Douglas Emmett (DEI) risk factors, FY2024 10-K

Risks Related to Our Properties and Our Business

1. 01Sustained or further increases in inflation could adversely impact our operating results, cash flows, financial position, our ability to pay dividends and distributions, and the market price of our common stock
2. 02Economic and political changes could adversely affect our business, operating results, cash flows, financial position, our ability to pay dividends and distributions, and the market price of our common stock
3. 03Our operating performance and the market value of our common stock are subject to risks associated with our investments in real estate and with trends in the real estate industry
4. 04We have a substantial amount of debt, which exposes us to interest rate fluctuation risk and the risk of not being able to refinance our debt, which in turn could expose us to the risk of default under our debt obligations
5. 05The rents we receive from new leases may be less than our asking rents, and we may experience rent roll-down from time to time
6. 06Although we have a diverse tenant base, a large portion of our tenants operate in a concentrated group of industries and downturns in these industries could adversely affect our financial condition, results of operations and cash flows
7. 07In order to successfully compete against other properties, we need to maintain, repair, and renovate our properties, which reduces our cash flows
8. 08We face intense competition, which could adversely impact the occupancy and rental rates of our properties
9. 09Potential losses, including from adverse weather conditions, natural disasters and title claims, may not be covered by insurance
10. 10We may be unable to renew leases or lease vacant space
11. 11Our business strategy for our office portfolio focuses on leasing to smaller-sized tenants which may present greater credit risks
12. 12Real estate investments are generally illiquid
13. 13We may incur significant costs to comply with laws, regulations and covenants
14. 14Because we own real property, we are subject to extensive environmental regulations, which create uncertainty regarding future environmental expenditures and liabilities
15. 15Our 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
16. 16We presently expect to continue operating and acquiring properties in areas that have adopted laws and regulations imposing restrictions on the timing or amount of rent increases or have imposed regulations relating to low- and moderate-income housing
17. 17We may be unable to complete acquisitions that would grow our business, or successfully integrate and operate acquired properties
18. 18We may be unable to successfully expand our operations into new markets and submarkets
19. 19We are exposed to risks associated with property development
20. 20We are exposed to certain risks when we enter into JVs or issue securities of our subsidiaries, including our Operating Partnership
21. 21If we default on the ground lease to which one of our properties is subject, our business could be adversely affected
22. 22We may not have sufficient cash available for distribution to stockholders at expected levels in the future
23. 23We face risks associated with contractual counterparties being designated “Prohibited Persons” by the Office of Foreign Assets Control
24. 24Terrorism and war could harm our business and operating results

Risks Related to Our Organization and Structure

1. 25Tax consequences to holders of OP Units upon a sale or refinancing of our properties may cause the interests of our executive officers to differ from the interests of our stockholders
2. 26Our executive officers have significant influence over our affairs
3. 27Under their employment agreements, certain of our executive officers will receive severance if they are terminated without cause or resign for good reason
4. 28The loss of any of our executive officers or key senior personnel could significantly harm our business
5. 29Compensation awards to our management may not be tied to or correspond with improved financial results or the market price of our common stock
6. 30Our board of directors may change significant corporate policies without stockholder approval
7. 31Our growth depends on external sources of capital which are outside of our control
8. 32We face risks associated with short-term liquid investments
9. 33(i) Our charter contains a five percent ownership limit
10. 34(ii) Our board of directors may create and issue a class or series of preferred stock without stockholder approval
11. 35(iii) Certain provisions in the partnership agreement of our Operating Partnership may delay or prevent an unsolicited acquisition of us
12. 36(iv) Certain provisions of Maryland law could inhibit changes in control
13. 37Our fiduciary duties as the sole stockholder of the general partner of our Operating Partnership could create conflicts of interest

Risks Related to Taxes and Our Status as a REIT

1. 38Our property taxes could increase due to property tax rate changes, reassessments or changes in property tax laws, which would adversely impact our cash flows
2. 39Transfer taxes like those imposed by Los Angeles Measure ULA could have a negative impact on our property valuations and our ability to acquire or sell properties at favorable prices or on a timely basis
3. 40Failure to qualify as a REIT would subject us to corporate taxation and potentially reduce cash available for distributions
4. 41If the Operating Partnership, or any of its subsidiaries (other than any TRS), were treated as a regular corporation for federal income tax purposes, we could cease to qualify as a REIT
5. 42Even if we qualify as a REIT, we will be required to pay some taxes which would reduce cash available for distributions
6. 43REIT distribution requirements could adversely affect our liquidity and cause us to forego otherwise attractive opportunities
7. 44REIT stockholders can receive taxable income without cash distributions
8. 45Legislative 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. 46Non-U.S. investors may be subject to FIRPTA, which would impose tax on certain distributions and on the sale of common stock if we are unable to qualify as a “domestically controlled” REIT or if our stock is not considered to be regularly traded on an established securities market

General Risks

1. 47Security breaches through cyber attacks, cyber intrusions or otherwise, as well as other significant disruptions of our IT networks and related systems could harm our business
2. 48Litigation could have an adverse effect on our business
3. 49If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results
4. 50New accounting pronouncements could adversely affect our operating results or the reported financial performance of our tenants