
Management and Operations - The company relies on the Administrator and Operator for management and administration services, which are critical for its operations [88]. - The company faces risks related to the departure of key personnel from the Administrator and Operator, which could adversely affect its financial condition and results [90]. - The Master Services Agreement with the Administrator renews automatically each year, limiting the company's ability to terminate it without cause [105]. - The Administrator and Operator receive fees regardless of the company's performance, which may reduce their incentive to seek profitable opportunities [107]. - The Administrator and Operator have broad discretion over day-to-day operations and capital deployment, which may not always align with stockholder interests [111]. - Conflicts of interest may arise as directors and executive officers hold positions with the Operator and Administrator, potentially affecting decisions made in the best interest of stockholders [114]. Financial Risks and Performance - The company carries commercial liability and business interruption insurance, but there is no assurance that it will not experience uninsured losses [94]. - The company may incur substantial costs if it seeks to internalize management functions, with uncertain outcomes regarding key personnel retention [92]. - The company may experience poor performance or losses due to limited liability of its Administrator and Operator under the Master Services Agreement [134]. - The company’s Board of Directors can revoke its REIT election without stockholder approval, which could adversely affect total returns to stockholders [130]. - The company may incur substantial costs in protecting its assets if a significant tenant defaults [145]. - The company may not generate sufficient cash flow to meet its debt service obligations, which could impact its ability to fund operations and capital expenditures [216]. - If the company incurs additional indebtedness for future projects, its debt service obligations could increase, potentially limiting its ability to make distributions [218]. Market and Economic Conditions - The COVID-19 pandemic has led to long-term changes in workplace practices, potentially decreasing demand for office space and impacting rental income [102]. - The company is subject to risks associated with the real estate industry, including adverse changes in economic conditions and increased vacancies [137]. - A significant portion of the company's properties are located in California, exposing it to greater economic risks and regulatory challenges [139]. - The company anticipates significant competition in the office real estate market, which may pressure rental rates and occupancy levels [177]. - The performance of the lodging industry is closely linked to the general economy and U.S. GDP growth [149]. - Market conditions, including financial market deterioration, could impact credit availability and the ability to meet debt obligations, affecting overall financial health [172]. Regulatory and Compliance Risks - The Maryland Business Combination Act may restrict third parties from acquiring control without Board approval, potentially limiting stockholder opportunities [119]. - The company has opted out of certain provisions of the Maryland Control Share Acquisition Act, which could affect voting rights in control share acquisitions [124]. - The company has implemented takeover defenses, including a two-thirds vote requirement to remove a director, which may limit stockholder influence [125]. - Compliance with the Americans with Disabilities Act (ADA) and other regulations may require unanticipated expenditures, impacting cash available for distributions [192]. - Non-compliance with SBA regulations could result in liability being transferred back to the company's lending operations, adversely affecting financial condition [244]. Environmental and Climate Risks - The company’s operations are susceptible to natural disasters, particularly in California, which could significantly impact its properties and financial performance [96]. - The company faces risks from climate change, which could lead to increased costs for property insurance and energy, adversely affecting financial conditions [191]. - The company’s properties are primarily located in California, which is at risk of extreme weather due to climate change, potentially increasing operational costs [190]. - Environmental regulations may impose liability for contamination, which could result in significant costs for the company [184]. Debt and Financing - The company has incurred significant indebtedness and may incur additional debt to fund future acquisitions and operational needs [205]. - High interest rates may persist in 2025, making it difficult for the company to finance or refinance assets, potentially reducing the number of properties it can acquire [212]. - The company expects a continued high interest rate environment in 2025, which will increase the variable rate component of its indebtedness, adversely affecting cash flows and distributions [215]. - The company may be required to borrow funds or sell assets to fund dividends, potentially at unfavorable rates [259]. Tenant and Lease Risks - The company has a significant tenant concentration, with Kaiser accounting for 22.9% of its annualized rental income for the year ended December 31, 2024 [143]. - 29.0% of the rentable square footage of the office portfolio was available for lease as of December 31, 2024 [148]. - 11.9% of the occupied square footage of office properties is scheduled to expire in 2025 [148]. - The company may face challenges in renewing leases or releasing apartment units at favorable terms [158]. - The company may be adversely affected by trends in the office real estate industry, such as telecommuting and shared office spaces [147]. Investment Strategy and Growth - The company is focused on Class A and creative office assets but may expand into multifamily residential and real estate debt to broaden its investment strategy [129]. - The company may be unable to deploy capital effectively for growth due to competition and market conditions [159]. - Changes in the Operator's acquisition process may result in inferior due diligence and transaction standards, negatively impacting asset performance [129]. Lending Operations - The company’s lending operations are concentrated in the hospitality industry, which exposes it to significant risks from economic downturns and other adverse events [232]. - The company’s SBA 7(a) Program loans are subject to delinquency and foreclosure risks, particularly due to the nature of the hospitality industry [236]. - The company has achieved national preferred lender program (PLP) status, allowing expedited loan processing without prior SBA review [243]. - Defaults on SBA 7(a) Program loans could materially adversely affect the company's business, financial condition, and cash flow [240]. Stockholder Rights and Dividends - The rights of Common Stock holders to receive dividends rank junior to those of Preferred Stock holders [277]. - Upon liquidation, Preferred Stock holders are entitled to receive a liquidation preference before any distribution to Common Stock holders [278]. - The company may pay required dividends in shares of stock rather than cash, leading to potential tax liabilities for stockholders [264]. - Delays in deploying capital may adversely affect the company's ability to pay distributions on Common and Preferred Stock [284]. - Cash distributions to holders of Preferred and Common Stock may be less frequent or lower than expected, depending on various factors [285].