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Real estate investments are subject to a variety of risks.
−Removed: If the communities and other real estate investments do not generate sufficient income to meet operating expenses, including debt service and capital expenditures, cash flow and the ability to make distributions to Essex's stockholders or the Operating Partnership's unitholders will be adversely affected.
−Removed: Income from the communities may be further adversely affected by, among other things, the following factors:
−Removed: • changes in the general or local economic climate, including layoffs, plant closings, industry slowdowns, relocations of significant local employers and other events negatively impacting local employment rates and wages and the local economy;
+Added: If the communities and other real estate investments, including development and redevelopment properties, do not generate sufficient income to meet operating expenses, including debt service and capital expenditures, cash flow and the ability to make distributions to Essex's stockholders or the Operating Partnership's unitholders will be adversely affected.
+Added: Income from the communities may be further adversely affected by, among other things, the following factors, in addition to the other risk factors listed in this Item 1A:
+Added: • changes in the general or local economic climate, including layoffs, plant closings, industry slowdowns, relocations of significant local employers, changing demographics, increased worker locational flexibility from teleconferencing and video-conferencing technology, and other events negatively impacting local employment rates.
+Added: wages and the local economy;
• local economic conditions in which the communities are located, such as oversupply of housing or a reduction in demand for rental housing;
−Removed: • adverse economic or market conditions due to the COVID-19 pandemic leading to a temporary or permanent move by tenants and/or prospective tenants from locations in which our communities are located;
−Removed: • the attractiveness and desirability of our communities to tenants, including, without limitation, the size and amenity offerings of our units, our technology offerings and our ability to identify and cost effectively implement new, relevant technologies, and to keep up with constantly changing consumer demand for the latest innovations, including any increased requirements due to the significant increase in the number of people who continue to “work from home”;
+Added: • adverse economic, regulatory, or market conditions due to the COVID-19 pandemic leading to (1) a temporary or permanent move by tenants and/or prospective tenants from locations in which our communities are located, (2) increased costs or government limitations on revenue, and/or (3) delinquency due to various eviction moratoria;
• inflationary environments in which the costs to operate and maintain communities increase at a rate greater than our ability to increase rents, or deflationary environments where we may be exposed to declining rents more quickly under our short-term leases;
−Removed: • competition from other available housing alternatives;
−Removed: • changes in rent control or stabilization laws or other laws regulating housing and other increasing regulations on people and businesses in locations where our communicates are located;
−Removed: • the Company’s ability to provide for adequate maintenance and insurance;
−Removed: • declines in the financial condition of our tenants, which may make it more difficult for us to collect rents from some tenants;
−Removed: • any decline in or tenants' perceptions of the safety, convenience and attractiveness of our communities and the neighborhoods where they are located;
−Removed: • changes in interest rates and availability of financing.
−Removed: As leases at the communities expire, tenants may enter into new leases on terms that are less favorable to the Company.
−Removed: Income and real estate values also may be adversely affected by such factors as applicable laws, including, without limitation, the Americans with Disabilities Act of 1990 (the "Disabilities Act"), Fair Housing Amendment Act of 1988 (the "FHAA"), permanent and temporary rent control laws, rent stabilization laws, other laws regulating housing that may prevent the Company from raising rents to offset increased operating expenses, and tax laws.
+Added: • the appeal and desirability of our communities to tenants, including, without limitation, the size and amenity offerings of our apartment homes, the safety and convenience of their locations, our technology offerings and our ability to identify and cost effectively implement new, relevant technologies,.
Short-term leases expose us to the effects of declining market rents, and the Company may be unable to renew leases or relet units as leases expire.
−Removed: Substantially all of our apartment leases are for a term of one year or less.
−Removed: If the Company is unable to promptly renew the leases or relet the units, or if the rental rates upon renewal or reletting are significantly lower than expected rates, then the Company’s results of operations and financial condition will be adversely affected.
+Added: If the Company is unable to promptly renew the in place short-term leases or relet the units, or if the rental rates upon renewal or reletting are significantly lower than expected rates, then the Company’s results of operations and financial condition will be adversely affected.
With these short-term leases, our rental revenues are impacted by declines in market rents more quickly than if our leases were for longer terms.
National and regional economic environments can negatively impact the Company’s liquidity and operating results.
−Removed: The Company's forecast for the national economy assumes growth of the gross domestic product of the national economy and the economies of the west coast states.
−Removed: In the event of a recession or other negative economic effects, including as a result of the COVID-19 pandemic, the Company could incur reductions in rental rates, occupancy levels, property valuations and increases in operating costs such as advertising and turnover expenses.
−Removed: Any such recession or similar event may affect consumer confidence and spending and negatively impact the volume and pricing of real estate transactions, which could negatively affect
−Removed: the Company’s liquidity and its ability to vary its portfolio promptly in response to changes to the economy.
+Added: The Company’s forecast for the national economy assumes growth of the GDP of the national economy and the economies of the west coast states.
+Added: In the event of a recession or other negative economic effects the Company could incur reductions in rental and occupancy rates, property valuations and increases in operating costs such as advertising and turnover expenses.
+Added: Any such recession or similar event may affect consumer confidence and spending and negatively impact the volume and pricing of real estate transactions, which could negatively affect the Company’s liquidity and its ability to vary its portfolio promptly in response to changes to the economy.
Furthermore, if residents do not experience increases in their income, they may be unable or unwilling to pay rent increases, and delinquencies in rent payments and rent defaults may increase.
−Removed: Rent control, or other changes in applicable laws, or noncompliance with applicable laws, could adversely affect the Company's operations or expose us to liability.
+Added: Rent control, or other changes in applicable laws, or noncompliance with applicable laws, could adversely affect the Company's operations, property values or expose us to liability.
The Company must own, operate, manage, acquire, develop and redevelop its properties in compliance with numerous federal, state and local laws and regulations, some of which may conflict with one another or be subject to limited judicial or regulatory interpretations.
−Removed: These laws and regulations may include zoning laws, building codes, rent control or stabilization laws, laws benefiting disabled persons, federal, state and local tax laws, landlord tenant laws, environmental laws, employment laws, immigration laws and other laws regulating housing or that are generally applicable to the Company's business and operations.
−Removed: Noncompliance with laws could expose the Company to liability.
−Removed: If the Company does not comply with any or all of these requirements, it may have to pay fines to government authorities or damage awards to private litigants, and/or may have to decrease rents in order to comply with such requirements.
−Removed: The Company does not know whether these requirements will change or whether new requirements will be imposed.
−Removed: Changes in, or noncompliance with, these regulatory requirements could require the Company to make significant unanticipated expenditures to address noncompliance, which could have a material adverse effect on the Company's financial condition, results of operations or cash flows.
−Removed: In addition, rent control or rent stabilization laws and other regulatory restrictions may limit our ability to increase rents and pass through new or increased operating costs to our tenants.
−Removed: There has been a recent increase in municipalities, including those in which we own properties, considering or being urged by advocacy groups to consider rent control or rent stabilization laws and regulations or take other actions which could limit our ability to raise rents based solely on market conditions.
+Added: These laws and regulations may include zoning laws, building codes, rent control or stabilization laws, governmental emergency orders, laws benefiting disabled persons, including, without limitation, the Americans with Disabilities Act of 1990, federal, state and local tax laws, landlord tenant laws, environmental laws, employment laws, immigration laws and other laws regulating housing, including, without limitation, the Fair Housing Amendment Act of 1988, or that are generally applicable to the Company's business and operations.
+Added: Noncompliance with laws could expose the Company to liability, including fines to government authorities or damage awards to private litigants, reduced income or increased costs in order to comply with such requirements.
+Added: requirements may change, or new requirements may be imposed.
+Added: Changes in, or noncompliance with, these regulatory requirements could require the Company to make significant unanticipated expenditures to address noncompliance.
+Added: Rent control or rent stabilization laws, and new such laws that may be implemented, and other regulatory restrictions may limit our ability to increase rents and pass through new or increased operating costs to our tenants.
These initiatives and any other future enactments of rent control or rent stabilization laws or other laws regulating multifamily housing, as well as any lawsuits against the Company arising from such rent control or other laws, may reduce rental revenues or increase operating costs.
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Furthermore, such regulations may negatively impact our ability to attract higher-paying tenants to such communities.
−Removed: The current COVID-19 pandemic, or the future outbreak of other highly infectious or contagious diseases, and the timing and effectiveness of vaccine distribution, could materially and adversely affect our business, financial condition and results of operations.
−Removed: The outbreak of COVID-19, which is present in nearly all regions around the world, including the United States and the specific regions in which our apartment communities are located, has created considerable instability and disruption in the U.S.
−Removed: and world economies.
−Removed: Considerable uncertainty still surrounds COVID-19, including when the pandemic will conclude, how quickly vaccines can be safely and widely distributed, the effectiveness of such vaccines, and the potential short-term and long-term effects, including but not limited to shifts in consumer housing demand based on geography, affordability, housing type (e.g.
−Removed: multi-family vs.
−Removed: single-family) and unit type (e.g.
−Removed: multi-bedroom), mainly resulting from the paradigm shift of work culture, the decentralization of corporate headquarters and the success of “work from home” models.
−Removed: Moreover, local, state and national measures taken to limit the spread of COVID-19, including “social distancing” and other restrictions on travel, congregation and business operations have already resulted in significant negative economic impacts.
−Removed: The prolonged impact of COVID-19 on the U.S.
−Removed: and world economies remains uncertain, but has resulted in increased health issues and mortality rates, increased unemployment, and a world-wide economic downturn, the duration and scope of which cannot currently be predicted.
−Removed: The extent to which the Company’s financial condition or operating results will continue to be affected by the COVID-19 pandemic will largely depend on future demand and developments, which are highly uncertain and cannot be accurately predicted.
−Removed: The Company’s operating results depend, in large part, on revenues derived from leasing space in our apartment communities to residential tenants and the ability of tenants to generate sufficient income to pay their rents in a timely manner.
−Removed: The market and economic challenges created by the COVID-19 pandemic, and measures implemented to prevent its spread, have, and may continue to, adversely affect our returns and profitability.
+Added: The COVID-19 pandemic, or the future outbreak of other highly contagious diseases, could materially affect our business, financial condition and results of operations.
+Added: Uncertainty still surrounds COVID-19, and the potential short-term and long-term effects, including but not limited to shifts in consumer housing demand based on geography, affordability, housing type and unit type, mainly resulting from the paradigm shift of work culture, as well as economic uncertainty, volatility and increased regulation.
As a result, our ability to make distributions to Essex’s stockholders and the Operating Partnership’s unitholders may be compromised and we could experience volatility with respect to the market value of our properties and common stock and Operating Partnership units.
−Removed: The spread of COVID-19 has resulted in increases in unemployment and mass layoffs, and some tenants have experienced deteriorating financial conditions and are unwilling or unable to pay all or part of their rent on a timely basis, or at all, and, the continued spread of COVID-19 as well as a sustained economic downturn may result in further increases or sustainment of these situations.
−Removed: In some cases, we may be legally required to or otherwise agree to restructure tenants’ rent obligations, and may not be able to do so on terms as favorable to us as those currently in place.
−Removed: Furthermore, various city, county and state laws restricting rent increases in times of emergency
−Removed: have come into effect in connection with the COVID-19 pandemic, and numerous state, local, federal and industry-initiated efforts have and may continue to affect our ability to collect rent or enforce remedies for the failure to pay rent, including, among others, limitations or prohibitions on evicting tenants unwilling or unable to pay rent and prohibitions on the ability to collect unpaid rent during certain timeframes.
−Removed: Additionally, eviction moratoriums have passed in various formats at every level of government and while the Company strives to comply, given some of the conflicting standards and unclear requirements, strict compliance might be difficult.
−Removed: Some residents’ views about their obligations to pay rent, even when financially capable of meeting their rent obligation, have shifted away from viewing rent as a primary and necessary financial obligation, and this shift may continue or worsen as a result of the eviction moratoriums and the various laws affecting our abilities to collect rent.
+Added: In some cases, we are subject to eviction moratoria or may be legally required to or otherwise agree to restructure tenants’ rent obligations and may not be able to do so on terms as favorable to us as those currently in place.
+Added: Furthermore, various city, county and state laws restricting rent increases in times of emergency have come into effect in connection with the COVID-19 pandemic, and numerous state, local, federal and industry-initiated efforts have and may continue to affect our ability to collect rent or enforce remedies for the failure to pay rent, including, among others, limitations or prohibitions on evicting tenants unwilling or unable to pay rent and prohibitions on the ability to collect unpaid rent during certain timeframes.
In the event of tenant nonpayment, default or bankruptcy, we may incur costs in protecting our investment and re-leasing our property and have limited ability to renew existing leases or sign new leases at projected rents.
−Removed: Our properties may also incur significant costs or losses related to legislative mandates, including shelter-in-place orders, business shut-downs, quarantines, infection or other related factors, which may result in a negative impact on our occupancy levels.
+Added: Our properties may also incur significant costs or losses related to legislative mandates which may result in a negative impact on our occupancy levels.
For example, many companies initially required, and now are continuing to allow or require, employees to “work from home” for an extended period of time, causing some tenants to move away from the urban centers temporarily or permanently.
−Removed: Some businesses have been ordered to temporarily shut down, such as indoor dining, and many have permanently closed due to deteriorating economic conditions, which has contributed to the shuttering of some commercial spaces in downtown areas, and the temporary, or possibly permanent, deterioration of neighborhoods in and around some of our urban communities, which may be further worsened by increases in homelessness and crime as a result of the effects of the pandemic on some individuals and communities.
−Removed: Moreover, we typically conduct aspects of our leasing activity on-site at our apartment communities.
−Removed: Reductions in the ability and willingness of prospective residents to visit our communities due to the COVID-19 pandemic could reduce rental revenue and ancillary operating revenue produced by our properties.
−Removed: Additionally, in connection with an outbreak that directly impacts one or more of our corporate offices or apartment communities, we may experience negative publicity and/or an unwillingness of prospective residents to visit or ultimately choose to live in our communities, which could directly affect our rental revenue.
−Removed: In addition, we have incurred costs associated with protecting our employees and residents, including the purchase of personal protective equipment and disinfecting our properties, and those costs may continue to increase.
+Added: Some businesses many have permanently closed due to deteriorating economic conditions, which has contributed to the temporary, or possibly permanent, deterioration of neighborhoods in and around some of our urban communities, which may be further worsened by increases in homelessness and crime.
There may also be an increased risk of material litigation due to the effects of the COVID-19 pandemic, including litigation brought by our residents or employees.
−Removed: To the extent our management or personnel are impacted in significant numbers by the COVID-19 pandemic and are not available or allowed to conduct work, our business and operating results may be negatively impacted.
−Removed: Additionally, our corporate offices remain closed as we have instituted “work from home” measures for our corporate associates, which may impact productivity and our employees’ overall mental health.
−Removed: Additionally, market fluctuations as a result of the COVID-19 pandemic may affect our ability to obtain necessary funds for our operations from current lenders or new borrowings.
−Removed: We may be unable to obtain financing for the acquisition of investments or re-financing for existing assets on satisfactory terms, or at all.
−Removed: In addition, moratoriums on construction and macro-economic factors have caused some construction delays and may cause construction contractors to be unable to perform and governmental inspections and approvals to be delayed or postponed, which may cause the delivery date of certain development projects or investments in third-party development projects to be materially extended.
+Added: Market fluctuations as a result of the COVID-19 pandemic may affect our ability to obtain necessary funds for our operations, acquisitions, or re-financings.
+Added: In addition, macro-economic factors have caused some worker shortages and construction delays which could increase costs and lower profitability.
Market fluctuations and construction delays experienced by the Company’s third-party mezzanine loan borrowers and preferred equity investment sponsors may also negatively impact their ability to repay the Company.
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The occurrence of any of the foregoing events or any other related matters could have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.
−Removed: The global impact of the COVID-19 pandemic continues to evolve rapidly, and the extent of its effect on our operational and financial performance will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact, the timing of distribution and effectiveness of vaccines and the willingness and ability of the public to get vaccinated in a timely manner, and the direct and indirect economic effects of the pandemic and related containment measures, among others.
−Removed: However, the COVID-19 pandemic presents material uncertainty and risk with respect to our business, financial condition and results of operations.
−Removed: Moreover, to the extent any of these risks and uncertainties adversely impact us in the ways described above or otherwise, they may also have the effect of heightening many of the other risks set forth in this Annual Report on Form 10-K.
−Removed: In addition, if in the future there is a further outbreak of COVID-19 or a variation thereof, an outbreak of another highly infectious or contagious disease or other health concern, the Company and our properties may be subject to similar risks as posed by COVID-19.
Acquisitions of communities involve various risks and uncertainties and may fail to meet expectations.
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The Company’s estimates of future income, expenses and the costs of improvements or redevelopment that are necessary to allow the Company to market an acquired apartment community as originally intended may prove to be inaccurate.
−Removed: Uncertainty related to the unknown short- and long-term economic and behavioral impacts of the COVID-19 pandemic make forecasting rental rates and occupancies more difficult, and assets the Company acquires may not perform as expected.
In addition, following an acquisition, the value and operational performance of an apartment community may be diminished if obsolescence or neighborhood changes occur before we are able to redevelop or sell the community.
−Removed: Also, in connection with such acquisitions, we may assume unknown liabilities, which could ultimately lead to material costs for us that we did not expect to incur.
−Removed: The Company expects to finance future acquisitions, in whole or in part, under various forms of secured or unsecured financing or through the issuance of partnership units by the Operating Partnership or related partnerships or joint ventures or additional equity by the Company.
−Removed: The use of equity financing, rather than debt, for future developments or acquisitions could dilute the interest of the Company’s existing stockholders.
+Added: Also, in connection with such acquisitions, we may assume unknown or contingent liabilities, which could ultimately lead to material costs for us that we did not expect to incur and for which the Company may have no recourse, or only limited recourse, against the sellers due to limited and no indemnification requirements for a breach of representations and warranties.
+Added: In addition, the total amount of costs and expenses that may be incurred with respect to liabilities associated with apartment communities may exceed our expectations, and we may experience other unanticipated adverse effects, all of which may adversely affect our business, financial condition and results of operations.
+Added: The Company expects to finance future acquisitions under various forms of secured or unsecured financing or through the issuance of partnership units by the Operating Partnership or related partnerships
+Added: or joint ventures or additional equity by the Company.
+Added: The use of equity financing for future developments or acquisitions could dilute the interest of the Company’s existing stockholders.
If the Company finances new acquisitions under existing lines of credit, there is a risk that, unless the Company obtains substitute financing, the Company may not be able to undertake additional borrowing for further acquisitions or developments or such borrowing may be not available on advantageous terms.
Development and redevelopment activities may be delayed, not completed, and/or not achieve expected results.
−Removed: The Company pursues development and redevelopment projects and these projects generally require various governmental and other approvals, which have no assurance of being received and/or the timing of which may be delayed from the Company’s expectations.
+Added: The Company pursues development and redevelopment projects.
The Company defines development projects as new communities that are being constructed or are newly constructed and are in a phase of lease-up and have not yet reached stabilized operations, and redevelopment projects as existing properties owned or recently acquired that have been targeted for additional investment by the Company with the expectation of increased financial returns through property improvement.
−Removed: As of December 31, 2020, the Company had three consolidated development projects and three unconsolidated joint venture development projects comprised of 1,853 apartment homes for an estimated cost of $1.1 billion, of which $174.0 million remains to be expended, and $118.0 million is the Company's share.
−Removed: In addition, at December 31, 2020, the Company had ownership interests in three major redevelopment projects aggregating 1,112 apartment homes with estimated redevelopment costs of $109.1 million, of which approximately $4.5 million remains to be expended.
+Added: As of December 31, 2021, the Company had one consolidated development project and one unconsolidated joint venture development project comprised of 371 apartment homes for an estimated cost of $217.0 million, of which $61.0 million remains to be expended, and $32.6 million is the Company's share.
The Company’s development and redevelopment activities generally entail certain risks, including, among others:
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These risks may reduce the funds available for distribution to Essex’s stockholders and the Operating Partnership's unitholders.
−Removed: Further, the development and redevelopment of communities is also subject to the general risks associated with real estate investments.
−Removed: For further information regarding these risks, please see the risk factor above titled " General real estate investment risks may adversely affect property income and values."
−Removed: Our apartment communities may be subject to unknown or contingent liabilities which could cause us to incur substantial costs.
−Removed: The properties that the Company owns or may acquire are or may be subject to unknown or contingent liabilities for which the Company may have no recourse, or only limited recourse, against the sellers.
−Removed: In general, the representations and
−Removed: warranties provided under the transaction agreements related to the sales of the properties may not survive the closing of the transactions.
−Removed: While the Company seeks to require the sellers to indemnify us with respect to breaches of representations and warranties that survive, such indemnification may be limited and subject to various materiality thresholds, a significant deductible or an aggregate cap on losses.
−Removed: As a result, there is no guarantee that we will recover any amounts with respect to losses due to breaches by the sellers of their representations and warranties.
−Removed: In addition, the total amount of costs and expenses that may be incurred with respect to liabilities associated with apartment communities may exceed our expectations, and we may experience other unanticipated adverse effects, all of which may adversely affect our business, financial condition and results of operations.
The geographic concentration of the Company’s communities and fluctuations in local markets may adversely impact the Company’s financial condition and operating results.
−Removed: The Company generated significant amounts of rental revenues for the year ended December 31, 2020, from the Company’s communities concentrated in Southern California (primarily Los Angeles, Orange, Santa Barbara, San Diego, and Ventura counties), Northern California (the San Francisco Bay Area), and the Seattle metropolitan area.
+Added: The Company generated significant amounts of rental revenues for the year ended December 31, 2021, from the Company’s communities concentrated in Southern California (primarily Los Angeles, Orange, San Diego, and Ventura counties), Northern California (the San Francisco Bay Area), and the Seattle metropolitan area.
For the year ended December 31, 2021, 83% of the Company’s rental revenues were generated from communities located in California.
This geographic concentration could present risks if local property market performance falls below expectations.
−Removed: In general, factors that may adversely affect local market and economic conditions include, among others, the following:
−Removed: • the economic climate, which may be adversely impacted by a reduction in job growth or income levels, industry slowdowns, changing demographics and other factors;
−Removed: • local conditions, such as oversupply of, or reduced demand for, apartment homes;
−Removed: • rent control or stabilization laws, or other laws regulating rental housing, which could prevent the Company from raising rents to offset increases in operating costs, or the inability or unwillingness of tenants to pay rent increases;
−Removed: • competition from other available apartments and other housing alternatives and changes in market rental rates;
−Removed: • economic conditions that could cause an increase in our operating expenses, including increases in property taxes, utilities and routine maintenance;
−Removed: • regional specific acts of nature (e.g., earthquakes, fires, floods, etc.).
−Removed: Because the Company’s communities are primarily located in Southern California, Northern California and the Seattle metropolitan area, the Company is exposed to greater economic concentration risks than if it owned a more geographically diverse portfolio.
+Added: Factors that may adversely affect local market and economic conditions include regional specific acts of nature (e.g., earthquakes, fires, floods, etc.) and those other factors listed in the risk factor titled “ General real estate investment risks may adversely affect property income and values ” and elsewhere in this Item 1A.
+Added: Because the Company’s communities are geographically concentrated, the Company is exposed to greater economic concentration risks than if it owned a more geographically diverse portfolio.
The Company is susceptible to adverse developments in California and Washington economic and regulatory environments, such as increases in real estate and other taxes, and increased costs of complying with governmental regulations.
In addition, the State of California is generally regarded as more litigious and more highly regulated and taxed than many states, which may reduce demand for the Company’s communities.
−Removed: Recently, California has also experienced increased relocation out of the state, including as a result of the regulatory landscape and the COVID-19 pandemic.
+Added: California has also experienced increased relocation out of the state.
Any adverse developments in the economy or real estate markets in California or Washington, or any decrease in demand for the Company’s communities resulting from the California or Washington regulatory or business environments, could have an adverse effect on the Company’s business and results of operations.
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Real property taxes on our properties may increase as our properties are reassessed by taxing authorities or as property tax rates change.
−Removed: Our real estate taxes in Washington could increase as a result of property value reassessments or increased property tax rates in that state.
−Removed: A current California law commonly referred to as Proposition 13 generally limits annual real estate tax increases on California properties to 2% of assessed value.
+Added: Our real estate taxes in Washington could increase as a result of property value reassessments or
+Added: increased property tax rates in that state.
+Added: A California law commonly referred to as Proposition 13 generally limits annual real estate tax increases on California properties to 2% of assessed value.
However, under Proposition 13, property tax reassessment generally occurs as a result of a "change in ownership" of a property, as specially defined for purposes of those rules.
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Therefore, the amount of property taxes we are required to pay could increase substantially from the property taxes we currently pay or have paid in the past, including on a retroactive basis.
−Removed: In addition, from time to time voters and lawmakers have announced initiatives to repeal or amend Proposition 13 to eliminate its application to commercial and industrial property and/or introduce split tax roll legislation.
+Added: In addition, from time to time voters and lawmakers have announced initiatives to repeal or amend Proposition 13 to eliminate its application to commercial and industrial property, increase the permitted annual real estate tax increases, and/or introduce split tax roll legislation.
Such initiatives, if successful, could increase the assessed value and/or tax rates applicable to commercial property in California, including our apartment communities.
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In some cases, we may spend more than budgeted amounts to make necessary improvements or maintenance.
−Removed: Increases in the
−Removed: Company’s expenses to own and maintain its properties could adversely impact the Company’s financial condition and results of operations.
+Added: Increases in the Company’s expenses to own and maintain its properties could adversely impact the Company’s financial condition and results of operations.
Competition in the apartment community market and other housing alternatives may adversely affect operations and the rental demand for the Company’s communities.
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These include other apartment communities, condominiums and single-family homes that are available for rent or for sale in the markets in which our communities are located.
−Removed: Competitive housing in a particular area and fluctuations in cost of owner-occupied single- and multifamily homes caused by a decrease in housing prices, mortgage interest rates and/or government programs to promote home ownership or create additional rental and/or other types of housing, or an increase in desire for more space due to work from home needs or increased time spent at home due to COVID-19, could adversely affect the Company’s ability to retain its tenants, lease apartment homes and increase or maintain rents.
+Added: Competitive housing in a particular area and fluctuations in cost of owner-occupied single- and multifamily homes caused by a decrease in housing prices, mortgage interest rates and/or government programs to promote home ownership or create additional rental and/or other types of housing, or an increase in desire for more space due to work from home needs or increased time spent at home, could adversely affect the Company’s ability to retain its tenants, lease apartment homes and increase or maintain rents.
If the demand for the Company’s communities is reduced or if competitors develop and/or acquire competing apartment communities, rental rates may drop, which may have a material adverse effect on the Company’s financial condition and results of operations.
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The Company may make or acquire mezzanine loans, which take the form of subordinated loans secured by second mortgages on the underlying property or loans secured by a pledge of the ownership interests of either the entity owning the property or a pledge of the ownership interests of the entity or entities that owns the interest in the entity owning the property.
−Removed: In general, investments in mortgages include the following risks:
−Removed: • that the value of mortgaged property may be less than the amounts owed, causing realized or unrealized losses;
+Added: In general, investing in mortgages may pose some risk, including but not limited to the value of mortgaged property may be less than the amounts owed, causing realized or unrealized losses;
the borrower may not pay indebtedness under the mortgage when due, requiring the Company to foreclose, and the amount recovered in connection with the foreclosure may be less than the amount owed;
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delays in the collection of principal and interest if a borrower claims bankruptcy;
−Removed: • unanticipated early prepayments may limit the Company’s expected return on its investment.
+Added: possible senior lender default or overconcentration of senior lenders in portfolio;
+Added: and unanticipated early prepayments may limit the Company’s expected return on its investment.
If any of the above were to occur, it could adversely affect the Company’s cash flows from operations.
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Although the Company seeks to maintain sufficient influence over any joint venture to achieve its objectives, the Company may be unable to take action without its joint venture partners’ approval.
−Removed: A joint venture partner might fail to approve decisions that are in the Company’s best interests.
Should a joint venture partner become bankrupt, the Company could become liable for such partner’s share of joint venture liabilities.
In some instances, the Company and the joint venture partner may each have the right to trigger a buy-sell arrangement, which could cause the Company to sell its interest, or acquire a partner’s interest, at a time when the Company otherwise would not have initiated such a transaction.
−Removed: From time to time, the Company, through the Operating Partnership, invests in corporations, limited partnerships, limited liability companies or other entities that have been formed for the purpose of acquiring, developing, financing, or managing real property.
−Removed: The Company makes certain co-investments in the form of preferred equity investments in third party entities that own real estate.
+Added: From time to time, the Company, through the Operating Partnership, makes certain co-investments in the form of preferred equity investments in third-party entities that have been formed for the purpose of acquiring, developing, financing, or managing real property.
With preferred equity investments and certain other co-investments, the Operating Partnership’s interest in a particular entity is typically less than a majority of the outstanding voting interests of that entity.
Therefore, the Operating Partnership’s ability to control the daily operations of such co-investment may be limited.
−Removed: Furthermore, the Operating Partnership may not have the power to remove a majority of the board of directors (in the case of a corporation) or the general partner or partners (in the case of a limited partnership) of such co-investment in the event that its operations conflict with the Operating Partnership’s objectives.
The Operating Partnership may not be able to dispose of its interests in such co-investment.
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Although the Company plans to hold the contributed assets or, if such assets consist of real property, defer recognition of gain on sale of such assets pursuant to the like-kind exchange rules under Section 1031 of the Internal Revenue Code of 1986, as amended (the "Code"), the Company can provide no assurance that the Company will be able to do so and if such tax liabilities were incurred they could have a material impact on its financial position.
−Removed: Also, from time to time, the Company invests in properties which may be subject to certain shared facilities agreements with homeowners' associations and other entities and/or invests in properties subject to ground leases where a subtenant may have certain similar rights to that of a party under such a shared facilities agreement.
−Removed: For such properties, the Company's ability to control the expenditure of capital improvements and its allocation with such other parties may adversely affect the Company's business, financial condition and results of operations.
+Added: Also, from time to time, the Company invests in properties which may be subject to certain shared facilities agreements with homeowners’ associations and other entities and/or invests in properties subject to ground leases where a subtenant may have certain similar rights to that of a party under such a shared facilities agreement and the Company’s ability to control expenditures, make necessary repairs and control certain decisions may adversely affect the Company's business, financial condition and results of operations.
We may pursue acquisitions of other REITs and real estate companies, which may not yield anticipated results and could adversely affect our results of operations.
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These transactions or any other acquisitions involve risks and uncertainties.
−Removed: For example, as a consequence of such transactions, we may assume unknown liabilities, which could ultimately lead to material costs for us.
In addition, the integration of acquired businesses or other acquisitions may not be successful and could result in disruption to other parts of our business.
To integrate acquired businesses or other acquisitions, we must implement our management information systems, operating systems and internal controls, and assimilate and manage the personnel of the acquired operations.
−Removed: The expected synergies from acquisitions may not be fully realized, which could result in increased costs or other issues and have an adverse effect on our business.
There can be no assurance that all pre-acquisition property due diligence will have identified all material issues that might arise with respect to such acquired business and its properties or as to any such other acquisitions.
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Real estate investments are illiquid and, in our markets, can at times be difficult to sell at prices we find acceptable.
−Removed: We may be unable to consummate dispositions of properties or interests in properties in a timely manner, on attractive terms, or at all.
These potential difficulties in selling real estate in our markets may limit our ability to change or reduce the apartment communities in our portfolio promptly in response to changes in economic or other conditions, which could have a material adverse effect on our financial condition and results of operations.
−Removed: In addition, if
−Removed: we are found to have held, acquired or developed a community as inventory or primarily for sale to customers in the ordinary course of business, federal tax laws may limit our ability to sell the community without incurring a 100% tax on the gain on the sale of the community and potentially adversely impacting our status as a REIT unless we own the community through one of our taxable REIT subsidiaries ("TRSs").
The Company may not be able to lease its retail/commercial space consistent with its projections or at market rates.
The Company has retail/commercial space in its portfolio, which represents approximately 2% of our total revenue.
−Removed: The retail/commercial space at our properties, among other things, serves as an additional amenity for our tenants.
−Removed: The long term nature of our retail/commercial leases, and the characteristics of many of our retail/commercial tenants (small, local businesses), may subject us to certain risks.
We may not be able to lease new space for rents that are consistent with our projections or at market rates, and the longer-term leases for existing space could result in below market rents over time.
Also, when leases for our existing retail/commercial space expire, the space may not be relet on a timely basis, or at all, or the terms of reletting, including the cost of allowances and concessions to tenants, may be less favorable than the current lease terms.
−Removed: Our properties compete with other properties with retail/commercial space.
−Removed: The presence of competitive alternatives may affect our ability to lease space and the level of rents we can obtain.
−Removed: If our retail/commercial tenants experience long term government-mandated closures of their businesses or other substantial restrictions on their operations due to the impact of COVID-19 or otherwise, financial distress or bankruptcy, they may fail to comply with their contractual obligations, seek concessions in order to continue operations or cease their operations, which could adversely impact our results of operations and financial condition.
The Company’s portfolio may have environmental liabilities.
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Mold growth may occur when excessive moisture accumulates in buildings or on building materials, particularly if the moisture problem remains undiscovered or is not addressed in a timely manner.
−Removed: Although the occurrence of mold at multifamily and other structures, and the need to remediate such mold, is not a new phenomenon, there has been increased awareness in recent years that certain molds may in some instances lead to adverse health effects, including allergic or other reactions.
−Removed: The Company has adopted policies for promptly addressing and resolving reports of mold when it is detected, and to minimize any impact mold might have on tenants of the affected property.
−Removed: The Company believes its mold policies and proactive response to address any known mold existence reduce its risk of loss from these cases;
−Removed: however, no assurance can be provided that the Company has identified and responded to all mold occurrences.
+Added: Although the occurrence of mold at multifamily and other structures, and the need to remediate such mold, is not a new phenomenon, there has been increased awareness in recent
+Added: years that certain molds may in some instances lead to adverse health effects, including allergic or other reactions.
+Added: The Company has adopted policies for promptly addressing and resolving reports of mold when it is detected, and to minimize any impact mold might have on tenants of the affected property, however, no assurance can be provided that the Company has identified and responded to all mold occurrences.
California has enacted legislation, commonly referred to as "Proposition 65," requiring that covered businesses provide "clear and reasonable" warnings before knowingly exposing persons to chemicals known to the State of California to cause cancer or reproductive toxicity, including tobacco smoke.
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Radon is also a naturally-occurring gas that is found below the surface and can pose a threat to human health requiring abatement action if present in sufficient concentration within occupied areas.
−Removed: The Company cannot assure you that it will not be adversely affected by costs related to its compliance with methane or radon gas related requirements or litigation costs related to methane or radon gas.
−Removed: We cannot assure you that costs or liabilities incurred as a result of environmental matters will not affect our ability to make distributions to Essex's stockholders or the Operating Partnership's unitholders, or that such costs or liabilities will not have a material adverse effect on our financial condition and results of operations;
+Added: The Company cannot assure that it will not be adversely affected by costs related to its compliance with methane or radon gas related requirements or litigation costs related to methane or radon gas.
However, the Company is unaware of any pending or threatened alleged claim resulting from such matters which would have a material adverse effect on the Company’s financial condition, results of operations or cash flows.
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However, there are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, pollution, environmental matters or extreme weather conditions such as hurricanes, fires and floods that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments.
−Removed: Insurance risks associated with potential terrorist acts could sharply increase the premiums the Company pays for coverage against property and casualty claims.
The Company utilizes a wholly owned insurance subsidiary, Pacific Western Insurance LLC ("PWI"), to self-insure certain earthquake and property losses for some of the communities in its portfolio.
As of December 31, 2021, PWI, which is consolidated in the Company's financial statements, had cash and marketable securities of approximately $198.1 million.
−Removed: The value of the marketable securities of PWI could decline, and if a decline in value were to occur, PWI's ability to cover all or any portion of the amount of any insured losses could be adversely affected.
+Added: The value of the marketable securities of PWI could decline and adversely affect PWI’s ability to cover all or any portion of the amount of any insured losses.
All of our communities are located in areas that are subject to earthquake activity.
The Company evaluates its financial loss exposure to seismic events by using actuarial loss models developed by the insurance industry and property vulnerability analyses based on structural evaluations by seismic consultants.
−Removed: The Company manages this exposure, where considered appropriate, desirable, and cost-effective, by upgrading properties to increase their resistance to forces caused by seismic events, by considering available funds and coverages provided by PWI and/or, in some cases, by purchasing seismic insurance.
+Added: The Company manages this exposure, where considered appropriate, desirable, and cost-effective, by upgrading properties to increase their resistance to seismic events, by considering available funds and coverages provided by PWI and/or, in some cases, by purchasing seismic insurance.
Purchasing seismic insurance coverage can be costly and such seismic insurance is in limited supply.
−Removed: As a result, the Company may experience a shortage in desired coverage levels if market conditions are such that insurance is not available, or the cost of the insurance makes it, in management's view, not economically practical.
+Added: As a result, the Company may experience a shortage in desired coverage levels if market conditions are such that insurance is not available, or not economically practical.
The Company may purchase limited earthquake insurance for certain high-density properties and, in most cases, properties owned by the Company's co-investments.
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Our communities could also directly or indirectly be the location or target of actual or threatened terrorist attacks, crimes, shootings, other acts of violence or other incidents beyond our control, the occurrence of which could directly impact the value of our communities through damage, destruction, loss or increased security costs, as well as operational losses due to reduction of traffic and rental demand for our communities, and the availability of insurance for such acts may be limited or may be subject to substantial costs.
−Removed: If such an incident were to occur at one of our communities, we may also be subject to significant liability claims.
+Added: If such an incident were to occur at one of our communities, we
+Added: may also be subject to significant liability claims.
Such events and losses could significantly affect our ability to operate those communities and materially impair our ability to achieve our expected results.
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Climate change may adversely affect our business.
−Removed: To the extent that climate change does occur, we may experience extreme weather and changes in precipitation and temperature, all of which may result in physical damage or a decrease in demand for our communities located in these areas or affected by these conditions.
+Added: To the extent that climate change does occur, we may experience extreme weather and changes in precipitation, temperature and wild fire exposure, all of which may result in physical damage or a decrease in demand for our communities located in these areas or affected by these conditions.
Should the impact of climate change be material in nature or occur for lengthy periods of time, our financial condition or results of operations may be adversely affected, and may negatively impact the types and pricing of insurance the Company is able to procure.
Our properties are located along the West Coast of the United States.
−Removed: To the extent climate change causes changes in weather patterns, the regions where our communities are located could experience increases in storm intensity, rising sea levels and/or drought frequency.
+Added: To the extent climate change causes changes in weather patterns, the regions where our communities are located could experience increases in storm intensity, wild fires, rising sea levels and/or drought frequency.
Over time, such conditions could result in reduced demand for housing in areas where our communities are located and increased costs related to further developing our communities to mitigate the effects of climate change or repairing damage related to the effects of climate change that may or may not be fully covered by insurance.
In addition, changes in federal, state and local legislation and regulation on climate change could result in increased operating costs (for example, increased utility costs) and/or increased capital expenditures to improve the energy efficiency of our existing communities and could also require us to spend more on our new development communities without a corresponding increase in revenue.
−Removed: For example, various federal, regional and state laws and regulations have been implemented or are under consideration to mitigate the effects of climate change caused by greenhouse gas emissions, including the California energy efficiency standards, referred to as Title 24 or The Building Energy Efficiency Standards.
−Removed: 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.
−Removed: The imposition of such requirements in the future could increase the costs of maintaining or improving our existing properties or developing properties (for example, requiring retrofits of existing properties to improve their energy efficiency and/or resistance to inclement weather) without creating corresponding increase in revenue, resulting in adverse impacts to our operating results.
Further, the impact of climate change may increase the cost of, or make unavailable, property insurance or other hazard insurance on terms we find acceptable or necessary to adequately protect our properties.
Accidental death or severe injuries at our communities due to fires, floods, other natural disasters or hazards could adversely affect our business and results of operations.
−Removed: The accidental death or severe injuries of persons living in our communities due to fires, floods, other natural disasters or hazards could have a material adverse effect on our business and results of operations.
−Removed: Our insurance coverage may not cover all losses associated with such events, and we may experience
−Removed: difficulty marketing communities where any such events have occurred, which could have a material adverse effect on our business and results of operations.
+Added: Our insurance coverage may not cover all losses associated with such events, and we may experience difficulty marketing communities where any such events have occurred, which could have a material adverse effect on our business and results of operations.
Adverse changes in laws may adversely affect the Company's liabilities and/or operating costs relating to its properties and its operations.
Increases in real estate taxes and income, service and transfer taxes cannot always be passed through to tenants or users in the form of higher rents, and may adversely affect the Company's cash available for distribution and its ability to make distributions to Essex's stockholders or the Operating Partnership's unitholders and pay amounts due on its debts.
−Removed: Similarly, changes in laws increasing the potential liability of the Company and/or its operating costs on a range of issues, including those regarding potential liability for other environmental conditions existing on properties or increasing the restrictions on discharges or other conditions, as well as changes in laws affecting development, construction and safety requirements, may result in significant unanticipated expenditures, including without limitation, those related to structural or seismic retrofit or more costly operational safety systems and programs, which could have a material adverse effect on the Company.
−Removed: For example, (1) the California statute, the "Sustainable Communities and Climate Protection Act of 2008," also known as "SB375," provides that, in order to reduce greenhouse emissions, there should be regional planning to coordinate housing needs with regional transportation and such planning could lead to restrictions on, or increases in, property development that adversely affect the Company and (2) the Environmental Protection Agency has implemented a program for long-term phase out of HCFC-22 coolant (freon) by 2030, which could lead to increased capital and/or operating costs.
+Added: Additionally, ongoing political volatility may increase the likelihood of significant changes in laws, such as repeal of Proposition 13, that could affect the Company's overall strategy.
+Added: Changes in laws increasing the potential liability of the Company and/or its operating costs on a range of issues, including those regarding potential liability for other environmental conditions existing on properties or increasing the restrictions on discharges or other conditions, as well as changes in laws affecting development, construction and safety requirements, may result in significant unanticipated expenditures, including without limitation, those related to structural or seismic retrofit or more costly operational safety systems and programs, which could have a material adverse effect on the Company.
Failure to succeed in new markets may limit the Company’s growth.
The Company may make acquisitions or commence development activity outside of its existing market areas if appropriate opportunities arise.
−Removed: The Company’s historical experience in its existing markets does not ensure that it will be able to operate successfully in new markets.
The Company may be exposed to a variety of risks if it chooses to enter new markets.
−Removed: These risks include, among others:
−Removed: • an inability to evaluate accurately local apartment market conditions and local economies;
+Added: These risks include but are not limited to an inability to evaluate accurately local apartment market conditions and local economies;
an inability to identify appropriate acquisition opportunities or to obtain land for development;
an inability to hire and retain key personnel;
−Removed: • lack of familiarity with local governmental and permitting procedures.
−Removed: Current volatility in market and economic conditions may impact the accuracy of the various estimates used in the preparation of our financial statements and footnotes to the financial statements.
−Removed: Various estimates are used in the preparation of our financial statements, including estimates related to the fair value of tangible and intangible assets and the carrying value of our real estate investments.
−Removed: Often these estimates require the use of local market knowledge and data that is difficult to assess, as well as estimates of future cash flows associated with our real estate investments that can also be difficult to accurately predict.
−Removed: The uncertainty surrounding the short- and long-term impacts of COVID-19 have increased the difficulty in preparing these estimates.
−Removed: Although our management believes it has been prudent and used reasonable judgment in making these estimates, it is possible that actual results may differ materially from these estimates.
+Added: and lack of familiarity with local governmental and permitting procedures.
Our business and reputation depend on our ability to continue providing high quality housing and consistent operation of our communities, the failure of which could adversely affect our business, financial condition and results of operations.
−Removed: Our business and reputation depend on providing tenants with quality housing with highly reliable services, including with respect to water and electric power, along with the consistent operation of our communities, including a wide variety of amenities such as covered parking, swimming pools, clubhouses with fitness facilities, playground areas, tennis courts and similar features.
+Added: We also provide tenants with reliable services, including water and electric power, along with the consistent operation of our communities, including a wide variety of amenities such as covered parking, pools, gyms, playgrounds, and similar features.
Public utilities, especially those that provide water and electric power, are fundamental for the consistent operation of our communities.
−Removed: The delayed delivery or any material reduction or prolonged interruption of these services may cause tenants to terminate their leases, or may result in a reduction of rents and/or increase in our costs or other issues.
−Removed: In addition, we may fail to provide quality housing and continuous access to amenities as a result of other factors, including government mandated closures due to health concerns, mechanical failure, power outage, human error, vandalism, physical or electronic security breaches, war, terrorism or similar events.
−Removed: Additionally, residents may choose not to use such facilities or amenities as a matter of social distancing or for other reasons, which may cause our communities to become less appealing to such residents.
−Removed: Such service interruptions, closures or lack of use of facilities, mechanical failures or other events may also expose us to additional liability claims and damage our reputation and brand, and could cause tenants to terminate or not renew their leases, or prospective tenants to seek housing elsewhere.
+Added: The delayed delivery or any prolonged interruption of these services may cause tenants to terminate their leases or may result in a reduction of rents and/or increase in our costs or other issues.
+Added: In addition, we may fail to provide quality housing and continuous access to amenities as a result of other factors, including government mandated closures, mechanical failure, power outage, human error, vandalism, physical or electronic security breaches, war, terrorism or similar events.
+Added: Such events may also expose us to additional liability claims and damage our reputation and brand and could cause tenants to terminate or not renew their leases, or prospective tenants to seek housing elsewhere.
Any such failures could impair our ability to continue providing quality housing and consistent operation of our communities, which could adversely affect our business, financial condition and results of operations.
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generally accepted accounting principles ("U.S.
−Removed: Factors considered in evaluating impairment of the Company’s existing multifamily real estate assets held for investment
−Removed: include significant declines in property operating profits, recurring property operating losses and other significant adverse changes in general market conditions that are considered permanent in nature.
+Added: Factors considered in evaluating impairment of the Company’s existing multifamily real estate assets held for investment include significant declines in property operating profits, recurring property operating losses and other significant adverse changes in general market conditions that are considered permanent in nature.
Generally, a multifamily real estate asset held for investment is not considered impaired if the undiscounted, estimated future cash flows of the asset over its estimated holding period are in excess of the asset’s net book value at the balance sheet date.
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We rely on information technology in our operations, and any material failure, inadequacy, interruption or breach of the Company’s privacy or information security systems, or those of our vendors or other third parties, could materially adversely affect the Company’s business and financial condition.
−Removed: The protection of tenant, employee, and company data is critically important to the Company.
We rely on information technology networks and systems, including the Internet, to process, transmit and store electronic information, and to manage or support a variety of business processes, including financial transactions and records, personally identifiable information, and tenant and lease data.
2 unchanged sentences
Privacy and information security laws continue to evolve and may be inconsistent from one jurisdiction to another.
−Removed: The Company endeavors to ensure compliance with all such laws and regulations, including by providing required disclosures, promptly responding to consumer requests for data, and seeking vendor compliance with applicable privacy and information security laws.
+Added: The Company endeavors to comply with all such laws and regulations, including by providing required disclosures, promptly responding to consumer requests for data, and seeking vendor compliance with applicable privacy and information security laws.
Compliance with all such laws and regulations may increase the Company’s operating costs and adversely impact the Company’s ability to market the Company’s properties and services.
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Moreover, if there is a compliance failure, or if a data security incident or breach affects the Company’s systems or such vendors’ systems, whether through a breach of the Company’s systems or a breach of the systems of third parties, or results in the unauthorized release of personally identifiable information, the Company’s reputation and brand could be materially damaged, which could increase our costs in attracting and retaining tenants, and other serious consequences may result.
−Removed: Such potential other consequences include, without limitation, that the Company and certain executive officers may be exposed to a risk of litigation and possible liability, including, without limitation, government enforcement actions and private litigation;
+Added: Such potential other consequences include, without limitation, that the Company may be exposed to a risk of litigation, including, without limitation, government enforcement actions, private
+Added: litigation or criminal penalties;
and that the Company may be exposed to a risk of loss including, without limitation, loss related to the fact that agreements with such vendors, or such vendors’ financial condition, may not allow the Company to recover all costs related to a cyber breach for which they alone or they and the Company should be jointly responsible for, which could result in a material adverse effect on the Company’s business, results of operations, and financial condition.
Privacy and information security risks have generally increased in recent years because of the proliferation of new technologies, such as ransomware, and the increased sophistication and activities of perpetrators of cyber-attacks.
−Removed: In light of the increased risks, we have dedicated additional Company resources to strengthening the security of the Company’s computer systems, including maintaining cyber risk insurance which may provide some coverage for certain risks arising out of cyber breaches.
+Added: We maintain cyber risk insurance which may provide some coverage for certain risks arising out of cyber breaches.
However, there can be no assurance that our cyber risk insurance will be sufficient in the event of a cyber incident.
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Any failure in or breach of the Company’s information security systems, those of third party service providers, or a breach of other third party systems that ultimately impacts the operational or information security systems of the Company as a result of cyber-attacks or information security breaches could result in a wide range of potentially serious harm to our business and results of operations.
−Removed: Additionally, government agencies involved in investigating any potential data security incidents may impose injunctive relief or other civil or criminal penalties on the Company and/or certain executives, which could, among other things, divert the attention of management, impact the Company's ability to collect and use tenant information, materially increase data security costs and/or otherwise require us to alter how we operate our business.
−Removed: Further, the techniques used by criminals to obtain unauthorized access to sensitive data, such as phishing and other forms of human engineering, are increasing in sophistication and are often novel or change frequently;
+Added: Further, the techniques used by criminals to obtain unauthorized access to sensitive data, such as phishing are increasing in sophistication and are often novel or change frequently;
accordingly, the Company may be unable to anticipate these techniques or implement adequate preventative measures.
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Risks Related to Our Indebtedness and Financings
−Removed: Capital and credit market conditions may affect the Company’s access to sources of capital and/or the cost of capital, which could negatively affect the Company’s business, results of operations, cash flows and financial condition.
−Removed: In periods when the capital and credit markets experience significant volatility, the amounts, sources and cost of capital available to the Company may be adversely affected.
+Added: Capital and credit market conditions and volatility may affect the Company’s access to sources of capital and/or the cost of capital, which could negatively affect the Company’s business, stock price, results of operations, cash flows and financial condition.
Our current balance sheet, the debt capacity available on the unsecured line of credit with a diversified bank group, access to the public and private placement debt markets and secured debt financing providers such as Fannie Mae and Freddie Mac provide some insulation from volatile capital markets.
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In general, to the extent that the Company’s access to capital and credit is at a higher cost than the Company has experienced in recent years (reflected in higher interest rates for debt financing or a lower stock price for equity financing without a corresponding change to investment cap rates) the Company’s ability to make acquisitions, develop or redevelop communities, obtain new financing, and refinance existing borrowing at competitive rates could be adversely affected, which would impact the Company's financial standing and related credit rating.
−Removed: In addition, if our ability to obtain financing is adversely affected, we may be unable to satisfy scheduled maturities on existing financing through other sources of our liquidity, which, in the case of secured financings, could result in lender foreclosure on the apartment communities securing such debt.
+Added: In addition, if our ability to obtain financing is adversely affected, the Company’s stock price may be adversely affected, and we may be unable to satisfy scheduled maturities on existing financing through other sources of our liquidity, which, in the case of secured financings, could result in lender foreclosure on the apartment communities securing such debt.
Debt financing has inherent risks.
−Removed: At December 31, 2020, the Company had approximately $6.3 billion of indebtedness (including $775.1 million of variable rate indebtedness, of which $175.0 million is subject to an interest rate swap effectively fixing the interest rate on $175.0 million in debt).
−Removed: The Company is subject to the risks normally associated with debt financing, including, among others, the following:
−Removed: • cash flow may not be sufficient to meet required payments of principal and interest;
−Removed: • inability to refinance maturing indebtedness on encumbered apartment communities;
−Removed: • inability to comply with debt covenants could trigger cash management provisions limiting our ability to control cash flows, cause defaults, or an acceleration of maturity dates;
−Removed: • paying debt before the scheduled maturity date could result in prepayment penalties.
−Removed: The Company may not be able to renew, repay or refinance its indebtedness when due or may be required to refinance its indebtedness at higher interest rates or on terms that may not be as favorable as the terms of existing indebtedness.
−Removed: Company is unable to refinance its indebtedness on acceptable terms, or at all, the Company might be forced to dispose of one or more of its properties on disadvantageous terms, which might result in losses.
−Removed: Such losses could have an adverse effect on the Company and its ability to make distributions to Essex's stockholders or the Operating Partnership's unitholders and pay amounts due on its debt.
−Removed: Debt financing of communities may result in insufficient cash flow to service debt and fund distributions.
+Added: At December 31, 2021, the Company had approximately $6.3 billion of indebtedness (including $565.6 million of variable rate indebtedness).
Where appropriate, the Company intends to continue to use leverage to increase the rate of return on the Company’s investments and to provide for additional investments that the Company could not otherwise make.
−Removed: There is a risk that the cash flow from the communities will be insufficient to meet both debt payment obligations and the REIT distribution requirements of the Code.
+Added: The Company is subject to the risks normally associated with debt financing, including, but not limited to cash flow may not be sufficient to meet required payments of principal and interest and the REIT distribution requirements of the Code;
+Added: inability to renew, repay, or refinance maturing indebtedness on encumbered apartment communities on favorable terms or at all, possibly requiring the Company to sell a property or properties on disadvantageous terms;
+Added: inability to comply with debt covenants could trigger cash management provisions limiting our ability to control cash flows, cause defaults, or an acceleration of maturity dates;
+Added: and paying debt before the scheduled maturity date could result in prepayment penalties.
+Added: Any of these risks might result in losses that could have an adverse effect on the Company and its ability to make distributions to
+Added: Essex's stockholders or the Operating Partnership's unitholders and pay amounts due on its debt.
Our ability to make payments on and to refinance our indebtedness and to fund our operations, working capital and capital expenditures, depends on our ability to generate cash in the future.
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The indentures governing our notes and other financing arrangements contain restrictive covenants that limit our operating flexibility.
−Removed: The indentures that govern our publicly registered notes contain financial and operating covenants that, among other things, restrict our ability to take specific actions, even if we believe them to be in our best interests, including restrictions on our ability to:
−Removed: • consummate a merger, consolidation or sale of all or substantially all of our assets;
−Removed: • incur additional secured and unsecured indebtedness.
+Added: The indentures that govern our publicly registered notes contain financial and operating covenants that, among other things, restrict our ability to take specific actions, even if we believe them to be in our best interests, including restrictions on our ability to consummate a merger, consolidation or sale of all or substantially all of our assets;
+Added: and incur additional secured and unsecured indebtedness.
The instruments governing our other unsecured indebtedness require us to meet specified financial covenants, including covenants relating to net worth, fixed charge coverage, debt service coverage, the amounts of total indebtedness and secured indebtedness, leverage and certain investment limitations.
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The interest rate on certain of the Company’s secured and unsecured debt obligations, including the Company’s two unsecured lines of credit, is based on the LIBOR.
−Removed: In July 2017, the United Kingdom regulator that regulates
−Removed: LIBOR announced its intention to phase out LIBOR rates by the end of 2021.
−Removed: On November 30, 2020, the United Kingdom regulator announced its intentions, subject to confirmation following an early December consultation, to cease the publication of the one week and two month U.S.
+Added: In July 2017, the United Kingdom regulator that regulates LIBOR announced its intention to phase out LIBOR rates by the end of 2021.
+Added: On March 5, 2021, the United Kingdom regulator confirmed its intentions to cease the publication of the one week and two month U.S.
dollar LIBOR immediately following the December 31, 2021 publications, and the remaining U.S.
3 unchanged sentences
If a published U.S.
−Removed: dollar LIBOR rate is unavailable after 2021, the interest rates on certain of the Company’s debt obligations could change.
−Removed: Uncertainty as to the nature of such potential changes, phase out, alternative reference rates or other reforms may materially adversely affect the trading market for LIBOR-based securities.
+Added: dollar LIBOR rate is unavailable after June 2023, the interest rates on certain of the Company’s debt obligations could change.
+Added: Uncertainty as to the nature of such potential changes, phase out, alternative reference rates or other reforms may adversely affect the trading market for LIBOR-based securities.
Any of these proposals or consequences could have a material adverse effect on our financing costs, and as a result, our financial condition and results of operations.
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The Company plans to manage its operations to maintain its investment grade credit rating with a capital structure consistent with its current profile, but there can be no assurance that it will be able to maintain its current credit ratings.
−Removed: Any downgrades in terms of ratings or outlook by any of the rating agencies could have a material adverse impact on the Company’s cost and availability of capital, which could in turn have a material adverse impact on its financial condition, results of operations and liquidity.
+Added: Any downgrades in terms of ratings or outlook by any of the rating agencies could have a material adverse impact on the Company’s cost and availability of capital, which could in turn have a material adverse impact on its financial condition, results of operations and liquidity, as well as the Company's stock price.
Changes in the Company’s financing policy may lead to higher levels of indebtedness.
5 unchanged sentences
If the Company or any of its subsidiaries defaults on an obligation to repay outstanding indebtedness when due, the default could trigger a cross-default or cross-acceleration under other indebtedness.
−Removed: If the Company or any of its subsidiaries defaults on its obligations to repay outstanding indebtedness, the default could cause a cross-default or cross-acceleration under other indebtedness.
A default under the agreements governing the Company’s or its subsidiaries’ indebtedness, including a default under mortgage indebtedness, lines of credit, bank term loan, or the indenture for the Company’s outstanding senior notes, that is not waived by the required lenders or holders of outstanding notes, could trigger cross-default or cross-acceleration provisions under one or more agreements governing the Company’s indebtedness, which could cause an immediate default or allow the lenders to declare all funds borrowed thereunder to be due and payable.
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Risks Related to Personnel
−Removed: The Company depends on its key personnel, whose continued service is not guaranteed.
+Added: The Company depends on its personnel, whose continued service is not guaranteed.
The Company’s success depends on its ability to attract, train and retain executive officers, senior officers and company managers.
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While the Company engages in regular succession planning for key positions, the Company’s plans may be impacted and therefore adjusted due to the departure of any key personnel.
+Added: Additionally, the Company must continue to recruit and train qualified operational staff at its properties.
+Added: While the Company offers competitive pay and benefits, it may be difficult to appropriately staff our properties in a highly competitive job market.
The Company’s Chairman is involved in other real estate activities and investments, which may lead to conflicts of interest.
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Marcus owns interests in various other real estate-related businesses and investments.
−Removed: He is the Chairman of the Marcus & Millichap Company ("MMC"), which is a parent company of a diversified group of real estate service, investment and development firms.
+Added: He is the Chairman of the Marcus & Millichap Company ("MMC"), which is a parent company of
+Added: a diversified group of real estate service, investment and development firms.
Marcus is also the Co-Chairman of Marcus & Millichap, Inc.
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As of December 31, 2021, Mr.
−Removed: Marcus wholly or partially owned approximately 1.9 million shares of common stock (including shares issuable upon exchange of limited partnership interests in the Operating Partnership and certain other partnerships, indirectly held shares of common stock and assuming exercise of all vested options).
+Added: Marcus wholly or partially owned approximately 1.9 million shares of common stock (including shares issuable upon exchange of limited partnership interests in the Operating Partnership and certain other partnerships, indirectly held shares of common stock).
Marcus currently does not have majority control over the Company.
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Risks Related to Taxes and Status as a REIT
−Removed: Failure to generate sufficient revenue or other liquidity needs and impacts of economic conditions could limit cash flow available for dividend distributions, as well as the form and timing of such distributions, to Essex's stockholders or the Operating Partnership's unitholders.
−Removed: A decrease in rental revenue, or liquidity needs such as the repayment of indebtedness or
−Removed: funding of our acquisition and development activities, could have an adverse effect on our ability to pay distributions to Essex's stockholders or the Operating Partnership's unitholders.
+Added: Failure to generate sufficient rental revenue or other liquidity needs and impacts of economic conditions could limit cash flow available for dividend distributions, as well as the form and timing of such distributions, to Essex's stockholders or the Operating Partnership's unitholders.
Significant expenditures associated with each community such as debt service payments, if any, real estate taxes, insurance and maintenance costs are generally not reduced when circumstances cause a reduction in income from a community.
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Essex may choose to pay dividends in its own stock, in which case stockholders may be required to pay tax in excess of the cash they receive.
−Removed: We may distribute taxable dividends that are payable in part in Essex's stock.
−Removed: Taxable stockholders receiving such dividends will be required to include the full amount of the dividend as income to the extent of our current and accumulated earnings and profits for federal income tax purposes.
−Removed: As a result, a U.S.
−Removed: stockholder may be required to pay tax with respect to such dividends in excess of the cash received.
stockholder sells the stock it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our stock at the time of the sale.
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tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock.
−Removed: In addition, the trading price of Essex's stock would experience downward pressure if a significant number of our stockholders sell shares of Essex's stock in order to pay taxes owed on dividends.
+Added: In addition, the trading price of
+Added: Essex's stock would experience downward pressure if a significant number of our stockholders sell shares of Essex's stock in order to pay taxes owed on dividends.
The Maryland Business Combination Act may delay, defer or prevent a transaction or change in control of the Company that might involve a premium price for the Company's stock or otherwise be in the best interest of our stockholders.
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The law also requires a two supermajority stockholder votes for such transactions.
−Removed: This means that the transaction must be approved by at least:
−Removed: • 80% of the votes entitled to be cast by holders of outstanding voting shares;
−Removed: • two-thirds of the votes entitled to be cast by holders of outstanding voting shares other than shares held by the interested stockholder with whom the business combination is to be effected.
+Added: This means that the transaction must be approved by at least 80% of the votes entitled to be cast by holders of outstanding voting shares;
+Added: and two-thirds of the votes entitled to be cast by holders of outstanding voting shares other than shares held by the interested stockholder with whom the business combination is to be effected.
The statute permits various exemptions from its provisions, including business combinations that are exempted by the board of directors prior to the time that the interested stockholder becomes an interested stockholder.
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The Company may establish one or more classes or series of stock that could delay, defer or prevent a transaction or a change in control.
−Removed: transaction might involve a premium price for the Company’s stock or otherwise be in the best interests of the holders of common stock.
+Added: Such a transaction might involve a premium price for the Company’s stock or otherwise be in the best interests of the holders of common stock.
Also, such a class or series of stock could have dividend, voting or other rights that could adversely affect the interests of holders of common stock.
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Moreover, any such amendment or elimination of such provision of the Bylaws may result in the application of the control share provisions of the Maryland General Corporation Law not only to control shares which may be acquired in the future, but also to control shares previously acquired.
−Removed: If the provisions of the Bylaws are amended or eliminated, the control share provisions of the Maryland General Corporation Law could delay, defer or prevent a transaction or change in control that might involve a premium price for the stock or otherwise be in the best interests of the Company’s stockholders.
+Added: If the provisions of the Bylaws are amended or eliminated, the control share provisions of the Maryland General Corporation Law could delay, defer or
+Added: prevent a transaction or change in control that might involve a premium price for the stock or otherwise be in the best interests of the Company’s stockholders.
The Company’s Charter and Bylaws as well as Maryland General Corporation Law also contain other provisions that may impede various actions by stockholders without approval of Essex’s Board of Directors, and that in turn may delay, defer or prevent a transaction, including a change in control that might involve a premium price for the stock or otherwise be in the best interests of the Company’s stockholders.
−Removed: Those provisions include, among others:
−Removed: • directors may be removed by stockholders, without cause, only upon the affirmative vote of at least two-thirds of the votes entitled to be cast generally in the election of the directors, and with cause, only upon the affirmative vote of a majority of the votes entitled to be cast generally in the election of the directors;
+Added: Those provisions include, among others, directors may be removed by stockholders, without cause, only upon the affirmative vote of at least two-thirds of the votes entitled to be cast generally in the election of the directors, and with cause, only upon the affirmative vote of a majority of the votes entitled to be cast generally in the election of the directors;
Essex’s Board of Directors can fix the number of directors and fill vacant directorships upon the vote of a majority of the directors and Essex's Board of Directors can classify the board such that the entire board is not up for re-election annually;
stockholders must give advance notice to nominate directors or propose business for consideration at a stockholders’ meeting;
−Removed: • for stockholders to call a special meeting, the meeting must be requested by not less than a majority of all the votes entitled to be cast at the meeting.
+Added: and for stockholders to call a special meeting, the meeting must be requested by not less than a majority of all the votes entitled to be cast at the meeting.
Loss of the Company's REIT status would have significant adverse consequences to the Company and the value of the Company's common stock .
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The Company’s qualification as a REIT requires it to satisfy various annual and quarterly requirements, including income, asset and distribution tests, established under highly technical and complex Code provisions for which there are only limited judicial or administrative interpretations.
−Removed: For example, in order to qualify as a REIT, at least 95% of our gross income in each year must be derived from qualifying sources, and we must pay distributions to stockholders aggregating annually at least 90% of our REIT taxable income (excluding net capital gains).
Although the Company intends that its current organization and method of operation enable it to qualify as a REIT, it cannot assure you that it so qualifies or that it will be able to remain so qualified in the future.
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To qualify as a REIT, we must continually satisfy tests concerning, among other things, the nature and diversification of our assets, the sources of our income and the amounts we distribute to our stockholders.
−Removed: We may be required to liquidate or forgo otherwise attractive investments in order to satisfy the asset and income tests or to qualify under certain
−Removed: statutory relief provisions.
+Added: We may be required to liquidate or forgo otherwise attractive investments in order to satisfy the asset and income tests or to qualify under certain statutory relief provisions.
We also may be required to make distributions to stockholders at disadvantageous times or when we do not have funds readily available for distribution.
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Also, the law relating to the tax treatment of other entities, or an investment in other entities, could change, making an investment in such other entities more attractive relative to an investment in a REIT.
−Removed: The Company’s ownership of TRSs is subject to certain restrictions, and it will be required to pay a 100% penalty tax on certain income or deductions if transactions with the Company’s TRSs are not conducted on arm’s length terms.
+Added: The Company’s ownership of taxable REIT subsidiaries ("TRSs") is subject to certain restrictions, and it will be required to pay a 100% penalty tax on certain income or deductions if transactions with the Company’s TRSs are not conducted on arm’s length terms.
The Company has established several TRSs.
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federal income tax on their taxable income as a regular C corporation.
−Removed: While the Company will attempt to ensure that its dealings with its TRSs do not adversely affect its REIT qualification, it cannot provide assurances that it will successfully achieve that result.
+Added: While the Company will attempt to ensure that its dealings with its TRSs do not adversely
+Added: affect its REIT qualification, it cannot provide assurances that it will successfully achieve that result.
Furthermore, the Company may be subject to a 100% penalty tax, to the extent dealings between the Company and its TRSs are not deemed to be arm’s length in nature.
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From time to time, the Company may transfer or otherwise dispose of some of its properties.
−Removed: Under the Code, unless certain exceptions apply, any gain resulting from transfers of properties that the Company holds as inventory or primarily for sale to customers in the ordinary course of business could be treated as income from a prohibited transaction subject to a 100% penalty tax.
+Added: Under the Code, unless certain exceptions apply, any gain resulting from transfers of properties that the Company holds as inventory or primarily for sale to customers in the ordinary course of business could be treated as income from a prohibited transaction subject to a 100% penalty tax from the gain on the sale of the community, which could potentially adversely impact our status as a REIT unless we own the community through one of our TRSs.
Since the Company acquires properties for investment purposes, it does not believe that its occasional transfers or disposals of property should be treated as prohibited transactions.
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Although this deduction reduces the effective tax rate applicable to certain dividends paid by REITs, such tax rate is still higher than the tax rate applicable to regular corporate qualified dividends.
−Removed: may cause investors to view REIT investments as less attractive than investments in non-REIT corporations, which in turn may adversely affect the value of stock in REITs, including the Company's stock.
+Added: This may cause investors to view REIT investments as less attractive than investments in non-REIT corporations, which in turn may adversely affect the value of stock in REITs, including the Company's stock.
We may face risks in connection with Section 1031 exchanges.
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Under current federal partnership tax audit rules, subject to certain exceptions, any audit adjustment to items of income, gain, loss, deduction, or credit of a partnership (and a partner’s allocable share thereof) is determined, and taxes, interest, and penalties attributable thereto are assessed and collected, at the partnership level.
−Removed: Unless the partnership makes an election or takes certain steps to require the partners to pay their tax on their allocable shares of the adjustment, it is possible that partnerships in which we directly or indirectly invest would be required to pay additional taxes, interest, and penalties as a result of an audit adjustment.
+Added: Unless the partnership makes an election or takes certain steps to require the partners to pay their tax on their allocable shares of the adjustment, it is possible that partnerships in which we directly or indirectly invest would be
+Added: required to pay additional taxes, interest, and penalties as a result of an audit adjustment.
We, as a direct or indirect partner of these partnerships, could be required to bear the economic burden of those taxes, interest, and penalties even though Essex, as a REIT, may not otherwise have been required to pay additional corporate‑level taxes had we owned the assets of the partnership directly.
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We may from time to time be subject to litigation, which could have a material adverse effect on our business, financial condition and results of operations.
−Removed: We may be a party to various claims and routine litigation arising in the ordinary course of business.
Some of these claims may result in defense costs, settlements, fines or judgments against us, some of which are not, or cannot be, covered by insurance.
Payment of any such costs, settlements, fines or judgments that are not insured could have an adverse impact on our financial position and results of operations.
−Removed: In addition, certain litigation or the resolution of certain litigation may affect the availability or cost of some of our insurance coverage, which could adversely impact our results of operations and cash flow, expose us to increased risks that would be uninsured, or adversely impact our ability to attract officers and directors.
+Added: In addition, certain litigation or the resolution of certain litigation may affect the availability or cost of some of our insurance coverage, which could adversely impact our reputation, our results of operations and cash flow, expose us to increased risks that would be uninsured.
Rising interest rates may affect the Company’s costs of capital and financing activities and results of operation and otherwise adversely affect the market price of our common stock.
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In the event that the volatility of the financial markets adversely affects these financial institutions or counterparties, we or other parties to the transactions with us may be unable to complete transactions as intended, which could adversely affect our business and results of operations.
−Removed: Additionally, certain of our tax-exempt bond
−Removed: financing documents require us to obtain a guarantee from a financial institution of payment of the principal and interest on the bonds.
+Added: Additionally, certain of our tax-exempt bond financing documents require us to obtain a guarantee from a financial institution of payment of the principal and interest on the bonds.
The guarantee may take the form of a letter of credit, surety bond, guarantee agreement or other additional collateral.
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• changes in the Company’s funds from operations or earnings estimates;
−Removed: • issuances of common stock, preferred stock or convertible debt securities, or the perception that such issuances might occur;
• publication of research reports about the Company or the real estate industry;
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• a change in analyst ratings or the Company’s credit ratings;
−Removed: • terrorist activity adversely affecting the markets in which the Company’s securities trade, possibly increasing market volatility and causing erosion of business and consumer confidence and spending;
+Added: • terrorist activity, armed conflict or geopolitical impacts adversely affecting the markets in which the Company’s securities trade, possibly increasing market volatility and causing erosion of business and consumer confidence and spending;
• hazards such as natural disasters like earthquakes, wildfires, landslides or flooding;
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• changes in public policy and tax law;
−Removed: • the issuance of ratings and scores related to corporate social responsibility ("CSR") and environmental, social and governance ("ESG") reports and disclosures.
+Added: • those other factors discussed in this Item 1A.
Many of the factors listed above are beyond the Company’s control.
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The Company’s future issuances of common stock, preferred stock or convertible debt securities could be dilutive to current stockholders and adversely affect the market price of the Company’s common stock.
−Removed: In order to finance the Company’s acquisition and development activities, the Company could issue and sell common stock, preferred stock and convertible debt securities.
−Removed: The Company may in the future sell further shares of common stock, including pursuant to its equity distribution program with Citigroup Global Markets Inc., Barclays Capital Inc., BNP Paribas Securities Corp., BTIG, LLC, Capital One Securities, Inc., Jefferies LLC, J.P.
−Removed: Morgan Securities LLC, Mizuho Securities USA LLC, MUFG Securities Americas Inc., and Scotia Capital (USA) Inc.
+Added: In order to finance the Company’s acquisition and development activities, the Company could issue and sell common stock, preferred stock and convertible debt securities, including pursuant to its equity distribution program.
In 2021, the Company filed a new shelf registration statement with the SEC, allowing the Company to sell an undetermined number of equity and debt securities as defined in the prospectus.
Future sales of common stock, preferred stock or convertible debt securities may dilute stockholder ownership in the Company and could adversely affect the market price of the common stock.
+Added: Additionally, the perception that such issuances might occur could adversely affect the market price of the common stock.
Stockholders have limited control over changes in our policies and operations.
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Our score or rating by proxy advisory firms or other corporate governance consultants advising institutional investors could have an adverse effect on the perception of our corporate governance, and thereby negatively impact the market price of our common stock.
−Removed: Various proxy advisory firms and other corporate governance consultants advising institutional investors
−Removed: provide scores or ratings of our governance measures, nominees for election as directors, executive compensation practices, ESG or sustainability matters, and other matters that may be submitted to stockholders for consideration at our annual meetings.
−Removed: From time to time certain matters that we propose for approval may not receive a favorable score or rating, or may result in a negative score or rating or recommendation against the nominee or matter proposed.
+Added: Various proxy advisory firms and other corporate governance consultants advising institutional investors provide scores or ratings of our governance measures, nominees for election as directors, executive compensation practices, environmental, social and governance (“ESG”) matters, and other matters that may be submitted to stockholders for consideration at our annual meetings.
+Added: From time to time certain matters that we propose for approval may not receive a favorable score or rating, or may result in a recommendation against the nominee or matter proposed.
These unfavorable scores or ratings may lead to rejected proposals or a loss of stockholder confidence in our corporate governance measures, which could adversely affect the market price of our common stock.
−Removed: We periodically review our corporate governance measures, including our ESG business practices, and consider implementing changes that we believe are responsive to concerns that have been raised, but there may be times where we decide not to implement changes or other measures recommended by proxy advisors or other corporate governance consultants that we believe are contrary to the best interests of our stockholders, notwithstanding the adverse effect this decision may have on our scores or ratings or the perception of our corporate governance, thereby negatively impacting the market price of our common stock.
+Added: We continuously review our corporate governance measures, including our ESG business practices, and consider implementing changes that we believe are responsive to concerns that have been raised, but there may be times where we decide not to implement recommendations by proxy advisors or other corporate governance consultants that we believe are contrary to the best interests of our stockholders, notwithstanding the adverse effect this decision may have on our scores or ratings or the perception of our corporate governance, thereby negatively impacting the market price of our common stock.
Corporate responsibility, specifically related to ESG factors, may impose additional costs and expose us to new risks.
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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.