American Assets Trust (AAT) risk factors, FY2024 10-K

Risks Related to Our Business and Operations

1. 01Our portfolio of properties is dependent upon regional and local economic conditions and is geographically concentrated in California, Washington, Oregon, Texas and Hawaii, which may cause us to be more susceptible to adverse developments in those markets than if we owned a more geographically diverse portfolio
2. 02We may be adversely affected by trends in office real estate
3. 03We have a substantial amount of indebtedness, which may expose us to the risk of default under our debt obligations
4. 04Our retail shopping center properties depend on anchor stores or major tenants to attract shoppers and could be adversely affected by the loss of, or a store closure by, one or more of these tenants
5. 05Many of the leases at our retail properties contain “co-tenancy” or “go-dark” provisions, which, if triggered, may allow tenants to pay reduced rent, cease operations or terminate their leases, any of which could adversely affect our performance or the value of the applicable retail property
6. 06We may be unable to identify and complete acquisitions of properties that meet our criteria, which may impede our growth
7. 07We face significant competition for acquisitions of real properties, which may reduce the number of acquisition opportunities available to us and increase the costs of these acquisitions
8. 08We may be unable to renew leases, lease vacant space or re-let space as leases expire, thereby increasing or prolonging vacancies, which could adversely affect our financial condition, results of operations, cash flow and per share trading price of our common stock
9. 09Our ability to grow will be limited if we cannot obtain additional capital
10. 10High mortgage rates and/or unavailability of mortgage debt 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
11. 11Mortgage debt obligations expose us to the possibility of foreclosure, which could result in the loss of our investment in a property or group of properties subject to mortgage debt
12. 12Our future acquisitions may not yield the returns we expect, and we may otherwise be unable to operate these properties to meet our financial expectations, which could adversely affect our financial condition, results of operations, cash flow and per share trading price of our common stock
13. 13We may not be able to control our operating costs or our expenses may remain constant or increase, even if our revenues do not increase, causing our results of operations to be adversely affected
14. 14Some of our financing arrangements involve balloon payment obligations, which may adversely affect our ability to make distributions
15. 15Failure to hedge effectively against interest rate changes may adversely affect our financial condition, results of operations, cash flow and per share trading price of our common stock
16. 16The effective subordination of our unsecured indebtedness may reduce amounts available for payment on our unsecured indebtedness
17. 17If we invest in mortgage receivables, including originating mortgages, such investment would be subject to several risks, any of which could decrease the value of such investments and result in a significant loss to us
18. 18Adverse economic and geopolitical conditions and dislocations in the credit markets could have a material adverse effect on our financial condition, results of operations, cash flow and per share trading price of our common stock
19. 19We face significant competition in the leasing market, which may decrease or prevent increases of the occupancy and rental rates of our properties
20. 20We may be required to make rent or other concessions and/or significant capital expenditures to improve our properties in order to retain and attract tenants, causing our financial condition, results of operations, cash flow and per share trading price of our common stock to be adversely affected
21. 21The actual rents we receive for the properties in our portfolio may be less than our asking rents, and we may experience lease roll down from time to time, which could negatively impact our ability to generate cash flow growth
22. 22We may acquire properties or portfolios of properties through tax deferred contribution transactions, which could result in stockholder dilution and limit our ability to sell or refinance such assets
23. 23We must rely on third-party management companies to operate the Waikiki Beach Walk-Embassy Suites™ in order to maintain our qualification as a REIT under the Code, and, as a result, we will have less control than if we were operating the hotel directly
24. 24Our franchisor, Embassy Suites™, could cause us to expend additional funds on upgraded operating standards, which may adversely affect our results of operations and reduce cash available for distribution to stockholders and unitholders
25. 25Embassy Suites™, our franchisor, has a right of first offer with respect to the Waikiki Beach Walk-Embassy Suites™, which may limit our ability to obtain the highest price possible for the hotel
26. 26Our real estate development activities are subject to risks particular to development, such as unanticipated expenses, delays and other contingencies, any of which could adversely affect our financial condition, results of operations, cash flow and the per share trading price of our common stock
27. 27Our success depends on key personnel whose continued service is not guaranteed, and the loss of one or more of our key personnel could adversely affect our ability to manage our business and to implement our growth strategies, or could create a negative perception in the capital markets
28. 28Mr. Rady is involved in outside businesses, which may interfere with his ability to devote time and attention to our business and affairs
29. 29We may be subject to on-going or future litigation and otherwise in the ordinary course of business, which could have a material adverse effect on our financial condition, results of operations, cash flow and per share trading price of our common stock
30. 30Potential losses from earthquakes, fires, floods or other natural disasters may not be fully covered by insurance
31. 31We may be adversely affected by laws, regulations or other issues related to climate change
32. 32Climate change may adversely impact our properties directly, and may lead to additional compliance obligations and costs as well as additional taxes and fees
33. 33Geographic concentration of our properties makes our business more vulnerable to natural disasters, severe weather conditions and climate change
34. 34We may not be able to rebuild our existing properties to their existing specifications if we experience a substantial or comprehensive loss of such properties
35. 35Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on co-venturers' financial condition and disputes between us and our co-venturers
36. 36Increased competition and increased affordability of residential homes could limit our ability to retain our residents, lease apartment homes or increase or maintain rents at our multifamily apartment communities

Risks Related to the Real Estate Industry

1. 37Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties and harm our financial condition
2. 38Our property taxes could increase due to property tax rate changes or reassessment, which would adversely impact our cash flows
3. 39As an owner of real estate, we could incur significant costs and liabilities related to environmental matters
4. 40Our properties may contain or develop harmful mold or suffer from other air quality issues, which could lead to liability for adverse health effects and costs of remediation
5. 41We may incur significant costs complying with various federal, state and local laws, regulations and covenants that are applicable to our properties

Risks Related to Our Organizational Structure

1. 42Ernest S. Rady and his affiliates, directly or indirectly, own a substantial beneficial interest in our company on a fully diluted basis and have the ability to exercise significant influence on our company and our Operating Partnership, including the approval of significant corporate transactions
2. 43Conflicts of interest may exist or could arise in the future between the interests of our stockholders and the interests of holders of units in our Operating Partnership, which may impede business decisions that could benefit our stockholders
3. 44Our charter and bylaws, the partnership agreement of our Operating Partnership and Maryland law contain provisions that may delay, defer or prevent a change of control transaction that might involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interest
4. 45We could increase the number of authorized shares of stock, classify and reclassify unissued stock and issue stock without stockholder approval
5. 46Certain provisions of Maryland law could inhibit changes in control, which may discourage third parties from conducting a tender offer or seeking other change of control transactions that could involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interest
6. 47Certain provisions in the partnership agreement of our Operating Partnership may delay or prevent unsolicited acquisitions of us
7. 48Our board of directors may change our investment and financing policies without stockholder approval and we may become more highly leveraged, which may increase our risk of default under our debt obligations
8. 49Our rights and the rights of our stockholders to take action against our directors and officers are limited
9. 50We are a holding company with no direct operations and, as such, we will rely on funds received from our Operating Partnership to pay liabilities, and the interests of our stockholders will be structurally subordinated to all liabilities and obligations of our Operating Partnership and its subsidiaries
10. 51Our operating structure subjects us to the risk of increased hotel operating expenses
11. 52Future sales of common stock or common units by our directors and officers, or their pledgees, as a result of margin calls or foreclosures could adversely affect the price of our common stock and could, in the future, result in a loss of control of our company

Risks Related to Our Status as a REIT

1. 53Failure to maintain our qualification as a REIT would have significant adverse consequences to us and the value of our common stock
2. 54If our Operating Partnership failed to qualify as a partnership for federal income tax purposes, we would cease to qualify as a REIT and suffer other adverse consequences
3. 55The asset tests applicable to REITs limit our ability to own taxable REIT subsidiaries, and we will be required to pay a 100% penalty tax on certain income or deductions if our transactions with our taxable REIT subsidiaries are not conducted on arm's length terms
4. 56We may in the future choose to make dividends payable partly in our common stock, in which case you may be required to pay tax in excess of the cash you receive
5. 57Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends
6. 58The tax imposed on REITs engaging in “prohibited transactions” may limit our ability to engage in transactions which would be treated as sales for federal income tax purposes
7. 59Complying with REIT requirements may affect our profitability and may force us to liquidate or forgo otherwise attractive investments
8. 60Legislative or other actions affecting REITs could have a negative effect on our investors or us, including our ability to maintain our qualification as a REIT or the federal income tax consequences of such qualification
9. 61Pandemics and related governmental or business restrictions could adversely impact our business, financial condition, results of operations, cash flows, liquidity and ability to satisfy our debt service obligations and to pay dividends and distributions to security holders