| GLENBOROUGH REALTY TRUST INC Item 1A Risk Factors We have identified a number of risk factors, which could adversely affect our stock value, asset value, or cash flow available to pay debt service or dividends |
| Market Fluctuations in Rental Rates and Occupancy Could Adversely Affect Our Operations Our portfolio of leases turns over continuously, with the number and value of expiring leases varying from year to year |
| Our ability to re-lease the space to existing or new tenants at rates equal to or greater than those realized historically is impacted by, among other things, the economic conditions of the market in which a property is located, the availability of competing space (including sublease space offered by tenants who have vacated space in competing buildings prior to the expiration of their lease term), and the level of improvements which may be required at the property |
| We cannot assure you that the rental rates we obtain in the future will be equal to or greater than those obtained under existing contractual commitments |
| If we cannot lease all or substantially all of the expiring space at our properties promptly, or if the rental rates are significantly lower than expected, then our results of operations and financial condition could be negatively impacted |
| Tenants’ Defaults Could Adversely Affect Our Operations Our ability to manage our assets is subject to federal bankruptcy laws and state laws that limit creditors’ rights and remedies available to real property owners to collect delinquent rents |
| If a tenant becomes insolvent or bankrupt, we cannot be sure that we could recover the premises from the tenant promptly or from a trustee or debtor-in-possession in any bankruptcy proceeding relating to that tenant |
| We also cannot be sure that we would receive rent in the proceeding sufficient to cover our expenses with respect to the premises |
| If a tenant becomes bankrupt, the federal bankruptcy code will apply, which in some instances may restrict the amount and recoverability of our claims against the tenant |
| A tenant’s default on its obligations to us could adversely affect our results of operations and financial condition |
| We May Suffer Adverse Consequences If Our Revenues Decline Since Our Operating Costs Do Not Necessarily Decline In Proportion To Our Revenue We earn a significant portion of our income from renting our properties |
| Our operating costs, however, do not necessarily fluctuate in relation to changes in our rental revenue |
| This means that our costs will not necessarily decline even if our revenues do |
| Our operating costs could also increase while our revenues do not |
| If our operating costs increase but our rental revenues do not, we may be forced to borrow to cover our costs, we may incur losses and we may not have cash available for distributions to our shareholders |
| Our Cash Flow May Be Insufficient for Debt Service Requirements As of December 31, 2005, we had approximately dlra811dtta5 million of total indebtedness, approximately dlra106dtta6 million of which is subject to variable interest rates and approximately dlra704dtta9 million of which is subject to fixed interest rates |
| Further, we intend to incur indebtedness in the future, including through borrowings under our unsecured bank line of credit, to finance property acquisitions, retirement of debt and stock repurchases |
| As a result, we expect to be subject to the risks associated with debt financing including the risk that: • interest rates may increase; • our cash flow may be insufficient to meet required payments on our debt; and • we may be unable to refinance or repay the debt as it comes due |
| Debt Restrictions May Affect Our Operations and Negatively Affect Our Ability to Repay Indebtedness at Maturity Our current dlra180 million unsecured bank line of credit contains provisions that restrict the amount of distributions we can make |
| These provisions provide that distributions may not exceed 95prca of funds from operations for any fiscal quarter |
| If we cannot obtain acceptable financing to repay indebtedness at maturity, we may have to sell properties to repay indebtedness or properties may be foreclosed upon, which could adversely affect our results of operations, financial condition and ability to service debt |
| Also, as of December 31, 2005, approximately dlra704dtta9 million of our total indebtedness included secured mortgages with cross-collateralization provisions |
| In the event of a default, the holders of this indebtedness may seek to foreclose upon properties which are not the primary collateral for their loan |
| This may, in turn, accelerate other indebtedness secured by these properties |
| Foreclosure of properties would cause us to lose income and asset value |
| Fluctuations in Interest Rates May Adversely Affect Our Operations As of December 31, 2005, we had approximately dlra106dtta6 million of variable interest rate indebtedness |
| Accordingly, an increase in interest rates would result in an increase in interest payments we make to service the debt which would adversely affect our net income and results of operations |
| 5 ______________________________________________________________________ [30]Table of Contents Limitations on Property Sales and Tax Indemnifications The Internal Revenue Code and individual agreements with sellers of properties limit our ability to sell some of our properties |
| Twenty-two of the properties in our portfolio were acquired on terms and conditions under which they can be disposed of only in a “like-kind exchange” or other non-taxable transaction for limited periods of time |
| The agreed upon time periods for these restrictions on dispositions vary from transaction to transaction |
| In the event we were to dispose of one of these properties through a taxable transaction during the restriction period, we would be required to indemnify the contributor of such property for all direct and indirect adverse tax consequences |
| Real estate investments are relatively illiquid and, therefore, will tend to limit our ability to vary our portfolio quickly in response to changes in economic or other conditions |
| We May Be Unable To Complete Acquisitions and Successfully Operate Acquired Properties We continue to evaluate the market of available properties and may acquire office and other properties when strategic opportunities exist |
| Our ability to acquire properties on favorable terms and successfully operate them may be exposed to the following significant risks: • potential inability to acquire a desired property because of competition from other real estate investors with significant capital, including both publicly traded REITs and institutional investment funds; • even if we are able to acquire a desired property, competition from other potential acquirers may significantly increase the purchase price; • even if we enter into agreements for the acquisition of office properties, these agreements are subject to customary conditions to closing, including completion of due diligence investigation to our satisfaction; • we may be unable to finance the acquisition at all or on favorable terms; • we may spend more than budgeted amounts to make necessary improvements or renovations to acquired properties; • we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations and, as a result, our results of operations and financial condition could be adversely affected; • market conditions may result in higher than expected vacancy rates and lower than expected rental rates; and • we may acquire properties subject to liabilities and without any recourse, or with only limited recourse, with respect to unknown liabilities such as liabilities for clean-up of undisclosed environmental contamination, claims by tenants, vendors or other persons dealing with the former owners of the properties and claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties |
| If we cannot finance property acquisitions on favorable terms, or operate acquired properties to meet our financial expectations, our financial condition, results of operations, cash flow, per share trading price of series A preferred stock and ability to satisfy our debt service obligations and to pay dividends to you could be adversely affected |
| Dependence on Executive Officers We depend on the efforts of Andrew Batinovich, our President and Chief Executive Officer, and Michael Steele, our Executive Vice President and Chief Operating Officer, as well as our other executive officers |
| The loss of the services of any of them could have an adverse effect on our results of operations and financial condition |
| Both Andrew Batinovich and Michael Steele have entered into employment agreements with us, as have some of the other executive officers |
| Potential Liability Due to Environmental Matters Under federal, state and local laws relating to protection of the environment, or Environmental Laws, a current or previous owner or operator of real estate may be liable for contamination resulting from the presence or discharge of petroleum products or other hazardous or toxic substances on the property |
| These owners may be required to investigate and clean-up the contamination on the property as well as the contamination which has migrated from the property |
| Environmental Laws typically impose liability and clean-up responsibility without regard to whether the owner or operator knew of, or was responsible for, the presence of the contamination |
| This liability may be joint and several unless the harm is divisible and there is a reasonable basis for allocation of responsibility |
| In addition, the owner or operator of a property may be subject to claims by third parties based on personal injury, property damage and/or other costs, including investigation and clean-up costs, resulting from environmental contamination |
| Environmental Laws may also impose restrictions on the manner in which a property may be used or transferred or in which businesses may be operated |
| These restrictions may require expenditures |
| Under the Environmental Laws, 6 ______________________________________________________________________ [31]Table of Contents any person who arranges for the transportation, disposal or treatment of hazardous or toxic substances may also be liable for the costs of investigation or clean-up of those substances at the disposal or treatment facility, whether or not the facility is or ever was owned or operated by that person |
| Our tenants generally are required by their leases to operate in compliance with all applicable Environmental Laws, and to indemnify us against any environmental liability arising from their activities on the properties |
| However, we could be subject to environmental liability relating to our management of the properties or strict liability by virtue of our ownership interest in the properties |
| Also, tenants may not satisfy their indemnification obligations under the leases |
| We are also subject to the risk that: • any environmental assessments of our properties, properties being considered for acquisition, or the properties owned by the partnerships managed by us may not have revealed all potential environmental liabilities, • any prior owner or prior or current operator of these properties may have created an environmental condition not known to us, or • an environmental condition may otherwise exist as to any one or more of these properties |
| Any one of these conditions could have an adverse effect on our results of operations and financial condition or ability to service debt, either directly (with respect to our properties), or indirectly (with respect to properties owned by partnerships we manage) |
| Moreover, future environmental laws, ordinances or regulations may have an adverse effect on our results of operations, financial condition and ability to service debt |
| Also, the current environmental condition of those properties may be affected by tenants and occupants of the properties, by the condition of land or operations in the vicinity of the properties (such as the presence of underground storage tanks), or by third parties unrelated to us |
| We are not aware of any current liabilities related to environmental matters that are material to us |
| Environmental Assessments and Potential Liability Due to Asbestos-Containing Materials Environmental Laws also govern the presence, maintenance and removal of asbestos-containing building materials |
| These laws require that asbestos-containing building materials be properly managed and maintained and that those who may come into contact with asbestos-containing building materials be adequately informed and trained |
| They also require that special precautions, including removal or other abatement, be undertaken in the event asbestos-containing building materials are disturbed during renovation or demolition of a building |
| These laws may impose fines and penalties on building owners or operators for failure to comply with these requirements |
| They also may allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos fibers |
| All of the properties that we presently own have been subject to Phase I environmental assessments by independent environmental consultants |
| Some of the Phase I environmental assessments recommended further investigations in the form of Phase II environmental assessments, including soil and groundwater sampling |
| We believe that these materials have been adequately contained and we have implemented an asbestos-containing building materials operations and maintenance program for the properties found to contain asbestos-containing building materials |
| Some, but not all, of the properties owned by partnerships we manage have been subject to Phase I environmental assessments by independent environmental consultants |
| We determine on a case-by-case basis whether to obtain Phase I environmental assessments on these properties and whether to undertake further investigation or remediation |
| In each case, we believe that these materials have been adequately contained and we have implemented an asbestos-containing building materials operations and maintenance program for the properties found to contain asbestos-containing building materials |
| We are not aware of any current liabilities related to asbestos-containing materials that are material to us |
| Potential Environmental Liability Resulting From Underground Storage Tanks Some of our properties, as well as properties that we previously owned, are leased or have been leased to owners or operators of businesses that use, store or otherwise handle petroleum products or other hazardous or toxic substances |
| These businesses include dry cleaners that operate on-site dry cleaning plants and auto care centers |
| 7 ______________________________________________________________________ [32]Table of Contents Some of these properties contain, or may have contained, underground storage tanks for the storage of petroleum products and other hazardous or toxic substances |
| These operations create a potential for the release of those substances |
| 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 |
| A few of our properties have been contaminated with these substances from on-site operations or operations on adjacent or nearby properties |
| In addition, some properties are on, or are adjacent to or near other properties upon which others, including former owners or tenants of the properties, have engaged or may engage in activities that may release petroleum products or other hazardous or toxic substances |
| Environmental Liabilities May Adversely Affect Operating Costs and Ability to Borrow The obligation to pay for the cost of complying with existing Environmental Laws as well as the cost of complying with future legislation may affect our operating costs |
| In addition, the presence of petroleum products or other hazardous or toxic substances at any of our properties, or the failure to remediate those properties properly, may adversely affect our ability to borrow by using those properties as collateral |
| The cost of defending against claims of liability and the cost of complying with Environmental Laws, including investigation or clean-up of contaminated property, could materially adversely affect our results of operations and financial condition |
| General Risks of Ownership of Real Estate We are subject to risks generally incidental to the ownership of real estate |
| These risks include: • changes in general economic or local conditions; • changes in supply of or demand for similar or competing properties in an area; • the impact of environmental protection laws; • changes in interest rates and availability of financing which may render the sale or financing of a property difficult or unattractive; • changes in tax, real estate and zoning laws; and • the creation of mechanics’ liens or similar encumbrances placed on the property by a lessee or other parties without our knowledge and consent |
| Should any of these events occur, our results of operations and financial condition could be adversely affected |
| General Risks Associated With Management and Leasing Contracts We are subject to the risks generally associated with the property management and leasing businesses |
| These risks include the risk that: • management contracts or service agreements may be terminated; • contracts will not be renewed upon expiration or will not be renewed on terms consistent with current terms; and • leasing activity generally may decline |
| Uninsured Losses May Adversely Affect Operations We, or in certain instances, tenants of our properties, carry property and liability insurance with respect to the properties |
| This coverage has policy specification and insured limits customarily carried for similar properties |
| However, certain types of losses (such as from earthquakes and floods) may be either uninsurable or not economically insurable |
| Further, certain of the properties are located in areas that are subject to earthquake activity and floods |
| Should a property sustain damage as a result of an earthquake or flood, we may incur losses due to insurance deductibles, co-payments on insured losses or uninsured losses |
| Additionally, we have elected to obtain insurance coverage for “certified acts of terrorism” as defined in the Terrorism Risk Insurance Act of 2002; however, our policies of insurance may not provide coverage for other acts of terrorism |
| Any losses from such other acts of terrorism might be uninsured |
| Should an uninsured loss occur, we could lose some or all of our capital investment, cash flow and anticipated profits related to one or more properties |
| This could have an adverse effect on our results of operations and financial condition |
| The Americans With Disabilities Act generally requires that places of public accommodation be made accessible to people with disabilities to the extent readily achievable |
| Compliance with the Americans With Disabilities Act requirements could require removal of access barriers |
| Non-compliance could result in imposition of fines by the federal government, an award of damages to private litigants and/or a court order to remove access barriers |
| Because of the limited history of the Americans With Disabilities Act, the impact of its application to our properties, including the 8 ______________________________________________________________________ [33]Table of Contents extent and timing of required renovations, is uncertain |
| Pursuant to lease agreements with tenants in certain of the “single-tenant” properties, the tenants are obligated to comply with the Americans With Disabilities Act provisions |
| If our costs are greater than anticipated or tenants are unable to meet their obligations, our results of operations and financial condition could be adversely affected |
| Development Alliances May Adversely Affect Operations We may, from time to time, enter into alliances with selected developers for the purpose of developing new projects in which these developers have, in the opinion of management, significant expertise or experience |
| These projects generally require various governmental and other approvals, the receipt of which cannot be assured |
| These development activities also may entail certain risks, including the risk that: • management may expend funds on and devote time to projects which may not come to fruition; • construction costs of a project may exceed original estimates, possibly making the project uneconomical; • occupancy rates and rents at a completed project may be less than anticipated; and • expenses at a completed development may be higher than anticipated |
| In addition, the partners in development alliances may have significant control over the operation of the alliance project |
| Therefore, these investments may, under certain circumstances, involve risks such as the possibility that the partner might: • become bankrupt; • have economic or business interests or goals that are inconsistent with our business interest or goals; or • be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives |
| Consequently, actions by a partner in a development alliance might subject property owned by the alliance to additional risk |
| Although we will seek to maintain sufficient control of any alliance to permit our objectives to be achieved, we may be unable to take action without the approval of our development alliance partners |
| Conversely, our development alliance partners could take actions binding on the alliance without our consent |
| In addition, should a partner in a development alliance become bankrupt, we could become liable for the partner’s share of the project’s liabilities |
| These risks may result in a development project adversely affecting our results of operations and financial condition |
| Joint Investments Could Be Adversely Affected By Our Lack Of Sole Decision-Making Authority and Reliance Upon a Co-Venturer’s Financial Condition We co-invest with third parties through partnerships, joint ventures, co-tenancies or other entities, acquiring non-controlling interests in, or sharing responsibility for managing the affairs of, a property, partnership, joint venture, co-tenancy or other entity |
| Therefore, we will not be in a position to exercise sole decision-making authority regarding that property, partnership, joint venture or other entity |
| Investments in partnerships, joint ventures, or other entities may involve risks not present were a third party not involved, including the possibility that our partners, co-tenants or co-venturers might become bankrupt or otherwise fail to fund their share of required capital contributions |
| Additionally, our partners or co-venturers might at any time have economic or other business interests or goals which are inconsistent with our business interests or goals |
| These investments may also have the potential risk of impasses on decisions such as a sale, because neither we nor the partner, co-tenant or co-venturer would have full control over the partnership or joint venture |
| Consequently, actions by such partner, co-tenant or co-venturer might result in subjecting properties owned by the partnership or joint venture to additional risk |
| In addition, we may in specific circumstances be liable for the actions of our third-party partners, co-tenants or co-venturers |
| As of December 31, 2005 we were participating in four unconsolidated joint ventures encompassing four properties and had an aggregate basis in the joint ventures totaling approximately dlra12 million |
| As of December 31, 2005, our share of joint venture debt totaled dlra22dtta8 million |
| Material Tax Risks Since 1996, we have operated as a REIT under the Internal Revenue Code |
| However, we may not be able to maintain our status as a REIT To qualify as a REIT, we must satisfy numerous requirements (some on an annual and quarterly basis) established under highly technical and complex Internal Revenue Code provisions |
| Only limited judicial or administrative interpretation exists for these provisions and involves the determination of various factual matters and circumstances not entirely within our control |
| We receive non-qualifying management fee income and, as a result, we may approach the income test limits imposed by the Internal Revenue Code |
| There is a risk that we may not satisfy these tests |
| Even if we continue to qualify as a REIT, we will be subject to certain federal, state and local taxes on our income and property |
| 9 ______________________________________________________________________ [34]Table of Contents Our Failure To Qualify as a REIT Would Be Costly We believe we have operated in a manner to qualify as a REIT for federal income tax purposes and intend to continue to so operate |
| Many of these requirements, however, are highly technical and complex |
| The determination that we are a REIT requires an analysis of factual matters and circumstances |
| These matters, some of which may not be totally within our control, can affect our qualification as a REIT For example, to qualify as a REIT, at least 95prca of our gross income must come from designated sources that are listed in the REIT tax laws |
| We are also required to distribute to shareholder at least 90prca of our REIT taxable income excluding capital gains |
| The fact that we hold our assets through the operating partnership and its subsidiaries further complicates the application of the REIT requirements |
| Even a technical or inadvertent mistake could jeopardize our REIT status |
| Furthermore, Congress and the Internal Revenue Service, which we refer to as the IRS, might make changes to the tax laws and regulations, and the courts might issue new rulings that make it more difficult, or impossible for us to remain qualified as a REIT If we fail to qualify as a REIT, we would be subject to federal income tax at regular corporate rates |
| Also, unless the IRS grants us relief under specific statutory provisions, we would remain disqualified as a REIT for four years following the year we first failed to qualify |
| If we failed to qualify as a REIT, we would have to pay significant income taxes and would therefore have less money available for investments or for distributions to shareholders |
| This would likely have a significant adverse effect on the value of our securities |
| In addition, the REIT tax laws would no longer require us to make any distributions to shareholders |
| New Tax Legislation Reduces Tax Rates For Dividends Paid By Non-REIT Corporations Under legislation recently enacted, the maximum tax rate on dividends to individuals has generally been reduced from 38dtta6prca to 15prca (from January 1, 2003 through December 31, 2008) |
| The reduction in rates on dividends is generally not applicable to dividends paid by a REIT except in limited circumstances that we do not contemplate |
| Although this legislation will not adversely affect the taxation of REITs or dividends paid by REITs , the favorable treatment of regular corporate dividends could cause investors who are individuals to consider stock of non-REIT corporations that pay dividends as relatively more attractive than stocks of REITs |
| It is not possible to predict whether such a change in perceived relative value will occur or what the effect, if any, this legislation will have on the market price of our stock |
| Possible Changes in Tax Laws; Effect on the Market Value of Real Estate Investments Income tax treatment of REITs may be modified by legislative, judicial or administrative action at any time |
| These changes may be applied to past as well as future operations |
| Legislation, regulations, administrative interpretations or court decisions may significantly change the tax laws with respect to (1) the qualification as a REIT or (2) the federal and state income tax consequences of this qualification |
| In addition, the changes might also indirectly affect the market value of all real estate investments, and consequently our ability to realize our investment objectives |
| Our Indebtedness Restrictions May Adversely Affect Our Ability to Incur Indebtedness Our organizational documents limit our ability to incur additional debt if the total debt, including the additional debt, would exceed 50prca of the “Borrowing Base |
| ” This could limit our ability to incur debt to fund new acquisitions, capital improvements to existing properties, or dividends |
| This debt limitation in our Charter can only be amended by an affirmative vote of the majority of all outstanding stock entitled to vote on such amendment |
| The term “Borrowing Base” is defined as the greater of Fair Market Value or Total Market Capitalization |
| Fair Market Value is based upon the value of our assets as determined by an independent appraiser |
| Total Market Capitalization is the sum of the market value of our outstanding capital stock, including shares issuable on exercise of redemption options by holders of units of the limited partnership, plus debt |
| An exception is made for refinancings and borrowings required to make distributions to maintain our status as a REIT In light of these debt restrictions, it should be noted that a change in the value of our common stock could affect the Borrowing Base, and therefore our ability to incur additional indebtedness, even though such change in the common stock’s value is unrelated to our liquidity |
| To Maintain Our REIT Status, We may be Forced to Borrow Funds During Unfavorable Market Conditions In order to maintain our REIT status, we may need to borrow funds on a short-term basis to meet the REIT distribution requirements, even if the then prevailing market conditions are not favorable for these borrowings |
| To qualify as REIT, we generally must distribute to our stockholders at least 90prca of our net taxable income each year, excluding capital gains |
| In addition, we will be subject to a 4prca nondeductible excise tax on the amount, if any, by which dividends paid by us in any calendar year are less than the sum of 85prca of our ordinary income, 95prca of our 10 ______________________________________________________________________ [35]Table of Contents capital gain net income and 100prca of our undistributed income from prior years |
| We may need short-term debt or long-term debt, proceeds from asset sales, creation of joint ventures or sale of common stock to fund required distributions as a result of differences in timing between the actual receipt of income and the recognition of income for federal income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required debt or amortization payments |
| Limitation on Ownership of Common Stock And Stockholder’s Rights Plan May Preclude Acquisition of Control Provisions of our Charter are designed to assist us in maintaining our qualification as a REIT under the Internal Revenue Code by preventing concentrated ownership in our common and preferred stock which might jeopardize our REIT qualification |
| Among other things, these provisions provide that: • any transfer or acquisition of our common or preferred stock that would result in our disqualification as a REIT under the Internal Revenue Code will be void; and • if any person attempts to acquire shares of our common or preferred stock that after the acquisition would cause the person to own an amount of common stock and preferred stock in excess of a predetermined limit, such acquisitions would be void |
| Ownership is determined by operation of certain attribution rules set out in the Internal Revenue Code |
| Pursuant to Board action, the limit currently is 9dtta9prca of the value of the outstanding shares of common stock and preferred stock |
| We refer to this limitation as the “Ownership Limitation |
| ” The common stock or preferred stock the transfer of which would cause any person to violate the Ownership Limitation, is referred to as the Excess Shares |
| A transfer that would violate the Ownership Limitation will be void and the common stock or preferred stock subject to the transfer will automatically be transferred to an unaffiliated trustee for the benefit of a charitable organization designated by the Board of Directors until sold by the trustee to a third party or purchased by us |
| This limitation on the ownership of common stock and preferred stock may preclude the acquisition of control of us by a third party without the consent of the Board of Directors |
| In general, the Board of Directors may waive the Ownership Limitation for any person |
| In this circumstance, the Ownership Limitation will be proportionally and automatically reduced with regard to all other persons such that no five persons may own more than 50prca of the value of the common stock and preferred stock |
| Certain other provisions contained in our Charter and Bylaws may also have the effect of discouraging a third party from making an acquisition proposal and may thereby inhibit a change in control of us even if a change in control would be in the best interests of the stockholders |
| In addition, in July 1998, the Board of Directors adopted a stockholder rights plan |
| The rights issued under the plan will be triggered, with certain exceptions, if and when any person or group acquires, or commences a tender offer to acquire, 15prca or more of our shares |
| The rights plan is intended to prevent abusive hostile takeover attempts by requiring a potential acquirer to negotiate the terms of an acquisition with the Board of Directors |
| However, it could have the effect of deterring or preventing an acquisition of us, even if a majority of our stockholders would be in favor of such acquisition, and could also have the effect of making it more difficult for a person or group to gain control of us or to change existing management |
| Risks of Litigation Certain claims and lawsuits have arisen against us in our normal course of business |
| We believe that such claims and lawsuits will not have a material adverse effect on our financial position, cash flow or results of operations |
| Uncertainty Due to the Board of Directors’ Ability to Change Investment Policies The Board of Directors may change our investment policies without a vote of the stockholders |
| If our investment policies change, the risks and potential rewards of an investment in the shares may also change |
| In addition, the methods of implementing our investment policies may vary as new investment techniques are developed |
| Effect of Market Interest Rates on Price of Common Stock The annual yield on the price paid for shares of our common stock from our distributions may influence the market price of the shares of our common stock in public markets |
| An increase in market interest rates may lead prospective purchasers of our common stock to seek a higher annual yield from their investments |
| This may adversely affect the market price of our common stock |
| Shares Available for Future Sale We cannot predict the effect, if any, that future sales of shares of our common stock or future conversions or exercises of securities for future sales will have on the market price of our common stock |
| Sales of substantial amounts of our common stock, or the perception that substantial sales could occur, may adversely affect the prevailing market price for our common stock |