1193558--3/1/2007--AMERICAN_FINANCIAL_REALTY

related topics

{debt, indebtedness, cash}

{investment, property, distribution}

{loan, real, estate}

{provision, law, control}

{acquisition, growth, future}

{loss, insurance, financial}

{regulation, change, law}

{cost, contract, operation}

{stock, price, share}

{tax, income, asset}

{cost, operation, labor}

{interest, director, officer}

{competitive, industry, competition}

{personnel, key, retain}

{operation, natural, condition}

{cost, regulation, environmental}

{condition, economic, financial}

If we are unable to execute on the strategic repositioning plan that we announced in August 2006, our operating results could be adversely affected. With limited exceptions, we acquire properties on an as is basis and, therefore, the value of these properties may decline if we discover problems with the properties after we acquire them. If we are unable to complete in a timely fashion or at all our contracts for property acquisitions and dispositions, our operating results could be adversely affected. Our use of debt financing and our substantial existing debt obligations may decrease our cash flow and put us at a competitive disadvantage. Our reported earnings per share may be more volatile because of the conversion contingency provision of our senior convertible notes. Our use of variable rate debt exposes us to interest rate volatility, which may adversely affect our operating results and financial condition. Failure of our tenants to pay rent could seriously harm our operating results and financial condition. The bankruptcy or insolvency of our tenants under their leases or delays by our tenants in making rental payments could seriously harm our operating results and financial condition. A significant portion of our properties is leased to banks, making us more economically vulnerable in the event of a downturn in the banking industry. We acquire a substantial number of bank branches, which are specialty-use properties and therefore may be more difficult to lease to non-banks. We are dependent on certain tenants for a significant portion of our revenues and failure of these tenants to perform their obligations or renew their leases upon expiration may adversely affect our cash flow and ability to pay dividends to shareholders. We may not have sufficient capital to fully perform our obligations to purchase properties under our agreements with financial institutions, which may subject us to liquidated or other damages or result in termination of these agreements. Our formulated price contracts with financial institutions may require us to purchase bank branches located in unattractive locations or vacant bank branches that we would not elect to otherwise purchase, which could have a material adverse effect on our operating results and financial condition, as well as our ability to pay dividends at historical levels or at all. Our formulated price contracts with financial institutions may require us to purchase a large number of bank branches at any given time that we would not elect to otherwise purchase, which could have a material adverse effect on our operating results and financial condition, as well as our ability to pay dividends at historical levels or at all. We may not be able to compete successfully for tenants with other entities that operate in our industry. We may be unable to lease properties that we acquire from financial institutions under our formulated price contracts, which could have a material adverse effect on our operating results and financial condition, as well as our ability to pay dividends to shareholders at historical levels or at all. We do not know if our tenants will renew their existing leases and, if they do not, we may be unable to lease the properties on as favorable terms, or at all, which would adversely affect our operating results and financial condition. Our financial covenants may restrict our operating or acquisition activities, which may harm our financial condition and operating results. We are subject to contractual obligations and covenants that may restrict our ability to dispose of our properties at attractive returns or when we otherwise desire to sell them. We have a credit facility under which the lender will have the right, under certain circumstances, to require that we pledge additional collateral or repay a portion of the outstanding principal on short notice, which could have an adverse effect on our business. Certain of our mortgage loans impose cash traps when the financial performance of the property or the portfolio of properties securing such loans fail to meet certain pre-determined financial metrics, which if enforced could adversely effect our financial condition and operating results Increasing competition for the acquisition of real estate may impede our ability to make future acquisitions or may increase the cost of these acquisitions, which could adversely affect our operating results and financial condition. The consideration paid for our properties may exceed fair market value, which may harm our financial condition and operating results. We structure many of our acquisitions using complex structures often based on forecasted results for the acquisitions, and if the acquired properties underperform forecasted results, our financial condition and operating results may be harmed. As a result of the limited time during which we have to perform due diligence on many of our acquired properties, we may become subject to significant unexpected liabilities and our properties may not meet projections. If third party managers providing property management services for our office buildings or their personnel are negligent in their performance of, or default on, their management obligations, our tenants may not renew their leases or we may become subject to unforeseen liabilities. If this occurs, our financial condition and operating results, as well as our ability to pay dividends to shareholders at historical levels or at all, could be substantially harmed. Rising operating expenses could reduce our cash flow and funds available for future dividends. We may be unable to generate sufficient revenue from operations to pay our operating expenses and to pay dividends to our shareholders at historical levels or at all. Risks Related to Our Organization and Structure We depend on key personnel with long-standing business relationships, the loss of whom could threaten our ability to operate our business successfully. Our board of trustees may authorize the issuance of additional shares that may cause dilution. Our rights and the rights of our shareholders to take action against our trustees and officers are limited, which could limit your recourse in the event of actions not in your best interests. Our ownership limitations may restrict business combination opportunities. We are dependent on external sources of capital for future growth. Our declaration of trust contains provisions that make removal of our trustees difficult, which could make it difficult for our shareholders to effect changes to our management. Our board of trustees may approve the issuance of preferred shares with terms that may discourage a third party from acquiring us. Maryland law may discourage a third party from acquiring us. Our board of trustees may change our investment and operational policies and practices without a vote of our common shareholders, which limits your control of our policies and practices. Our executive officers have agreements that provide them with benefits in the event their employment is terminated, which could prevent or deter a potential acquiror from pursuing a change of control of our company. Risks Related to the Real Estate Industry Mortgage debt obligations expose us to increased risk of property losses, which could harm our financial condition, cash flow and ability to satisfy our other debt obligations and pay dividends. Illiquidity 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. The costs of compliance with or liabilities under environmental laws may harm our operating results. Our properties may contain or develop harmful mold, which could lead to liability for adverse health effects and costs of remediating the problem. Our properties may contain asbestos which could lead to liability for adverse health effects and costs of remediating asbestos. Compliance with the Americans with Disabilities Act and fire, safety and other regulations may require us to make unintended expenditures that adversely impact our ability to pay dividends to shareholders at historical levels or at all. An uninsured loss or a loss that exceeds the policies on our properties could subject us to lost capital or revenue on those properties. Terrorist attacks, such as the attacks that occurred in New York and Washington, D.C. on September 11, 2001, and other acts of violence or war may affect any market on which our common shares trade, the markets in which we operate, our operations and our profitability. Tax Risks of our Business and Structure Your investment in our common shares has various federal, state and local income tax risks that could affect the value of your investment. Distribution requirements imposed by law limit our flexibility in executing our business plan. We may incur additional indebtedness in order to meet our distribution requirements. Our disposal of properties may have negative implications, including unfavorable tax consequences.

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1193558--3/1/2007--AMERICAN_FINANCIAL_REALTY_TRUST