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Item 1A. Risk Factors

2021-02-17 compared with 2020-02-19 · 276 added, 168 removed, 351 unchanged (56% of the section changed)

The risks summarized and detailed below are not the only risks facing us.

Please be aware that additional risks and uncertainties not currently known to us or that we currently believe to be immaterial could also materially harm our business, operating results, cash flows and/or financial condition, impair our future prospects, negatively affect our ability to make distributions to our stockholders and/or cause the price of our common stock to decline.

You should also refer to the other information contained in our periodic reports, including the Cautionary Note Regarding Forward-Looking Statements, our consolidated financial statements and the related notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations for a further discussion of the risks, uncertainties, and assumptions relating to our business.

Summary of Risk Factors

Material risks that may affect our business, operating results and financial condition include, but are not limited to, the following:

Risks Related to Our Business and Operations

• actual or threatened public health epidemics or outbreaks, such as the COVID-19 pandemic, and governmental and private measures taken to combat such health crises;

• economic, regulatory, socio-economic and/or technology changes that impact the real estate market generally, or that could affect patterns of use of commercial office space;

• competition in the leasing market;

• conditions of the office market in general, and of the specific markets in which we operate;

• lease termination and/or tenant defaults, particularly by one of our significant lead tenants;

• early terminations of leases;

• managing properties owned by governmental tenants;

• adverse market and economic conditions;

• difficulty in identifying and consummating suitable acquisitions that meet our investment criteria;

• future acquisitions of properties may not yield anticipated returns, may disrupt our business, and may strain our resources;

• acquired properties may be located in new, unfamiliar markets;

• illiquidity of real estate investments;

• inability to dispose of properties in a timely or efficient manner;

• development and construction delays;

• our development strategies may not be successful;

• future terrorist attacks;

• cybersecurity incidents and security;

• uninsured losses or losses in excess of our insurance coverage;

• insolvency of our insurance carriers;

• lack of sole decision-making authority for our joint venture investments;

• costs of complying with governmental laws and regulations;

• liability for environmental contamination or adverse environmental conditions in our buildings;

• physical and transitional effects of climate change;

• loss of key personnel;

• litigation;

• ineffective disclosure controls or internal controls;

• failure to comply with the Americans with Disabilities Act or similar regulations;

Risks Related to Our Organization and Structure

• our organizational documents contain provisions that may have an anti-takeover effect and discourage third parties from seeking change of control transactions;

• our charter limits the number of shares a person may own which may discourage a takeover;

• our board of directors can take many actions without stockholder approval;

• our board or directors can issue stock with terms that may subordinate the rights of our common stockholders which may discourage a takeover;

• our board of directors could elect for us to be subject to certain Maryland law limitations on changes in control that could prevent transactions;

• our rights and the rights of our stockholders to recover claims against our directors and officer are limited;

Index to Financial Statements

Risks Related to Tax Matters

• failure to qualify as a REIT;

• changes in tax laws;

• incurring certain tax liabilities;

• differences between the recognition of taxable income and the actual receipt of cash;

• our distributions do not qualify for certain reduced tax rates;

• a re-characterization of transaction may result in lost tax benefits or prohibited transactions;

• adverse changes in state and local tax laws;

• property taxes affecting returns on real estate;

Risks Associated with Debt Financing

• continuing to incur mortgage or other debt;

• high interest rates;

• restrictive debt covenants;

• increases in variable -rate debt payments;

• changes in interest rates that impact our interest rate derivative contracts;

• change in the method pursuant to which the LIBOR rates are determined and the phasing out of LIBOR after 2021;

• a downgrade in our credit rating;

General Risks

• changes in our dividend policy;

• price and volume fluctuations in the public market, including on the New York Stock Exchange;

• future offering of debt securities;

• changes in interest rates;

• securities analysts' coverage of our common stock.

Index to Financial Statements

Risks Related to Our Business and Operations

Actual or threatened public health epidemics or outbreaks, such as the COVID-19 pandemic that the world is currently experiencing, and governmental and private measures taken to combat such health crises, could have a material adverse effect on our business operations and financial results.

The COVID-19 pandemic that the world is currently experiencing has adversely impacted the U.S.

and global economies and our business and results of operations, changing in several ways the manner in which we operate with more emphasis on tenant and employee wellness, higher reliance on remote connectivity, and increased monitoring of tenant credit-worthiness.

Various mandates from international, federal, state and local authorities requiring forced closures or other restrictions continue to impact certain markets in which our buildings are located.

Although some of these restrictions have been relaxed in certain jurisdictions, others have been reinstated in areas that experienced a resurgence of COVID-19 cases.

Such restrictions have affected the global economy and the regional U.S.

economies in which we operate, and have negatively impacted some of our tenants' ability to pay their rent.

As a result, we have entered into lease modification agreements with approximately 70 of our tenants who have experienced disruptions in their business as a result of the pandemic.

Most of these agreements deferred the payment of all or some portion of three to four months of rent until 2021.

The restrictions put in place to combat the pandemic have also caused certain of our retail and restaurant tenants to close or operate at reduced capacity for an extended period of time, which could cause such tenants to default on their leases.

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

Although various governmental financial programs may mitigate the risk of our tenants being unable to pay their rent under our leases, governmental assistance may not be available to all affected tenants or may be significantly delayed or discontinued.

Piedmont has an approximately $4.6 million general reserve as of December 31, 2020 related to tenant lease-related assets.

There can be no assurances that this amount will be sufficient to cover any future losses of rental income should these tenants be unable to pay back deferred rents when such rents become due.

The measures taken to curb the spread of COVID-19 may increase our costs, which may not be fully recoverable under our leases or adequately covered by insurance, and could impact our profitability.

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

The prevalence of work-from-home policies as a result of the pandemic may alter tenant preferences and/or demand in the long term with respect to leasing office space.

The impact on our operations and those of our tenants of the COVID-19 pandemic and of actions taken to contain it remains highly uncertain and difficult to predict, and will depend on future developments, including the scope, severity and duration of the pandemic, the success of the actions taken to contain and treat the virus, the availability and effectiveness of vaccines or other treatments, and the availability of government assistance.

The long-term impact of COVID-19 on the U.S.

and global economies could cause a prolonged world-wide economic downturn or recession and may lead to corporate bankruptcies among our tenants.

Any of these developments, and other effects of the ongoing global pandemic of COVID-19 or any other pandemic, epidemic or outbreak of contagious diseases, could have a material adverse effect on our business and results of operations.

In addition, many of the other risk factors described herein are heightened by the effects of the COVID-19 pandemic and related economic conditions, which could result in material adverse effects on our business and results of operations.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” for additional information on how we have been impacted by the COVID-19 pandemic and the steps we have taken in response.

Economic, regulatory, socio-economic and/or technology changes that impact the real estate market generally, or that could affect patterns of use of commercial office space, may cause our operating results to suffer and decrease the value of our real estate properties.

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• local office market conditions such as employment rates and changes in the supply of, or demand for, space in properties similar to those that we own within a particular area;

• changes in the patterns of office or parking garage use due to technological advances which may make telecommuting more prevalent or reduce the demand for office workers or parking spaces generally;

Index to Financial Statements

• changes in the patterns of office or parking garage use due to telecommuting or work-from-home arrangements becoming more prevalent or that reduce the demand for office workers or parking spaces generally;

• increased demand for "co-working" or sharing of office space with other companies;

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• the attractiveness of our properties to potential tenants and competition from other available properties;

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

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

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

• the financial stability of our tenants or groups of tenants in specific industry sectors (such as the oil and gas, insurance, and co-working sectors), including bankruptcies, financial difficulties, or lease defaults by our tenants;

• inability to finance property development or acquisitions on favorable terms;

• changes in operating costs and expenses, including costs for maintenance, insurance, and real estate taxes, and our ability to control rents in light of such changes;

• the financial stability of our tenants or groups of tenants in specific industry sectors (such as the oil and gas, hospitality, travel, and co-working sectors), including bankruptcies, financial difficulties, or lease defaults by our tenants;

• the inability to finance property development or acquisitions on favorable terms;

• changes in operating costs and expenses, including costs for maintenance, insurance, and real estate taxes, and our inability to timely adjust rents in light of such changes;

• the need to periodically fund the costs to repair, renovate, and re-let space;

• earthquakes, tornadoes, hurricanes and other natural disasters, civil unrest, terrorist acts or acts of war, which may result in uninsured or under-insured losses;

• health crises such as the spread of communicable diseases;

• changes in, or increased costs of compliance with, governmental regulations, including those governing usage, zoning, the environment, and taxes;

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In addition, periods of economic slowdown or recession, rising interest rates, or declining demand for real estate could result in a general decrease in rents or an increased occurrence of defaults under existing leases, which would adversely affect our financial condition and results of operations.

Any of the above factors may prevent us from generating sufficient cash flow or maintaining the value of our real estate properties.

Any of the above factors may prevent us from generating sufficient cash flow to operate our business, make distributions to our stockholders, or maintain the value of our real estate properties.

We face considerable competition in the leasing market and may be unable to renew existing leases or re-let space on terms similar to the existing leases, or we may expend significant capital in our efforts to re-let space.

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The competition for credit worthy tenants is intense, and we may have difficulty competing, especially with competitors who have purchased properties at discounted prices allowing them to offer space at reduced rental rates, or those that have the ability to offer superior amenities or more flexible leasing terms.

To the extent that we are able to renew leases that are scheduled to expire in the short-term or re-let such space to new tenants, this intense competition may require us to utilize rent concessions and tenant improvements to a greater extent than we have historically.

Index to Financial Statements

If our competitors offer office accommodations at rental rates below current market rates or below the rental rates we currently charge our tenants, we may lose potential tenants, and we may be pressured to reduce our rental rates below those we currently charge in order to retain tenants upon expiration of their existing leases.

Even if our tenants renew their leases or we are able to re-let the space to new tenants, the terms and other costs of renewal or re-letting, including the cost of required renovations or additional amenities, increased tenant improvement allowances, leasing commissions, declining rental rates, and other potential concessions, may be less favorable than the terms of our current leases and could require significant capital expenditures.

If we are unable to renew leases or re-let space in a reasonable time, or if rental rates decline or tenant improvement, leasing commissions, or other costs increase, our financial condition, cash flows, cash available for distribution, value of our common stock, and ability to satisfy our debt service obligations could be adversely affected.

If we are unable to renew leases or re-let space in a reasonable time, or if rental rates decline or tenant improvements, leasing commissions, or other costs increase, our financial condition, operating results, or cash flows could be adversely affected.

Our rental revenues will be significantly influenced by the conditions of the office market in general and of the specific markets in which we operate.

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Further, our portfolio of properties is primarily located in seven major metropolitan areas:

Atlanta, Boston, Dallas, Minneapolis, New York, Orlando, and Washington, D.C.

Collectively, these seven metropolitan areas accounted for approximately 93% of our ALR from our portfolio of properties as of December 31, 2019.

As a result, we are particularly susceptible to adverse market conditions in these cities, including any reduction in demand for office properties, industry slowdowns, governmental cut backs, relocation of businesses and changing demographics.

Dallas, Atlanta, Washington, D.C., Minneapolis, Boston, Orlando, and New York.

Collectively, these seven metropolitan areas accounted for approximate ly 96% of our ALR as of December 31, 2020.

As a result, we are particularly susceptible to adverse market conditions in these cities, including any reduction in demand for office properties, industry slowdowns, civil unrest, governmental cut backs, relocation of businesses and changing demographics.

Adverse economic or real estate developments in these markets, or in any of the other markets in which we operate, or any decrease in demand for office space resulting from the local or national government and business climates, could adversely affect our rental revenues and operating results.

Index to Financial Statements

We depend on tenants for our revenue, and accordingly, lease terminations and/or tenant defaults, particularly by one of our significant lead tenants, could adversely affect the income produced by our properties.

The success of our investments materially depends on the financial stability of our tenants, any of whom may experience a change in their business at any time.

Many of our tenants may be adversely impacted by the specific consequences of, and the general market uncertainty associated with, geopolitical developments that could negatively affect international trade, including the uncertainty surrounding the United Kingdom’s withdrawal from the European Union, the termination or threatened termination of existing international trade agreements, or the implementation of tariffs or retaliatory tariffs on imported or exported goods.

If any of our tenants, or groups of tenants in specific industry sectors (such as the oil and gas, insurance, and co-working sectors), experience or anticipate an adverse change in their respective businesses for any reason, they may delay lease commencements, decline to extend or renew their leases upon expiration, fail to make rental payments when due, or declare bankruptcy.

Many of our tenants may be adversely impacted by the specific consequences of the COVID-19 pandemic or various geopolitical developments that negatively affect international trade, including the uncertainty surrounding the terms of the United Kingdom’s withdrawal from the European Union or the implementation of tariffs on imported or exported goods.

If any of our tenants, or groups of tenants in specific industry sectors, experience or anticipate an adverse change in their respective businesses for any reason, they may delay lease commencements, decline to extend or renew their leases upon expiration, fail to make rental payments when due, or declare bankruptcy.

Any of these actions could result in the termination of the tenants’ leases, or expiration of existing leases without renewal, and the loss of rental income attributable to the terminated or expired leases.

In the event of a tenant default or bankruptcy, we may experience delays in enforcing our rights as a landlord and may incur substantial costs in protecting our investment and re-letting our property.

If significant leases are terminated or defaulted upon, we may be unable to lease the property for the rent previously received or to sell the property without incurring a loss.

In addition, significant expenditures related to mortgage payments, real estate taxes, insurance, and maintenance costs are generally fixed or may not decrease immediately when revenues at the related property decrease.

If any leases are terminated or defaulted upon, we may also be unable to re-lease the property for the rent previously received or to sell the property without incurring a loss.

In addition, significant expenditures related to debt payments, real estate taxes, insurance, and maintenance costs are generally fixed or may not decrease immediately when revenues at the related property decrease.

The occurrence of any of the situations described above, particularly if it involves one of our significant lead tenants, could seriously harm our operating performance.

As of December 31, 2019, our largest lead tenants, based on ALR, were:

US Bancorp (5.3% of ALR), State of New York (5.1% of ALR), Independence Blue Cross (3.9% of ALR), the City of New York (2.3% of ALR), and Transocean (1.9% of ALR).

As of December 31, 2020, only two tenants represented 5% or more of our revenue stream:

US Bancorp (5.1% of ALR) and State of New York (5.0% of ALR).

The revenues generated by the properties that any of our lead tenants occupy are substantially dependent upon the financial condition of these tenants and, accordingly, any event of bankruptcy, insolvency, or a general downturn in the business of any of these tenants may result in the failure or delay of such tenant’s rental payments, which may have a substantial adverse effect on our operating performance.

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To the extent that our tenants exercise early termination rights, our cash flow and earnings will be adversely affected, and we can provide no assurances that we will be able to generate an equivalent amount of net rental income by leasing the vacated space to new third party tenants.

Index to Financial Statements

We may face additional risks and costs associated with directly managing properties occupied by government tenants.

We currently own five properties in which some of the tenants in each property are federal government agencies.

Lease agreements with these federal government agencies contain certain provisions required by federal law, which require, among other things, that the contractor (which is the lessor or the owner of the property) agree to comply with certain rules and regulations, including but not limited to, rules and regulations related to anti-kickback procedures, examination of records, audits and records, equal opportunity provisions, prohibitions against segregated facilities, certain executive orders, subcontractor costs or pricing data, and certain provisions intending to assist small businesses.

We currently own four properties in which some of the tenants are federal government agencies.

Through one of our wholly-owned subsidiaries, we directly manage properties with federal government agency tenants and, therefore, we are subject to additional risks associated with compliance with all such federal rules and regulations.

In addition, we face additional risks and costs associated with directly managing properties occupied by government tenants, including an increased risk of default by such tenants during periods in which state or federal governments are shut down or on furlough.

We face additional risks and costs associated with directly managing properties occupied by government tenants, including an increased risk of default by such tenants during periods in which state or federal governments are shut down or on furlough.

There are certain additional requirements relating to the potential application of the Employment Standards Administration’s Office of Federal Contract Compliance Programs and the related requirement to prepare written affirmative action plans applicable to government contractors and subcontractors.

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One of our wholly-owned subsidiaries is considered a government contractor, increasing the risk that requirements of these equal opportunity provisions, including the requirement to prepare affirmative action plans, may be determined to be applicable to the entire operations of our company.

Adverse market and economic conditions may negatively affect us and could cause us to recognize impairment charges on tangible real estate and related lease intangible assets or otherwise impact our performance.

Index to Financial Statements

Adverse market and economic conditions may cause us to recognize impairment charges on tangible real estate and related lease intangible assets or otherwise impact our performance.

We continually monitor events and changes in circumstances that could indicate that the carrying value of the real estate and related lease intangible assets in which we have an ownership interest, either directly or through investments in joint ventures, may not be recoverable.

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In addition, adverse economic conditions could also cause us to recognize additional asset impairment charges in the future, which could materially and adversely affect our business, financial condition and results of operations.

Adverse market and economic conditions could cause us to recognize impairment charges on our goodwill, or otherwise impact our performance.

Adverse market and economic conditions could cause us to recognize impairment charges on our goodwill.

We review the value of our goodwill on an annual basis and when events or changes in circumstances indicate that the carrying value of goodwill may exceed the estimated fair value of such assets.

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Volatility in the overall market could cause the price of our common stock to fluctuate and cause the carrying value of our company to exceed the estimated fair value.

If that occurs, our goodwill potentially could be impaired.

If that occurs, our goodwill could potentially be impaired.

Impairment charges recognized in order to reduce our goodwill could materially and adversely affect our financial condition and results of operations.

Our earnings growth will partially depend upon future acquisitions of properties, and we may not be successful in identifying and consummating suitable acquisitions that meet our investment criteria.

Our business strategy involves the acquisition of primarily high-quality office properties in selected markets.

These activities require us to identify suitable acquisition candidates or investment opportunities that meet our criteria and are compatible with our growth strategy.

Our business strategy primarily involves the acquisition of high-quality office properties in selected markets.

This strategy requires us to identify suitable acquisition candidates or investment opportunities that meet our criteria and are compatible with our growth strategy.

We may not be successful in identifying suitable properties or other assets that meet our acquisition criteria or in consummating acquisitions on satisfactory terms, if at all.

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Likewise, we may incur costs pursuing acquisitions that we are ultimately unsuccessful in completing.

Index to Financial Statements

Further, we face significant competition for attractive investment opportunities from a large number of other real estate investors, including investors with significant capital resources such as domestic and foreign corporations and financial institutions, publicly traded and privately held REITs, private institutional investment funds, investment banking firms, life insurance companies and pension funds.

As a result of competition, we may be unable to acquire additional properties as we desire, the purchase price may be significantly elevated, or we may have to accept lease-up risk for a property with lower occupancy, any of which could adversely affect our financial condition, results of operations, cash flows and the ability to pay dividends on, and the market price of, our common stock.

The illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties.

Because real estate investments are relatively illiquid and large-scale office properties such as many of those in our portfolio are particularly illiquid, our ability to sell promptly one or more properties in our portfolio in response to changing economic, financial, and investment conditions is limited.

The real estate market is affected by many forces, such as general economic conditions, availability of financing, interest rates, and other factors, including supply and demand, that are beyond our control.

We cannot predict whether we will be able to sell any property for the price or on the terms set by us or whether any price or other terms offered by a prospective purchaser would be acceptable to us.

We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a property.

We may be required to expend funds to correct defects or to make improvements before a property can be sold.

We cannot provide any assurances that we will have funds available to correct such defects or to make such improvements.

Our inability to dispose of assets at opportune times or on favorable terms could adversely affect our cash flows and results of operations, thereby limiting our ability to make distributions to stockholders.

Future acquisitions of properties may not yield anticipated returns, may result in disruptions to our business, and may strain management resources.

We also face significant competition for attractive investment opportunities from a large number of other real estate investors, including investors with significant capital resources such as domestic and foreign corporations and financial institutions, publicly traded and privately held REITs, private institutional investment funds, investment banking firms, life insurance companies and pension funds.

As a result of competition, we may be unable to acquire additional properties, the purchase price may be significantly elevated, or we may have to accept lease-up risk for a property with lower occupancy, any of which could adversely affect our financial condition, results of operations or cash flows.

Future acquisitions of properties may not yield anticipated returns, may disrupt our business, and may strain management resources.

We intend to continue acquiring high-quality office properties, subject to:

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Costs necessary to bring acquired properties up to standards established for their intended market position may exceed our expectations, which may result in the properties’ failure to achieve projected returns.

In particular, to the extent that we engage in acquisition activities, they will pose the following risks for our ongoing operations:

To the extent that we engage in acquisition activities, they will pose the following risks, among others:

• we may acquire properties or other real estate-related investments that are not initially accretive to our results upon acquisition or accept lower cash flows in anticipation of longer term appreciation, and we may not successfully manage and lease those properties to meet our expectations;

• we may not achieve expected cost savings and operating efficiencies;

Index to Financial Statements

• we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations;

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• the acquired properties may not perform as well as we anticipate due to various factors, including changes in macro-economic conditions and the demand for office space;

• we may acquire properties without any recourse, or with only limited recourse, for liabilities, whether known or unknown, such as clean-up of environmental contamination, unknown/undisclosed latent structural issues or maintenance problems, claims by tenants, vendors or other persons against the former owners of the properties, and claims for indemnification by general partners, directors, officers, and others indemnified by the former owners of the properties.

• we may acquire properties without any recourse, or with only limited recourse, for liabilities, whether known or unknown, such as clean-up of environmental contamination, unknown/undisclosed latent structural issues or maintenance problems, claims by tenants, vendors or others against the former owners of the properties, and claims for indemnification by general partners, directors, officers, and others indemnified by the former owners of the properties.

Acquired properties may be located in new markets, where we may face risks associated with investing in an unfamiliar market.

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In addition, the time and resources that may be required to obtain market knowledge and/or integrate such properties into our existing portfolio could divert our management’s attention from our existing business or other attractive opportunities.

Index to Financial Statements

The illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties.

We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a property.

We may be required to expend funds to correct defects or to make improvements before a property can be sold.

We cannot provide any assurances that we will have funds available to correct such defects or to make such improvements.

Our inability to dispose of assets at opportune times or on favorable terms could adversely affect our cash flows and results of operations.

We may not be able to dispose of properties that no longer meet our strategic plans or to timely and efficiently apply the proceeds from any disposition of properties.

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As such, we may not be able to adequately time any decrease in revenues from the sale of properties with a corresponding increase in revenues associated with the acquisition of new properties.

The failure to dispose of properties, or to timely and more efficiently apply the proceeds from any disposition of properties to attractive acquisition opportunities, could have an adverse effect on our results of operations and our ability to make distributions to our stockholders.

Our operating results may suffer because of potential development and construction delays and resultant increased costs and risks.

Our operating results may suffer because of development and construction delays and resultant increased costs and risks.

From time to time, we engage in various development and re-development projects where we may be subject to uncertainties associated with re-zoning, environmental concerns of governmental entities and/or community groups, and our builders’ ability to build in conformity with plans, specifications, budgeted costs and timetables.

A builder’s performance may also be affected or delayed by conditions beyond the builder’s control.

Delays in completing construction could also give tenants the right to terminate preconstruction leases.

Delays in completing construction could also give tenants the right to terminate pre-construction leases.

We may incur additional risks when we make periodic progress payments or other advances to builders before they complete construction.

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In addition, we will be subject to normal lease-up risks relating to newly constructed projects.

Index to Financial Statements

Projects with long lead times may increase leasing risk due to changes in market conditions.

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From time to time, we engage in various development and redevelopment activities to the extent attractive projects become available.

When we engage in development activities, we are subject to risks associated with those activities that could adversely affect our financial condition, results of operations, cash flows and ability to pay distributions on, and the market price of, our common stock, including, but not limited to:

When we engage in development activities, we are subject to risks associated with those activities that could adversely affect our financial condition, results of operations and cash flows, including, but not limited to:

• development projects in which we have invested may be abandoned and the related investment will be impaired;

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• upon completion of construction, we may not be able to obtain, or obtain on advantageous terms, permanent financing for activities that we financed through construction loans;

• we may not achieve sufficient occupancy levels and/or obtain sufficient rents to ensure the profitability of a completed project.

Moreover, substantial renovation and development activities, regardless of their ultimate success, typically require a significant amount of management’s time and attention, diverting their attention from our other operations.

Future terrorist attacks in the major metropolitan areas in which we own properties or armed hostilities could significantly impact the demand for, and value of, our properties.

• we may not achieve sufficient occupancy levels and/or obtain sufficient rents to make a completed project profitable;

• substantial renovation and development activities may require a significant amount of management’s time and attention, diverting their attention from our other operations.

Future terrorist attacks, armed hostilities, or civil unrest in the major metropolitan areas in which we own properties could significantly impact the demand for, and value of, our properties.

Our portfolio of properties is primarily located in the following major metropolitan areas:

Atlanta, Boston, Dallas, Minneapolis, New York, Orlando, and Washington, D.C., any of which could be, and some of which have been, the target of terrorist attacks.

Future terrorist attacks and other acts of terrorism or war could severely impact the demand for, and value of, our properties.

Index to Financial Statements

Terrorist attacks in and around any of the major metropolitan areas in which we own properties also could directly impact the value of our properties through damage, destruction, loss, or increased security costs, and could thereafter materially impact the availability or cost of insurance to protect against such acts.

Attacks or armed conflicts could result in increased operating costs;

including building security, property and casualty insurance, and property maintenance.

Dallas, Atlanta, Washington, D.C., Minneapolis, Boston, Orlando, and New York, any of which could be, and some of which have been, the target of terrorist attacks or armed hostilities.

Future terrorist attacks and other acts of hostility or war could severely impact the demand for, and value of, our properties.

Terrorist attacks, other armed hostilities, or civil unrest in and around any of the major metropolitan areas in which we own properties also could directly impact the value of our properties through damage, destruction, loss, or increased security costs, and could thereafter materially impact the availability or cost of insurance to protect against such acts.

Attacks or armed conflicts could result in increased operating costs including building security, property and casualty insurance, and property maintenance.

As a result of terrorist activities or other armed hostilities, the cost of insurance coverage for our properties could also increase.

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To the extent that any future terrorist attacks or armed hostilities otherwise disrupt our tenants’ businesses, it may impair our tenants’ ability to make timely payments under their existing leases with us, which would harm our operating results.

We face risks related to the occurrence of cyber incidents, or a deficiency in our cyber-security, which could negatively impact our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results.

We face risks related to the occurrence of cyber incidents, or a deficiency in our cybersecurity, which could negatively impact our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results.

A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity, functionality, or availability of our information resources and systems.

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Any or all of the preceding risks could have a material adverse effect on our results of operations, financial condition and cash flows.

Index to Financial Statements

Insider or employee cyber and security threats are increasingly a concern for all companies, including ours.

In addition, social engineering and phishing are a particular concern for companies with employees.

We are continuously working to install new, and to upgrade our existing networks, building operating and information technology systems, and to train employees against phishing, malware and other cyber risks to ensure that we are protected, to the greatest extent possible, against cyber risks and security breaches.

We are continuously working to install new networks and to upgrade our existing networks, building operating and information technology systems, and to train employees against phishing, malware and other cyber risks to ensure that we are protected, to the greatest extent possible, against cyber risks and security breaches.

However, such upgrades, new technology and training may not be sufficient to protect us from all risks.

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

We are not aware of any of our tenants experiencing a cyber incident, and if any such cyber incident has occurred among our tenants, it has not given rise to a default under such tenant’s lease with us.

Uninsured losses or losses in excess of our insurance coverage could adversely affect our financial condition and our cash flow, and there can be no assurance as to future costs and the scope of coverage that may be available under insurance policies.

We carry comprehensive general liability, fire, rental loss, environmental, cyber-security, and umbrella liability coverage on all of our properties and earthquake, wind, and flood coverage on properties in areas where such coverage is warranted.

We carry comprehensive general liability, fire, rental loss, environmental, cybersecurity, and umbrella liability coverage on all of our properties and earthquake, wind, and flood coverage on properties in areas where such coverage is warranted.

We believe the policy specifications and insured limits of these policies are adequate and appropriate given the relative risk of loss, the cost of the coverage, and industry practice.

However, we may be subject to certain types of losses, those that are generally catastrophic in nature, such as losses due to wars, conventional or cyber terrorism, armed hostilities, chemical, biological, nuclear and radiation (“CBNR”) acts of terrorism and, in some cases, earthquakes, hurricanes, and flooding, either because such

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coverage is not available or is not available at commercially reasonable rates.

If we experience a loss that is uninsured or that exceeds policy limits, we could lose a significant portion of the capital we have invested in the damaged property, as well as the anticipated future revenue from the property.

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In addition, insurance risks associated with potential terrorist acts could sharply increase the premiums we pay for coverage against property and casualty claims.

Under the Terrorism Risk Insurance Act ("TRIA"), which is currently effective through December 31, 2027, United States insurers cannot exclude conventional (non-CBNR) terrorism losses.

These insurers must make terrorism insurance available under their property and casualty insurance policies;

Under the Terrorism Risk Insurance Act, which is currently effective through December 31, 2027, United States insurers cannot exclude conventional (non-CBNR) terrorism losses and must make terrorism insurance available under their property and casualty insurance policies.

However, this legislation does not regulate the pricing of such insurance.

In some cases, mortgage lenders may insist that commercial property owners purchase coverage against terrorism as a condition of providing mortgage loans.

In some cases, lenders may insist that commercial property owners purchase coverage against terrorism as a condition of providing financing.

Such insurance policies may not be available at a reasonable cost, which could inhibit our ability to finance or refinance our properties.

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Replacing insurance coverage at unfavorable rates and the potential of uncollectible claims due to carrier insolvency could adversely impact our results of operations and cash flows.

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Our joint venture investments could be adversely affected by a lack of sole decision-making authority and our reliance on joint venture partners’ financial condition.

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Any of the above might subject a property to liabilities in excess of those contemplated and thus reduce the returns to our investors.

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Costs of complying with governmental laws and regulations may reduce our net income and the cash available for distributions to our stockholders.

Costs of complying with governmental laws and regulations may reduce our net income.

All real property and the operations conducted on real property are subject to federal, state, and local laws and regulations relating to environmental protection and human health and safety.

In addition, under the Americans with Disabilities Act ("ADA"), places of public accommodation must meet certain federal requirements related to access and use by disabled persons.

Tenants’ ability to operate and to generate income to pay their lease obligations may be affected by permitting and compliance obligations arising under such laws and regulations.

Some of these laws and regulations may impose joint and several liability on tenants, owners, or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal.

Noncompliance with ADA could result in the imposition of fines by the federal government or the award of damages to private litigants.

In addition, the presence of hazardous substances, or the failure to properly remediate these substances, may hinder our ability to sell, rent, or pledge such property as collateral for future borrowings.

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In addition, there are various local, state, and federal fire, health, life-safety, and similar regulations with which we may be required to comply, and which may subject us to liability in the form of fines or damages for noncompliance.

Any material expenditures, liabilities, fines, or damages we must pay will reduce our cash flows and ability to make distributions and may reduce the value of our stockholders’ investment.

Although we believe that our properties are currently in material compliance with these regulatory requirements, we have not conducted an audit or investigation of all of our properties to determine our compliance, and we cannot predict the ultimate cost of compliance.

Any material expenditures, liabilities, fines, or damages we must pay will reduce our net income and cash flows.

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As the present or former owner or operator of real property, we could become subject to liability for environmental contamination, regardless of whether we caused such contamination.

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In addition, certain of our properties are on, adjacent to, or near sites upon which others, including former owners or tenants of our properties, have engaged, or may in the future engage, in activities that have released or may have released petroleum products or other hazardous or toxic substances.

The cost of defending against claims of liability, of remediating any contaminated property, or of paying personal injury claims could reduce the amounts available for distribution to our stockholders.

As the owner of real property, we could become subject to liability for adverse environmental conditions in the buildings on our property.

The cost of defending against claims of liability, of remediating any contaminated property, or of paying personal injury claims could reduce our net income and cash flows.

We could become subject to liability for adverse environmental conditions in the buildings on our property.

Some of our properties have building materials that contain asbestos.

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The properties also may contain or develop harmful mold or suffer from other air quality issues.

Any of these materials or conditions could result in liability for personal injury and costs of remediating adverse conditions, which could have an adverse effect on our cash flows and ability to make distributions to our stockholders.

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Any of these materials or conditions could result in liability for personal injury and costs of remediating adverse conditions, which could have an adverse effect on our results of operations or cash flows.

As the owner of real property, we could become subject to liability for a tenant’s failure to comply with environmental requirements regarding the handling and disposal of regulated substances and wastes or for non-compliance with health and safety requirements, which requirements are subject to change.

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If we or our tenants fail to comply with these various requirements, we might incur governmental fines or private damage awards.

Moreover, we do not know whether or the extent to which existing requirements or their enforcement will change or whether future requirements will require us to make significant unanticipated expenditures, either of which could materially and adversely impact our financial condition, results of operations, cash flows, cash available for distribution to stockholders, the market price of our common stock, and our ability to satisfy our debt service obligations.

If our tenants become subject to liability for noncompliance, it could affect their ability to make rental payments to us.

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To the extent that climate change causes variations in weather patterns, our markets could experience increases in storm intensity, larger flood zones, and/or rising sea-levels.

Over time, these conditions could result in physical damage to our buildings or a decline in demand for office space in our buildings.

Over time, these conditions could result in physical damage to our buildings or a decline in demand for office

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space in our buildings.

Climate change could also indirectly negatively impact our business by causing increased costs associated with property and casualty or flood insurance, energy, or storm cleanup.

There can be no assurance that climate change will not have a material adverse effect on our properties, operations, or business.

We may face possible risks associated with the transition to a lower-carbon economy.

Transitioning to a lower-carbon economy may entail extensive policy, legal, technological, and market changes to address mitigation and adaption requirements related to climate change.

Depending on the nature, speed, and focus of these changes, transition risks may pose varying levels of financial and reputational risk to us and/or our tenants.

Policy action around climate change such as implementing carbon-pricing mechanisms to reduce green house gas emission, shifting energy use toward lower emission sources, adopting energy-efficiency solutions, encouraging greater water efficiency measures, and promoting more sustainable land-use practices can result in financial impacts to both us and our tenants.

Alterations to third-party certifications/ratings may impact investor or tenant demand and consequential valuation for buildings with lower scoring.

Climate related litigation claims can result in financial and reputational damage.

Technology improvements or innovations that support the transition to a lower-carbon, energy efficient economic system and shifts in supply and demand for certain commodities, products, and services as climate-related risks and opportunities are increasingly taken into account may affect the strength and competitiveness of our tenants' business, and ultimately their ability to meet their rental obligations to us.

Climate change has also been identified as a potential source of reputational risk tied to changing customer or community perceptions of an organization's contribution to or detraction from the transition to a lower-carbon economy.

We depend on key personnel, each of whom would be difficult to replace.

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Deficiencies, including any material weakness, in our internal control over financial reporting which may occur in the future could result in misstatements of our results of operations, restatements of our financial statements, a decline in the trading price of our common stock, or otherwise materially adversely affect our business, reputation, results of operations, financial condition, or liquidity.

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Compliance or failure to comply with the Americans with Disabilities Act and other similar regulations could result in substantial costs.

Under the Americans with Disabilities Act, places of public accommodation must meet certain federal requirements related to access and use by disabled persons.

Noncompliance could result in the imposition of fines by the federal government or the award of damages to private litigants.

If we are required to make unanticipated expenditures to comply with the Americans with Disabilities Act, including removing access barriers, then our cash flows and the amounts available for distributions to our stockholders may be adversely affected.

If one or more of our properties is not in compliance with the Americans with Disabilities Act or other legislation, then we would be required to incur additional costs to achieve compliance.

If we incur substantial costs to comply with the Americans with Disabilities Act or other legislation, our financial condition, results of operations, the market price of our common stock, cash flows, and our ability to satisfy our debt obligations and to make distributions to our stockholders could be adversely affected.

Risks Related to Our Organization and Structure

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Our charter and bylaws contain provisions that may have the effect of delaying, deferring, or preventing a change in control of our company (including an extraordinary transaction such as a merger, tender offer, or sale of all or substantially all of our assets) that might provide a premium price for our common stock or otherwise be in the best interest of our stockholders.

These provisions include, among other things, restrictions on the ownership and transfer of our stock, advance notice requirements for stockholder nominations for directors and other business proposals, and our board of directors’ power to classify or reclassify unissued shares of common or preferred stock and issue additional shares of common or preferred stock.

These provisions include, among other things, restrictions on the ownership and transfer of our stock, advance notice requirements for

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stockholder nominations for directors and other business proposals, and our board of directors’ power to classify or reclassify unissued shares of common or preferred stock and issue additional shares of common or preferred stock.

In order to preserve our REIT status, our charter limits the number of shares a person may own, which may discourage a takeover that could result in a premium price for our common stock or otherwise benefit our stockholders.

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• suspend, modify or terminate the dividend reinvestment plan.

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Any of these actions could increase our operating expenses, impact our ability to make distributions, or reduce the value of our assets without giving our stockholders the right to vote.

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Certain provisions of Maryland law may have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change of control under certain circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over the then-prevailing market price of such shares, including:

• “business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our outstanding voting stock or any affiliate or associate of ours who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of our then outstanding stock) or an affiliate thereof for five years after the most recent date on which the stockholder becomes an interested stockholder and thereafter impose supermajority voting requirements on these combinations;

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of our outstanding voting stock or any affiliate or associate of ours who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of our then outstanding stock) or an affiliate thereof for five years after the most recent date on which the stockholder becomes an interested stockholder and thereafter impose supermajority voting requirements on these combinations;

• “control share” provisions that provide that “control shares” of our company (defined as shares which, when aggregated with other shares controlled by the stockholder, except solely by virtue of a revocable proxy, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.

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Our charter eliminates our directors’ and officers’ liability to us and our stockholders for money damages except for liability resulting from actual receipt of an improper benefit or profit in money, property, or services or active and deliberate dishonesty established by a final judgment and which is material to the cause of action.

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or officers, except to the extent that the act or omission of the director or officer was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty, the director or officer actually received an improper personal benefit in money, property, or services, or, in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.

Our charter and bylaws require us to indemnify our directors and officers to the maximum extent permitted by Maryland law for any claim or liability to which they may become subject or which they may incur by reason of their service as directors or officers, except to the extent that the act or omission of the director or officer was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty, the director or officer actually received an improper personal benefit in money, property, or services, or, in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.

As a result, we and our stockholders may have more limited rights against our directors and officers than might otherwise exist under common law, which could reduce our and our stockholders’ recovery from these persons if they act in a negligent manner.

In addition, we may be obligated to fund the defense costs incurred by our directors and officers (as well as by our employees and agents) in some cases.

Risks Related to Our Common Stock

Any change in our dividend policy could have a material adverse effect on the market price of our common stock.

Distributions are authorized and determined by our board of directors in its sole discretion and depend upon a number of factors, including:

• cash available for distribution;

• our results of operations and anticipated future results of operations;

• our financial condition, especially in relation to our anticipated future capital needs of our properties;

• the level of reserves we establish for future capital expenditures;

• the distribution requirements for REITs under the Code;

• the level of distributions paid by comparable listed REITs;

• our operating expenses;

• other factors our board of directors deems relevant.

We expect to continue to pay quarterly distributions to our stockholders;

however, we bear all expenses incurred by our operations, and our funds generated by operations, after deducting these expenses, may not be sufficient to cover desired levels of distributions to our stockholders.

Any change in our distribution policy could have a material adverse effect on the market price of our common stock.

There are significant price and volume fluctuations in the public markets, including on the exchange which we listed our common stock.

stock markets, including the NYSE on which our common stock is listed, have historically experienced significant price and volume fluctuations.

The market price of our common stock may be highly volatile and could be subject to wide fluctuations and investors in our common stock may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects.

If the market price of our common stock declines significantly, stockholders may be unable to resell their shares at or above their purchase price.

We cannot assure stockholders that the market price of our common stock will not fluctuate or decline significantly in the future.

Some of the factors that could negatively affect our stock price or result in fluctuations in the price or trading volume of our common stock include, but are not limited to, the following:

• actual or anticipated variations in our quarterly operating results;

• changes in our earnings estimates or publication of research reports about us or the real estate industry, although no assurance can be given that any research reports about us will be published or the accuracy of such reports;

• changes in our dividend policy;

• future sales of substantial amounts of our common stock by our existing or future stockholders;

• increases in market interest rates, which may lead purchasers of our stock to demand a higher yield;

• changes in market valuations of similar companies;

• adverse market reaction to any increased indebtedness we incur in the future;

• additions or departures of key personnel;

• actions by institutional stockholders;

• material, adverse litigation judgments;

• speculation in the press or investment community;

• general market and economic conditions;

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

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Future offerings of debt securities, which would be senior to our common stock upon liquidation, or equity securities, which would dilute our existing stockholders and may be senior to our common stock for the purposes of distributions, may adversely affect the market price of our common stock.

We may attempt to increase our capital resources by making additional offerings of debt or equity securities, including medium term notes, senior or subordinated notes and classes of preferred or common stock.

Upon liquidation, holders of our debt securities and shares of preferred stock and lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of our common stock.

Additional equity offerings may dilute the holdings of our existing stockholders or reduce the market price of our common stock or both.

Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings.

Thus, our stockholders bear the risk of our future offerings reducing the market price of our common stock and diluting their proportionate ownership.

Market interest rates may have an effect on the value of our common stock.

One of the factors that investors may consider in deciding whether to buy or sell our common stock is our distribution rate as a percentage of our share price, relative to market interest rates.

If market interest rates increase, prospective investors may desire a higher yield on our common stock or seek securities paying higher dividends or yields.

It is likely that the public valuation of our common stock will be based primarily on our earnings and cash flows and not from the underlying appraised value of the properties themselves.

As a result, interest rate fluctuations and capital market conditions can affect the market value of our common stock.

For instance, if interest rates rise, it is possible that the market price of our common stock will decrease, because potential investors may require a higher dividend yield on our common stock as market rates on interest-bearing securities, such as bonds, rise.

If securities analysts do not publish research or reports about our business or if they downgrade our common stock or our sector, the price of our common stock could decline.

The trading market for our common stock relies in part on the research and reports that industry or financial analysts publish about us or our business.

We do not control these analysts.

Furthermore, if one or more of the analysts who do cover us downgrades our shares or our industry, or the stock of any of our competitors, the price of our shares could decline.

If one or more of these analysts ceases coverage of our company, we could lose attention in the market, which in turn could cause the price of our common stock to decline.

Federal Income Tax Risks

Risks Related to Tax Matters

Our failure to qualify as a REIT could adversely affect our operations and our ability to make distributions.

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federal income tax on its taxable income at corporate rates.

Moreover, unless the non-qualifying REIT were to obtain relief under certain statutory provisions, the non-qualifying REIT also would be disqualified from treatment as a REIT for the four taxable years following the year during which qualification is lost.

Moreover, unless the non-

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qualifying REIT were to obtain relief under certain statutory provisions, the non-qualifying REIT also would be disqualified from treatment as a REIT for the four taxable years following the year during which qualification is lost.

This treatment would reduce our net earnings available for investment or distribution to our stockholders because of the additional tax liability to us for the years involved.

As a result of such additional tax liability, we might need to borrow funds or liquidate certain investments on terms that may be disadvantageous to us in order to pay the applicable tax.

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Changes in tax laws may eliminate the benefits of REIT status, prevent us from maintaining our qualification as a REIT, or otherwise adversely affect our stockholders.

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

Among other changes, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), signed into law on March 27, 2020, makes certain changes to H.R.1.

These changes impacted us, our stockholders, and our tenants in various ways and the IRS continues to issue clarifying guidance with respect to certain of the provisions of H.R.

1, any of which may be adverse or potentially adverse compared to prior law.

1 and the CARES Act, any of which may be adverse or potentially adverse compared to prior law.

Additional changes to tax laws are likely to continue to occur in the future.

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1 also includes limitations on the deductibility of certain compensation paid to our executives, certain interest payments, and certain net operating loss carryforwards, each of which could potentially increase our taxable income and our required distributions.

However, under H.R.

1, as modified by the CARES Act, federal net operating losses incurred in taxable years beginning after December 31, 2017 can be carried forward indefinitely.

Net operating

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losses of a REIT may not be carried back to any taxable year, regardless of whether the taxpayer qualified as a REIT in such taxable year.

In addition, beginning after December 31, 2017, H.R.

1 had limited the deduction of net operating losses to 80% of current year taxable income (determined without regard to the deduction for dividends paid).

The CARES Act eliminates this 80% limitation for taxable years beginning before January 1, 2021.

As a result, the requirement to distribute a substantial portion of our taxable income could cause us to:

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Compliance with REIT qualification requirements may, therefore, hinder our ability to operate solely on the basis of maximizing profits.

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Distributions made by REITs do not qualify for the reduced tax rates that apply to certain other corporate distributions.

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These increased tax costs could adversely affect our financial condition and results of operations and the amount of cash available for payment of dividends.

Property taxes may decrease returns on real estate.

Real property owned by us will be subject to real property taxes and, in some instances, personal property taxes or franchise taxes.

Such real and personal property taxes and franchise taxes may increase as property tax or franchise tax rates change and as the properties are assessed or reassessed by taxing authorities.

An increase in property taxes on or franchise taxes related to our real property could affect adversely our financial condition, results of operations, cash flow and ability to make distributions to stockholders and could decrease the value of that real property.

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Risks Associated with Debt Financing

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Significant borrowings by us increase the risks of an investment in us.

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.

Our ability to make payments on our indebtedness and to fund our operations, working capital and capital expenditures, depends on our ability to generate cash in the future.

Our cash flow is subject to general economic, industry, financial, competitive, operating, legislative, regulatory and other factors, many of which are beyond our control.

If there is a shortfall between the cash flow from properties and the cash flow needed to service our indebtedness, then the amount available for distributions to stockholders may be reduced.

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indebtedness in full and, in the case of secured indebtedness, could allow them to sell the collateral securing that indebtedness and use the proceeds to repay that indebtedness.

Our failure to pay amounts due with respect to any of our indebtedness may constitute an event of default under the instrument governing that indebtedness, which could permit the holders of that indebtedness to require the immediate repayment of that indebtedness in full and, in the case of secured indebtedness, could allow them to sell the collateral securing that indebtedness and use the proceeds to repay that indebtedness.

For example, defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions.

Although we believe no such instances exist as of December 31, 2019, in those cases, we could lose the property securing the loan that is in default.

Although no such instances exist as of December 31, 2020, if we were to default on our indebtedness, we could lose the property securing the loan that is in default.

For tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage.

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If any of our properties are foreclosed on due to a default, our ability to pay cash distributions to our stockholders will be limited.

We cannot give any assurance that our business will generate sufficient cash flow from operations or that future sources of cash will be available to us in an amount sufficient to enable us to pay amounts due on our indebtedness or to fund our other liquidity needs.

We may need to refinance all or a portion of our indebtedness on or before maturity.

In the future, we may need to refinance all or a portion of our indebtedness on or before maturity.

Our ability to refinance our indebtedness or obtain additional financing will depend on, among other things our financial condition, results of operations and market conditions at the time;

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Any of these events or circumstances could have a material adverse effect on our financial condition, results of operations, cash flows, the trading price of our securities and our ability to satisfy our debt service obligations.

High mortgage rates may make it difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire, our net income, and the amount of cash distributions we can make.

If mortgage debt is unavailable at reasonable rates, we may not be able to finance the purchase of properties.

High interest rates may make it difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire, our net income, and the amount of cash distributions we can make.

If debt financing is unavailable at reasonable rates, we may not be able to finance the purchase of properties.

If we place mortgage debt on properties, we run the risk of being unable to refinance the properties when the loans become due, or of being unable to refinance on favorable terms.

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We are subject to certain restrictions pursuant to the restrictive covenants of our outstanding indebtedness, which may affect our distribution and operating policies and our ability to incur additional debt.

Loan documents evidencing our existing indebtedness contain, and loan documents entered into in the future will likely contain, certain operating covenants that limit our ability to further mortgage the property or discontinue insurance coverage.

Loan documents evidencing our existing

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indebtedness contain, and loan documents entered into in the future will likely contain, certain operating covenants that limit our ability to further mortgage the property or discontinue insurance coverage.

In addition, the agreements governing our existing indebtedness contain financial covenants, including certain coverage ratios and limitations on our ability to incur secured and unsecured debt, make dividend payments, sell all or substantially all of our assets, and engage in mergers and consolidations and certain acquisitions.

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In addition, failure to meet any of these covenants, including the financial coverage ratios, could cause an event of default under and/or accelerate some or all of our indebtedness, which would have a material adverse effect on us.

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Increases in interest rates would increase the amount of our variable-rate debt payments and could limit our ability to pay dividends to our stockholders.

Currently, any outstanding draws on our $500 Million Unsecured 2018 Line of Credit and our variable-rate debt instruments which are not subject to hedging under interest rate swap agreements represent our exposure to interest rate changes.

In addition, any outstanding draws under the $500 Million Unsecured 2018 Line of Credit are subject to various length LIBOR locks;

In addition, any outstanding draws under the $500 Million Unsecured 2018 Line of Credit are subject to LIBOR locks of various length.

However, increases in interest rates could increase our interest costs associated with this variable rate debt to the extent our current locks expire and new balances are drawn under the facility.

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The potential termination or renegotiation of the terms of the interest rate derivative contracts as a result of changing counterparties through insolvency or merger could result in an adverse impact on our results of operations and cash flows.

Changes in the method pursuant to which the LIBOR rates are determined and potential phasing out of LIBOR after 2021 may adversely affect our results of operations.

Changes in the method pursuant to which the LIBOR rates are determined and the phasing out of LIBOR after 2021 may adversely affect our results of operations.

LIBOR and certain other “benchmarks” are the subject of recent national, international and other regulatory guidance and proposals for reform.

These reforms may cause such benchmarks to perform differently than in the past or have other consequences which cannot be predicted.

In particular, on July 27, 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, publicly announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021.

It is unclear whether, at that time, LIBOR will cease to exist or if new methods of calculating LIBOR will be established.

In particular, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, has publicly announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021.

The cessation date for submission and publication of rates for certain tenors of U.S.

dollar LIBOR has since been extended by the ICE Benchmark Administration until mid-2023.

While this announcement extends the transition period, the United States Federal Reserve issued a statement advising banks to stop new U.S.

dollar LIBOR issuances by the end of 2021.

In the United States, the Alternative Reference Rates Committee, which was convened by the Federal Reserve Board and the Federal Reserve Bank of New York, has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate for U.S.

dollar LIBOR.

Financial regulators in the United Kingdom, the European Union, Japan, and Switzerland also have formed working groups with the aim of recommending alternatives to LIBOR denominated in their local currencies.

Although SOFR appears to be the preferred replacement rate for U.S.

dollar LIBOR, it is unclear if other benchmarks may emerge or if other rates will be adopted outside of the United States.

As of December 31, 2020, approximately $555 million of our outstanding indebtedness had interest rate payments determined directly or indirectly based on LIBOR.

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Any uncertainty regarding the continued use and reliability of LIBOR as a benchmark interest rate could adversely affect the performance of LIBOR relative to its historic values.

If the methods of calculating LIBOR change from current methods for any reason, or if LIBOR ceases to perform as it has historically, our interest expense associated with the unhedged portion of our outstanding indebtedness or any future indebtedness we incur may increase.

Further, if LIBOR ceases to exist, we may be forced to substitute an alternative reference rate, such as a different benchmark interest rate or base rate borrowings, in lieu of LIBOR under our current and future indebtedness and interest rate swaps.

At this point, it is not clear what, if any, alternative reference rate may be adopted to replace LIBOR, however, any such alternative reference rate may be calculated differently than LIBOR and may increase the interest expense associated with our existing or future indebtedness.

Finally, the replacement or disappearance of LIBOR may adversely affect the value of and costs associated with our LIBOR-based obligations and the availability, pricing and terms of LIBOR-based interest rate swaps we use to hedge our interest rate risk.

Alternative reference rates or modifications to LIBOR may not align for our assets, liabilities, and hedging instruments, which could reduce the effectiveness of certain of our interest rate hedges, and could cause increased volatility in our earnings.

Even if financial instruments are transitioned to alternative benchmarks, such as SOFR, successfully, the new benchmarks are likely to differ from LIBOR, and our interest expense associated with our outstanding floating rate indebtedness or any future indebtedness we incur may

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Transitioning to an alternative benchmark rate, such as SOFR, may result in us incurring significant expense and legal risks, as renegotiation and changes to documentation may be required in effecting the transition.

The replacement or disappearance of LIBOR may adversely affect the value of and costs associated with our LIBOR-based obligations and the availability, pricing and terms of LIBOR-based interest rate swaps we use to hedge our interest rate risk.

Alternative reference rates, such as SOFR, may not align with our assets, liabilities, and hedging instruments, which could reduce the effectiveness of certain of our interest rate hedges, and could cause increased volatility in our earnings.

We may also incur expenses to amend and adjust our indebtedness and swaps to eliminate any differences between any alternative reference rates used by our interest rate hedges and our outstanding indebtedness.

Any of these occurrences could materially and adversely affect our borrowing costs, business and results of operations.

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A downgrade in our credit rating could materially adversely affect our business and financial condition.

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If any of the credit rating agencies that have rated our debt securities downgrades or lowers its credit rating, or if any credit rating agency indicates that it has placed any such rating on a so-called “watch list” for a possible downgrading or lowering or otherwise indicates that its outlook for that rating is negative, it could have a material adverse effect on our costs and availability of capital, which could in turn have a material adverse effect on our financial condition, results of operations, cash flows and our ability to satisfy our debt service obligations.

General Risks

Any change in our dividend policy could have a material adverse effect on the market price of our common stock.

Distributions are authorized and determined by our board of directors in its sole discretion and depend upon a number of factors, including:

• cash available for distribution;

• our results of operations and anticipated future results of operations;

• our financial condition, especially in relation to our anticipated future capital needs of our properties;

• the level of reserves we establish for future capital expenditures;

• the distribution requirements for REITs under the Code;

• the level of distributions paid by comparable listed REITs;

• our operating expenses;

• other factors our board of directors deems relevant.

We expect to continue to pay quarterly distributions to our stockholders;

Any change in our distribution policy could have a material adverse effect on the market price of our common stock.

There are significant price and volume fluctuations in the public markets, including on the exchange which we listed our common stock.

stock markets, including the NYSE on which our common stock is listed, have historically experienced significant price and volume fluctuations.

If the market price of our common stock declines significantly, stockholders may be unable to resell their shares at or above their purchase price.

We cannot assure stockholders that the market price of our common stock will not fluctuate or decline significantly in the future.

Some of the factors that could negatively affect our stock price or result in fluctuations in the price or trading volume of our common stock include, but are not limited to, the following:

• changes in the perceived demand for office space;