What changed in this filing

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Item 1A. Risk Factors

2022-02-18 compared with 2021-02-22 · 21 added, 25 removed, 370 unchanged (11% of the section changed)

11 unchanged sentences

Risks Related to Our Properties and Our Business

The COVID-19 global pandemic could adversely affect our business, financial position, results of operations, cash flows, our ability to service our debt, our ability to pay dividends to our stockholders, our REIT status, our ability to capitalize on business opportunities as they arise, our ability to raise capital, and/or the market price of our common stock.

The COVID-19 global pandemic has and could continue to adversely affect our business, financial position, results of operations, cash flows, our ability to service our debt, our ability to pay dividends to our stockholders, our REIT status, our ability to capitalize on business opportunities as they arise, our ability to raise capital, and/or the market price of our common stock.

The COVID-19 global pandemic has led to severe disruption to general economic activities as governments and businesses take actions to mitigate the public health crisis.

The extent to which the COVID-19 global pandemic ultimately impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions taken to contain the virus, and how quickly and to what extent normal economic and operating conditions resume.

Even if the COVID-19 global pandemic subsides, we may continue to experience significant impacts to our business as a result of its global economic impact, including any resulting economic recession.

Although the impacts of the pandemic cannot be predicted at this time, some potential impacts from the pandemic could include:

• Government actions that reduce or otherwise hinder our ability to collect rent promptly or at all, adversely affect tenant demand, increase our costs or otherwise reduce our collections;

The extent to which the pandemic ultimately impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of each variant, its severity, the actions taken to contain the virus, the emergence and impact of future virus variants, and how quickly and to what extent normal economic and operating conditions resume.

Even if the pandemic subsides, we may continue to experience significant impacts to our business as a result of its global economic impact, including any resulting economic recession.

Not all of the impacts of the pandemic can be predicted at this time, however, some of the potential impacts from the pandemic could include:

• Government actions, including but not limited to lease enforcement moratoriums, that reduce or otherwise hinder our ability to collect rent promptly or at all, adversely affect tenant demand, increase our costs or otherwise reduce our collections;

• Supply chain, governmental or other disruptions that adversely affect construction or our operations and/or those of our tenants;

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• Reduced or different tenant demand, leading to lower occupancy and/or rental rates in our buildings;

• Reduced attendance in our buildings, resulting in lower parking revenues;

• Increases in expenses and/or capital investments or decreases in tenant demand as a result of safety concerns;

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• Disruption of our operations as a result of the illness or social distancing of our employees or tenants;

• Impact on the labor market, which could lead to higher employee turnover and increased labor costs;

• Changes in the financial markets, the value of our properties and/or our cash flows which adversely affect our stock price and/or our tenants' access to needed debt or equity capital on reasonable or any terms;

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• any foreclosure on our properties could also create taxable income without accompanying cash proceeds, which could adversely affect our ability to meet the REIT distribution requirements imposed by the Code;

• our floating rate debt and related hedges are indexed to USD-LIBOR, any regulatory changes which impact the USD-LIBOR benchmark, such as the potential transition to the Secured Overnight Financing Rate (see Item 7A - "Quantitative and Qualitative Disclosures about Market Risk" below), could impact our borrowing costs or the effectiveness of our hedges.

• most of our floating rate debt and related hedges are indexed to USD-LIBOR, any regulatory changes which impact the USD-LIBOR benchmark, such as the transition to the Secured Overnight Financing Rate (see Item 7A - "Quantitative and Qualitative Disclosures about Market Risk" in this Report) or other indexes, could impact our borrowing costs or the effectiveness of our hedges.

The rents we receive from new leases may be less than our asking rents, and we may experience rent roll-down from time to time.

As a result of various factors, such as competitive pricing pressure in our submarkets, adverse conditions in the Los Angeles County or Honolulu real estate market, general economic downturns, or the desirability of our properties compared to other properties in our submarkets, the rents we receive on new leases could be less than our in-place rents.

In order to successfully compete against other properties, we must spend money to maintain, repair, and renovate our properties, which reduces our cash flows.

In order to successfully compete against other properties, we need to maintain, repair, and renovate our properties, which reduces our cash flows.

If our properties are not as attractive to current and prospective tenants in terms of rent, services, condition, or location as properties owned by our competitors, we could lose tenants or suffer lower rental rates.

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Our business operations in Los Angeles County, California and Honolulu, Hawaii are susceptible to, and could be significantly affected by, adverse weather conditions and natural disasters such as earthquakes, tsunamis, hurricanes, volcanoes, drought, wind, floods, landslides and fires.

The likelihood of such disasters may be increased as a result of climate changes.

Adverse weather conditions and natural disasters could cause significant damage to our properties or to the economies of the regions in which they are located, the risk of which is enhanced by the concentration of our properties’ locations.

The likelihood of such disasters may be increased as a result of climate changes, and climate changes could also have other impacts such as rising sea levels, which could impact our properties in Honolulu.

Adverse weather conditions, natural disasters and climate change impacts could cause significant damage to our properties or to the economies of the regions in which they are located, the risk of which is enhanced by the concentration of our properties’ locations.

Our insurance coverage may not be adequate to cover business interruption or losses resulting from adverse weather or natural disasters.

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Furthermore, certain properties may be adversely affected by contractual rights, such as rights of first offer or ground leases.

We may incur significant costs complying with laws, regulations and covenants that are applicable to our properties.

We may incur significant costs to comply with laws, regulations and covenants.

The properties in our portfolio are subject to various covenants, federal, state and local laws, ordinances, regulatory requirements, including permitting and licensing requirements, various environmental laws, the ADA and rent control laws.

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• competition from other potential acquirers may significantly increase the purchase price of a desired property;

• we may acquire properties that are not accretive to our results upon acquisition or we may not successfully manage and

lease them up to meet our expectations;

• we may acquire properties that are not accretive to our results upon acquisition or we may not successfully manage and lease them up to meet our expectations;

• we may be unable to generate sufficient cash from operations, or obtain the necessary debt or equity financing to consummate an acquisition or, if obtained, the financing may not be on favorable terms;

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To the extent that we do so, we are subject to certain risks, including the following:

• We may not complete a development or redevelopment project on schedule or within budgeted amounts (as a result of risks beyond our control, such as weather, labor conditions, material shortages and price increases);

• We may not complete a development or redevelopment project on schedule or within budgeted amounts (as a result of risks beyond our control, such as weather, labor conditions, permitting issues, material shortages and price increases);

• We may be unable to lease the developed or redeveloped properties at budgeted rental rates or lease up the property within budgeted time frames;

• We may devote time and expend funds on development or redevelopment of properties that we may not complete;

• We may encounter delays or refusals in obtaining all necessary zoning, land use, and other required entitlements, and building, occupancy and other required governmental permits and authorizations, and our costs to comply with the conditions imposed by such permits and authorizations could increase;

• We may encounter delays, refusals and unforeseen cost increases resulting from third-party litigation or objections;

• We may fail to obtain the financial results expected from properties we develop or redevelop;

• We have developed and redeveloped properties in the past, however only in a limited manner in recent years, which could adversely affect our ability to develop or redevelop properties or to achieve our expected returns.

We are exposed to certain risks when we enter into JVs or issue securities of our subsidiaries, including our Operating Partnership.

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Our executive officers have significant influence over our affairs.

At December 31, 2020, our executive officers owned 4% of our outstanding common stock, but they would own 15% if they converted all of their OP Units into common stock.

At December 31, 2021, our executive officers owned 4% of our outstanding common stock, but they would own 15% if all of their outstanding LTIPs and OP Units were converted into common stock.

As a result, our executive officers, to the extent that they vote their shares in a similar manner, will have significant influence over our affairs and could exercise such influence in a manner that is not in the best interests of our other stockholders, including by attempting to delay, defer or prevent a change of control transaction that might otherwise be in the best interests of our stockholders.

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We are required to pay property taxes for our properties, which could increase as property tax rates increase or as our properties are assessed or reassessed by taxing authorities.

In California, under current law, reassessment occurs primarily as a result of a “change in ownership”.

A potential reassessment may take a considerable amount of time, during which the property taxing authorities make a determination of the occurrence of a “change of ownership”, as well as the actual reassessed value.

In addition, from time to time, there have been proposals to base property taxes on commercial properties on their current market value, without any limit based on purchase price.

If any similar proposal were adopted, the property taxes we pay could increase substantially.

In California, pursuant to an existing state law commonly referred to as Proposition 13, properties are reassessed to market value only at the time of change in ownership or completion of construction, and thereafter, annual property reassessments are limited to 2% increases over the previously assessed values.

In California, pursuant to an existing state law commonly referred to as Proposition 13, properties are currently reassessed to market value only at the time of change in ownership or completion of construction, and thereafter, annual property reassessments are generally limited to 2% increases over the previously assessed values.

As a result, Proposition 13 generally results in significant below-market assessed values over time.

From time to time, including recently, lawmakers and political coalitions have initiated efforts to repeal or amend Proposition 13 to eliminate its application to commercial and industrial properties.

If successful, a repeal of Proposition 13 could substantially increase the assessed values and property taxes for our properties in California.

From time to time, including recently, lawmakers and political coalitions have initiated efforts to repeal or amend Proposition 13 to eliminate its application to commercial and/or other properties.

If Proposition 13 no longer limited the assessed value of our California properties, the assessed values and property taxes for those properties could increase substantially, which could have a material impact on our results of operations, cash flows and financial condition.

Failure to qualify as a REIT would result in higher taxes and reduced cash available for distributions.

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Holding most of our assets through our Operating Partnership further complicates the application of the REIT requirements and a technical or inadvertent mistake could jeopardize our REIT status.

Legislation, new regulations, administrative interpretations or court decisions could significantly change the tax laws with respect to the requirements for qualification as a REIT or the federal income tax consequences of qualification as a REIT.

New legislation, Treasury regulations, administrative interpretations or court decisions could significantly change the tax laws with respect to the requirements for qualification as a REIT or the federal income tax consequences of qualification as a REIT.

Although we believe that we will continue to qualify as a REIT, we can give no assurance that we have qualified or will continue to qualify as a REIT.

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If a Section 1031 Exchange were later to be determined to be taxable, we may be required to amend our tax returns for the applicable year in question, including any reports we distributed to our stockholders.

It is possible that legislation could be enacted that could modify or repeal the laws with respect to Section 1031 Exchanges, which could make it more difficult or not possible for us to dispose of properties on a tax deferred basis.

Legislative or other actions affecting REITs could have a negative effect on our investors or us, including our ability to maintain our qualification as a REIT or the federal income tax consequences of such qualification.

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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