What changed in this filing

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Item 1A. Risk Factors

2022-02-03 compared with 2021-02-11 · 68 added, 69 removed, 334 unchanged (29% of the section changed)

11 unchanged sentences

• uninsured losses as a result of casualty events;

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• sociopolitical unrest such as political instability, civil unrest, armed hostilities, or political activism resulting in a disruption of day-to-day building operations;

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Our ability to collect rent from tenants may affect our ability to pay for adequate maintenance, insurance, and other operating costs (including real estate taxes).

Also, the expense of owning and operating a property is not necessarily reduced when circumstances such as market factors cause a reduction in income from the property.

If a property is mortgaged and we are unable to meet the mortgage payments, the lender could foreclose on the mortgage and take title to the property.

Also, the expense of owning and operating a property is not necessarily reduced when circumstances such as reduced occupancy or other market factors cause a reduction in income from the property.

If a property is mortgaged and we are unable to meet the mortgage payments, the lender could foreclose on the mortgage and take

title to the property.

In addition, interest rates, financing availability, law changes, and governmental regulations (including those governing usage, zoning, and taxes) may adversely affect our financial condition.

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The inability of any of our significant tenants to pay rent or a decision by a significant tenant to vacate their premises prior to, or at the conclusion of, their lease term could have a significant negative impact on our results of operations or financial condition if a suitable replacement tenant is not secured in a timely manner.

For the three months ended December 31, 2020, 35.0% of our net operating income for properties owned was derived from the metropolitan Atlanta area, 27.1% was derived from the Austin area, and 11.2% was derived from the Charlotte area.

Any adverse economic conditions impacting Atlanta, Austin, or Charlotte could adversely affect our overall results of operations and financial condition.

For the three months ended December 31, 2021, 39.8% of our net operating income for properties owned was derived from the metropolitan Atlanta area, 26.8% was derived from the Austin area, 9.1% was derived from the Charlotte area, 9.0% was derived from the Tampa area, and 7.7% was derived from the Phoenix area.

Any adverse economic conditions impacting Atlanta, Austin, Charlotte, Tampa, or Phoenix could adversely affect our overall results of operations and financial condition.

Uninsured losses and condemnation costs .

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Federal, state, and local laws and regulations relating to the protection of the environment may require a current or previous owner or operator of real estate to investigate and clean up hazardous or toxic substances or petroleum product released at a property.

If determined to be liable, the owner or operator may have to pay a governmental entity or third parties for property damage and for investigation and clean-up costs incurred by such parties in connection

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with the contamination, or perform such investigation and clean-up itself.

Although certain legal protections may be available to prospective purchasers of property, these laws typically impose clean-up responsibility and liability without regard to whether the owner or operator knew of or caused the presence of the regulated substances.

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Unidentified environmental liabilities could arise, however, and could have an adverse effect on our financial condition and results of operations.

Inquiries about indoor air quality may necessitate special investigation and, depending on the results, remediation beyond our regular indoor air quality testing and maintenance programs.

Indoor air quality issues can stem from inadequate ventilation, chemical contaminants from indoor or outdoor sources, and biological contaminants such as molds, pollen, viruses, and bacteria.

Inquiries about indoor air quality and water quality may necessitate special investigation and, depending on the results, remediation beyond our regular testing and maintenance programs.

Indoor air quality and water quality issues can stem from inadequate ventilation, chemical contaminants from indoor or outdoor sources, and biological contaminants such as molds,

pollen, viruses, and bacteria.

Indoor exposure to chemical or biological contaminants above certain levels can be alleged to be connected to allergic reactions or other health effects and symptoms in susceptible individuals.

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

To the extent climate change causes changes in weather patterns, our markets could experience increases in storm intensity, rising sea-levels, and changes in precipitation, temperature, and air quality.

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

Climate change may also indirectly affect 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 risk of flood at our properties.

To the extent climate change causes changes in weather patterns or severity, our markets could experience increase in storm intensity (including floods, tornadoes, hurricanes, or ice storms), rising sea-levels, and changes in precipitation, temperature, air quality, and quality and availability of water.

Over time, these conditions could result in physical damage to, or declining demand for, our properties or our inability to operate the buildings efficiently or at all.

Climate change may also indirectly affect our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptable, increasing the cost of required resources, including energy, other fuel sources, water, and waste removal services, and increasing the risk and severity of flood and earthquakes at our properties.

Should the impact of climate change be severe or occur for lengthy periods of time, our financial condition or results of operations could be adversely impacted.

In addition, compliance with new or more stringent laws or regulations or stricter interpretations of existing laws may require material expenditure by us.

For example, various federal, state, and local laws and regulations have been implemented or are under consideration to mitigate the effects of climate change caused by greenhouse gas emissions.

Among other things, "green" building codes may seek to reduce emissions through the imposition of standards for design, construction materials, water and energy usage and efficiency, and waste management.

Such codes could require us to make improvements to our existing properties, increase the costs of maintaining or improving our existing properties or developing new properties, or increase taxes and fees assessed on us or our properties.

Expenditures required for compliance with such codes may affect our cash flow and results of operations.

Joint venture structure risks .

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These structures involve participation by other parties whose interests and rights may not be the same as ours.

For example, a venture partner may have economic and/or other business interests or goals which are incompatible with our business interests or goals and that venture partner may be in a position to take action contrary to our interests.

In addition, such venture partners may default on their obligations, including loans secured by property owned by the joint venture, which could have an adverse impact on the financial condition and operations of the joint venture.

Such defaults may result in our fulfilling the defaulting's partner's obligations that may, in some cases, require us to contribute additional capital to the ventures.

For example, a venture partner may have economic and/or other business interests or goals that are incompatible with our business interests or goals and that venture partner may be in a position to take action contrary to our interests.

In addition, such venture partners may default on their obligations, including loans secured by property owned by the joint venture that could have an adverse impact on the financial condition and operations of the joint venture.

Such defaults may result in our fulfilling the defaulting partners' obligations that may, in some cases, require us to contribute additional capital to the ventures.

Furthermore, the success of a project may be dependent upon the expertise, business judgment, diligence, and effectiveness of our venture partners in matters that are outside our control.

Thus, the involvement of venture partners could adversely impact the development, operation, ownership, financing, or disposition of the underlying properties.

Risks associated with the development of mixed-use properties .

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

This means that, in addition to the development of office space, the project may also include space for retail, residential, or other commercial purposes.

We do not have as much experience in developing and managing non-office real estate as we do office real estate and, as a result, we may seek to develop the non-office component ourselves, sell the right to that component to a third-party developer, or we may partner with a third party who has more non-office real estate experience.

If we do choose to develop other components ourselves, we would be exposed not only to those risks typically associated with the development of commercial real estate generally, but also to specific risks associated with the development and ownership of

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non-office real estate.

In addition, even if we sell the rights to develop the other components or elect to participate in the development through a joint venture, we may be exposed to the risks associated with the failure of the other party to complete the development as expected.

These include the risk that the other party would default on its obligations necessitating that we complete the other component ourselves, including potential financing of the project.

If we decide not to sell or participate in a joint venture and instead hire a third party manager, we would be dependent on them and their key personnel to provide services to us and we may not find a suitable replacement if the management agreement is terminated, or if key personnel leave or otherwise become unavailable to us.

Title insurance risk .

We did not acquire new title insurance policies in connection with the mergers with Parkway in 2016 and with TIER in 2019, instead relying on existing policies benefiting those entities' subsidiaries.

We did not acquire new title insurance policies in connection with the merger with TIER in 2019, instead relying on existing policies benefiting those entities' subsidiaries.

We generally do acquire title insurance policies for all developed and acquired properties;

however, these policies may be for amounts less than the current or future values of the covered properties.

If there were a title defect related to any of these properties, or to any of the properties acquired in connection with the mergers with Parkway and TIER where title insurance policies are ruled unenforceable, we could lose both our capital invested in and our anticipated profits from such property.

If there were a title defect related to any of these properties, or to any of the properties acquired in connection with the merger with TIER where title insurance policies are ruled unenforceable, we could lose both our capital invested in and our anticipated profits from such property.

Liquidity risk .

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Ground lease risks .

As of December 31, 2020, we had interests in eleven land parcels in various markets which we lease individually on a long-term basis.

As of December 31, 2020, we had 2.3 million a ggregate rentable square feet of rental space located on these leased parcels, from which we recognized 11.1% of total Net Operating Income ("NOI") in the fourth quarter of 2020.

As of December 31, 2021, we had interests in nine land parcels in various markets that we lease individually on a long-term basis.

As of December 31, 2021, we had 2.2 million aggregate square feet of rental space located on these leased parcels, from which we recognized 10.2% of total Net Operating Income ("NOI") in the fourth quarter of 2021.

In the future, we may invest in additional properties on some of these parcels or additional parcels subject to ground leases.

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These sources of capital, and the risks associated with each, include the following:

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• Credit Facility .

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If a property is mortgaged to secure payment of indebtedness and we are unable to make the mortgage payments, the lender may foreclose.

Further, at the time a mortgage matures, the property may be worth less than the mortgage amount and, as a result, we may determine not to refinance the mortgage and permit foreclosure, potentially generating defaults on other debt.

Further, at the time a mortgage matures, the

property may be worth less than the mortgage amount and, as a result, we may determine not to refinance the mortgage and permit foreclosure, potentially generating defaults on other debt.

• Asset sales .

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• Construction loans .

Construction loans generally relate to specific assets under construction and fund costs above an initial equity amount deemed acceptable by the lender.

Construction loans generally relate to specific assets under construction and fund costs above an initial equity amount as negotiated with the lender.

Terms and conditions of construction loans vary, but they generally carry a term of two to five years, charge interest at variable rates, require the lender to be satisfied with the nature and amount of construction costs prior to funding, and require the lender to be satisfied with the level of pre-leasing prior to funding.

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• Common stock .

Common stock issuances may have a dilutive effect on our earnings per share and funds from operations per share.

We can also provide no assurance that conditions will be favorable for future issuances of common stock when we need capital.

In addition, common stock issuances may have a dilutive effect on our earnings per share and funds from operations per share.

The actual amount of dilution, if any, from any future offering of common stock will be based on numerous factors, particularly the use of proceeds and any return generated from these proceeds.

The per share trading price of our common stock could decline as a result of the sale of shares of our common stock in the market in connection with an offering or as a result of the perception or expectation that such sales could occur.

We can also provide no assurance that conditions will be favorable for future issuances of common stock when we need capital.

• Preferred stock .

The availability of preferred stock at favorable terms and conditions is dependent upon a number of factors including the general condition of the economy, the overall interest rate environment, the condition of the capital markets, and the demand for this product by potential holders of the securities.

Issuance of preferred stock could be dilutive to earnings per share and have an adverse effect on the trading price of common stock.

We can provide no assurance that conditions will be favorable for future issuances of preferred

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stock when we need the capital, which could have an adverse effect on our ability to fund acquisition and development activities.

Issuance of preferred stock, if convertible, could be dilutive to earnings per share and have an adverse effect on the trading price of common stock.

We can provide no assurance that conditions will be favorable for future issuances of preferred stock when we need the capital, which could have an adverse effect on our ability to fund acquisition and development activities.

• Operating partnership units .

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If our degree of leverage is viewed unfavorably by lenders or potential joint venture partners, it could affect our ability to obtain additional financing.

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general, our degree of leverage could also make us more vulnerable to a downturn in business or the economy.

In general, our degree of leverage could also make us more vulnerable to a downturn in business or the economy.

In addition, increases in our net debt to market capitalization ratio, which is in part a function of our stock price, or to other measures of asset value used by financial analysts may have an adverse effect on the market price of common stock.

Changes in, or the planned discontinuation of, LIBOR could have an adverse impact on operations.

LIBOR has been the subject of regulatory guidance and proposals for reform and in July 2017, the United Kingdom's Financial Conduct Authority (the authority that regulates LIBOR) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021.

Planned discontinuation of LIBOR could have an adverse impact on operations.

The London Interbank Offered Rate ("LIBOR") has been the subject of regulatory guidance and proposals for reform, and in March 2021, the United Kingdom's Financial Conduct Authority (the authority that regulates LIBOR) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR 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 including our Credit Facility and term loan.

1 unchanged sentence

Our variable-interest debt instruments, including our Credit Facility and term loan facilities, provide for alternate interest rate calculations if LIBOR is no longer widely available or should the alternative interest rate prove more favorable.

There can be no assurances as to what alternative interest rates may be and whether such interest rates will be more or less favorable than LIBOR and any other unforeseen impacts of the potential discontinuation of LIBOR.

The Company intends to continue monitoring the developments with respect to the planned phasing out of LIBOR after 2021 and work with its lenders to ensure any transition away from LIBOR will have minimal impact on its financial condition.

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 and any other unforeseen impacts of the potential discontinuation of LIBOR.

Real Estate Acquisition and Development Risks

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We may incur significant costs for predevelopment activity for projects that are abandoned, which would directly affect our results of operations.

For projects that are abandoned, we must expense certain costs, such as salaries, that would have otherwise been

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For projects that are abandoned, we must expense certain costs, such as salaries, that would have otherwise been capitalized.

We have procedures and controls in place that are intended to minimize this risk, but it is likely that we will incur predevelopment expense on abandoned projects on an ongoing basis.

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• Governmental approvals .

All necessary zoning, land-use, building, occupancy, and other required governmental permits and authorization may not be obtained, may only be obtained subject to onerous conditions, or may not be obtained on a timely basis resulting in possible delays, decreased profitability, and increased management time and attention.

All necessary zoning, land-use, building, occupancy, and other required governmental permits and authorizations may not be obtained, may only be obtained subject to onerous conditions, or may not be obtained on a timely basis resulting in possible delays, decreased profitability, and increased management time and attention.

• Competition .

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As the competition for tenants is intense, we may be required to provide rent abatements, incur charges for tenant improvements and other concessions, or we may not be able to lease vacant space in a timely manner.

• Risks associated with the development of mixed-use properties .

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

This means that in addition to the development of office space, the project may also include space for retail, residential, or other commercial purposes.

These include the risk that the other party would default on its obligations necessitating that we complete the other component ourselves, including potential financing of the project.

If we decide not to sell or participate in a joint venture and instead hire a third party manager, we would be dependent on them and their key personnel to provide services to us, and we may not find a suitable replacement if the management agreement is terminated or if key personnel leave or otherwise become unavailable to us.

Federal Income Tax Risks

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We intend to continue to operate in a manner to qualify as a REIT for federal income tax purposes.

Qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code (the “Code”), for which there are only limited judicial or administrative interpretations.

Certain facts and circumstances not entirely within our

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control may affect our ability to qualify as a REIT.

Qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code (the “Code”), for

which there are only limited judicial or administrative interpretations.

Certain facts and circumstances not entirely within our control may affect our ability to qualify as a REIT.

In addition, we can provide no assurance that legislation, new regulations, administrative interpretations, or court decisions will not adversely affect our qualification as a REIT or the federal income tax consequences of our REIT status.

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In particular, the comprehensive tax reform legislation enacted in December 2017 and commonly known as the Tax Cuts and Jobs Act ("TCJA") made many significant changes to the U.S.

federal income tax laws that will profoundly impact the taxation of individuals and corporations (including both regular C corporations and corporations that have elected to be taxed as REITs).

federal income tax laws that have profoundly impacted the taxation of individuals and corporations (including both regular C corporations and corporations that have elected to be taxed as REITs).

A number of changes that affect noncorporate taxpayers will expire at the end of 2025 unless Congress acts to extend them.

Among other changes, the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, signed into law on March 27, 2020, makes certain changes to the TCJA.

These changes will impact us and our stockholders in various ways, some of which are adverse or potentially adverse compared to prior law.

These changes have impacted us and our stockholders in various ways, some of which are adverse or potentially adverse compared to prior law.

To date, the IRS has issued only limited guidance with respect to certain of the new provisions, and there are numerous interpretive issues that will require further guidance.

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There can be no assurance, however, that technical clarifications or changes needed to prevent unintended or unforeseen tax consequences will be enacted by Congress in the near future.

Additional changes to tax laws are likely to continue to occur in the future, and we cannot assure investors that any such changes will not adversely affect the taxation of our stockholders.

Any such changes could have an adverse effect on an investment in shares or on the market value or the

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resale potential of our properties.

Additional changes to tax laws are likely to continue to occur in the future, and we cannot assure investors that any such changes will not adversely affect the

taxation of our stockholders.

Any such changes could have an adverse effect on an investment in shares or on the market value or the resale potential of our properties.

Investors are urged to consult with their own tax advisor with respect to the impact of recent legislation on ownership of shares and the status of legislative, regulatory, or administrative developments and proposals, and their potential effect on ownership of shares.

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The potential impact of a pandemic, epidemic, or outbreak of a contagious disease on our tenants and our properties is difficult to predict or assess.

The extent to which the ongoing COVID-19 pandemic, including the outbreaks in Atlanta, Austin, Charlotte, Phoenix, Tampa, and Dallas and actions taken to contain or slow them, continues to impact our operations and those of our tenants, will depend on future developments.

The extent to which the ongoing COVID-19 pandemic, including the outbreaks in Atlanta, Austin, Charlotte, Phoenix, Tampa, Dallas, and Nashville and actions taken to contain or slow them, continues to impact our operations and those of our tenants, will depend on future developments.

These may include the scope, severity, and duration of the pandemic, and the actions taken to mitigate its impact including the availability and effectiveness of vaccines or other treatments;

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In addition to the general economic impact of a pandemic, epidemic, or outbreak of a contagious disease, if an outbreak of COVID-19 occurs within the workforce of our tenants or otherwise disrupts their management and other personnel, the business and operating results of our tenants could be negatively impacted.

Large-scale “shelter in place”, “stay safe”, or "social distancing" executive orders and health guidance in Atlanta, Austin, Charlotte, Phoenix, Tampa, or Dallas, where we have high concentrations of our lease revenues, have caused many of our tenants, including retailers and restaurants, to stay closed or operate at reduced capacity for an extended period of time.

Large-scale “shelter in place”, “stay safe”, or "social distancing" executive orders and health guidance in Atlanta, Austin, Charlotte, Phoenix, Tampa, Dallas, or Nashville, where we have high concentrations of our lease revenues and/or development activity, have caused many of our tenants, including retailers, restaurants, and our business partners, to stay closed or operate at reduced capacity for an extended period

Although many (but not all) of these restrictions have been gradually lifted, national "social distancing" guidance has remained, and it remains unclear whether an initial surge in the level of business activity is likely to be sustained, especially if the areas in which our properties are located experience a resurgence in COVID-19 cases and/or are subject to the reimposition of previously lifted business restrictions, the imposition of new business restrictions, or the issuance of new or revised local or national health guidance.

The negative impact upon our tenants may include an immediate reduction in cash flow available to pay rent under our leases, and although various

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governmental financial programs may mitigate this, governmental assistance may not be available to all affected tenants or may be significantly delayed or discontinued.

The negative impact upon our tenants may include an immediate reduction in cash flow available to pay rent under our leases, and although various governmental financial programs may mitigate this, governmental assistance may not be available to all affected tenants or may be significantly delayed or discontinued.

In turn, our tenants' inability to pay rent under our leases could adversely affect our own liquidity, and there can be no guarantee that additional liquidity will be readily available or available on favorable terms in the future.

Large-scale executive orders and other measures taken to curb the spread of COVID-19 may also negatively impact the ability of our properties to continue to obtain necessary goods and services or provide adequate staffing, which may also adversely affect our operating results and reputation.

Any increased costs or lost revenue as a result of tenant financial difficulty, or their need to comply with executive orders and other guidance from the Centers for Disease Control and Prevention, or other health agencies or departments may not be fully recoverable under our leases or adequately covered by insurance, which could impact our profitability.

Large-scale executive orders and other measures taken to curb the spread of COVID-19 may also negatively impact the ability of our properties and developments to continue to obtain necessary goods and services or provide adequate staffing, which may also adversely affect our operating results and reputation.

Any increased costs or lost revenue as a result of tenant financial difficulty, or their need to comply with executive orders or any OSHA regulations, or other health agencies or departments may not be fully recoverable under our leases or adequately covered by insurance, which could impact our profitability.

In addition to the potential consequences listed above, these same factors may cause prospective tenants to delay their leasing decisions or to lease less space.

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• any failure to comply with existing debt covenants;

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• any foreclosure or deed in lieu of foreclosure of our properties;

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• uncertainties in world financial markets;

• the realization of any of the other risk factors described in this report;

• general market and economic conditions;

in particular, market and economic conditions of Atlanta, Austin, Charlotte, Phoenix, Tampa, and Dallas.

in particular, market and economic conditions of Atlanta, Austin, Charlotte, Phoenix, Tampa, Dallas, and Nashville;

• the realization of any of the other risk factors described in this report.

Many of the factors listed above are beyond our control.

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As cyber threats continue to evolve, we may be required to expend additional resources to continue to enhance our information security measures and to investigate and remediate any information security vulnerabilities.

Public attention to environmental, social, and governance matters

Recently, more attention is being directed towards publicly-traded companies regarding environmental, social, and governance ("ESG") matters.

Our efforts to improve our ESG profile and practices, including reducing emissions and improve the efficiency of our building operations, may require capital expenditures and may result in short- or long-term increases in our operating costs, all of which could adversely impact our financial condition or results of operations.

A failure, or a perceived failure, to respond to investor, customer, employee, or other stakeholder expectations related to ESG concerns, or to comply with regulatory requirements, including a failure, or a perceived failure, to achieve any voluntarily adopted goals or initiatives, could negatively impact our reputation, ability to do business with certain partners, access to

capital, stock price, and customer and employee attraction and retention.

In addition, organizations that provide information to investors on corporate governance and other matters have developed rating systems for evaluating companies on their approach to ESG.

Unfavorable ESG ratings may lead to negative investor sentiment, which could have a negative impact on our stock price.

Additionally, while we strive to create and maintain an inclusive culture and a diverse workforce where everyone feels valued and respected, a failure, or a perceived failure, to properly address matters of culture, including inclusivity and diversity matters, could result in a reputational harm or an inability to attract and retain customers or employees.

Unresolved Staff Comments

Not applicable.

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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