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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation | (I.R.S. Employer Identification No.) | |
or organization) |
(Address of principal executive offices)(Zip Code)
(
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: |
| Trading Symbol |
| Name of each exchange on which registered: |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ☐ | ||
Non-accelerated Filer ☐ | Smaller Reporting Company | |
Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of shares of common stock outstanding as of April 28, 2022 was
Franklin Street Properties Corp.
Form 10-Q
Quarterly Report
March 31, 2022
Table of Contents
PART I — FINANCIAL INFORMATION
Item 1.Financial Statements
Franklin Street Properties Corp.
Consolidated Balance Sheets
(Unaudited)
March 31, | December 31, |
| |||||
(in thousands, except share and par value amounts) |
| 2022 |
| 2021 |
| ||
Assets: | |||||||
Real estate assets: | |||||||
Land |
| $ | |
| $ | | |
Buildings and improvements |
| |
| | |||
Fixtures and equipment |
| |
| | |||
| |
| | ||||
Less accumulated depreciation |
| |
| | |||
Real estate assets, net |
| |
| | |||
Acquired real estate leases, less accumulated amortization of $ |
| |
| | |||
Cash, cash equivalents and restricted cash |
| |
| | |||
Tenant rent receivables |
| |
| | |||
Straight-line rent receivable |
| |
| | |||
Prepaid expenses and other assets |
| |
| | |||
Related party mortgage loan receivables |
| |
| | |||
Office computers and furniture, net of accumulated depreciation of $ |
| |
| | |||
Deferred leasing commissions, net of accumulated amortization of $ |
| |
| | |||
Total assets |
| $ | |
| $ | | |
Liabilities and Stockholders’ Equity: | |||||||
Liabilities: | |||||||
Bank note payable |
| $ | |
| $ | — | |
Term loans payable, less unamortized financing costs of $ |
| |
| | |||
Series A Series B Senior Notes, less unamortized financing costs of $ | | | |||||
Accounts payable and accrued expenses |
| |
| | |||
Accrued compensation |
| |
| | |||
Tenant security deposits |
| |
| | |||
Lease liability | | | |||||
Other liabilities: derivative liabilities |
| |
| | |||
Acquired unfavorable real estate leases, less accumulated amortization of $ |
| |
| | |||
Total liabilities |
| |
| | |||
Commitments and contingencies | |||||||
Stockholders’ Equity: | |||||||
Preferred stock, $ |
|
| |||||
Common stock, $ |
| |
| | |||
Additional paid-in capital |
| |
| | |||
Accumulated other comprehensive loss |
| ( |
| ( | |||
Accumulated distributions in excess of accumulated earnings |
| ( |
| ( | |||
Total stockholders’ equity |
| |
| | |||
Total liabilities and stockholders’ equity |
| $ | |
| $ | | |
The accompanying notes are an integral part of these consolidated financial statements.
3
Franklin Street Properties Corp.
Consolidated Statements of Operations
(Unaudited)
| |||||||
For the Three Months Ended March 31, | |||||||
(in thousands, except per share amounts) |
| 2022 |
| 2021 |
| ||
Revenues: | |||||||
Rental | $ | | $ | | |||
Related party revenue: | |||||||
Management fees and interest income from loans |
| |
| | |||
Other |
| |
| | |||
Total revenues |
| |
| | |||
Expenses: | |||||||
Real estate operating expenses |
| |
| | |||
Real estate taxes and insurance |
| |
| | |||
Depreciation and amortization |
| |
| | |||
General and administrative |
| |
| | |||
Interest |
| |
| | |||
Total expenses |
| |
| | |||
Loss before taxes |
| ( |
| ( | |||
Tax expense |
| |
| | |||
Net Loss | $ | ( | $ | ( | |||
Weighted average number of shares , basic and |
| |
| | |||
Net loss per , basic and | $ | ( | $ | ( | |||
The accompanying notes are an integral part of these consolidated financial statements.
4
Franklin Street Properties Corp.
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
For the |
| ||||||
Three Months Ended |
| ||||||
March 31, |
| ||||||
(in thousands) |
| 2022 |
| 2021 |
| ||
| |||||||
Net loss | $ | ( | $ | ( | |||
Other comprehensive income (loss): | |||||||
Unrealized gain (loss) on derivative financial instruments |
| |
| | |||
| |||||||
Total other comprehensive income (loss) |
| |
| | |||
Comprehensive income (loss) | $ | | $ | ( | |||
The accompanying notes are an integral part of these consolidated financial statements.
5
Franklin Street Properties Corp.
Consolidated Statements of Stockholders’ Equity
(Unaudited)
Accumulated | Distributions |
| ||||||||||||||||
Additional | other | in excess of | Total |
| ||||||||||||||
Common Stock | Paid-In | comprehensive | accumulated | Stockholders’ |
| |||||||||||||
(in thousands, except per share amounts) |
| Shares |
| Amount |
| Capital |
| income (loss) |
| earnings |
| Equity |
| |||||
| ||||||||||||||||||
Balance, December 31, 2020 |
| | $ | | $ | | $ | ( | $ | ( | $ | | ||||||
Comprehensive income (loss) |
| — |
| — |
| — |
| |
| ( |
| ( | ||||||
Distributions $ |
| — |
| — |
| — |
| — |
| ( |
| ( | ||||||
Balance, March 31, 2021 |
| | $ | | $ | | $ | ( | $ | ( | $ | | ||||||
Balance, December 31, 2021 |
| | $ | | $ | | $ | ( | $ | ( | $ | | ||||||
Comprehensive income (loss) |
| — |
| — |
| — |
| |
| ( |
| | ||||||
Repurchased shares | ( |
| — |
| ( |
| — |
| — |
| ( | |||||||
Distributions $ |
| — |
| — |
| — |
| — |
| ( |
| ( | ||||||
Balance, March 31, 2022 |
| | $ | | $ | | $ | ( | $ | ( | $ | | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
6
Franklin Street Properties Corp.
Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months Ended March 31, | ||||||
(in thousands) |
| 2022 |
| 2021 | ||
Cash flows from operating activities: | ||||||
Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||
Depreciation and amortization expense |
| |
| | ||
Amortization of above and below market leases |
| ( |
| ( | ||
Changes in operating assets and liabilities: | ||||||
Tenant rent receivables |
| ( |
| | ||
Straight-line rents |
| ( |
| ( | ||
Lease acquisition costs |
| ( |
| ( | ||
Prepaid expenses and other assets |
| ( |
| ( | ||
Accounts payable and accrued expenses |
| ( |
| ( | ||
Accrued compensation |
| ( |
| ( | ||
Tenant security deposits |
| ( |
| ( | ||
Payment of deferred leasing commissions |
| ( |
| ( | ||
Net cash provided by (used in) operating activities |
| ( |
| | ||
Cash flows from investing activities: | ||||||
Property improvements, fixtures and equipment | ( | ( | ||||
Net cash used in investing activities |
| ( |
| ( | ||
Cash flows from financing activities: | ||||||
Distributions to stockholders |
| ( |
| ( | ||
Stock repurchases |
| ( |
| — | ||
Borrowings under bank note payable |
| |
| | ||
Repayments of bank note payable |
| ( |
| ( | ||
Deferred financing costs |
| ( |
| — | ||
Net cash provided by (used in) financing activities |
| ( |
| | ||
Net decrease in cash, cash equivalents and restricted cash |
| ( |
| ( | ||
Cash, cash equivalents and restricted cash, beginning of year |
| |
| | ||
Cash, cash equivalents and restricted cash, end of period | $ | | $ | | ||
Supplemental disclosure of cash flow information: | ||||||
Cash paid for: | ||||||
Interest | $ | | $ | | ||
Taxes | $ | | $ | | ||
Non-cash investing activities: | ||||||
Accrued costs for purchases of real estate assets | $ | | $ | | ||
The accompanying notes are an integral part of these consolidated financial statements.
7
Franklin Street Properties Corp.
Notes to Consolidated Financial Statements
(Unaudited)
1. Organization, Properties, Basis of Presentation, Financial Instruments and Recent Accounting Standards
Organization
Franklin Street Properties Corp. (“FSP Corp.” or the “Company”) holds, directly and indirectly,
As of March 31, 2022, the Company owned and operated a portfolio of real estate consisting of
Properties
The following table summarizes the Company’s number of operating properties, which we also refer to as our owned properties and rentable square feet of real estate.
As of March 31, |
| ||||
| 2022 |
| 2021 |
| |
Operating Properties: | |||||
Number of properties |
| |
| | |
Rentable square feet |
| |
| | |
Basis of Presentation
The unaudited consolidated financial statements of the Company include all of the accounts of the Company and its majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. These financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 2021, as filed with the Securities and Exchange Commission.
The accompanying interim financial statements are unaudited; however, the financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair presentation of the financial statements for these interim periods have been included. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 or for any other period.
Financial Instruments
As disclosed in Note 4, the Company’s derivatives are recorded at fair value using Level 2 inputs. The Company estimates that the carrying values of cash and cash equivalents, restricted cash, receivables, prepaid expenses, accounts payable and accrued expenses, accrued compensation, and tenant security deposits approximate their fair values based on their short-term maturity and the bank note and term loans payable approximate their fair values as they bear interest at variable interest rates or at rates that are at market for similar investments.
8
Cash, Cash Equivalents and Restricted Cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statement of cash flows.
| March 31, |
| March 31, | |||
(in thousands) | 2022 | 2021 | ||||
Cash and cash equivalents | $ | | $ | | ||
Restricted cash |
| |
| | ||
Total cash, cash equivalents and restricted cash | $ | | $ | | ||
Restricted cash consists of escrows arising from property sales. Cash held in escrow is paid based on the terms of the closing agreements for the sale.
Variable Interest Entities (VIEs)
We determine whether an entity is a VIE and, if so, whether it should be consolidated by utilizing judgments and estimates that are inherently subjective. The determination of whether an entity in which we hold a direct or indirect variable interest is a VIE is based on several factors, including whether the entity’s total equity investment at risk upon inception is sufficient to finance the entity’s activities without additional subordinated financial support. We make judgments regarding the sufficiency of the equity at risk based first on a qualitative analysis, and then a quantitative analysis, if necessary.
We analyze any investments in VIEs to determine if we are the primary beneficiary. In evaluating whether we are the primary beneficiary, we evaluate our direct and indirect economic interests in the entity. Determining which reporting entity, if any, is the primary beneficiary of a VIE is primarily a qualitative approach focused on identifying which reporting entity has both (1) the power to direct the activities of a VIE that most significantly impact such entity’s economic performance and (2) the obligation to absorb losses or the right to receive benefits from such entity that could potentially be significant to such entity. Performance of that analysis requires the exercise of judgment.
We consider a variety of factors in identifying the entity that holds the power to direct matters that most significantly impact the VIE’s economic performance including, but not limited to, the ability to direct a proposed sale of the property or merger of the company. In addition, we consider the rights of other investors to participate in those decisions, to replace the manager and to amend the corporate charter. We determine whether we are the primary beneficiary of a VIE at the time we become involved with a variable interest entity and reconsider that conclusion upon a reconsideration event. As of March 31, 2022, our relationship with FSP Monument Circle LLC was considered a VIE for which we are not the primary beneficiary. Our maximum exposure to losses associated with this VIE is limited to the outstanding Sponsored REIT Loan, the related accrued interest receivable and an exit fee receivable, which were in aggregate approximately $
Recent Accounting Standards
In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. The Company is currently assessing the potential impact that the adoption of ASU 2020-04 may have on its consolidated financial statements.
9
2. Related Party Transactions and Investments in Non-Consolidated Entities
Investment in Sponsored REITs:
At each of March 31, 2022 and December 31, 2021, the Company held a non-controlling common stock interest in
Management fees and interest income from loans:
Asset management fees range from
From time to time the Company may make secured loans (“Sponsored REIT Loans”) to Sponsored REITs in the form of mortgage loans or revolving lines of credit to fund construction costs, capital expenditures, leasing costs and for other purposes. The Company reviews the need for an allowance under the current expected credit loss model (“CECL”) for Sponsored REIT Loans each reporting period. The measurement of expected credit losses is based upon historical experiences, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The Company has elected to apply the practical expedient for financial assets secured by collateral in instances where the borrower is experiencing financial difficulty and repayment of the Sponsored REIT Loan is expected to be provided substantially through operation or sale of the collateral. The Company uses the fair value of the collateral at the reporting date and an adjustment to the allowance for expected credit losses is recorded when the amortized cost basis of the financial asset exceeds the fair value of the collateral, less costs to sell.
The Company regularly evaluates the extent and impact of any credit deterioration that could affect performance and the value of the secured property, as well as the financial and operating capability of the borrower. A property’s fair value, operating results and existing cash balances are considered and used to assess whether cash flows from operations are sufficient to cover the current and future operating and debt service requirements. The Company also evaluates the borrower’s competency in managing and operating the secured property and considers the overall economic environment, real estate sector and geographic sub-market in which the secured property is located. The Company applies normal loan review and underwriting procedures (as may be implemented or modified from time to time) in making that judgment.
The Company anticipates the sole Sponsored REIT Loan outstanding will be repaid at maturity or earlier from refinancing, long term financings of the underlying property, cash flows from the underlying property or some other capital event. The outstanding Sponsored REIT Loan is secured by a mortgage on the underlying property and has a term of approximately
The following is a summary of the sole Sponsored REIT Loan outstanding as of March 31, 2022:
|
|
|
|
| Maximum |
| Amount | Interest |
| |||
(dollars in thousands, except footnotes) |
| Maturity | Amount | Outstanding | Rate at |
| ||||||
Sponsored REIT |
| Location | Date | of Loan | 31-Mar-22 | 31-Mar-22 |
| |||||
| ||||||||||||
Mortgage loan secured by property | ||||||||||||
FSP Monument Circle LLC (1) | Indianapolis, IN | 30-Jun-23 | $ | | $ | | | % | ||||
$ | | $ | | |||||||||
| (1) | The interest rate is a fixed rate and this mortgage loan includes an origination fee of $ |
10
The Company recognized interest income and fees from the Sponsored REIT Loan of approximately $
On October 29, 2021, the Company agreed to amend and restate its existing Sponsored REIT Loan to FSP Monument Circle LLC to extend the maturity date from December 6, 2022 to June 30, 2023 and to advance an additional $
3. Bank Note Payable, Term Loans Payable and Senior Notes
JPM Term Loan
On August 2, 2018, the Company entered into an Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent and lender (“JPMorgan”), and the other lending institutions party thereto (the “JPM Credit Agreement”), which provided a single unsecured bridge loan in the aggregate principal amount of $
Although the interest rate on the JPM Term Loan was variable under the JPM Credit Agreement, the Company fixed the LIBOR-based rate on a portion of the JPM Term Loan by entering into interest rate swap transactions. On March 7, 2019, the Company entered into ISDA Master Agreements with various financial institutions to hedge a $
BMO Term Loan
On September 27, 2018, the Company entered into a Second Amended and Restated Credit Agreement with the lending institutions party thereto and Bank of Montreal (“BMO”), as administrative agent (the “BMO Credit Agreement”). The BMO Credit Agreement provides for a single, unsecured term loan borrowing in the initial amount of $
11
The BMO Term Loan bears interest at either (i) a number of basis points over LIBOR depending on the Company’s credit rating (
Although the interest rate on the BMO Term Loan is variable under the BMO Credit Agreement, the Company fixed the base LIBOR interest rate by entering into interest rate swap transactions. On August 26, 2013, the Company entered into an ISDA Master Agreement with BMO that fixed the base LIBOR interest rate on the BMO Term Loan at
The BMO Credit Agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations with respect to indebtedness, liens, investments, mergers and acquisitions, disposition of assets, changes in business, certain restricted payments, the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates. The BMO Credit Agreement also contains financial covenants that require the Company to maintain a minimum tangible net worth, a maximum leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, a maximum unencumbered leverage ratio, and minimum unsecured interest coverage. The BMO Credit Agreement provides for customary events of default with corresponding grace periods, including failure to pay any principal or interest when due, certain cross defaults and a change in control of the Company (as defined in the BMO Credit Agreement). In the event of a default by the Company, the administrative agent may, and at the request of the requisite number of lenders shall, declare all obligations under the BMO Credit Agreement immediately due and payable, terminate the lenders’ commitments to make loans under the BMO Credit Agreement, and enforce any and all rights of the lenders or the administrative agent under the BMO Credit Agreement and related documents. For certain events of default related to bankruptcy, insolvency, and receivership, the commitments of lenders will be automatically terminated and all outstanding obligations of the Company will become immediately due and payable. The Company was in compliance with the BMO Term Loan financial covenants as of March 31, 2022.
BofA Revolver
On January 10, 2022, the Company entered into a Credit Agreement (the “BofA Credit Agreement”) with Bank of America, N.A., as administrative agent, a letter of credit issuer and a lender (“BofA”), and the other lending institutions party thereto, for a new revolving line of credit for borrowings, at the Company’s election, of up to $
Borrowings under the BofA Revolver bear interest at a margin over either (i) the daily simple Secured Overnight Financing Rate (“SOFR”), plus an adjustment of
12
Based upon the Company’s credit rating, as of March 31, 2022, the interest rate on the BofA Revolver was
The BofA Credit Agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations with respect to indebtedness, liens, investments, mergers and acquisitions, disposition of assets, changes in business, certain restricted payments, the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates. The BofA Credit Agreement also contains financial covenants that require the Company to maintain a minimum tangible net worth, a maximum leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, a maximum unencumbered leverage ratio and a minimum unsecured interest coverage ratio. The BofA Credit Agreement also restricts the Company’s ability to make dividend distributions that exceed
The BofA Credit Agreement provides for customary events of default with corresponding grace periods, including failure to pay any principal or interest when due, failure to comply with the provisions of the BofA Credit Agreement, certain cross defaults and a change in control of the Company (as defined in the BofA Credit Agreement). In the event of a default by the Company, BofA, in its capacity as administrative agent, may, and at the request of the requisite number of lenders shall, declare all obligations under the BofA Credit Agreement immediately due and payable and enforce any and all rights of the lenders or BofA under the BofA Credit Agreement and related documents. For certain events of default related to bankruptcy, insolvency, and receivership, all outstanding obligations of the Company will become immediately due and payable.
The Company may use the net proceeds of the BofA Revolver to finance the acquisition of real properties and for other permitted investments; to finance investments associated with Sponsored REITs, to refinance or retire indebtedness and for working capital and other general business purposes, in each case to the extent permitted under the BofA Credit Agreement.
BofA Credit Facility
On July 21, 2016, the Company entered into a First Amendment (the “BofA First Amendment”), and on October 18, 2017, the Company entered into a Second Amendment (the “BofA Second Amendment”), to the Second Amended and Restated Credit Agreement dated October 29, 2014 among the Company, the lending institutions party thereto and BofA, as administrative agent, L/C Issuer and Swing Line Lender (as amended by the BofA First Amendment and the BofA Second Amendment, the “BofA Credit Facility”) that continued an existing unsecured revolving line of credit (the “Former BofA Revolver”) and an existing term loan (the “BofA Term Loan”). Effective simultaneously with the closing of the BofA Revolver on January 10, 2022, the Company delivered a notice to BofA terminating the aggregate lender commitments under the Former BofA Revolver in their entirety. There were no amounts drawn on the Former BofA Revolver as of December 31, 2021 and January 10, 2022.
BofA Term Loan Highlights
| ● | The original principal amount of the BofA Term Loan was $ |
| ● | The BofA Term Loan matures on January 12, 2023. |
| ● | The BofA Credit Facility includes an accordion feature that allows for an aggregate amount of up to $ |
13
The BofA Term Loan bears interest at either (i) a margin over LIBOR depending on the Company’s credit rating (
The interest rate on the BofA Term Loan was variable at March 31, 2022. Previously the Company had fixed the base LIBOR interest rate on the BofA Term Loan by entering into interest rate swap transactions. On July 22, 2016, the Company entered into ISDA Master Agreements with a group of banks that fixed the base LIBOR interest rate on the BofA Term Loan at
BofA Credit Facility General Information
The BofA Credit Facility contains customary affirmative and negative covenants for credit facilities of this type, including limitations with respect to indebtedness, liens, investments, mergers and acquisitions, disposition of assets, changes in business, certain restricted payments, the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates. The BofA Credit Facility also contains financial covenants that require the Company to maintain a minimum tangible net worth, a maximum leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, a maximum unencumbered leverage ratio, and minimum unsecured interest coverage. The BofA Credit Facility provides for customary events of default with corresponding grace periods, including failure to pay any principal or interest when due, certain cross defaults and a change in control of the Company (as defined in the BofA Credit Facility). In the event of a default by the Company, the administrative agent may, and at the request of the requisite number of lenders shall, declare all obligations under the BofA Credit Facility immediately due and payable, terminate the lenders’ commitments to make loans under the BofA Credit Facility, and enforce any and all rights of the lenders or administrative agent under the BofA Credit Facility and related documents. For certain events of default related to bankruptcy, insolvency, and receivership, the commitments of lenders will be automatically terminated and all outstanding obligations of the Company will become immediately due and payable. The Company was in compliance with the BofA Credit Facility financial covenants as of March 31, 2022.
The Company may use the proceeds of the loans under the BofA Credit Facility to finance the acquisition of real properties and for other permitted investments; to finance investments associated with Sponsored REITs, to refinance or retire indebtedness and for working capital and other general business purposes, in each case to the extent permitted under the BofA Credit Facility.
Senior Notes
On October 24, 2017, the Company entered into a note purchase agreement (the “Note Purchase Agreement”) with the various purchasers named therein (the “Purchasers”) in connection with a private placement of senior unsecured notes. Under the Note Purchase Agreement, the Company agreed to sell to the Purchasers an aggregate principal amount of $
The Senior Notes bear interest depending on the Company’s credit rating. As of March 31, 2022, the Series A Notes bear interest at
The Note Purchase Agreement contains customary financial covenants, including a maximum leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, and a maximum unencumbered leverage ratio. The Note Purchase Agreement also contains restrictive covenants that, among other things, restrict the ability of the Company and its subsidiaries to enter into transactions with affiliates, merge, consolidate, create liens, make certain restricted payments, enter into certain agreements or prepay certain indebtedness. Such financial and restrictive covenants are substantially similar to
14
the corresponding covenants contained in the BofA Credit Facility, the BMO Credit Agreement and the JPM Credit Agreement. The Senior Notes financial covenants require, among other things, the maintenance of a fixed charge coverage ratio of at least
4. Financial Instruments: Derivatives and Hedging
On July 22, 2016, the Company entered into interest rate swap transactions that fixed the interest rate for the period beginning on September 27, 2017 and ended on September 27, 2021 on the BofA Term Loan (the “2017 Interest Rate Swap”). On March 7, 2019, the Company entered into interest rate swap transactions that fixed the interest rate for the period beginning on March 29, 2019 and ended on November 30, 2021 on a $
On June 4, 2021, the Company paid approximately $
The Interest Rate Swaps qualify as cash flow hedges and have been recognized on the consolidated balance sheets at fair value. If a derivative qualifies as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedged asset, liability, or firm commitment through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value will be recognized in earnings in the same period in which the hedged interest payments affect earnings, which may increase or decrease reported net income and stockholders’ equity prospectively, depending on future levels of interest rates and other variables affecting the fair values of derivative instruments and hedged items, but will have no effect on cash flows.
The following table summarizes the notional and fair value of the Company’s derivative financial instruments at March 31, 2022 and December 31, 2021. The notional value is an indication of the extent of the Company’s involvement in these instruments at that time, but does not represent exposure to credit, interest rate or market risks.
| Notional |
| Strike |
| Effective |
| Expiration |
| Fair Value (2) at |
| ||||||
(in thousands) | Value | Rate | Date | Date | March 31, 2022 |
| December 31, 2021 |
| ||||||||
2019 BMO Interest Rate Swap (1) | $ | |
| | % | Aug-20 |
| Jan-24 | $ | ( | $ | ( | ||||
(1) The Notional Value decreased to $ | ||||||||||||||||
(2) Classified within Level 2 of the fair value hierarchy. | ||||||||||||||||
The 2019 BMO Interest Rate Swap was reported as a liability with a fair value of approximately $
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The gain/(loss) on the Company’s Interest Rate Swaps that was recorded in other comprehensive income (loss) (OCI) and the accompanying consolidated statements of operations as a component of interest expense for the three months ended March 31, 2022 and 2021, respectively, was as follows:
(in thousands) | Three Months Ended March 31, | |||||
Interest Rate Swaps in Cash Flow Hedging Relationships: |
| 2022 |
| 2021 | ||
Amounts of gain (loss) recognized in OCI | $ | | $ | | ||
Amounts of previously recorded gain/(loss) reclassified from OCI into Interest Expense | $ | ( | $ | ( | ||
Total amount of Interest Expense presented in the consolidated statements of operations | $ | | $ | | ||
Over time, the unrealized gains and losses held in accumulated other comprehensive income will be reclassified into earnings as an increase or reduction to interest expense in the same periods in which the hedged interest payments affect earnings. The Company estimates that approximately $
The Company is hedging the exposure to variability in anticipated future interest payments on existing debt.
The BMO Term Loan hedging transaction uses derivative instruments that involve certain additional risks such as counterparty credit risk, the enforceability of hedging contracts and the risk that unanticipated and significant changes in interest rates will cause a significant loss of basis in the contract. The Company requires its derivatives contracts to be with counterparties that have investment grade ratings. As a result, the Company does not anticipate that any counterparty will fail to meet its obligations. However, there can be no assurance that the Company will be able to adequately protect against the foregoing risks or that it will ultimately realize an economic benefit that exceeds the related amounts incurred in connection with engaging in such hedging strategies.
The fair value of the Company’s derivative instruments are determined using the net discounted cash flows of the expected cash flows of the derivative based on the market based interest rate curve and are adjusted to reflect credit or nonperformance risk. The risk is estimated by the Company using credit spreads and risk premiums that are observable in the market. These financial instruments were classified within Level 2 of the fair value hierarchy and were classified as an asset or liability on the consolidated balance sheets.
The Company’s derivatives are recorded at fair value in other assets: derivative asset and other liabilities: derivative liability in the consolidated balance sheets and the effective portion of the derivatives’ fair value is recorded to other comprehensive income (loss) in the consolidated statements of comprehensive income (loss).
5. Net Income Per Share
Basic net income per share is computed by dividing net income by the weighted average number of Company shares outstanding during the period. Diluted net income per share reflects the potential dilution that could occur if securities or other contracts to issue shares were exercised or converted into shares. There were
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6. Stockholders’ Equity
As of March 31, 2022, the Company had
Dividends Per | Total |
| |||||
Quarter Paid |
| Share |
| Dividends |
| ||
Special dividend declared in December 2021 and paid January 2022 |
| $ | |
| $ | | |
First quarter of 2022 |
| $ | |
| $ | | |
First quarter of 2021 |
| $ | |
| $ | | |
Equity-Based Compensation
On May 20, 2002, the stockholders of the Company approved the 2002 Stock Incentive Plan (the “Plan”). The Plan is an equity-based incentive compensation plan, and provides for the grants of up to a maximum of
On June 4, 2020 and May 20, 2021, the Company granted shares under the Plan to non-employee directors at a compensation cost of approximately $
| Shares Available | Compensation | ||||
for Grant | Cost | |||||
Balance December 31, 2020 | | $ | | |||
Shares granted 2021 | ( | | ||||
Balance December 31, 2021 | | | ||||
Shares granted 2022 | - | - | ||||
Balance March 31, 2022 | | $ | | |||
Repurchase of Common Stock
On June 23, 2021, the Board of Directors of the Company authorized the repurchase of up to $
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A summary of the repurchase of common stock by the Company is shown in the following table:
(Cost in thousands) | Shares Repurchased | Cost | ||||
Balance December 31, 2020 |
| |
| $ | | |
Repurchase of shares | | | ||||
Balance, December 31, 2021 | | | ||||
Repurchase of shares | | | ||||
Balance, March 31, 2022 | | $ | | |||
7. Income Taxes
General
The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). As a REIT, the Company generally is entitled to a tax deduction for distributions paid to its shareholders, thereby effectively subjecting the distributed net income of the Company to taxation at the shareholder level only. The Company must comply with a variety of restrictions to maintain its status as a REIT. These restrictions include the type of income it can earn, the type of assets it can hold, the number of shareholders it can have and the concentration of their ownership, and the amount of the Company’s taxable income that must be distributed annually.
One such restriction is that the Company generally cannot own more than
Income taxes are recorded based on the future tax effects of the difference between the tax and financial reporting bases of the Company’s assets and liabilities. In estimating future tax consequences, potential future events are considered except for potential changes in income tax law or in rates.
The Company adopted an accounting pronouncement related to uncertainty in income taxes effective January 1, 2007, which did not result in recording a liability, nor was any accrued interest and penalties recognized with the adoption. Accrued interest and penalties will be recorded as income tax expense, if the Company records a liability in the future. The Company’s effective tax rate was not affected by the adoption. The Company and one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The statute of limitations for the Company’s income tax returns is generally three years and as such, the Company’s returns that remain subject to examination would be primarily from 2018 and thereafter.
Net operating losses
Section 382 of the Code restricts a corporation’s ability to use NOLs to offset future taxable income following certain “ownership changes.” Such ownership changes occurred with past mergers and accordingly a portion of the NOLs incurred by the Sponsored REITs available for use by the Company in any particular future taxable year will be limited. To the extent that the Company does not utilize the full amount of the annual NOLs limit, the unused amount may be carried forward to offset taxable income in future years. NOLs generated prior to December 31, 2018 will expire 20 years after the year in which they arise, and the last of the Company’s NOLs will expire in 2027. A valuation allowance is provided for the full
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amount of the NOLs as the realization of any tax benefits from such NOLs is not assured. The gross amount of NOLs available to the Company was $
Income Tax Expense
The Company is subject to a business tax known as the Revised Texas Franchise Tax. Some of the Company’s leases allow reimbursement by tenants for these amounts because the Revised Texas Franchise Tax replaces a portion of the property tax for school districts. Because the tax base on the Revised Texas Franchise Tax is derived from an income based measure, it is considered an income tax. The Company recorded a provision for the Revised Texas Franchise Tax of $
The income tax expense reflected in the consolidated statements of operations relates primarily to a franchise tax on the Company’s Texas properties.
For the Three Months Ended March 31, |
| ||||||
(Dollars in thousands) |
| 2022 |
| 2021 |
| ||
| |||||||
Revised Texas Franchise Tax | $ | | $ | | |||
Other Taxes |
| — |
| — | |||
Tax expense | $ | | $ | | |||
Taxes on income are a current tax expense.
8. Leases
Leases as a Lessor:
The Company is a lessor of commercial real estate with operations that include the leasing of office and industrial properties. Many of the leases with customers contain options to extend leases at a fair market rate and may also include options to terminate leases. The Company considers several inputs when evaluating the amount it expects to derive from its leased assets at the end of the lease terms, such as the remaining useful life, expected market conditions, fair value of lease payments, expected fair values of underlying assets, and expected deployment of the underlying assets. The Company’s strategy to address its risk for the residual value in its commercial real estate is to re-lease the commercial space.
The Company has elected to apply the practical expedient to not separate non-lease components from the related lease component of real estate leases. This combined component is primarily comprised of fixed lease payments, early termination fees, common area maintenance cost reimbursements, and parking lease payments. The Company applies ASC 842-Leases to the combined lease and non-lease components.
A minority of the Company’s leases are subject to annual changes in the Consumer Price Index (“CPI”). Although increases in the CPI are not estimated as part of the Company’s measurement of straight-line rent revenue, to the extent that the actual CPI is greater or less than the CPI at lease commencement, there could be changes to realized income or loss.
For the three months ended March 31, 2022 and 2021, the Company recognized the following amounts of income relating to lease payments:
Income relating to lease payments: | ||||||
Three Months Ended | ||||||
(in thousands) |
| March 31, 2022 | March 31, 2021 | |||
Income from leases (1) | $ | | $ | | ||
$ | | $ | | |||
(1) Amounts recognized from variable lease payments were $ | ||||||
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9. Subsequent Events
On April 1, 2022, the Board of Directors of the Company declared a cash distribution of $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2021. Historical results and percentage relationships set forth in the consolidated financial statements, including trends which might appear, should not be taken as necessarily indicative of future operations. The following discussion and other parts of this Quarterly Report on Form 10-Q may also contain forward-looking statements based on current judgments and current knowledge of management, which are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those indicated in such forward-looking statements. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements. Investors are cautioned that our forward-looking statements involve risks and uncertainty, including without limitation, adverse changes in general economic or local market conditions, including the impact of increasing inflation, energy prices and interest rates, as well as a result of the COVID-19 pandemic and other potential infectious disease outbreaks and terrorist attacks or other acts of violence, which may negatively affect the markets in which we and our tenants operate, adverse changes in energy prices, which if sustained, could negatively impact occupancy and rental rates in the markets in which we own properties, including energy-influenced markets such as Dallas, Denver and Houston, expectations for future property dispositions, uncertainty relating to the completion and timing of the disposition of the properties under agreement, expectations for potential repurchases of our common stock and the potential payment of special dividends, changes in interest rates as a result of economic market conditions, disruptions in the debt markets, economic conditions in the markets in which we own properties, risks of a lessening of demand for the types of real estate owned by us, uncertainties relating to fiscal policy, changes in government regulations and regulatory uncertainty, geopolitical events, and expenditures that cannot be anticipated such as utility rate and usage increases, delays in construction schedules, unanticipated increases in construction costs, unanticipated repairs, increases in the level of general and administrative costs as a percentage of revenues as revenues decrease as a result of property dispositions, additional staffing, insurance increases and real estate tax valuation reassessments. See Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 and Part II, Item 1A. “Risk Factors” below. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We may not update any of the forward-looking statements after the date this Quarterly Report on Form 10-Q is filed to conform them to actual results or to changes in our expectations that occur after such date, other than as required by law.
Overview
FSP Corp., or we or the Company, operates in a single reportable segment: real estate operations. The real estate operations market involves real estate rental operations, leasing, secured financing of real estate and services provided for asset management, property management, property acquisitions, dispositions and development. Our current strategy is to invest in infill and central business district office properties in the United States sunbelt and mountain west regions as well as select opportunistic markets. We believe that the United States sunbelt and mountain west regions have macro-economic drivers that have the potential to increase occupancies and rents. We seek value-oriented investments with an eye towards long-term growth and appreciation, as well as current income.
As of March 31, 2022, approximately 6.0 million square feet, or approximately 86.3% of our total owned portfolio, was located in Atlanta, Dallas, Denver, Houston and Minneapolis.
The main factor that affects our real estate operations is the broad economic market conditions in the United States. These market conditions affect the occupancy levels and the rent levels on both a national and local level. We have no influence on broader economic/market conditions. We may look to acquire and/or develop quality properties in good locations in order to lessen the impact of downturns in the market and to take advantage of upturns when they occur.
We continue to believe that the current price of our common stock does not accurately reflect the value of our underlying real estate assets and we will seek to increase shareholder value (1) through the potential sale of select properties where we believe that short to intermediate term valuation potential has been reached and (2) by striving to increase occupancy in our continuing portfolio of real estate. Pursuant to this strategy, we anticipate that dispositions in 2022 will result in estimated gross proceeds in the range of approximately $250 million to $350 million. As we continue to execute this strategy, our revenue, Funds From Operations, and capital expenditures are likely to decrease in the short term. Proceeds from
21
dispositions are intended to be used for the repayment of debt, repurchases of our common stock, any special dividends required to meet REIT requirements, and other general corporate purposes.
For the year ended December 31, 2021, our disposition strategy resulted in gross sale proceeds of approximately $603 million, and we repaid approximately $508 million of debt. Specifically, on May 27, 2021, we sold One Ravinia, Two Ravinia and One Overton Park in Atlanta, Georgia for aggregate gross proceeds of approximately $219.5 million, on June 29, 2021, we sold Loudoun Technology Center in Sterling, Virginia for gross proceeds of approximately $17.25 million, on August 31, 2021, we sold River Crossing in Indianapolis, Indiana for gross proceeds of $35 million, on September 23, 2021, we sold Timberlake and Timberlake East, in Chesterfield, Missouri for aggregate gross proceeds of $67 million, on October 22, 2021, we sold 999 Peachtree in Atlanta, Georgia for gross proceeds of approximately $223.9 million and on November 16, 2021, we sold two office properties in Chantilly, Virginia for aggregate gross proceeds of approximately $40 million. During the three months ended June 30, 2021, we repaid approximately $155 million of term loan indebtedness and the approximately $47.5 million that had been drawn under our revolving line of credit. During the three months ended September 30, 2021 and December 31, 2021, we repaid $90 million and $215 million, respectively, of term loan indebtedness. During the three months ended March 31, 2022, we did not have any property dispositions and, as a result, did not repay any indebtedness.
On June 15, 2021, the credit rating for our senior unsecured debt was downgraded by Moody’s Investor Service to Ba1 from Baa3. The interest rate applicable to borrowings under our credit facilities is based in part on the rating of our debt. We anticipate that as a result of this downgrade we will incur approximately $2.2 million in additional interest costs during the next twelve months based on our borrowings and interest rates as defined in our loan agreements as of March 31, 2022.
Trends and Uncertainties
COVID-19 Outbreak
Beginning in January 2020, there was a global outbreak of COVID-19, which continues to adversely impact global commercial activity and has contributed to significant volatility in financial markets. It has already disrupted global travel supply chains, adversely impacted global commercial activity, and its long-term economic impact remains uncertain. Considerable uncertainty still surrounds the COVID-19 pandemic and its potential effects on the population, including the spread of more contagious variants of the virus, as well as the availability, administration rates and effectiveness of vaccines, therapeutics and any responses taken on a national and local level by government authorities and businesses. The travel restrictions, limits on hours of operations and/or closures of various businesses and other efforts to curb the spread of COVID-19 significantly disrupted business activity globally, including in the markets where we own properties. Many of our tenants do not fully occupy the space that they lease. The pandemic has had an adverse impact on economic and market conditions in various sectors of the economy. However, the evolving nature of the pandemic makes it difficult to ascertain the long-term impact it will have on commercial real estate markets and our business. Nevertheless, the COVID-19 pandemic continues to present material uncertainty and risk with respect to the performance of our properties and our financial results, such as the potential negative impact to the businesses of our tenants, the potential negative impact to leasing efforts and occupancy at our properties, the potential closure of certain of our assets for an extended period, uncertainty regarding future rent collection levels or requests for rent concessions from our tenants, the occurrence of a default under any of our debt agreements, the potential for increased borrowing costs, our ability to refinance existing indebtedness or to secure new sources of capital on favorable terms, fluctuations in our level of dividends, increased costs of operations, our ability to complete required capital expenditures in a timely manner and on budget, decrease in values of our real estate assets, changes in law and/or regulation, and uncertainty regarding government and regulatory policy. We are unable to estimate the impact the COVID-19 pandemic will have on our future financial results at this time. See Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021.
We have been following and directing our vendors to follow the guidelines from the Centers for Disease Control and other applicable authorities to minimize the spread of COVID-19 among our employees, tenants, vendors and visitors, as well as at our properties. During the year ended December 31, 2021 and the three months ended March 31, 2022, all of our properties remained open for business. Some of our tenants have requested rent concessions, and more tenants may request rent concessions or may not pay rent in the future. Future rent concession requests or nonpayment of rent could lead to increased rent delinquencies and/or defaults under leases, a lower demand for rentable space leading to increased concessions or lower
22
occupancy, extended lease terms, increased tenant improvement capital expenditures, or reduced rental rates to maintain occupancies. We review each rent concession request on a case by case basis and may or may not provide rent concessions, depending on the specific circumstances involved. Cash, cash equivalents and restricted cash were $11.0 million as of March 31, 2022. Management believes that existing cash, cash anticipated to be generated internally by operations and our existing availability under the BofA Revolver ($197.5 million available as of April 28, 2022), will be sufficient to meet working capital requirements and anticipated capital expenditures for at least the next 12 months. Although there is no guarantee that we will be able to obtain the funds necessary for our future growth, we anticipate generating funds from continuing real estate operations. We believe that we have adequate funds to cover unusual expenses and capital improvements, in addition to normal operating expenses. Our ability to maintain or increase our level of dividends to stockholders, however, depends in significant part upon the level of rental income from our real estate properties and the amount, timing and terms of any property dispositions.
Economic Conditions
The global economy is experiencing significant disruptions as a result of various factors, including geopolitical events such as the ongoing conflict between Russia and Ukraine, the COVID-19 pandemic and continuing supply chain difficulties. In addition, increasing inflation, energy prices and interest rates are contributing to recessionary concerns for the economy of the United States. Economic conditions directly affect the demand for office space, our primary income producing asset. In addition, the broad economic market conditions in the United States are typically affected by numerous factors, including but not limited to, inflation and employment levels, energy prices, the pace of economic growth and/or recessionary concerns, uncertainty about government fiscal, monetary, trade and tax policies, changes in currency exchange rates, geopolitical events, the regulatory environment, the availability of credit, and interest rates. During the three months ended March 31, 2022, the Federal Reserve raised the federal funds rate target by 25 basis points to a range of 0.25% to 0.50% and signaled the likely possibility of additional increases in 2022. In addition, in April 2022, the Federal Reserve confirmed its plan to reduce its balance sheet at a rapid pace beginning in May 2022, launching a process known as quantitative tightening, which could further result in increases in interest rates. If interest rates increase, then the interest costs on our unhedged variable rate debt could also increase, which could adversely affect our cash flow, our ability to pay principal and interest on our debt and our ability to make distributions to stockholders. Increasing interest rates could also decrease the amount third parties are willing to pay for our assets and limit our ability to incur new debt or refinance existing debt when it matures. As of the date of this report, the impact of current economic conditions, geopolitical events and the COVID-19 pandemic and related fallout from containment and mitigation measures, such as work from home arrangements and the closing of various businesses, are adversely affecting the demand for office space in the United States.
Real Estate Operations
As of March 31, 2022, our real estate portfolio was comprised of 24 operating properties, which we also refer to as our owned properties. Our 24 operating properties were approximately 77.3% leased as of March 31, 2022, a decrease from 78.4% leased as of December 31, 2021. The 1.1% decrease in leased space was primarily a result of lease maturities that occurred during the three months ended March 31, 2022. As of March 31, 2022, we had approximately 1,568,000 square feet of vacancy in our owned properties compared to approximately 1,496,000 square feet of vacancy at December 31, 2021. During the three months ended March 31, 2022, we leased approximately 131,000 square feet of office space, of which approximately 28,000 square feet were with existing tenants, at a weighted average term of 8.6 years. On average, tenant improvements for such leases were $52.16 per square foot, lease commissions were $18.10 per square foot and rent concessions were approximately eight months of free rent. Average GAAP base rents under such leases were $33.35 per square foot, or 2.4% higher than average rents in the respective properties as applicable compared to the year ended December 31, 2021.
As of March 31, 2022, leases for approximately 4.3% and 5.1% of the square footage in our owned portfolio are scheduled to expire during 2022 and 2023, respectively. As the second quarter of 2022 begins, we believe that our operating properties are stabilized, with a balanced lease expiration schedule, and that existing vacancy is being actively marketed to numerous potential tenants. While leasing activity at our properties has continued, we believe that geopolitical events and the COVID-19 outbreak and related containment and mitigation measures may limit or delay new tenant leasing during at least the second quarter of 2022 and potentially in future periods.
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While we cannot generally predict when an existing vacancy in our owned portfolio will be leased or if existing tenants with expiring leases will renew their leases or what the terms and conditions of the lease renewals will be, we expect to renew or sign new leases at then-current market rates for locations in which the buildings are located, which could be above or below the expiring rates. Also, we believe the potential exists for any of our tenants to default on its lease or to seek the protection of bankruptcy. If any of our tenants defaults on its lease, we may experience delays in enforcing our rights as a landlord and may incur substantial costs in protecting our investment. In addition, at any time, a tenant of one of our properties may seek the protection of bankruptcy laws, which could result in the rejection and termination of such tenant’s lease and thereby cause a reduction in cash available for distribution to our stockholders.
Dispositions of Properties
We sold three office properties located in Atlanta, Georgia on May 27, 2021 for an aggregate sales price of approximately $219.5 million, at a net gain of approximately $22.8 million. We sold an office property in Dulles, Virginia on June 29, 2021 for a sales price of approximately $17.3 million, at a loss of $2.1 million. We sold an office property located in Indianapolis, Indiana on August 31, 2021 for a sales price of approximately $35 million, at a loss of approximately $1.7 million. We sold two office properties located in Chesterfield, Missouri on September 23, 2021 for an aggregate sales price of approximately $67 million, at a gain of approximately $10.3 million. On October 22, 2021, we sold an office property in Atlanta, Georgia for a sales price of approximately $223.9 million, at a gain of approximately $86.8 million. On November 16, 2021, we sold two office properties in Chantilly, Virginia for an aggregate sales price of approximately $40 million, at a loss of approximately $2.9 million. There were no properties held for sale as of March 31, 2022.
We used the proceeds of the dispositions principally to repay outstanding indebtedness.
The dispositions of these properties did not represent a strategic shift that has a major effect on our operations and financial results. Our current strategy is to continue to invest in the sunbelt region of the United States. Accordingly, the properties sold remained classified within continuing operations for all periods presented.
We continue to believe that the current price of our common stock does not accurately reflect the value of our underlying real estate assets, and we will seek to increase shareholder value (1) through the potential sale of select properties where we believe that short to intermediate term valuation potential has been reached and (2) by striving to increase occupancy in our continuing portfolio of real estate. Pursuant to this strategy, we anticipate that dispositions in 2022 will result in estimated gross proceeds in the range of approximately $250 million to $350 million. As we continue to execute this strategy, our revenue, Funds From Operations, and capital expenditures are likely to decrease in the short term. Proceeds from dispositions are intended to be used for the repayment of debt, repurchases of our common stock, any special dividends required to meet REIT requirements, and other general corporate purposes.
Critical Accounting Estimates
We have certain critical accounting policies that are subject to judgments and estimates by our management and uncertainties of outcome that affect the application of these policies. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances. On an on-going basis, we evaluate our estimates. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current information. The accounting policies that we believe are most critical to the understanding of our financial position and results of operations, and that require significant management estimates and judgments, are discussed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2021.
Critical accounting policies are those that have the most impact on the reporting of our financial condition and results of operations and those requiring significant judgments and estimates. We believe that our judgments and estimates are consistently applied and produce financial information that fairly presents our results of operations.
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Recent Accounting Standards
In March 2020, the Financial Accounting Standards Board (FASB) issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The ASU contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. The Company is currently assessing the potential impact that the adoption of ASU 2020-04 may have on its consolidated financial statements.
Results of Operations
The following table shows financial results for the three months ended March 31, 2022 and 2021:
Three months ended March 31, | ||||||||||
(in thousands) |
| 2022 |
| 2021 |
| Change |
| |||
Revenues: | ||||||||||
Rental | $ | 41,797 | $ | 58,623 | $ | (16,826) | ||||
Related party revenue: | ||||||||||
Management fees and interest income from loans |
| 460 |
| 410 |
| 50 | ||||
Other |
| 7 |
| 6 |
| 1 | ||||
Total revenues |
| 42,264 |
| 59,039 |
| (16,775) | ||||
Expenses: | ||||||||||
Real estate operating expenses |
| 12,834 |
| 15,939 |
| (3,105) | ||||
Real estate taxes and insurance |
| 8,719 |
| 12,366 |
| (3,647) | ||||
Depreciation and amortization |
| 15,670 |
| 24,381 |
| (8,711) | ||||
General and administrative |
| 3,784 |
| 4,146 |
| (362) | ||||
Interest |
| 5,366 |
| 8,600 |
| (3,234) | ||||
Total expenses |
| 46,373 |
| 65,432 |
| (19,059) | ||||
Loss before taxes |
| (4,109) |
| (6,393) |
| 2,284 | ||||
Tax expense |
| 49 |
| 67 |
| (18) | ||||
Net loss | $ | (4,158) | $ | (6,460) | $ | 2,302 | ||||
Comparison of the three months ended March 31, 2022 to the three months ended March 31, 2021:
Revenues
Total revenues decreased by $16.8 million to $42.3 million for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021. The decrease was primarily a result of:
| ● | A decrease in rental revenue of approximately $16.8 million arising primarily from the sale of ten properties in the last twelve months and other losses of rental income from leases that expired after March 31, 2021 and during the three months ended March 31, 2022, compared to the three months ended March 31, 2021. These decreases were partially offset by rental income earned from leases commencing after March 31, 2021. Our leased space in our operating properties was 77.3% at March 31, 2022 and 81.9% at March 31, 2021. |
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Expenses
Total expenses decreased by $19.1 million to $46.4 million for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021. The decrease was primarily a result of:
| ● | A decrease in real estate operating expenses and real estate taxes and insurance of approximately $6.8 million primarily attributable to the property dispositions noted above. |
| ● | A decrease in depreciation and amortization of approximately $8.7 million primarily attributable to the property dispositions noted above. |
| ● | A decrease in general and administrative expenses of $0.4 million, which was primarily from lower professional fees and public company expenses. |
| ● | A decrease in interest expense of approximately $3.2 million. The decrease was primarily from lower interest expense as a result of a lower principal amount of debt outstanding, which was partially offset by higher interest rates during the three months ended March 31, 2022 compared to the same period in 2021. |
Tax expense on income
Included in income taxes is the Revised Texas Franchise Tax, which is a tax on revenues from Texas properties, which decreased $18,000 during the three months ended March 31, 2022 compared to the three months ended March 31, 2021.
Net loss
Net loss for the three months ended March 31, 2022 was $4.2 million compared to a net loss of $6.5 million for the three months ended March 31, 2021, for the reasons described above.
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Non-GAAP Financial Measures
Funds From Operations
The Company evaluates performance based on Funds From Operations, which we refer to as FFO, as management believes that FFO represents the most accurate measure of activity and is the basis for distributions paid to equity holders. The Company defines FFO as net income or loss (computed in accordance with GAAP), excluding gains (or losses) from sales of property, hedge ineffectiveness, acquisition costs of newly acquired properties that are not capitalized and lease acquisition costs that are not capitalized plus depreciation and amortization, including amortization of acquired above and below market lease intangibles and impairment charges on mortgage loans, properties or investments in non-consolidated REITs, and after adjustments to exclude equity in income or losses from, and, to include the proportionate share of FFO from, non-consolidated REITs.
FFO should not be considered as an alternative to net income or loss (determined in accordance with GAAP), nor as an indicator of the Company’s financial performance, nor as an alternative to cash flows from operating activities (determined in accordance with GAAP), nor as a measure of the Company’s liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company’s needs.
Other real estate companies and the National Association of Real Estate Investment Trusts, or NAREIT, may define this term in a different manner. We have included the NAREIT FFO definition as of May 17, 2016 in the table and note that other REITs may not define FFO in accordance with the NAREIT definition or may interpret the current NAREIT definition differently than we do.
We believe that in order to facilitate a clear understanding of the results of the Company, FFO should be examined in connection with net income or loss and cash flows from operating, investing and financing activities in the consolidated financial statements.
The calculations of FFO are shown in the following table:
March 31, |
| ||||||
(in thousands): |
| 2022 |
| 2021 |
| ||
Net loss | $ | (4,158) | $ | (6,460) | |||
Depreciation and amortization |
| 15,661 |
| 24,349 | |||
NAREIT FFO |
| 11,503 |
| 17,889 | |||
Lease Acquisition costs |
| 79 |
| 116 | |||
Funds From Operations | $ | 11,582 | $ | 18,005 | |||
Net Operating Income (NOI)
The Company provides property performance based on Net Operating Income, which we refer to as NOI. Management believes that investors are interested in this information. NOI is a non-GAAP financial measure that the Company defines as net income or loss (the most directly comparable GAAP financial measure) plus selling, general and administrative expenses, depreciation and amortization, including amortization of acquired above and below market lease intangibles and impairment charges, interest expense, less equity in earnings of nonconsolidated REITs, interest income, management fee income, hedge ineffectiveness, gains or losses on extinguishment of debt, gains or losses on the sale of assets and excludes non-property specific income and expenses. The information presented includes footnotes and the data is shown by region with properties owned in the periods presented, which we call Same Store. The comparative Same Store results include properties held for the periods presented and exclude properties that are redevelopment properties. We also exclude properties that have been placed in service, but that do not have operating activity for all periods presented, dispositions and significant nonrecurring income such as bankruptcy settlements and lease termination fees. NOI, as defined by the Company, may not be comparable to NOI reported by other REITs that define NOI differently. NOI should not be considered an alternative to net income or loss as an indication of our performance or to cash flows as a measure of the Company’s liquidity or its ability to make distributions. The calculations of NOI are shown in the following table:
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Net Operating Income (NOI)*
Rentable | |||||||||||||||
Square |
| ||||||||||||||
Feet | Three Months Ended | Three Months Ended | Inc | % |
| ||||||||||
(in thousands) |
| or RSF |
| 31-Mar-22 |
|
| 31-Mar-21 |
| (Dec) |
| Change |
| |||
Region | |||||||||||||||
East |
| 363 |
| $ | 497 |
|
| $ | 505 |
| $ | (8) |
| (1.6) | % |
MidWest |
| 1,130 |
| 3,897 |
| 3,217 |
| 680 |
| 21.1 | % | ||||
South |
| 2,796 |
| 5,817 |
| 7,095 |
| (1,278) |
| (18.0) | % | ||||
West |
| 2,627 |
| 9,681 |
| 10,369 |
| (688) |
| (6.6) | % | ||||
Property NOI* from Operating Properties |
| 6,916 |
| 19,892 |
| 21,186 |
| (1,294) |
| (6.1) | % | ||||
Dispositions and Redevelopment Properties (a) | - |
| (311) |
| 8,574 |
| (8,885) |
| (28.1) | % | |||||
Property NOI* | 6,916 |
| $ | 19,581 |
|
| $ | 29,760 |
| $ | (10,179) |
| (34.2) | % | |
| |||||||||||||||
Same Store |
| $ | 19,892 |
|
| $ | 21,186 |
| $ | (1,294) |
| (6.1) | % | ||
Less Nonrecurring | |||||||||||||||
Items in NOI* (b) |
| 273 |
| 32 |
| 241 |
| (1.2) | % | ||||||
Comparative | |||||||||||||||
Same Store |
| $ | 19,619 |
|
| $ | 21,154 |
| $ | (1,535) |
| (7.3) | % | ||
Three Months Ended | Three Months Ended | ||||||||||||||
Reconciliation to Net Income (Loss) | 31-Mar-22 | 31-Mar-21 | |||||||||||||
Net loss |
| $ | (4,158) |
|
| $ | (6,460) | ||||||||
Add (deduct): | |||||||||||||||
Management fee income |
| (291) |
| (465) | |||||||||||
Depreciation and amortization |
| 15,670 |
| 24,381 | |||||||||||
Amortization of above/below market leases |
| (9) |
| (32) | |||||||||||
General and administrative |
| 3,784 |
| 4,146 | |||||||||||
Interest expense |
| 5,366 |
| 8,600 | |||||||||||
Interest income |
| (451) |
| (394) | |||||||||||
Equity in income of non-consolidated REITs |
| — |
| — | |||||||||||
Non-property specific items, net |
| (330) |
| (16) | |||||||||||
Property NOI* |
| $ | 19,581 |
|
| $ | 29,760 | ||||||||
| (a) | We define redevelopment properties as properties being developed, redeveloped or where redevelopment is complete, but are in lease-up and that are not stabilized. We also include properties that have been placed in service, but that do not have operating activity for all periods presented. |
| (b) | Nonrecurring Items in NOI include proceeds from bankruptcies, lease termination fees or other significant nonrecurring income or expenses, which may affect comparability. |
*Excludes NOI from investments in and interest income from secured loans to non-consolidated REITs.
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The information presented below provides the weighted average GAAP rent per square foot for the three months ended March 31, 2022 for our properties and weighted occupancy square feet and percentages. GAAP rent includes the impact of tenant concessions and reimbursements. This table does not include information about properties held by our investments in non-consolidated REITs or those to which we have provided Sponsored REIT Loans.
|
|
|
|
|
|
|
|
|
|
| Weighted |
|
|
| ||
Occupied | Weighted |
| ||||||||||||||
Year Built | Weighted | Percentage as of | Average |
| ||||||||||||
or | Net Rentable | Occupied | March 31, | Rent per Occupied |
| |||||||||||
Property Name | City | State | Renovated | Square Feet | Sq. Ft. | 2022 (a) | Square Feet (b) |
| ||||||||
| ||||||||||||||||
Forest Park | Charlotte | NC | 1999/2020 | 64,198 | 50,331 | 78.4 | % | $ | 23.52 | |||||||
Innsbrook | Glen Allen | VA | 1999 | 298,183 | 151,805 | 50.9 | % |
| 18.98 | |||||||
East total | 362,381 | 202,136 | 55.8 | % |
| 20.11 | ||||||||||
Northwest Point | Elk Grove Village | IL | 1999 | 177,095 | 177,095 | 100.0 | % |
| 32.47 | |||||||
909 Davis Street | Evanston | IL | 2002 | 195,098 | 182,104 | 93.3 | % |
| 43.02 | |||||||
121 South 8th Street | Minneapolis | MN | 1974 | 298,121 | 266,401 | 89.4 | % |
| 25.39 | |||||||
801 Marquette Ave | Minneapolis | MN | 1923/2017 | 129,821 | 119,111 | 91.8 | % | 21.78 | ||||||||
Plaza Seven | Minneapolis | MN | 1987 | 330,096 | 275,630 | 83.5 | % |
| 35.02 | |||||||
Midwest total | 1,130,231 | 1,020,341 | 90.3 | % |
| 31.94 | ||||||||||
Blue Lagoon Drive | Miami | FL | 2002/2021 | 213,182 | 156,795 | 73.6 | % | 26.03 | ||||||||
Park Ten | Houston | TX | 1999 | 157,609 | 113,431 | 72.0 | % |
| 28.89 | |||||||
Addison Circle | Addison | TX | 1999 | 289,333 | 196,197 | 67.8 | % |
| 33.19 | |||||||
Collins Crossing | Richardson | TX | 1999 | 300,887 | 256,175 |
| 85.1 | % | 25.19 | |||||||
Eldridge Green | Houston | TX | 1999 | 248,399 | 248,399 |
| 100.0 | % | 26.40 | |||||||
Park Ten Phase II | Houston | TX | 2006 | 156,746 | 148,924 |
| 95.0 | % | 28.39 | |||||||
Liberty Plaza | Addison | TX | 1985 | 217,364 | 145,764 |
| 67.1 | % | 23.70 | |||||||
Legacy Tennyson Center | Plano | TX | 1999/2008 | 208,966 | 85,342 |
| 40.8 | % | 28.24 | |||||||
One Legacy Circle | Plano | TX | 2008 | 214,110 | 124,013 |
| 57.9 | % | 34.53 | |||||||
Westchase I II | Houston | TX | 1983/2008 | 629,025 | 335,145 |
| 53.3 | % | 28.07 | |||||||
Pershing Park Plaza | Atlanta | GA | 1989 | 160,145 | 19,810 | 12.4 | % | 29.99 | ||||||||
South Total | 2,795,766 | 1,829,995 |
| 65.5 | % | 28.01 | ||||||||||
380 Interlocken | Broomfield | CO | 2000 | 240,359 | 145,322 |
| 60.5 | % | 33.18 | |||||||
1999 Broadway | Denver | CO | 1986 | 680,255 | 454,206 |
| 66.8 | % | 33.21 | |||||||
1001 17th Street | Denver | CO | 1977/2006 | 657,706 | 590,357 |
| 89.8 | % | 35.20 | |||||||
600 17th Street | Denver | CO | 1982 | 611,163 | 480,435 |
| 78.6 | % | 33.93 | |||||||
Greenwood Plaza | Englewood | CO | 2000 | 196,236 | 196,236 |
| 100.0 | % | 28.25 | |||||||
390 Interlocken | Broomfield | CO | 2002 | 241,512 | 239,990 |
| 99.4 | % | 34.10 | |||||||
West Total | 2,627,231 | 2,106,546 |
| 80.2 | % | 33.57 | ||||||||||
Total Owned Properties | 6,915,609 | 5,159,018 | 74.6 | % | $ | 30.75 | ||||||||||
| (a) | Based on weighted occupied square feet for the three months ended March 31, 2022, including month-to-month tenants, divided by the Property’s net rentable square footage. |
| (b) | Represents annualized GAAP rental revenue for the three months ended March 31, 2022, per weighted occupied square foot. |
29
Liquidity and Capital Resources
Cash, cash equivalents and restricted cash were $11.0 million and $40.8 million at March 31, 2022 and December 31, 2021, respectively. The decrease of $29.8 million is attributable to $9.8 million used in operating activities, $10.0 million used in investing activities and $10.0 million used in financing activities. Management believes that existing cash, cash anticipated to be generated internally by operations and our existing availability under the BofA Revolver ($197.5 million available as of April 28, 2022), will be sufficient to meet working capital requirements and anticipated capital expenditures for at least the next 12 months. Although there is no guarantee that we will be able to obtain the funds necessary for our future growth, we anticipate generating funds from continuing real estate operations. We believe that we have adequate funds to cover unusual expenses and capital improvements, in addition to normal operating expenses. Our ability to maintain or increase our level of dividends to stockholders, however, depends in significant part upon the level of rental income from our real properties and our interest costs.
Operating Activities
Cash used in operating activities for the three months ended March 31, 2022 of $9.8 million is primarily attributable to a net loss of $4.2 million plus the add-back of $15.0 million of non-cash expenses, less a decrease in accounts payable and accrued compensation of $14.0 million, an increase in payment of deferred leasing commissions of $3.7 million, an increase in prepaid expenses of $1.3 million, an increase in lease acquisition costs of $1.1 million, an increase in tenant security deposits of $0.4 million and an increase in tenant rent receivables of $0.1 million.
Investing Activities
Cash used in investing activities for the three months ended March 31, 2022 of $10.0 million is primarily attributable to purchases of other real estate assets and office equipment investments of $10.0 million.
Financing Activities
Cash used in financing activities for the three months ended March 31, 2022 of $10.0 million is primarily attributable to payment of distributions paid to stockholders of $42.6 million, stock repurchases of $4.8 million and payment of deferred financing costs of $2.6 million, which was partially offset by net borrowings on the BofA Revolver (as defined below) of $40.0 million.
Liquidity beyond the next 12 months
Our ability to generate cash adequate to meet our needs is dependent primarily on income from real estate investments, the sale of real estate investments, leveraging of real estate investments, availability of bank borrowings, proceeds from public offerings of stock, private placement of debt and access to the capital markets. The acquisition of new properties, the payment of expenses related to real estate operations, capital improvement expenses, debt service payments, general and administrative expenses, and distribution requirements place demands on our liquidity.
We intend to operate our properties from the cash flows generated by our properties. However, our expenses are affected by various factors, including inflation. See Part II, Item 1A, Risk Factors for additional factors. Increases in operating expenses are predominantly borne by our tenants. To the extent that increases cannot be passed on to our tenants through rent reimbursements, such expenses would reduce the amount of available cash flow, which can adversely affect the market value of the applicable property.
We have used a variety of sources to fund our cash needs in addition to our free cash flow generated from our investments in real estate. In the past, we considered borrowing on our unsecured line of credit facility, adding or refinancing existing term debt or raising capital through public offerings or At The Market (ATM) programs of our common stock. See Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Contractual Obligations. We believe these sources of funds will provide sufficient funds to adequately meet our obligations beyond the next twelve months.
30
JPM Term Loan
On August 2, 2018, the Company entered into an Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent and lender (“JPMorgan”), and the other lending institutions party thereto (the “JPM Credit Agreement”), which provided a single unsecured bridge loan in the aggregate principal amount of $150 million (the “JPM Term Loan”). On December 24, 2020, the Company repaid a $50 million portion of the JPM Term Loan with a portion of the proceeds from the December 23, 2020 sale of its Durham, North Carolina property, and $100 million remained fully advanced and outstanding under the JPM Term Loan. On June 4, 2021, the Company repaid the remaining $100 million outstanding on the loan, which had been scheduled to mature on November 30, 2021, and incurred a loss on extinguishment of debt of $0.1 million related to unamortized deferred financing costs. The repayment was made with a portion of the proceeds from the May 27, 2021 sales of the three Atlanta properties.
Although the interest rate on the JPM Term Loan was variable under the JPM Credit Agreement, the Company fixed the LIBOR-based rate on a portion of the JPM Term Loan by entering into interest rate swap transactions. On March 7, 2019, the Company entered into ISDA Master Agreements with various financial institutions to hedge a $100 million portion of the future LIBOR-based rate risk under the JPM Credit Agreement. Effective March 29, 2019, the Company fixed the LIBOR-based rate at 2.44% per annum on a $100 million portion of the JPM Term Loan until November 30, 2021. On June 4, 2021, the Company paid approximately $1.2 million to terminate the interest rate swap, which was scheduled to mature on November 30, 2021.
BMO Term Loan
On September 27, 2018, the Company entered into a Second Amended and Restated Credit Agreement with the lending institutions party thereto and Bank of Montreal, as administrative agent (the “BMO Credit Agreement”). The BMO Credit Agreement provides for a single, unsecured term loan borrowing in the initial amount of $220 million (the “BMO Term Loan”), of which $165 million remains fully advanced and outstanding. The BMO Term Loan initially consisted of a $55 million tranche A term loan and a $165 million tranche B term loan. On June 4, 2021, the Company repaid the tranche A term loan that was scheduled to mature on November 30, 2021, and incurred a loss on extinguishment of debt of $0.1 million related to unamortized deferred financing costs. The repayment was made with a portion of the proceeds from the May 27, 2021 sales of the three Atlanta properties. The $165 million tranche B term loan matures on January 31, 2024. The BMO Credit Agreement also includes an accordion feature that allows up to $100 million of additional loans, subject to receipt of lender commitments and satisfaction of certain customary conditions.
The BMO Term Loan bears interest at either (i) a number of basis points over LIBOR depending on the Company’s credit rating (165 basis points over LIBOR at March 31, 2022) or (ii) a number of basis points over the base rate depending on the Company’s credit rating (65 basis points over the base rate at March 31, 2022).
Although the interest rate on the BMO Term Loan is variable under the BMO Credit Agreement, the Company fixed the base LIBOR interest rate by entering into interest rate swap transactions. On August 26, 2013, the Company entered into an ISDA Master Agreement with Bank of Montreal that fixed the base LIBOR interest rate on the BMO Term Loan at 2.32% per annum, which matured on August 26, 2020. On February 20, 2019, the Company entered into ISDA Master Agreements with a group of banks that fixed the base LIBOR interest rate on the BMO Term Loan at 2.39% per annum for the period beginning on August 26, 2020 and ending January 31, 2024. Accordingly, based upon the Company’s credit rating, as of March 31, 2022, the effective interest rate on the BMO Term Loan was 4.04% per annum. On June 4, 2021, the Company paid approximately $0.6 million to terminate the portion of the interest rate swap on the tranche A term loan, which was scheduled to mature on November 30, 2021.
The BMO Credit Agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations with respect to indebtedness, liens, investments, mergers and acquisitions, disposition of assets, changes in business, certain restricted payments, the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates. The BMO Credit Agreement also contains financial covenants that require the Company to maintain a minimum tangible net worth, a maximum leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, a maximum unencumbered leverage ratio, and minimum unsecured interest
31
coverage. The BMO Credit Agreement provides for customary events of default with corresponding grace periods, including failure to pay any principal or interest when due, certain cross defaults and a change in control of the Company (as defined in the BMO Credit Agreement). In the event of a default by the Company, the administrative agent may, and at the request of the requisite number of lenders shall, declare all obligations under the BMO Credit Agreement immediately due and payable, terminate the lenders’ commitments to make loans under the BMO Credit Agreement, and enforce any and all rights of the lenders or the administrative agent under the BMO Credit Agreement and related documents. For certain events of default related to bankruptcy, insolvency, and receivership, the commitments of lenders will be automatically terminated and all outstanding obligations of the Company will become immediately due and payable. The Company was in compliance with the BMO Term Loan financial covenants as of March 31, 2022.
BofA Revolver
On January 10, 2022, the Company entered into a Credit Agreement (the “BofA Credit Agreement”) with Bank of America, N.A., as administrative agent, a letter of credit issuer and a lender (“BofA”), and the other lending institutions party thereto, for a new revolving line of credit for borrowings, at the Company’s election, of up to $217.5 million (the “BofA Revolver”). On February 10, 2022, the Company increased its BofA Revolver availability by $20.0 million to $237.5 million as part of the accordion feature that is available to increase borrowing capacity. Borrowings made under the BofA Revolver may be revolving loans or letters of credit, the combined sum of which may not exceed $237.5 million outstanding at any time. As of March 31, 2022, there were borrowings of $40.0 million drawn and outstanding under the BofA Revolver. Borrowings made pursuant to the BofA Revolver may be borrowed, repaid and reborrowed from time to time until the maturity date on January 12, 2024. The Company has the right to request an extension of the maturity date, subject to acceptance by the lenders and satisfaction of certain other customary conditions. The BofA Revolver includes an accordion feature that allows the Company to request an increase in borrowing capacity to an amount not exceeding $750 million in the aggregate, subject to receipt of lender commitments and satisfaction of certain customary conditions.
Borrowings under the BofA Revolver bear interest at a margin over either (i) the daily simple Secured Overnight Financing Rate (“SOFR”), plus an adjustment of 0.11448%, or (ii) one, three or six month term SOFR, plus a corresponding adjustment of 0.11448%, 0.26161% or 0.42826%, respectively. In addition, under certain circumstances, such as if SOFR is not able to be determined, the BofA Revolver will instead bear interest at a margin over a specified base rate. The margin over SOFR or, if applicable, the base rate varies depending on the Company’s leverage ratio (1.650% over SOFR and 0.650% over the base rate at March 31, 2022). The Company is also obligated to pay an annual facility fee and, if applicable, letter of credit fees in amounts that are also based on the Company’s leverage ratio. The facility fee is assessed against the aggregate amount of lender commitments regardless of usage (0.30% at March 31, 2022).
Based upon the Company’s credit rating, as of March 31, 2022, the interest rate on the BofA Revolver was 2.06% per annum. The weighted average variable interest rate on all amounts outstanding under the BofA Revolver through March 31, 2022 was approximately 2.04% per annum.
The BofA Credit Agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations with respect to indebtedness, liens, investments, mergers and acquisitions, disposition of assets, changes in business, certain restricted payments, the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates. The BofA Credit Agreement also contains financial covenants that require the Company to maintain a minimum tangible net worth, a maximum leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, a maximum unencumbered leverage ratio and a minimum unsecured interest coverage ratio. The BofA Credit Agreement also restricts the Company’s ability to make dividend distributions that exceed 95% of the Company’s good faith estimate of projected funds from operations for the applicable fiscal year; provided, however, that notwithstanding such restriction, the Company is permitted to make dividend distributions based on the Company’s good faith estimate of projected or estimated taxable income or otherwise as necessary to retain the Company’s status as a real estate investment trust, to meet the distribution requirements of Section 857 of the Internal Revenue Code or to eliminate any income or excise taxes to which the Company would otherwise be subject. The Company was in compliance with the BofA Revolver financial covenants as of March 31, 2022.
The BofA Credit Agreement provides for customary events of default with corresponding grace periods, including failure to pay any principal or interest when due, failure to comply with the provisions of the BofA Credit Agreement, certain
32
cross defaults and a change in control of the Company (as defined in the BofA Credit Agreement). In the event of a default by the Company, BofA, in its capacity as administrative agent, may, and at the request of the requisite number of lenders shall, declare all obligations under the BofA Credit Agreement immediately due and payable and enforce any and all rights of the lenders or BofA under the BofA Credit Agreement and related documents. For certain events of default related to bankruptcy, insolvency, and receivership, all outstanding obligations of the Company will become immediately due and payable.
The Company may use the net proceeds of the BofA Revolver to finance the acquisition of real properties and for other permitted investments; to finance investments associated with Sponsored REITs, to refinance or retire indebtedness and for working capital and other general business purposes, in each case to the extent permitted under the BofA Credit Agreement.
BofA Credit Facility
On July 21, 2016, the Company entered into a First Amendment (the “BofA First Amendment”), and on October 18, 2017, the Company entered into a Second Amendment (the “BofA Second Amendment”), to the Second Amended and Restated Credit Agreement dated October 29, 2014 among the Company, the lending institutions party thereto and BofA, as administrative agent, L/C Issuer and Swing Line Lender (as amended by the BofA First Amendment and the BofA Second Amendment, the “BofA Credit Facility”) that continued an existing unsecured revolving line of credit (the “Former BofA Revolver”) and an existing term loan (the “BofA Term Loan”). Effective simultaneously with the closing of the BofA Revolver on January 10, 2022, the Company delivered a notice to BofA terminating the aggregate lender commitments under the Former BofA Revolver in their entirety. There were no amounts drawn on the Former BofA Revolver as of December 31, 2021 and January 10, 2022.
BofA Term Loan Highlights
| ● | The original principal amount of the BofA Term Loan was $400 million. On September 30, 2021, the Company repaid a $90 million portion and on October 25, 2021, the Company repaid a $200 million portion of the BofA Term Loan and incurred a loss on extinguishment of debt of $0.7 million related to unamortized deferred financing costs. As of March 31, 2022, $110 million remained outstanding under the BofA Term Loan. |
| ● | The BofA Term Loan matures on January 12, 2023. |
| ● | The BofA Credit Facility includes an accordion feature that allows for an aggregate amount of up to $500 million of additional borrowing capacity applicable to the BofA Term Loan, subject to receipt of lender commitments and satisfaction of certain customary conditions. |
The BofA Term Loan bears interest at either (i) a margin over LIBOR depending on the Company’s credit rating (1.75% over LIBOR at March 31, 2022) or (ii) a margin over the base rate depending on the Company’s credit rating (0.75% over the base rate at March 31, 2022).
The interest rate on the BofA Term Loan was variable at March 31, 2022. Previously the Company had fixed the base LIBOR interest rate on the BofA Term Loan by entering into interest rate swap transactions. On July 22, 2016, the Company entered into ISDA Master Agreements with a group of banks that fixed the base LIBOR interest rate on the BofA Term Loan at 1.12% per annum for the period beginning on September 27, 2017 and ended on September 27, 2021. Based upon the Company’s credit rating, as of March 31, 2022, the interest rate on the BofA Term Loan was 2.20% per annum. The weighted average variable interest rate on all amounts outstanding under the BofA Term Loan through March 31, 2022, was approximately 1.90% per annum.
BofA Credit Facility General Information
The BofA Credit Facility contains customary affirmative and negative covenants for credit facilities of this type, including limitations with respect to indebtedness, liens, investments, mergers and acquisitions, disposition of assets, changes in business, certain restricted payments, the requirement to have subsidiaries provide a guaranty in the event that they incur
33
recourse indebtedness and transactions with affiliates. The BofA Credit Facility also contains financial covenants that require the Company to maintain a minimum tangible net worth, a maximum leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, a maximum unencumbered leverage ratio, and minimum unsecured interest coverage. The BofA Credit Facility provides for customary events of default with corresponding grace periods, including failure to pay any principal or interest when due, certain cross defaults and a change in control of the Company (as defined in the BofA Credit Facility). In the event of a default by the Company, the administrative agent may, and at the request of the requisite number of lenders shall, declare all obligations under the BofA Credit Facility immediately due and payable, terminate the lenders’ commitments to make loans under the BofA Credit Facility, and enforce any and all rights of the lenders or administrative agent under the BofA Credit Facility and related documents. For certain events of default related to bankruptcy, insolvency, and receivership, the commitments of lenders will be automatically terminated and all outstanding obligations of the Company will become immediately due and payable. The Company was in compliance with the BofA Credit Facility financial covenants as of March 31, 2022.
The Company may use the proceeds of the loans under the BofA Credit Facility to finance the acquisition of real properties and for other permitted investments; to finance investments associated with Sponsored REITs, to refinance or retire indebtedness and for working capital and other general business purposes, in each case to the extent permitted under the BofA Credit Facility.
Senior Notes
On October 24, 2017, the Company entered into a note purchase agreement (the “Note Purchase Agreement”) with the various purchasers named therein (the “Purchasers”) in connection with a private placement of senior unsecured notes. Under the Note Purchase Agreement, the Company agreed to sell to the Purchasers an aggregate principal amount of $200 million of senior unsecured notes consisting of (i) Series A Senior Notes due December 20, 2024 in an aggregate principal amount of $116 million (the “Series A Notes”) and (ii) Series B Senior Notes due December 20, 2027 in an aggregate principal amount of $84 million (the “Series B Notes” and, together with the Series A Notes, the “Senior Notes”). On December 20, 2017, the Senior Notes were funded and the proceeds were used to reduce the outstanding balance of the Former BofA Revolver.
The Senior Notes bear interest depending on the Company’s credit rating. As of March 31, 2022, the Series A Notes bear interest at 4.49% per annum and the Series B Notes bear interest at 4.76% per annum.
The Note Purchase Agreement contains customary financial covenants, including a maximum leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, and a maximum unencumbered leverage ratio. The Note Purchase Agreement also contains restrictive covenants that, among other things, restrict the ability of the Company and its subsidiaries to enter into transactions with affiliates, merge, consolidate, create liens, make certain restricted payments, enter into certain agreements or prepay certain indebtedness. Such financial and restrictive covenants are substantially similar to the corresponding covenants contained in the BofA Credit Facility, the BMO Credit Agreement and the JPM Credit Agreement. The Senior Notes financial covenants require, among other things, the maintenance of a fixed charge coverage ratio of at least 1.50; a maximum leverage ratio and an unsecured leverage ratio of no more than 60% (65% if there were a significant acquisition for a short period of time). In addition, the Note Purchase Agreement provides that the Note Purchase Agreement will automatically incorporate additional financial and other specified covenants (such as limitations on investments and distributions) that are effective from time to time under the existing credit agreements, other material indebtedness or certain other private placements of debt of the Company and its subsidiaries. The Note Purchase Agreement contains customary events of default, including payment defaults, cross defaults with certain other indebtedness, breaches of covenants and bankruptcy events. In the case of an event of default, the Purchasers may, among other remedies, accelerate the payment of all obligations. The Company was in compliance with the Senior Notes financial covenants as of March 31, 2022.
Stock Repurchase Program
On June 23, 2021, FSP Corp. announced that the Board of Directors of FSP Corp. had authorized the repurchase of up to $50 million of the Company’s common stock from time to time in the open market, privately negotiated transactions or
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other manners as permitted by federal securities laws. The repurchase authorization may be suspended or discontinued at any time.
Contingencies
From time to time, we may provide financing to Sponsored REITs in the form of a construction loan and/or a revolving line of credit secured by a mortgage. As of March 31, 2022, we had one loan outstanding for $24 million principal amount with one Sponsored REIT under such arrangements for the purpose of funding construction costs, capital expenditures, leasing costs or for other purposes. We anticipate that advances made under these facilities will be repaid at their maturity date or earlier from refinancing, long term financings of the underlying properties, cash flows from the underlying properties or another other capital event.
We may be subject to various legal proceedings and claims that arise in the ordinary course of our business. Although occasional adverse decisions (or settlements) may occur, we believe that the final disposition of such matters will not have a material adverse effect on our financial position or results of operations.
Related Party Transactions
We intend to draw on the BofA Revolver in the future for a variety of corporate purposes, including the acquisition of properties that we acquire directly for our portfolio and for Sponsored REIT Loans as described below.
Loans to Sponsored REIT
Sponsored REIT Loans
From time to time we may make secured loans (“Sponsored REIT Loans”) to Sponsored REITs in the form of mortgage loans or revolving lines of credit to fund construction costs, capital expenditures, leasing costs and for other purposes. We anticipate that advances made under these facilities will be repaid at their maturity date or earlier from refinancing, long term financings of the underlying properties, cash flows from the underlying properties or another capital event. A Sponsored REIT Loan is secured by a mortgage on the underlying property and has a term of approximately two to three years.
Our Sponsored REIT Loans subject us to credit risk. However, we believe that our position as asset manager of each of the Sponsored REITs helps mitigate that risk by providing us with unique insight and the ability to rely on qualitative analysis of the Sponsored REITs. Before making a Sponsored REIT Loan, we consider a variety of subjective factors, including the quality of the underlying real estate, leasing, the financial condition of the applicable Sponsored REIT and local and national market conditions. These factors are subject to change and we do not apply a formula or assign relative weights to the factors. Instead, we make a subjective determination after considering such factors collectively.
Additional information about our Sponsored REIT Loan outstanding as of March 31, 2022, including a summary table of our Sponsored REIT Loans, is incorporated herein by reference to Part 1, Item 1, Note 2, “Related Party Transactions and Investments in Non-Consolidated Entities - Management fees and interest income from loans in the Notes to Consolidated Financial Statements included in this report.
Other Considerations
We generally pay the ordinary annual operating expenses of our properties from the rental revenue generated by the properties. For the three months ended March 31, 2022 and 2021, respectively, the rental income exceeded the expenses for each individual property, with the exception of Pershing Park for the three months ended March 31, 2022.
Pershing Park has approximately 160,000 square feet of rentable space, which was 12.4% leased at June 30, 2021 due to a large tenant departure on May 31, 2021. During the three months ended September 30, 2021 and the three months ended March 31, 2022, we signed a lease and expansion of space with a new tenant for approximately 101,000 square feet
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that has not commenced. The property had $187,000 of rental income and $557,000 of operating expenses for the three months ended March 31, 2022, and was 78.1% leased as of March 31, 2022.
Off-Balance Sheet Arrangements and Contractual Obligations
There have been no material changes to our contractual obligations and off-balance-sheet arrangements as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market Rate Risk
We are exposed to changes in interest rates primarily from our floating rate borrowing arrangements. We use interest rate derivative instruments to manage exposure to interest rate changes. As of March 31, 2022 and December 31, 2021, if market rates on our outstanding borrowings under the BofA Revolver and the BofA Term Loan subject to a floating rate increased by 10% at maturity, or approximately 21 and 22 basis points, respectively, over the current variable rate, the increase in interest expense would decrease future earnings and cash flows by approximately $0.1 million and $0.2 million annually, respectively. Based upon our credit rating, the interest rate on the BofA Revolver as of March 31, 2022 was SOFR plus an adjustment of 0.11448% plus 165 basis points, or 2.07% per annum. Based upon our credit rating, the interest rate on the BofA Term Loan as of March 31, 2022 was LIBOR plus 175 basis points, or 2.20% per annum. There was $40 million drawn on the BofA Revolver and $110 million was outstanding on the BofA Term Loan as of March 31, 2022. We do not believe that the interest rate risk on the BofA Revolver and the BofA Term Loan are material as of March 31, 2022.
Although the interest rates on the BMO Term Loan, the BofA Term Loan and the JPM Term Loan are variable, the Company fixed the base LIBOR interest rates on the BMO Term Loan and the BofA Term Loan, and the LIBOR-based rate on the remaining $100 million portion of the JPM Term Loan, by entering into interest rate swap agreements. On July 22, 2016, the Company fixed the interest rate for the period beginning on September 27, 2017 and ended on September 27, 2021 on the BofA Term Loan with multiple interest rate swap agreements (the “2017 Interest Rate Swap”). On March 7, 2019, the Company fixed the interest rate for the period beginning on March 29, 2019 and ended on November 30, 2021 for the notional value of $100 million on the JPM Term Loan with interest rate swap agreements (the “2019 JPM Interest Rate Swap”). On June 4, 2021, the Company paid approximately $1.2 million to terminate the 2019 JPM Interest Rate Swap, which was scheduled to mature on November 30, 2021. On February 20, 2019, the Company fixed the interest rate for the period beginning August 26, 2020 and ending January 31, 2024 on the BMO Term Loan with interest rate swap agreements (the “2019 BMO Interest Rate Swap”). On June 4, 2021, the Company paid approximately $0.6 million to terminate $55 million in Notional Value on the 2019 BMO Interest Rate Swap, which was scheduled to mature on November 30, 2021. Accordingly, based upon our credit rating, as of March 31, 2022, the interest rate on the BMO Term Loan was 4.04% per annum. The fair value of these interest rate swaps are affected by changes in market interest rates. We believe that we have mitigated interest rate risk with respect to the BMO Term Loan through the 2019 BMO Interest Rate Swap until January 31, 2024. This interest rate swap was our only derivative instrument as of March 31, 2022.
The table below lists our derivative instruments, which are hedging variable cash flows related to interest on our BMO Term Loan as of March 31, 2022 and December 31, 2021 (in thousands):
| Notional |
| Strike |
| Effective |
| Expiration | Fair Value (2) at | |||||||
(in thousands) | Value | Rate | Date | Date | March 31, 2022 |
| December 31, 2021 | ||||||||
| |||||||||||||||
2019 BMO Interest Rate Swap (1) | $ | 165,000 |
| 2.39 | % | Aug-20 |
| Jan-24 | $ | (195) | $ | (5,239) | |||
(1) The Notional Value decreased to $165 million on June 4, 2021. | |||||||||||||||
(2) Classified within Level 2 of the fair value hierarchy. | |||||||||||||||
Our BMO Term Loan hedging transaction uses derivative instruments that involve certain additional risks such as counterparty credit risk, the enforceability of hedging contracts and the risk that unanticipated and significant changes in interest rates will cause a significant loss of basis in the contract. We require our derivatives contracts to be with counterparties that have investment grade ratings. As a result, we do not anticipate that any counterparty will fail to meet its obligations. However, there can be no assurance that we will be able to adequately protect against the foregoing risks or that we will ultimately realize an economic benefit that exceeds the related amounts incurred in connection with engaging in such hedging strategies.
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The Company’s derivatives are recorded at fair value in other assets and liabilities in the consolidated balance sheets, the effective portion of the derivatives’ fair value is recorded to other comprehensive income in the consolidated statements of other comprehensive income (loss).
The following table presents, as of March 31, 2022, our contractual variable rate borrowings under our BofA Revolver, which matures on January 12, 2024, under our BofA Term Loan, which matures on January 12, 2023, under our BMO Term Loan Tranche B, which matures on January 31, 2024, under our Series A Notes, which mature on December 20, 2024, and under our Series B Notes, which mature on December 20, 2027.
Payment due by period |
| |||||||||||||||||||||
(in thousands) |
| |||||||||||||||||||||
| Total |
| 2022 |
| 2023 |
| 2024 |
| 2025 |
| 2026 |
| Thereafter |
| ||||||||
BofA Revolver | $ | 40,000 | $ | — | $ | — | $ | 40,000 | $ | — | $ | — | $ | — | ||||||||
BofA Term Loan |
| 110,000 | — |
| 110,000 |
|
| — |
| — | — | |||||||||||
BMO Term Loan Tranche B | 165,000 | — | — | 165,000 | — | — | — | |||||||||||||||
Series A Notes | 116,000 | — | — | 116,000 |
| — |
| — |
| — | ||||||||||||
Series B Notes |
| 84,000 | — | — | — |
| — |
| — |
| 84,000 | |||||||||||
Total | $ | 515,000 | $ | — | $ | 110,000 | $ | 321,000 | $ | — | $ | — | $ | 84,000 | ||||||||
Item 4. Controls and Procedures
Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2022, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
No change in our internal control over financial reporting occurred during the quarter ended March 31, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may be subject to legal proceedings and claims that arise in the ordinary course of our business. Although occasional adverse decisions (or settlements) may occur, we believe that the final disposition of such matters will not have a material adverse effect on our financial position, cash flows or results of operations.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in the Annual Report on Form 10-K for the year ended December 31, 2021, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K for the year ended December 31, 2021 are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On June 23, 2021, FSP Corp. announced that the Board of Directors of FSP Corp. had authorized the repurchase of up to $50 million of the Company’s common stock from time to time in the open market, privately negotiated transactions or other manners as permitted by federal securities laws. The repurchase authorization may be suspended or discontinued at any time.
The following table provides information about purchases by Franklin Street Properties Corp. during the quarter ended March 31, 2022 of equity securities that are registered by the Company pursuant to Section 12 of the Securities Exchange Act of 1934:
Issuer Purchases of Equity Securities
Period | (a) Total Number of Shares (or Units) Purchased | (b) Average Price Paid per Share (or Unit) | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs |
January 1, 2022 through January 31, 2022 | 0 | N/A | 0 | $31,755,550 |
February 1, 2022 through February 28, 2022 | 457,539 | $5.66 | 457,539 | $29,164,305 |
March 1, 2022 through March 31, 2022 | 389,200 | $5.78 | 389,200 | $26,913,083 |
Total: | 846,739 | $5.72 | 846,739 | $26,913,083 |
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Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
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Item 6. Exhibits
Exhibit No. |
| Description |
3.1 (1) | ||
3.2 (2) | ||
10.1 (3) | ||
10.2 (4) | ||
31.1* | ||
31.2* | ||
32.1* | ||
32.2* | ||
101* | The following materials from FSP Corp.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Stockholders’ Equity; (iv) the Consolidated Statements of Cash Flows; (v) the Consolidated Statements of Comprehensive Income (Loss); and (vi) the Notes to Consolidated Financial Statements. | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
Footnotes |
| Description |
(1) | ||
(2) | ||
(3) | ||
(4) | ||
* | Filed herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN STREET PROPERTIES CORP. |
Date |
| Signature |
| Title |
Date: May 3, 2022 | /s/ George J. Carter | Chief Executive Officer and Director | ||
George J. Carter | (Principal Executive Officer) | |||
Date: May 3, 2022 | /s/ John G. Demeritt | Chief Financial Officer | ||
John G. Demeritt | (Principal Financial Officer) |
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