Easterly Government Properties (DEA) risk factors, FY2025 10-K

Risks Related to our Business and Operations

1. 01We may be unable to renew leases or lease vacating space on favorable terms or at all as leases expire, which could adversely affect our business, financial condition and results of operations
2. 02We are exposed to risks associated with property development and redevelopment, including new developments for anticipated tenant agencies and build-to-suit renovations for existing tenant agencies
3. 03the inability to complete construction and leasing of a property on schedule, resulting in increased debt service expense and development and renovation costs
4. 04Unfavorable market and economic conditions in the United States and globally could adversely affect occupancy levels, rental rates, rent collections, operating expenses and the overall market value of our assets and have a material adverse effect on our business, financial condition and results of operations
5. 05possible reduction or relocation of the U.S. Government workforce and government shutdowns; and
6. 06Our properties are leased to a limited number of U.S. Government tenant agencies, and a change to any of these agencies’ missions could have a material adverse effect on our business, financial condition and results of operations
7. 07Some of our leases with U.S. Government tenant agencies permit the tenant agency to vacate the property and discontinue paying rent prior to their lease expiration date
8. 08We currently have a concentration of properties located in California and are exposed to changes in market conditions and natural disasters in this state27% rewritten
9. 09We are subject to risks from natural disasters and climate change
10. 10Any future pandemic, epidemic or outbreak of any highly infectious disease may cause significant disruptions to the U.S. and global economy and could contribute to significant volatility and negative pressure in financial markets
11. 11A U.S. Government tenant agency could institute condemnation proceedings against us and seek to take our property, or a leasehold interest therein, through its power of eminent domain
12. 12The impact of prolonged government shutdowns and budgetary reductions or impasses could have a material adverse effect on our business, financial condition and results of operations
13. 13An increase in the amount of U.S. Government-owned real estate may adversely affect us
14. 14We may be required to make significant capital expenditures to improve our properties in order to retain and attract tenants, including U.S. Government tenant agencies35% rewritten
15. 15Capital and credit market conditions may adversely affect our access to various sources of capital or financing or the cost of capital, which could impact our business activities, dividends, earnings and common stock price, among other things
16. 16We may be unable to identify and successfully complete acquisitions and, even if acquisitions are identified and completed, completed acquisitions may not achieve the intended benefits or may disrupt our plans and operations
17. 17Certain of our properties are leased to private tenants and we may be unable to collect balances due from private tenants that file for bankruptcy protection
18. 18Because our principal tenants are agencies of the U.S. Government, our properties have a higher risk of terrorist attack and are more likely to be the site of civil unrest than similar properties leased to non-governmental tenants
19. 19Competition could limit our ability to acquire attractive investment opportunities and to attract and retain tenants
20. 20We may be subject to increased costs of insurance and limitations on coverage, particularly regarding acts of terrorism
21. 21We may become subject to liability relating to environmental and health and safety matters, which could have a material adverse effect on our business, financial condition and results of operations
22. 22Failure to comply with U.S. Government contractor requirements could result in substantial costs and loss of substantial revenue
23. 23Our development activities may be subject to risks relating to various local, state and federal statutes, ordinances, rules and regulations concerning zoning, building design, construction and similar matters, including local regulations that impose restrictive zoning requirements
24. 24Failure to comply with the Americans with Disabilities Act and other similar regulations could result in substantial costs
25. 25Real estate investments are relatively illiquid and may limit our flexibility
26. 26Debt and preferred equity investments could cause us to incur expenses, which could adversely affect our results of operations71% rewritten
27. 27investment upon foreclosure or other remedies even if we make substantial improvements or repairs to maximize such properties' investment potentialNew
28. 28Our properties may be subject to impairment charges
29. 29We may be subject to unknown or contingent liabilities related to properties or businesses that we have acquired or may acquire in the future for which we may have limited recourse against the sellers
30. 30We may need to borrow funds or dispose of assets to meet our distribution requirements
31. 31Our subsidiaries may be prohibited from making distributions and other payments to us
32. 32Our existing tax protection agreements, and any similar agreements that we enter into in the future, could limit our flexibility with respect to selling or otherwise disposing of properties contributed to our operating partnership
33. 33We are subject to risks involved in real estate activity through joint ventures

Risks Related to Our Organization and Structure

1. 34The ability of stockholders to control our policies and effect a change of control of our company is limited by certain provisions of our charter and bylaws and by Maryland law
2. 35Certain provisions in the partnership agreement of our operating partnership may delay or prevent acquisitions of us
3. 36We may decide to change our investment strategy without stockholder approval and acquire and develop properties outside of our target market, which could have a material adverse effect on our business, financial condition and results of operations
4. 37Our board of directors may change our policies without stockholder approval
5. 38Our rights and the rights of our stockholders to take action against our directors and officers are limited, which could limit your recourse in the event of actions that you do not believe are in your best interests
6. 39a final judgment based upon a finding of active and deliberate dishonesty by the director or officer that was material to the cause of action adjudicated
7. 40Conflicts of interest may exist or could arise in the future between the interests of our stockholders and the interests of holders of common units, which may impede business decisions that could benefit our stockholders

Risks Related to Our Indebtedness and Financing

1. 41We have a substantial amount of indebtedness that may limit our financial and operating activities and may adversely affect our ability to incur additional debt to fund future needs22% rewritten
2. 42place us at a competitive disadvantage to competitors that have relatively less debt than we have
3. 43We may be unable to refinance current or future indebtedness on favorable terms, if at all
4. 44We may not have sufficient cash flow to meet the required payments of principal and interest on our debt or to pay distributions on our shares at expected levels
5. 45Certain of our debt agreements include restrictive covenants, requirements to maintain financial ratios and default provisions, which could limit our flexibility, limit our ability to make distributions and require us to repay the indebtedness prior to its maturity
6. 46Variable rate debt is subject to interest rate risk that could increase our interest expense, increase the cost to refinance and increase the cost of issuing new debt
7. 47Hedging activity may expose us to risks, including the risks that a counterparty will not perform and that the hedge will not yield the economic benefits we anticipate, which could adversely affect us29% rewritten
8. 48Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities
9. 49Mortgage 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
10. 50High mortgage rates 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

Risks Related to Our Common Stock

1. 51The trading price of our common stock may be volatile. In addition, the trading volume in our common stock may fluctuate and cause significant price variations to occur
2. 52general market and economic conditions
3. 53The form, timing or amount of dividend distributions in future periods may vary and be impacted by economic and other considerations
4. 54We cannot guarantee that we will repurchase our common stock pursuant to our share repurchase program or that our share repurchase program will enhance long-term stockholder value. Share repurchases could also increase the volatility of the price of our common stock and could diminish our cash reserves
5. 55The number of shares available for future sale could adversely affect the market price of our common stock

Risks Related to Our Status as a REIT

1. 56Failure to qualify or to maintain our qualification as a REIT would have significant adverse consequences to the value of our common stock
2. 57We may owe certain taxes notwithstanding our qualification as a REIT
3. 58If our operating partnership is treated as a corporation for U.S. federal income tax purposes, we will cease to qualify as a REIT
4. 59Our REIT status may depend on the REIT status of an Easterly Fund REIT
5. 60Dividends payable by REITs generally do not qualify for reduced tax rates applicable to non-corporate taxpayers
6. 61A portion of our distributions may be treated as a return of capital for U.S. federal income tax purposes, which could reduce the basis of a stockholder’s investment in shares of our common stock and, if greater than such basis, may trigger taxable gain
7. 62Complying with the REIT requirements may cause us to forego otherwise attractive opportunities or liquidate certain of our investments
8. 63We may be subject to a 100% penalty tax on any prohibited transactions that we enter into, or may be required to forego certain otherwise beneficial opportunities in order to avoid the penalty tax on prohibited transactions
9. 64REIT distribution requirements could adversely affect our liquidity and our ability to execute our business plan
10. 65The ability of our board of directors to revoke our REIT qualification without stockholder approval may cause adverse consequences to our stockholders
11. 66Our ability to provide certain services to our tenants may be limited by the REIT rules, or may have to be provided through a TRS88% rewritten
12. 67tenants or share in the revenue from such services if we do so through a TRS, though income earned through the TRS will be subject to corporate income taxesNew
13. 68We may face risks in connection with Section 1031 exchanges
14. 69The partnership audit rules may alter who bears the liability in the event any subsidiary partnership (such as our operating partnership) is audited and an adjustment is assessed
15. 70Possible legislative, regulatory or other actions could adversely affect our stockholders and us20% rewritten
16. 71We depend on the members of our senior management team and the loss of any of their services, or an inability to attract and retain highly qualified personnel, could have a material adverse effect on our business, financial condition and results of operations
17. 72We may from time to time be subject to litigation, which could have a material adverse effect on our business, financial condition and results of operations
18. 73We rely on information technology (“IT”) in our operations and any material failure, inadequacy, interruption or security failure of that technology could harm our business29% rewritten
19. 74Artificial generative intelligence technologies present risks related to the control of our proprietary business information, keeping such information confidential, and emerging regulatory risk, any or all of which may adversely affect our business and results of operationsNew