ● | privately
negotiated transactions. |
Subject
to maintaining our qualification as a REIT, we may also enter into hedging transactions. For example, we may:
| ● | enter
into transactions with a broker-dealer or affiliate thereof in connection with which such
broker-dealer or affiliate will engage in short sales of securities offered pursuant to this
prospectus, in which case such broker-dealer or affiliate may use securities issued pursuant
to this prospectus to close out its short positions; |
| ● | sell
securities short and redeliver such shares to close out our short positions; |
| ● | enter
into option or other types of transactions that require us to deliver securities to a broker-dealer
or an affiliate thereof, who will then resell or transfer securities under this prospectus;
or |
| ● | loan
or pledge securities to a broker-dealer or an affiliate thereof, who may sell the loaned
securities or, in an event of default in the case of a pledge, sell the pledged securities
pursuant to this prospectus. |
We
will set forth in a prospectus supplement the terms of the offering of securities, including:
| ● | the
name or names of any agents or underwriters; |
| ● | the
purchase price of the securities being offered and the proceeds we will receive from the
sale; |
| ● | the
terms of the securities offered; |
| ● | any
over-allotment options under which underwriters or agents may purchase or place additional
securities; |
| ● | any
agency fees or underwriting discounts and other items constituting agents’ or underwriters’
compensation; |
| ● | any
public offering price; |
| ● | any
discounts or concessions allowed or reallowed or paid to dealers; and |
| ● | any
securities exchanges on which such securities may be listed. |
Agents
We
may designate agents who agree to use their reasonable efforts to solicit purchases for the period of their appointment or to sell the
securities being offered hereby on a continuing basis, unless otherwise provided in a prospectus supplement.
We
may from time to time engage a broker-dealer to act as our offering agent for one or more offerings of our securities. If we reach agreement
with an offering agent with respect to a specific offering, including the number of securities and any minimum price below which sales
may not be made, then the offering agent will try to sell such securities on the agreed terms. The offering agent could make sales in
privately negotiated transactions and/or any other method permitted by law, including sales deemed to be an “at the market”
offering as defined in Rule 415 promulgated under the Securities Act, including sales made directly on the NYSE, or sales made to or
through a market maker other than on an exchange. The offering agent will be deemed to be an “underwriter” within the meaning
of the Securities Act, with respect to any sales effected through an “at the market” offering.
Underwriters
If
we use underwriters for a sale of securities, the underwriters will acquire the securities, and may resell the securities in one or more
transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale.
The obligations of the underwriters to purchase the securities will be subject to the conditions set forth in the applicable underwriting
agreement. We may change from time to time any public offering price and any discounts or concessions the underwriters allow or reallow
or pay to dealers. We may use underwriters with whom we have a material relationship. We will describe in the prospectus supplement naming
the underwriter the nature of any such relationship.
Institutional
Purchasers
We
may authorize underwriters, dealers or agents to solicit certain institutional investors, approved by us, to purchase our securities
on a delayed delivery basis or pursuant to delayed delivery contracts provided for payment and delivery on a specified future date. These
institutions may include commercial and savings banks, insurance companies, pension funds, investment companies and educational and charitable
institutions. We will describe in the prospectus supplement details of any such arrangement, including the offering price and applicable
sales commissions payable on such solicitations.
Direct
Sales
We
may also sell securities directly to one or more purchasers without using underwriters or agents. Underwriters, dealers and agents that
participate in the distribution of the securities may be underwriters as defined in the Securities Act and any discounts or commissions
they receive from us and any profit on their resale of the securities may be treated as underwriting discounts and commissions under
the Securities Act. We will identify in the applicable prospectus supplement any underwriters, dealers or agents and will describe their
compensation. We may have agreements with the underwriters, dealers and agents to indemnify them against specified civil liabilities,
including liabilities under the Securities Act. Underwriters, dealers and agents may engage in transactions with or perform services
for us in the ordinary course of their businesses from time to time.
Underwriting
Compensation
Any
underwriting compensation paid by us to underwriters, dealers or agents in connection with the offering of securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers, will be set forth in the applicable prospectus supplement.
Dealers and agents participating in the distribution of the securities may be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of the securities may be deemed to be underwriting discounts and commissions
under the Securities Act. Underwriters, dealers and agents may be entitled, under agreements entered into with us and our operating partnership,
to indemnification against and contribution toward civil liabilities, including liabilities under the Securities Act. We will describe
any indemnification agreement in the applicable prospectus supplement.
Trading
Markets and Listing of Securities
Unless
otherwise specified in the applicable prospectus supplement, each class or series of securities covered by this prospectus will be a
new issue with no established trading market, other than our Class A common stock, which is listed on the NYSE. We may elect to list
any other class or series of securities on any exchange, but we are not obligated to do so. It is possible that one or more underwriters
may make a market in a class or series of securities, but the underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. We cannot give any assurance as to the liquidity of the trading market for any of the securities.
Stabilization Activities
In
accordance with Regulation M under the Exchange Act, underwriters may engage in over-allotment, stabilizing or short covering transactions
or penalty bids in connection with an offering of our securities. Over-allotment transactions involve sales in excess of the offering
size, which create a short position. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing
bids do not exceed a specified maximum price. Short covering transactions involve purchases of the securities in the open market after
the distribution is completed to cover short positions. Penalty bids permit the underwriters to reclaim a selling concession from a dealer
when the securities originally sold by the dealer are purchased in a covering transaction to cover short positions. Those activities
may cause the price of the securities to be higher than they would otherwise be. If commenced, the underwriters may discontinue any of
the activities at any time.
LEGAL
MATTERS
Certain
legal matters in connection with the offering of securities covered by this prospectus will be passed upon for us by Hunton Andrews Kurth
LLP and, with respect to certain matters of Maryland law, Venable LLP.
EXPERTS
The
consolidated financial statements and schedule of Postal Realty Trust, Inc. as of December 31, 2022 and 2021 and for each of the years
then ended incorporated by reference in this prospectus and in the registration statement have been so incorporated in reliance on
the report of BDO USA, LLP (n/k/a BDO USA, P.C.), an independent registered public accounting firm, incorporated herein by reference, given on the authority
of said firm as experts in auditing and accounting.
$500,000,000
PROSPECTUS
Postal
Realty Trust, Inc.
Common
Stock
Preferred
Stock
Warrants
Units
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
14. Other Expenses of Issuance and Distribution.
The
following table itemizes the expenses incurred by us in connection with the issuance and registration of the securities being registered
hereunder. All such expenses, except the SEC registration fee, are based on the number of issuances and accordingly cannot be estimated
at this time.
| SEC
Registration Fee |
|
$ |
27,070.35 |
|
| Printing
Costs |
|
|
* |
|
| Legal
Fees and Expenses |
|
|
* |
|
| Transfer
Agent and Registrar Fees |
|
|
* |
|
| Accounting
Fees and Expenses |
|
|
* |
|
| Miscellaneous
Expenses |
|
|
* |
|
| |
|
|
|
|
| Total |
|
$ |
* |
|
| * |
These
fees and expenses are based on the number of issuances and accordingly cannot be estimated at this time. |
These
amounts do not include expenses of preparing and printing any accompanying prospectus supplements, listing fees, trustee fees and expenses,
transfer agent fees and other expenses related to offerings of particular securities from time to time. Estimated fees and expenses associated
with future offerings will be provided in the applicable prospectus supplement.
Item
15. Indemnification of Directors and Officers.
Maryland
law permits a Maryland corporation to include in its charter a provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability resulting from (a) actual receipt of an improper benefit or profit
in money, property or services or (b) active and deliberate dishonesty that is established by a final judgment and is material to the
cause of action. Our charter contains a provision which eliminates our directors’ and officers’ liability to the maximum
extent permitted by Maryland law.
Maryland
law requires a Maryland corporation (unless its charter provides otherwise, which our charter does not) to indemnify a director or officer
who has been successful, on the merits or otherwise, in the defense of any proceeding to which he or she is made or threatened to be
made a party by reason of his or her service in that capacity. Maryland law permits a Maryland corporation to indemnify its present and
former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred
by them in connection with any proceeding to which they may be made, or threatened to be made, a party to, or witness in, by reason of
their service in those or other capacities unless it is established that: (a) the act or omission of the director or officer was material
to the matter giving rise to the proceeding and (i) was committed in bad faith or (ii) was the result of active and deliberate dishonesty;
(b) the director or officer actually received an improper personal benefit in money, property or services; or (c) in the case of
any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. However, under
Maryland law, a Maryland corporation may not indemnify a director or officer for an adverse judgment in a suit by or in the right of
the corporation or for a judgment of liability on the basis that personal benefit was improperly received, unless in either case a court
orders indemnification and then only for expenses. In addition, Maryland law permits a Maryland corporation to advance reasonable expenses
to a director or officer upon the corporation’s receipt of (a) a written affirmation by the director or officer of his or her good
faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation and (b) a written undertaking
by the director of officer or on the director’s or officer’s behalf to repay the amount paid or reimbursed by the corporation
if it is ultimately determined that the standard of conduct was not met.
Our
charter obligates us, to the maximum extent permitted by Maryland law in effect from time to time, to indemnify and, without requiring
a preliminary determination of the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of final
disposition of such a proceeding to:
| ● | any
present or former director or officer of our company who is made, or threatened to be made,
a party to, or witness in, the proceeding by reason of his or her service in that capacity;
or |
| ● | any
individual who, while a director or officer of our company and at our request, serves or
has served as a director, officer, partner, trustee, member, manager, employee or agent of
another corporation, real estate investment trust, limited liability company, partnership,
joint venture, trust, employee benefit plan or other enterprise and who is made, or threatened
to be made, a party to, or witness in, the proceeding by reason of his or her service in
that capacity. |
Our
charter also permits us to indemnify and advance expenses, with the approval of our Board of Directors, to any individual who served
our predecessor in any of the capacities described above and to any employee or agent of our company or our predecessor.
We
have entered into indemnification agreements with each of our executive officers and directors whereby we will indemnify such executive
officers and directors to the fullest extent permitted by Maryland law against all expenses and liabilities, subject to limited exceptions.
These indemnification agreements also provide that upon an application for indemnity by an executive officer or director to a court of
appropriate jurisdiction, such court may order us to indemnify such executive officer or director. In addition, our directors and officers
are indemnified for specified liabilities and expenses pursuant to the partnership agreement of Postal Realty LP, the partnership of
which we serve as sole general partner.
Insofar
as the foregoing provisions permit indemnification of directors, officers or persons controlling us for liability arising under the Securities
Act, we have been informed that in the opinion of the SEC this indemnification is against public policy as expressed in the Securities
Act and is therefore unenforceable.
Item
16. Index to Exhibits.
| * |
To
be filed by amendment or incorporated by reference in connection with the offering of a particular class or series of securities.
|
Item
17. Undertakings.
| (a) |
The
undersigned registrant hereby undertakes: |
| |
(1) |
To
file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
| |
(i) |
To
include any prospectus required by Section 10(a)(3) of the Securities Act of 1933 (the “Securities Act”); |
| |
(ii) |
To
reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end
of the estimated maximum offering range may be reflected in the form of prospectus filed with the United States Securities and Exchange
Commission (the “Commission”) pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent
no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee”
table in the effective registration statement; and |
| (iii) | To
include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any
material change to such information in this registration statement; |
provided, however, that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.
| |
(2) |
That,
for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof. |
| |
(3) |
To
remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the
termination of the offering. |
| |
(4) |
That,
for purposes of determining liability under the Securities Act to any purchaser: |
| |
(i) |
Each
prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the
date the filed prospectus was deemed part of and included in the registration statement; and |
| |
(ii) |
Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on
Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information
required by Section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the
earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities
in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is
at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities
in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus
that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior
to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part
of the registration statement or made in any such document immediately prior to such effective date. |
| |
(5) |
That,
for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution
of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant
to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities
are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller
to the purchaser and will be considered to offer or sell such securities to such purchaser: |
| |
(i) |
Any
preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule
424; |
| |
(ii) |
Any
free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by
the undersigned registrant; |
| |
(iii) |
The
portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant
or its securities provided by or on behalf of the undersigned registrant; and |
| |
(iv) |
Any
other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
| (b) |
The
undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of
the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each
filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| (c) |
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue. |
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that
the Registrant meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Cedarhurst, State of New York, on October 23, 2023.
| |
POSTAL REALTY TRUST, INC. |
| |
|
| |
By: |
/s/ Andrew Spodek |
| |
Name: |
Andrew Spodek |
| |
Title: |
Chief Executive Officer
(Principal Executive Officer) |
POWER
OF ATTORNEY
KNOW
ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Andrew Spodek and Robert
Klein, with full power to act without the other, such person’s true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign this registration statement
and any and all amendments thereto (including post-effective amendments), and any registration statement relating to the offering covered
by this registration statement and filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with exhibits and schedules thereto, and other documents in connection therewith, with the United States Securities and Exchange Commission,
granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing necessary
or desirable to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that each said attorney-in-fact and agent or his or her substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in
the capacities and on the dates indicated.
| SIGNATURE |
|
TITLE |
|
DATE |
| |
|
|
|
|
| /s/
Andrew Spodek |
|
Chief Executive Officer and Director |
|
October 23, 2023 |
| Andrew Spodek |
|
(Principal Executive Officer) |
|
|
| |
|
|
|
|
| /s/ Robert Klein |
|
Chief Financial Officer |
|
October 23, 2023 |
| Robert Klein |
|
(Principal Financial Officer) |
|
|
| |
|
|
|
|
| /s/ Matt Brandwein |
|
Senior Vice President and Chief Accounting Officer |
|
October 23, 2023 |
| Matt Brandwein |
|
(Principal Accounting Officer) |
|
|
| |
|
|
|
|
| /s/
Patrick Donahoe |
|
Director and Chair of Board of Directors |
|
October 23, 2023 |
| Patrick Donahoe |
|
|
|
|
| |
|
|
|
|
| /s/
Anton Feingold |
|
Director |
|
October 23, 2023 |
| Anton Feingold |
|
|
|
|
| |
|
|
|
|
| /s/
Jane Gural-Senders |
|
Director |
|
October 23, 2023 |
| Jane Gural-Senders |
|
|
|
|
| |
|
|
|
|
| /s/ Barry Lefkowitz |
|
Director |
|
October 23, 2023 |
| Barry Lefkowitz |
|
|
|
|
II-6
EXHIBIT 5.1
[LETTERHEAD OF VENABLE LLP]
October 23, 2023
Postal Realty Trust, Inc.
75 Columbia Avenue
Cedarhurst, NY 11516
| Re: | Registration Statement on Form S-3 |
Ladies and Gentlemen:
We have served as Maryland counsel to Postal Realty
Trust, Inc., a Maryland corporation (the “Company”), in connection with certain matters of Maryland law relating to the registration
by the Company of the following securities of the Company having an aggregate initial offering price of up to $500,000,000 (collectively,
the “Securities”): (i) shares of Class A Common Stock, $0.01 par value per share (the “Common Stock”); (ii) shares
of preferred stock, $0.01 par value per share (the “Preferred Stock”); (iii) warrants (“Warrants”) to purchase
shares of Common Stock, Preferred Stock or other Securities that may be registered thereunder and sold from time to time; and (iv) units
(the “Units”) consisting of any combination of the foregoing, each covered by the Registration Statement on Form S-3,
and all amendments thereto (the “Registration Statement”), filed with the United States Securities and Exchange Commission
(the “Commission”) by the Company on or about the date hereof under the Securities Act of 1933, as amended (the “1933
Act”).
In connection with our representation of the Company,
and as a basis for the opinion hereinafter set forth, we have examined originals, or copies certified or otherwise identified to our satisfaction,
of the following documents (hereinafter collectively referred to as the “Documents”):
1. The Registration
Statement and the related form of prospectus included therein in the form in which it was filed with the Commission under the 1933 Act;
2. The charter
of the Company (the “Charter”), certified by the State Department of Assessments and Taxation of Maryland (the “SDAT”);
3. The Amended
and Restated Bylaws of the Company (the “Bylaws”), certified as of the date hereof by an officer of the Company;
4. Resolutions
(the “Resolutions”) adopted by the Board of Directors of the Company (the “Board”), relating to the registration
and issuance of the Securities, certified as of the date hereof by an officer of the Company;
5. A certificate
of the SDAT as to the good standing of the Company, dated as of a recent date;
Postal Realty Trust, Inc.
October 23, 2023
Page 2
6. A certificate
executed by an officer of the Company, dated as of the date hereof; and
7. Such
other documents and matters as we have deemed necessary or appropriate to express the opinion set forth in this letter, subject to the
assumptions, limitations and qualifications stated herein.
In expressing the opinion set forth below, we have
assumed the following:
1. Each
individual executing any of the Documents, whether on behalf of such individual or another person, is legally competent to do so.
2. Each
individual executing any of the Documents on behalf of a party (other than the Company) is duly authorized to do so.
3. Each
of the parties (other than the Company) executing any of the Documents has duly and validly executed and delivered each of the Documents
to which such party is a signatory, and such party’s obligations set forth therein are legal, valid and binding and are enforceable
in accordance with all stated terms.
4. All Documents
submitted to us as originals are authentic. The form and content of all Documents submitted to us as unexecuted drafts do not differ in
any respect relevant to this opinion from the form and content of such Documents as executed and delivered. All Documents submitted to
us as certified or photostatic copies conform to the original documents. All signatures on all Documents are genuine. All public records
reviewed or relied upon by us or on our behalf are true and complete. All representations, warranties, statements and information contained
in the Documents are true and complete. There has been no oral or written modification of or amendment to any of the Documents, and there
has been no waiver of any provision of any of the Documents, by action or omission of the parties or otherwise.
5. Upon
the issuance of any Securities that are shares of Common Stock (“Common Securities”), including Common Securities which may
be issued upon conversion or exercise of any other Securities convertible into or exercisable for Common Securities, the total number
of shares of Common Stock issued and outstanding will not exceed the total number of shares of Common Stock that the Company is then authorized
to issue under the Charter.
6. Upon
the issuance of any Securities that are shares of Preferred Stock (“Preferred Securities”), including Preferred Securities
which may be issued upon conversion or exercise of any other Securities convertible into or exercisable for Preferred Securities, the
total number of shares of Preferred Stock issued and outstanding, and the total number of issued and outstanding shares of the applicable
class or series of Preferred Stock designated pursuant to the Charter, will not exceed the total number of shares of Preferred Stock or
the number of shares of such class or series of Preferred Stock that the Company is then authorized to issue under the Charter.
Postal Realty Trust, Inc.
October 23, 2023
Page 3
7. Any Securities
convertible into or exercisable for any other Securities will be duly converted or exercised in accordance with their terms.
8. The issuance,
and certain terms, of the Securities to be issued by the Company from time to time will be authorized and approved by the Board, or a
duly authorized committee thereof, in accordance with the Maryland General Corporation Law, the Charter, the Bylaws, the Registration
Statement and the Resolutions and, with respect to any Preferred Securities, articles supplementary setting forth the number of shares
and the terms of any class or series of Preferred Stock to be issued by the Company will be filed with and accepted for record by the
SDAT prior to their issuance (such approvals and, if applicable, acceptance for record, referred to herein as the “Corporate Proceedings”).
9. None
of the Securities will be issued, sold or transferred in violation of the restrictions on ownership and transfer set forth in Article
VII of the Charter or any comparable provision in the Articles Supplementary designating any other class or series of Preferred Stock.
Based upon the foregoing, and subject to the assumptions,
limitations and qualifications stated herein, it is our opinion that:
1. The Company
is a corporation duly incorporated and existing under and by virtue of the laws of the State of Maryland and is in good standing with
the SDAT.
2. Upon
the completion of all Corporate Proceedings relating to the Common Securities, the issuance of the Common Securities will be duly authorized
and, when and if issued and delivered against payment therefor in accordance with the Registration Statement, the Resolutions and the
Corporate Proceedings, the Common Securities will be validly issued, fully paid and nonassessable.
3. Upon
the completion of all Corporate Proceedings relating to the Preferred Securities, the issuance of the Preferred Securities will be duly
authorized and, when and if issued and delivered against payment therefor in accordance with the Registration Statement, the Resolutions
and the Corporate Proceedings, the Preferred Securities will be validly issued, fully paid and nonassessable.
4. Upon
the completion of all Corporate Proceedings relating to the Warrants, the issuance of the Warrants will be duly authorized.
5. Upon
the completion of all Corporate Proceedings relating to the Units, the issuance of the Units will be duly authorized.
Postal Realty Trust, Inc.
October 23, 2023
Page 4
The foregoing opinion is limited to the laws of the
State of Maryland and we do not express any opinion herein concerning federal law or any other state law. We express no opinion as to
the applicability or effect of any federal or state securities laws, including the securities laws of the State of Maryland, federal or
state laws regarding fraudulent transfers or the laws, codes or regulations of any municipality or other jurisdiction. To the extent that
any matter as to which our opinion is expressed herein would be governed by the laws of any jurisdiction other than the State of Maryland,
we do not express any opinion on such matter. The opinion expressed herein is subject to the effect of any judicial decision which may
permit the introduction of parol evidence to modify the terms or the interpretation of agreements.
The opinion expressed herein is limited to the matters
specifically set forth herein and no other opinion shall be inferred beyond the matters expressly stated. We assume no obligation to supplement
this opinion if any applicable law changes after the date hereof or if we become aware of any fact that might change the opinion expressed
herein after the date hereof.
This opinion is being furnished to you for submission
to the Commission as an exhibit to the Registration Statement. We hereby consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of the name of our firm therein. In giving this consent, we do not admit that we are within the category of persons
whose consent is required by Section 7 of the 1933 Act.
| |
Very truly yours, |
| |
|
| |
/s/ Venable LLP |
Exhibit 8.1
 |
Hunton Andrews Kurth LLP
File No: 88502.8
|
October 23, 2023
Postal Realty Trust, Inc.
75 Columbia Avenue
Cedarhurst, NY 11516
Postal Realty Trust, Inc.
Qualification as a
Real Estate Investment Trust
Ladies and Gentlemen:
We have acted as counsel to
Postal Realty Trust, Inc., a Maryland corporation (the “Company”), in connection with the preparation of a Registration
Statement on Form S-3, filed with the Securities and Exchange Commission on October 23, 2023, as amended through the date hereof (the
“Registration Statement”), with respect to the offer and sale, from time to time, of Class A common shares of beneficial
interest, par value $0.01 per share, of the Company (“Common Shares”), preferred shares of beneficial interest, par
value $0.01 per share, of the Company (“Preferred Shares”), warrants entitling the holders to purchase Common Shares
or Preferred Shares, and units comprising one or more of the preceding securities of the Company as set forth in the Registration Statement.
You have requested our opinion regarding certain U.S. federal income tax matters.
In giving this opinion letter,
we have examined the following:
| 1. | the Registration Statement and the prospectus (the “Prospectus”) filed as part of the
Registration Statement; |
| 2. | the Company’s Articles of Amendment and Restatement, as filed on May 16, 2019 with the Department
of Assessments and Taxation of the State of Maryland; |
| 3. | the Amended and Restated Agreement of Limited Partnership of the Postal Realty LP, dated as of May 16,
2019; |
| 4. | the earnings and profits report obtained by the Company from Shanholt
Glassman Klein Kramer & Co. (the “E&P Report”); and |
| 5. | such other documents as we have deemed necessary or appropriate for purposes of this opinion. |
ATLANTA AUSTIN BANGKOK BEIJING BOSTON BRUSSELS CHARLOTTE DALLAS DUBAI HOUSTON LONDON
LOS ANGELES MIAMI NEW YORK RICHMOND SAN FRANCISCO TOKYO TYSONS WASHINGTON, DC
www.HuntonAK.com
Postal Realty Trust, Inc.
October 23, 2023
Page 2
In connection with the opinions
rendered below, we have assumed, with your consent, that:
| 1. | each of the documents referred to above has genuine signatures,
has been duly authorized, executed, and delivered; is authentic, if an original, or is accurate, if a copy; and has not been amended; |
| 2. | during its taxable year ending December 31, 2023, and future
taxable years, the Company has operated and will operate in a manner that will make the factual representations contained in a certificate,
dated the date hereof and executed by a duly appointed officer of the Company (the “Officer’s Certificate”),
true for such years; |
| 3. | the Company will not make any amendments to its organizational
documents after the date of this opinion that would adversely affect the Company’s qualification as a real estate investment trust
(a “REIT”) for any taxable year; and |
| 4. | no action will be taken by the Company after the date hereof
that would have the effect of altering the facts upon which the opinions set forth below are based. |
In connection with the opinions
rendered below, we also have relied upon the correctness, without regard to any qualification as to knowledge or belief, of the factual
representations contained in the Officer’s Certificate, the conclusions in the E&P Report, and the factual matters discussed
in the Prospectus. We are not aware of any facts that are inconsistent with the representations contained in the Officer’s Certificate.
Based solely on the documents
and assumptions set forth above, the representations set forth in the Officer’s Certificate, and the factual matters discussed in
the Prospectus under the caption “Material U.S. Federal Income Tax Considerations” (which is incorporated herein by reference),
we are of the opinion that:
(a) the
Company qualified to be taxed as a REIT pursuant to sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the
“Code”) for its short taxable year ended December 31, 2019, through its taxable year ended December 31, 2022, and
the Company’s organization and current and proposed method of operation will enable it to continue to qualify as a REIT under
the Code for its taxable year ending December 31, 2023, and thereafter; and
(b) the
descriptions of the law and the legal conclusions contained in the Prospectus under the caption “Material U.S. Federal Income
Tax Considerations” are correct in all material respects.
Postal Realty Trust, Inc.
October 23, 2023
Page 3
We will not review on a continuing
basis the Company’s compliance with the documents or assumptions set forth above, or the representations set forth in the Officer’s
Certificate. Accordingly, no assurance can be given that the actual results of the Company’s operations for any given taxable year
will satisfy the requirements for qualification and taxation as a REIT. In addition, the opinions set forth above do not foreclose the
possibility that the Company may have to pay a deficiency dividend, or an excise or penalty tax, which could be significant in amount,
in order to maintain REIT qualification. Although we have made such inquiries and performed such investigations as we have deemed necessary
to fulfill our professional responsibilities as counsel, we have not undertaken an independent investigation of all the facts referred
to in this opinion letter or the Officer’s Certificate. In particular, we note that the Company has engaged in transactions in connection
with which we have not provided legal advice and may not have reviewed.
The foregoing opinions are based
on current provisions of the Code, the Treasury regulations thereunder (the “Regulations”), published administrative
interpretations of any of the foregoing, and published court decisions. The Internal Revenue Service has not issued Regulations or administrative
interpretations with respect to various provisions of the Code relating to REIT qualification. No assurance can be given that the law
will not change in a way that will prevent the Company from qualifying as a REIT.
The foregoing opinions are limited
to the U.S. federal income tax matters addressed herein, and no other opinions are rendered with respect to other U.S. federal tax matters
or to any issues arising under the tax laws of any other country, or any state or locality. We undertake no obligation to update the opinions
expressed herein after the date of this letter. This opinion letter speaks only as of the date hereof. Except as provided in the next
paragraph, this opinion letter may not be distributed, relied upon for any purpose by any other person, quoted in whole or in part or
otherwise reproduced in any document, or filed with any governmental agency without our express written consent.
Postal Realty Trust, Inc.
October 23, 2023
Page 4
We hereby consent to the filing
of this opinion as an exhibit to the Registration Statement. We also consent to the references to Hunton Andrews Kurth LLP under the captions
“Material U.S. Federal Income Tax Considerations” and “Legal Matters” in the Prospectus. In giving this consent,
we do not admit that we are in the category of persons whose consent is required by Section 7 of the Securities Act of 1933, as amended,
or the rules and regulations promulgated thereunder by the SEC.
| |
Very truly yours, |
| |
|
| |
/s/ Hunton Andrews Kurth LLP |
EXHIBIT 23.1
Consent of Independent Registered Public Accounting
Firm
Postal Realty Trust, Inc.
Cedarhurst, New York
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated March 7, 2023, relating to the consolidated financial statements
and financial statement schedule appearing in Postal Realty Trust, Inc.’s Annual Report on Form 10-K for the year ended December
31, 2022.
We also consent to the reference to us under the caption “Experts”
in the Prospectus.
/s/ BDO USA, P.C.
New York, New York
October 23, 2023
Exhibit 107
Calculation of Filing
Fee Tables
Form S-3
(Form Type)
Postal Realty Trust,
Inc.
(Exact Name of Registrant
as Specified in its Charter)
Table 1: Newly Registered
and Carry Forward Securities
| |
|
Security
Type |
|
Security
Class Title |
|
Fee
Calculation
Rule |
|
Amount
Registered |
|
Proposed
Maximum Offering Price Per Unit |
|
Maximum
Aggregate
Offering Price |
|
|
Fee
Rate |
|
|
Amount
of
Registration Fee |
|
|
Carry
Forward Form Type |
|
Carry
Forward File Number |
|
Carry
Forward
Initial
Effective
Date |
|
Filing
Fee
Previously
Paid In
Connection
with
Unsold
Securities
to be
Carried
Forward |
|
| Newly Registered
Securities |
| Fees
to Be Paid |
|
Equity |
|
Class
A Common Stock, par value $0.01 per share |
|
|
457(o) |
|
|
|
(1) |
|
|
(2) |
|
|
(3)(4)(5) |
|
|
0.0001476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Equity |
|
Preferred
Stock, par value $0.01 per share |
|
|
457(o) |
|
|
|
(1) |
|
|
(2) |
|
|
(3)(4)(5) |
|
|
0.0001476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Other |
|
Warrants |
|
|
457(o) |
|
|
|
(1) |
|
|
(2) |
|
|
(3)(4)(5)(6) |
|
|
0.0001476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Other |
|
Units |
|
|
457(o) |
|
|
|
(1) |
|
|
(2) |
|
|
(3)(4)(5) |
|
|
0.0001476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Unallocated
(Universal) Shelf |
|
|
|
|
457(o) |
|
|
|
|
|
Unallocated
(Universal) Shelf |
|
$ |
183,403,488.98 |
(7) |
|
|
0.0001476 |
|
|
$ |
27,070.35 |
(7) |
|
|
|
|
|
|
|
|
|
|
| Fees
Previously Paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Carry
Forward Securities |
|
| Carry
Forward Securities |
|
Equity |
|
Class
A Common Stock, par value $0.01 per share |
|
|
415(a)(6) |
|
|
|
(1) |
|
|
(2) |
|
|
(3)(4)(5) |
|
|
0.0001091 |
|
|
|
|
|
|
S-3 |
|
333-251079 |
|
12/11/2020 |
|
|
|
|
| |
|
Equity |
|
Preferred
Stock, par value $0.01 per share |
|
|
415(a)(6) |
|
|
|
(1) |
|
|
(2) |
|
|
(3)(4)(5) |
|
|
0.0001091 |
|
|
|
|
|
|
S-3 |
|
333-251079 |
|
12/11/2020 |
|
|
|
|
| |
|
Other |
|
Warrants |
|
|
415(a)(6) |
|
|
|
(1) |
|
|
(2) |
|
|
(3)(4)(5)(6) |
|
|
0.0001091 |
|
|
|
|
|
|
S-3 |
|
333-251079 |
|
12/11/2020 |
|
|
|
|
| |
|
Other |
|
Units |
|
|
415(a)(6) |
|
|
|
(1) |
|
|
(2) |
|
|
(3)(4)(5) |
|
|
0.0001091 |
|
|
|
|
|
|
S-3 |
|
333-251079 |
|
12/11/2020 |
|
|
|
|
| |
|
Unallocated
(Universal) Shelf |
|
|
|
|
415(a)(6) |
|
|
N/A |
|
|
Unallocated
(Universal) Shelf |
|
$ |
316,596,511.02 |
|
|
|
0.0001091 |
|
|
$ |
34,540.67 |
(7) |
|
S-3 |
|
333-251079 |
|
12/11/2020 |
|
$ |
34,540.67 |
(7) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
500,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total
Offering Amounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total
Fees Previously Paid |
|
|
$ |
34,540.67 |
(7) |
|
|
|
|
|
|
|
|
|
|
| |
|
Total
Fee Offsets |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Net
Fee Due |
|
|
$ |
27,070.35 |
(7) |
|
|
|
|
|
|
|
|
|
|
| (1) | Subject to footnote (5), there is being registered hereunder
such indeterminate number or amount of securities of each identified class of securities of Postal Realty Trust, Inc. (the “Registrant”)
as may from time to time be issued or sold at indeterminate prices, with a maximum aggregate public offering price not to exceed $500,000,000.
Pursuant to Rule 416(a) under the Securities Act of 1933, as amended (the “Securities Act”), this Registration Statement
shall be deemed to cover any additional number of securities as may be offered or issued from time to time upon stock splits, stock dividends,
recapitalizations or similar transactions. No additional consideration will be received for such securities and, therefore, no registration
fee is required pursuant to Rule 457(i) under the Securities Act. |
| (2) | Not required to be included in accordance with General Instruction
II.D of Form S-3 under the Securities Act. |
| (3) | Not required to specify by each class of security in accordance
with General Instruction II.D of Form S-3 under the Securities Act. |
| (4) | No separate consideration will be received for Class A common
stock as may, from time to time, be issued upon conversion of preferred stock registered hereunder. No separate consideration will be
received for preferred stock as may, from time to time, be issued upon conversion, exchange or exercise of securities registered hereunder
to the extent any such securities are, by their terms, convertible into, or exchangeable or exercisable for, preferred stock. |
| (5) | The proposed maximum aggregate offering price has been estimated
solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act. The aggregate public offering
price of the securities registered hereunder will not exceed $500,000,000. |
| (6) | Includes warrants to purchase Class A common stock, preferred
stock or other securities that may be registered hereunder and issued and sold from time to time. |
| (7) | The Registrant previously registered $500,000,000 in aggregate
offering price of securities pursuant to the Registration Statement on Form S-3 (No. 333-251079) filed with the SEC on December 2, 2020
and declared effective on December 11, 2020 (the “2020 Registration Statement”). Pursuant to Rule 415(a)(6) under the Securities
Act, the Registrant is carrying forward to this Registration Statement $316,596,511.02 in aggregate offering price of securities that
were initially registered under the 2020 Registration Statement and remain unsold (the “Unsold Securities”). The Registrant
previously paid a filing fee of $34,540.67 with respect to the Unsold Securities (based on the filing fee rate in effect at the time
of the filing of the 2020 Registration Statement). A filing fee of $27,070.35 with respect to the remaining $183,403,488.98 of securities
registered hereunder is being paid herewith. To the extent that, after the filing date hereof and prior to the effectiveness of this
Registration Statement, the Registrant sells any Unsold Securities pursuant to the 2020 Registration Statement, the Registrant will identify
in a pre-effective amendment to this Registration Statement the updated amount of Unsold Securities from the 2020 Registration Statement
to be included in this Registration Statement pursuant to Rule 415(a)(6) under the Securities Act and the updated amount of securities
to be registered on this Registration Statement. Pursuant to Rule 415(a)(6) under the Securities Act, the offering of the Unsold Securities
under the 2020 Registration Statement will be deemed terminated as of the date of effectiveness of this Registration Statement. |
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