What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2022-02-24 compared with 2021-02-24 · 44 added, 39 removed, 385 unchanged (18% of the section changed)

18 unchanged sentences

• increases in non-discretionary operating costs, including insurance expense, utilities, real estate taxes, state and local taxes, labor shortages and heightened security costs may not be offset by increased market rental rates;

• increases in operating costs due to inflation may not be offset by increased market rental rates;

• reduced values of our properties would limit our ability to dispose of assets at attractive prices, limit our access to debt financing secured by our properties and reduce the availability of unsecured loans;

• increases in interest rates, reduced availability of financing and reduced liquidity in the capital markets may adversely affect our ability or the ability of potential buyers of properties and tenants of properties to obtain financing on favorable terms, or at all;

• one or more lenders under our unsecured revolving credit facility could refuse or be unable to fund their financing commitment to us and we may not be able to replace the financing commitment of any such lenders on favorable terms, or at all;

• one or more lenders under our unsecured credit facility could refuse or be unable to fund their financing commitment to us and we may not be able to replace the financing commitment of any such lenders on favorable terms, or at all;

• civil disturbances, earthquakes and other natural disasters, or terrorist acts or acts of war may result in uninsured or underinsured losses.

Our performance is dependent upon the economic conditions of the markets in which our properties are located.

Our results of operations will be significantly influenced by the economies and other conditions of the real estate markets in which we operate, particularly in Philadelphia, Pennsylvania, the suburbs of Philadelphia, Pennsylvania, Austin, Texas,

Washington, D.C., Northern Virginia and Southern Maryland.

Any adverse changes in economic conditions in any of these economies or real estate markets could negatively affect cash available for distribution and debt service.

17 unchanged sentences

In general, our tenant leases allow us to pass through all or a portion of these costs to them.

We cannot assure you, however, that tenants will actually bear the full burden of these increased costs, or that such increased costs will not lead them, or other prospective tenants, to seek office space elsewhere.

We cannot assure you, however, that tenants will actually bear the full burden of these increased costs, or that such

increased costs will not lead them, or other prospective tenants, to seek office space elsewhere.

If operating expenses increase, the availability of other comparable office space in our core geographic markets might limit our ability to increase rents;

8 unchanged sentences

• dependence on the financial, technology and professional services sector as part of our tenant base;

• construction costs exceeding original estimates due to rising interest rates, diminished availability of materials and labor, and increases in the costs of materials and labor;

• construction costs exceeding original estimates due to rising interest rates, inflation, diminished availability of materials and labor, and increases in the costs of materials and labor;

• construction and lease-up delays resulting in increased debt service, fixed expenses and construction or renovation costs;

16 unchanged sentences

Our development projects may be dependent on strategic alliances with unaffiliated third parties.

We face challenges in managing our strategic alliances.

We may face challenges in managing our strategic alliances.

As our development projects become more complex, the need for trust, collaboration, and equitable risk-sharing is essential to the success of these projects.

The alliances we engage in are driven by the complementary skills and capabilities of our partners.

Despite the diligence performed establishing these alliances, our objectives may not fully align with those of our partners throughout the development project or projects.

Despite the diligence performed establishing these

alliances, our objectives may not fully align with those of our partners throughout the development project or projects.

Disagreements with one or more third parties with whom we partner in the development of one or more of the development components may restrict our ability to act exclusively in our own interests.

8 unchanged sentences

These include the risk that the other party would default on its obligations, necessitating that we complete the other component ourselves (including providing any necessary financing).

In the case of residential properties, these risks also include competition for prospective residents from other operators whose properties may be perceived to offer a better location or

better amenities or whose rent may be perceived as a better value given the quality, location and amenities that the resident seeks.

In the case of residential properties, these risks also include competition for prospective residents from other operators whose properties may be perceived to offer a better location or better amenities or whose rent may be perceived as a better value given the quality, location and amenities that the resident seeks.

Because we have limited experience with residential properties, we expect to retain third parties to manage our residential properties.

60 unchanged sentences

If we were to dispose of any of these properties in a taxable transaction, we may be required under provisions of the Internal Revenue Code applicable to REITs to distribute a significant amount of the taxable gain to our shareholders and this could, in turn, impact our cash flow.

In some cases, tax protection

agreements with third parties will prevent us from selling certain properties in a taxable transaction without incurring substantial costs.

In some cases, tax protection agreements with third parties will prevent us from selling certain properties in a taxable transaction without incurring substantial costs.

In addition, purchase options and rights of first refusal held by tenants or partners in unconsolidated real estate ventures may also limit our ability to sell certain properties.

All of these factors reduce our ability to respond to changes in the performance of our investments and could adversely affect our cash flow and ability to make distributions to shareholders as well as the ability of someone to purchase us, even if a purchase were in our shareholders’ best interests.

Our property taxes could increase due to property tax rate changes or reassessment, which would adversely impact our cash flows.

Even if we continue to qualify as a REIT for federal income tax purposes, we will be required to pay some state and local taxes on our properties.

The real property taxes on our properties may increase as property tax rates change or as our properties are assessed or reassessed by taxing authorities.

If the property taxes we pay increase, our cash flow would be adversely impacted, and our ability to pay any expected dividends to our stockholders and unitholders could be adversely affected.

Regulatory Risk Factors

8 unchanged sentences

These costs may be substantial.

While we do maintain environmental insurance, we cannot be assured that our insurance coverage will be sufficient to protect us from all of the aforesaid remediation costs.

While we do maintain environmental insurance, we cannot be assured that our insurance coverage will be sufficient to protect us from all of the aforesaid

remediation costs.

Also, if hazardous or toxic substances are present on a property, or if we fail to adequately remediate such substances, our ability to sell or rent the property or to borrow using that property as collateral may be adversely affected.

13 unchanged sentences

Disaster Risk Factors

The ongoing COVID-19 pandemic and measures intended to prevent its spread present material uncertainty and risk and could have a material adverse effect on our business, results of operations, cash flows and financial condition.

The ongoing COVID-19 pandemic across many countries around the globe, including the U.S., has significantly slowed global economic activity, caused significant volatility in financial markets, and resulted in unprecedented job losses causing many to fear an imminent global recession.

A pandemic, epidemic or outbreak of a contagious disease, such as the ongoing COVID-19 pandemic, could adversely affect us.

Pandemics, epidemics, and other public health crises, including the ongoing COVID-19 pandemic, have impacted, and could continue to impact many countries around the globe, including the U.S.

The COVID-19 pandemic’s long-term impact on global economies, financial markets, and the job market remain uncertain and could result in prolonged economic downturns and recessions that adversely impact us and our tenants.

The global impact of the outbreak has been rapidly evolving and the responses of many countries, including the U.S., have included quarantines, restrictions on business activities, including construction activities, restrictions on group gatherings, and restrictions on travel.

These actions are creating disruption in the global economy and supply chains and adversely impacting many industries, including owners and developers of office and mixed-use buildings.

Moreover, there is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S.

Moreover, there is significant uncertainty around the breadth and duration of business disruptions related to the COVID-19 pandemic, as well as its impact on the U.S.

economy and consumer confidence.

1 unchanged sentence

These factors can be significantly adversely affected by a variety of factors beyond our control.

The extent to which COVID-19 impacts our results will depend on future developments, many of which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions taken to contain it or treat its impact.

The extent to which the COVID-19 pandemic impacts our results will depend on future developments, many of which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19, new variants of COVID-19 and the actions taken to contain it or treat its impact.

The impact of the COVID-19 pandemic could negatively impact our business in a number of ways, including:

2 unchanged sentences

(iii) costs associated with construction delays and cost overruns at our development and redevelopment projects;

(iv) reduction in availability of, and increased costs of, capital;

and (v) failure of our contract counterparties, including partners in Real Estate Ventures, to meet their obligations.

(iv) costs associated with higher inflation rates;

(v) reduction in availability of, and increased costs of, capital;

and (vi) failure of our contract counterparties, including partners in unconsolidated real estate ventures, to meet their obligations.

The ongoing situation presents material uncertainty and risk and could have a material adverse effect on our business, results of operations, cash flows and financial condition.

1 unchanged sentence

The physical effects of climate change could have a material adverse effect on our properties, operations and business.

For example, many of our properties are located along the East Coast, particularly those in the central business districts of Philadelphia, Pennsylvania and Washington, D.C.

For example, many of our properties are located along the East Coast, particularly those in the central business districts of

Philadelphia, Pennsylvania and Washington, D.C.

To the extent climate change causes variations in weather patterns, our markets could experience increases in storm intensity and rising sea-levels.

16 unchanged sentences

Even a technical or inadvertent mistake could jeopardize our REIT status and, given the highly complex nature of the rules governing REITs and the ongoing importance of factual determinations, we cannot provide any assurance that we will continue to qualify as a REIT.

Changes to rules governing corporate taxation, including REITs, were made by

legislation commonly known as the Tax Cuts and Jobs Act (the “TCJA”) and the Protecting Americans From Tax Hikes Act of 2015, signed into law on December 22, 2017 and December 18, 2015, respectively.

Changes to rules governing corporate taxation, including REITs, were made by legislation commonly known as the Tax Cuts and Jobs Act (the “TCJA”) and the Protecting Americans From Tax Hikes Act of 2015, signed into law on December 22, 2017 and December 18, 2015, respectively.

Congress and the IRS might make further changes to the tax laws and regulations, and the courts might issue new rulings or interpretations of tax law, that make it more difficult, or impossible, for us to remain qualified as a REIT.

14 unchanged sentences

Compliance with this requirement may hinder our ability to operate solely on the basis of maximizing profits.

We will pay some taxes even if we qualify as a REIT, which will reduce the cash available for distribution to our shareholders.

Even if we qualify as a REIT for federal income tax purposes, we will be required to pay certain federal, state and local taxes on our income and properties.

We may pay some taxes even if we qualify as a REIT, which will reduce the cash available for distribution to our shareholders.

Even if we qualify as a REIT for federal income tax purposes, we may be required to pay certain federal, state and local taxes on our income and properties.

For example, we will be subject to income tax to the extent we distribute less than 100% of our REIT taxable income, including capital gains.

7 unchanged sentences

For example, a taxable REIT subsidiary is limited in its ability to deduct certain interest payments made to an affiliated REIT.

In addition, the REIT has to pay a 100% penalty tax on some payments that it receives or on some deductions taken by a taxable REIT subsidiary if the economic arrangements between the REIT, the REIT’s customers, and the taxable REIT subsidiary are not comparable to

similar arrangements between unrelated parties.

Finally, some state and local jurisdictions may tax some of our income even though as a REIT we are not subject to federal income tax on that income because not all states and localities follow the federal income tax treatment of REITs.

Finally, even if we continue to qualify as a REIT for federal income tax purposes, we will be required to pay some state and local real property taxes on our properties, and some state and local jurisdictions may tax some of our income even though as a REIT we are not subject to federal income tax on that income because not all states and localities follow the federal income tax treatment of REITs.

To the extent that we and our affiliates are required to pay federal, state and local taxes, we will have less cash available for distributions to our shareholders.

1 unchanged sentence

The Bipartisan Budget Act of 2015, effective for taxable years beginning after December 31, 2017, requires our operating partnership and any subsidiary partnership to pay the hypothetical increase in partner-level taxes (including interest and penalties) resulting from an adjustment of partnership tax items on audit or in other tax proceedings, unless the partnership elects an alternative method under which the taxes resulting from the adjustment (and interest and penalties) are assessed at the partner level.

Many uncertainties remain as to the application of these rules, including the application of the alternative method to partners that are REITs, and the impact they will have on us.

Uncertainties remain as to the application of these rules, including the application of the alternative method to partners that are REITs, and the impact they will have on us.

However, it is possible, that partnerships in which we invest may be subject to U.S.

1 unchanged sentence

federal income tax audit as a result of these law changes.

Legislative or regulatory tax changes related to REIT’s could materially and adversely affect our business.

Legislative or regulatory tax changes related to REITs could materially and adversely affect our business.

At any time, the federal income tax laws or regulations governing REITs or the other administrative interpretations of those laws or regulations may be changed, possibly with retroactive effect.

90 unchanged sentences

From time to time, we enter into interest rate swap agreements and other interest rate hedging contracts.

of the agreements, the agreements will be unenforceable and the underlying transactions will fail to qualify as highly-effective cash flow hedges under the applicable accounting guidance.

While these agreements are intended to lessen the impact of rising interest rates on us, they also expose us to the risk that the other parties to the agreements will not perform, we could incur significant costs associated with the settlement or termination of the agreements, the agreements will be unenforceable and the underlying transactions will fail to qualify as highly-effective cash flow hedges under the applicable accounting guidance.

In addition, an increase in interest rates could decrease the amounts third parties are willing or able to pay for our assets, thereby limiting our ability to recycle capital and change our portfolio promptly in response to changes in economic or other conditions.

7 unchanged sentences

The terms and covenants relating to our indebtedness could adversely impact our economic performance.

Our credit facilities, term loans and the indenture governing our unsecured public debt securities contain (and any new or amended facility and term loans may contain) restrictions, requirements and other limitations on our ability to incur indebtedness, including total debt to asset ratios, secured debt to total asset ratios, debt service coverage ratios and minimum ratios of unencumbered assets to unsecured debt which we must maintain.

indebtedness, including total debt to asset ratios, secured debt to total asset ratios, debt service coverage ratios and minimum ratios of unencumbered assets to unsecured debt which we must maintain.

Our ability to borrow under our credit facilities is subject to compliance with such financial and other covenants.

6 unchanged sentences

Discontinuation of the London interbank offered rate and transition to an alternative benchmark could adversely affect our operating results

On July 27, 2017, the Chief Executive of the U.K.

Financial Conduct Authority (the “FCA”), which regulates the London interbank offered rate (“LIBOR”), announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of the LIBOR benchmark after 2021.

This announcement indicates that the continuation of LIBOR on the current basis cannot be guaranteed after 2021, and there is a substantial risk that LIBOR will be discontinued or modified by the end of 2021.

Our variable rate debt and derivative financial instruments are indexed to LIBOR and failure by market participants and regulators to successfully replace LIBOR could result in disruption in the financial markets which could have a negative impact on our results of operations and our variable rate debt.

In March 2021, the Chief Executive of the U.K.

Changes in, or the planned discontinuation of, LIBOR would cause changes in how interest is calculated on our variable rate debt as our variable rate debt is indexed to LIBOR.

There can be no assurances as to what alternative interest rates may be and whether such interest rates, such as the Secured Overnight Financing Rate ("SOFR"), will be more or less favorable than LIBOR.

Any other unforeseen impacts of the potential discontinuation of LIBOR could have a negative impact on our results of operations and our variable rate debt.

Data security breaches may cause damage to our business and reputation.

3 unchanged sentences

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.

Protected information, networks, systems and facilities remain vulnerable because the techniques used in such attempted security breaches evolve and may not be recognized or

detected until launched against a target.

Protected information, networks, systems and facilities remain vulnerable because the techniques used in such attempted security breaches evolve and may not be recognized or detected until launched against a target.

Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures.

31 unchanged sentences

Such events could adversely affect our cash flow and ability to make distributions to shareholders.

If one or more of our insurance providers were to fail to pay a claim as a result of insolvency, bankruptcy or otherwise, the nonpayment of such

claims could have an adverse effect on our financial condition and results of operations.

If one or more of our insurance providers were to fail to pay a claim as a result of insolvency, bankruptcy or otherwise, the nonpayment of such claims could have an adverse effect on our financial condition and results of operations.

In addition, if one or more of our insurance providers were to become subject to insolvency, bankruptcy or other proceedings and our insurance policies with the provider were terminated or cancelled as a result of those proceedings, we cannot guarantee that we would be able to find alternative coverage in adequate amounts or at reasonable prices.

5 unchanged sentences

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