Company: INRE
Filing Date: 2025-03-05
Form Type: 10-K
Source: 0000950170-25-033568
Chunk: 105

Company: Inland Real Estate Income Trust, Inc.
Filing Date: 2025-03-05
Form: 10-K
Item: Item 1A
Chunk 105
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 as a result of an increase in market interest rates in response to higher than anticipated inflation rate, increase our mortgage and debt interest costs, and these costs could increase at a rate higher than our rents increase. Property taxes are also impacted by inflationary changes as taxes are typically regularly reassessed in most states based on changes in the fair value of our properties. An increase in our expenses, or expenses paid 

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or incurred by our Business Manager or its affiliates that are reimbursed by us pursuant to the Business Management Agreement, or a failure of revenues to increase at least with inflation could adversely impact our results of operations.

Only twenty of our leases, generally limited to leases for less than 5,000 square feet, contain annual rental rate escalations based on increases in the Consumer Price Index. Some others contain fixed annual rent escalations. If the fixed rent increases begin to lag behind inflation, and our expenses increase with or greater than the inflation rate, then our profitability would be negatively impacted. Future leases may not contain escalation provisions, and even those that do include rent escalation provisions may not be sufficient to protect our revenues from the adverse effects of inflation. Moreover, if we are not able to increase rents at a rate that keeps pace with inflation, the purchasing power of the dollars that we receive will be lower that it would have been in the absence of inflation.

Most leases require our tenant to reimburse us for the tenant’s pro rata share of certain, but not all, operating expenses, but increases in operating expenses passed through to our tenants, without a corresponding increase in our tenants’ profitability, may place pressure on our ability to grow base rent as tenants look to manage their total occupancy costs. Renewals of leases or future leases for our properties may not be negotiated on a basis requiring the tenants to pay some of the operating expenses, in which event we may have to pay those costs. If we are unable to lease properties on a basis requiring the tenants to pay all or some of such expenses, or if tenants fail to pay required tax, utility and other impositions, we could be required to pay those costs.

Inflation could also have an adverse effect on consumer spending, which may impact our tenants’ sales and ability to pay rent and, with respect to those leases including percentage rent clauses, our average rents. Additionally, if inflation increases prices of properties at a rate that is greater than inflation increases rents that we can charge to tenants at those properties, this will have a negative effect on our opportunities to acquire real estate by making what would otherwise be