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New words:
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Financial report summary
?Risks
- We may own or invest in special use single tenant properties, and, as such, it may be difficult to re-lease or sell these properties, which could have a material adverse effect on us.
- Tenant defaults may have a material adverse effect on our business, financial condition and results of operations.
- We currently rely on five tenants for approximately a quarter of our revenue and adverse effects to their business, including a tenant’s bankruptcy or insolvency, a general downturn in a tenant’s business, a lease termination or election by a tenant not to renew, or other events affecting our tenants, could have a material adverse effect on us.
- Approximately a quarter of the leases in our portfolio are scheduled to expire in the next four years. An inability to sell or re-lease such properties could result in a material adverse effect on us. Also, vacancies increase our exposure to downturns in the real estate market during the time that we are trying to sell or re-lease such space, and could increase our capital expenditure requirements during the liquidation or re-leasing period, as applicable, any of which could have a material adverse effect on us.
- Our portfolio has geographic market concentrations that make us especially susceptible to adverse developments in those geographic markets.
- We may be unable to fully benefit from increases in market rental rates because certain of our leases contain fixed renewal rates or limitations on market rental rate resets upon renewal.
- Our ability to fully control the maintenance of our net-leased properties may be limited.
- To the extent we are unable to pass along our property operating expenses to our tenants, our business, financial condition and results of operations, may be negatively impacted.
- We face significant competition for tenants, which may decrease or prevent increases of the occupancy and rental rates of our properties. Furthermore, at the time we elect to dispose of our properties, we will also be in competition with sellers of similar properties to locate suitable purchasers for our properties. The occurrence of any of the foregoing could have a material adverse effect on us.
- We may suffer adverse effects from acquisitions of and/or other investments in properties if such properties fail to perform as expected or market conditions deteriorate, particularly with respect to investments in new markets and new business lines.
- We may enter into a new business line or market or acquire or invest in real estate assets that have characteristics that differ from our current portfolio.
- Properties we acquire or invest in may require development or redevelopment in order for the property to be leased to a new tenant.
- We may not be able to control the extent of warranties and indemnities we may be required to provide when disposing of properties.
- We have limited control with respect to properties that are partially owned or managed by third parties, which may adversely affect our ability to manage such properties and related business.
- A substantial portion of our portfolio is comprised of office assets, which have generally experienced a decrease in demand and value. Office assets may experience a further decrease in demand and value and such decrease in demand could have a material adverse effect on us. Further, our ability to sell any of our office assets may be limited in the current economic climate.
- We depend on current key personnel for our future success, and the loss of such personnel or inability to attract and retain personnel could harm our business and the loss of services of one or more members of our executive management team, or our inability to attract and retain highly qualified personnel, could adversely affect our business, diminish our investment opportunities and weaken our business relationships with lenders, business partners, companies that may lease or guarantee our properties and other industry participants, any of which could have a material adverse effect on us.
- If global market and economic conditions deteriorate, including as a result of geopolitical conflicts, U.S. elections, bank failures and negative depositor confidence in depositary institutions, it could have a material adverse effect on us.
- The outbreak of a highly infectious or contagious disease or declaration of a pandemic, epidemic or other health crises could have a material adverse effect on us.
- If we fail to maintain effective internal controls over financial reporting, we could severely inhibit our ability to accurately and timely report our financial condition, results of operations or cash flows.
- Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
- Our operating results will be affected by economic and regulatory changes, such as inflation and rising interest rates, that have an adverse impact on the real estate market in general, and we cannot provide any assurance that we will be profitable or that we will realize growth in the value of the real estate we own and/or are invested in.
- If we suffer losses that are not covered by insurance or that are in excess of insurance coverage, it could have a material adverse effect on us.
- Costs of complying with governmental laws and regulations, including those relating to environmental matters and the ADA, may have a material adverse effect on us.
- If we sell properties by providing financing to purchasers, defaults by the purchasers could have a material adverse effect on us.
- If we are unable to increase the number of shares authorized for issuance under our long-term incentive plan, we may need to settle awards to our trustees and employees in cash.
- If we are unable to refinance our existing debt or obtain new debt to replace such maturing debt on favorable terms or at all, we would have to use cash on hand to repay such debt at maturity, and we may not have sufficient cash available to repay such debt at maturity. In that event, we could default under the associated loan agreement, including our unsecured corporate credit agreement, which could have a material adverse effect on us.
- We may finance properties with prepayment lock-out provisions, which may prohibit us from selling a property, or may require us to maintain specified debt levels for a period of years on some properties.
- We have broad authority to incur debt, and our indebtedness could have a material adverse effect on us.
- We expect to need additional funding to fund future investments.
- We have incurred, and intend to continue to incur, indebtedness secured by our properties. If we are unable to make our debt payments when required, a lender could foreclose on the property or properties securing such debt, which could have a material adverse effect on us.
- Increases in interest rates could increase the amount of our debt payments and adversely affect our ability to pay dividends to shareholders at our current level or otherwise have a material adverse effect on us.
- Failure to hedge effectively against interest rate changes may adversely affect our business, financial condition, results of operations and ability to pay dividends to our shareholders.
- Failure to continue to qualify as a REIT would adversely affect our operations and our ability to pay dividends because we would incur additional tax liabilities, which could have a material adverse effect on us.
- To qualify as a REIT, and to avoid the payment of U.S. federal income and excise taxes and maintain our REIT status, we may be forced to borrow funds, use proceeds from the issuance of securities, or sell assets to pay dividends, which may result in our distributing amounts that may otherwise be used for our operations, which could have a material adverse effect on us.
- If certain of our subsidiaries, including our Operating Partnership, fail to maintain their respective status as a partnership or disregarded entity, as applicable, for U.S. federal income tax purposes, we could cease to qualify as a REIT and suffer other adverse consequences.
- In certain circumstances, even if we qualify as a REIT, we and our subsidiaries may be subject to certain federal, state, and other income taxes, which would reduce our cash available to pay dividends to our shareholders and could have a material adverse effect on us.
- The tax imposed on REITs engaging in “prohibited transactions” may limit our ability to engage in transactions that would be treated as sales for U.S. federal income tax purposes.
- We may be required to pay some taxes due to actions of our taxable REIT subsidiaries, which would reduce our cash available to pay dividends to our shareholders and could have a material adverse effect on us.
- Complying with the REIT requirements may cause us to forgo otherwise attractive opportunities, which could have a material adverse effect on us.
- To the extent our dividends represent a return of capital for tax purposes, a shareholder could recognize an increased capital gain upon a subsequent sale of the shareholder’s common shares.
- Legislation that modifies the rules applicable to partnership tax audits may affect us.
- Legislative or regulatory tax changes related to REITs could materially and adversely affect our business.
- The price of our common shares may experience volatility. In addition, limited trading volume may depress the market price of our common shares and make it difficult for investors to sell their shares and less attractive to new investors to purchase our common shares.
- We may change our dividend policy.
- Our shareholders are subject to the risk that our business and operating plans may change.
- Increases in market interest rates may result in a decrease in the value of our common shares.
- The future issuance of common shares or the resale of outstanding common shares could adversely affect the market price of our common shares.
- Conflicts of interest may exist or could arise in the future between the interests of our shareholders and the interests of holders of OP Units, which may impede business decisions that could otherwise have benefitted our shareholders.
- Certain of our executive officers own an interest in an incentive compensation plan controlled by our former Executive Chairman and pursuant to which they may be entitled to receive substantial payments, which could create the appearance of a conflict of interest between the interest of the Company and the interests of these executive officers.
- Our charter contains certain ownership limits with respect to our shares.
- Certain provisions of Maryland law could inhibit changes in control, which may discourage third parties from conducting a tender offer or seeking other change of control transactions that might involve a premium price for our shares or that our shareholders might otherwise believe to be in their best interest.
- Our rights and the rights of our shareholders to recover claims against our officers and trustees are limited, which could reduce our shareholders’ and our recovery against them if they cause us to incur losses.
- We are uncertain of our sources of funding our future capital needs. If we cannot obtain funding on acceptable terms, it could affect our ability to make necessary capital improvements to our properties, pursue acquisitions of and/or other investments in properties as part of our business plan, pay our expenses, pay dividends, expand our business or otherwise have a material adverse effect on us.
- Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain actions and proceedings that may be initiated by our shareholders.
- Cybersecurity risks and cyber incidents or the failure to comply with laws and regulations concerning data privacy and security may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, any of which could have a material adverse effect on us.
- We are subject to risks from climate change and natural disasters such as earthquakes and severe weather conditions.
- Corporate responsibility, specifically related to environmental, social, and governance (“ESG”) factors, may impose additional costs and expose us to new risks.
- We may be subject to litigation relating to our business, which could have a material adverse effect on our business, financial condition and results of operations and could result in significant defense costs and potentially significant judgments against us.
Management Discussion
- The Company’s long-term objective is to leverage the experience of our team to maximize shareholder value through the ownership and operation of industrial and select office assets located in strategic growth markets. We are focused on maintaining a strong balance sheet that enables us to execute multi-channel investments across the risk and capital spectrum. It is our intention to continue to maximize our balance sheet flexibility through, among other things, free cash flow generation and the continued execution of our strategic disposition plan. We seek to generate internal and external growth by increasing the cash flow from our properties and expanding our portfolio by making industrial-focused investments.