What changed in this filing

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Item 1A. Risk Factors

2025-02-06 compared with 2024-02-07 · 159 added, 57 removed, 343 unchanged (39% of the section changed)

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Factors that may adversely affect the economic performance and value of our properties include, among other things:

• changes in the national, regional, and local economic climate;

• local real estate conditions such as an oversupply of rentable space caused by increased development of new properties, a reduction in demand for rentable space caused by a change in the preferences and requirements of our tenants (including space usage), such as work-from-home practices and utilization of open workspaces or "co-working" space, or local economic conditions decreasing the desirability of our locations;

• changes or volatility within the national, regional, and local economic climate, including dislocations and volatility in the capital markets;

• Risks associated with real estate assets, including

• competition from other available properties and other local real estate conditions such as an oversupply of rentable space caused by increased development of new properties, a reduction in demand for rentable space caused by a change in the preferences and requirements of our tenants (including space

usage), such as work-from-home practices and utilization of open workspaces or "co-working" space, or local economic conditions decreasing the desirability of our locations,

• the financial condition of our tenants, including potential adverse effects from the bankruptcy or insolvency of one or more major tenants,

• the attractiveness of our properties to tenants or buyers,

• competition from other available properties;

• changes in market rental rates and related concessions granted to tenants including, but not limited to, free rent and tenant improvement allowances,

• uninsured losses or losses in excess of our insurance coverage as a result of casualty events or other claims or events;

• insolvency of our insurance carriers;

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

• the impact of a public health crisis and the governmental and third party response to such a crisis;

• the need to periodically repair, renovate, and re-lease properties,

• changes in federal, state, and local income tax laws as they affect real estate companies and real estate investors;

• changes in interest rates and availability of permanent financing sources that may render the sale of a property difficult or unattractive or otherwise reduce returns to stockholders;

• supply chain disruptions, labor shortages, and increased construction costs.

• potential delays in completion of development and re-development projects due to supply chain disruptions, labor shortages, and increased construction costs;

• the impact of common stock, debt, or operating partnership issuances;

• uninsured losses (including those resulting from high deductibles) or losses in excess of our insurance coverage as a result of casualty events or other claims or events;

• insolvency of our insurance carriers or increased cost or unavailability of insurance;

• the financial condition and liquidity of, or disputes with, joint venture partners;

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

• the immediate and long-term impact of a public health crisis and the governmental and third party response to such a crisis;

• changes in federal, state, and local income laws and regulations (including tax laws and environmental or other regulatory requirements) as they affect real estate companies and real estate investors;

• changes in interest rates and availability and cost of corporate and property financing sources, and the inability to comply with debt covenants under credit agreements;

• risks associated with security breaches through cyber attacks, cyber intrusions, or otherwise;

• changes in senior management, the Board of Directors, or key personnel;

• risks associated with climate change and severe weather events, as well as compliance with regulatory efforts intended to address those risks.

Uncertain economic conditions may adversely impact current tenants in our various markets and, accordingly, could affect their ability to pay rent owed to us pursuant to their leases.

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If we decide to sell a real estate asset rather than holding it for long-term investment or if we reduce our estimates of future cash flows on a real estate asset, the risk of impairment increases.

In some cases, our joint venture partners may elect to require a sale of a real estate asset that we intended to hold for a longer period, which could increase the risk of impairment.

The magnitude and frequency with which these charges occur could materially and adversely affect our business, financial condition, and results of operations.

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Our operating office properties were 91.6% leased at December 31, 2024.

Our 20 largest customers account for a meaningful portion of our revenues.

Our 20 largest tenants account for a meaningful portion of our revenues.

Our operating revenues are dependent upon entering into leases with, and collecting rents from, our tenants.

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Also, our tenants may approach us for additional concessions in order to remain open and operating.

The granting of these concessions may adversely affect our results of operations and cash flows to the extent that they result in reduced rental rates, additional capital improvements, or allowances paid to, or on behalf of, the tenants.

The granting of these concessions may adversely affect our

results of operations and cash flows to the extent that they result in reduced rental rates, additional capital improvements, or allowances paid to, or on behalf of, the tenants.

Tenant and market concentration risk .

As of December 31, 2023, our top 20 tenants represented 37.9% of our annualized base rental revenues with our largest single tenant accounting for 8.1% of our annualized base rental revenues.

The inability or refusal 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, 2023, 36.5% of our net operating income for properties owned was derived from the Atlanta area, 32.8% was derived from the Austin area, 9.1% was derived from the Tampa area, 8.6% was derived from the Charlotte area, and 7.6% was derived from the Phoenix area.

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

As of December 31, 2024, our top 20 tenants represented 39.5% of total annualized rent with our largest single tenant accounting for 8.1% of annualized rent.

The inability or refusal 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 (including as a result of a bankruptcy proceeding) 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, 2024, 35.7% of our net operating income for properties owned was derived from the Atlanta area, 32.4% was derived from the Austin area, 9.0% was derived from the Charlotte area, 8.6% was derived from the Tampa area, 8.1% was derived from the Phoenix area, and 2.4% was derived from the Dallas area.

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

Because our portfolio consists primarily of lifestyle office buildings (as opposed to a more diversified real estate portfolio), a decrease in demand for this type of workplace could adversely affect our overall results of operations and financial condition.

Additionally, some of our markets (and the submarkets within which we operate) have an outsized concentration of a limited number of industries.

For example, as of December 31, 2024, in Austin, technology companies represent 52.0% of our annualized rent, in Charlotte, banking and other financial sector companies represent 32.9% of our annualized rent, and in Tampa, biotechnology and health science companies represent 26.6% of our our annualized rent.

A significant downturn in one or more of the foregoing sectors and/or sustained changes in space utilization due to remote or hybrid work models could result in decreased leasing demand and have an adverse effect on our overall results of operations and financial condition.

The bankruptcy or insolvency of a major tenant may adversely affect the income produced by our properties.

For example, major tenants such as Silicon Valley Bank Financial and WeWork have previously filed for bankruptcy protection.

Other major tenants could file for bankruptcy protection or become insolvent in the future and we cannot evict a tenant on this basis alone.

On the other hand, a bankrupt tenant may reject and terminate its lease with us.

In such a case, our claim against the bankrupt tenant for unpaid and future rent would be subject to a statutory cap that might be substantially less than the remaining rent actually owed under the lease, and, even so, our claim for unpaid rent would likely not be paid in full.

This shortfall could adversely affect our cash flow and results of operations.

Uninsured losses and condemnation costs .

Accidents, earthquakes, hurricanes, tornadoes, floods, droughts, ice storms, terrorism incidents, and other physical losses at our properties could adversely affect our operating results.

Casualties may occur that significantly damage an operating property or property under development, insurance deductibles or co-insurance limits may be significant (including with respect to damage from named wind storms), and insurance proceeds may be less than the total loss incurred by us.

Although we, or our joint venture partners where applicable, maintain casualty insurance under policies we believe to be adequate and appropriate, including rent loss insurance on operating properties, some types of losses, such as those related to the termination of longer-term leases and other contracts, generally are not insured.

Certain types of insurance may not be available or may be available on terms that could result in large uninsured losses, and insurers may not pay a claim as required under a policy.

Accidents, earthquakes, hurricanes, tornadoes, floods, droughts, ice storms, wind storms, terrorism incidents, and other physical losses at our properties could adversely affect our operating results and financial condition.

Casualties may occur that significantly damage an operating property or property under development, insurance deductibles or co-insurance limits may be significant (including with respect to damage from named wind storms, where available co-insurance limits are significantly in excess of deductibles for most other casualty losses), and insurance proceeds may be less than the total loss incurred by us.

Although we, or our joint venture partners where applicable, maintain casualty insurance under policies we believe to be adequate and appropriate, including commercial general liability, fire, flood, and rent loss insurance on operating properties, as well as cyber coverage, some types of losses, such as those related to the termination of longer-term leases and other contracts, generally are not insured.

Property ownership also involves potential liability to third parties for such matters as personal injuries occurring on the property.

There may be certain losses that are not generally insured against or that are not generally fully insured against because it is not deemed economically feasible or prudent to do so, including losses due to floods, wind, earthquakes, acts of war, acts of terrorism, riots, or pandemics.

A number of our properties are located in areas that are known to be subject to hurricane or flood risk.

We carry hurricane and flood hazard insurance on all of our properties located in areas historically subject to such activity, subject to coverage limitations and deductibles, if we believe it is commercially reasonable.

In Tampa and Houston, our wind storm insurance is subject to deductibles from 2% to 5% of the value of the affected building.

We evaluate our insurance coverage annually in light of current industry practice through an analysis prepared by outside consultants.

If an uninsured loss or a loss in excess of insured limits occurs with respect to one or more of our properties, then we could lose the capital we invested in the properties, as well as the anticipated future revenue from the properties.

We continue to monitor the state of the insurance market in general, but we cannot anticipate what insurance coverage will be available on commercially reasonable terms in future policy years.

Such losses may not be fully insured.

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Environmental issues .

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 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.

Even if more than one person may have been responsible for the release of regulated substances at the property, each person covered by the environmental laws may be held responsible for all of the clean-up costs incurred.

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 products or other chemicals which are discovered at or migrating from a property, simply because of our past ownership or operation of the real estate.

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 remediation responsibility and liability without regard to whether the owner or operator knew of or caused the presence of the regulated substances.

In addition, third parties may sue the owner or operator of a site for damages and costs resulting from regulated substances emanating from that site.

We manage this risk through Phase I Environmental Site Assessments and, as necessary, Phase II Environmental Site Assessments, which may include environmental sampling on properties we acquire or develop.

Most of our properties are located in urban or previously developed areas, and the historic use of some sites may have resulted in contamination.

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.

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We are not currently aware of any environmental liabilities at locations that we believe could have a material adverse effect on our business, assets, financial condition, or results of operations.

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

Unidentified environmental liabilities could arise, however, including as a result of our new or more stringent environmental laws and regulations, and could have an adverse effect on our financial condition and results of operations.

Sustainability strategies .

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Failure to develop and maintain sustainable and resilient buildings relative to our peers could adversely impact our ability to lease space at competitive rates and negatively impact our results of operations and portfolio attractiveness.

Climate change risks .

Climate change and severe weather event risks .

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 or severity, our markets could experience increases in storm intensity (including floods, fires, tornadoes, hurricanes, droughts, or ice storms), rising sea-levels, and changes in precipitation, temperature, air quality, and quality and availability of water.

To the extent climate change causes changes in weather patterns or severity, our markets could experience increases in storm intensity (including floods, fires, tornadoes, hurricanes, droughts, wind storms, ice storms, and earthquakes), 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 floods, fires, tornadoes, hurricanes, droughts, ice storms, 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.

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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.

We have historically voluntarily disclosed relevant information regarding our sustainability practices;

however, federal, state, and local laws and regulations are evolving and future regulation may require more stringent data reporting.

We face transition risks in the event of the implementation of any such federal, state, and local laws, regulations, and codes.

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

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We hold ownership interests in a number of joint ventures with varying structures and may in the future invest in additional real estate through such structures.

Our venture partners may have rights to take actions over which we have no control, or the right to withhold approval of actions that we propose, either of which could adversely affect our interests in the related joint ventures, and in some cases, our overall financial condition and results of operations.

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.

We currently have joint ventures that are and are not consolidated within our financial statements.

Our venture partners may have rights to take actions over which we have no control, or the right to withhold approval of actions that we propose (including with respect to the decision to commence development of or to sell a project), either of which could adversely affect our interests in the related joint ventures, and in some cases, our overall financial condition and results of operations.

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, including declining to sell at a time or price that we find attractive or determining to sell at a time or price that we do not find attractive.

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.

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Title insurance risk .

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

We did not acquire new title insurance policies in connection with the mergers with Parkway Properties, Inc.

("Parkway") in 2016 or TIER REIT, Inc.

("TIER") in 2019, instead relying on existing policies benefiting those entities' subsidiaries.

Nevertheless, because we acquired these properties indirectly through the acquisition of these subsidiaries, the title insurance policies benefiting those entities may continue to benefit us.

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

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Our properties are subject to various federal, state, and local regulatory requirements, such as state and local fire, health, and life safety requirements.

We are currently in compliance with these requirements.

We believe that we are currently in compliance with these requirements.

If we fail to comply with these requirements, we could incur fines or other monetary damages.

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We generally finance our acquisition and development projects through one or more of the following:

our $1 billion senior unsecured line of credit (the "Credit Facility"), unsecured debt, non-recourse mortgages, construction loans, the sale of assets, joint venture equity, the issuance of common stock, the issuance of preferred stock, and the issuance of units of CPLP.

Each of these sources may be constrained from time to time because of market conditions, and the related cost of raising this

capital may be unfavorable at any given point in time.

our $1 billion senior unsecured line of credit (the "Credit Facility"), public and private unsecured debt, non-recourse mortgages, construction loans, the sale of assets, joint venture equity, the issuance of common stock, the issuance of preferred stock, and the issuance of units of CPLP.

Each of these sources may be constrained from time to time because of market conditions, and the related cost of raising this capital may be unfavorable at any given point in time.

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

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Terms and conditions available in the marketplace for unsecured debt vary over time.

The availability of unsecured debt may vary based on the capital markets and capital market activity.

Unsecured debt generally contains restrictive covenants that may place limitations on our ability to conduct our business similar to those placed upon us by our Credit Facility.

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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.

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

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.

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Covenants contained in our Credit Facility, senior unsecured notes, term loans, and mortgages could restrict our operational flexibility, which could adversely affect our results of operations.

Our Credit Facility, senior unsecured notes, and our unsecured term loans impose financial and operating covenants on us.

Our Credit Facility, senior unsecured notes, and unsecured term loans impose financial and operating covenants on us.

These restrictions may be modified from time to time, but restrictions of this type include limitations on our ability to incur debt, as well as limitations on the amount of our secured debt, unsecured debt, and on the amount of joint venture activity in which we may engage.

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

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 debt ratios may have an adverse effect on the market price of common stock.

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 debt ratios may have an adverse effect on the market price of common stock and debt securities.

Adverse changes to our credit ratings could limit our access to funding and increase our borrowing costs.

Credit ratings are subject to ongoing review by rating agencies, which consider a number of factors, including our financial strength, performance, prospects, and operations as well as factors not under our control.

Other factors that influence our credit ratings include changes to the rating agencies' methodologies for our industry or certain security types;

the rating agencies' assessment of the general operating environment for financial services companies;

our relative positions in the markets in which we compete;

our various risk exposures and risk management policies and activities;

pending litigation and other contingencies;

our reputation;

our liquidity position, diversity of funding sources and funding costs;

the current and expected level and volatility of our earnings;

our capital position and capital management practices;

our corporate governance;

current or future regulatory and legislative initiatives;

and the agencies' views on whether the U.S.

government would provide meaningful support to us or our subsidiaries in a crisis.

Rating agencies could make adjustments to our credit ratings at any time, and there can be no assurance that they will maintain our ratings at current levels or that downgrades will not occur.

Any downgrade in our credit ratings could potentially adversely affect the cost and other terms upon which we are able to borrow or obtain funding, increase our cost of capital, and/or limit our access to capital markets.

In particular, interest rate spreads on some of our corporate floating rate debt are based on our current corporate credit ratings.

If these ratings were to decrease, the Company would see an increase in the interest expense related to these loans, which could have a material impact to earnings.

Credit rating downgrades or negative watch warnings could negatively impact our reputation with lenders, investors, and other third parties, which could also impair our ability to compete in certain markets or engage in certain transactions.

In particular, holders of securities or debt instruments may perceive such a downgrade or warning negatively and pursue divestment of all or a portion of such securities or debt instruments.

While certain aspects of a credit rating downgrade are quantifiable, the impact that such a downgrade would have on our liquidity, business, and results of operations in future periods is inherently uncertain and would depend on a number of interrelated factors, including, among other things, the magnitude of the downgrade, the rating relative to peers, the rating assigned by the relevant agency pre-downgrade, individual client behavior, and future mitigating actions we might take.

Real Estate Acquisition and Development Risks

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As a result, if a liability were asserted against us based upon ownership of those properties, we might have to pay substantial sums to settle or contest it, which might not be fully covered by owner's title insurance policies or other insurance policies.

Our acquisition process requires that we pursue a large number of opportunities;

we may incur significant costs related to the pursuit of acquisitions that do not close, which could directly or indirectly affect our results of operations.

We have procedures and controls in place that are intended to minimize this risk, but it is likely that we will continue to incur costs related to pursuing acquisitions on projects that we do not successfully acquire or complete.

Any of these risks could cause a failure to realize the intended benefits of our acquisitions and could have a material adverse effect on our financial condition, results of operations, and the market price of our common stock.

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• Construction delays .

disruption, the financial health of general contractors or sub-contractors, and the competing demands on plan-approving authorities.

Development activity carries the risk that a project could be delayed due to, but not limited to, weather and other forces of nature, availability of materials, availability of skilled labor, supply chain disruption, the financial health of general contractors or sub-contractors, and the competing demands on plan-approving authorities.

Construction delays could cause adverse financial impacts to us which could include incurring more interest and other carrying costs than originally budgeted, monetary penalties from tenants pursuant to their leases, and higher construction costs.

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If we decide to 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.

We regularly review our existing portfolio to confirm alignment of each property with our standards for a high-quality tenant experience.

Where additional investment in an existing property is anticipated to result in greater leasing success and higher property value, we may undertake selective redevelopment activities, including with respect to lobbies and other common areas.

Such redevelopment activities bear many of the risks associated with new development, as identified above.

Investment in Real Estate Debt Risks

Our investments in real estate debt face prepayment risk and interest rate fluctuations that may adversely affect our results of operations and financial condition.

During periods of declining interest rates, a borrower under a loan may exercise its option to prepay principal earlier than scheduled, forcing the Company to reinvest the proceeds from such prepayment into potentially lower yielding securities or loans, which may result in a decline in return.

Debt investments frequently have call features that allow the borrower to prepay the loan at dates prior to its stated maturity at a specified price (typically greater than par) only if certain prescribed conditions are met.

An issuer or borrower may choose to prepay a loan if, for example, the issuer or borrower can refinance the debt at a lower cost due to declining interest rates or an improvement in the credit standing of the issuer or borrower.

In addition, the market price of the investments will change in response to changes in interest rates and other factors.

The magnitude of these fluctuations in the market price of debt investments is generally greater for loans with longer maturities.

These changes could have an impact on the value of our investments and have a material impact on earnings as these investments are carried at fair value.

We will face risks related to our investments in mezzanine loans.

Our mezzanine loans are secured by a pledge of the ownership interests of the entity or entities that own(s) the property.

These types of assets involve a higher degree of risk than long-term senior mortgage lending secured by income-producing real property because the loan may become unsecured as a result of foreclosure by the senior lender.

Repayment of a mezzanine loan is dependent on the successful operation of the underlying commercial properties.

Therefore, mezzanine loans are subject to similar considerations and risks as our investments in operating real estate.

In the event of a bankruptcy of the entity providing the pledge of its ownership interests as security, we may not have full recourse to the assets of such entity, the assets of the entity may not be sufficient to satisfy our mezzanine loan, or, as the mezzanine loans are generally non-recourse to the borrowers, there is a risk that at foreclosure the value of the ownership interest in the entity is less than the carrying value of the investment resulting in a charge from the decrease in carrying value of our investment.

Additionally, in the event of a foreclosure of the pledged interests, there may not be a robust market of willing purchasers to acquire interests in an entity that would be willing to undertake the cure of senior mortgages necessary to prevent real property foreclosures.

If a borrower defaults on our mezzanine loan or debt senior to our loan, or in the event of a borrower bankruptcy, our mezzanine loan will be satisfied only after the senior debt.

Thus, while there may be sufficient revenue from the property to service the mortgage loan, those revenues may be exhausted before the mezzanine loan is serviced.

The same would be true for casualty situations.

As a result, we may not recover some or all of our investment.

The mortgage loans in which we may invest are subject to delinquency, foreclosure, and loss, which could result in losses to us.

Mortgage loans secured by commercial properties and are subject to risks of delinquency and foreclosure.

The ability of a borrower to repay a loan secured by an income-producing property typically is dependent primarily upon the successful operation of such property rather than upon the existence of independent income or assets of the borrower.

If the net operating income of the property is reduced, the borrower’s ability to repay the loan may be impaired.

Net operating income of an income-producing property can be affected by, among other things:

tenant mix and tenant bankruptcies, success of tenant businesses, property management decisions, including with respect to capital improvement, particularly in older building structures, property location and condition, competition from comparable types of properties offering the same or similar services, changes in laws that increase operating expenses or limit rents that may be charged, changes in interest rates, and in the state of the credit markets and the debt and equity capital markets, including diminished availability or lack of debt financing for commercial real estate, any need to address environmental contamination at the property, the occurrence of any uninsured casualty at the property, changes in national, regional, or local economic conditions or specific industry segments, declines in regional or local real estate values, declines in regional, or local rental or occupancy rates, increases in real estate tax rates, tax credits and other operating expenses, changes in governmental rules, regulations, and fiscal policies, including environmental legislation, natural disasters, terrorism, social unrest, and civil disturbances, and adverse changes in zoning laws.

In the event of any default under a mortgage loan held directly by us, we will bear a risk of loss of principal to the extent of any deficiency between the value of the collateral and the principal and accrued interest of the mortgage loan, which could have a material adverse effect on our cash flow from operations and limit amounts available for distribution to our shareholders.

In the event of the bankruptcy of a mortgage loan borrower, the mortgage loan to such borrower will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law.

Foreclosure of a mortgage loan can be an expensive and lengthy process, which could have a substantial negative effect on our anticipated return on the foreclosed mortgage loan.

We are exposed to the risk of judicial proceedings with our borrowers, including bankruptcy or other litigation, as a strategy to avoid foreclosure or enforcement of other rights by us as a lender or investor.

In the event that any of the properties or entities underlying or collateralizing our loans or investments experiences or continues to experience any of the other foregoing events or occurrences, the value of, and return on, such investments could be reduced, which would adversely affect our results of operations and financial condition.

We may need to foreclose on certain of the loans we originate or acquire, which could result in losses that harm our results of operations and financial condition.

We may find it necessary or desirable to foreclose on certain of the loans we originate or acquire, and the foreclosure process may be lengthy and expensive.

If we foreclose on an asset, we may take title to the property securing that asset, and if we do not or cannot sell the property, we would then come to own and operate it as “real estate owned.” Owning and operating real property involves risks that are different (and in many ways more significant) than the risks faced in owning an asset secured by that property.

The costs associated with operating and redeveloping a

property, including any operating shortfalls and significant capital expenditures, could materially and adversely affect our results of operations, financial conditions, and liquidity.

Whether or not we have participated in the negotiation of the terms of any such loans, we cannot be assured as to the adequacy of the protection of the terms of the applicable loan, including the validity or enforceability of the loan and the maintenance of the anticipated priority and perfection of the applicable security interests.

Furthermore, claims may be asserted by lenders or borrowers that might interfere with enforcement of our rights.

Borrowers may resist foreclosure actions by asserting numerous claims, counterclaims and defenses against us, including, without limitation, lender liability claims and defenses, even when the assertions may have no basis in fact, in an effort to prolong the foreclosure action and seek to force the lender into a modification of the loan or a favorable buy-out of the borrower’s position in the loan.

Foreclosure actions in some U.S.

states can take several years or more to litigate and may also be time consuming and expensive to complete in other U.S.

states and foreign jurisdictions in which we do business.

At any time prior to or during the foreclosure proceedings, the borrower may file for bankruptcy, which would have the effect of staying the foreclosure actions and further delaying the foreclosure process, and could potentially result in a reduction or discharge of a borrower’s debt.

Foreclosure may create a negative public perception of the related property, resulting in a diminution of its value.

Even if we are successful in foreclosing on a loan, the liquidation proceeds upon sale of the underlying real estate may not be sufficient to recover our cost basis in the loan, resulting in a loss to us.

Furthermore, any costs or delays involved in the foreclosure of the loan or a liquidation of the underlying property will further reduce the net sale proceeds and, therefore, increase any such losses to us.

Federal Income Tax Risks

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Under the Code, any gains resulting from transfers or dispositions, from other than a taxable REIT subsidiary, that are deemed to be prohibited transactions would be subject to a 100% tax on any gain associated with the transaction.

Prohibited transactions generally include sales of assets that constitute inventory or other property held-for-sale to customers in the ordinary course of business.

Prohibited transactions generally include sales of assets

that constitute inventory or other property held-for-sale to customers in the ordinary course of business.

Since we acquire properties primarily for investment purposes, we do not believe that our occasional transfers or disposals of property are deemed to be prohibited transactions.

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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.

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

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

Additional changes to tax laws were enacted with the Inflation Reduction Act ("IRA") of 2022, signed into law on August 16, 2022.

Additional changes to tax laws were enacted with the Inflation Reduction Act ("IRA") of 2022, signed into law in August 2022.

Many of the material provisions of the IRA exempt REITs.

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A pandemic, epidemic, or outbreak of a contagious disease could adversely affect us.

Public health crises, pandemics, and epidemics have had, and could continue to have, a material adverse effect on global, national, and local economies, as well as on our business and our tenants’ businesses.

Public health crises, pandemics, and epidemics have had, and in the future could have, a material adverse effect on global, national, and local economies, as well as on our business and our tenants’ businesses.

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.

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One of our objectives is to develop and maintain a strong management group at all levels.

At any given time, we could lose the services of key executives, members of the Board of Directors, and other employees.

At any given time, we could lose the services of key executives, members of the Board of Directors, and other employees, including the managing directors and other leaders of our respective markets.

None of our Board members, key executives, or other employees are subject to employment contracts.

Further, we do not carry key person insurance on any of our executive officers or other key employees.

The loss of services of any of these key persons could have an adverse effect upon our results of operations, financial condition, and our ability to execute our business strategy.

While we believe that we could find replacements for these key personnel, the loss of services of any of these key persons could diminish relationships with investors, lendors, prospective customers, joint venture partners, and others in the industry, and therefore such a loss could have an adverse effect upon our results of operations, financial condition, and our ability to execute our business strategy.

We may change our policies without obtaining the approval of our stockholders.

Our operating and financial policies, including our policies with respect to acquisitions, development, and dispositions of real estate, growth, target markets, operations, indebtedness, capitalization, and dividends are exclusively determined by

the Company's Board of Directors.

Accordingly, our stockholders do not control these policies.

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Those factors may cause the market price of shares of our common stock to decline, regardless of our financial performance, condition, and prospects.

The market price of shares of our common stock may fall significantly in the future, and it may be difficult for our stockholders to resell our common stock at prices they find attractive.

The market price of shares of our common stock may fall significantly in the future, and it may be difficult for our stockholders or holders of our debt securities to resell our common stock at prices they find attractive.

If our future operating performance does not meet the projections of our analysts or investors, our stock price could decline.

Securities analysts publish quarterly and annual projections of our financial performance.

These projections are developed independently based on their own analyses, and we undertake no obligation to monitor, and take no responsibility

for, such projections.

These projections are developed independently based on their own analyses, and we undertake no obligation to monitor, and take no responsibility for, such projections.

Such estimates are inherently subject to uncertainty and should not be relied upon as being indicative of the performance that we anticipate for any applicable period.

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A security breach or other significant disruption involving our IT networks and systems could result in our inability to maintain the building systems relied upon by our customers for their efficient use of their leased space, and the continuation of that circumstance could entitle the affected tenants to abate a portion of their rent.

Further, one or more of our tenants could experience a cyber incident which could impact their operations and ability to perform under the terms of their lease with us.

Further, our vendors or partners could experience a cyber incident which could impact their operations and ability to meet their obligations to us.

Similarly, one or more of our tenants could experience a cyber incident which could impact their operations and ability to perform under the terms of their contracts with us.

While we maintain insurance coverage that may, subject to policy terms and conditions including deductibles, cover specific aspects of cyber risks, such insurance coverage may be insufficient to cover all losses.

10 unchanged sentences

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

Similarly, our approach to and description of our culture, policies, and practices could be perceived by some investors or third parties as failing to meet regulatory or best practices, which could negatively impact our reputation, ability to do business with certain partners, access to capital, and stock price.

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