What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2023-02-14 compared with 2022-02-15 · 76 added, 84 removed, 184 unchanged (47% of the section changed)

4 unchanged sentences

This impact could be materially adverse to the extent that the current COVID-19 pandemic, or future pandemics, cause tenants to be unable to pay their rent or reduce the demand for commercial real estate, or cause other impacts described below.

The COVID-19 pandemic in many countries, including the United States, continues to adversely impact global economic activity and has contributed to significant volatility and negative pressure in financial markets.

The global impact of the pandemic has been evolving and many countries, including the United States, have reacted by instituting a range of evolving measures designed to contain the spread of COVID-19 and mitigate its public health effects.

cities and states, including cities and states where our properties are located, have also instituted quarantines, restrictions on travel, restrictions on types of business that may continue to operate, and/or restrictions on types of construction projects that may continue.

There can be no assurances as to the length of time any such continuing restrictions will remain in place.

The COVID-19 pandemic has adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets.

Any ongoing negative economic impacts arising from the pandemic or any prolongation or worsening of the pandemic, including as a result of additional waves or variants of the COVID-19 disease, or the emergence of another future pandemic, could adversely affect us and/or our tenants due to, among other factors:

1 unchanged sentence

● difficulty accessing debt and equity capital on attractive terms, or at all-a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our and our tenants' ability to access capital necessary to fund business operations or replace or renew maturing liabilities on a timely basis on attractive terms, and may adversely affect the valuation of financial assets and liabilities, any of which could affect our ability to meet liquidity and capital expenditure requirements or have a material adverse effect on our business, financial condition, results of operations and cash flows;

● an inability to operate in affected areas, or delays in the supply of products or services from the vendors that are needed to operate effectively, including without limitation, the ability to complete construction on time and on budget;

● a reduction in demand for oil as a result of decreased economic activity and travel restrictions which, if sustained, could have an adverse impact on occupancy and rental rates in the markets where we own properties, including energy-influenced markets such as Dallas, Denver and Houston, where we have a significant concentration of properties;

● delays in the supply of products or services from the vendors that are needed to operate effectively, including without limitation, the ability to complete construction on time and on budget;

● a reduction in demand for oil as a result of decreased economic activity which, if sustained, could have an adverse impact on occupancy and rental rates in the markets where we own properties, including energy-influenced markets such as Dallas, Denver and Houston, where we have a significant concentration of properties;

● tenants’ inability to pay rent on their leases or our inability to re-lease space that is or becomes vacant, which inability, if extreme, could cause us to:

(i) no longer be able to maintain our current level of dividends in order to preserve liquidity and (ii) be unable to meet our debt obligations to lenders, and/or be unable to meet debt covenants, either of which could trigger a default or defaults and cause us to have to sell properties or refinance debt on unattractive terms.

The COVID-19 pandemic has adversely impacted our properties and operating results and will continue to do so to the extent it reduces occupancy, increases the cost of operation, results in limited hours, results in decreased rental receipts, results in increased borrowings or necessitates the closure of such properties.

In addition, quarantines, states of emergencies and other measures taken to curb the spread of COVID-19 may negatively impact the ability of our properties to continue to obtain necessary goods and services or provide adequate staffing, which may also adversely affect our properties and operating results.

Some of our existing tenants and potential tenants operate in industries that are being adversely affected by the disruption to business caused by this pandemic.

Tenants have been, and may in the future be, required to suspend operations at our properties for extended periods of time.

For example, some of our retail tenants have been, and may continue to be, closed for an extended period of time or only open certain hours of the day.

Some of our tenants have requested rent concessions and more tenants may request rent concessions or may not pay rent in the future.

This could lead to increased rent delinquencies and/or defaults under leases, a lower demand for rentable space leading to increased concessions or lower occupancy, increased tenant improvement capital expenditures, or reduced rental rates to maintain occupancies.

(i) no longer be able to maintain the payment of dividends in order to preserve liquidity and (ii) be unable to meet our debt obligations to lenders, and/or be unable to meet debt covenants, either of which could trigger a default or defaults and cause us to have to sell properties or refinance debt on unattractive terms.

The COVID-19 pandemic has adversely impacted our properties and operating results and will continue to do so to the extent it reduces occupancy, increases the cost of operation, results in decreased rental receipts or results in increased borrowings.

Some of our existing tenants and potential tenants operate in businesses and industries that continue to be adversely affected by the disruption to business caused by this pandemic.

Some of our existing tenants and potential tenants have elected to, or been required to, and may in the future elect to, or be required to, reduce or suspend operations for extended periods of time, including as a result of work-from-home policies.

Some of our tenants have requested rent

concessions and more tenants may request rent concessions or may not pay rent in the future.

These situations could lead to increased rent delinquencies and/or defaults under leases, a lower demand for rentable space leading to increased concessions or lower occupancy, increased tenant improvement capital expenditures, or reduced rental rates to maintain occupancies.

For example, on December 21, 2020, the parent company of a tenant that leases approximately 130,000 square feet filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code, resulting in a writeoff charge of $3.1 million.

Our operations could be materially negatively affected if the economic downturn is prolonged, which could adversely affect our operating results, ability to pay dividends, our ability to repay or refinance our existing indebtedness, and the price of our common stock.

The continuing evolution of this situation precludes any prediction as to the ultimate impact of the COVID-19 pandemic.

Our operations could be materially negatively affected if the economic downturn is prolonged, which could adversely affect our operating results, our ability to pay dividends, our ability to repay or refinance our existing indebtedness, and the price of our common stock.

The full extent of the impact and effects of the COVID-19 pandemic on our future financial performance, as a whole, and, specifically, on our real estate property holdings, are uncertain at this time.

The impact will depend on the availability, administration rates and effectiveness of vaccines and therapeutics and future developments, and other factors that are generally beyond our knowledge or control, including the severity and containment of certain COVID-19 variants, the continued duration and severity of the pandemic, and how quickly and to what extent normal economic and operating conditions can resume.

COVID-19 and the current financial, economic and capital markets environment, and future developments in these and other areas, present uncertainty and risk with respect to our performance, financial condition, results of operations, cash flows, and the price of our common stock .

The impact will depend on future developments that are generally beyond our knowledge or control, including the severity and containment of certain COVID-19 variants and the continued duration and severity of the pandemic COVID-19 and the current financial, economic and capital markets environment, and future developments in these and other areas, present uncertainty and risk with respect to our performance, financial condition, results of operations, cash flows, and the price of our common stock .

Risks Related to our Indebtedness

If a Sponsored REIT defaults on a Sponsored REIT Loan, we may be required to request additional draws, keep balances outstanding on our existing debt, exercise any maturity date extension rights, seek new debt or use our cash balance to repay our existing debt, which may reduce cash available for distribution to our stockholders or for other corporate purposes.

From time-to-time, we may make secured loans to Sponsored REITs in the form of mortgage loans or revolving lines of credit to fund construction costs, capital expenditures, leasing costs and for other purposes.

We refer to these loans as Sponsored REIT Loans.

We anticipate that each Sponsored REIT Loan will be repaid at maturity or earlier from long term financing of the property securing the loan, cash flows from that underlying property or some other capital event.

If a Sponsored REIT defaults on a Sponsored REIT Loan, the Sponsored REIT could be unable to fully repay the Sponsored REIT Loan and we may have to satisfy our obligations under our existing debt through other means, including without limitation, requesting additional draws, keeping balances outstanding, exercising any maturity date extension rights, seeking new debt, and/or using our cash balance.

If our one remaining Sponsored REIT defaults on its Sponsored REIT Loan, we may be required to request additional draws, keep balances outstanding on our existing debt, exercise any maturity date extension rights, seek new debt or use our cash balance to repay our existing debt, which may reduce cash available for distribution to our stockholders or for other corporate purposes.

We have one remaining secured loan to a Sponsored REIT in the form of a mortgage loan, which we refer to as the Sponsored REIT Loan.

We anticipate that the Sponsored REIT Loan will be repaid through cash flow from property operations or sale of the underlying property, although the actual amount and timing of any repayment is uncertain and will likely depend on prevailing market conditions at the time of any such sale.

If the Sponsored REIT defaults on the Sponsored REIT Loan, the Sponsored REIT could be unable to fully repay the Sponsored REIT Loan and we may have to satisfy our obligations under our existing debt through other means, including without limitation, to the extent permitted, requesting additional draws, keeping balances outstanding, exercising any maturity date extension rights, seeking new debt, and/or using our cash balance.

If that happens, we may have less cash available for distribution to our stockholders or for other corporate purposes.

Our operating results and financial condition could be adversely affected if we are unable to refinance the BofA Revolver, the BofA Term Loan, the BMO Term Loan, the Series A Notes or the Series B Notes.

There can be no assurance that we will be able to refinance the BofA Revolver, the BofA Term Loan, the BMO Term Loan, the Series A Notes or the Series B Notes (each as defined in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations) upon their respective maturities, or that any such refinancings would be on terms as favorable as the terms of the BofA Revolver, the BofA Term Loan, the BMO Term

Loan, the Series A Notes, or the Series B Notes, or that we will be able to otherwise obtain funds by selling assets or raising equity to make required payments on the BofA Revolver, the BofA Term Loan, the BMO Term Loan, the Series A Notes or the Series B Notes.

If we are unable to refinance the BofA Revolver, the BofA Term Loan, the BMO Term Loan, the Series A Notes or the Series B Notes at maturity or meet our payment obligations, the amount of our distributable cash flow and our financial condition would be adversely affected.

Failure to comply with covenants in the documents evidencing the BofA Revolver, the BofA Term Loan, the BMO Term Loan, the Series A Notes or the Series B Notes could adversely affect our financial condition.

The documents evidencing the BofA Revolver, the BofA Term Loan, the BMO Term Loan, the Series A Notes and the Series B Notes contain customary affirmative and negative covenants, including limitations with respect to indebtedness, liens, investments, mergers and acquisitions, disposition of assets, changes in business, certain restricted payments, the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates.

In addition, subject to certain tax-related exceptions, the documents evidencing the BofA Revolver restrict our ability to make dividend distributions that exceed 95% of our good faith estimate of projected funds from operations for the applicable fiscal year.

The documents evidencing the BofA Revolver, the BofA Term Loan, the BMO Term Loan, the Series A Notes and the Series B Notes contain some or all of the following financial covenants:

Our operating results and financial condition could be adversely affected if we are unable to refinance the BofA Revolver, the BMO Term Loan, the Series A Notes or the Series B Notes.

There can be no assurance that we will be able to refinance the BofA Revolver, the BMO Term Loan, the Series A Notes or the Series B Notes (each as defined in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations) upon their respective maturities, or that any such refinancings would be on terms as favorable as the terms of the BofA Revolver, the BMO Term Loan, the Series A Notes, or the Series B Notes, or that we will be able to otherwise obtain funds by selling assets or raising equity to make required payments on the BofA Revolver, the BMO Term Loan, the Series A Notes or the Series B Notes.

If we are unable to refinance the BofA Revolver, the BMO Term Loan, the Series A Notes or the Series B Notes at maturity or meet our payment obligations, the amount of our distributable cash flow and our financial condition would be adversely affected.

Failure to comply with covenants in the documents evidencing the BofA Revolver, the BMO Term Loan, the Series A Notes or the Series B Notes could adversely affect our financial condition.

The documents evidencing the BofA Revolver, the BMO Term Loan, the Series A Notes and the Series B Notes contain customary affirmative and negative covenants, including some or all of the following:

limitations with respect to indebtedness, liens, investments, mergers and acquisitions, disposition of assets, changes in business, certain restricted payments, use of proceeds, the amount of cash and cash equivalents that we can have on our balance sheet after giving effect to an advance, repurchases and redemptions of our common stock, going concern qualifications to our financial

statements, and the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates.

In addition, subject to certain tax-related exceptions, the documents evidencing the BofA Revolver and the BMO Term Loan restrict our ability to make quarterly dividend distributions that exceed $0.01 per share of our common stock.

The documents evidencing the BofA Revolver, the BMO Term Loan, the Series A Notes and the Series B Notes contain some or all of the following financial covenants:

minimum tangible net worth;

1 unchanged sentence

maximum secured leverage ratio;

maximum secured recourse leverage ratio;

minimum fixed charge coverage ratio;

1 unchanged sentence

and minimum unsecured interest coverage.

Our continued ability to borrow under the BofA Revolver and our continued general compliance with the BofA Revolver, the BofA Term Loan, the BMO Term Loan, the Series A Notes and the Series B Notes is subject to ongoing compliance with our financial and other covenants.

Failure to comply with such covenants could cause a default under the BofA Revolver, the BofA Term Loan, the BMO Term Loan, the Series A Notes or the Series B Notes, and we may then be required to repay them with capital from other sources.

Our continued ability to borrow under the BofA Revolver and our continued general compliance with the BofA Revolver, the BMO Term Loan, the Series A Notes and the Series B Notes is subject to ongoing compliance with our financial and other covenants.

Failure to comply with such covenants could cause a default under the BofA Revolver, the BMO Term Loan, the Series A Notes or the Series B Notes, and we may then be required to repay them with capital from other sources.

Under those circumstances, other sources of capital may not be available to us, or be available only on unattractive terms.

We may use the proceeds of the BofA Revolver, the BofA Term Loan, and the BMO Term Loan to finance the acquisition of real properties and for other permitted investments, to finance investments associated with Sponsored REITs, to refinance or retire indebtedness and for working capital and other general business purposes, all to the extent permitted under the applicable documents.

If we breach covenants in the documents evidencing the BofA Revolver, the BofA Term Loan, the BMO Term Loan, the Series A Notes or the Series B Notes, the lenders can declare a default.

A default under documents evidencing the BofA Revolver, the BofA Term Loan, the BMO Term Loan, the Series A Notes, or the Series B Notes could result in difficulty financing growth in our business and could also result in a reduction in the cash available for distribution to our stockholders or for other corporate purposes.

A default under documents evidencing the BofA Revolver, the BofA Term Loan, the BMO Term Loan, the Series A Notes or the Series B Notes could materially and adversely affect our financial condition and results of operations.

We may continue to borrow under the BofA Revolver for permitted investments and for working capital and other general business purposes, including for building improvements, tenant improvements and leasing commissions, all to the extent permitted under the applicable documents.

If we breach covenants in the documents evidencing the BofA Revolver, the BMO Term Loan, the Series A Notes or the Series B Notes, the lenders can declare a default.

A default under documents evidencing the BofA Revolver, the BMO Term Loan, the Series A Notes, or the Series B Notes could result in difficulty financing growth in our business and could also result in a reduction in the cash available for distribution to our stockholders or for other corporate purposes.

A default under documents evidencing the BofA Revolver, the BMO Term Loan, the Series A Notes or the Series B Notes could materially and adversely affect our financial condition and results of operations.

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

As of December 31, 2021 and January 10, 2022, we had no borrowings under the Former BofA Revolver (as defined in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations).

On January 10, 2022, we terminated the Former BofA Revolver two days prior to its scheduled maturity and simultaneously with the closing of the BofA Revolver.

As of February 14, 2022, we had borrowings of $35 million drawn and outstanding under the BofA Revolver.

Borrowings under the BofA Revolver, which may not exceed $237.5 million outstanding at any time, bear interest at variable rates based on our leverage ratio, from which we may incur additional indebtedness in the future.

As of December 31, 2021, $110 million was drawn and outstanding under the BofA Term Loan.

The BofA Term Loan includes an accordion feature that allows for an aggregate amount of up to $500 million of additional borrowing capacity.

On July 22, 2016, we fixed the base LIBOR rate on the BofA Term Loan at 1.12% until September 27, 2021 by entering into an interest rate swap agreement.

Subsequent to expiration of the interest rate swap agreement, interest on the BofA Term Loan has been at variable rates based on our credit rating.

As of December 31, 2021, $165 million was drawn and outstanding under the BMO Term Loan, although such amount may be increased by up to an additional $100 million through the exercise of an accordion feature.

BMO Term Loan consists of a $55 million tranche A term loan, which was fully repaid on June 4, 2021, and a $165 million tranche B term loan that remains outstanding.

Although interest on the BMO Term Loan is at variable rates based on our credit rating, on August 26, 2013, we fixed the base LIBOR rate on the BMO Term Loan at 2.32% per annum until August 26, 2020 by entering into an interest rate swap agreement.

As of December 31, 2022 and February 10, 2023, we had $48 million and $105 million, respectively, of borrowings under the BofA Revolver, including a borrowing of $40 million used to repay a portion of the BMO Term Loan on February 10, 2023.

Borrowings under the BofA Revolver, which may not exceed $150 million (subject to future reductions to $125 million on October 1, 2023 and to $100 million on April 1, 2024) outstanding at any time, bear interest at variable rates based on a spread over SOFR, from which we may incur additional indebtedness in the future.

As of December 31, 2022 and February 10, 2023, we had $165 million and $125 million, respectively, outstanding under the BMO Term Loan.

The BMO Term Loan consists of a $165 million tranche B term loan, $40 million of which was repaid on February 10, 2023.

On or before April 1, 2024, we are required to repay an additional $25 million of the BMO Term Loan.

Effective February 10, 2023, interest on the BMO Term Loan became variable based on a spread over SOFR.

Previously, interest on the BMO Term Loan was variable based on a spread over LIBOR.

On August 26, 2013, we fixed the base LIBOR rate on the BMO Term Loan at 2.32% per annum until August 26, 2020 by entering into an interest rate swap agreement.

On February 20, 2019, we fixed the base LIBOR rate on the BMO Term Loan at 2.39% per annum for the period beginning August 26, 2020 and ending on January 31, 2024, by entering into interest rate swap agreements.

In the future, if interest rates increase, then the interest costs on our unhedged variable rate debt will also increase, which could adversely affect our cash flow, our ability to pay principal and interest on our debt and our ability to make distributions to stockholders.

On February 8, 2023, we terminated all remaining interest rate swaps applicable to the BMO Term Loan and, on February 10, 2023, we received an aggregate of approximately $4.3 million as a result of such terminations .

During 2022 and as of February 10, 2023, the Federal Reserve raised the federal funds rate target several times, most recently by 25 basis points on February 1, 2023, to a range of 4.50% to 4.75% and indicated that ongoing increases in the target range will be appropriate.

We expect that there will be additional increases in the Federal Reserve benchmark rate.

If interest rates continue to increase, then the interest costs on our unhedged variable rate debt will also increase, which could adversely affect our cash flow, our ability to pay principal and interest on our debt and our ability to make distributions to stockholders.

In addition, rising interest rates could limit our ability to incur new debt or to refinance existing debt when it matures.

From time to time, we may enter into additional interest rate swap agreements and other interest rate hedging contracts, including swaps, caps and floors.

While these agreements are intended to lessen the impact of rising interest rates on us, they also expose us to the risks that the other parties to the agreements will not perform, we could incur significant costs associated with the settlement of the agreements, the agreements will be unenforceable and the underlying transactions will fail to qualify as highly-effective cash flow hedges.

In addition, an increase in interest rates could decrease the amount third parties are willing to pay for our assets, thereby limiting our ability to change our portfolio promptly in response to changes in economic or other conditions.

Changes to and replacement of the LIBOR benchmark interest rate could adversely affect our business, financial results and operation.

We may be adversely affected by the expected discontinuance of LIBOR.

In July 2017, the United Kingdom Financial Conduct Authority (the regulatory authority over LIBOR) announced that it will plan for a phase out of regulatory oversight of LIBOR interest rate indices after 2021 to allow for an orderly transition to an alternate reference rate.

However, the ICE Benchmark Administration, in its capacity as administrator of USD LIBOR, has announced that it intends to extend publication of USD LIBOR (other than one-week and two-month tenors) to June 2023.

At this time, no consensus exists as to what rate or rates may become acceptable alternatives to LIBOR and it is impossible to predict the effect of any such alternatives on the value of LIBOR-based securities and variable rate loans, or other securities or financial arrangements, given LIBOR’s role in determining market interest rates globally.

We are evaluating the potential impact of the eventual replacement of the LIBOR benchmark interest rate, including the possibility of SOFR as the dominant replacement in the United States.

In addition, other benchmarks may emerge or other rates may be adopted outside of the United States.

Although the full impact of the transition away from LIBOR, including the discontinuance of LIBOR publication and the adoption of a replacement rate for LIBOR, remains unclear, these changes may have an adverse impact on our financing costs with respect to any floating rate indebtedness.

From time to time, we may enter into interest rate swap agreements and other interest rate hedging contracts, including swaps, caps and floors.

While these agreements are intended to lessen the impact of rising interest rates on us, they also expose us to the risks that the other parties to the agreements will not

perform, we could incur significant costs associated with the settlement of the agreements, the agreements will be unenforceable and the underlying transactions will fail to qualify as highly-effective cash flow hedges.

In addition, increases in interest rates could decrease the amount third parties are willing to pay for our assets, thereby limiting our ability to change our portfolio promptly in response to changes in economic or other conditions, to incur new debt or refinance existing debt when it matures.

Downgrades in our credit ratings could reduce our access to funding sources in the credit and capital markets.

5 unchanged sentences

Economic conditions in the United States could have a material adverse impact on our earnings and financial condition.

The economic outlook in the United States is uncertain as a result of the COVID-19 pandemic.

Because economic conditions in the United States may affect the demand for office space, real estate values, occupancy levels and property income, current and future economic conditions in the United States could have a material adverse impact on our earnings and financial condition.

Economic conditions may be affected by numerous factors, including but not limited to, the pace of economic growth and/or recessionary concerns, inflation, increases in the levels of unemployment, energy prices, changes in currency exchange rates, uncertainty about government fiscal and tax policy, geopolitical

events, the regulatory environment, the availability of credit and interest rates.

As of the date of this report, the impact of the COVID-19 pandemic and related fallout from containment and mitigation measures, such as work from home arrangements and the closing of various businesses, is adversely affecting the demand for office space.

The economic outlook in the United States is uncertain and facing recessionary concerns, including as a result of the ongoing effects of negative gross domestic product growth, the COVID-19 pandemic, rising inflation, increasing interest rates, supply chain disruptions and the conflict between Russia and Ukraine.

Because economic conditions in the United States may affect the demand for office space, real estate values, occupancy levels and property income, current and future economic conditions in the United States, including slower growth, stock market volatility or recession fears, could have a material adverse impact on our earnings and financial condition.

Economic conditions may be affected by numerous other factors, including but not limited to, inflation, increases in the levels of unemployment, energy prices, changes in currency exchange rates, uncertainty about government fiscal and tax policy, geopolitical events, the regulatory environment and the availability of credit.

As of the date of this report, the continuing impact of the COVID-19 pandemic and increased interest rates continue to adversely affect the demand for office space.

Future economic factors also may negatively affect the demand for office space, real estate values, occupancy levels and property income.

If we are not able to collect sufficient rents from each of our owned real properties, or investments in Sponsored REITs, or collect interest on Sponsored REIT Loans we fund, we may suffer significant operating losses or a reduction in cash available for future dividends.

A substantial portion of our revenue is generated by the rental income of our real properties and investments in Sponsored REITs.

If our properties do not provide us with a steady rental income or we do not collect interest income from Sponsored REIT Loans we fund, our revenues will decrease, which may cause us to incur operating losses in the future and reduce the cash available for distribution to our stockholders.

If we are not able to collect sufficient rents from each of our owned real properties or collect interest on the Sponsored REIT Loan, we may suffer significant operating losses or a reduction in cash available for future dividends.

A substantial portion of our revenue is generated by the rental income of our real properties and the Sponsored REIT Loan.

If our properties do not provide us with a steady rental income or we do not collect interest income from the Sponsored REIT Loan, our revenues will decrease, which may cause us to incur operating losses in the future and reduce the cash available for distribution to our stockholders.

We may not be able to dispose of properties on acceptable terms or within the time periods we anticipate pursuant to our disposition strategy.

We have adopted a strategy seeking to increase shareholder value through the sale of select properties where we believe that short to intermediate term valuation potential has been reached.

Pursuant to this strategy, we anticipate that dispositions of properties in 2022 will result in estimated aggregate gross proceeds in the range of approximately $250 million to $350 million.

As we execute this strategy, our revenue, Funds From Operations, and capital expenditures are likely to decrease in the short term.

Proceeds from dispositions are intended to be used for the repayment of debt, repurchases of our common stock, any special dividends required to meet REIT requirements, and other general corporate purposes.

We have adopted a strategy seeking to increase shareholder value by pursuing the sale of select properties where we believe that short to intermediate term valuation potential has been reached and striving to lease vacant space.

As we execute this strategy, our revenue, Funds From Operations, and capital expenditures may decrease in the short term.

Proceeds from dispositions are intended to be used primarily for the repayment of debt.

We may not be able to dispose of properties at acceptable prices or otherwise on anticipated terms and conditions within the time periods contemplated by our disposition strategy, which would adversely affect our ability to use the proceeds as intended and impair our financial flexibility.

12 unchanged sentences

In addition, at any time, a tenant of one of our properties may seek the protection of bankruptcy laws, which could result in the rejection and termination of such tenant’s lease and thereby cause a reduction in cash available for distribution to our stockholders.

New acquisitions may fail to perform as expected.

We may fund acquisitions of new properties, if any, with cash, by drawing on the BofA Revolver, by assuming existing indebtedness, by entering into new indebtedness, by issuing debt securities, by issuing shares of our stock or by other means.

We may fund acquisitions of new properties, if any, with cash, by assuming existing indebtedness, by entering into new indebtedness, by issuing debt securities, by issuing shares of our stock or by other means.

Our acquisition activities are subject to the following risks:

16 unchanged sentences

When leases expire, we may incur expenses and may not be able to re-lease the space on the same terms.

While we cannot predict when existing vacant space in properties will be leased, if existing tenants with expiring leases will renew their leases or what the terms and conditions of the lease renewals will be, we expect to renew or sign new leases at current market rates for locations in which the buildings are located, which in some cases may be below the expiring rates.

at current market rates for locations in which the buildings are located, which in some cases may be below the expiring rates.

Certain leases provide tenants the right to terminate early if they pay a fee.

7 unchanged sentences

South — 44.8%, West — 34.4.%, Midwest — 15.0% and East — 5.8%.

However, within certain of those regions, we hold a larger concentration of our properties in Greater Denver, Colorado — 38.0%, Dallas, Texas — 17.8%, Houston, Texas — 17.2% and Minneapolis, Minnesota — 11.0%.

However, within certain of those regions, we hold a larger concentration of our properties in Denver, Colorado — 34.4%, Dallas, Texas — 19.7%, Houston, Texas — 19.1% and Minneapolis, Minnesota — 12.1%.

We are likely to face risks to the extent that any of these areas in which we hold a larger concentration of our properties suffer deteriorating economic conditions.

As the Dallas, Denver and Houston metropolitan areas have a significant presence in the energy sector, a prolonged period of low oil or natural gas prices, or other factors negatively impacting the energy industry, could have an adverse impact on our ability to maintain the occupancy of our properties in those areas or could cause us to lease

space at rates below current in-place rents, or at rates below the rates we have leased space in those areas in the prior year.

In addition, factors negatively impacting the energy industry could reduce the market values of our properties in those areas, which could reduce our net asset value and adversely affect our financial condition and results of operations, or cause a decline in the value of our common stock.

11 unchanged sentences

For example, climate change could increase utility and other costs of operating our properties, including increased costs for energy, water, insurance, regulatory compliance and other supply chain materials, which if not offset by rising rental income and/or paid by tenants, could have a material adverse effect on our properties, operations and business.

We are also subject to climate change induced severe storm hazards, which to the extent not covered by insurance, could result in significant capital expenditures.

We are also subject to climate change induced severe storm hazards, which to the extent not covered by

insurance, could result in significant capital expenditures.

Over time, the physical effects of climate change could result in declining demand for office space in our buildings or our inability to operate the buildings at all.

Security breaches and other disruptions could compromise our information and expose us to liability, which could cause our business and reputation to suffer.

In the ordinary course of our business, we collect and store sensitive data concerning investors in the Sponsored REITS, tenants and vendors.

In the ordinary course of our business, we collect and store sensitive data concerning investors in the Sponsored REIT, tenants and vendors.

Although we have taken steps to protect the security of our information technology systems and the data maintained in those systems, such systems and infrastructure may be vulnerable to attacks by hackers, computer viruses or ransomware, or breaches due to employee error, malfeasance, impersonation of authorized users or other disruptions.

6 unchanged sentences

We have significant investments in markets that may be the targets of actual or threatened terrorism attacks in the future.

As a result, some tenants in these markets may choose to relocate their businesses to other markets or to lower-profile office buildings within these markets that may be perceived to be less likely targets of future terrorist

This could result in an overall decrease in the demand for office space in these markets generally or in our properties in particular, which could increase vacancies in our properties or necessitate that we lease our properties on less favorable terms or both.

11 unchanged sentences

The presence of hazardous substances on a property may adversely affect the owner’s ability to sell such property or to borrow using such property as collateral, and it may cause the owner of the property to incur substantial remediation costs.

In addition to claims for cleanup costs, the presence of hazardous substances on a property could result in the owner incurring substantial liabilities as a result of a claim by a private party for personal injury or a claim by an adjacent property owner for property damage.

In addition to claims for cleanup costs, the presence of hazardous

substances on a property could result in the owner incurring substantial liabilities as a result of a claim by a private party for personal injury or a claim by an adjacent property owner for property damage.

In addition, we cannot assure you that:

21 unchanged sentences

As a result of these fluctuations, the amount of cash available for distribution to our stockholders may fluctuate, which may result in our not being able to maintain or grow dividend levels, including special dividends, in the future.

In 2022, we adopted a variable quarterly dividend policy, which replaced our previous regularly quarterly dividend policy.

Under this new dividend policy, our Board of Directors will determine quarterly dividends based upon a variety of factors, including our estimates of our annual taxable income and the amount that we are required to distribute annually in the aggregate to enable us to continue to qualify as a REIT for federal income tax purposes.

In addition, in 2023, amendments to our BofA Revolver and our BMO Term Loan included

restrictions on our ability to make quarterly dividend distributions that exceed $0.01 per share of our common stock;

provided, however, that notwithstanding such restrictions, we are permitted to make dividend distributions based on our good faith estimate of projected or estimated taxable income or otherwise as necessary to retain our status as a REIT, to meet the distribution requirements of Section 857 of the Internal Revenue Code or to eliminate any income or excise taxes to which we would otherwise be subject.

The real properties held by us may significantly decrease in value.

14 unchanged sentences

During February 2006, our Board of Directors approved a change in control plan, which included a form of retention agreement and discretionary payment plan.

Payments under the discretionary plan are capped at 1% of the

market capitalization of FSP Corp.

Payments under the discretionary plan are capped at 1% of the market capitalization of FSP Corp.

as reduced by the amount paid under the retention plan.

33 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors