Cohen & Steers Income Opportunities REIT Inc.

03/17/2026 | Press release | Distributed by Public on 03/17/2026 14:03

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations
This Section of the Annual Report on Form 10-K discusses 2025 and 2024 items and year to year comparison between 2025 and 2024. For the discussion of 2024 compared to 2023, see "Part II. Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report for the year ended December 31, 2024, which specific discussion is incorporated by reference.
The following discussion should be read in conjunction with our financial statements and accompanying notes included in Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K. In addition to historical data, this discussion contains forward-looking statements about our business, operations, and financial performance based on current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those in this discussion as a result of various factors, including those discussed in Part I. Item 1A - "Risk Factors" in this Annual Report on Form 10-K.
Overview
We are a Maryland corporation formed on July 18, 2022. We were formed to invest primarily in high-quality, stabilized real estate assets within the U.S. We also invest, to a lesser extent, in real estate-related securities (including listed REITs), preferred equity and debt instruments. We are an externally advised, perpetual-life REIT formed to pursue the following investment objectives:
•provide attractive current income in the form of regular, stable cash distributions;
•preserve and protect invested capital;
•realize appreciation in NAV from proactive investment management and asset management; and
•provide an investment alternative for stockholders seeking to allocate a portion of their long-term investment portfolios to commercial and other types of real estate with historically lower volatility than publicly traded real estate companies.
We cannot assure you that we will achieve our investment objectives. In particular, we note that the NAV of non-traded REITs may be subject to volatility related to the values of their underlying assets.
We elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our taxable year ended December 31, 2024. We own substantially all of our assets through the Operating Partnership, of which we are the sole general partner.
The Board will at all times have ultimate oversight and policy-making authority over us, including responsibility for governance, financial controls, compliance and disclosure. Pursuant to the Advisory Agreement, however, we have delegated to the Advisor the authority to source, evaluate and monitor our investment opportunities and make decisions related to the acquisition, management, financing and disposition of our assets, in accordance with our investment objectives, guidelines, policies and limitations, subject to oversight by our Board.
On February 21, 2023, the SEC declared effective our registration statement for our initial public offering for up to $3.0 billion in shares of common stock. Our initial public offering terminated upon the commencement of our second public offering, which we commenced on January 30, 2026. Pursuant to our Offering, we are offering on a continuous basis up to $3.0 billion in shares of common stock, consisting of up to $2.4 billion in shares in our primary offering and up to $0.6 billion in shares pursuant to our distribution reinvestment plan. We are offering any combination of our Class T shares, Class S shares, Class D shares, Class I shares and Class F-I shares, with a dollar value up to the maximum offering amount. Class F-I shares are offered to all investors through June 30, 2026, following which Class F-I shares will be offered only to investors or clients of a financial intermediary that, in the aggregate, held at least $10.0 million in Class F-I shares as of June 30, 2026, unless such minimum is waived by the Dealer Manager, and through our distribution reinvestment plan. We reserve the right to extend the offering of Class F-I shares beyond June 30, 2026 in our sole discretion. We are not currently offering any of our Class F-T shares, Class F-S shares or Class F-D shares in any offering.
The Company is also conducting a private offering of our Private Placement Shares to Cohen & Steers and its affiliates (for Class P shares only) and certain persons that are accredited investors, as that term is defined under the Securities Act of 1933, as amended (the "Securities Act"), and Regulation D promulgated thereunder. Certain of the Private Placement Shares are not subject to upfront selling commissions, dealer manager fees, stockholder servicing fees and/or performance participation. The Private Placement Shares sold in the Company's private offering are not being offered to the public. In addition to its $0.2 million investment in Class I shares, Cohen & Steers has committed to invest $124.8 million through the Advisor in Class P shares for an aggregate of $125.0 million. As of March 17, 2026, we had received cumulative net proceeds of $207.4 million, including proceeds received pursuant to our distribution reinvestment plan, from the sale of shares of our Class P common stock in our private offerings, of which of which $75.1 million represented net proceeds from sales of Class P shares to the Advisor. The Company can call the remaining $49.7 million of the Advisor's $124.8 million commitment to purchase Class P shares at any time. As of December 31, 2025, the Company had not sold any Class B, Class R-I, Class R-S, Class M-I or Class M-S shares. From January 1, 2026 to March 17, 2026, we had received cumulative net proceeds of $9.7 million, including proceeds received pursuant to our distribution reinvestment plan, from the sale of shares of our Class B, Class R-I and Class R-S common stock in our private offerings.
We have contributed and intend to contribute the net proceeds from the Offering and our private offering to the Operating Partnership in respect of a corresponding number of Class T, Class S, Class D, Class I, Class F-I, Class P, Class B, Class M-I, Class M-S, Class R-I and Class R-S units of the Operating Partnership. The Operating Partnership uses the net proceeds received from us to make investments and pay fees and expenses attributable to our operations in accordance with our investment strategy and policies.
We are not aware of any material trends or uncertainties, favorable or unfavorable, other than national economic conditions affecting real estate generally, that may be reasonably anticipated to have a material impact on either capital resources or the revenues or income to be derived from acquiring properties or real estate-related securities, other than those referred to in this Annual Report on Form 10-K.
2025 Highlights
Operating Results
•We declared monthly distributions totaling $9.1 million during the year ended December 31, 2025.
•The details of our annualized distribution rates and total returns for share classes that had shares outstanding for the full year ended December 31, 2025 are shown in the following table:
Class I Class F-I Class P
Annualized Distribution Rate (1)
4.66% 4.75% 4.54%
Year-to-Date Total Return (2)
8.00% 7.78% 8.86%
Inception-to Date Total Return (2)
9.94% 8.80% 11.31%
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(1) Distribution rate reflects the December 31, 2025 distribution for such share class annualized and divided by the prior month's NAV for such share class, which is inclusive of all fees and expenses.
(2) Total return is calculated as the change in NAV per share from the beginning of the applicable period, plus the amount of any distribution per share (assuming reinvestment of distributions pursuant to the Company's distribution reinvestment plan) divided by the NAV per share at the beginning of the period. Inception-to-date returns are annualized. The inception date for the Class I and Class P shares was January 11, 2024 and the inception date for Class F-I shares was August 1, 2024.
Capital Raising
•We have raised net proceeds of $15.4 million from the Offering during the year ended December 31, 2025, including proceeds received pursuant to our distribution reinvestment plan.
•We raised net proceeds of $54.6 million from our private offering of Class P shares to accredited investors and the Advisor in a private placement during the year ended December 31, 2025, including proceeds received pursuant to our distribution reinvestment plan.
Investments and Financing
•On January 17, 2025, we completed the purchase of a grocery-anchored shopping center in Orlando, Florida, commonly known as Oak Grove Shoppes, through our programmatic joint venture between us and Phillips Edison & Company ("PECO"). Through our ownership interest in the joint venture, we indirectly own an 80% interest in the property. The total purchase price was $40.2 million, including acquisition costs. We partially financed the acquisition with a $24.3 million 7-year fixed-rate loan. The loan has a fixed interest rate of 5.88% and is interest-only throughout the term.
•On August 1, 2025, we completed the purchase of a community shopping center in Phoenix, Arizona, commonly known as Deer Valley Towne Center, through our existing programmatic joint venture with The Sterling Organization, LLC. Through our ownership interest in the joint venture, we indirectly own a 99% interest in the property. The total purchase price was $34.0 million, including acquisition costs. On October 28, 2025, we partially financed the acquisition with a $18.9 million 5-year fixed-rate loan. The loan has a fixed interest rate of 5.31% and is interest-only throughout the term.
•On October 30, 2025, we completed the purchase of a grocery-anchored shopping center in Charlottesville, Virginia, commonly known as Rio Hill Shopping Center, through our programmatic joint venture with PECO. Through our ownership interest in the joint venture, we indirectly own an 80% interest in the property. The total purchase price was $52.2 million, including acquisition costs. We partially financed the acquisition with a $33.3 million 7-year fixed-rate loan. The loan has a fixed interest rate of 5.38% and is interest-only throughout the term.
•On December 5, 2025, we completed the purchase of a grocery-anchored shopping center in Bonita Springs, Florida, commonly known as Springs Plaza, through our programmatic joint venture with PECO. Through our ownership interest in the joint venture, we indirectly own an 80% interest in the property. The total purchase price was $34.2 million, including acquisition costs. We partially financed the acquisition with a $21.9 million 5-year variable-rate loan bearing interest at the Secured Overnight Financing Rate ("SOFR") plus 1.75% and structured as interest-only throughout the term. Concurrently, we entered into an interest rate swap agreement that effectively converts the loan's variable interest to a fixed rate of 5.24% for the duration of the term.
•During the year ended December 31, 2025, we purchased $41.1 million of investments in real estate-related securities. We also received proceeds of $26.2 million from the sale of certain real estate-related securities, realizing a net gain on sale of $2.9 million.
Portfolio
Investments in Real Estate
The following table provides information regarding our real estate properties as of December 31, 2025:
Investment Ownership Interest Number of Properties Location Property Type Acquisition Date Sq. Ft. (in thousands) Occupancy
Marketplace at Highland Village 99% 1 Dallas, TX Community shopping center January 22, 2024 207 93%
Des Peres Corners 80% 1 St. Louis, MO Grocery-anchored shopping center July 25, 2024 121 85%
Village on Pooler Parkway 99% 1 Savannah, GA Community shopping center September 18, 2024 142 100%
Bridgepointe Shopping Center 99% 1 San Mateo, CA Community shopping center December 20, 2024 227 100%
Oak Grove Shoppes 80% 1 Orlando, FL Grocery-anchored shopping center January 17, 2025 142 98%
Deer Valley Towne Center 99% 1 Phoenix, AZ Community shopping center August 1, 2025 159 96%
Rio Hill Shopping Center 80% 1 Charlottesville, VA Grocery-anchored shopping center October 30, 2025 286 89%
Springs Plaza Shopping Center 80% 1 Bonita Springs, FL Grocery-anchored shopping center December 5, 2025 195 99%
8 1,479
The following table details the expiring leases at our real estate properties by annualized base rent as of December 31, 2025 ($ in thousands):
Year Number of Expiring Leases
Annualized Base Rent (1)
% of Total Annualized Base Rent Expiring
2026 14 $ 816 3 %
2027 21 2,603 9 %
2028 16 2,687 10 %
2029 37 5,935 21 %
2030 21 3,002 11 %
2031 16 1,593 6 %
2032 11 2,071 7 %
2033 19 2,963 11 %
2034 13 2,729 10 %
2035 3 148 1 %
Thereafter 12 3,189 11 %
Total 183 $ 27,736 100 %
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(1) Annualized base rent ("ABR") represents the annualized monthly contractual base rent for our properties as of December 31, 2025. ABR is presented on a pro-rata ownership basis.
Investments in Real Estate-Related Securities
The following table details our investments in real estate-related securities as of December 31, 2025 ($ in thousands):
December 31, 2025
Type of Real Estate-Related Securities Cost Basis Fair Value
Common stock of publicly-listed REITs $ 23,621 $ 22,744
Real estate-related debt securities 13,795 14,080
Preferred securities 1,323 1,310
Total Investments in real estate-related securities $ 38,739 $ 38,134
Results of Operations
The following table sets forth information regarding our consolidated results of operations for the years ended December 31, 2025 and 2024 (in thousands, except per share data):
For the Years Ended December 31,
2025 2024 Change
Revenues
Rental revenue $ 33,524 $ 8,277 $ 25,247
Total revenues 33,524 8,277 25,247
Expenses
Property operating 11,076 3,138 7,938
General and administrative 1,138 472 666
Organization expenses - 1,852 (1,852)
Management fees 1,671 - 1,671
Performance participation allocation 10 7 3
Depreciation and amortization 16,401 5,204 11,197
Total expenses 30,296 10,673 19,623
Other income (expense), net
Realized and unrealized gains from real estate-related securities, net 2,899 269 2,630
Interest expense (10,266) (1,593) (8,673)
Other income 850 579 271
Total other income (expense), net (6,517) (745) (5,772)
Net loss $ (3,289) $ (3,141) $ (148)
Net income (loss) attributable to non-controlling interests 134 (51) 185
Net loss attributable to common stockholders $ (3,423) $ (3,090) $ (333)
Net loss per share of common stock - basic $ (0.20) $ (0.49) $ 0.30
Net loss per share of common stock - diluted $ (0.20) $ (0.49) $ 0.30
Weighted-average shares of common stock outstanding
Basic 17,256 6,252 11,004
Diluted 17,256 6,252 11,004
Rental Revenue, Property Operating Expenses, Depreciation and Amortization
The increase in rental revenue, property operating expenses and depreciation and amortization during the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily attributable to additional properties within our real estate portfolio. The current year's results include a full year of operations from a total of eight properties acquired over the course of 2024 and 2025, whereas 2024 results reflect a partial year of operations from four properties acquired at various times during the year.
General and Administrative Expenses
The increase in general and administrative expenses for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily attributable to higher professional fees and higher net assets. As net assets increased, the Company absorbed more general & administrative expenses, pursuant to the Expense Limitation and Reimbursement Agreement.
Organization Expenses
The decrease in organization expense for the year ended December 31, 2025, compared to the year ended December 31, 2024, was attributable to the completion of the Company's formation during the prior period as such costs are non-recurring in nature.
Management Fees
The management fee expense accrued during the year ended December 31, 2025, was based on the average NAV during the year. We accrued no management fees expense for the year ended December 31, 2024. The Advisor waived its management fee on shares issued in the initial public offering until January 31, 2025, and on shares issued in the private offering until April 30, 2025.
Other Income (Expense), Net
During the year ended December 31, 2025 and 2024, we recognized $6.5 million and $0.7 million of other income (expense), net, respectively. Realized and unrealized gains from real estate-related securities, net, increased due to a larger securities portfolio and improved market performance compared to the prior year. Interest expense, net, increased due to interest on mortgages on all our 2025 acquisitions, and a full year of interest expense from the mortgage financings in 2024.
Net Income (Loss) Attributable to Non-Controlling Interests
The increase in net income attributable to non-controlling interests for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily attributable to a joint venture partner's promote interest earned during the period, as well as operating results from the eight properties in our portfolio, all of which are held through joint ventures.
Liquidity and Capital Resources
Our primary needs for liquidity and capital resources are to fund our investments, make distributions to our stockholders, repurchase shares of our common stock pursuant to our share repurchase plan, pay our offering and operating fees and expenses and pay interest on any outstanding indebtedness we may incur. Our offering and operating expenses include, among other things, the management fee we pay to the Advisor, the performance participation allocation that the Operating Partnership pays to the Special Limited Partner, stockholder servicing fees we will pay to the Dealer Manager, legal, audit and valuation expenses, federal and state filing fees, printing expenses, administrative fees, transfer agent fees, marketing and distribution expenses and fees related to acquiring, financing, appraising and managing our properties. We do not have any office or personnel expenses as we do not have any employees.
We will reimburse the Advisor for certain out-of-pocket expenses in connection with our operations. The Advisor has agreed to advance all of our organization and offering expenses on our behalf (other than upfront selling commissions and stockholder servicing fees) through the earlier of (i) December 31, 2026 or (ii) the month that our aggregate NAV is at least $750 million. We will reimburse the Advisor for all such advanced expenses ratably over the 60 months following such date. As of December 31, 2025 and December 31, 2024, the Advisor had incurred approximately $10.8 million and $8.4 million, respectively, of organization and offering expenses on our behalf.
Pursuant to an Amended and Restated Expense Limitation and Reimbursement Agreement, by and between the Company and the Advisor (the "Expense Limitation and Reimbursement Agreement"), until the earlier of (1) December 31, 2026 or (2) the month that the Company's aggregate net asset value is at least $750 million (the "Limitation Period"), the Advisor has contractually agreed to waive its fees and/or reimburse expenses on our behalf so that the Specified Expenses (as defined below) will not exceed 0.50% of net assets (annualized). We agreed to repay these amounts, when and if requested by the Advisor, but only if and to the extent that Specified Expenses are less than 0.50% of net assets (annualized) (or, if a lower expense limit is then in effect, such lower limit) within three years after the date the Advisor waived or reimbursed such fees or expenses. Any Excess Expense (as defined in the Expense Limitation and Reimbursement Agreement) will not be recognized as an expense until it is probable that we will reimburse the Advisor for such cost. This arrangement cannot be terminated prior to the Limitation Period without the consent of our Board, including a majority of independent directors. "Specified Expenses" includes all expenses attributable to our operations, excluding organizational and offering costs, and the following exceptions: (i) the management fee, (ii) the performance participation interest, (iii) the stockholder servicing fees, (iv) property-level expenses, (v) brokerage costs or other investment-related out-of-pocket expenses, including with respect to unconsummated investments, (vi) dividend/interest payments (including any dividend payments, interest expenses, commitment fees, or other expenses related to any leverage incurred by us), (vii) taxes and (viii) extraordinary expenses (as determined in the sole discretion of the Advisor).
We elected to be taxed as a REIT under Sections 856 through 860 of the Code, beginning with our taxable year ended December 31, 2024. In order to maintain our qualification as a REIT, we are required to, among other things, distribute as dividends at least 90% of our REIT taxable income, determined without regard to the dividends-paid deduction and excluding net capital gains, to our stockholders and meet certain tests regarding the nature of our income and assets.
Over time, we generally intend to fund our cash needs for items other than asset acquisitions from operations. Our cash needs for acquisitions will be funded primarily from the sale of shares of our common stock and through the assumption or incurrence of debt.
If we are unable to raise substantial funds we will make fewer investments resulting in less diversification in terms of the type, number, geography and size of investments we make and the value of an investment in us will fluctuate significantly with the performance of the specific assets we acquire. Further, we have certain fixed operating expenses, including certain expenses as a publicly offered REIT, regardless of whether we are able to raise substantial funds. Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, reducing our net income and limiting our ability to make distributions.
Other potential future sources of capital include secured or unsecured financings from banks or other lenders and proceeds from the sale of assets. If necessary, we may use financings or other sources of capital in the event of unforeseen significant capital expenditures.
Although we have not received any commitments from lenders to fund a line of credit to date, we may decide to obtain a line of credit to fund acquisitions, to repurchase shares pursuant to our share repurchase plan and for any other corporate purpose. If we decide to obtain a line of credit, we would expect that it would afford us borrowing availability to fund repurchases. As our assets increase, however, it may not be commercially feasible or we may not be able to secure an adequate line of credit to fund share repurchases. Moreover, actual availability may be reduced at any given time if we use borrowings under the line of credit to fund share repurchases or for other corporate purposes.
As of March 17, 2026, approximately $49.7 million of the Advisor's $124.8 million commitment to purchase Class P shares remained outstanding. We may call all or a portion of this commitment at any time.
The Company's mortgage notes disclosed below are interest-only throughout their respective term, with balloon-payments owed at maturity. The following table provides a summary of the fixed-rate and variable-rate mortgage note indebtedness of the Company's properties as of as of December 31, 2025 and December 31, 2024 ($ in thousands):
Balance as of December 31,
Indebtedness Interest Rate Maturity Date 2025 2024
Marketplace at Highland Village 6.13% October 1, 2034 $ 23,155 $ 23,155
Des Peres Corners 6.02% August 1, 2034 23,160 23,160
Village on Pooler Parkway 6.14% October 1, 2034 20,400 20,400
Bridgepointe Shopping Center 5.69% January 1, 2035 70,000 70,000
Oak Grove Shoppes 5.88% February 1, 2032 24,300 -
Deer Valley Towne Center 5.31% November 1, 2030 18,850 -
Rio Hill Shopping Center 5.38% November 1, 2032 33,296 -
Springs Plaza Shopping Center(1)
SOFR + 175bps December 5, 2030 21,900 -
Total loans secured by real estate 235,061 136,715
Deferred financing costs, net (3,305) (1,819)
Mortgage notes, net $ 231,756 $ 134,896
_________
(1) The Company entered into a non-hedge interest rate swap on December 5, 2025 maturing on November 1, 2030, which fixed the rate at 5.24%.
Cash Flows
The following table provides a breakdown of the net change in our cash and cash equivalents ($ in thousands):
Year Ended December 31,
2025 2024
Cash flows provided by operating activities $ 11,415 $ 5,086
Cash flows used in investing activities (176,705) (269,751)
Cash flows provided by financing activities 186,406 272,969
Net increase in cash and cash equivalents $ 21,116 $ 8,304
Cash flows provided by operating activities were approximately $11.4 million for the year ended December 31, 2025, primarily as a result of income generated from our investments in real estate and real estate-related securities.
Cash flows used in investing activities were $176.7 million for the year ended December 31, 2025, primarily due to our acquisitions of real estate and purchases of real estate-related securities.
Cash flows provided by financing activities were $186.4 million for the year ended December 31, 2025, primarily due to $66.3 million of proceeds from the issuance of common stock and $98.3 million of proceeds from property-level financing, net of $1.5 million of deferred financing costs.
Critical Accounting Estimates
Our significant accounting policies are described in Note 2to our consolidated financial statements. Many of these accounting policies require judgment and the use of estimates and assumptions when applying these policies in the preparation of our consolidated financial statements. On a quarterly basis, we evaluate these estimates and judgments based on historical experience as well as other factors that we believe to be reasonable under the circumstances. These estimates are subject to change in the future if underlying assumptions or factors change. Certain accounting policies, while significant, may not require the use of estimates. Below is a summary of certain critical accounting estimates used in the preparation of our consolidated financial statements.
Accounting for Acquisitions
The results of operations of acquired properties will be included in our results of operations from their respective dates of acquisition. Estimates of future cash flows and other valuation techniques will be used to record the purchase of identifiable assets acquired and liabilities assumed such as land, buildings and improvements, equipment and identifiable intangible assets and liabilities such as amounts related to in-place leases, acquired above- and below-market leases, tenant relationships and asset retirement obligations. Values of buildings and improvements will be determined on an as-if-vacant basis.
The estimated fair value of acquired in-place leases will be the costs we would have incurred to lease the properties to the occupancy level of the properties at the date of acquisition. Such estimates include the fair value of leasing commissions, legal costs and other direct costs that would be incurred to lease the properties to such occupancy levels. Additionally, we will evaluate the time period over which such occupancy levels would be achieved. Such evaluation will include an estimate of the net market-based rental revenues and net operating costs (primarily consisting of real estate taxes, insurance and utilities) that would be incurred during the lease-up period. Acquired in-place leases as of the date of acquisition will be amortized over the remaining lease terms.
Acquired above- and below-market lease values will be recorded based on the present value (using an interest rate that reflects the risks associated with the lease acquired) of the difference between the contractual amounts to be paid pursuant to the in-place leases and management's estimate of fair market value lease rates for the corresponding in-place leases. The capitalized above- and below-market lease values will be amortized as adjustments to rental revenue over the remaining terms of the respective leases. Should a tenant terminate its lease, the unamortized portion of the in-place lease value will be charged to amortization expense and the unamortized portion of above- or below-market lease value will be charged to rental revenue.
Impairments of Real Estate
We will review our real estate portfolio to ascertain if there are any indicators of impairment in the value of any of our real estate assets, including deferred costs and intangibles, in order to determine if there is any need for an impairment charge. In reviewing the portfolio, we will examine the type of asset, the economic situation in the area in which the asset is located, the economic situation in the industry in which the tenant is involved and the timeliness of the payments made by the tenant under its lease, as well as any current correspondence that may have been had with the tenant, including property inspection reports. For each real estate asset owned for which indicators of impairment exist, if the undiscounted cash flow analysis yields an amount which is less than the asset's carrying amount, an impairment loss will be recorded to the extent that the estimated fair value is lower than the asset's carrying amount. The estimated fair value will be determined using a discounted cash flow model of the expected future cash flows with subjective assumptions such as future occupancy, rental rates, capital requirements, capitalization rates and discount rates. Real estate assets that are expected to be disposed of are valued at the lower of carrying amount or fair value less costs to sell on an individual asset basis. Any impairment charge taken with respect to any part of our real estate portfolio will reduce our earnings and assets to the extent of the amount of any impairment charge, but it will not affect our cash flow or our distributions until such time as we dispose of the property.
Valuation of Real Estate-Related Securities
Our investment portfolio consists of common stock of publicly-listed REITs, real estate-related preferred securities, and real estate-related debt securities. Each of these investment types requires determination of fair value, which represents a critical accounting estimate due to the judgment involved in the valuation process. The fair value measurements directly affect our financial results as changes in fair value are recorded in current period earnings and impact our realized and unrealized gains or losses. The complexity of fair value determination varies by security type and market conditions. Management must make ongoing judgments about the quality and reliability of available market data used in these valuations, which can materially impact our consolidated statements of operations through both value changes and related investment income recognition.
Recent Accounting Pronouncements
See Note 2to our consolidated financial statements in this Annual Report on Form 10-K for a discussion concerning recent accounting pronouncements.
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