1080657--5/29/2009--NETREIT

related topics

{loan, real, estate}

{investment, property, distribution}

{tax, income, asset}

{debt, indebtedness, cash}

{stock, price, share}

{provision, law, control}

{interest, director, officer}

{property, intellectual, protect}

{cost, contract, operation}

{stock, price, operating}

{personnel, key, retain}

{condition, economic, financial}

{operation, international, foreign}

{operation, natural, condition}

We may be prevented from paying dividends by legal requirements. We may change one or more of our investment policies. Our shareholders have a very limited right to influence our business or affairs. We depend on key personnel. The availability and timing of cash dividends is uncertain. Our bylaws may prevent our participation in certain business combinations. A limit on the number of Shares a person may own may discourage a takeover. Our common stock is subordinate to our Preferred Stock in rights to distributions. Possible acquisition of our affiliated property manager s business. Possible future transactions with our executive management or their affiliates. Our return to our shareholders could be reduced if we are required to register as an investment company. Risks Relating to Private Offering Exemption and Lack of Liquidity Private placement offering compliance with exemption requirements. It will be difficult for our shareholders to sell their common shares because there is currently no public market for the shares and we do not intend to list the shares on a stock exchange. If our shareholders are able to sell their shares, they will likely have to sell them at a substantial discount. Risks Relating to Real Estate Investments Current unsettled conditions in the financial and equity markets negatively affect the U.S. and world economies. Current commercial mortgage market trends may affect the terms and conditions of our mortgage financing. Continued illiquidity and disruption of the mortgage market affects our ability to obtain mortgage financing. Dislocations in the real estate mortgage markets have depressed real estate values. A decrease in real estate values will negatively affect our ability to refinance our properties and possibly our existing mortgage obligations. Continued deterioration of the U.S. mortgage markets would reduce our ability to acquire real estate and diversify our portfolio. We are not required to set aside and maintain specific levels of cash reserves. We may be unable to sell a property at any particular time. Some of our properties may depend upon a single tenant for all of their rental income. Some of our properties may be suitable for only one use. We may obtain only limited warranties when we purchase a property. Our ability to operate a property may be limited by contract. Shorter lease terms tend to increase our maintenance costs. A property that incurs a vacancy could be difficult to sell or re-lease. We may have to extend credit to buyers of our properties. We may not have funding for future tenant improvements. Uninsured losses may adversely affect returns to our shareholders. Our compliance with various legal requirements of real estate ownership may involve significant costs. Our competition for properties could impact our profitability. The bankruptcy or insolvency of one of our major tenants would adversely impact our operations and our ability to pay dividends. We could incur uninsured losses which could adversely impact the value of one or more of our properties. Discovery of previously undetected environmentally hazardous conditions may adversely affect our operating results. Recent increase in costs of credit and stagnation of real estate prices have lead to economic slowdown and a recession. The War on Terrorism and any future terrorist attacks may negatively affect our operations and profitability. Methods we use to own our properties. If we invest in a DOWNREIT partnership as a general partner we would be responsible for all liabilities of such partnership. In a sale-leaseback transaction, we are at risk that our seller/lessee will default if its tenants default. Uncertain market conditions and the broad discretion of management relating to the future disposition of properties could adversely affect the return on our Shares. Regulatory changes may adversely affect our specific properties and may have adverse results on our operations and returns on our Shares. Changes in local conditions may affect one or more of our properties. Each of our properties will be subject to local supply and demand for similar or competing properties. Risks Relating to Debt Financing The more leverage we use, the higher our operational risks will be. If we fail to make our debt payments, we could lose our investment in a property. Lenders may require us to enter into restrictive covenants relating to our operations. If we enter into financing arrangements involving balloon payment obligations, it may adversely affect our ability to pay dividends. Our risks of losing property through a mortgage loan default will be greater where the property is cross-collateralized. Due-on-sale clauses in our mortgages may prevent us from taking advantage of interest rate changes. Risks Associated with Making or Investing in Mortgage Loans We do not have experienced loan underwriting personnel. Mortgage loans may be impacted by unfavorable real estate market conditions, which could decrease the value of our mortgage investments. Mortgage loans may be subject to interest rate fluctuations that could reduce our returns as compared to market interest rates. Returns on mortgage loans may be limited by regulations. Delays in liquidating a defaulted mortgage loan could reduce our investment returns. Foreclosures create additional ownership risks that could adversely impact our returns on mortgage investments. Risks Relating to Our Management s Conflicts of Interest We face certain conflicts of interest with respect to our operations. There is competition for the time and services of our senior management, and our property manager and its affiliates may not dedicate all of the time necessary to manage our business. The amounts of compensation to be paid to our management, our property manager and possibly their affiliates cannot be predicted. Our rights, and the rights of our shareholders, to recover claims against our officers and directors are limited. Risks Relating to Federal Income Taxes Because of recently enacted tax legislation, REIT investments are comparatively less attractive than investments in other corporations. Failure to qualify as a REIT could adversely affect our operations and our ability to make distributions. To maintain our REIT status, we may be forced to borrow funds on a short-term basis during unfavorable market conditions. Qualified plans investing in our Shares will be taxed on our distributions to the extent that they are unrelated business taxable income. We still may be required to pay federal or state taxes. Foreign shareholders selling their Securities may be subject to FIRPTA tax. There are special considerations that apply to qualified plans and IRAs investing in our Shares.

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