INDUS REALTY TRUST, INC. - Annual Report: 2020 (Form 10-K)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

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For the transition period from __ to __

Commission file number 1-12879

INDUS REALTY TRUST, INC.

(Exact name of registrant as specified in its charter)

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Registrant’s telephone number, including area code (212) 218-7910

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

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Securities registered pursuant to Section 12(g) of the Act: None

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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

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

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

The aggregate market value of the common stock held by non-affiliates of the registrant was approximately $114,009,000 based on the closing sales price on The Nasdaq Stock Market LLC on May 29, 2020, the last business day of the registrant’s most recently completed second quarter. Shares of common stock held by each executive officer, director and persons or entities known to the registrant to be affiliates of the foregoing have been excluded in that such persons may be deemed to be affiliates. This assumption regarding affiliate status is not necessarily a conclusive determination for other purposes.

As of February 12, 2021, 5,663,040 shares of common stock were outstanding.

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INDUS REALTY TRUST, INC.

FORM 10-K

Index

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FORWARD-LOOKING STATEMENTS

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This Annual Report on Form 10-K (the “Annual Report”) contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For this purpose, any statements contained in this Annual Report that relate to future events or conditions, including without limitation, the statements in Part I, Item 1. “Business” and Item 1A. “Risk Factors” and in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as located elsewhere in this Annual Report regarding industry prospects or INDUS Realty Trust, Inc.’s (“INDUS” or the “Company”) prospective results of operations or financial position, competitive position, objectives and strategy; expectations regarding funding of future growth, potential sales and acquisitions, including the completion and closing dates for outstanding purchase and sale agreements and planned development, construction and acquisition activities; estimated completion dates for current and planned developments; anticipated or targeted stabilization and underwritten stabilized Cash NOI yields (as defined below) for planned development and acquisition activities; expected marketing of the Florida Farm (as defined below); potential vacancies in INDUS’s buildings; INDUS’s anticipated future liquidity and capital expenditures, including expectations regarding the entry into a definitive loan amendment to, and increase of INDUS’s borrowing capacity under, its revolving credit line facility, any potential issuance of securities under the Universal Shelf (as defined below) and anticipated use of any future proceeds from the Securities Purchase Agreement (as defined below); expectations regarding INDUS’s tax status and ability to avoid the incurrence of certain taxes and penalties, and the impacts to stockholders of INDUS’s organizational structure; expectations regarding the payment of the E&P Distribution (as defined below) and other future distributions; and expectations and uncertainties related to COVID-19, may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “may” and similar expressions are intended to identify forward-looking statements. Such forward-looking statements represent management’s current expectations and are inherently uncertain. There are a number of important factors that could materially impact the value of the Company’s common stock or cause actual results to differ materially from those indicated by such forward-looking statements. Such factors include: risks related to the COVID-19 pandemic; adverse economic conditions and credit markets; a downturn in the commercial and residential real estate markets; risks associated with a concentration of real estate holdings; risks associated with the acquisition or development of properties, current portfolio weaknesses and entering new real estate markets; risks associated with competition with other parties for acquisition of properties; risks associated with the use of third-party managers for day-to-day property management; risks relating to reliance on lease revenues; risks associated with nonrecourse mortgage loans; risks of financing arrangements that include balloon payment obligations; risks associated with restrictive credit facility terms and covenants; risks associated with reliance on key personnel; risks associated with failure to effectively hedge against interest rate changes; risks related to the discontinuance of LIBOR; risks associated with volatility in the capital markets; risks associated with increased operating expenses; potential environmental liabilities; governmental laws and regulations; inadequate insurance coverage; risks of environmental factors; risks associated with the cost of raw materials, labor or energy costs; illiquidity of real estate investments; risks associated with deficiencies in disclosure controls and procedures or internal control over financial reporting; risks associated with information technology security breaches; litigation risks; risks related to the limited rights of INDUS and its stockholders to take action against the Company’s directors and officers; risks related to the Company’s charter and bylaw provisions, and Maryland law, in connection with certain acquisitions or a change of control; risks associated with charter restrictions on the ownership and transfer of INDUS’s stock and the board of directors’ ability to issue additional shares; risks related to INDUS’s bylaws and exclusive forum provisions; risks related to INDUS’s real estate investment trust (“REIT”) structure, including risks associated with INDUS’s failure to remain qualified as a REIT, taxes that INDUS and its subsidiaries may, or will, owe, INDUS’s ability to obtain capital during unfavorable market conditions, compliance with REIT requirements, ownership limitations and prohibitions on engaging in certain transactions, legislative or regulatory action affecting REITs, and U.S. federal tax reform; risks associated with the E&P Distribution and INDUS’s ability to generate sufficient cash flows to make future distributions; risks related to issuance or sales of common stock; risks related to volatility of common stock; risks of future offerings that are senior to common stock, or preferred stock issuances; and the concentrated ownership of the Company’s common stock by members of the Cullman and Ernst families. These and the important factors discussed under the caption “Risk Factors” in Part I, Item 1A of this Annual Report for the fiscal year ended November 30, 2020, among others, could cause actual results to differ materially from

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those indicated by forward-looking statements made in this Annual Report and presented elsewhere by management from time to time. Any such forward-looking statements represent management’s estimates as of the date of this Annual Report. While the Company may elect to update such forward-looking statements at some point in the future, the Company disclaims any obligation to do so, even if subsequent events cause the Company’s views to change. These forward-looking statements should not be relied upon as representing the Company’s views as of any date subsequent to the date of this Annual Report.

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Summary of Principal Risk Factors

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INDUS’s business is subject to numerous risks and uncertainties, including those described in Part I, Item 1A. “Risk Factors” in this Annual Report. These risks and uncertainties should be carefully considered when investing in INDUS’s common stock. The principal risks and uncertainties affecting INDUS’s business include the following:

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PART I

ITEM 1. BUSINESS.

The Company

INDUS Realty Trust, Inc. (“INDUS” or the “Company”), formerly known as Griffin Industrial Realty, Inc., is an acquiror, developer and asset manager of industrial/logistics real estate in select supply-constrained and high-growth markets in the United States (“U.S.”). INDUS’s real estate holdings consist primarily of industrial/logistics properties, which accounted for 91.5% of its square footage as of November 30, 2020. INDUS also owns a limited number of office/flex properties, which accounted for 8.5% of its square footage, in addition to approximately 3,400 acres of undeveloped land as of November 30, 2020. For further information, see Part I, Item 2. “Properties” in this Annual Report.

At November 30, 2020, INDUS’s industrial/logistics portfolio consisted of approximately 4.2 million aggregate rentable square feet across 30 buildings with a weighted average building age of 12 years. INDUS’s industrial/logistics portfolio is geographically located in the following markets by square footage: 49% in Hartford, CT; 31% in the Lehigh Valley, PA; 13% in Charlotte, NC; and 7% in Orlando, FL. As of November 30, 2020, INDUS’s office/flex portfolio consisted of approximately 0.4 million aggregate rentable square feet across 11 buildings. INDUS expects that its office/flex portfolio will continue to become a smaller percentage of its total square footage as it plans to focus on the growth of its industrial/logistics building portfolio either through the acquisition of fully or partially leased buildings, development of buildings on land currently owned or to be acquired, or both.

INDUS is a Maryland corporation and its corporate headquarters is located at 641 Lexington Avenue, 26^th Floor in New York City, with another principal office located at 204 West Newberry Road in Bloomfield, Connecticut.

INDUS’s website is www.indusrt.com. The information on INDUS’s website is not incorporated or deemed to be incorporated by reference in, or otherwise a part of, this Annual Report. All reports required to be filed with the Securities and Exchange Commission (“SEC”) are available and can be accessed free of charge through the Investors section of INDUS’s website. INDUS’s common stock is listed on The Nasdaq Stock Market LLC under the ticker symbol “INDT”.

Corporate Structure & History

INDUS traces its history as an independent, publicly-traded company back to 1997 when Culbro Corporation (“Culbro”) underwent a corporate reorganization such that each holder of Culbro’s common stock received one share of common stock of Griffin Land & Nurseries, Inc. (“GL&N”). GL&N was primarily engaged in developing, managing, and leasing industrial and commercial properties and it also operated a landscape nursery business through its wholly owned subsidiary, Imperial Nurseries, Inc. (“Imperial”). In 2014, GL&N sold Imperial, and, in 2015, GL&N changed its name to Griffin Industrial Realty, Inc.

On December 30, 2020, pursuant to an Agreement and Plan of Merger, by and among INDUS, Griffin Industrial Realty, Inc., a Delaware corporation (“Griffin”), and Griffin Industrial Maryland, LLC, a Maryland limited liability company and a wholly-owned subsidiary of INDUS, the Company completed an internal merger (the “Merger”) to reincorporate from a Delaware corporation to a Maryland corporation. On December 31, 2020, following the Merger and reincorporation, Griffin changed its name from Griffin Industrial Realty, Inc. to INDUS Realty Trust, Inc. On January 4, 2021, INDUS announced that it intends to elect to be taxed as a Real Estate Investment Trust (“REIT”) under sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “REIT Conversion”). Provided INDUS qualifies for taxation as a REIT, it generally will not be subject to U.S. federal income taxes if it distributes 100% of its taxable income for each year to its stockholders. However, any taxable income from any taxable REIT subsidiaries (each a “TRS” and, collectively, "TRSs") will be subject to U.S. federal, state and local income taxes.

Unless the context requires otherwise, all references to “Company,” “Griffin,” “INDUS,” “we,” “our,” and “us” mean legacy Griffin, a Delaware corporation, and its consolidated subsidiaries for periods prior to the Merger and INDUS Realty Trust, Inc., a Maryland corporation, and its consolidated subsidiaries for periods following the Merger.

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Competitive Strengths

INDUS believes that it is well-positioned in its industry and markets due to the quality of its portfolio and tenancy, in addition to its size, track record, and growth opportunities. Summarized below are what management believes to be INDUS’s competitive strengths:

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Management Objectives & Strategy

INDUS’s management objectives and investment strategies seek to maximize long-term growth in cash flows, net asset value and total stockholder return. In its pursuit of these objectives, the Company plans to:

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Environmental, Social and Governance (“ESG”) Matters

INDUS believes that protecting the environment and supporting the communities in which its team lives and works are important measures of corporate responsibility. INDUS strives to support sustainability through its commitment to building environmentally responsible properties. Nearly 100% of its industrial/logistics properties feature energy efficient lighting, of which 54% have LED lighting. INDUS has also made the commitment to incorporate energy efficient features in its developments and, since 2012, 100% of its new developments have clerestory windows and all of INDUS’s properties in warm weather states like Florida and North Carolina have white reflective roof decks. Going forward, INDUS will seek ways to implement environmentally conscious decisions in the development and management of its industrial/logistics portfolio to create long-term value for the environment, the Company and stockholders.

Over the years, INDUS has participated in various charitable service organizations in its local business communities as part of its commitment to social responsibility. INDUS is also committed to socially-responsible policies and practices to attract and develop a diverse company culture, including a comprehensive employee benefits program and a commitment to our Code of Business Conduct and Ethics.

INDUS relies on its Board of Directors (the “Board”) and management team to maintain the trust of its employees, stockholders, tenants and partners. INDUS believes the integrity of its leadership is evidenced through good corporate governance policies that are developed to align with the best interests of stockholders.

Employees

As of November 30, 2020, INDUS had 33 employees, including 32 full-time employees. Presently, none of INDUS’s employees are represented by a union. INDUS believes that relations with its employees are satisfactory, and seeks to promote a culture that is based on integrity, an entrepreneurial spirit and collaboration. INDUS relies on its employee relationships to support the Company’s vision and growth and believes that the strength of these relationships is evidenced by its low turnover and employee tenure, which, as of November 30, 2020, was over 14 years for INDUS’s corporate staff (which excludes maintenance and landscaping employees). Additionally, INDUS seeks to attract and develop a diverse company culture and female employees comprised 50% of its corporate staff as of November 30, 2020.

Competition

The market for leasing industrial/logistics space and office/flex space is highly competitive. INDUS competes for tenants with owners of numerous properties in the areas where its buildings are located. Some of these competitors have greater financial resources than INDUS. INDUS’s real estate business competes on the bases of location, price, availability of space, convenience and amenities.

There is a great amount of competition for the acquisition of industrial/logistics buildings and for the acquisition of undeveloped land for construction of such buildings. INDUS competes for the acquisition of industrial/logistics properties with REITs, institutional investors, such as pension funds, private real estate investment funds, insurance company investment accounts and public and private investment companies, individuals and other entities engaged in real estate investment activities. Some of these competitors have greater financial resources than INDUS, and may be able to accept more risk, including risk related to the creditworthiness of tenants or the degree of leverage they may be willing to take on. Competitors for acquisitions may also have advantages such as a lower cost of capital or greater operating efficiencies associated with being a larger entity.

Government Regulations

Environmental Matters

Under various federal and state laws, ordinances and regulations, an owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances or petroleum product releases at such property and

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may be held liable to a governmental entity or to third parties for property damage and for investigation and cleanup costs incurred by such parties in connection with contamination. The cost of investigation, remediation or removal of such substances may be substantial, and the presence of such substances, or the failure to remediate properly such substances, may adversely affect the owner’s ability to sell or rent such property or to borrow using such property as collateral. In connection with the ownership (direct or indirect), operation, management and development of real estate properties, INDUS may be considered an owner or operator of such properties or as having arranged for the disposal or treatment of hazardous or toxic substances and, therefore, potentially liable for removal or remediation costs, as well as certain other related costs, including governmental fines and injuries to persons and property. The value of INDUS’s land may be affected by the presence of residual chemicals from the prior use of the land for farming, principally on a portion of the land that is intended for residential use. In the event that INDUS is unable to remediate adequately any of its land intended for residential use, its ability to develop or sell the land for its intended purposes would be materially affected.

INDUS periodically reviews its properties for the purpose of evaluating such properties’ compliance with applicable federal and state environmental laws. At this time, management does not anticipate experiencing, in the next twelve months, any material expense in complying with such laws on any of its properties. INDUS may incur remediation costs in the future in connection with its development operations. Such costs are not expected to be significant as compared to expected proceeds from development projects or sales of real estate assets.

Americans with Disabilities Act and Fire, Safety and Other Land Use Regulations

All of INDUS’s properties are required to comply with the Americans with Disabilities Act of 1990, as amended ("ADA"). The ADA generally requires that places of public accommodation comply with federal requirements related to access and use by people with disabilities. Compliance with the ADA requirements may be costly and could require removal of access barriers, and non-compliance could result in imposition of fines by the U.S. government and/or an award of damages to private litigants. In addition, INDUS is required to operate its properties in compliance with fire and safety regulations, building codes and other land use regulations adopted by governmental agencies and bodies and applicable to INDUS’s properties, which may require capital expenditures.

Local Zoning Ordinances, Wetlands Restrictions, Storm Water Regulations and Open Space Preservation

INDUS’s operations are subject to various governmental regulations that affect its real estate development activities, such as local zoning ordinances, wetlands restrictions, storm water regulations, open space preservation initiatives, traffic considerations, and other restrictions to development imposed by governmental agencies.

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ITEM 1A. RISK FACTORS.

INDUS’s real estate business is subject to a number of risks. The risk factors discussed below are those that management deems to be material, but they may not be the only risks facing INDUS. Additional risks not currently known or currently deemed not to be material may also impact INDUS. If any of the following risks occur, INDUS’s business, financial condition, operating results, cash flows and ability to pay dividends could be adversely affected. Investors should also refer to INDUS’s quarterly reports on Form 10-Q for any material updates to these risk factors.

Risks Related to INDUS’s Business and Properties

The COVID-19 pandemic has caused and could continue to cause disruptions to INDUS’s business, and its financial condition, results of operations or stock price may be adversely impacted by the COVID-19 pandemic.

In December 2019, a novel strain of coronavirus (“COVID-19”) surfaced in Wuhan, China. During and subsequent to fiscal 2020, the world (including all states in which INDUS’s buildings are located) has been impacted by COVID-19, including government restrictions to minimize the spread of this virus and ongoing effects of the pandemic. Such restrictions, including the institution of quarantines, travel restrictions, mandatory closure or reduced capacity of

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businesses and other measures have caused global business disruptions and significant volatility in U.S. and international debt and equity markets.

INDUS has directly experienced, and may continue to experience, disruptions and other impacts to its business as a result of the ongoing pandemic and actions taken to mitigate its effects, including, without limitation:

These and other factors may continue to impact INDUS, including, without limitation, by delaying or preventing INDUS from completing current or planned development projects, or monetizing our current or future real estate assets; reducing INDUS’s ability to lease vacant space, particularly in its office/flex portfolio; restricting INDUS’s ability to travel to, locate and execute on acquisitions or enter new markets; and reducing its access to debt and equity capital.

There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. economy. The extent to which the coronavirus pandemic further impacts INDUS’s business or ultimately impacts its results of operations, financial condition and stock price and its ability to develop, acquire, dispose or lease properties for its portfolio, will depend on numerous evolving factors that are highly uncertain and which INDUS may not be able to predict, including: the duration and scope of the pandemic; governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic; the availability and effectiveness of vaccines to combat COVID-19; the impact on economic activity from the pandemic and actions taken in response, including ongoing travel restrictions; the impact on the availability and pricing of certain materials and supplies; the impact on INDUS’s employees; any other operational disruptions or difficulties INDUS may face; the effect on INDUS’s tenants and their businesses; the ability of tenants to pay their rent; any closures of our tenants’ facilities, including, without limitation, due to shutdowns that may be requested or mandated by governmental authorities; the ability of prospective tenants to inspect vacant space in our buildings; and INDUS’s ability to complete sales of real estate assets, acquisitions or planned construction and development. Any of these events could materially adversely impact INDUS’s business, financial condition, results of operations or stock price.

INDUS’s real estate portfolio is concentrated in the industrial real estate sector, and its business would be adversely affected by an economic downturn in that sector.

As of November 30, 2020, 91.5% of INDUS’s square footage was classified as industrial/logistics space . This level of concentration exposes INDUS to the risk of economic downturns in the industrial real estate sector to a greater extent than if its properties were more diversified across other sectors of the real estate industry. In particular, an economic downturn affecting the leasing market for industrial properties could have a material adverse effect on

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INDUS’s results of operations, cash flows, financial condition, ability to satisfy debt obligations and ability to pay dividends to stockholders.

INDUS’s real estate portfolio is geographically concentrated, which causes it to be especially susceptible to adverse developments in those markets.

In addition to general, regional, national and international economic conditions, INDUS’s operating performance is impacted by the economic conditions of the specific geographic markets in which it has concentrations of properties. The portfolio includes holdings in Connecticut, the Lehigh Valley of Pennsylvania, the greater Charlotte, North Carolina area and Orlando, Florida, which represented 53%, 29%, 12% and 6% of INDUS’s total portfolio by square footage, respectively, as of November 30, 2020. This geographic concentration could adversely affect INDUS’s operating performance if conditions become less favorable in any of the states or regions in which it has a concentration of properties. It is possible that some or all of its markets will not grow or that underlying real estate fundamentals will not be favorable to owners and operators of properties. INDUS’s operations may also be adversely affected if competing properties are built in its target markets. The construction of new facilities by competitors would increase capacity in the marketplace, and an increase in the amount of vacancies in competitors’ properties and negative absorption of space could result in INDUS experiencing longer times to lease vacant space, eroding lease rates or hindering renewals by existing tenants. Any adverse economic or real estate developments in INDUS’s target markets, or any decrease in demand for industrial space resulting from the regulatory environment, business climate or energy or fiscal problems in these markets, could materially and adversely impact INDUS’s results of operations, cash flows, financial condition, ability to satisfy debt obligations and ability to pay dividends to stockholders.

INDUS’s ability to grow its portfolio partially depends on its ability to develop properties, which may suffer under certain circumstances.

INDUS intends to continue to develop properties when warranted by its assessment of market conditions. INDUS’s general construction and development activities include the risks that:

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The actual initial full year stabilized cash net operating income yields from INDUS’s planned development and acquisition activities may not be consistent with the underwritten stabilized Cash NOI yield ranges set forth in this Annual Report.

As a part of INDUS’s standard development and acquisition underwriting process, INDUS analyzes the targeted initial full year stabilized Cash NOI yield for each development project and acquisition target and establishes a range of initial full year stabilized Cash NOI yields, which it refers to as “underwritten stabilized Cash NOI yields.” Underwritten stabilized Cash NOI yields are calculated as a development project’s or acquisition’s initial full year stabilized Cash NOI as a percentage of its estimated total investment, including costs to stabilize the buildings to 95% occupancy (other than in connection with build-to-suit development projects and single tenant properties). INDUS calculates the targeted initial full year stabilized Cash NOI by subtracting the development project’s or acquisition’s estimated initial full year stabilized operating expenses, real estate taxes and non-cash rental revenue, including straight-line rents (before interest expense, income taxes, if any, and depreciation and amortization), from its estimated initial full year stabilized rental revenue.

INDUS cautions you not to place undue reliance on the underwritten stabilized Cash NOI yield ranges for its planned development and acquisition activities because they are based solely on INDUS’s estimates, using data available to it in its development and acquisition underwriting processes. INDUS’s total cost to complete a development project or acquisition may differ substantially from its estimates due to various factors, including unanticipated expenses, delays in the estimated start and/or completion date of planned development projects, effects of the COVID-19 pandemic and other contingencies. In addition, INDUS’s actual initial full year stabilized Cash NOI from its planned development and acquisition activities may differ substantially from its estimates based on numerous other factors, including delays and/or difficulties in leasing and stabilizing a development project or acquisition, failure to obtain estimated occupancy and rental rates, inability to collect anticipated rental revenues, tenant bankruptcies and unanticipated expenses of the development project or acquisition that INDUS cannot pass on to its tenants. It is possible that that the actual initial full year stabilized Cash NOI yield from INDUS’s planned development and acquisition activities will not be consistent with the underwritten stabilized Cash NOI yield ranges set forth in this Annual Report.

INDUS’s ability to achieve growth in its portfolio partially depends in part on INDUS’s ability to acquire properties, which may suffer under certain circumstances.

INDUS acquires individual properties and in the future may continue to acquire individual properties or portfolios of properties. INDUS’s acquisition activities and their success are generally subject to the following risks:

INDUS may acquire properties subject to liabilities and without any recourse, or with only limited recourse, with respect to unknown liabilities. As a result, if a liability were asserted against INDUS based upon ownership of those properties, INDUS might have to pay substantial sums to settle the liabilities, which could adversely affect its cash flow and financial position.

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Weakness in INDUS’s office/flex portfolio could negatively impact its business.

INDUS’s office/flex portfolio, which as of November 30, 2020 comprised 8.5% of its total square footage and was 71% occupied, is concentrated in the north submarket of Hartford, Connecticut. The demand for office/flex space in this market is weak and competitive, with market vacancy in excess of 30% as of December 31, 2020, according to the Q4 2020 CBRE|New England Report, and such demand may continue to be impacted by effects of the COVID-19 pandemic. There is no certainty that INDUS will retain existing tenants or attract new tenants to its office/flex buildings. Re-leasing INDUS’s office/flex properties typically requires greater investment per square foot than for INDUS’s industrial/logistics properties and could negatively impact INDUS’s results of operations and cash flow.

INDUS may experience increased operating costs, which could adversely affect its results of operations.

INDUS’s properties are subject to increases in operating expenses such as real estate taxes, fuel, utilities, labor, repairs and maintenance, building materials and insurance, some of which have been and may continue to be impacted by the COVID-19 pandemic. While many of INDUS’s current tenants generally are obligated to pay a significant portion of these costs, it is possible that existing or new tenants will not agree to, or make, these payments. If operating expenses increase, INDUS may not be able to pass these costs on to its tenants and, therefore, any increases could have an adverse effect on INDUS’s results of operations and cash flow. Additionally, for space that has remained or remains unleased, INDUS has incurred, and will continue to incur, all of the building’s operating costs for the space without reimbursements from tenants.

INDUS relies on third-party managers for day-to-day property management of certain of its properties.

INDUS relies on local third-party managers for the day-to-day management of its properties in the Lehigh Valley of Pennsylvania, the greater Charlotte, North Carolina area and Orlando, Florida. To the extent that INDUS uses a third-party manager, the cash flows from its Lehigh Valley, greater Charlotte and Orlando properties may be adversely affected if the property manager fails to provide quality services. These third-party managers may fail to manage INDUS’s properties effectively or in accordance with their agreements with INDUS, may be negligent in their performance and may engage in criminal or fraudulent activity. If any of these events occur, INDUS could incur losses or face liabilities from the loss or injury to its property or to persons at its properties. In addition, disputes may arise between INDUS and these third-party managers, and INDUS may incur significant expenses to resolve those disputes, or terminate the relevant agreement with these third parties and locate and engage competent and cost-effective alternative service providers to manage the relevant properties. Additionally, third party managers may manage and own other properties that may compete with INDUS’s properties, which may result in conflicts of interest and decisions regarding the operation of INDUS’s properties that are not in INDUS’s best interests. INDUS has and likely will continue to rely on third-party managers in any new markets it enters through its acquisition activities.

Unfavorable events affecting INDUS’s existing and potential tenants and its properties, or negative market conditions that may affect INDUS’s existing and potential tenants, could have an adverse impact on INDUS’s ability to attract new tenants, re-let space, collect rent and renew leases, and thus could have a negative effect on INDUS’s results of operations and cash flow.

The substantial majority of INDUS’s revenue is derived from lease revenue from its industrial/logistics and office/flex buildings. INDUS’s results of operations and cash flows depend on its ability to lease space to tenants on economically favorable terms. Therefore, INDUS has and could in the future be adversely affected by various factors and events over which INDUS has limited control, such as:

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INDUS’s tenants have and may in the future be unable to pay rent due to INDUS. INDUS may be forced to evict the tenant, or engage in other remedies, similar to the rent relief and deferral agreements INDUS has been required to consider and grant during fiscal 2020, which may be expensive and time consuming and may adversely affect INDUS’s results of operation and cash flows.

If INDUS’s tenants do not renew their leases as they expire, INDUS may not be able to re-lease the space. Furthermore, leases that are renewed, or new leases for space that is re-let, may have terms that are less economically favorable to INDUS than current lease terms, or may require INDUS to incur significant costs, such as for renovations, tenant improvements or lease transaction costs.

Any of these events could adversely affect INDUS’s results of operations and cash flows and its ability to make dividend payments and service its indebtedness.

A significant portion of INDUS’s costs, such as real estate taxes, insurance costs, and debt service payments, are fixed, which means that they generally are not reduced when circumstances cause a decrease in cash flow from its properties.

Declining real estate valuations and any related impairment charges could materially adversely affect INDUS’s financial condition, results of operations, cash flows, ability to satisfy debt obligations and ability to pay dividends on, and the per share trading price of, its common stock.

INDUS reviews the carrying value of its properties when circumstances, such as adverse market conditions, indicate a potential impairment may exist. INDUS bases its review on an estimate of the future cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition on an undiscounted basis. INDUS considers factors such as future operating income, trends and prospects, as well as the effects of leasing demand, competition and other factors. With respect to undeveloped land, INDUS evaluates the cash flow to be generated from the potential use or sale of such land as compared to the costs, including entitlement and infrastructure costs for the intended use or costs required to prepare the land for sale. If INDUS’s evaluation indicates that it may be unable to recover the carrying value of a real estate investment, an impairment loss would be recorded to the extent that the carrying value exceeds the estimated fair value of the property.

Impairment losses have a direct impact on INDUS’s results of operations because recording an impairment loss results in an immediate negative adjustment to INDUS’s operating results. The evaluation of anticipated cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results in future periods. A worsening real estate market may cause INDUS to reevaluate the assumptions used in its impairment analysis. Impairment charges could materially adversely affect INDUS’s financial condition, results of operations, cash flows and ability to pay dividends on, and the per share trading price of, its common stock.

INDUS’s use of nonrecourse mortgage loans and construction loans could have a material adverse effect on its financial condition.

As of November 30, 2020, INDUS had indebtedness under nonrecourse mortgage loans of approximately $163.2 million, collateralized by approximately 94% of the total square footage of its industrial/logistics and office/flex buildings. If a significant number of INDUS’s tenants were unable to meet their obligations to INDUS or if INDUS were unable to lease a significant amount of space in its properties on economically favorable lease terms, there would be a risk that INDUS would not have sufficient cash flow from operations for payments of required principal and interest on these loans. If INDUS was unable to make the payments and was to default, the property collateralizing the mortgage loan could be foreclosed upon, and INDUS’s financial condition and results of operations would be adversely affected. In addition, two of INDUS’s nonrecourse mortgage loans contain cross default provisions. A default under a mortgage loan that has cross default provisions may cause INDUS to automatically default on another loan.

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INDUS’s use of financing arrangements that include balloon payment obligations could have a material adverse effect on its financial condition.

Approximately 95% of the principal balance of INDUS’s nonrecourse mortgage loans as of November 30, 2020 require a lump-sum or “balloon” payment at maturity. INDUS’s ability to make a balloon payment at maturity may be uncertain and may depend upon its ability to obtain additional financing. At the time the balloon payment is due, INDUS may or may not be able to refinance the balloon payment on terms as favorable as the original mortgage terms. If INDUS were to be unable to refinance the balloon payment, then it may be forced to sell the property or pay the balloon payment using its existing cash on hand or other liquidity sources, or the property could be foreclosed. Any balloon payments that INDUS makes out of its existing cash or liquidity may have a material adverse effect on its financial condition and leave it with insufficient cash to invest in other properties, pay dividends to stockholders or meet its other obligations.

INDUS’s failure to effectively hedge against interest rate fluctuation could have a material adverse effect on its financial condition.

INDUS has entered into several interest rate swap agreements to hedge its interest rate exposures related to its variable rate nonrecourse mortgages on certain of its industrial/logistics and office/flex buildings. These agreements have costs and involve the risks that these arrangements may not be effective in reducing INDUS’s exposure to interest rate fluctuations and that a court could rule that such agreements are not legally enforceable. The failure to hedge effectively against interest rate fluctuations may have a material adverse effect on INDUS’s results of operations if interest rates were to rise materially. Additionally, any settlement charges incurred to terminate an interest rate swap agreement may result in increased interest expense, which may also have an adverse effect on INDUS’s results of operations.

INDUS may suffer adverse effects as a result of the terms of and covenants relating to its credit facilities.

INDUS’s continued ability to borrow under its credit facilities with Webster Bank, N.A. (“Webster Bank”) including its $19.5 million revolving credit facility and its $15 million acquisition credit facility, is subject to compliance with certain financial and other covenants. INDUS’s failure to comply with such covenants under any of its credit facilities could cause a default under such credit facility, and INDUS may then be required to repay amounts outstanding, if any, under such facility with capital from other sources. Under those circumstances, other sources of capital may not be available to INDUS, or may be available only on unattractive terms.

INDUS’s risk related to the discontinuation of LIBOR.

In July 2017, the Financial Conduct Authority in the United Kingdom, which regulates LIBOR, announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2023. It is expected that a transition away from the widespread use of LIBOR to alternative interest rates will occur over the course of the next two years. As of November 30, 2020, INDUS had approximately $98.1 million of floating rate debt under nonrecourse mortgage loans, the interest on which is based on LIBOR, however, INDUS entered into interest rate swap agreements whereby the floating LIBOR rates under all mortgage loans are hedged, effectively fixing the interest rate on those loans.

In the event that LIBOR is no longer available, the revolving credit line provides for a transition to a comparable rate of interest determined by Webster Bank and the Acquisition Credit Line contemplates that Webster Bank will transition to an alternate rate of interest to the LIBOR rate taking into account then prevailing standards in the market for determining interest rates for commercial loans made by financial institutions in the United States at such time. Such an event would not affect INDUS’s ability to borrow or maintain already outstanding borrowings, but the replacement rate or alternate base rate could be higher or more volatile than LIBOR prior to its discontinuance. The full impact of the expected transition away from LIBOR and the potential discontinuation of LIBOR after 2023 is unclear, but these changes could adversely affect INDUS’s cash flow, financial condition and results of operations.

INDUS relies on key personnel.

INDUS’s success depends to a significant degree upon the contribution of certain key personnel, including but not limited to INDUS’s President and Chief Executive Officer, INDUS Realty, LLC’s Executive Vice President and its Senior Vice President of Construction and Development. If any key personnel of INDUS or its subsidiaries were to cease

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employment, INDUS’s operating results could suffer. INDUS’s ability to retain its senior management group or attract suitable replacements should any members of the senior management group leave is dependent on the competitive nature of the employment market. The loss of services from key members of the management group or a limitation on their availability could adversely affect INDUS’s results of operations and cash flows. INDUS has not obtained and does not expect to obtain key man life insurance on any of its key personnel.

Risks Related to the Real Estate Industry

Changing or adverse political and economic conditions, credit markets or other events may impact INDUS’s results of operations and financial condition.

INDUS’s real estate business may be affected by market conditions, political and economic uncertainty experienced by the U.S. economy as a whole, conditions in the credit markets, by local economic conditions in the markets in which its properties are located or by other global and domestic events, such as the COVID-19 pandemic. Such conditions may impact INDUS’s results of operations, financial condition or ability to expand its operations and pay dividends to stockholders as a result of the following:

An increase in interest rates could adversely impact INDUS’s ability to refinance existing debt or to finance new developments and acquisitions.

Rising interest rates could limit INDUS’s ability to refinance existing debt on favorable terms, or at all, when it matures. Interest rates have been in recent years, and currently remain, low by historical standards. However, the Federal Reserve raised its benchmark interest rate multiple times in 2017 and 2018, and, although rates were reduced during 2020 in connection with the COVID-19 pandemic, further interest rate increases may occur in the future. If interest rates increase, so will INDUS’s interest costs, which would adversely affect INDUS’s cash flow and could affect INDUS’s ability to pay principal and interest on its debt.

From time to time, INDUS enters into interest rate swap agreements and other interest rate hedging contracts, including swaps, caps and floors. These agreements, which are intended to lessen the impact of rising interest rates on INDUS, expose INDUS to the risks that the other parties to the agreements might not perform, or that INDUS could incur significant costs associated with the settlement of the agreements, or that the agreements might be unenforceable and the underlying transactions would fail to qualify as highly-effective cash flow hedges under relevant accounting guidance.

In addition, an increase in interest rates could decrease the amounts third parties are willing to lend to INDUS for use towards potential acquisitions or development costs, thereby limiting its ability to grow its property portfolio.

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INDUS may not be able to compete successfully with other entities that operate in its industry.

The market for leasing industrial/logistics space and office/flex space is highly competitive. INDUS competes for tenants with owners of numerous properties in the areas where INDUS’s buildings are located. Some of INDUS’s competitors for tenants have greater financial resources than INDUS and may be able to offer prospective tenants more attractive financial or other terms than INDUS is able to offer and may be able to accept more risk related to the creditworthiness of tenants. INDUS’s competes for tenants on the bases of location, price, availability of space, convenience and amenities.

There is a great amount of competition for the acquisition of industrial/logistics buildings and for the acquisition of undeveloped land for construction of such buildings. INDUS competes for the acquisition of industrial/logistics properties with other REITs, institutional investors, such as pension funds, private real estate investment funds, insurance company investment accounts, public and private investment companies, individuals and other entities engaged in real estate investment activities. Some of these competitors have greater financial resources than INDUS, and may be able to accept more risk, including risk related to the degree of leverage they may be willing to take on and risk related to acquiring properties that are not substantially leased. Competitors for acquisitions may also have advantages from a lower cost of capital or greater operating efficiencies associated with being a larger entity.

INDUS may experience increased costs or delays in supply of raw materials, labor and energy, which could adversely affect its operations.

INDUS’s construction activities and maintenance of its current portfolio could be adversely affected by increases in raw materials, labor or energy costs or disruption of these supply chains, including, without limitation, as a result of the COVID-19 pandemic. An increase in the cost of building new facilities could negatively impact INDUS’s future operating results through increased depreciation expense. An increase in construction costs would also require increased investment in INDUS’s real estate assets, which may lower the return on investment in new facilities. The lack of availability of raw materials or labor has impacted and could continue to impact INDUS, resulting in higher construction costs as a result of increases in wage rates and delay construction of new facilities. Furthermore, as petroleum and other energy costs increase, products used in the construction of INDUS’s facilities, such as steel, masonry, asphalt, cement and building products may increase. Additionally, government international trade policies, including implementation of or changes in tariffs, could impact the cost of products used in INDUS’s facilities. An increase in energy costs could increase INDUS’s building operating expenses and thereby lower INDUS’s operating results.

Real estate investments are illiquid, and INDUS may not be able to sell its properties when INDUS determines it is appropriate to do so.

Real estate properties are not as liquid as other types of investments and this lack of liquidity could limit INDUS’s ability to react promptly to changes in economic, financial, investment or other conditions, such as the COVID-19 pandemic. In addition, provisions of the Internal Revenue Code of 1986, as amended (the “Code”), provide for the ability to exchange “like-kind” property to defer income taxes related to a gain on sale (“1031 Like-Kind Exchange”). The illiquidity of real estate properties may limit INDUS’s ability to find a replacement property to effectuate an exchange.

Potential environmental liabilities could result in substantial costs.

INDUS has properties in Connecticut, the Lehigh Valley of Pennsylvania, the greater Charlotte area in North Carolina and Orlando, Florida in addition to extensive land holdings in Connecticut, Massachusetts and northern Florida. Under federal, state and local environmental laws, ordinances and regulations, INDUS may be required to investigate and clean up the effects of releases of hazardous substances or petroleum products at its properties because of its current or past ownership or operation of the real estate. If previously unidentified environmental problems arise, INDUS may have to make substantial payments, which could adversely affect its cash flow. As an owner or operator of properties, INDUS may have to pay for investigation and clean-up costs incurred in connection with a contamination. The law typically imposes cleanup responsibility and liability regardless of whether the owner or operator knew of or caused the contamination. Changes in environmental regulations may impact the development potential of INDUS’s undeveloped land or could increase operating costs due to the cost of complying with new regulations.

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Compliance with the Americans with Disabilities Act and fire, safety and other regulations may require INDUS to make expenditures that adversely impact INDUS’s operating results.

All of INDUS’s properties are required to comply with the Americans with Disabilities Act ("ADA"). The ADA generally requires that places of public accommodation comply with federal requirements related to access and use by people with disabilities. Compliance with the ADA requirements could require removal of access barriers, and non-compliance could result in imposition of fines by the U.S. government or an award of damages to private litigants, or both. Expenditures related to complying with the provisions of the ADA could adversely affect INDUS’s results of operations and financial condition. In addition, INDUS is required to operate its properties in compliance with fire and safety regulations, building codes and other land use regulations, as they may continue to be adopted by governmental agencies and bodies and become applicable to INDUS’s properties. INDUS has made and may continue to be required to make substantial capital expenditures to comply with those requirements and these expenditures could have a material adverse effect on INDUS’s operating results and financial condition and INDUS’s ability to satisfy debt obligations and issue dividends to stockholders.

Governmental regulations and control could adversely affect INDUS’s real estate development activities.

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INDUS’s operations are subject to governmental regulations that affect real estate development, such as local zoning ordinances, wetlands restrictions, storm water regulations and open space preservation initiatives. Any changes in regulations regarding these matters may impact the ability of INDUS to develop its properties or increase INDUS’s costs of development. Subdivision and other residential development may also be affected by the potential adoption of initiatives meant to limit or concentrate residential growth. Commercial and industrial development activities of INDUS’s undeveloped land may also be affected by traffic considerations, potential environmental issues, community opposition and other restrictions to development imposed by governmental agencies.

Uninsured losses or a loss in excess of insured limits could adversely affect INDUS’s business, results of operations and financial condition.

INDUS carries comprehensive insurance coverage, including property, liability, terrorism and loss of rental revenue. The insurance coverage contains policy specifications and insured limits. However, there are certain losses that are not generally insured against or that are not fully insured against. If an uninsured loss or a loss in excess of insured limits occurs with respect to one or more of INDUS’s properties, INDUS could experience a significant loss of capital invested in and potential revenue from the properties affected.

Information technology (“IT”) security breaches and other incidents could disrupt INDUS’s operations, compromise confidential information maintained by INDUS, and damage INDUS’s reputation, all of which could negatively impact INDUS’s business, results of operations and the per share trading price of its common stock.

As part of INDUS’s normal business activities, it uses IT and other computer resources to carry out important operational activities and to maintain its business records. INDUS’s computer systems, including its backup systems, are subject to interruption or damage from power outages, computer and telecommunications failures, computer viruses, security breaches (including through cyber-attack and data theft), usage errors and catastrophic events, such as fires, floods, tornadoes and hurricanes. If INDUS’s computer systems and its backup systems are compromised, degraded, damaged or breached, or otherwise cease to function properly, INDUS could suffer interruptions in its operations or unintentionally allow misappropriation of proprietary or confidential information, which could damage its reputation and require INDUS to incur significant costs to remediate or otherwise resolve these issues. It is possible that the security efforts and measures INDUS has implemented will not be effective or that attempted security breaches or disruptions will be successful or damaging.

INDUS is exposed to the potential impacts of future climate change and climate-change related risks.

INDUS is exposed to potential physical risks from possible future changes in climate. INDUS’s properties may be exposed to rare catastrophic weather events, such as severe storms, hurricanes and/or floods. If the frequency of extreme weather events increases due to climate change, INDUS’s exposure to these events could increase.

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As a real estate owner and developer, INDUS may be adversely impacted in the future by stricter energy efficiency standards for buildings. INDUS may be required to make improvements to its existing properties to meet such standards and the costs to meet these standards may increase INDUS’s costs for new construction.

INDUS’s properties may contain or develop harmful mold or suffer from other air quality issues, which could lead to liability for adverse health effects and costs of remediation.

When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed. Some molds may produce airborne toxins or irritants. Indoor air quality issues can also stem from inadequate ventilation, chemical contamination from indoor or outdoor sources, and other biological contaminants such as pollen, viruses and bacteria. Indoor exposure to airborne toxins or irritants above certain levels can be alleged to cause a variety of adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of significant mold or other airborne contaminants at any of INDUS’s properties could require INDUS to undertake a costly remediation program to contain or remove the mold or other airborne contaminants from the affected property or increase indoor ventilation. In addition, the presence of significant mold or other airborne contaminants could expose INDUS to liability from its tenants, employees of its tenants or others if property damage or personal injury is alleged to have occurred.

Risks Related to INDUS’s Organization and Structure

INDUS’s rights and the rights of INDUS stockholders to take action against its directors and officers are limited.

Maryland law provides that a director has no liability in the capacity as a director if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in the company’s best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. As permitted by Maryland law, INDUS’s charter limits the liability of its directors and officers to the Company and its stockholders for money damages, except for liability resulting from:

In addition, INDUS’s charter requires it to indemnify its directors and officers for actions taken by them in those capacities and to pay or reimburse their reasonable expenses in advance of final disposition of a proceeding to the maximum extent permitted by Maryland law, and INDUS has entered into indemnification agreements with its directors and executive officers. As a result, INDUS and its stockholders may have more limited rights against its directors and officers than might otherwise exist under common law. Accordingly, in the event that any of INDUS’s directors or officers are exculpated from, or indemnified against, liability but whose actions impede the Company’s performance, INDUS’s stockholders’ ability to recover damages from that director or officer will be limited.

INDUS’s charter and bylaws contain provisions that may delay, defer or prevent an acquisition of its common stock or a change in control.

INDUS’s charter and bylaws contain a number of provisions, the exercise or existence of which could delay, defer or prevent a transaction or a change in control that might involve a premium price for its stockholders or otherwise be in their best interests, including the following:

INDUS’s charter contains restrictions on the ownership and transfer of its stock.

In order for INDUS to qualify as a REIT, no more than 50% of the value of outstanding shares of its stock may be owned, beneficially or constructively, by five or fewer individuals at any time during the last half of each taxable year other than the first year for which INDUS elects to be taxed as a REIT. Subject to certain exceptions, INDUS’s charter prohibits any stockholder from owning, beneficially or constructively, more than 5.5% in value or in number of shares, whichever is more restrictive, of the outstanding shares of its common stock, or 5.5% in value of the aggregate of the outstanding shares of all classes or series of our stock. INDUS refers to these restrictions collectively as the “ownership limits.” The constructive ownership rules under the Code are complex and may cause the outstanding stock owned by a

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group of related individuals or entities to be deemed to be constructively owned by one individual or entity. As a result, the acquisition of less than 5.5% of INDUS’s outstanding common stock or the outstanding shares of all classes or series of INDUS’s stock by an individual or entity could cause that individual or entity or another individual or entity to own constructively in excess of the relevant ownership limits. INDUS’s charter also prohibits any person from owning shares of INDUS’s stock that could result in INDUS being “closely held” under Section 856(h) of the Code or otherwise cause INDUS to fail to qualify as a REIT. Any attempt to own or transfer shares of INDUS’s common stock or of any of INDUS’s other capital stock in violation of these restrictions may result in the shares being automatically transferred to a charitable trust or may be void. These ownership limits may prevent a third-party from acquiring control of INDUS if INDUS’s Board does not grant an exemption from the ownership limits, even if INDUS’s stockholders believe the change in control is in their best interests. Although it is under no continuing obligation to do so, INDUS’s Board intends to grant some limited exemptions from the ownership limits applicable to certain holders of its common stock, subject to certain initial and ongoing conditions designed to protect INDUS’s status as a REIT, including, if deemed advisable, the receipt of an Internal Revenue Service, or IRS, private letter ruling or an opinion of counsel.

INDUS’s Board has the power to cause the Company to issue additional shares of INDUS stock without stockholder approval.

INDUS’s charter authorizes the Company to issue additional authorized but unissued shares of common or preferred stock. In addition, INDUS’s Board may, without stockholder approval, amend the Company’s charter to increase the aggregate number of INDUS shares of common stock or the number of shares of stock of any class or series that INDUS has the authority to issue and classify or reclassify any unissued shares of common or preferred stock and set the preferences, rights and other terms of the classified or reclassified shares. As a result, INDUS’s Board may establish a class or series of shares of common or preferred stock that could delay or prevent a transaction or a change in control that might involve a premium price for the Company’s shares of common stock or otherwise be in the best interests of INDUS’s stockholders.

Certain provisions of Maryland law may limit the ability of a third-party to acquire control of INDUS.

Certain provisions of the Maryland General Corporation Law (the “MGCL”) may have the effect of inhibiting a third-party from acquiring INDUS or of impeding a change of control under circumstances that otherwise could provide INDUS’s common stockholders with the opportunity to realize a premium over the then-prevailing market price of such shares, including:

Pursuant to the Maryland Business Combination Act (the “MBCA”), INDUS’s Board has by resolution exempted from the provisions of the MBCA business combinations between any other person and INDUS. INDUS’s bylaws contain a provision exempting from the Maryland Control Share Acquisition Act any and all acquisitions by any person of shares of INDUS stock. There can be no assurance that these exemptions or resolutions will not be amended or eliminated at any time in the future.

Additionally, Title 3, Subtitle 8 of the MGCL permits INDUS’s Board, without stockholder approval and regardless of what is currently provided in INDUS’s charter or bylaws, to implement certain takeover defences, such as a classified board, some of which INDUS does not have.

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INDUS’s bylaws designate the Circuit Court for Baltimore City, Maryland, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by INDUS stockholders, which could limit INDUS’s stockholders’ ability to bring a claim in a judicial forum that the stockholders believe is a more favorable judicial forum for disputes with INDUS or its directors, officers or other employees.

INDUS’s bylaws provide that, subject to limited exceptions, the Circuit Court for Baltimore City, Maryland, is 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 INDUS’s behalf, other than actions arising under federal securities laws, (c) any action asserting a claim of breach of any duty owed by any of INDUS’s directors, officers or other employees to INDUS or its stockholders, (d) any action asserting a claim against INDUS or any of its directors, officers or other employees arising pursuant to any provision of the MGCL, INDUS’s charter or its bylaws or (e) any action asserting a claim against INDUS or any of its directors, officers or other employees that is governed by the internal affairs doctrine. This provision may limit a stockholder’s ability to bring a claim in a judicial forum that it believes is more favorable for disputes against INDUS or its directors, officers or employees, which may discourage such lawsuits against INDUS and its directors, officers and other employees.

The concentrated ownership of INDUS common stock by members of the Cullman and Ernst families may limit other INDUS stockholders’ ability to influence INDUS’s corporate and management policies.

Members of the Cullman and Ernst families (the “Cullman and Ernst Group”), which include Michael S. Gamzon, a director and INDUS’s President and Chief Executive Officer and Frederick M. Danziger and Edgar M. Cullman, Jr., directors of INDUS, members of their families and trusts for their benefit, partnerships in which they own substantial interests and charitable foundations on whose boards of directors they sit, owned, directly or indirectly, approximately 40.2% of the outstanding common stock of INDUS as of November 30, 2020. There is an informal understanding that the persons and entities included in the Cullman and Ernst Group will vote together the shares owned by each of them. As a result, the Cullman and Ernst Group may effectively control the determination of INDUS’s corporate and management policies and may limit other INDUS stockholders’ ability to influence INDUS’s corporate and management policies.

INDUS’s Board may change its investment and financing policies without stockholder approval and INDUS may become more highly leveraged, which may increase INDUS’s risk of default under its debt obligations.

INDUS’s investment and financing policies are exclusively determined by its Board. Accordingly, INDUS’s stockholders do not control these policies. Further, INDUS’s charter and bylaws do not limit the amount or percentage of indebtedness, funded or otherwise, that INDUS may incur. INDUS’s Board may alter or eliminate its current policy on borrowing at any time without stockholder approval. If this policy changed, INDUS could become more highly leveraged which could result in an increase in its debt service. Higher leverage also increases the risk of default on INDUS’s obligations. In addition, a change in INDUS’s investment policies, including the manner in which INDUS allocates its resources across the portfolio or the types of assets in which INDUS seeks to invest, may increase its exposure to interest rate risk, real estate market fluctuations and liquidity risk. Changes to INDUS’s policies with regard to the foregoing could adversely affect INDUS’s financial condition, results of operations, cash flows and its ability to pay dividends on, and the per share trading price of, its common stock.

Risks Related to INDUS’s REIT Structure

If INDUS fails to remain qualified as a REIT, INDUS would be subject to corporate income taxes and would not be able to deduct distributions to stockholders when computing its taxable income.

INDUS currently operates in a manner that is intended to allow it to qualify as a REIT for federal income tax purposes commencing with its taxable year beginning January 1, 2021. However, it is possible that INDUS will not have qualified or will not remain qualified as a REIT. Qualification as a REIT requires INDUS to satisfy numerous requirements established under highly technical and complex sections of the Code, which may change from time to time and for which there are only limited judicial and administrative interpretations and involves the determination of various factual matters and circumstances not entirely within INDUS’s control. If INDUS fails to qualify as a REIT in any taxable year:

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As a result of all these factors, INDUS’s failure to qualify as a REIT also could impair its ability to expand its business and raise capital. Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations.

In order to qualify as a REIT, INDUS must satisfy a number of requirements, including requirements regarding the ownership of its stock, requirements regarding the composition of its assets and requirements regarding the sources of its gross income. Also, INDUS must make distributions to stockholders aggregating annually at least 90% of its REIT taxable income, determined without regard to the dividends paid deduction and excluding net capital gains. In addition, legislation, new regulations, administrative interpretations or court decisions may materially adversely affect INDUS investors, its ability to qualify as a REIT for federal income tax purposes or the desirability of an investment in a REIT relative to other investments.

Even if INDUS remains qualified as a REIT, it may owe taxes under certain circumstances.

Even if INDUS qualifies as a REIT, it will be subject to certain U.S. federal, state and local taxes on its income and property, including on taxable income that the Company does not distribute to its stockholders, and on net income from certain “prohibited transactions”. In addition, if INDUS fails to qualify as a REIT but nevertheless qualifies for relief under certain statutory relief provisions, it may be required to pay an excise or penalty tax (which could be significant in amount) in order to utilize one or more such relief provisions under the Code to maintain its qualification as a REIT. Moreover, INDUS’s taxable REIT subsidiary will be subject to tax as a regular corporation in the jurisdictions it operates. Furthermore, if INDUS sells an asset it held on the first day of the first taxable year for which it qualifies as a REIT (i.e., January 1, 2021) during the five-year period beginning on such first day, INDUS generally will be required to pay regular U.S. federal corporate income tax on the gain to the extent of the excess of (i) the fair market value of the asset, over (ii) the adjusted tax basis of the asset, determined as of the first day of the first taxable year for which INDUS qualifies as a REIT.

To maintain INDUS’s REIT status, INDUS may be forced to obtain capital during unfavorable market conditions, which could adversely affect its overall financial performance.

In order to qualify as a REIT, INDUS will generally be required each year to distribute to its stockholders at least 90% of its REIT taxable income (determined without regard to the dividends paid deduction and by excluding any net capital gain), and INDUS will be subject to tax to the extent its taxable income (including net capital gain) is not fully distributed. In addition, INDUS will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions it pays in any calendar year are less than the sum of 85% of its ordinary income, 95% of its net capital gains, and 100% of its undistributed income from prior years. Accordingly, INDUS may not be able to retain sufficient cash flow from operations to meet its debt service requirements and repay its debt. Therefore, INDUS may need to raise additional capital for these purposes, and INDUS cannot assure that a sufficient amount of capital will be available to INDUS on favorable terms, or at all, when needed. Further, in order to maintain its REIT qualification and avoid the payment of income and excise taxes, INDUS may need to borrow funds to meet the REIT distribution requirements even if the then prevailing market conditions are not favorable for these borrowings. These borrowing needs could result from, among other things, differences in timing between the actual receipt of cash and inclusion of income for federal income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required debt or amortization payments. These sources, however, may not be available on favorable terms or at all. INDUS’s access to third-party sources of capital depends on a number of factors, including the market’s perception of INDUS’s growth potential, INDUS’s current debt levels, the per share trading price of INDUS’s common stock, and INDUS’s current and potential future earnings. It is possible that INDUS will not have access to such capital on favorable terms at the desired times, or at all, which may cause INDUS to curtail its investment activities and/or to dispose of assets at inopportune times.

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There will be uncertainties relating to INDUS’s estimate of the E&P Distribution.

To qualify for taxation as a REIT effective for the year ended December 31, 2021, INDUS is required to distribute to its stockholders on or before December 31, 2021, its undistributed accumulated earnings and profits attributable to taxable periods ending prior to January 1, 2021, which is referred to as the “E&P Distribution.” INDUS believes that the total value of the E&P Distribution will be sufficient to fully distribute its accumulated earnings and profits and that a portion of the E&P Distribution will exceed its accumulated earnings and profits. However, the amount of INDUS’s accumulated earnings and profits is a complex factual and legal determination. INDUS may have less than complete information at the time it estimates its earnings and profits or may interpret the applicable law differently from the IRS. Substantial uncertainties exist relating to the computation of INDUS’s undistributed accumulated earnings and profits, including the possibility that the IRS could, in auditing tax years through 2020, successfully assert that INDUS’s taxable income should be increased, which could increase INDUS’s pre-REIT accumulated earnings and profits. Thus, INDUS could fail to satisfy the requirement that it distribute all of its pre-REIT accumulated earnings and profits by the close of its first taxable year as a REIT. Moreover, although there are procedures available to cure a failure to distribute all of its pre-REIT accumulated earnings and profits, INDUS cannot now determine whether it would be able to take advantage of them or the economic impact to INDUS of doing so.

INDUS’s taxable REIT subsidiaries will be subject to federal income tax, and INDUS will be required to pay a 100% penalty tax on certain income or deductions if its transactions with its taxable REIT subsidiaries are not conducted on arm’s length terms.

INDUS owns an interest in a taxable REIT subsidiary and may acquire securities in additional taxable REIT subsidiaries in the future. A taxable REIT subsidiary is an entity treated as a corporation for federal income tax purposes other than a REIT in which a REIT directly or indirectly holds stock, and that has made a joint election with such REIT to be treated as a taxable REIT subsidiary. If a taxable REIT subsidiary owns more than 35% of the total voting power or value of the outstanding securities of another corporation, such other corporation will also be treated as a taxable REIT subsidiary. Other than some activities relating to lodging and health care facilities, a taxable REIT subsidiary may generally engage in any business, including the provision of customary or non-customary services to tenants of its parent REIT. A taxable REIT subsidiary is subject to federal income tax as a regular C corporation. INDUS will be required to pay a 100% penalty tax on certain income or deductions if its transactions with its taxable REIT subsidiary are not conducted on an arm’s length basis.

REIT ownership limitations may restrict or prevent stockholders from engaging in certain transfers of INDUS’s common stock.

In order to satisfy the requirements for REIT qualification, no more than 50% in value of all classes or series of INDUS’s outstanding shares of stock may be owned, actually or constructively, by five or fewer individuals (as defined in the Code to include certain entities) at any time during the last half of each taxable year beginning with INDUS’s 2022 taxable year. To assist INDUS in satisfying this share ownership requirement, INDUS’s charter imposes ownership limits on its shares of stock. Under applicable constructive ownership rules, any shares of stock owned by certain affiliated owners generally would be added together for purposes of the common stock ownership limits. See the section entitled “Description of Capital Stock – Common Stock – Restrictions on Ownership and Transfer.” These ownership limitations may restrict or prevent stockholders from engaging in certain transfers of our common stock.

Complying with REIT requirements may cause INDUS to forego otherwise attractive opportunities or liquidate otherwise attractive investments.

To qualify as a REIT for federal income tax purposes, INDUS must continually satisfy tests concerning, among other things, the sources of its income, the nature and diversification of its assets, the amounts INDUS distributes to its stockholders and the ownership of its common stock. If INDUS fails to comply with one or more of the asset tests at the end of any calendar quarter, INDUS must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing its REIT qualification and suffering adverse tax consequences. In order to meet these tests, INDUS may be required to forego investments it might otherwise make or to liquidate otherwise attractive investments. Thus, compliance with the REIT requirements may hinder INDUS’s performance and reduce amounts available for distribution to its stockholders.

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The tax imposed on REITs engaging in “prohibited transactions” may limit INDUS’s ability to engage in transactions which would be treated as sales for federal income tax purposes.

Any gain that INDUS realizes on the sale of property (other than any foreclosure property) held as inventory or otherwise held primarily for sale to customers in the ordinary course of business, including its share of any such gain realized by its operating company, either directly or through its subsidiary partnerships, will be treated as income from a prohibited transaction that is subject to a 100% penalty tax, unless certain safe harbor exceptions apply. Although INDUS does not intend to hold any properties that would be characterized as held for sale to customers in the ordinary course of its business, such characterization is a factual determination and it is possible the IRS would not agree with INDUS’s characterization of its properties or that INDUS will not always be able to make use of the available safe harbors.

INDUS has not established a minimum distribution payment level, and INDUS may be unable to generate sufficient cash flows from its operations to make distributions to its stockholders at any time in the future.

INDUS is generally required to distribute to its stockholders at least 90% of its net taxable income (excluding net capital gains) each year to qualify as a REIT under the Code. To the extent INDUS satisfies the 90% distribution requirement but distributes less than 100% of its net taxable income (including net capital gains), INDUS will be subject to federal corporate income tax on its undistributed net taxable income. INDUS intends to distribute at least 100% of its net taxable income (including net capital gains). However, INDUS’s ability to make distributions to its stockholders may be adversely affected by the issues described in the risk factors set forth herein and in those incorporated herein by reference. Subject to satisfying the requirements for REIT qualification, INDUS intends over time to make regular quarterly distributions to its stockholders. INDUS’s Board has the sole discretion to determine the timing, form and amount of any distributions to its stockholders. INDUS’s Board makes determinations regarding distributions based upon, among other factors, its historical and projected results of operations, financial condition, cash flows and liquidity, satisfaction of the requirements for REIT qualification and other tax considerations, capital expenditure and other expense obligations, debt covenants, contractual prohibitions or other limitations and applicable law and such other matters as its Board may deem relevant from time to time. Among the factors that could impair INDUS’s ability to make distributions to its stockholders are:

As a result, it is possible that INDUS will not be able to continue to make distributions to its stockholders or that the level of any distributions INDUS does make to its stockholders will achieve a market yield or increase or even be maintained over time, any of which could materially and adversely affect the market price of INDUS shares of common stock. Distributions could be dilutive to INDUS’s financial results and may constitute a return of capital to its investors, which would have the effect of reducing each stockholder’s basis in its shares of common stock. INDUS also may need to borrow funds or use proceeds from the sale of assets to fund distributions.

Dividends payable by REITs, including INDUS, generally do not qualify for the reduced tax rates available for some dividends.

The maximum tax rate applicable to “qualified dividend income” payable to U.S. stockholders that are individuals, trusts and estates is 20%. Dividends payable by REITs, however, generally are not eligible for these reduced rates. Under the 2017 Tax Reform Act, however, U.S. stockholders that are individuals, trusts and estates generally may deduct up to 20% of the ordinary dividends (e.g., dividends not designated as capital gain dividends or qualified dividend income) received from a REIT for taxable years beginning after December 31, 2017 and before January 1, 2026. Although this deduction reduces the effective tax rate applicable to certain dividends paid by REITs (generally to 29.6% assuming the stockholder is subject to the 37% maximum rate), such tax rate is still higher than the tax rate applicable to corporate dividends that constitute qualified dividend income. Accordingly, investors who are individuals,

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trusts and estates may perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs.

Legislative or regulatory action affecting REITs could adversely affect INDUS or its stockholders.

In recent years, numerous legislative, judicial and administrative changes have been made to the federal income tax laws applicable to investments in REITs and similar entities. At any time, the federal income tax laws governing REITs or the administrative interpretations of those laws may be amended. Changes to the tax laws, regulations and administrative interpretations, which may have retroactive application, could adversely affect INDUS and may impact our taxation or that of its stockholders. Accordingly, it is possible that any such change will significantly affect INDUS’s ability to qualify for taxation as a REIT or the federal income tax consequences to INDUS of such qualification.

U.S. federal tax reform legislation could affect REITs generally, the geographic markets in which INDUS operates, its stock and its results of operations, both positively and negatively in ways that are difficult to anticipate.

As a REIT, INDUS is generally not required to pay federal taxes otherwise applicable to regular corporations (except for income generated by INDUS’s TRSs) if INDUS complies with the various tax regulations governing REITs. Stockholders, however, are generally required to pay taxes on REIT dividends. Tax reform legislation affects the way in which dividends paid on shares of our common stock are taxed and could impact INDUS’s stock price or how stockholders and potential investors view an investment in REITs generally. In addition, while certain elements of tax reform legislation may not impact INDUS directly as a REIT, they could impact the geographic markets in which INDUS operates, particularly affecting tenants of INDUS’s leased property and their corporate tax obligations, if any.

Risks Related to INDUS’s Common Stock

Issuances or sales of INDUS’s common stock or the perception that issuances or sales might occur could adversely affect the per share trading price of INDUS’s common stock.

INDUS’s ability to develop and acquire properties in part depends on INDUS’s access to capital, which may in the future include the issuance of common equity. INDUS’s Board can authorize the issuance of additional securities without stockholder approval. Furthermore, INDUS intends to have an active a shelf registration statement on Form S-3 that will allow it to offer and sell securities from time to time in one or more public offerings, including shares of its common stock.

The issuance or sale of INDUS common stock, including under INDUS’s shelf registration statement, in connection with future property, portfolio or business acquisitions, to repay indebtedness or for general corporate purposes, or the availability of shares for resale in the open market, could have an adverse effect on the per share trading price of INDUS’s common stock and would be dilutive to existing stockholders.

The exercise of any options or the issuance of any common stock granted to certain directors, executive officers and other employees under INDUS’s 2020 Incentive Award Plan or INDUS’s 2009 Stock Option Plan or other equity incentive plan could also have an adverse effect on the per share trading price of its common stock and be dilutive to existing stockholders. The existence of such options could also adversely affect the terms upon which INDUS may be able to obtain additional capital through the sale of equity securities.

Future offerings of debt securities, which would be senior to INDUS common stock upon liquidation, and/or preferred stock, which may be senior to INDUS common stock for purposes of dividend distributions or upon liquidation, may adversely affect the per share trading price of its common stock.

In the future, INDUS may attempt to increase its capital resources by making offerings of debt or additional equity securities, including medium-term notes, senior or subordinated notes and classes or series of its preferred stock under its shelf registration statement or otherwise, including on a private placement basis. Upon liquidation, holders of INDUS debt securities and shares of INDUS preferred stock, and lenders with respect to other borrowings will be entitled to receive its available assets prior to distribution to the holders of its common stock. Additionally, any convertible or exchangeable securities that INDUS issues in the future may have rights, preferences and privileges more favorable than those of its common stock and may result in dilution to owners of its common stock. Holders of INDUS common stock are not entitled to preemptive rights or other protections against dilution. Any shares of INDUS preferred stock that are issued in the future under its shelf registration statement or otherwise, could have a preference on

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liquidating distributions or a preference on dividend payments that could limit INDUS’s ability pay dividends to the holders of its common stock. Because INDUS’s decision to issue securities in any future offering under its shelf registration statement or otherwise will depend on market conditions and other factors beyond its control, INDUS cannot predict or estimate the amount, timing or nature of its any such future offerings. Thus, INDUS’s stockholders bear the risk of any such future offerings reducing the per share trading price of its common stock and diluting their interest in INDUS.

Market interest rates may have an effect on the per share trading price of INDUS’s common stock.

One of the factors that influences the price of INDUS’s common stock is the dividend yield on its common stock (as a percentage of the price of its common stock) relative to market interest rates. An increase in market interest rates, which are currently at low levels relative to historical rates, may lead prospective purchasers of INDUS’s common stock to expect a higher dividend yield and higher interest rates would likely increase its borrowing costs and potentially decrease funds available for distribution. Thus, higher market interest rates could cause the market price of INDUS’s common stock to decrease.

INDUS’s earnings and cash distributions will affect the market price of shares of its common stock.

​

To the extent that the market value of a REIT’s equity securities is based primarily upon market perception of the REIT’s growth potential and its current and potential future cash distributions, whether from operations, sales, acquisitions, development or refinancing and is secondarily based upon the value of the underlying assets, shares of INDUS’s common stock may trade at prices that are higher or lower than the net asset value per share. To the extent INDUS retains operating cash flow for investment purposes, working capital reserves or other purposes rather than distributing the cash flow to stockholders, these retained funds, while increasing the value of INDUS’s underlying assets, may negatively impact the market price of its common stock. INDUS’s failure to meet market expectations with regard to future earnings and cash distributions would likely adversely affect the market price of its common stock.

General Risk Factors

Volatility in the capital and credit markets could materially adversely impact INDUS.

Volatility and disruption in the capital and credit markets could make it more difficult to borrow money. Market volatility could hinder INDUS’s ability to obtain new debt financing or refinance maturing debt on favorable terms, or at all. Any financing or refinancing issues could have a material adverse effect on INDUS. Market turmoil and the tightening of credit could lead to an increased lack of consumer confidence and widespread reduction of business activity in general, which also could materially adversely impact INDUS, including its ability to acquire and dispose of assets on favorable terms, or at all.

If INDUS fails to maintain appropriate internal controls in the future, it may not be able to report its financial results accurately, which may adversely affect the per share trading price of its common stock and its business.

INDUS’s efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002, as amended, and the related regulations regarding its required assessment of internal control over financial reporting requires the commitment of significant financial and managerial resources. INDUS’s system of internal controls may not prevent all errors, misstatements or misrepresentations, and it is possible that its internal control over financial reporting will not be effective in accomplishing all control objectives all of the time. Deficiencies, including any material weakness or significant deficiency, in INDUS’s internal control over financial reporting that may occur in the future could result in misstatements of its results of operations, restatements of its financial statements and a decline in its stock price, or otherwise materially adversely affect INDUS’s business, reputation, results of operations, financial condition or liquidity.

INDUS is subject to litigation that may adversely impact operating results.

From time to time, INDUS may be a party to legal proceedings and claims arising in the ordinary course of business which could become significant. Given the inherent uncertainty of litigation, INDUS can offer no assurance

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that a future adverse development related to existing litigation or any future litigation will not have a material adverse impact on its business, consolidated financial position, results of operations or cash flows.

The market price and trading volume of INDUS’s common stock may be volatile.

The trading volume in INDUS’s common stock may fluctuate and cause significant price variations to occur. If the per share trading price of INDUS’s common stock declines significantly, stockholders may be unable to resell their shares at or above the price paid for them. It is possible that the per share trading price of INDUS’s common stock will fluctuate or decline significantly in the future.

Some of the factors that could negatively affect INDUS’s share price or result in fluctuations in the price or trading volume of its common stock include:

In the past, securities class action litigation has often been instituted against companies following periods of volatility in the price of their common stock. This type of litigation could result in substantial costs and divert INDUS’s management’s attention and resources, which could have an adverse effect on INDUS’s financial condition, results of operations, cash flows and INDUS’s ability to pay dividends on, and the per share trading price of, its common stock.

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ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not applicable.

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ITEM 2. PROPERTIES.

As of November 30, 2020, INDUS owned thirty industrial/logistics buildings and eleven office/flex buildings aggregating approximately 4.6 million square feet (91.5% of which was industrial/logistics properties and 8.5% of which was office/flex properties) in addition to 58 acres of entitled industrial land under development and approximately 3,370 acres of additional undeveloped land. As of November 30, 2020, approximately 94.3% of INDUS’s approximately 4.2 million industrial/logistics square footage was leased and 71.3% of INDUS’s approximately 0.4 million office/flex square footage was leased.

INDUS’s building portfolio is located in the north submarket of Hartford, Connecticut, the Lehigh Valley of Pennsylvania, the greater Charlotte, North Carolina area and Orlando, Florida. INDUS expects to continue to acquire and develop properties that are consistent with its core industrial/logistics focused strategy in these markets, as well as a select number of additional high-growth, supply constrained markets. INDUS targets properties that are in close proximity to transportation infrastructure (highways, airports, railways and seaports) and can accommodate single and multiple tenants in flexible layouts. INDUS expects that most of such potential future acquisitions of land and buildings will be located outside of the Hartford area.

Real estate acquisitions may or may not occur based on many factors, including real estate pricing. INDUS may commence speculative construction projects on its undeveloped land that is either currently owned or acquired in the future if the Company believes market conditions are favorable for development. INDUS also may construct build-to-suit facilities on its undeveloped land if lease terms and building designs are favorable and market appropriate to align with INDUS’s strategy of owning buildings, not leases.

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Developed Properties

The following tables present INDUS’s industrial/logistics buildings and its office/flex buildings aggregating approximately 4.2 million square feet and approximately 0.4 million square feet, respectively. A listing of those holdings and leasing data as of November 30, 2020 and November 30, 2019 is as follows:

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(1) Acquired in February 2020 and March 2020.

* Included as collateral under one of INDUS’s nonrecourse mortgage loans as of January 31, 2021.

** Included as collateral under INDUS’s revolving line of credit with Webster Bank as of January 31, 2021.

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(1) 55 Griffin Road South is a 40,330 square foot office/flex building built in 1985 that was fully vacant in both years and was sold in November 2020. Prior to its sale, 55 Griffin Road South was included as collateral under INDUS’s revolving line of credit with Webster Bank. Subsequent to that sale, 170 Sunport Lane (see above) was added as a replacement property under the revolving line of credit.

*     Included as collateral under one of INDUS’s nonrecourse mortgage loans as of January 31, 2021.

**   Included as collateral under INDUS’s revolving line of credit with Webster Bank as of January 31, 2021.

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Leasing Activity in Developed Properties

In fiscal 2020, the net effect of leasing transactions was an increase of approximately 108,000 square feet of industrial/logistics space under lease as of November 30, 2020, as compared to November 30, 2019, and a decrease of approximately 23,000 square feet of office/flex space under lease as of November 30, 2020, as compared to November 30, 2019. In addition, INDUS acquired two industrial/logistics properties in Orlando, 3320 Maggie Boulevard and 170 Sunport Lane, totaling approximately 177,000 square feet that were 71.3% leased during the year, adding an additional approximately 126,000 square feet to INDUS’s leased square footage. In fiscal 2020, INDUS’s total office/flex square footage was reduced when the Company sold a vacant, approximately 40,000 square foot office/flex building.

In the fiscal year ended November 30, 2019 (“fiscal 2019”), the net effect of leasing transactions was an increase of approximately 269,000 square feet of industrial/logistics space under lease as of November 30, 2019, as compared to November 30, 2018, and a decrease of approximately 10,000 square feet of office/flex space under lease as of November 30, 2019, as compared to November 30, 2018. In fiscal 2019, in addition to the acquisition of 7466 Chancellor Drive in Orlando, INDUS completed and placed in service 160 International Drive (“160 International”) and 180 International Drive (“180 International”), industrial/logistics buildings of approximately 147,000 square feet and approximately 136,000 square feet, respectively, on a land parcel in Concord, North Carolina in the greater Charlotte area, that was purchased in fiscal 2018. In the fourth quarter of fiscal 2019, INDUS entered into two leases aggregating approximately 105,000 square feet in 160 International. The Company’s construction of 160 International and 180 International was completed in the 2019 fourth quarter.

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Summary of Industrial/Logistics Leasing Trends by Market

INDUS’s operating results depend primarily upon rental income, which is impacted by the results of leasing activity, tenant retention and occupancy in its portfolio. During fiscal 2020, INDUS had an industrial/logistics tenant retention rate of 79%, as measured by the number of tenants who signed renewals during the year divided by the total number of tenants who either renewed or vacated their leased space over the course of the year. Excluding leases with terms of less than 12 months and leases for first generation space, INDUS renewed a total of eleven industrial/logistics leases and signed five new industrial/logistics leases in fiscal 2020, with weighted average rent growth from leasing activity (“Weighted Average Rent Growth”)¹ on a cash basis of 2.6% and Weighted Average Rent Growth from leasing activity on a straight-line basis of 15.0%.

As of November 30, 2020, INDUS had 49 unique industrial/logistics leases in its portfolio and its average lease size was 80,947 square feet. A summary of INDUS’s industrial/logistics square footage as of November 30, 2020 and leases in INDUS’s industrial/logistics buildings scheduled to expire during the next three fiscal years by market are as follows:

Hartford, CT (Market presence since Company inception)

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Lehigh Valley, PA (Market entered in 2010)

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¹ Weighted average rent growth reflects the percentage change of annualized rental rates between the previous leases and the current leases. The rental rate change on a straight-line basis represents average annual base rental payments on a straight-line basis for the term of each lease including free rent periods. Cash basis rent growth represents the change in starting rental rates per the lease agreement on new and renewed leases signed during the period, as compared to the previous ending rental rates for that same space. The cash rent growth calculation excludes free rent periods. The change in rental rate calculations excludes leases for first generation space on properties acquired or developed by INDUS.

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Charlotte, NC (Market entered in 2017)

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Orlando, FL (Market entered in 2019)

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* Less than 1%.

Summary of Office/Flex Leasing Trends by Market

INDUS expects that its office/flex space will continue to become a smaller percentage of its total square footage as it focuses on the growth of its industrial/logistics building portfolio. A summary of INDUS’s office/flex square footage as of November 30, 2020 and leases in INDUS’s office/flex buildings scheduled to expire during the next three fiscal years are as follows:

Hartford, CT (Owned since Company inception)

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* Less than 1%.

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Developments and Acquisitions

As of November 30, 2020, INDUS owned a total of 58 acres of land for development in the Lehigh Valley (the “Lehigh Valley Land”) and in Charlotte (the “Charlotte Land”).

INDUS acquired the Lehigh Valley Land totaling approximately 14 acres for approximately $1.9 million in fiscal 2019 using a portion of the proceeds from the sale of approximately 280 acres of undeveloped land in Simsbury, Connecticut (the “Simsbury Land Sale”) to complete a 1031 Like-Kind Exchange. In fiscal 2020, the Company began construction of an approximately 103,000 square foot industrial/logistics building on the Lehigh Valley Land, which it expects to deliver in the fourth quarter of 2021.

INDUS acquired the Charlotte Land totaling approximately 44 acres in fiscal 2019 using a portion of the proceeds from the Simsbury Land Sale to complete a 1031 Like-Kind Exchange. In fiscal 2020, the Company obtained the entitlements to construct three industrial/logistics buildings aggregating approximately 520,000 square feet on the Charlotte Land. Subsequent to November 30, 2020, the Company entered into a preliminary agreement with a leading e-commerce company for the re-design of the Charlotte Land to accommodate the build-to-suit of a last-mile industrial/logistics facility to be leased by such company (the “Charlotte Build-to-Suit”). The Charlotte Build-to-Suit would utilize all of the development potential of the Charlotte Land and includes an approximately 142,000 square foot building. The Company estimates that the total development cost for the Charlotte Build-to-Suit will be between $35-$45 million (including the land cost) and that the tenant would enter into a fifteen-year lease for the property at a rental rate calculated as a percentage of the total project cost. The Company anticipates obtaining construction financing to fund a portion of the development costs for the Charlotte Build-to-Suit. Through January 31, 2021, INDUS has expended approximately $0.5 million for the re-design and development of the Charlotte Land for the Charlotte Build-to-Suit. The prospective tenant has indemnified the Company for those expenditures. It is possible that development of the Charlotte Land, the completion of the Charlotte Build-to-Suit and subsequent leasing of that property, as contemplated under the preliminary agreement, will not be completed under the current terms, or at all.

On June 24, 2020, INDUS entered into a Purchase and Sale Agreement (the “First Allentown Purchase Agreement”) to acquire for a purchase price of $3.1 million, an approximately 18 acre parcel of undeveloped land in the Lehigh Valley of Pennsylvania. On August 27, 2020, INDUS entered into a Purchase and Sale Agreement (the “Second Allentown Purchase Agreement”) to acquire for a purchase price of $1.1 million, approximately 5 acres of undeveloped land that abuts that 18 acre parcel to be acquired under the First Allentown Purchase Agreement. Closings on the land acquisitions contemplated under the First Allentown Purchase Agreement and the Second Allentown Purchase Agreement are subject to significant contingencies, including INDUS obtaining all governmental approvals for its planned development of an approximately 206,000 square foot industrial/logistics building on the land parcels that would be acquired. Given these contingencies, it is possible that the land acquisitions as contemplated under the First Allentown Purchase Agreement and the Second Allentown Purchase Agreement will not be completed under their current terms, or at all.

On July 17, 2020, INDUS entered into a Purchase and Sale Agreement (the “Orlando Purchase Agreement”) to acquire for a purchase price of $5.25 million an approximately 14 acre parcel of undeveloped land in Orlando, Florida. Closing on the land acquisition contemplated under the Orlando Purchase Agreement is subject to significant contingencies, including INDUS obtaining all governmental approvals for its planned development of two industrial/logistics buildings totaling approximately 195,000 square feet on the land parcel that would be acquired. Given these contingencies, it is possible that the land acquisition as contemplated under the Orlando Purchase Agreement will not be completed under its current terms, or at all.

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The following table summarizes INDUS’s current and planned development and acquisition activities as described above:

​

The total estimated investment in INDUS’s current and planned development and acquisition activities (as shown above) is approximately $93.7 million (inclusive of leasing costs), with approximately $11.4 million spent as of November 30, 2020.

As a part of INDUS’s standard development and acquisition underwriting process, INDUS analyzes the targeted initial full year stabilized Cash NOI yield for each development project and acquisition target and establishes a range of initial full year stabilized Cash NOI yields, which it refers to as “underwritten stabilized Cash NOI yields.” INDUS’s weighted average underwritten stabilized Cash NOI yield from the current and planned development and acquisition activities shown above is expected to range between 6.0% and 6.5%. Underwritten stabilized Cash NOI yields are calculated as a development project’s or acquisition’s initial full year stabilized Cash NOI as a percentage of its estimated total investment, including costs to stabilize the buildings to 95% occupancy (other than in connection with build-to-suit development projects and single tenant properties). INDUS calculates initial full year stabilized Cash NOI for a development project or acquisition by subtracting its estimate of the development project’s or acquisition’s initial full year stabilized operating expenses, real estate taxes and non-cash rental revenue, including straight-line rents (before interest, income taxes, if any, and depreciation and amortization), from its estimate of its initial full year stabilized rental revenue. Actual initial full year stabilized Cash NOI yields may vary from INDUS’s underwritten stabilized Cash NOI yield ranges based on the actual total cost to complete a project or acquire a property and its actual initial full year stabilized Cash NOI. See “Item 1A. “Risk Factors—Risks Related to INDUS’s Business and Properties—The actual initial full year stabilized cash net operating income yields from INDUS’s planned development and acquisition activities may not be consistent with the underwritten stabilized Cash NOI yield ranges set forth in this Annual Report.”

Land Holdings by State

As of November 30, 2020, INDUS’s undeveloped and developed acreage was as follows:

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Undeveloped Land Holdings by Category

Development of INDUS’s land is affected by regulatory and other constraints. Development of INDUS’s undeveloped land may also be affected by traffic considerations, potential environmental issues, community opposition and other restrictions to development imposed by governmental agencies. Portions of INDUS’s land holdings in Connecticut are zoned for residential and office uses. The weakness in these markets has adversely affected INDUS, and may continue to do so in the future, by potentially lowering selling prices for land intended for such uses or delaying sales or development of such land.

A breakdown of INDUS’s undeveloped land holdings by category as of November 30, 2020 was as follows:

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Dispositions of Non-Core Undeveloped Land and Office/Flex Property

Periodically, INDUS may sell certain portions of its real estate assets that it has owned for an extended time period and the use of which is not consistent with INDUS’s core industrial/logistics acquisition, development and asset management strategy. These sale transactions may take place either before or after obtaining development approvals and building basic infrastructure.

In fiscal 2020, INDUS completed several sales aggregating approximately 46 acres of undeveloped land, as well as one vacant office/flex building located at 55 Griffin Road South. 55 Griffin Road South was sold in November of 2020 for gross proceeds of $1.4 million. 32 of the 46 acres of undeveloped land were a mix of residential land parcels and other uses which sold for a combined total of $1.4 million in gross proceeds, while the remaining 14 acres, which had limited development potential, were in INDUS’s Phoenix Crossing business park, and sold for approximately $0.3 million in gross proceeds.

In fiscal 2019, INDUS completed several land sales, the largest being the sale of approximately 280 acres of undeveloped land in Simsbury, Connecticut (the “Simsbury Land Sale”) for approximately $7.7 million. The proceeds from the Simsbury Land Sale were placed in escrow at closing to be used as part of a like-kind exchange (a “1031 Like-Kind Exchange”) under Section 1031 of the Code that enabled INDUS to defer the gain on the Simsbury Land Sale for income tax purposes. Subsequently, the sale proceeds were used to acquire two undeveloped parcels of land in Charlotte, North Carolina totaling approximately 44 acres, also referred to as the Old Statesville Road development, and an approximately 14 acre parcel of undeveloped land in the Lehigh Valley, also referred to as the Chapmans Road development.

In fiscal 2019, INDUS also completed the sales of approximately 116 acres of undeveloped land in East Windsor, Connecticut (the “East Windsor Land”) and the East Windsor Land’s development rights in two separate transactions totaling approximately $1.6 million. INDUS also received approximately $0.5 million from several smaller land sales.

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Land Under Agreement for Sale

Land parcels currently under agreement for sale are as follows:

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East Granby / Windsor Parcels

On December 10, 2019, INDUS entered into an Option Purchase Agreement (the “East Granby/Windsor Option Agreement”) whereby INDUS granted the buyer an exclusive one-year option, in exchange for a nominal fee, to purchase approximately 280 acres of undeveloped land in East Granby and Windsor, Connecticut for use as a solar farm. Subsequent to November 30, 2020 the option period was extended through December 10, 2021. The buyer may extend the option period for an additional two years upon payment of additional option fees. The purchase price has a range from a minimum of $6.0 million to a maximum of $7.95 million based upon the projected amount of electricity to be generated from the site. The land subject to the East Granby/Windsor Option Agreement does not have any of the approvals that would be required for the buyer’s planned use of the land. A closing on the land sale contemplated by the East Granby/Windsor Option Agreement is subject to several significant contingencies, including the buyer securing contracts under a competitive bidding process and obtaining local and state approvals for that planned use of the land. Given these contingencies, it is possible that the land sale contemplated under the East Granby/Windsor Option Agreement will not be completed under its current terms, or at all.

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Meadowood Residential Parcels

On February 3, 2020, INDUS entered into an option agreement (the “Meadowood Option Agreement”) with a national land conservation organization (the “Conservation Organization”) to sell the approximately 277 acres of Meadowood (the “Meadowood Land”). For a minimal fee, the Meadowood Option Agreement grants the Conservation Organization the right to purchase the Meadowood Land for open space and farmland preservation whereby INDUS would receive net proceeds of approximately $5.4 million, if the purchase option is exercised. The Meadowood Option Agreement grants the Conservation Organization an initial term of twelve months, with one six-month extension, to exercise its option and acquire the Meadowood Land. On February 3, 2021, the Conservation Organization exercised its six months extension. Completion of a sale of the Meadowood Land contemplated under the Meadowood Option Agreement is subject to several contingencies, including the satisfactory outcome of due diligence by the Conservation Organization and the Conservation Organization securing funding from several public and private sources to acquire the Meadowood Land. Given these contingencies, it is possible a sale of the Meadowood Land will not be completed under the current terms of the Meadowood Option Agreement, or at all.

Stratton Farms Residential Parcels

In fiscal 2006, INDUS completed the infrastructure for a fifty lot residential subdivision in Suffield, Connecticut called Stratton Farms. INDUS sold twenty five residential lots in Stratton Farms to a local homebuilder in fiscal 2006 and fiscal 2007, and subsequently sold nine additional lots. On November 24, 2020, INDUS entered into an agreement to sell the remaining 16 residential lots for gross proceeds of $900,000. On January 12, 2021, INDUS and the buyer entered into an amendment to the agreement of sale which adjusted the outside closing date of the sale to the third fiscal quarter of 2021. A sale of the Stratton Farms parcels is subject to contingencies and, as such, it is possible a sale of the Stratton Farms residential parcels will not be completed under the current terms, or at all.

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Southwick, MA Land

On February 10, 2021, INDUS entered into an agreement to sell approximately 91 acres of its undeveloped land in Southwick, MA for $5.25 million (the “Southwick Land Sale”). The land subject to the Southwick Land Sale does not have any of the approvals that would be required for the buyer’s planned use of the land and closing on the land sale is subject to several significant contingencies, including the buyer obtaining governmental approvals for the planned use of the land. Given these contingencies, it is possible that the Southwick Land Sale will not be completed under its current terms, or at all.

Property-Level Financings

As with many companies engaged in real estate investment and development, INDUS holds portions of its real estate portfolio subject to mortgage debt. See Note 6 to INDUS’s consolidated financial statements for information concerning the mortgage loans associated with INDUS’s properties. As of November 30, 2020, all of INDUS’s industrial/logistics buildings, except 160 and 180 International Drive in Charlotte, 210 West Newberry Road and 131 Phoenix Crossing in Bloomfield, and 170 Sunport Lane in Orlando, were mortgaged for a total of $159.1 million. INDUS’s two multi-story office buildings in Griffin Center, 5 and 7 Waterside Crossing, were mortgaged for approximately $4.1 million, as of November 30, 2020.

INDUS’s $19.5 million revolving line of credit is secured by the balance of INDUS’s eight single-story office/flex buildings, and three industrial/logistics properties: 210 West Newberry Road and 131 Phoenix Crossing in Bloomfield and 170 Sunport Lane in Orlando.

Other

INDUS subleases approximately 1,920 square feet in New York City for its executive offices from Bloomingdale Properties, Inc. (“Bloomingdale Properties”), an entity that is controlled by certain members of the Cullman and Ernst Group. The sublease with Bloomingdale Properties was approved by the Board’s Audit Committee and the lease rates under the sublease were at market rate at the time the sublease was signed.

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ITEM 3. LEGAL PROCEEDINGS.

From time to time, INDUS is involved, as a defendant, in various litigation matters arising in the ordinary course of business. In the opinion of management, based on the advice of legal counsel, the ultimate liability, if any, with respect to these matters is not expected to be material to INDUS’s financial position, results of operations or cash flows.

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ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

INDUS’s common stock is traded on The Nasdaq Stock Market LLC under the symbol INDT (previously GRIF). As of January 29, 2021, there were 130 holders of record of INDUS common stock, which does not include beneficial owners whose shares are held of record in the names of brokers or nominees and the closing market price as quoted on The Nasdaq Stock Market LLC on such date was $63.73 per share.

Dividend Policy

In conjunction with its conversion to a REIT, on January 13, 2021, INDUS announced that a special dividend had been declared to distribute the Company’s accumulated earnings and profits (the “E&P Distribution”) based on the Company’s taxable income through December 31, 2020. The E&P Distribution will be $11,250,000 or $1.99 per share payable to holders of record as of January 22, 2021. Subject to the stockholder elections described below, the E&P Distribution is a special dividend payable in a combination of cash and shares of INDUS’s common stock with a total amount of cash payable to stockholders of approximately $3,398,000 equating to $0.60 per share. Stockholders of record as of January 22, 2021 have been provided with election materials to elect, subject to certain limitations, to receive the E&P Distribution either in cash, shares of Common Stock or a fixed combination of cash and shares of Common Stock. The E&P Distribution is expected to be paid on March 8, 2021, following the solicitation period.

INDUS intends to make regular quarterly cash dividend payments, commencing with the quarter ending June 30, 2021.

INDUS’s previous dividend policy was to consider the payment of an annual dividend at the end of its fiscal year, which enabled the Board to evaluate both INDUS’s prior full year results and its cash needs for the succeeding year when determining whether to declare an annual dividend and the amount thereof, if any

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ITEM 6. SELECTED FINANCIAL DATA.

The following table sets forth selected statement of operations data for fiscal years 2016 through 2020 and balance sheet data as of the end of each fiscal year. The selected statement of operations data for fiscal 2018, fiscal 2019 and fiscal 2020 and the selected balance sheet data for fiscal 2019 and fiscal 2020 are derived from the audited consolidated financial statements included in Item 8 of this Annual Report. The selected statement of operations data for fiscal 2016 and fiscal 2017 and the balance sheet data for fiscal 2016, fiscal 2017 and fiscal 2018 were derived from the audited consolidated financial statements for those years. This selected financial data should be read in conjunction with the consolidated financial statements and accompanying notes, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other financial information included elsewhere in this Annual Report. Historical results are not necessarily indicative of future performance.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Overview

On December 30, 2020, pursuant to an Agreement and Plan of Merger, by and among INDUS Realty Trust, Inc., a Maryland corporation, Griffin Industrial Realty, Inc., a Delaware corporation (“Griffin”), and Griffin Industrial Maryland, LLC, a Maryland limited liability company and a wholly-owned subsidiary of INDUS Realty Trust, Inc., we completed an internal merger (the “Merger”) to reincorporate from a Delaware corporation to a Maryland corporation. On December 31, 2020, following the Merger, Griffin changed its name to INDUS Realty Trust, Inc. (“INDUS” or the “Company”). INDUS intends to elect to be taxed as a real estate investment trust (“REIT”) under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”) for taxable year ending December 31, 2021.

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In November 2020, in connection with the anticipated election to become a REIT, the Company changed its fiscal year end from November 30 to December 31, effective beginning with the next fiscal year, which began on January 1, 2021 and will end on December 31, 2021 (the “fiscal 2021”). As a result of the change in fiscal year, there will be a one-month transition period beginning on December 1, 2020 and ending on December 31, 2020 (the “Transition Period”), the results of which are expected to be reported in the Quarterly Report on Form 10-Q to be filed for the first quarter of fiscal 2021 and in the Company’s Annual Report on Form 10-K to be filed for fiscal 2021.

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INDUS is a real estate business principally engaged in developing, acquiring, managing and leasing high-quality industrial/logistics properties in select supply-constrained and high growth markets in the United States. The Company seeks to add to its property portfolio through the development of land or the acquisition of modern, market-appropriate logistics buildings in the markets it targets, all of which can serve multiple drivers of demand in the modern supply chain. Although the Company’s real estate holdings primarily consist of industrial/logistics properties, INDUS also owns a limited number of office/flex properties and undeveloped land parcels. The Company may sell certain office/flex properties or portions of its undeveloped land that it has owned for an extended time and the use of which is not consistent with the Company’s core industrial and logistics strategy.

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The notes to the Company’s consolidated financial statements included in Part II, Item 8 “Financial Statements and Supplemental Data” of this Annual Report contain a summary of the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements. In the opinion of management, because of the relative magnitude of the Company’s real estate assets, accounting methods and estimates related to those assets are critical to the preparation of the Company’s consolidated financial statements. The Company uses accounting policies and methods under accounting principles generally accepted in the United States of America (“U.S. GAAP”). The following are the critical accounting estimates and methods used by the Company:

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Revenue and gain recognition: Rental revenue from the Company’s industrial and commercial properties is accounted for on a straight-line basis over the applicable lease terms in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 842, “Leases.” Gains on sales of real estate assets are recognized in accordance with FASB ASC 606, “Revenue from Contracts with Customers,” based on the specific terms of each sale. When the percentage of completion method is used to account for a sale of real estate, gains on sales are recognized over time as performance obligations are satisfied.

Impairment of long-lived assets: The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If indicators of impairment are present, the Company evaluates the carrying value of the assets in relation to the operating performance and expected future undiscounted cash flows or the estimated fair value based on expected future cash flows of the underlying assets. Development costs that have been capitalized are reviewed periodically for future recoverability.

Stock based compensation: The Company accounts for stock option compensation based on the estimated fair values of stock options as determined on their grant dates using the Black-Scholes option-pricing

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model. In determining the estimated fair values of stock options issued, INDUS makes assumptions on expected volatility, risk-free interest rates, expected option terms and dividend yields.

Derivative instruments: The Company evaluates each interest rate swap agreement to determine if it qualifies as an effective cash flow hedge. Changes in the fair value of each interest rate swap agreement are recorded as a component of other comprehensive income. The fair value of each interest rate swap agreement is determined based on observable market participant data, such as yield curves, as of the fair value measurement date.

Income taxes: In accounting for income taxes under FASB ASC 740, “Income Taxes,” management estimates future taxable income from operations, the sale of appreciated assets, the remaining years before the expiration of net operating loss carryforwards, future reversals of existing temporary differences and tax planning strategies in determining if it is more likely than not that INDUS will realize the benefits of its deferred tax assets. Deferred tax assets and deferred tax liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and deferred tax liabilities of a change in tax rates on income is recognized in the period that the tax rate change is enacted.

Summary

In the fiscal year ended November 30, 2020 (“fiscal 2020”), the Company incurred a net loss of approximately $12.7 million as compared to net income of approximately $3.7 million in the fiscal year ended November 30, 2019 (“fiscal 2019”). The net loss in fiscal 2020, as compared to the net income in fiscal 2019, principally reflected: (a) an expense of approximately $6.0 million in fiscal 2020 for the change in fair value of financial instruments; (b) a decrease of approximately $5.5 million in gain from sales of real estate assets in fiscal 2020 as compared to fiscal 2019; (c) an approximately $3.1 million income tax provision in fiscal 2020 as compared to an approximately $0.2 million income tax benefit in fiscal 2019; (d) an increase in real estate taxes of approximately $0.6 million; and (e) increases in general and administrative expenses, depreciation and amortization expense and interest expense in fiscal 2020, as compared to fiscal 2019, of approximately $2.3 million, $1.8 million and $0.9 million, respectively; partially offset by the approximately $3.2 million increase in rental revenue in fiscal 2020, as compared to fiscal 2019, and an impairment loss of approximately $2.1 million in fiscal 2020 versus an impairment loss of $3.1 million in fiscal 2019.

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The Company’s net operating income from its properties (“NOI”), which is defined as rental revenue less operating expenses of rental properties and real estate taxes, increased to $26.9 million in fiscal 2020 from approximately $24.2 million in fiscal 2019. The approximately $2.7 million increase in NOI in fiscal 2020, as compared to fiscal 2019, reflected approximately $1.1 million from leasing first generation space, a total of approximately $1.0 million from three industrial/logistics buildings in Orlando, Florida (see below) and approximately $0.6 million from leasing previously vacant space and other changes across all other properties. See below under “Non-GAAP Reconciliations” for information regarding why the Company believes NOI and other non-GAAP measures are meaningful supplemental measures of its performance and reconciliations of these measures from net income (loss), presented in accordance with U.S. GAAP.

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In the three months ended November 30, 2019 (the “2019 fourth quarter”), the Company acquired 7466 Chancellor Drive (“7466 Chancellor”), a fully-leased approximately 100,000 square foot building in Orlando, Florida. In the three months ended February 29, 2020 (the “2020 first quarter”) the Company acquired 3320 Maggie Boulevard (“3320 Maggie”), a fully-leased approximately 108,000 square foot building in Orlando, and in the three months ended May 31, 2020 (the “2020 second quarter”) the Company acquired 170 Sunport Lane (“170 Sunport”), a mostly-vacant approximately 68,000 square foot building in Orlando. 7466 Chancellor, 3320 Maggie and 170 Sunport (collectively the “Orlando Properties”) were the Company’s first acquisitions in the Orlando market.

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Results of Operations

Impact of Covid-19

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During and subsequent to fiscal 2020, the world has been impacted by the coronavirus (COVID-19) pandemic, which has created significant economic uncertainty and volatility. The full extent to which the coronavirus pandemic further impacts the Company’s business or impacts the Company’s operations, liquidity and financial results will depend on numerous evolving factors that the Company is not able to predict at this time, including: the duration and scope of the pandemic; governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic; the availability and effectiveness of vaccines to combat COVID-19; the impact on economic activity from the pandemic and actions taken in response, including ongoing travel restrictions; the impact on the availability and pricing of certain materials and supplies; the effect on the Company’s tenants and their businesses; the ability of tenants to make their rental payments; any closures of tenants’ facilities; the ability of existing or prospective tenants to evaluate or enter into leases; and the Company’s ability to complete sales and acquisitions of real estate assets or planned construction and development. Any of these events could materially adversely impact the Company’s business, financial condition, results of operations or stock price.

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COVID-19 did not have a material impact on the Company’s rent collections in fiscal 2020, as 99% of cash rent due each month in fiscal 2020, inclusive of rent relief agreements, was collected. In fiscal 2020, the Company entered into agreements with two tenants that granted rent relief aggregating approximately 0.4% of the Company’s total rental revenue for fiscal 2020. The much larger of these two tenants is a subsidiary of a Fortune 500 company and the rent relief was granted as part of an early 5-year renewal of that tenant’s lease. Subsequent to November 30, 2020, a tenant that leases an approximately 7,000 square foot restaurant building in Connecticut requested rent relief. The tenant has paid all rent through October 31, 2020. As of the date of this filing, the Company has not determined if it will grant rent relief in connection with this request.

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COVID-19 has disrupted the availability, supply and costs of raw materials, particularly the increased cost and decreased availability of structural steel, which could result in an increase in the Company’s cost of construction. Additionally, as a result of the pandemic there could be a reduction in the Company’s rental revenue, particularly with respect to its office/flex portfolio.

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See Part I, Item 1A "Risk Factors" for further discussion of the possible impact of the COVID-19 pandemic on the Company’s business.

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Fiscal 2020 Compared to Fiscal 2019

Fiscal 2020 rental revenue increased to approximately $37.4 million from approximately $34.2 million in fiscal 2019. The approximately $3.2 million increase in rental revenue in fiscal 2020, as compared to fiscal 2019, was principally due to rental revenue in the amount of: (a) $1.3 million from the Orlando Properties; (b) approximately $1.2 million from leases of first generation space that commenced during fiscal 2020; (c) approximately $0.2 million from a lease of first generation space that commenced during fiscal 2019 and was in place for the entirety of fiscal 2020; (d) approximately $0.2 million from a lease of second generation previously vacant space in fiscal 2020; and (e) approximately $0.3 million of rental revenue from an increase in expense reimbursements, early lease termination fees and other lease related revenue.

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Summaries of the total square footage and leased square footage of the Company’s industrial/logistics properties and the Company’s total real estate portfolio are as follows:

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The approximately 177,000 square foot increase in total industrial/logistics square footage as of November 30, 2020, as compared to November 30, 2019, reflected the acquisitions of 3320 Maggie and 170 Sunport. The approximately 234,000 square foot increase in leased square footage of industrial/logistics properties as of November 30, 2020, as compared to November 30, 2019, was due to: (a) 3320 Maggie being fully leased at the time it was acquired and leases aggregating approximately 18,000 square feet in place at 170 Sunport when that building was acquired; (b) leasing approximately 60,000 square feet of first generation space in 6975 Ambassador Drive (“6975 Ambassador”), an approximately 134,000 square foot building in the Lehigh Valley of Pennsylvania; and (c) leasing approximately 48,000 square feet that was vacant at the beginning of fiscal 2020. In addition, approximately 291,000 square feet of industrial/logistics space under leases that expired during fiscal 2020 was re-leased to new tenants during fiscal 2020.

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In fiscal 2020, the Company renewed several leases aggregating approximately 707,000 square feet of industrial/logistics space, including approximately 558,000 square feet under leases that were scheduled to expire subsequent to November 30, 2020. As of November 30, 2020, the Company’s industrial/logistics square footage comprised 91.5% of its total square footage and was 94.3% leased. The Company’s significant vacancies of industrial/logistics space as of November 30, 2020 were the entirety of 180 International Drive (as defined below), approximately 42,000 square feet in 160 International Drive (as defined below) and approximately 51,000 square feet in 170 Sunport. The Company’s construction of an approximately 147,000 square foot industrial/logistics building (“160 International”) and an approximately 136,000 square foot industrial/logistics building (“180 International”) on previously acquired land in the Charlotte, North Carolina area was completed in the 2019 fourth quarter.

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The approximately 136,000 square foot increase in the Company’s total square footage as of November 30, 2020, as compared to November 30, 2019, reflected the acquisitions of 3320 Maggie and 170 Sunport partially offset by the sale of 55 Griffin Road South (“55 GRS”), an approximately 40,000 square foot office/flex building in Bloomfield, Connecticut. The approximately 212,000 square foot increase in the total portfolio’s leased square footage as of November 30, 2020, as compared to November 30, 2019, reflected the approximately 234,000 square foot increase in leased industrial/logistics space discussed above, partially offset by a net decrease of approximately 22,000 square feet of office/flex space leased during fiscal 2020 as a result of lease expirations during fiscal 2020.

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Operating expenses of rental properties decreased to approximately $4.9 million in fiscal 2020 from approximately $5.0 million in fiscal 2019. Operating expenses of rental properties increased by approximately $0.1 million related to the Orlando Properties and approximately $0.2 million related to 160 International and 180 International, which was more than offset by a decrease of approximately $0.3 million across all other properties due primarily to lower snow removal expenses in fiscal 2020, as compared to fiscal 2019.

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Real estate taxes increased to approximately $5.6 million in fiscal 2020 from approximately $5.0 million in fiscal 2019. The increase of approximately $0.6 million in real estate taxes in fiscal 2020, as compared to fiscal 2019, reflected approximately $0.3 million related to the Orlando Properties, approximately $0.1 million related to 160 International and 180 International, and approximately $0.2 million across all other properties.

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The Company’s NOI and NOI on a cash basis (“Cash NOI”) for industrial/logistics properties (“Cash NOI of Industrial/Logistics Properties”)² and for its total real estate portfolio for fiscal 2020 and fiscal 2019 were as follows: