What changed in this filing

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Item 1A. Risk Factors

2023-02-21 compared with 2022-02-24 · 76 added, 71 removed, 358 unchanged (29% of the section changed)

44 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;

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• insufficient capital to pay development costs;

• limited experience in developing or redeveloping properties in certain of our geographic markets may lead us to incorrectly project development costs and returns on our investments;

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

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• increased use restrictions by local zoning or planning authorities limiting our ability to develop and impacting the size of developments;

• limited experience in developing or redeveloping properties in certain of our geographic markets may lead us to incorrectly project development costs and returns on our investments.

See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Factors that May Influence Future Results of Operations - Development Risk.”

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As part of our project management business, we are responsible for managing various contractors required for a project, including general contractors, in order to ensure that the cost of a project does not exceed the contract amount and that the project is completed on time.

In the event that one or more of the contractors involved does not, or cannot, perform as a result of bankruptcy or for another reason, we may be responsible for cost overruns, as well as the consequences of late delivery.

In the event that one or more

of the contractors involved does not, or cannot, perform as a result of bankruptcy or for another reason, we may be responsible for cost overruns, as well as the consequences of late delivery.

In the event that we have not accurately estimated our own costs of providing services under guaranteed cost contracts, we may be exposed to losses on such contracts.

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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.

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We operate, are currently developing, and may in the future develop, properties either alone or through real estate ventures that are known as “mixed-use” developments.

In addition to the development of office space, mixed-use projects may also include space for life science/lab, residential, retail, hotel or other commercial purposes.

In addition to the development of office space, mixed-use projects may also include space for life science/lab, residential, hotel or other commercial purposes.

If a development project consists of a non-office or non-retail use, we may seek to develop that component ourselves, assign the rights to that component to a third-party developer with experience in that use, or we may seek to partner with such a developer.

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• liabilities incurred in the ordinary course of business.

We have agreed not to sell certain of our properties and to maintain indebtedness subject to guarantees.

We acquired in the past and in the future may acquire properties or portfolios of properties through tax deferred contribution transactions in exchange for partnership interests in our Operating Partnership.

This acquisition structure has the effect, among other factors, of reducing the amount of tax depreciation we can deduct over the tax life of the acquired properties, and typically requires that we agree to protect the contributors’ ability to defer recognition of taxable gain through restrictions on our ability to dispose of the acquired properties and/or the allocation of partnership debt to the contributors to maintain their tax bases.

We have agreed not to sell some of our properties for varying periods of time, in transactions that would trigger taxable income to the former owners, and we may enter into similar arrangements as a part of future property acquisitions.

These agreements generally provide that we may dispose of the subject properties only in transactions that qualify as tax-free exchanges under Section 1031 of the Internal Revenue Code or in other tax deferred transactions.

Such transactions can be difficult to complete and can result in the property acquired in exchange for the disposed of property inheriting the tax attributes (including tax protection covenants) of the sold property.

Violation of such tax protection agreements may impose significant costs on us.

As a result, we are restricted with respect to decisions related to financing, encumbering, expanding or selling these properties.

These restrictions on dispositions could limit our ability to sell an asset or pay down partnership debt during a specified time, or on terms, that would be favorable absent such restrictions.

We have also entered into agreements that provide prior owners of properties with the right to guarantee specific amounts of indebtedness and, in the event that the specific indebtedness that they guarantee is repaid or reduced, we would be required to provide substitute indebtedness for them to guarantee.

These agreements may hinder actions that we may otherwise desire to take to repay or refinance guaranteed indebtedness because we would be required to make payments to the beneficiaries of such agreements if we violate these agreements.

We may be unable to renew leases or re-lease space as leases expire;

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Preferred equity, mezzanine loans, and other investments that are subordinated or otherwise junior in an issuer’s capital structure and that involve privately negotiated structures will expose us to greater risk of loss.

We may have made preferred equity investments and may in the future make or acquire additional preferred equity investments, mezzanine loans and other investments that are subordinated or otherwise junior in an issuer’s capital structure and that involve privately negotiated structures.

To the extent we invest in subordinated debt or mezzanine tranches of an entity’s capital structure, or in preferred equity instruments, such investments and our remedies with respect thereto, including the ability to foreclose on collateral (if any) securing such investments, will be subject to the rights of holders of more senior tranches in the issuer’s capital structure and, to the extent applicable, contractual intercreditor, co-lender and/or participation agreement provisions.

We have previously made equity investments and may in the future make or acquire additional preferred equity investments, mezzanine loans and other investments that are subordinated or otherwise junior in an entity's capital structure and that involve privately negotiated structures.

To the extent we invest in subordinated debt or mezzanine tranches of an entity’s capital structure, or in preferred equity instruments, such investments and our remedies with respect thereto, including the ability to foreclose on collateral (if any) securing such investments, will be subject to the rights of holders of more senior tranches in the entity's capital structure and, to the extent applicable, contractual intercreditor, co-lender and/or participation agreement provisions.

Significant losses related to such investments or loans could adversely affect our results of operations and financial condition.

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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.

We have agreed not to sell certain of our properties and to maintain indebtedness subject to guarantees.

Violation of such tax protection agreements may impose significant costs on us.

As a result, we are restricted with respect to decisions related to financing, encumbering, expanding or selling these properties.

These restrictions on dispositions could limit our ability to sell an asset or pay down partnership debt during a specified time, or on terms, that would be favorable absent such restrictions.

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

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Our properties are also subject to various regulatory requirements, such as those relating to the environment, fire and safety.

Our failure to comply with these requirements could result in the imposition of fines and damage awards and could result in a default under some of our tenant leases.

Our failure to comply with these requirements could result in the imposition of fines and damage awards and could result in a default under some of our tenant

Moreover, the costs to comply with any new or different regulations could adversely affect our cash flow and our ability to make distributions to shareholders.

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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.

12 unchanged sentences

Such costs may adversely affect our cash flow and ability to make distributions to shareholders.

Disaster Risk Factors

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 the COVID-19 pandemic, as well as its impact on the U.S.

economy and consumer confidence.

Demand for space at our properties is dependent on a variety of macroeconomic factors, such as employment levels, interest rates, changes in stock market valuations, rent levels and availability of competing space.

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

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:

(i) deterioration in the financial condition of our tenants and in their ability to pay rents;

(ii) reduction in demand for space in our portfolio;

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

(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.

We face possible risks associated with the physical effects of climate change.

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.

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

Over time, these conditions could result in declining demand for office space in our buildings or our inability 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 and increasing the cost of snow removal at our properties.

While we maintain insurance coverage for flooding, we may not have adequate insurance to cover the associated costs of repair or reconstruction of sites for a major future event, lost revenue, including from new tenants that could have been added to our properties but for the event, or other costs to remediate the impact of a significant event.

There can be no assurance that climate change will not have a material adverse effect on our properties, operations or business.

REIT Risk Factors

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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.

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.

Congress and the IRS might make 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.

If we fail to qualify as a REIT for federal income tax purposes and are able to avail ourselves of one or more of the statutory savings provisions in order to maintain our REIT status, we would nevertheless be required to pay penalty taxes of $50,000 or more for each such failure.

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In such event, we would cease to qualify as a REIT and the imposition of a corporate tax on the Operating Partnership, subsidiary partnership or unconsolidated real estate venture would reduce the amount of cash available for distribution from the Operating Partnership to us and ultimately to our shareholders.

If any subsidiary REIT failed to qualify as a REIT, we could be directly or indirectly subject to higher taxes and could fail to remain qualified as a REIT.

We directly or indirectly (through disregarded subsidiaries or pass-through entities) own shares of certain subsidiaries that have elected to be taxed as a REIT for U.S.

federal income tax purposes.

Any such subsidiary REIT is subject to the REIT qualification requirements and other limitations described herein that are applicable to us.

If any such subsidiary REIT were to fail to qualify as a REIT, then (i) such subsidiary REIT would become subject to U.S.

federal income tax and applicable state and local taxes on its taxable income at regular corporate rates and (ii) our ownership of shares in such subsidiary REIT would cease to be a qualifying asset for purposes of the asset tests applicable to REITs.

In that case, it is possible that we would fail certain of the asset tests applicable to REITs, in which event we would fail to qualify as a REIT unless we could avail ourselves of certain relief provisions.

To maintain our REIT status, we may be forced to borrow funds on a short-term basis during unfavorable market conditions.

8 unchanged sentences

In general, prohibited transactions are sales or other dispositions of property held primarily for sale to customers in the ordinary course of business.

The determination as to whether a particular sale or series of sales is/are a prohibited transaction depends on the facts and circumstances related to that sale.

The determination as to whether a particular sale or series of sales is/are a prohibited transaction depends on the facts and circumstances related to

We cannot guarantee that sales of our properties would not be prohibited transactions unless we comply with certain statutory safe-harbor provisions.

5 unchanged sentences

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.

Legislation that modifies the rules applicable to partnership tax audits may affect us.

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.

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.

federal income tax, interest and penalties in the event of a U.S.

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

Partnership tax audit rules could have a material adverse effect on us.

Under the rules applicable to U.S.

federal income tax audits of partnerships, subject to certain exceptions, any audit adjustment to items of income, gain, loss, deduction, or credit of a partnership (and any partner’s distributive share thereof) is determined, and taxes, interest, or penalties attributable thereto could be assessed and collected, at the partnership level.

Absent available elections, it is possible that the Operating Partnership, and any other partnership in which we directly or indirectly invest, could be required to pay additional taxes, interest and penalties as a result of an audit adjustment, and we, as a direct or indirect partner of a partnership, could be required to bear the economic burden of those taxes, interest, and penalties even though we may not otherwise have been required to pay additional taxes had we owned the assets of these partnerships directly.

There can be no assurance that these rules will not have a material adverse effect on us.

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

35 unchanged sentences

This bylaw provision limits the ability of shareholders to make nominations of persons for election as trustees or to introduce other proposals unless we are notified in a timely manner prior to the meeting.

Disaster Risk Factors

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 global impact of the outbreak has been rapidly evolving and there is significant uncertainty regarding its continued impact on the U.S.

economy and consumer confidence.

Demand for space at our properties is dependent on a variety of macroeconomic factors, such as employment levels, inflation, interest rates, changes in stock market valuations, rent levels and availability of competing space.

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

The extent to which the COVID-19 pandemic continues to impact our results will depend on future developments, many of which are highly uncertain and cannot be predicted.

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

(i) deterioration in the financial condition of our tenants and in their ability to pay rents;

(ii) reduction in demand for space in our portfolio;

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

(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.

We face possible risks associated with the physical effects of climate change.

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.

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

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

There can be no assurance that climate change will not have a material adverse effect on our properties, operations or business.

General Risk Factors

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We face possible federal, state and local tax audits.

Because we are organized and qualify as a REIT, we are generally not subject to federal income taxes, but are subject to certain state and local taxes.

Because we are organized and qualify as a REIT, we are generally not subject to federal income taxes on our income that we distribute currently to our shareholders, but are subject to certain state and local taxes.

Certain entities through which we own real estate have undergone tax audits.

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If market interest rates go up, prospective purchasers of our securities may require a higher yield.

Higher market interest rates would not, however, result in more funds for us to distribute and, to the contrary, would likely increase our borrowing costs and potentially decrease funds available for distribution.

Higher market interest rates would not, however, result in more funds for us to distribute and, to the contrary, would likely increase our borrowing costs and

potentially decrease funds available for distribution.

Thus, higher market interest rates could cause the market price of our common shares to go down;

17 unchanged sentences

Our Board of Trustees also has the power to establish the preferences and rights of each class or series of units in the Operating Partnership, and may afford the holders in any series or class of preferred units preferences, distributions, powers and rights, voting or otherwise, senior to the rights of holders of common units.

We may incur impairment charges.

We have incurred, and may in the future incur, impairment charges.

We evaluate on a quarterly basis our real estate portfolios for indicators of impairment.

Impairment charges reflect management's judgment of the probability and severity of the decline in the value of real estate assets and investments we own.

These charges and provisions may be required in the future as a result of factors beyond our control, including, among other things, changes in our expected holding periods, changes in the economic environment and market conditions affecting the value of real property assets or natural or man-made disasters.

If we are required to take impairment charges, our results of operations could be adversely impacted.

These charges and provisions may be required as a result of factors beyond our control, including, among other things, changes in our expected holding periods, changes in the economic environment and market conditions affecting the value of real property assets or natural or man-made disasters.

If we are required to take additional impairment charges, our results of operations could be adversely impacted.

An increase in interest rates would increase our interest costs on variable rate debt and could adversely impact our ability to refinance existing debt or sell assets on favorable terms or at all.

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

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 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.

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

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If we breach covenants in our secured debt agreements, the lenders can declare a default and take possession of the property securing the defaulted loan.

Certain of our mortgages include restrictive covenants and default provisions, which could limit our flexibility, limit our ability to sell the encumbered properties and require us to repay the indebtedness prior to its maturity.

Certain mortgages on our properties contain customary negative covenants that, among other things, limit our ability, without the prior consent of the lender, to further mortgage or sell the encumbered property.

The loan documents also contain customary financial, leasing and environmental covenants, cash management and reserve requirements, requirements regarding the management and maintenance of the encumbered properties and maintenance of insurance on the properties.

The lenders under our mortgage loans may exercise certain rights under the loan documents, including the right to accelerate payment of the entire balance of the loans upon events of default.

A downgrading of our debt could subject us to higher borrowing costs.

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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 June 30, 2023.

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.

Due to the cessation of LIBOR, we have entered into financial transactions, including the 2022 Credit Agreement, that use the Secured Overnight Financing Rate (“SOFR”) as an interest rate benchmark.

SOFT is calculated differently from LIBOR and has inherent differences, which could give rise to uncertainties, including the limited historical data and volatility in the benchmark rate.

The full effects of the transition to SOFR, or any other benchmark rate, remains uncertain.

Any other unforeseen impacts of the discontinuation of LIBOR and subsequent transition to SOFR, or any other benchmark rate, 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.

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We currently carry property insurance against all-risks of physical loss or damage (unless otherwise excluded in the policy) including time element and commercial general liability coverage on all of our properties.

There are, however, types of losses, such as lease and other contract claims, biological, radiological and nuclear hazards and acts of war that generally are not insured.

There are, however, types of losses, such as lease and other contract claims, biological, radiological and nuclear hazards and acts of war that generally are

We cannot assure you that we will be able to renew insurance coverage in an adequate amount or at reasonable prices.

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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