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Item 1A. Risk Factors

2023-02-13 compared with 2022-02-14 · 213 added, 217 removed, 185 unchanged (70% of the section changed)

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RISKS RELATED TO OUR PROPERTIES AND INDUSTRY

Our business, financial condition, results of operations and cash flows have been and may continue to be adversely affected by the COVID-19 pandemic and the impact could be material to us.

Our business has been adversely affected by the ongoing COVID-19 pandemic and preventive measures taken to curb the spread of the virus.

The pandemic has resulted in governments and other authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and business closures.

Existing and potential new variants make the ongoing impact of the COVID-19 pandemic difficult to predict.

If the virus continues to spread significantly in its current form or as a more contagious variant, governmental agencies and other authorities may order additional closures or impose further restrictions on businesses, which could negatively impact the financial condition of our tenants.

The continuation of the pandemic could also have fundamental adverse effects on our business.

Further delays in tenant return-to-work plans as a result of the continued risks of the pandemic and further dependence on work from home and flexible work arrangements may lead our office tenant to reassess its long-term physical space needs.

Further, while many of the limitations and restrictions imposed on retailers during the onset of the pandemic have been lifted and/or eased, economic conditions, including a decline in New York City tourism since the onset of the virus, continue to adversely affect the financial health of our retail tenants.

The impact of such conditions could cause retailers to reduce the number and size of their physical locations and further increase reliance on e-commerce.

Over time, these factors could decrease the demand for office and retail space and ultimately decrease occupancy and/or rent levels across our portfolio, which may have a negative impact on our financial condition and/or access to capital.

In addition, the value of our real estate assets may decline, which may result in non-cash impairment charges in future periods and the impact could be material.

The extent of the COVID-19 pandemic’s effect on our operational and financial performance will depend on future developments, including vaccination rates among the population, the efficacy and durability of vaccines against emerging variants and governmental and tenant responses thereto, all of which are uncertain at this time.

Given the dynamic nature of the circumstances, it is difficult to predict the ongoing impact of the COVID-19 pandemic on our business, financial condition, results of operations and cash flows but the impact could be material.

All of our properties are in the New York City metropolitan area and are affected by the economic cycles and risks inherent in that area.

All of our revenues come from properties located in the New York City metropolitan area.

We may be adversely affected by trends in office real estate, including work from home trends.

In 2022, approximately 56% of our rental revenue was from Bloomberg, the office tenant at our 731 Lexington Avenue office property.

Work from home, flexible or hybrid work schedules, open workplaces, videoconferencing, and teleconferencing are becoming more common, particularly as a result of the COVID-19 pandemic.

Changes in tenant space utilization, including increased acceptance of work from home and flexible work arrangement policies, may cause office tenants to reassess their long-term physical space needs, which could have an adverse effect on our business.

All of our properties are in New York City and are affected by the economic cycles and risks inherent in that area.

All of our revenues come from properties located in New York City.

Real estate markets are subject to economic downturns and we cannot predict how economic conditions will impact this market in either the short or long term.

Recent declines in the economy and declines in the real estate market in this area, have hurt and could continue to hurt, our financial performance and the value of our properties.

Declines in the economy or declines in the real estate markets in New York City, including the effects of the COVID-19 pandemic, have hurt and could continue to hurt our financial performance and the value of our properties.

In addition to the factors affecting the national economic condition generally, the factors affecting economic conditions in this area include:

• financial performance and productivity of the media, advertising, professional services, financial, technology, retail, insurance and real estate industries;

• the impact of the COVID-19 pandemic;

• business layoffs or downsizing;

• any oversupply of, or reduced demand for, real estate;

• industry slowdowns;

• the effects of inflation;

• relocations of businesses;

• changing demographics;

• increased telecommuting and use of alternative work places;

• changes in the number of domestic and international tourists to our markets (including as a result of changes in the relative strengths of world currencies);

• increased work from home and use of alternative work places;

• changes in the number of domestic and international tourists to our markets (including as a result of changes in the relative strengths of world currencies and the COVID-19 pandemic);

• the fiscal health of New York State and New York City governments and local transit authorities, particularly as a result of the impact of the COVID-19 pandemic;

• quality of life conditions;

• infrastructure quality;

• changes in the rates or treatment of the deductibility of state and local taxes;

• any oversupply of, or reduced demand for, real estate.

• increased government regulation and costs of complying with such regulations;

• changes in rates or the treatment of the deductibility of state and local taxes.

It is impossible for us to predict the future or the effect of trends in the economic and investment climates of the New York City metropolitan region, and more generally of the United States, on the real estate market in this area.

Local, national or global economic downturns could negatively affect our business and profitability.

We may be adversely affected by trends in office real estate, including work from home trends.

Trends in the working environment, including work from home, flexible or hybrid work schedules, open workplaces and teleconferencing are becoming more common and have accelerated as a result of the COVID-19 pandemic.

These practices enable businesses to reduce their office space requirements.

There is also an increasing trend among some businesses to utilize shared office spaces and co-working spaces.

A continuation of these trends could, over time, erode the overall demand for office space and, in turn, place downward pressure on occupancy, rental rates and property valuations.

Local, national or global economic downturns could negatively affect the value of properties, our business and profitability.

We are subject to risks that affect the general and New York City retail environments.

Certain of our properties are New York City retail properties.

As such, these properties are affected by the general and New York City retail environments, including the level of consumer spending and consumer confidence, New York City tourism, which has not fully recovered from the effects of the COVID-19 pandemic, employer remote-working policies, the threat of terrorism, increasing competition from on-line retailers, other retailers and outlet malls and the impact of technological change upon the retail environment generally.

For a number of our tenants that operate retail businesses involving high contact interactions with their customers, the negative impact of the COVID-19 pandemic on their business has been particularly severe and the recovery more difficult, with customer traffic down significantly.

Furthermore, it is unknowable whether consumers’ retail habits will return to norms that existed prior to the COVID-19 pandemic.

These factors could adversely affect the financial condition of our retail tenants, or result in the bankruptcy of such tenants, and the willingness of retailers to lease space in our retail locations, which could have an adverse effect on our business and profitability.

Terrorist attacks may adversely affect the value of our properties and our ability to generate cash flow.

All of our properties are located in the New York City metropolitan area, and our most significant property, 731 Lexington Avenue, is located on Lexington Avenue and 59th Street in Manhattan.

In response to a terrorist attack or the perceived threat of terrorism, tenants in this area may choose to relocate their businesses to less populated, lower-profile areas of the United States that may be perceived to be less likely targets of future terrorist activity and fewer customers may choose to patronize businesses in this area.

This, in turn, could trigger a decrease in the demand for space in these markets, which could increase vacancies in our properties and force us to lease our properties on less favorable terms.

Furthermore, we may experience increased costs for security, equipment and personnel.

As a result, the value of our properties and the level of our revenues could decline materially.

Natural disasters and the effects of climate change could have a concentrated impact on the area which we operate and could adversely impact our results.

Our investments are in the New York City metropolitan area and since they are concentrated along the Eastern Seaboard, natural disasters, including hurricanes, could cause significant damage to our properties and the surrounding environment or area.

Potentially adverse consequences of “global warming,” including rising sea levels, could similarly have an impact on our properties and the economy of the New York City metropolitan area in which we operate.

Government efforts to combat climate change may impact the cost of operating our properties and real estate in the New York City metropolitan area.

Over time, these conditions could result in declining demand for office space in our buildings or the inability of us to operate the buildings at all.

Climate change may also have indirect effects on our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptable, increasing the cost of energy at our properties and requiring us to expend funds as we seek to repair and protect our properties against such risks.

The incurrence of these losses, costs or business interruptions may adversely affect our operating and financial results.

Our properties are located in urban areas, which means the vitality of our properties is reliant on sound transportation and utility infrastructure.

If that infrastructure is compromised in any way by an extreme weather event, such a compromise could have an adverse impact on our local economies and populations, as well as on our tenants’ ability to do business in our buildings.

Our properties are subject to transitional risks related to climate-related policy change.

De-carbonization of grid-supplied energy could lead to increased energy costs and operating expenses for our buildings.

Retrofitting our building systems to consume less energy could lead to increased capital costs.

Buildings which consume fossil fuels onsite may be subject to penalties.

In addition, the full transition of grid-supplied energy to renewable sources (as has been mandated by the Climate Leadership and Community Protection Act in New York State) could lead to increased energy costs and operating expenses for our buildings.

In addition, we may become subject to costs, taxes or penalties, or increases therein, associated with natural resource or energy usage, such as a “carbon tax” and by local legislation such as New York City’s Local Law 97, which sets limits on carbon emissions in our buildings and imposes penalties if we exceed those limits, and New York City’s Intro 2317, or the “gas ban” bill, which limits any onsite fossil fuel combustion in new construction and major renovations.

These costs, taxes or penalties could increase our operating costs and decrease the cash available to pay our obligations or distribute to equity holders.

federal tax legislation now and in the future could affect REITs generally, the trading of our shares and our results of operations, both positively and negatively, in ways that are difficult to anticipate.

The rules dealing with U.S.

federal, state and local income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S.

Treasury Department.

Changes to tax laws (which changes may have retroactive application) could adversely affect our stockholders or us.

In recent years, many such changes have been made, including under the Tax Cuts and Jobs Act of 2017, which made major changes to the Internal Revenue Code (the “Code”), including a number of provisions of the Code that affect the taxation of REITs and their shareholders, and changes are likely to continue to occur in the future.

We cannot predict whether, when, in what form, or with what effective dates, tax laws, regulations and rulings may be enacted, promulgated or decided, or technical corrections made, which could result in an increase in our, or our stockholders’, tax liability or require changes in the manner in which we operate in order to minimize increases in our tax liability.

A shortfall in tax revenues for states and municipalities in which we operate may lead to an increase in the frequency and size of such changes.

If such changes occur, we may be required to pay additional taxes on our assets or income and/or be subject to additional restrictions.

These increased tax costs could, among other things, adversely affect our financial condition, the results of operations and the amount of cash available for the payment of dividends.

Stockholders are urged to consult with their own tax advisors with respect to the impact that recent legislation may have on their investment and the status of legislative, regulatory or administrative developments and proposals and their potential effect on their investment in our shares.

Certain of our properties are New York City retail properties and thus are affected by the general and New York City retail environments, including office and residential occupancy rates, the level of consumer spending and consumer confidence, New York City tourism, employer remote-working policies, the threat of terrorism or other criminal acts, increasing competition from on-line retailers and other retail centers, and the impact of technological change upon the retail environment generally.

Furthermore, New York City tourism h as not yet fully reco vered from the effects of the COVID-19 pandemic.

Our performance and the value of an investment in us are subject to risks associated with our real estate assets and with the real estate industry.

The value of our real estate and the value of an investment in us fluctuates depending on conditions in the general economy and the real estate business.

These conditions may also adversely impact our revenues and cash flows.

These conditions may also adversely affect our revenues and cash flows.

The factors that affect the value of our real estate include, among other things:

• global, national, regional and local economic conditions;

• the impact of the COVID-19 pandemic;

• competition from other available space;

• competition from other available space, including co-working space and sub-leases;

• local conditions such as an oversupply of space or a reduction in demand for real estate in the area;

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• changes in market rental rates;

• increased competition from online shopping and its impact on retail tenants and their demand for retail space;

• the timing and costs associated with property improvements and rentals;

• whether we are able to pass all or portions of any increases in operating costs through to tenants;

• political and regulatory conditions;

• changes in real estate taxes and other expenses;

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• changes in consumer preferences adversely affecting retailers and retail store values;

• changes in space utilization by our tenants due to technology, economic conditions and business environment;

• changes in tenant space utilization;

• the financial condition of our tenants, including the extent of tenant bankruptcies or defaults;

• consequences of any armed conflict involving, or terrorist attack against, the United States or individual acts of violence in public spaces;

• trends in office real estate;

• the impact on our retail tenants and demand for retail space at our properties due to increased competition from online shopping;

• consequences of any armed conflict involving, or terrorist attacks against, the United States or individual acts of violence in public spaces;

• trends in office real estate, including many tenants’ preferences for space in modern amenitized buildings which may require the landlord to incur significant capital expenditures;

• availability of financing on acceptable terms or at all;

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• climate change;

The rents we receive and the occupancy levels at our properties may decline as a result of adverse changes in any of these factors.

If our rental revenues and/or occupancy levels decline, we generally would expect to have less cash available for operating costs, to pay our indebtedness and for distribution to our stockholders.

In addition, some of our major expenses, including mortgage payments, real estate taxes and maintenance costs generally do not decline when the related rents decline, and maintenance costs can increase substantially in an inflationary environment.

Real estate is a competitive business and that competition may adversely impact us.

We compete with a large number of property owners and developers, some of which may be willing to accept lower returns on their investments.

Principal factors of competition are rents charged, attractiveness of location, the quality of the property and the breadth and the quality of services provided.

Substantially all of our properties face competition from similar properties in the same market, which may adversely impact the rents we can charge at those properties and our results of operations.

• the impact of the COVID-19 pandemic or outbreaks of other highly infectious diseases.

The rents or sales proceeds we receive and the occupancy levels at our properties may decline as a result of adverse changes in any of these factors.

If rental revenues, sales proceeds and/or occupancy levels decline, we generally would expect to have less cash available for operating costs, to pay indebtedness and for distribution to our stockholders.

In addition, some of our major expenses, including mortgage interest payments, real estate taxes and maintenance costs generally do not decline when the related rents decline, and maintenance costs can increase substantially in an inflationary environment.

These factors may cause the value of our real estate assets to decline, which may result in non-cash impairment charges and the impact could be material.

Real estate is a competitive business and that competition may adversely affect us.

We compete with a large number of real estate investors, property owners and developers, some of which may be willing to accept lower returns on their investments.

Principal factors of competition are rents charged, sales prices, attractiveness of location, the quality of the property and the breadth and the quality of services provided.

Substantially all of our properties face competition from similar properties in the same market, which may adversely affect the rents we can charge at those properties and our results of operations.

We depend on leasing space to tenants on economically favorable terms and collecting rent from tenants who may not be able to pay.

Our financial results depend significantly on leasing space in our properties to tenants on economically favorable terms.

In addition, because a majority of our income is derived from renting real property, our income, funds available to pay indebtedness and for distributions to stockholders will decrease if certain of our tenants cannot pay their rent or if we are not able to maintain our occupancy levels on favorable terms.

If a tenant does not pay its rent, we might not be able to enforce our rights as landlord without delays and might incur substantial legal and other costs.

In addition, because a majority of our income is derived from renting real property, our income, and funds available to pay indebtedness and for distributions to stockholders will decrease if certain of our tenants cannot pay their rent or if we are not able to maintain our occupancy levels on favorable terms.

If a tenant does not pay its rent, we might not be able to enforce our rights as landlord without delays and may incur substantial legal and other costs.

Even if we are able to enforce our rights, a tenant may not have recoverable assets.

Additionally, in limited circumstances, we have agreed and may continue to agree to rent deferrals and abatements for certain of our tenants.

Bankruptcy or insolvency of tenants may decrease our revenues, net income and available cash.

From time to time, some of our tenants have declared bankruptcy, and other tenants may declare bankruptcy or become insolvent in the future.

The bankruptcy or insolvency of a major tenant could cause us to suffer lower revenues and operational difficulties, including leasing the remainder of the property.

As a result, the bankruptcy or insolvency of a major tenant or multiple tenants could result in decreased revenues, net income and funds available to pay our indebtedness or make distributions to stockholders.

We depend upon anchor tenants to attract shoppers at our Rego Park I and II retail properties and decisions made by these tenants, or adverse developments in the businesses of these tenants, could materially affect our financial condition and results of operations.

Our Rego Park I and II retail properties are anchored by well-known department stores and other tenants who generate shopping traffic.

The value of these properties would be adversely affected if our anchor tenants failed to meet their contractual obligations, sought concessions in order to continue operations or ceased their operations, including as a result of bankruptcy.

If the level of sales of stores operating in our properties were to decline significantly due to economic conditions, increased competition from online shopping, closing of anchors or for other reasons, tenants may be unable to pay their minimum rents or expense recovery charges.

In the event of a default by a tenant or anchor, we may experience delays and costs in enforcing our rights as landlord.

Additionally, closure of an anchor or major tenant could result in lease terminations by, or reductions of rent from, other tenants if the other tenants’ leases have co-tenancy clauses.

We may be unable to renew leases or relet space as leases expire.

When our tenants decide not to renew their leases upon their expiration, we may not be able to relet the space.

Even if tenants do renew or we can relet the space, the terms of renewal or reletting, considering among other things, the cost of improvements to the property and leasing commissions, may be less favorable than the terms in the expired leases.

In addition, changes in space utilization by our tenants may impact our ability to renew or relet space without the need to incur substantial costs in renovating or redesigning the internal configuration of the relevant property.

Even if tenants do renew or we can relet the space, the terms of renewal or reletting, considering among other things, rent and other concessions, the cost of improvements to the property and leasing commissions, may be less favorable than the terms in the expired leases.

If we are unable to promptly renew the leases or relet the space at similar rates or if we incur substantial costs in renewing or reletting the space, our cash flow and ability to service debt obligations and pay dividends and distributions to stockholders could be adversely affected.

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Loss of Bloomberg as a tenant or deterioration in Bloomberg’s credit quality could adversely affect our financial condition and results of operations.

Bloomberg accounted for revenue of $113,140,000, $109,066,000, and $109,113,000 in the years ended December 31, 2021, 2020, and 2019, respectively, representing approximately 55%, 55% and 48% of our rental revenues in each year, respectively.

Bloomberg accounted for revenu e of $115,129,000, $113,140,000 and $109,066,000 in the years ended December 31, 2022, 2021 and 2020, respectively, representing approximately 56% , 55% and 55% of our rental revenues in each year, respectively.

No other tenant accounted for more than 10% of our rental revenues.

If we were to lose Bloomberg as a tenant, or if Bloomberg were to be unable to fulfill its obligations under its lease, it would adversely affect our results of operations and financial condition.

Our Rego Park I and II retail properties are anchored by well-known department stores and other tenants who generate shopping traffic.

If the level of sales of stores operating in our properties were to decline significantly due to economic conditions, increased competition from on-line shopping, closing of anchors or for other reasons, tenants may be unable to pay their minimum rents or expense recovery charges.

In the event of a default by a tenant or anchor, we may experience delays and costs in enforcing our rights as landlord.

Additionally, closure of an anchor or major tenant could result in lease terminations by, or reductions of rent from, other tenants if the other tenants’ leases have co-tenancy clauses.

On December 3, 2022, IKEA closed its 112,000 square foot anchor store at Rego Park I.

IKEA remains obligated under its lease which expires in December 2030.

The lease includes a right to terminate effective no earlier than March 2026, subject to payment of rent through the termination date and an additional termination payment equal to the lesser of $10,000,000 or the amount of rent due under the remaining term.

Bankruptcy or insolvency of tenants may decrease our revenues, net income and available cash.

From time-to-time, some of our tenants have declared bankruptcy, and other tenants may declare bankruptcy or become insolvent in the future.

The bankruptcy or insolvency of a major tenant could cause us to suffer lower revenues and operational difficulties, including leasing the remainder of the property.

Our business, financial condition, results of operations and cash flows have been and may continue to be adversely affected by the COVID-19 pandemic, or future outbreaks of other highly infectious diseases, and the impact could be material to us.

Our business has been, and may continue to be, adversely affected by the economic and industry challenges created by the COVID-19 pandemic and preventive measures taken to curb the spread of the virus.

While substantially all of the limitations and restrictions imposed during the onset of the pandemic have been lifted and/or eased and people have largely resumed pre-pandemic activities, economic conditions continue to negatively impact the financial health of our retail tenants.

The impact of such conditions could cause retailers to reduce the number and size of their physical locations and further increase reliance on e-commerce.

Additionally, our office tenant may see further delay in employee return-to-work plans as a result of the continued risks of the pandemic and further dependence on work from home and flexible work arrangements may lead our office tenant to reassess its long-term physical space needs.

Additionally, if the COVID-19 virus or another more contagious variant were to spread, governmental agencies and other authorities may reorder closures or reimpose restrictions on businesses, which could further negatively impact the financial condition of our tenants.

There is no guarantee that the jurisdictions in which we operate will not reimpose restrictions in an effort to mitigate risks to public health.

We may continue to experience material impacts to our business, financial condition, and operating results due to the COVID-19 pandemic or variants or future outbreaks of other highly infectious diseases and those impacts may have the effect of heightening other risks described under this heading “Risk Factors.”

Some of our potential losses may not be covered by insurance.

We maintain general liability insurance with limits of $300,000,000 per occurrence and per property, of which the first $30,000,000 includes communicable disease coverage, and all-risk property and rental value insurance coverage with limits of $1.7 billion per occurrence, including coverage for acts of terrorism, with sub-limits for certain perils such as floods and earthquakes on each of our properties and excluding communicable disease coverage.

Fifty Ninth Street Insurance Company, LLC (“FNSIC”), our wholly owned consolidated subsidiary, acts as a direct insurer for coverage for acts of terrorism, including nuclear, biological, chemical and radiological (“NBCR”) acts, as defined by the Terrorism Risk Insurance Act of 2002, as amended to date and which has been extended through December 2027.

Coverage for acts of terrorism (including NBCR acts) is up to $1.7 billion per occurrence and in the aggregate.

Coverage for acts of terrorism (excluding NBCR acts) is fully reinsured by third party insurance companies and the Federal government with no exposure to FNSIC.

For NBCR acts, FNSIC is responsible for a $298,000 deductible and 20% of the balance of a covered loss, and the Federal government is responsible for the remaining 80% of a covered loss.

We are ultimately responsible for any loss incurred by FNSIC.

We continue to monitor the state of the insurance market and the scope and costs of coverage for acts of terrorism or other events.

However, we cannot anticipate what coverage will be available on commercially reasonable terms in the future.

We are responsible for uninsured losses and for deductibles and losses in excess of our insurance coverage, which could be material and adversely affect our business, results of operations and financial condition.

The principal amounts of our mortgage loans are non-recourse to us and the loans contain customary covenants requiring us to maintain insurance.

Although we believe that we have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future.

If lenders insist on greater coverage than we are able to obtain, it could adversely affect our ability to finance or refinance our properties.

Actual or threatened terrorist attacks may adversely affect the value of our properties and our ability to generate cash flow.

All of our properties are located in New York City, and our most significant property, 731 Lexington Avenue, is located on Lexington Avenue and 59th Street in Manhattan.

In response to a terrorist attack, the perceived threat of terrorism or other criminal acts, tenants in this area may choose to relocate their businesses to less populated, lower-profile areas of the United States that may be perceived to be less likely targets of future terrorist activity or have lower rates of crime and fewer customers may choose to patronize businesses in this area.

This, in turn, could trigger a decrease in the demand for space in these areas, which could increase vacancies in our properties and force us to lease our properties on less favorable terms .

Furthermore, we may experience increased costs for security, equipment and personnel.

As a result, the value of our properties and the level of our revenues and cash flows could decline materially.

Natural disasters and the effects of climate change could have a concentrated impact on the area which we operate and could adversely affect our results.

Our investments are in New York City.

Natural disasters, including earthquakes, storms, tornados, floods and hurricanes, could cause significant damage to our properties and the surrounding environment or area.

Potentially adverse consequences of “global warming,” including rising sea levels, could similarly have an impact on our properties and the economies of the metropolitan area in which we operate.

Government efforts to combat climate change may impact the cost of operating our properties.

Over time, these conditions could result in declining demand for space in our buildings or the inability of us to operate the buildings at all.

The incurrence of these losses, costs or business interruptions may adversely affect our operating and financial results.

Our properties are located in urban areas, which means the vitality of our properties is reliant on sound transportation and utility infrastructure.

If that infrastructure is compromised in any way by an extreme weather event, such a compromise could have an adverse effect on our local economies and populations, as well as on our tenants’ ability to do business in our buildings.

Our properties are subject to transitional risks related to climate-related policy change.

De-carbonization of grid-supplied energy could lead to increased energy costs and operating expenses for our buildings.

Retrofitting our building systems to consume less energy could lead to increased capital costs.

Buildings which consume fossil fuels onsite may be subject to penalties.

We may also become subject to costs, taxes or penalties, or increases therein, associated with natural resource or energy usage, such as a “carbon tax” and by local legislation such as New York City’s Local Law 97, which sets limits on carbon emissions in our buildings and imposes penalties if we exceed those limits, and New York City’s Intro 2317, or the “gas ban” bill, which limits any onsite fossil fuel combustion in new construction and major renovations.

These costs, taxes or penalties could increase our operating costs and decrease the cash available to pay our indebtedness or make distributions to our stockholders.

Changes to tax laws could affect REITs generally, the trading of our shares and our results of operations, both positively and negatively, in ways that are difficult to anticipate.

The rules dealing with U.S.

federal, state and local income taxation are constantly under review by persons involved in the legislative process and by the IRS and the Treasury Department.

Changes to tax laws (which changes may have retroactive application) could adversely affect the taxation of REITs and their shareholders.

If such changes occur, we may be required to pay additional taxes on our assets or income and/or be subject to additional restrictions.

These increased tax costs could, among other things, adversely affect the trading price for our common shares, our financial condition, our results of operations and the amount of cash available for the payment of dividends.

RISKS RELATED TO OUR OPERATIONS AND STRATEGIES

Significant inflation and continuing increases in the inflation rate could adversely affect our business and financial results.

Recent substantial increases in the rate of inflation and potential future elevated rates of inflation, both real and anticipated, may impact our investments and results of operations.

In a highly inflationary environment, we may be unable to raise rental rates at or above the rate of inflation, which could reduce our profit margins.

In addition, our cost of labor and materials could increase, which could have an adverse effect on our business or financial results.

Increased inflation could also adversely affect us by increasing costs of construction and renovation.

While increases in most operating expenses at our properties can be passed on to our office and retail tenants, some tenants have fixed reimbursement charges and expenses at our residential property may not be able to be passed on to residential tenants.

Unreimbursed increased operating expenses may reduce cash flow available to pay our indebtedness or make distributions to our stockholders.

We may acquire, develop, or redevelop properties and this may create risks.

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We continue to engage in development, redevelopment and repositioning activities with respect to our properties.

Specifically, in 2021, we filed permits to construct an apartment tower at our Rego Park III property.

We are subject to certain risks in connection with development and redevelopment activities, which could adversely affect us, including our financial condition and results of operations.

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(ii) the availability and timely receipt of zoning and other regulatory approvals;

(iii) the potential for the fluctuation of occupancy rates and rents at redeveloped properties, which may result in our investment not being profitable;

(iv) start up, repositioning and redevelopment costs may be higher than anticipated;

(v) cost overruns, especially in an inflationary environment, and untimely completion of construction (including risks beyond our control, such as weather or labor conditions, material shortages or supply chain delays);

(iii) increased costs of construction and any cost overruns, especially in an inflationary environment, and untimely completion of construction (including risks beyond our control, such as weather or labor conditions, material shortages or supply chain delays);

(iv) the potential for the fluctuation of occupancy rates and rents at redeveloped properties, which may result in our investment not being profitable;

(v) start up, repositioning and redevelopment costs may be higher than anticipated;

(vi) the potential that we may fail to recover expenses already incurred if we abandon development or redevelopment opportunities after we begin to explore them;

(vii) the potential that we may expend funds on and devote management time to projects which we do not complete;

(viii) the inability to lease a property on schedule or at all, resulting in increased construction or redevelopment costs;

and (ix) the possibility that properties will be leased at below expected rental rates.

These risks could result in substantial unanticipated delays or expenses and could prevent the initiation or the completion of redevelopment activities, any of which could have an adverse effect on our financial condition, results of operations, cash flow, the market value of our common stock and ability to satisfy our principal and interest obligations and to make distributions to our stockholders.

It may be difficult to sell real estate timely, which may limit our flexibility.

(viii) the inability to complete leasing of a property on schedule or at all, resulting in an increase in carrying or redevelopment costs;

(ix) the possibility that properties will be leased at below expected rental rates and (x) to the extent the redevelopment activities are conducted in partnership with third parties, the possibility of disputes with our joint venture development partners and the potential that we miss certain project milestone deadlines.

These risks could result in substantial unanticipated delays or expenses and could prevent the initiation or the completion of redevelopment activities or the ultimate rents achieved on new developments, any of which could have an adverse effect on our financial condition, results of operations, cash flow, the market value of our common shares and ability to pay our indebtedness and to make distributions to our stockholders.

It may be difficult to sell real estate on a timely basis, which may limit our flexibility.

Real estate investments are relatively illiquid.

Consequently, we may have limited ability to dispose of assets in our portfolio promptly in response to changes in economic or other conditions which could have an adverse effect on our sources of working capital and our ability to satisfy our debt obligations.

Significant inflation could adversely affect our business and financial results.

Increased inflation can adversely affect us by increasing costs of land, construction and renovation.

In a highly inflationary environment, we may be unable to raise the rental rates at or above the rate of inflation, which could reduce our profit margins.

In addition, our cost of labor and materials can increase, which could have an adverse impact on our business or financial results.

While increases in most operating expenses at our commercial properties can be passed on to our office and retail tenants, increases in expenses at our residential properties may not be able to be passed on to residential tenants.

An increase to unreimbursed operating expenses may reduce cash flow available for payment of mortgage debt and interest and for distributions to stockholders.

RISKS RELATED TO OUR INDEBTEDNESS AND ACCESS TO CAPITAL

Capital markets and economic conditions can materially affect our liquidity, financial condition and results of operations as well as the value of an investment in our common stock.

There are many factors that can affect the value of our equity securities and any debt securities we may issue in the future, including the state of the capital markets and economy.

Demand for office and retail space typically declines nationwide due to an economic downturn, bankruptcies, downsizing, layoffs and cost cutting.

Government action or inaction may adversely affect the state of the capital markets.

The cost and availability of credit may be adversely affected by illiquid credit markets and wider credit spreads, which may adversely affect our liquidity and financial condition, including our results of operations, and the liquidity and financial condition of our tenants.

Our inability or the inability of our tenants to timely refinance maturing liabilities and access the capital markets to meet liquidity needs may materially affect our financial condition and results of operations and the value of our common stock.

We have outstanding debt, and the amount of debt and its cost may increase and refinancing may not be available on acceptable terms.

As of December 31, 2022, total debt outstanding was $1,096,544,000 , excluding deferred financing costs, and our ratio of total debt to total enterprise value was 54%.

“Enterprise value” means the market equity value of our common stock, plus debt, less cash and cash equivalents at such date.

In addition, we have significant debt service obligations.

For the year ended December 31, 2022, our total cash payments for principal and interest was $25,934,000.

In the future, we may incur additional debt, and thus increase the ratio of total debt to total enterprise value.

If our level of indebtedness increases, there may be an increased risk of default which could adversely affect our financial condition and results of operations.

In addition, in a rising interest rate environment, the cost of refinancing our existing debt and any new debt or market rate security or instrument may increase.

Continued uncertainty in the equity and credit markets may negatively impact our ability to obtain financing on reasonable terms or at all, which may negatively affect our ability to refinance our debt.

We have a substantial amount of indebtedness that could affect our future operations.

As of December 31, 2022, total debt outstanding was $1,096,544,000, excluding deferred financing costs.

We are subject to the risks normally associated with debt financing, including the risk that our cash flow from operations will be insufficient to meet required debt service.

Our debt service costs generally will not be reduced if developments in the market or at our properties, such as the entry of new competitors or the loss of major tenants, cause a reduction in the income from our properties.

Should such events occur, our operations may be adversely affected.

If a property is mortgaged to secure payment of indebtedness and income from such property is insufficient to pay that indebtedness, the property could be foreclosed upon by the mortgagee resulting in a loss of income and a decline in our total asset value.

Substantially all of our assets are owned by subsidiaries.

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As of December 31, 2022, we had outstanding mortgage indebtedness of $1,096,544,000, secured by three of our properties.

These mortgages contain covenants that limit our ability to incur additional indebtedness on these properties, provide for lender approval of tenants’ leases in certain circumstances, and provide for yield maintenance or defeasance premiums to prepay them.

These mortgages contain covenants that limit our ability to incur additional indebtedness on these properties, provide for lender approval of tenants’ leases in certain circumstances, and in certain cases provide for yield maintenance or defeasance premiums to prepay them.

These mortgages may significantly restrict our operational and financial flexibility.

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In such an event, it is possible that we would have insufficient assets remaining to make payments to other creditors or to any holders of our securities.

We have a substantial amount of indebtedness that could affect our future operations.

As of December 31, 2021, total debt outstanding was $1,096,544,000.

We are subject to the risks normally associated with debt financing, including the risk that our cash flow from operations will be insufficient to meet required debt service.

Should such events occur, our operations may be adversely affected.

We have outstanding debt, and the amount of debt and its cost may increase and refinancing may not be available on acceptable terms.

As of December 31, 2021, total debt outstanding was $1,096,544,000 and our ratio of total debt to total enterprise value was 56%.

“Enterprise value” means the market equity value of our common stock, plus debt, less cash and cash equivalents at such date.

In addition, we have significant debt service obligations.

For the year ended December 31, 2021, our cash payments for principal and interest were $86,568,000.

In the future, we may incur additional debt, and thus increase the ratio of total debt to total enterprise value.

If our level of indebtedness increases, there may be an increased risk of default which could adversely affect our financial condition and results of operations.

In addition, in a rising interest rate environment, the cost of refinancing our existing debt and any new debt or market rate security or instrument may increase.

Failure to hedge effectively against interest rate changes may adversely affect results of operations.

The interest rate hedge instruments we use to manage some of our exposure to interest rate volatility involve risk and counterparties may fail to perform under these arrangements.

In addition, these arrangements may not be effective in reducing our exposure to interest rate changes and when existing interest rate hedges terminate, we may incur increased costs in implementing further interest rate hedges.

Failure to hedge effectively against interest rate changes may adversely affect our results of operations.

The hedge instruments we may use to manage our exposure to interest rate volatility involve risks.

The interest rate hedge instruments we may use to manage some of our exposure to interest rate volatility involve risks, including the risk that counterparties may fail to perform under these arrangements.

If interest rates were to fall, these arrangements may cause us to pay higher interest on our debt obligations than would otherwise be the case.

In addition, the use of such instruments may generate income that may not be treated as qualifying REIT income for purposes of the 75% gross income test or 95% gross income test.

Furthermore, there can be no assurance that our hedging arrangements will qualify as “highly effective” cash flow hedges under applicable accounting standards.

If our hedges do not qualify as “highly effective,” the changes in the fair value of these instruments would be reflected in our results of operations and could adversely affect our earnings.

We may be adversely affected by the discontinuation of London Interbank Offered Rate (“LIBOR”).

On March 5, 2021, the Financial Conduct Authority (“FCA”) announced that USD LIBOR will no longer be published after June 30, 2023.

The Secured Overnight Financing Rate (“SOFR”) has been identified by market participants as the preferred alternative to USD LIBOR in derivatives and other financial contracts.

Our new floating rate loans entered into after December 31, 2021 will no longer reference LIBOR and will reference SOFR or another floating rate.

As of December 31, 2022, we had variable debt indexed to LIBOR of $500,000,000, subject to an interest rate cap arrangement that caps LIBOR at a rate of 6.00% through June 2023.

The transition of our LIBOR-based obligations to SOFR could affect all-in interest rates on our debt and interest rate swap and cap arrangements and could result in interest payable that does not correlate over time with the interest rates and/or payments that would have been made on our obligations if LIBOR was available in its current form.

RISKS RELATED TO OUR ORGANIZATION AND STRUCTURE

Loss of our key personnel could harm our operations and adversely affect the value of our common stock.

We are dependent on the efforts of Steven Roth, our Chief Executive Officer.

Although we believe that we could find a replacement, the loss of his services could harm our operations and adversely affect the value of our common stock.

Alexander’s charter documents and applicable law may hinder any attempt to acquire us.

Provisions in Alexander’s certificate of incorporation and by laws, as well as provisions of the Code and Delaware corporate law, may delay or prevent a change in control of the Company or a tender offer, even if such action might be beneficial to stockholders, and limit the stockholders’ opportunity to receive a potential premium for their shares of common stock over then prevailing market prices.

Primarily to facilitate maintenance of its qualification as a REIT, Alexander’s certificate of incorporation generally prohibits ownership, directly, indirectly or beneficially, by any single stockholder of more than 9.9% of the outstanding shares of preferred stock of any class or 4.9% of outstanding common stock of any class.

In order to qualify as a REIT, five or fewer individuals, as defined in the Code, may not own, actually or constructively, more than 50% in value of the issued and outstanding shares of our stock at any time during the last half of each taxable year.

Additionally, at least 100 persons must beneficially own shares of our stock during at least 335 days of a taxable year for each taxable year.

To help ensure that we meet these tests, among other purposes, our charter restricts the acquisition and ownership of shares of our s tock.

Primarily to facilitate maintenance of its qualification as a REIT, Al exander’s certificate of incorporation generally prohibits ownership, directly, indirectly or beneficially, by any single stockholder of more than 9.9% of the outstanding shares of preferred stock of any class or 4.9% of outstanding common stock of any class.

The Board of Directors may waive or modify these ownership limits with respect to one or more persons if it is satisfied that ownership in excess of these limits will not jeopardize Alexander’s status as a REIT for federal income tax purposes.

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They and some of our other directors and officers have interests or positions in other entities that may compete with us.

As of December 31, 2021, Interstate and its partners owned approximately 6.9% of the common shares of beneficial interest of Vornado and approximately 26.0% of our outstanding common stock.

As of December 31, 2022, Inter state and its partners owned approximately 7.0% of the common shares of beneficial interest of Vornado and approximately 26.0% of our outstanding common stock.

Steven Roth, David Mandelbaum and Russell B.

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In addition, Vornado manages and leases the real estate assets of Interstate.

As of December 31, 2021, Vornado owned 32.4% of our outstanding common stock, in addition to the 26.0% owned by Interstate and its partners.

In addition to the relationships described in the immediately preceding paragraph, Dr.

Richard West and Ms.

Mandakini Puri are both trustees of Vornado and members of our Board of Directors.

As of December 31, 2022, Vornado owned 32.4% of our outstanding common stock, in addition to the 26.0% o wned by Interstate and its partners.

In addition to the relationships described in the immediately preceding paragraph, Ms.

Mandakini Puri is a trustee of Vornado and a member of our Board of Directors.

Additionally, personnel and services that we require are provided to us under contracts with Vornado.

We depend on Vornado to manage our operations and to acquire and manage our portfolio of real estate assets.

Vornado makes all decisions regarding the day-to-day management of our company, subject to the supervision of, and any guidelines established by, our board of directors.

Because of their overlapping interests, Vornado, Mr.

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Vornado manages, develops and leases our properties under agreements that have one-year terms expiring in March of each year, which are automatically renewable.

Because we share common senior management with Vornado and because five of the trustees of Vornado are on our Board of Directors, the terms of the foregoing agreements and any future agreements may not be comparable to those we could have negotiated with an unaffiliated third party.

Because we share common senior management with Vornado and becau se four of the trustees of Vornado are on our Board of Directors, the terms of the foregoing agreements and any future agreements may not be comparable to those we could have negotiated with an unaffiliated third party.

For a description of Interstate’s ownership of Vornado and Alexander’s, see “Steven Roth, Vornado and Interstate may exercise substantial influence over us.

They and some of our other directors and officers have interests or positions in other entities that may compete with us.” above.

For a description of our related party transactions with Vornado, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Related Party Transactions.”

The occurrence of cyber incidents, or a deficiency in our cyber security, as well as other disruptions of our IT networks and related systems, could 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 or reputation, all of which could adversely affect our financial results.

We face risks associated with security breaches, whether through cyber attacks or cyber intrusions over the Internet, malware, ransomware, computer viruses, attachments to e-mails, persons who access our systems from inside or outside our organization, and other significant disruptions of our IT networks and related systems.

The risk of a security breach or disruption, particularly through cyber attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.

Although we have not experienced cyber incidents that are individually, or in the aggregate, material, we have experienced cyber attacks in the past, which have thus far been mitigated by preventative, detective, and responsive measures that we have put in place.

Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations (including managing our building systems) and, in some cases, may be critical to the operations of certain of our tenants.

Although we make efforts to maintain the security and integrity of these types of IT networks and related systems, and we have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging.

Unauthorized parties, whether within or outside our company, may disrupt or gain access to our systems, or those of third parties with whom we do business, through human error, misfeasance, fraud, trickery, or other forms of deceit, including break-ins, use of stolen credentials, social engineering, phishing, computer viruses or other malicious codes, and similar means of unauthorized and destructive tampering.

Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed to not be detected and, in fact, may not be detected.

Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for us to entirely mitigate this risk.

A security breach or other significant disruption involving our IT networks and related systems could disrupt the proper functioning of our networks and systems and therefore our operations and/or those of certain of our tenants;

result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of, proprietary, confidential, sensitive or otherwise valuable information of ours or others, which others could use to compete against us or which could expose us to damage claims by third-parties for disruptive, destructive or otherwise harmful purposes and outcomes;

result in our inability to maintain the building systems relied upon by our tenants for the efficient use of their leased space;

require significant management attention and resources to remedy any damages that result;

may require payments to the attackers;

subject us to litigation claims for breach of contract, damages, credits, fines, penalties, governmental investigations and enforcement actions or termination of leases or other agreements;

or damage our reputation among our tenants and investors generally.

Any or all of the foregoing could have a material adverse effect on our results of operations, financial condition and cash flows.

A cyber attack or systems failure could interfere with our ability to comply with financial reporting requirements, which could adversely affect us.

A cyber attack could also compromise the confidential information of our employees, tenants, customers and vendors.

A successful attack could disrupt and materially affect our business operations, including damaging relationships with tenants, customers and vendors.

Any compromise of our information security systems could also result in a violation of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation, loss or misuse of the information (which may be confidential, proprietary and/or commercially sensitive in nature) and a loss of confidence in our security measures, which could harm our business.

RISKS RELATED TO OUR COMMON STOCK

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These broad market fluctuations have in the past and may in the future adversely affect the market price of our common stock.

In particular, the market price of our common shares has been further adversely impacted since March 2020 due to the COVID-19 pandemic.

Among the factors that could affect the price of our common stock are:

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• the financial condition of our tenants, including the extent of tenant bankruptcies or defaults;

• the impact of the COVID-19 pandemic;

• actual or anticipated quarterly fluctuations in our operating results and financial condition;

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• fluctuations in the stock price and operating results of our competitors;

• general financial and economic market conditions and, in particular, developments related to market conditions for office, retail and residential REITs and other real estate related companies and the New York City real estate market generally;

• domestic and international economic factors unrelated to our performance;

• general financial and economic market conditions and, in particular, developments related to market conditions for office REITs and other real estate related companies and the New York City real estate market;

• domestic and international economic factors unrelated to our performance (including the macro-economic impact of the conflict between Russia and Ukraine);

• changes in tax laws and rules;

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As of December 31, 2022, we had authorized but unissued 4,826,550 shares of common stock, par value of $1.00 per share and 3,000,000 shares of preferred stock, par value $1.00 per share;

of which 17,188 shares of common stock are reserved for issuance upon redemption of the deferred stock units previously granted to our Board of Directors.

of which 19,796 shares of common stock are reserve d for issuance upon redemption of the deferred stock units previously granted to our Board of Directors.

In addition, 485,991 shares are available for future grant under the terms of our 2016 Omnibus Stock Plan.

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We cannot predict the impact that future issuances of common or preferred stock or any exercise of outstanding options or grants of additional equity-based interests would have on the market price of our common stock.

Loss of our key personnel could harm our operations and adversely affect the value of our common stock.

We are dependent on the efforts of Steven Roth, our Chief Executive Officer.

Although we believe that we could find a replacement, the loss of his services could harm our operations and adversely affect the value of our common stock.

RISKS RELATED TO REGULATORY COMPLIANCE

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Although we believe that we will remain organized and will continue to operate so as to qualify as a REIT for federal income tax purposes, we might fail to remain qualified.

Qualification as a REIT for federal income tax purposes is governed by highly technical and complex provisions of the Code for which there are only limited judicial or administrative interpretations and depends on various facts and circumstances that are not entirely within our control.

Qualification are governed by highly technical and complex provisions of the Internal Revenue Code for which there are only limited judicial or administrative interpretations and depends on various facts and circumstances that are not entirely within our control.

In addition, legislation, new regulations, administrative interpretations or court decisions may significantly change the relevant tax laws and/or the federal income tax consequences of qualifying as a REIT.

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The federal income tax payable would include any applicable alternative minimum tax.

If we had to pay federal income tax, the amount of money available to distribute to stockholders and pay our indebtedness would be reduced for the year or years involved, and we would no longer be required to make distributions to stockholders in that taxable year and in future years until we were able to qualify as a REIT and did so.

If we had to pay federal income tax, the amount of money available to distribute to stockholders and pay our indebtedness would be reduced for the year or years involved, and we would not be required to make distributions to stockholders in that taxable year and in future years until it was able to qualify as a REIT and did so.

In addition, we would also be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost, unless we were entitled to relief under the relevant statutory provisions.

We may face possible adverse changes in federal tax laws, which may result in an increase in our tax liability.

In the normal course of business, certain entities through which we own real estate either have undergone or may undergo tax audits.

Although we believe that we have substantial arguments in favor of our positions, in some instances there is no controlling precedent or interpretive guidance.

There can be no assurance that audits will not occur with increased frequency or that the ultimate result of such audits will not have a material adverse effect on our results of operations.

At any time, the U.S.

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federal income tax law, Treasury regulation or administrative interpretation.

We may incur significant costs to comply with environmental laws and environmental contamination may impair our ability to lease and/or sell real estate.

Our operations and properties are subject to various federal, state and local laws and regulations concerning the protection of the environment, including air and water quality, hazardous or toxic substances and health and safety.

Under some environmental laws, a current or previous owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances released at a property.

The owner or operator may also be held liable to a governmental entity or to third parties for property damage or personal injuries and for investigation and clean-up costs incurred by those parties because of the contamination.

These laws often impose liability without regard to whether the owner or operator knew of the release of the substances or caused the release.

The presence of contamination or the failure to remediate contamination may also impair our ability to sell or lease real estate or to borrow using the real estate as collateral.

Other laws and regulations govern indoor and outdoor air quality including those that can require the abatement or removal of asbestos-containing materials in the event of damage, demolition, renovation or remodeling and govern emissions of and exposure to asbestos fibers in the air.

The maintenance and removal of lead paint and certain electrical equipment containing polychlorinated biphenyls (PCBs) are also regulated by federal and state laws.

We are also subject to risks associated with human exposure to chemical or biological contaminants such as molds, pollens, viruses and bacteria which, above certain levels, can be alleged to be connected to allergic or other health effects and symptoms in susceptible individuals.

We could incur fines for environmental compliance and be held liable for the costs of remedial action with respect to the foregoing regulated substances or related claims arising out of environmental contamination or human exposure to contamination at or from our properties.

Each of our properties has been subjected to varying degrees of environmental assessment.

To date, these environmental assessments have not revealed any environmental condition material to our business.

However, identification of new compliance concerns or undiscovered areas of contamination, changes in the extent or known scope of contamination, human exposure to contamination or changes in clean-up or compliance requirements could result in significant costs to us.

We face risks associated with our tenants being designated “Prohibited Persons” by the Office of Foreign Assets Control and similar requirements.

Pursuant to Executive Order 13224 and other laws, the Office of Foreign Assets Control of the United States Department of the Treasury (“OFAC”) maintains a list of persons designated as terrorists or who are otherwise blocked or banned (“Prohibited Persons”) from conducting business or engaging in transactions in the United States and thereby restricts our doing business with such persons.

In addition, our leases, loans and other agreements may require us to comply with OFAC and related requirements, and any failure to do so may result in a breach of such agreements.

If a tenant or other party with whom we conduct business is placed on the OFAC list or is otherwise a party with whom we are prohibited from doing business, we may be required to terminate the lease or other agreement or face other penalties.

Any such termination could result in a loss of revenue or otherwise negatively affect our financial results and cash flows.

We may face possible adverse state and local tax audits and changes in state and local tax law.

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If such changes occur, we may be required to pay additional taxes on our assets or income.

These increased tax costs could adversely affect our financial condition and results of operations and the amount of cash available for the payment of dividends and distributions to our stockholders.

These increased tax costs could adversely affect our financial condition and results of operations and the amount of cash available for the payment of our indebtedness and make distributions to our stockholders.

Compliance or failure to comply with the Americans with Disabilities Act (“ADA”) or other safety regulations and requirements could result in substantial costs.

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We do not know whether existing requirements will change or whether compliance with future requirements will require significant unanticipated expenditures that will affect our cash flow and results of operations.

GENERAL RISKS

The occurrence of cyber incidents, or a deficiency in our cyber security, as well as other disruptions of our IT networks and related systems, could negatively impact our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships or reputation, all of which could negatively impact our financial results.

result in our inability to maintain the building systems relied upon by our tenants for the efficient use of their leased space;

require significant management attention and resources to remedy any damages that result;

may require payments to the attackers;

subject us to litigation claims for breach of contract, damages, credits, fines, penalties, governmental investigations and enforcement actions or termination of leases or other agreements;

or damage our reputation among our tenants and investors generally.

Any or all of the foregoing could have a material adverse effect on our results of operations, financial condition and cash flows.

A cyber attack or systems failure could interfere with our ability to comply with financial reporting requirements, which could adversely affect us.

A cyber attack could also compromise the confidential information of our employees, tenants, customers and vendors.

A successful attack could disrupt and materially affect our business operations, including damaging relationships with tenants, customers and vendors.

Capital markets and economic conditions can materially affect our liquidity, financial condition and results of operations as well as the value of an investment in our debt and equity securities.

There are many factors that can affect the value of our equity securities and any debt securities we may issue in the future, including the state of the capital markets and economy.

Demand for office and retail space typically declines nationwide due to an economic downturn, bankruptcies, downsizing, layoffs and cost cutting.

Government action or inaction may adversely affect the state of the capital markets.

Some of our potential losses may not be covered by insurance.

Coverage for acts of terrorism (including NBCR acts) is up to $1.7 billion per occurrence and in the aggregate.

Coverage for acts of terrorism (excluding NBCR acts) is fully reinsured by third party insurance companies and the Federal government with no exposure to FNSIC.

For NBCR acts, FNSIC is responsible for a $287,500 deductible and 20% of the balance of a covered loss, and the Federal government is responsible for the remaining 80% of a covered loss.

We are ultimately responsible for any loss incurred by FNSIC.

We continue to monitor the state of the insurance market and the scope and costs of coverage for acts of terrorism or other events.

However, we cannot anticipate what coverage will be available on commercially reasonable terms in the future.

We are responsible for uninsured losses and for deductibles and losses in excess of our insurance coverage, which could be material.

The principal amounts of our mortgage loans are non-recourse to us and the loans contain customary covenants requiring us to maintain insurance.

Although we believe that we have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future.

If lenders insist on greater coverage than we are able to obtain, it could adversely affect our ability to finance or refinance our properties.

We may be adversely affected by the discontinuation of London Interbank Offered Rate (“LIBOR”).

On March 5, 2021, the Financial Conduct Authority (“FCA”) announced that USD LIBOR will no longer be published after June 30, 2023.

The Secured Overnight Financing Rate (“SOFR”) has been identified by market participants as the preferred alternative to USD LIBOR in derivatives and other financial contracts.

Our new floating rate loans entered into after December 31, 2021 will no longer reference LIBOR and will reference SOFR or another floating rate.

As of December 31, 2021, we had $1,002,544,000 of outstanding debt indexed to LIBOR.

$300,000,000 of this debt is subject to interest rate swaps that convert the floating rates to a fixed interest rate.

In the transition from the use of LIBOR to SOFR or other alternatives, the level of interest payments we incur may change.

In addition, although certain of our LIBOR based obligations provide for alternative methods of calculating the interest rate payable (including transition to an alternative benchmark rate) if LIBOR is not reported and we have been entering into amendments to certain of our financing agreements to provide for alternative benchmark rates if LIBOR is discontinued, uncertainty as to the extent and manner of future changes may result in interest rates and/or payments that are higher than or lower than or that do not otherwise correlate over time with the interest rates and/or payments that would have been made on our obligations if LIBOR was available in its current form.

Use of alternative interest rates or other LIBOR reforms could result in increased volatility or a tightening of credit markets which could adversely affect our ability to obtain cost-effective financing.

In addition, the transition of our existing LIBOR financing agreements to alternative benchmarks may result in unanticipated changes to the overall interest rate paid on our liabilities.

We may incur significant costs to comply with environmental laws and environmental contamination may impair our ability to lease and/or sell real estate.

Under some environmental laws, a current or previous owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances released at a property.

These laws often impose liability without regard to whether the owner or operator knew of the release of the substances or caused the release.

The presence of contamination or the failure to remediate contamination may also impair our ability to sell or lease real estate or to borrow using the real estate as collateral.

The maintenance and removal of lead paint and certain electrical equipment containing polychlorinated biphenyls (PCBs) are also regulated by federal and state laws.

Each of our properties has been subjected to varying degrees of environmental assessment.

To date, these environmental assessments have not revealed any environmental condition material to our business.

UNRESOLVED STAFF COMMENTS

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors