Hudson Pacific Properties (HPP) risk factors, FY2024 10-K

Risks Related to Our Properties and Our Business

1. 01Our properties are located in Northern and Southern California, the Pacific Northwest, New York, Western Canada and Greater London, United Kingdom, and we are susceptible to adverse economic conditions, local regulations and natural disasters affecting those markets
2. 02We derive a significant portion of our rental revenue from tenants in the technology and media and entertainment industries, which makes us particularly susceptible to demand for rental space in those industries
3. 03We may be unable to identify and complete acquisitions of properties that meet our criteria, which may impede our growth
4. 04Our future acquisitions may not yield the returns we expect
5. 05We may acquire properties or portfolios of properties through tax deferred contribution transactions, which could result in stockholder dilution and limit our ability to sell such assets
6. 06Our growth depends on external sources of capital that are outside of our control and may not be available to us on commercially reasonable terms or at all
7. 07Failure to hedge effectively against interest rate changes may adversely affect our financial condition, results of operations, cash flow, cash available for distribution, including cash available for payment of dividends on and the per share trading price of our securities
8. 08Mortgage 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
9. 09Our unsecured revolving credit facility, registered senior notes, term loan facility and note purchase agreements restrict our ability to engage in some business activities
10. 10Further downgrades in our credit ratings could materially adversely affect our business and financial condition
11. 11We face significant competition, which may decrease or prevent increases in the occupancy and rental rates of our properties
12. 12We depend on significant tenants
13. 13We may be unable to renew leases, lease vacant space or re-let space as leases expire
14. 14We 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 securities to be adversely affected
15. 15The 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
16. 16Some of our properties are subject to ground leases, the termination or expiration of which could cause us to lose our interest in, and the right to receive rental income from, such properties
17. 17Our success depends on key personnel whose continued service is not guaranteed
18. 18Some of our workforce is covered by collective bargaining agreements and our business may be adversely affected by any disruptions caused by union activities
19. 19Joint 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
20. 20If we fail to maintain an effective system of integrated internal controls, we may not be able to accurately report our financial results
21. 21We have suspended paying dividends on our common stock and we cannot assure you of our ability to pay dividends in the future or the amount of any dividends

Risks Related to the Real Estate Industry

1. 22Our performance and value are subject to risks associated with real estate assets and the real estate industry
2. 23Illiquidity 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
3. 24We could incur significant costs related to government regulation and litigation over environmental matters
4. 25potential liability for noncompliance. This may result in significant unanticipated expenditures or may otherwise materially and adversely affect our operations, or those of our tenants, which could in turn have an adverse effect on us
5. 26Our 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
6. 27We may incur significant costs complying with various federal, state and local laws, regulations and covenants that are applicable to our properties
7. 28We are exposed to risks associated with property development and redevelopment

Risks Related to Our Organizational Structure

1. 29Our common stock is ranked junior to our series C preferred stock
2. 30Conflicts of interest 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. 31Our 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, even if such a change in control may be in our interest, and as a result may depress the market price of our securities
4. 32Certain provisions in the partnership agreement of our operating partnership may delay or prevent unsolicited acquisitions of us
5. 33Our 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
6. 34Our rights and the rights of our stockholders to take action against our directors and officers are limited
7. 35We are a holding company with no direct operations and, as such, we rely on funds received from our operating partnership to pay liabilities, and the interests of our stockholders are structurally subordinated to all liabilities and obligations of our operating partnership and its subsidiaries

Risks Related to Our Status as a REIT

1. 36Failure to qualify as a REIT would have significant adverse consequences to us and the value of our stock
2. 37In addition, legislation, new regulations, administrative interpretations or court decisions may materially adversely affect our investors, our ability to qualify as a REIT for federal income tax purposes or the desirability of an investment in a REIT relative to other investments
3. 38If our operating partnership were to fail to qualify as a partnership for federal income tax purposes, we would cease to qualify as a REIT and suffer other adverse consequences
4. 39The tax imposed on REITs engaging in “prohibited transactions” may limit our ability to engage in transactions that would be treated as sales for federal income tax purposes
5. 40Our ownership of taxable REIT subsidiaries is subject to certain restrictions, 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
6. 41To maintain our REIT status, we may be forced to borrow funds during unfavorable market conditions
7. 42Complying with REIT requirements may affect our profitability and may force us to liquidate or forgo otherwise attractive investments
8. 43Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends
9. 44The power of our board of directors to revoke our REIT election without stockholder approval may cause adverse consequences to our stockholders and unitholders
10. 45Legislative or other actions affecting REITs could have a negative effect on our investors and us

Risks Related to General and Global Factors

1. 46Adverse 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 securities
2. 47Epidemics, pandemics or other outbreaks, and restrictions intended to prevent their spread, 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
3. 48Social, political, and economic instability, unrest, and other circumstances beyond our control could adversely affect our business operations
4. 49Potential losses, including from adverse weather conditions, natural disasters and title claims, may not be covered by insurance
5. 50We may become subject to litigation, which could have an adverse effect on our financial condition, results of operations, cash flow and the per share trading price of our securities
6. 51We face risks associated with security breaches through cyber attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (“IT”) networks and related systems
7. 52Our business and operations would suffer in the event of IT networks and related systems failures
8. 53Future terrorist activity or engagement in war by the United States may have an adverse effect on our financial condition and operating results