1254595--3/8/2010--FIRST_POTOMAC_REALTY

related topics

{investment, property, distribution}

{tax, income, asset}

{loan, real, estate}

{provision, law, control}

{stock, price, share}

{cost, regulation, environmental}

{acquisition, growth, future}

{regulation, change, law}

{debt, indebtedness, cash}

{loss, insurance, financial}

{interest, director, officer}

{cost, contract, operation}

{operation, natural, condition}

{stock, price, operating}

We are subject to the credit risk of our tenants, who may declare bankruptcy or otherwise fail to make lease payments, which could have a material adverse effect on our results of operations and cash flow. Loss of the U.S. Government as a tenant could have a material adverse effect on our results of operations and cash flow, and could cause an impairment of the value of some of our properties. We may be unable to renew expiring leases or re-lease vacant space on a timely basis or on attractive terms, which could have a material adverse effect on our results of operations and cash flow. Our debt level may have a negative impact on our results of operations, financial condition, cash flow and our ability to pursue growth through acquisitions and development projects. We may be required to repay or refinance a portion of our mortgage indebtedness prior to its maturity date, which could have a material adverse effect on our financial condition and results of operations Newly developed and acquired properties may not produce the returns that we expect, particularly in the current global economic environment, which could materially adversely affect our results of operations. Our business strategy contemplates expansion through acquisition and we may not be able to adapt our management and operational systems to successfully integrate new properties into our portfolio without unanticipated disruption or expense, which could have a material adverse effect on our results of operations and financial condition. Our variable rate debt subjects us to interest rate risk. We have and may continue to engage in hedging transactions, which can limit our gains and increase exposure to losses. We compete with other parties for tenants and property acquisitions. All of our properties are located in the Southern Mid-Atlantic region, making us vulnerable to changes in economic, regulatory or other conditions in that region that could have a material adverse effect on our results of operations. Development and construction risks could materially adversely affect our results of operations and growth prospects. Failure to succeed in new markets may limit our growth and/or have a material adverse effect on our results of operations. Under some of our leases, tenants have the right to terminate prior to the scheduled expiration of the lease, which could have a material adverse effect on our results of operations and cash flow. Property owned through joint ventures, or in limited liability companies and partnerships in which we are not the sole equity holder, may limit our ability to act exclusively in our interests. Risks Related to Our Organization and Structure Our executive officers have agreements that provide them with benefits in the event of a change in control of our Company or if their employment agreement is terminated without cause or not renewed, which could prevent or deter a change in control of our Company. We may experience conflicts of interest with several members of our board of trustees and our executive officers relating to their ownership of units of our Operating Partnership. We depend on key personnel, particularly Mr. Douglas J. Donatelli, with long-standing business relationships, the loss of whom could threaten our ability to operate our business successfully and have other negative implications under certain of our indebtedness. One of our trustees may have conflicts of interest with our Company. Our rights and the rights of our security holders 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 board of trustees may approve the issuance of preferred shares with terms that may discourage a third party from acquiring us. Our ownership limitations may restrict business combination opportunities. Our board of trustees may change our investment and operational policies and practices without a vote of our security holders, which limits your control of our policies and practices. 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 bylaws may only be amended by our board of trustees, which could limit your control of certain aspects of our corporate governance. Maryland law may discourage a third party from acquiring us. Risks Related to the Real Estate Industry Real estate investments are inherently risky, which could materially adversely affect our results of operations and cash flow. Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties and have a material adverse effect on our results of operations, financial condition and cash flow. The liabilities under environmental laws for contamination may have a material adverse effect on our results of operations, financial condition and cash flow. The costs of compliance with environmental laws may have an material adverse effect on our results of operations, financial condition and cash flow. The Company s properties may contain or develop harmful mold, which could lead to liability for adverse health effects and costs of remediating the problem. Compliance with the Americans with Disabilities Act and fire, safety and other regulations may require us to make unintended expenditures that materially adversely impact our cash flow. An uninsured loss or a loss that exceeds the policies on our properties could have a material adverse effect on our results of operations, financial condition and cash flow. Terrorist attacks and other acts of violence or war may affect any market on which our securities trade, the markets in which we operate, our business and our results of operations. We face risks associated with our tenants being designated Prohibited Persons by the Office of Foreign Assets Control. Our properties may suffer from air quality issues, which could lead to liability for adverse health effects and costs of remediation. Rising energy costs may have an adverse effect on our results of operations. Tax Risks of our Business and Structure If we fail to remain qualified as a REIT for federal income tax purposes, we will not be able to deduct our distributions, and our income will be subject to taxation, which would reduce the cash available for distribution to our shareholders. Distribution requirements relating to qualification as a REIT for federal income tax purposes limit our flexibility in executing our business plan. Our disposal of properties may have negative implications, including unfavorable tax consequences. We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our securities. We may in the future choose to pay dividends in our own shares, in which case you may be required to pay income taxes in excess of the cash dividends you receive. Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends. Complying with REIT requirements may force us to sell otherwise attractive investments. If we or our predecessor entity failed to qualify as an S corporation for any of our tax years prior to our initial public offering, we may fail to qualify as a REIT. If First Potomac Management, Inc. failed to qualify as an S corporation during any of its tax years, we may be responsible for any entity level taxes due. Risks Related to an Investment in Our Common Shares Our common shares trade in a limited market which could hinder your ability to sell our common shares. The market price and trading volume of our common shares may be volatile. Broad market fluctuations could negatively impact the market price of our common shares. An increase in market interest rates may have an adverse effect on the market price of our common shares. We have not established a minimum dividend payment level and we cannot assure of our ability to pay dividends in the future or the amount of any dividends.

Full 10-K form ▸

1254595--3/8/2010--FIRST_POTOMAC_REALTY_TRUST