1335686--3/28/2006--Republic_Property

related topics

{investment, property, distribution}

{debt, indebtedness, cash}

{tax, income, asset}

{acquisition, growth, future}

{loan, real, estate}

{stock, price, operating}

{provision, law, control}

{interest, director, officer}

{operation, natural, condition}

{regulation, change, law}

{loss, insurance, financial}

{cost, regulation, environmental}

{system, service, information}

If one or more of our tenants with early termination rights terminates their lease with us and we are unable to secure a replacement tenant on at least as favorable terms, our cash flows and operating results would be adversely impacted. We may be unable to renew existing leases or re-let space on terms similar to the existing leases, or at all, as leases expire, or we may expend significant capital in our efforts to re-let space, which may harm our operating performance. Our future growth is dependent on the acquisition of our three option properties and our growth may be harmed if our option agreements are terminated upon a change in control of our company or our independent trustees do not approve an acquisition of one or more of the option properties. Our operating flexibility and ability to sell any of the option properties that we may later acquire may be economically prohibited by certain tax protection obligations. Certain of our trustees and executive officers, and their affiliates, have substantial ownership interests in our three option properties and these interests may conflict with our shareholders interests. We face competition when pursuing fee-based development opportunities and our inability to capture these opportunities could negatively impact our growth and profitability. When providing fee-based development services, our right to receive fees for development services is typically subordinate to the rights of other creditors in connection with the construction of the property and as a result we may not be able to timely collect development fees, if at all, which could harm our operating results. If we lose the right to provide fee-based development services for the City Center project in the City of West Palm Beach, Florida, our cash flows and operating results may be negatively impacted. If we lose our right to provide management services on an outsource basis for The Portals Properties, our cash flows and operating results will be negatively impacted. We may not be successful in identifying and consummating suitable acquisitions of office and office-oriented mixed-use properties meeting our criteria, which may impede our growth and negatively impact the price of our common shares. If we are not successful in efficiently integrating and operating the properties we acquire, management s attention may be diverted away from our day-to-day operations and we may experience other disruptions which could harm our results of operations. Acquired properties may expose us to unknown liabilities which could harm our growth and future operations. We face significant competition, which may impede our ability to retain tenants or re-let space when existing tenants vacate. Our operating results will be harmed if we are unable to fully lease-up vacant space at properties, such as Presidents Park I and II, which were underperforming at the time we acquired them. Future terrorist attacks in Greater Washington, D.C. could significantly impact the demand for, and value of, our properties. Uninsured losses or losses in excess of our insurance coverage could adversely affect our financial condition and our cash flow. If in the future we elect to make joint venture investments, we could be adversely affected by a lack of sole decision-making authority, reliance on joint venture partners financial condition and any disputes that might arise between us and our joint venture partners. Risks related to our debt financing Required payments of principal and interest on our loan obligations may leave us with insufficient cash to operate our properties or to pay the distributions currently contemplated or necessary to maintain our qualification as a REIT and may expose us to the risk of default under our debt obligations. Our existing mortgage indebtedness contains, and any future mortgage indebtedness may contain, covenants that restrict our operating and acquisition activities. If we are unable to close our proposed $150 million senior secured revolving credit facility, we may not be able to execute our business plan, including developing and acquiring properties, or make distributions to our shareholders. We anticipate that the financial and other covenants that are included in our proposed $150 million senior secured revolving credit facility will place limitations on our ability to take certain actions in respect of our business and could adversely affect our financial condition, liquidity and results of operations. We could become more leveraged in the future because our organizational documents contain no limitation on the amount of debt we may incur. We depend on external sources of capital that are outside of our control and may not be available to us, which could adversely affect our ability to develop or acquire properties, satisfy our debt obligations or make distributions to shareholders. Risks related to our organization and structure Our organizational documents contain provisions which may discourage a takeover of us and depress our common share price. Our Chairman of the Board, our President and Chief Development Officer, our Chief Executive Officer and our Chief Operating Officer and General Counsel, and their affiliates, own approximately 7.6%, 1.4%, 1.2% and 2.5%, respectively, of our outstanding common shares and partnership units of our Operating Partnership on a fully-diluted basis and have the ability to exercise significant control over our operations and any matter presented to our shareholders. Our Chairman of the Board and our President and Chief Development Officer have substantial outside business interests, including interests in Portals Development Associates Limited Partnership and Republic Properties Corporation, rights to continued management and development fee income in connection with The Portals Properties and ownership interests in the lessor of our office space, which give rise to various conflicts of interest with us and could harm our business. We may pursue less vigorous enforcement of the terms of our agreements with members of our senior management and their affiliated entities because of our dependence on them as well as conflicts of interest that exist. Our management has limited experience operating as a REIT or a public company and we cannot assure you that this inexperience will not harm our business and operating results. Our business and growth strategies could be harmed if key personnel with well-established ties to the Greater Washington, D.C. real estate market terminate their employment with us. Our employment agreements with each of Messrs. Keller, Grigg, Siegel and Green provide benefits in the event of a change in control of our company or if the employment agreement is not renewed, which could deter a change in control that could be beneficial to our shareholders. Our Board of Trustees may change our investment and operational policies and practices and enter into new lines of business without a vote of our shareholders, which limits our shareholders control of our policies and practices and may subject us to different risks. Our Board of Trustees has the power to issue additional shares in a manner that may not be in our shareholders best interests. The rights of our shareholders to take action against our trustees and officers are limited. We may have assumed unknown liabilities in connection with the Formation Transactions, which could harm our financial condition. We have fiduciary duties as general partner to our Operating Partnership that may result in conflicts of interests in representing our shareholders interests. Our ability to pay our estimated distributions in 2006 depends upon our actual operating results, and we currently expect to borrow funds under our proposed line of credit to pay at least a portion of this distribution, which could slow our growth and depress the price of our common shares. Risks related to the real estate industry Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties. Costs associated with complying with the Americans with Disabilities Act may result in unanticipated expenses and may affect our results of operations. Environmental compliance costs and liabilities associated with operating our properties may result in unanticipated expenses and may affect our results of operations. Risks related to qualification and operation as a REIT Failure to qualify as a REIT would subject us to U.S. federal income tax and would subject us and our shareholders to other adverse consequences. Failure to qualify as a domestically-controlled REIT could subject our non-U.S. shareholders to adverse U.S. federal income tax consequences. Failure to make required distributions would subject us to U.S. federal income tax. If our Operating Partnership failed to qualify as a partnership for U.S. federal income tax purposes, we would fail to qualify as a REIT and suffer other adverse consequences. We are subject to some taxes even though we believe we qualify as a REIT. Our ownership limitations may restrict or prevent our shareholders from engaging in certain transfers of our common shares.

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1335686--3/28/2006--Republic_Property_Trust