FG Communities Holdings Inc.

Current report

General economic conditions and the concentration of our manufactured housing properties in certain states may affect our ability to generate sufficient revenue to achieve profitability.

Current report

The market and economic conditions in our current markets may significantly affect manufactured home occupancy or rental rates. Occupancy and rental rates, in turn, may significantly affect our revenues, and if our communities do not generate revenues sufficient to meet our operating expenses, including debt service and capital expenditures, our cash flow and ability to pay or refinance our debt obligations could be adversely affected. As a result of the geographic concentration of our properties in North Carolina, we are exposed to the risks of downturns in the local economy or other local real estate market conditions which could adversely affect occupancy rates, rental rates, and property values in these markets.

Current report

Our revenue would also be adversely affected if residents of our manufactured housing communities were unable to pay rent or if sites were unable to be rented on favorable terms. If we were unable to promptly relet or renew the leases for a significant number of the sites, or if the rental rates upon such renewal or reletting were significantly lower than expected rates, then our business and results of operations could be adversely affected. In addition, certain expenditures associated with each property (such as real estate taxes and maintenance costs) generally are not reduced when circumstances cause a reduction in income from the property.

Current report

The following factors, among others, may adversely affect the revenues generated by our properties:

Current report

Competition affects occupancy levels and rents, which could adversely affect our revenues.

Current report

The manufactured housing industry is highly fragmented. There are many international, national, and regional competitors in the markets we currently serve and in new markets that we may enter. Properties that we may acquire could be located in developed areas that include other manufactured housing communities. The number of competitive communities in a particular area could have a material adverse effect on our ability to lease sites and increase rents charged at our properties or at any newly acquired properties. We may be competing with others with greater resources. In addition, other forms of multi-family residential properties, such as private and federally funded or assisted multi-family housing projects and single-family housing, provide housing alternatives to potential residents of manufactured housing communities.

Current report

We may incur liability under environmental laws arising from conditions at properties we acquire or operations at the properties we own and operate.

Current report

Under various federal, state, local, and foreign laws, ordinances and regulations, an owner or operator of real estate is liable for the costs of removal or remediation of certain hazardous substances at, on, under, or in such property. Such hazardous substances may be used at or located on our properties. Such laws often impose liability without regard to whether the owner knew of, or was responsible for, the presence of such hazardous substances. The presence of such substances, or the failure to properly remediate such substances, may adversely affect the owner’s ability to sell or rent the property, to borrow using the property as collateral or to develop the property. Persons who arrange for the disposal or treatment of hazardous substances also may be liable for the costs of removal or remediation of such substances at a disposal or treatment facility owned or operated by another person. In addition, certain environmental laws impose liability for the management and disposal of asbestos-containing materials and for the release of such materials into the air. These laws may result in fines or penalties and may permit third parties to seek recovery from owners or operators of real properties for personal injury associated with asbestos-containing materials.

Current report

As the purchaser of the manufactured housing properties we acquire, or in connection with the operation of the manufactured housing properties we own or manage, we may be liable for removal or remediation costs, governmental fines and injuries to persons and property. When we arrange for the treatment or disposal of hazardous substances at landfills or other facilities owned by other persons, we may be liable for the removal or remediation costs at such facilities.

Current report

Moreover, we cannot be sure that future laws, ordinances or regulations will not impose any material environmental liability, or that the current environmental condition of our properties will not be affected by residents and occupants of the properties, by the condition of land or operations in the vicinity of our properties (such as the presence of underground storage tanks), or by unrelated third parties. Environmental liabilities that we may incur could have an adverse effect on our financial condition, results of operations, and cash flows.

Current report

Rent control legislation may harm our ability to increase rents.

Current report

National, state, and local rent control laws in certain jurisdictions may limit our ability to increase rents at our manufactured housing communities to recover increases in operating expenses and the costs of capital improvements. Enactment of such laws has been considered from time to time in other jurisdictions. Properties we may purchase may be in markets subject to rent controls or where other rent-limiting legislation exists or may be enacted.

Current report

Our properties may not be readily adaptable to other uses.

Current report

Properties in our portfolio are specific-use properties and may contain features or assets that have limited alternative uses. These properties may also have distinct operational functions that involve specific procedures and training. If the operations of any of those properties becomes unprofitable due to industry competition, operational execution or otherwise, then it may not be feasible to operate that Property for another use and the value of certain features or assets used at that Property, or the Property itself, may be impaired. Should any of these events occur, our financial condition, results of operations and cash flows could be adversely impacted.

Current report

We may be required or otherwise need to expend capital to maintain, repair and renovate our properties, which could negatively impact our financial condition, results of operations and cash flows.

Current report

We may be required or choose to make significant capital expenditures to maintain or enhance the competitiveness of our manufactured housing properties, including infrastructure improvements. In addition, as most of our residents own their homes located in our properties, the replacement, repairs and refurbishment of these homes may not be within our control. If our properties are not as attractive to current and prospective residents as compared to the properties owned by our competitors, we could lose residents or suffer lower rental rates. There is no assurance that any capital expenditure would result in higher occupancy or higher rental rates. In addition, the price of commodities and skilled labor for our construction projects may increase unpredictably due to external factors, including supply chain disruptions. It is uncertain whether we would be able to source the essential commodities, supplies, materials, and skilled labor timely or at all without incurring significant costs or delays, particularly during times of economic uncertainty resulting from events outside of our control.

Current report

There is a risk of accidents, injuries or disease outbreaks occurring at our properties which may negatively impact our operations.

Current report

While we maintain and promote safety at our properties, there are inherent risks associated with certain features, assets and activities at our properties. An accident, injury or disease outbreak at any of our properties, particularly an accident, injury or disease outbreak involving the safety of our residents, guests and employees, may be associated with claims against us involving higher assertions of damages and/or higher public visibility. The occurrence of an accident, injury or disease outbreak at any of our properties could also cause damage to our brand or reputation, lead to loss of consumer confidence in us, reduce occupancy at our properties and negatively impact our results of operations.

Current report

We may be unable to sell properties when appropriate because real estate investments are illiquid.

Current report

Real estate investments generally cannot be sold quickly and, therefore, will tend to limit our ability to vary our property portfolio promptly in response to changes in economic or other conditions.

Current report

Many of our costs may be adversely impacted by continued heightened inflation.

Current report

A sustained or further increase in inflation could have an adverse impact on our general and administrative and operating expenses, including the costs of personnel, professional fees, insurance, utilities, security, and the purchase of manufactured homes, and otherwise adversely affect our business and results of operations. While we expect to recover some cost increases through increases in our rental rates, there can be no assurance that higher operating expenses resulting from inflationary pressures will be fully offset by higher rental rates. As a result, to the extent the inflation rate exceeds the annual rent increases we are able to institute, we may not adequately mitigate the impact of inflation, which may adversely affect our business, financial condition, results of operations, and cash flows.

Current report

Costs associated with taxes and regulatory compliance may reduce our revenue.

Current report

We may become subject to significant governmental regulation that inhibits our activities and may increase our costs in certain jurisdictions. Local zoning and use laws, environmental statutes and other governmental requirements may restrict expansion, rehabilitation and reconstruction activities. These regulations may prevent us from taking advantage of economic opportunities. Legislation such as the Americans with Disabilities Act may require us to modify our properties at a substantial cost and noncompliance could result in the imposition of fines or an award of damages to private litigants. Future legislation may impose additional requirements. We cannot predict what requirements may be enacted or amended or what costs we will incur to comply with such requirements. Costs resulting from changes in real estate laws, income taxes, service or other taxes may adversely affect our funds from operations and our ability to pay or refinance our debt. Similarly, changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures, which would adversely affect our business and results of operations.

Current report

Laws and regulations in certain jurisdictions may also govern the provision of utility services. Such laws regulate, for example, how and to what extent owners or operators of property can charge renters for provision of utilities. Such laws can also regulate the operations and performance of utility systems and may impose fines and penalties on real property owners or operators who fail to comply with these requirements. The laws and regulations may also require capital investment to maintain compliance.

Current report

Climate change may adversely affect our business.

Current report

To the extent that significant changes in the climate occur in areas where our properties are located, we may experience extreme weather and changes in precipitation and temperature, all of which may result in physical damage to or a decrease in demand for properties located in these areas or affected by these conditions. Should the impact of climate change be material in nature, including significant property damage to or destruction of our properties, or occur for lengthy periods of time, our financial condition or results of operations may be adversely affected. In addition, changes in federal, state and local legislation and regulations based on concerns about climate change could result in increased capital expenditures on our properties (for example, to improve their energy efficiency and/or resistance to inclement weather) without a corresponding increase in revenue, resulting in adverse impacts to our net income.

Current report

Losses in excess of our insurance coverage or uninsured losses could adversely affect our cash flow.

Current report

We generally maintain insurance policies related to our business, including casualty, general liability and other policies covering business operations, employees and assets. However, we may be required to bear all losses that are not adequately covered by insurance. In addition, there are certain losses that are not generally insured because it is not economically feasible to insure against them, including, but not limited to, losses due to riots, acts of war or other catastrophic events. If an uninsured loss or a loss in excess of insured limits occurs with respect to one or more of our properties, then we could lose the capital we invested in the properties, as well as the anticipated profits and cash flow from the properties and, in the case of debt which is with recourse to us, we would remain obligated for any mortgage debt or other financial obligations related to the properties. Although we believe that our insurance programs are adequate, no assurance can be given that we will not incur losses in excess of our insurance coverage, or that we will be able to obtain insurance in the future at acceptable levels and reasonable cost.

Current report

Our investments are concentrated in the manufactured housing communities sector and our business would be adversely affected by an economic downturn in that sector.

Current report

Our investments in real estate assets are primarily concentrated in the manufactured housing communities sector. This concentration may expose us to the risk of economic downturns in this sector to a greater extent than if our business activities included a more significant portion of other sectors of the real estate industry.

Current report

We may not be able to integrate or finance our acquisitions and our acquisitions may not perform as expected.

Current report

We have acquired and intend to continue to selectively acquire manufactured housing communities. Our acquisition activities and their success are subject to the following risks: