What changed in this filing

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Item 1A. Risk Factors

2024-02-20 compared with 2023-02-23 · 66 added, 83 removed, 454 unchanged (25% of the section changed)

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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 or financial condition, impair our future prospects, negatively affect our ability to make distributions to our stockholders 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.

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 risks, uncertainties, and assumptions relating to our business.

Risks Related to Our Business and Operations

Economic, regulatory, socio-economic 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.

The investment returns available from equity investments in real estate depend on the amount of income earned and capital appreciation generated by the properties, as well as the expenses incurred in connection with the 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 work-from-home arrangements, or remote work technology (e.g.

Metaverse, Zoom, etc) becoming more prevalent or other changes that reduce the demand for office workers or parking spaces generally;

• changes in the patterns of office or parking garage use due to work-from-home arrangements, remote work technology (e.g.

Artificial Intelligence, Zoom, etc) becoming more prevalent, or other changes that reduce the demand for office workers or parking spaces generally;

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

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• changes in market rental rates and related concessions granted to tenants, including 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, hospitality, travel, retail, and co-working sectors), including bankruptcies, financial difficulties, or lease defaults by our tenants;

• the financial stability of our tenants, including bankruptcies, financial difficulties, or lease defaults by our tenants;

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

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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 to operate our business, make distributions to our stockholders, or maintain 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 properties.

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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.

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, and we may expend significant capital in our efforts to re-let space.

Every year, we compete with a number of other developers, owners, and operators of office and office-oriented, mixed-use properties to renew leases with our existing tenants and to attract new tenants.

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This concentration exposes us to the risk of economic downturns in the office sector to a greater extent than if our portfolio also included other sectors of the real estate industry.

Collectively, over two-thirds of our ALR is generated from our properties located in our Sunbelt markets as of December 31, 2022.

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

Collectively, approximately 70% of our ALR is generated from our properties located in our Sunbelt markets as of December 31, 2023.

As a result, we are particularly susceptible to adverse conditions in these markets, including any reduction in demand for office properties, industry slowdowns, civil unrest, natural disasters, health crises, governmental cut backs, relocation of businesses, business layoffs or downsizing, and changing demographics.

Our operations may also be affected if competing properties are built in any of these markets.

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There has also been a trend of businesses utilizing open workspaces and “co-working” spaces.

These practices enable businesses to reduce their space requirements.

These trends, some of which could accelerate as a result of changes in work practices during the COVID-19 pandemic, could erode demand for commercial office space and, in turn, place downward pressure on occupancy, rental rates and property valuations.

These practices enable businesses to reduce their space requirements, thereby eroding demand for commercial office space and, in turn, placing downward pressure on occupancy, rental rates and property valuations.

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

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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, 2022, our two largest tenants were:

US Bancorp (5.0% of ALR) and State of New York (4.6% 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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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.

Some of our leases provide tenants with the right to terminate their leases early.

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We currently own six properties in which at least one of the tenants is a federal government agency.

Lease agreements with these federal government agencies contain certain provisions required by federal law, which require, among other things, that the lessor or the owner of the property complies with certain rules and regulations, 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 intended to assist small businesses.

Lease agreements with these federal government agencies contain certain provisions required by federal law, which require, among other things, that the lessor or the owner of the property complies with certain 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 intended to assist small businesses.

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.

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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.

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

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

In conjunction with the performance of our goodwill impairment assessment during the year ended December 31, 2022, we recognized an impairment charge related to our goodwill of approximately $16.0 million.

See Note 6 to our accompanying consolidated financial statements for more information.

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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.

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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:

the availability of attractive properties, our ability to arrange financing, and our ability to consummate acquisitions on satisfactory terms.

We intend to continue acquiring high-quality office properties, subject to the availability of attractive properties, our ability to arrange financing, and our ability to consummate acquisitions on satisfactory terms.

In deciding whether to acquire a particular property, we make certain assumptions regarding the expected future performance of that property.

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For example, 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.

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

To the extent that we engage in acquisition activities, we will face 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;

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We may acquire properties in new markets, where we may face risks associated with investing in an unfamiliar market.

We may acquire properties located in markets in which we do not have an established presence.

We may face risks associated

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with a lack of market knowledge or understanding of the local economy, acquiring additional properties in the new market and achieving economies of scale, forging new business relationships in the area and unfamiliarity with local government and permitting procedures.

We have in the past and may in the future acquire properties located in markets in which we do not have an established presence.

To the extent we acquire any such properties, we will face risks associated with a lack of market knowledge or understanding of the local economy, acquiring additional properties in the new market and achieving economies of scale, forging new business relationships in the area and unfamiliarity with local government and permitting procedures.

As a result, the operating performance of properties acquired in new markets may be less than we anticipate, and we may have difficulty integrating such properties into our existing portfolio.

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

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

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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;

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• 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.

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

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

Actual or threatened public health epidemics or outbreaks, and the actions taken to combat such epidemics or outbreaks, may adversely impact the global economy or the economic and other conditions in the markets in which we operate.

In particular, the recent COVID-19 pandemic and its associated variants adversely impacted the global economy and the regional U.S.

For example, the COVID-19 pandemic and its associated variants adversely impacted the global economy and the regional U.S.

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

The recent COVID-19 pandemic also accelerated some company’s adoption of remote work platforms and may result in a longer-term decrease in the need for office space among some companies.

While some effects of the COVID-19 pandemic have begun to subside, the rise of additional viral variants could cause a resurgence of the pandemic and its adverse impacts in the future.

Among other effects, any restrictions put in place to combat public health epidemics or outbreaks could cause some of our tenants to close or operate at reduced capacity for an extended period of time, in some cases causing such tenants to default on their leases, or could result in technological and social changes that reduce the long-term necessity for office space among companies generally.

The COVID-19 pandemic also accelerated some companies’ adoption of remote work platforms and could result in longer term technological and social changes that reduce the demand for office space among companies generally.

Our tenants' inability to pay rent under our leases and any declines in demand for office space could adversely affect our own liquidity and operating results.

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

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

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

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

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To the extent that any future terrorist attacks, armed hostilities, or civil unrest 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 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.

More specifically, a cyber incident is an intentional attack or an unintentional event that can include gaining unauthorized access to systems to disrupt building or corporate operations, corrupt data, or steal confidential information.

While we have not experienced any material cyber incidents in the past, the risk of a security breach or disruption, particularly through cyber attacks or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.

We face risks related to the occurrence of cybersecurity incidents, or a deficiency in our information systems, 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 cybersecurity incident is considered to be an unauthorized occurrence, or a series of related unauthorized occurrences, on or conducted through our information systems that jeopardizes the confidentiality, integrity, or availability of our information systems or any information residing therein.

While we have not experienced any material cybersecurity incidents in the past, the risk of such an incident, including as a result of computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.

As our reliance on technology has increased, so have the risks posed to our systems, both internal and those we have outsourced.

Risks that could directly result from the occurrence of a cyber incident include physical harm to occupants of our buildings, physical damage to our buildings, actual cash loss, operational interruption, damage to our relationship and reputation with our tenants, potential errors from misstated financial reports, violations of loan covenants, missed reporting deadlines, and private data exposure, among others.

Risks that could directly result from the occurrence of a cybersecurity incident include physical harm to occupants of our buildings, physical damage to our buildings, actual cash loss, operational interruption, regulatory investigations, fines and orders, litigation, damage to our relationship and reputation with our tenants, potential errors from misstated financial reports, violations of loan covenants, missed reporting deadlines, and private data exposure, among others.

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

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

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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.

Insider or employee cyber and security threats, including as a result of social engineering and phishing attempts, are increasingly a concern for all companies, including ours.

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 cybersecurity risks and incidents.

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

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This continued development and enhancement will require us to expend additional resources, including to investigate and remediate any information security vulnerabilities that may be detected.

Although we make efforts to maintain the security and integrity of these types of information technology networks and related systems, and despite various measures we have implemented to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging.

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attempted security breaches or disruptions would not be successful or damaging.

Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed to not be detected.

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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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• we may not be in a position to exercise sole decision-making authority regarding the property or joint venture, which could create the potential risk of creating impasses on decisions, such as acquisitions or sales;

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• such co-venturer may, at any time, have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals;

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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.

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

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

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.

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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, if contamination is discovered on our properties, environmental laws may impose restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us from entering into leases with prospective tenants.

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Some of our properties are adjacent to or near other properties that have contained or currently contain underground storage tanks used to store petroleum products or other hazardous or toxic substances.

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Our markets could experience increases in rainfall, storm intensity, larger flood zones, water shortages, hurricanes, changing temperature averages or extremes, or rising sea-levels as a result of global climate change.

Over time, these conditions could result in physical damage

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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 space in our buildings.

Climate change could also indirectly negatively impact our business by causing increased costs associated with energy, storm cleanup, or property and casualty or flood insurance premiums, deductibles, claims or liabilities, or a decrease in or unavailability of coverage, for properties in areas subject to severe weather.

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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.

Climate change has also been identified as a potential source of

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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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Risks Related to Our Organization and Structure

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This restriction may have the effect of delaying, deferring, or preventing a change in control, 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.

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Our board of directors can take many actions without stockholder approval.

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Such preferred stock also could have the effect of delaying, deferring, or preventing a change in control, 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.

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Our board of directors could elect for us to be subject to certain Maryland law limitations on changes in control that could have the effect of preventing transactions in the best interest of our stockholders.

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Our bylaws contain a provision exempting any acquisition by any person of shares of our stock from the control share acquisition statute, and our board of directors has adopted a resolution exempting any business combination with any person from the business combination statute.

As a result, these provisions currently will not apply to a business combination or control share acquisition involving our company.

As a result, these provisions currently will not apply to a business combination or

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control share acquisition involving our company.

However, our board of directors still has the ability to opt into the business combination provisions and the control share provisions of Maryland law in the future.

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

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Risks Related to Tax Matters

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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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Failure of our operating partnership to be treated as a disregarded entity or a partnership would have serious adverse consequences to our stockholders.

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For example, we will be subject to federal income tax on any undistributed REIT taxable income.

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from prior periods, we will be subject to a 4% excise tax on the excess of the required distribution over the sum of (i) the amounts actually distributed by us, plus (ii) retained amounts on which we pay income tax at the corporate level.

Further, if we fail to distribute during each calendar year at least the sum of (a) 85% of our ordinary income for such year, (b) 95% of our net capital gain income for such year, and (c) any undistributed taxable income from prior periods, we will be subject to a 4% excise tax on the excess of the required distribution over the sum of (i) the amounts actually distributed by us, plus (ii) retained amounts on which we pay income tax at the corporate level.

If we realize net income from foreclosure properties that we hold primarily for sale to customers in the ordinary course of business, we must pay tax thereon at the highest corporate income tax rate, and if we sell a property, other than foreclosure property, that we are determined to have held for sale to customers in the ordinary course of business, any gain realized would be subject to a 100% “prohibited transaction” tax.

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federal income tax purposes no later than when such income is taken into account as revenue on our financial statement (subject to an exception for certain income that is already subject to a special method of accounting under the Code).

This could cause us to recognize taxable income prior to the receipt of the associated cash.

This could cause us to recognize taxable

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income prior to the receipt of the associated cash.

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.

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The more favorable rates applicable to regular corporate dividends could cause investors who are individuals to perceive investments in REITs to be relatively less attractive than investments in non-REIT corporations that make distributions, particularly after the scheduled expiration of the 20% deduction applicable to qualified REIT dividends on December 31, 2025.

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A recharacterization of transactions undertaken by our operating partnership may result in lost tax benefits or prohibited transactions, which would diminish cash distributions to our stockholders, or even cause us to lose REIT status.

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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 distributions to our stockholders.

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Property taxes may decrease returns on real estate.

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Although the instruments governing our indebtedness limit our ability to incur additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and, under certain circumstances, debt incurred in compliance with these restrictions could be substantial.

We may incur additional indebtedness to acquire properties or other real estate-related investments, to fund property improvements, and other capital expenditures or for other corporate purposes, such as to repurchase shares of our common stock through repurchase programs that our board of directors have authorized or to fund future distributions to our stockholders.

We may incur additional indebtedness to acquire properties or other real estate-related investments, to fund property improvements, and other capital expenditures or for other corporate purposes.

Significant borrowings by us increase the risks of investors' willingness to make an investment in us.

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and restrictions in the agreements governing our indebtedness.

As a result, we may not be

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able to refinance our indebtedness on commercially reasonable terms, or at all.

As a result, we may not be able to refinance our indebtedness on commercially reasonable terms, or at all.

If we do not generate sufficient cash flow from operations, and additional borrowings or refinancings or proceeds of assets sales or other sources of cash are not available to us, we may not have sufficient cash to enable us to meet all of our obligations.

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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 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 cause the amount of our variable-rate debt payments to also increase and could limit our ability to make distributions to our stockholders.

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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.

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The replacement of LIBOR with SOFR may adversely affect our results of operations.

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 and will cease publication of USD LIBOR as of June 30, 2023.

The Federal Reserve Board ("FRB"), Federal Deposit Insurance Corporation ("FDIC"), and Office of the Comptroller of the Currency ("OCC") have issued supervisory guidance encouraging banks to cease entering into new contracts that use USD LIBOR as a reference rate.

The Alternative Reference Rates Committee, which was convened by the Federal Reserve Board and the Federal Reserve Bank of New York, has identified SOFR as its preferred alternative for USD LIBOR.

As of December 31, 2022, our $250 Million Unsecured 2018 Term Loan had interest rate payments determined based on LIBOR.

In addition, we currently have interest rate swaps with a notional value of $100 million that also use LIBOR as a reference rate.

Even if our financial instruments are successfully transitioned to SOFR, the interest rate payments determined using SOFR may differ from what such interest rate payments would have been using LIBOR, and the interest expense associated with our $250 Million Unsecured 2018 Term Loan may increase relative to what such interest expense would have been had LIBOR continued to have been used as the reference rate.

Additionally, 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 caused by the replacement of LIBOR with SOFR.

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

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

The credit ratings assigned to our unsecured debt securities could change based upon, among other things, our results of operations and financial condition.

If any of the credit rating agencies that have rated our unsecured 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.

A downgrade in our credit ratings, the credit ratings of the Operating Partnership or the credit ratings of our or the Operating Partnership's unsecured debt securities could materially adversely affect our business and financial condition.

The credit ratings assigned to us, to the Operating Partnership and to our and their unsecured debt securities could change based upon, among other things, our results of operations and financial condition.

If any of the credit rating agencies that have rated us, the Operating Partnership or our or their unsecured debt securities downgrades or lowers these credit ratings, or if any credit rating agency indicates that it has placed any such rating on a so-called “watch list” for 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 (including by increasing interest expense as a result of increases in the state interest rate spreads over reference rates or increased interest rate step-ups on certain of our or the Operating Partnership's debt instruments) 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

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• other factors our board of directors deems relevant.

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

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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,

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stockholders may be unable to resell their shares at or above their purchase price.

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.

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

• change in the credit ratings assigned to us, the Operating Partnership or our or their unsecured debt securities;

• additions or departures of key personnel;

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For instance, if interest rates continue to 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.

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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.

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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.

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UNRESOLVED STAFF COMMENTS

There were no unresolved SEC staff comments as of December 31, 2022.

The failure of any bank in which we deposit our funds could reduce the amount of cash we have available to pay distributions and make additional investments.

The Federal Deposit Insurance Corporation only insures amounts up to $250,000 per depositor.

We have cash and cash equivalents and restricted cash deposited in certain financial institutions in excess of federally insured levels.

Recently, we have seen the abrupt failure of more than one regional bank.

Although we hold cash primarily in the top ten banks in the United States and we did not experience any loss related to the recent bank failures, if any of the banking institutions in which we deposit funds ultimately fails, we may lose amounts of our deposits over federally insured levels.

The loss of our deposits could reduce the amount of cash we have available to distribute, to pay down maturing debt, or to invest, and could result in a decline in the value of our stockholders' investment.

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What changed 10-K

Item 1A. Risk Factors