Item 2. Management’s Discussion and Analysis
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, 2024. 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 recessionary concerns, inflation, energy prices and interest rates, as well as those resulting from the COVID-19 pandemic, and the impact of work-from-home and return-to-work policies, 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, our inability to extend and/or refinance our debt or effect asset sales or other potential transactions sufficient to repay such debt prior to the maturity dates thereof, 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 potential property dispositions, expectations for future potential leasing activity, expectations for 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, 2024. 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 focus on 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 are focused on long-term growth and appreciation, as well as current income.
As of September 30, 2025, all of our total owned portfolio, consisting of approximately 4.8 million square feet, was located in 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 are continuing to pursue select potential property dispositions when we believe that short to intermediate term valuation potential has been reached. Assuming that demand, pricing and liquidity allows us to transact on any potential dispositions, we intend to use the net proceeds primarily for the continued repayment of debt.
We continue to believe that the current price of our common stock does not accurately reflect the intrinsic value of our underlying real estate assets and we will seek to increase shareholder value by (1) pursuing the sale of select properties where
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we believe that short to intermediate term valuation potential has been reached and (2) striving to lease vacant space. As we continue to execute this strategy, our revenue, Funds From Operations, and capital expenditures may decrease in the short term. Proceeds from dispositions are intended to be used primarily for the repayment of debt.
For the year ended December 31, 2024, our disposition strategy resulted in aggregate gross sale proceeds of $100.0 million. On February 21, 2024, we repaid an aggregate amount of $102 million of debt in connection with the extensions of our BofA Term Loan, BMO Term Loan, Series A Notes and Series B Notes (each as defined in Liquidity and Capital Resources below). On July 10, 2024 and October 25, 2024, we repaid an aggregate amount of $25.3 million and $27.4 million, respectively, of our debt previously outstanding under the BofA Term Loan, BMO Term Loan, Series A Notes and Series B Notes (each as defined in Liquidity and Capital Resources below).
In July 2022, we adopted a variable quarterly dividend policy, which replaced our previous regular quarterly dividend policy. Under the variable quarterly dividend policy, the Board of Directors determines quarterly dividends based upon a variety of factors, including the Company’s estimates of its annual taxable income and the amount that the Company is required to distribute annually in the aggregate to enable the Company to continue to qualify as a real estate investment trust for federal income tax purposes.
As of February 21, 2024, the interest rate applicable to borrowings under the Senior Notes (as defined in Liquidity and Capital Resources below) was no longer based on the credit rating of our debt. The credit rating for our senior unsecured debt was downgraded by Moody’s Investor Service from Ba1 to Ba3 on April 12, 2023, from Ba3 to B3 on June 14, 2023, and from B3 to Caa1 on February 27, 2025. As of September 30, 2025, our credit rating remains at Caa1.
Strategic Review
In May 2025, the Company announced that its Board of Directors had initiated a review of strategic alternatives in order to explore ways to maximize shareholder value. The review includes a range of potential strategic alternatives, including a sale of the Company, a sale of assets, and a refinancing of existing indebtedness, among others. No assurances can be given regarding the outcome or timetable for completion of the strategic review process.
Trends and Uncertainties
Long-Term Impact of COVID-19 Pandemic
Considerable uncertainty still surrounds the long-term impact of the COVID-19 pandemic and its potential effects on the population, including the spread of more contagious variants of the virus, and on the commercial real estate market and our business. Many of our tenants still do not fully occupy the space that they lease. The impact of 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 impact of work-from-home and return-to-work policies, the potential negative impact to leasing efforts and occupancy at our properties, 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, negative impacts on 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, making more difficult our ability to complete required capital expenditures in a timely manner and on budget, decreases 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 full extent of the long-term impact that the COVID-19 pandemic has had and will have on our future financial results at this time. See “The long-term impact of the COVID-19 pandemic has had and may continue to have an adverse impact on our financial condition and results of operations. This impact could be materially adverse to the extent that the long-term impact of the COVID-19 pandemic, or future pandemics, cause tenants to be unable to pay their rent or reduce the demand for commercial real estate, or cause other impacts described below.” in Item 1A. “Risk Factors ” of our Annual Report on Form 10-K for the year ended December 31, 2024.
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Economic Conditions
Although recent indicators suggest that economic activity has expanded at a modest pace, the global economy continues to experience significant disruptions as a result of various factors, including geopolitical events such as the conflicts in Ukraine and the Middle East, increasing tensions with China and Iran, the long-term impact of the COVID-19 pandemic and continuing supply chain difficulties. In addition, various economic factors, including but not limited to, impacts of changes in tariffs that the United States and other countries have announced or implemented, as well as any additional new tariffs, trade restrictions or export regulations that may be implemented or reversed in the future, inflation 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 other factors, including but not limited to, employment levels, energy prices, uncertainty about government fiscal, monetary, trade and tax policies, changes in currency exchange rates, the regulatory environment and the availability of credit. During 2023 through 2025, the Federal Reserve adjusted the federal funds rate target several times, most recently decreasing it by 25 basis points on September 17, 2025, to a range of 4.00% to 4.25%. If interest rates increase, then the interest costs on our unhedged variable rate debt would be adversely affected, which could in turn adversely affect our cash flow, our ability to pay principal and interest on our debt and our ability to make distributions to stockholders. As of September 30, 2025, approximately 50.6% of our total debt constituted unhedged variable rate debt. Increased 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 and geopolitical events and the long-term impact of the COVID-19 pandemic are adversely affecting the demand for office space in the United States.
Real Estate Operations
As of September 30, 2025, our real estate portfolio was comprised of 14 owned properties, which we refer to as our owned properties. We also hold a non-controlling common stock interest in the corporation that is the sole member of FSP Monument Circle LLC, which corporation was organized to operate as a real estate investment trust, which we refer to as the Sponsored REIT. The Sponsored REIT, which we also refer to as Monument Circle, was consolidated effective January 1, 2023 and the property held by the Sponsored REIT was sold on June 6, 2025. We refer to these 15 properties as our owned and consolidated properties. Our owned properties were approximately 68.9% leased as of September 30, 2025, a decrease from 70.3% leased as of December 31, 2024. The 1.4% decrease in leased space was primarily a result of lease maturities that occurred during the nine months ended September 30, 2025. As of September 30, 2025, we had approximately 1,497,000 square feet of vacancy in our owned properties compared to approximately 1,428,000 square feet of vacancy at December 31, 2024. During the nine months ended September 30, 2025, we leased approximately 274,000 square feet of office space in our owned properties, of which approximately 219,000 square feet were with existing tenants, at a weighted average term of 5.7 years. On average, tenant improvements for such leases were $24.83 per square foot, lease commissions were $9.98 per square foot and rent concessions were approximately four months of free rent. Average GAAP base rents under such leases were $31.81 per square foot, or 6.0% higher than average rents in the respective properties as applicable compared to the year ended December 31, 2024.
As of September 30, 2025, leases for approximately 1.6% and 11.5% of the square footage in our owned portfolio are scheduled to expire during 2025 and 2026, respectively. As the fourth quarter of 2025 begins, we believe that:
• approximately half of our operating properties are stabilized with leased occupancy of 75% or more; and
• our remaining operating properties are value add in nature with leased occupancy of less than 75%.
Existing vacancy is being actively marketed to numerous potential tenants. While leasing activity at our properties has continued, we believe that the impact of geopolitical events, current economic conditions and the long-term impact of the COVID-19 pandemic may limit or delay new tenant leasing during at least the fourth quarter of 2025 and potentially in future periods.
While we cannot generally predict when an existing vacancy in our owned properties 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
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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.
Consolidation of Sponsored REIT
As of January 1, 2023, we consolidated Monument Circle into our financial statements. On October 29, 2021, we agreed to amend and restate our existing loan to Monument Circle that is secured by a mortgage on real estate owned by Monument Circle, which we refer to as the Sponsored REIT Loan. The amended and restated Sponsored REIT Loan extended the maturity date from December 6, 2022 to June 30, 2023, increased the aggregate principal amount of the loan from $21 million to $24 million, and included certain other modifications. In consideration of our agreement to amend and restate the Sponsored REIT Loan, we obtained from the stockholders of Monument Circle the right to vote their shares in favor of any sale of the property owned by Monument Circle any time on or after January 1, 2023. As a result of our obtaining this right to vote shares, GAAP variable interest entity (VIE) rules required us to consolidate Monument Circle as of January 1, 2023. A gain on consolidation of approximately $0.4 million was recognized in the three months ended March 31, 2023. On June 26, 2023, the Sponsored REIT Loan maturity was initially extended to September 30, 2023 and on September 26, 2023 was further extended to September 30, 2024. On September 27, 2024, the Sponsored REIT Loan maturity was extended to September 30, 2025. The Sponsored REIT Loan was extinguished on June 6, 2025, when the property securing the loan was sold.
Additional information about the consolidation of Monument Circle is described below and incorporated herein by reference to Note 1, “Organization, Properties, Basis of Presentation, Financial Instruments, and Recent Accounting Standards – Variable Interest Entities (VIEs)” and to Note 8, “Disposition of Properties and Assets Held for Sale”, in the Notes to Consolidated Financial Statements included in this report.
Dispositions of Properties and Assets Held for Sale
On April 7, 2025, Monument Circle entered into a purchase and sale agreement with a third party to sell its property located in Indianapolis, Indiana for a gross sales price of $6.0 million. We estimated the fair value of this property, less estimated costs to sell, based on the purchase price set forth in the letter of intent to purchase the property that Monument Circle entered into with the third party, which resulted in recording an impairment loss of $13.3 million during the three months ended March 31, 2025, and we reclassified the property as an asset held for sale of $5.7 million as of March 31, 2025. On June 6, 2025, the property was sold and the impairment loss was decreased by $0.4 million during the three months ended June 30, 2025 to a net loss of $12.9 million for final sale adjustments after the sale was completed.
During the three months ended September 30, 2023, we entered into an agreement to sell a property in Atlanta, Georgia for a gross sales price of approximately $40.0 million at an expected loss of $20.5 million. We recorded an impairment on this asset held for sale as of September 30, 2023. During the three months ended September 30, 2024, we increased the expected loss on the property in Atlanta, Georgia by $6.6 million after we entered into a new agreement to sell the property for a gross sales price of $34.0 million
During the nine months ended September 30, 2024, we entered into an agreement to sell a property in Glen Allen, Virginia for a gross sales price of approximately $31.0 million at an expected loss of $13.2 million, which was recorded as an impairment, and we classified the property as an asset held for sale as of June 30, 2024. The property was sold on July 8, 2024, at the expected loss. During the three months ended September 30, 2024, an additional $0.7 million in costs related to the sale of properties previously sold were recorded.
On January 26, 2024, we sold an office property located in Richardson, Texas for a sales price of $35 million. The property was classified as held for sale as of December 31, 2023 and an impairment loss of $2.1 million was recorded during the year ended December 31, 2023. An additional $5,000 of costs related to the sale were recorded during the three months ended March 31, 2024.
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The disposition 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 focus on the sunbelt and mountain west regions of the United States. Accordingly, the properties sold remained classified within continuing operations for all periods presented.
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, 2024.
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.
Recent Accounting Standards
In October 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative (“ASU 2023-06”). ASU 2023-06 adds interim and annual disclosure requirements to GAAP at the request of the Securities and Exchange Commission. The guidance in ASU 2023-06 is required to be applied prospectively and the GAAP requirements will be effective when the removal of the related SEC disclosure requirements is effective. If the SEC does not act to remove its related requirements by June 30, 2027, any related FASB amendments will be removed from the Accounting Standards Codification and will not be effective. The Company does not anticipate that the adoption of ASU 2023-06 will have a material impact on the consolidated financial statements.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 requires public entities to disclose significant segment expense and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. The guidance in ASU 2023-07 is applied retrospectively to all periods presented in the financial statements and is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption was permitted. The Company adopted ASU 2023-07 for the fiscal year ended December 31, 2024, which did not have a material impact on the consolidated financial statements.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 enhances the transparency and decision usefulness of income tax disclosures and disclosures about income taxes paid. The guidance in ASU 2023-09 should be applied prospectively but may be applied retrospectively for each period presented. ASU 2023-09 is effective for public entities for fiscal years beginning after December 15, 2024. The Company adopted ASU 2023-09 on January 1, 2025, which did not have a material impact on the consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). ASU 2024-03 requires public business entities to provide disaggregated disclosures, in the notes to the financial statements, of certain categories of expenses that are included in expense line items on the face of the income statement. The guidance in ASU 2024-03 is required to be applied prospectively and entities may apply it retrospectively. ASU 2024-03 is effective for public entities for fiscal years beginning after December 15, 2026. The Company does not anticipate that the adoption of ASU 2024-03 will have a material impact on the consolidated financial statements.
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Results of Operations
The following table shows financial results for the three months ended September 30, 2025 and 2024:
Three months ended September 30,
(in thousands)
2025
2024
Change
Revenues:
Rental
$
27,300
$
29,662
$
(2,362)
Other
—
20
(20)
Total revenues
27,300
29,682
(2,382)
Expenses:
Real estate operating expenses
10,671
11,574
(903)
Real estate taxes and insurance
5,262
5,512
(250)
Depreciation and amortization
10,550
10,911
(361)
General and administrative
3,034
3,275
(241)
Interest
6,348
6,585
(237)
Total expenses
35,865
37,857
(1,992)
Loss on extinguishment of debt
(7)
(477)
470
Gain (loss) on sale of properties and impairment of assets held for sale, net
—
(7,254)
7,254
Interest income
249
340
(91)
Loss before taxes
(8,323)
(15,566)
7,243
Tax expense
3
56
(53)
Net loss
$
(8,326)
$
(15,622)
$
7,296
Comparison of the three months ended September 30, 2025 to the three months ended September 30, 2024:
Revenues
Total revenues decreased by $2.4 million to $27.3 million for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024. The decrease was primarily a result of:
● A decrease in rental revenue of approximately $2.4 million arising primarily from the sale of three properties in 2024 and other losses of rental income from lease expirations during the periods presented. These decreases were partially offset by rental income earned from leases commencing after September 30, 2024. Our leased space in our owned properties was 68.9% as of September 30, 2025 and 70.4% as of September 30, 2024.
Expenses
Total expenses decreased by $2.0 million to $35.9 million for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024. The decrease was primarily a result of:
● A decrease in real estate operating expenses and real estate taxes and insurance of approximately $1.2 million, which was primarily attributable to the property dispositions noted above.
● A decrease in depreciation and amortization of approximately $0.4 million, which was primarily attributable to the property dispositions noted above.
● A decrease in general and administrative expenses of $0.2 million, which was primarily attributable to lower personnel costs and was partially offset by higher professional fees incurred during the three months ended September 30, 2024.
● A decrease in interest expense of approximately $0.2 million. The decrease was primarily due to a lower principal amount of debt outstanding during the three months ended September 30, 2025
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compared to the same period in 2024 and was partially offset by higher interest rates that went into effect on April 1, 2025 under the loan amendment we entered into on February 21, 2024.
Loss on extinguishment of debt
During the three months ended September 30, 2025 and September 30, 2024, we repaid debt and incurred losses on extinguishment of debt of approximately $7,000 and $477,000, respectively, related to unamortized deferred financing costs on the dates of the repayments.
Gain (loss) on sale of properties and impairment on asset held for sale
During the three months ended September 30, 2023, we entered into an agreement to sell a property in Atlanta, Georgia for a gross sales price of approximately $40.0 million at an expected loss of $20.5 million. We recorded an impairment on this asset held for sale as of September 30, 2023. During the three months ended September 30, 2024, we increased the expected loss on the property in Atlanta, Georgia by $6.6 million after we entered into a new agreement to sell the property for a gross sales price of $34.0 million.
On July 8, 2024, we sold a property located in Glen Allen, Virginia at a loss of $13.2 million, which had been recorded as an impairment during the three months ended June 30, 2024. During the three months ended September 30, 2024, an additional $0.7 million in costs related to the sale of properties previously sold were recorded.
Interest income
During the three months ended September 30, 2025 and September 30, 2024, we invested disposition proceeds in an interest-bearing account and earned $0.2 million and $0.3 million, respectively, in interest income.
Tax expense on income
Included in income taxes is the Revised Texas Franchise Tax, which is a tax on revenues from Texas properties which was $3,000 during the three months ended September 30, 2025, compared to $56,000 during the three months ended September 30, 2024.
Net loss
Net loss for the three months ended September 30, 2025 was $8.3 million, compared to a net loss of $15.6 million for the three months ended September 30, 2024, for the reasons described above.
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The following table shows financial results for the nine months ended September 30, 2025 and 2024:
Nine months ended September 30,
(in thousands)
2025
2024
Change
Revenues:
Rental
$
81,122
$
91,705
$
(10,583)
Other
—
32
(32)
Total revenues
81,122
91,737
(10,615)
Expenses:
Real estate operating expenses
31,467
33,620
(2,153)
Real estate taxes and insurance
14,822
17,175
(2,353)
Depreciation and amortization
32,000
34,018
(2,018)
General and administrative
9,799
11,069
(1,270)
Interest
18,378
20,513
(2,135)
Total expenses
106,466
116,395
(9,929)
Loss on extinguishment of debt
(12)
(614)
602
Loss on sale of properties and impairment of assets held for sale, net
(12,900)
(20,459)
7,559
Interest income
756
1,696
(940)
Loss before taxes
(37,500)
(44,035)
6,535
Tax expense
137
162
(25)
Net loss
$
(37,637)
$
(44,197)
$
6,560
Comparison of the nine months ended September 30, 2025 to the nine months ended September 30, 2024:
Revenues
Total revenues decreased by $10.6 million to $81.1 million for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024. The decrease was primarily a result of:
● A decrease in rental revenue of approximately $10.6 million arising primarily from the sale of three properties in 2024 and other losses of rental income from lease expirations during the periods presented. These decreases were partially offset by rental income earned from leases commencing after September 30, 2024. Our leased space in our owned properties was 68.9% as of September 30, 2025 and 70.4% as of September 30, 2024.
Expenses
Total expenses decreased by $9.9 million to $106.5 million for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024. The decrease was primarily a result of:
● A decrease in real estate operating expenses and real estate taxes and insurance of approximately $4.5 million, which was primarily attributable to the property dispositions noted above.
● A decrease in depreciation and amortization of approximately $2.0 million, which was primarily attributable to the property dispositions noted above.
● A decrease in general and administrative expenses of $1.3 million, which was primarily attributable to lower personnel costs during 2025 and fees and costs incurred from the loan amendment we entered into on February 21, 2024 and higher professional fees incurred during the nine months ended September 30, 2024.
● A decrease in interest expense of approximately $2.1 million. The decrease was primarily due to a lower principal amount of debt outstanding during the nine months ended September 30, 2025 compared to the same period in 2024 and was partially offset by higher interest rates that went into effect on April 1, 2025 under the loan amendment we entered into on February 21, 2024.
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Loss on extinguishment of debt
During the nine months ended September 30, 2025 and September 30, 2024, we repaid debt and incurred a loss on extinguishment of debt of approximately $12,000 and $614,000, respectively, related to unamortized deferred financing costs on the dates of the repayments.
Loss on sale of properties and impairment on asset held for sale
On April 7, 2025, Monument Circle entered into a purchase and sale agreement to sell its property located in Indianapolis, Indiana for a gross sales price of $6.0 million. We estimated the fair value of this property, less estimated costs to sell, based on the purchase price set forth in the letter of intent to purchase the property that Monument Circle entered into with the third party, which resulted in recording an impairment charge of $13.3 million during the three months ended March 31, 2025 that was decreased by $0.4 million during the three months ended June 30, 2025 for final sale adjustments after the sale was completed on June 6, 2025.
During the three months ended September 30, 2023, we entered into an agreement to sell a property in Atlanta, Georgia for a gross sales price of approximately $40.0 million at an expected loss of $20.5 million. We recorded an impairment on this asset held for sale as of September 30, 2023. During the three months ended September 30, 2024, we increased the expected loss on the property in Atlanta, Georgia by $6.6 million after we entered into a new agreement to sell the property for a gross sales price of $34.0 million
During the nine months ended September 30, 2024, we sold an office property located in Richardson, Texas on January 26, 2024, for a sales price of $35.0 million at a loss of approximately $2.1 million. The property was classified as held for sale as of December 31, 2023, and an impairment loss of $2.1 million was recorded during the year ended December 31, 2023. An additional $5,000 of costs related to the sale were recorded during the three months ended March 31, 2024.
During the nine months ended September 30, 2024, we entered into an agreement to sell a property in Glen Allen, Virginia for a gross sales price of approximately $31.0 million at an expected loss of $13.2 million, which was recorded as an impairment, and we classified the property as an asset held for sale as of June 30, 2024. The property was sold on July 8, 2024, at the expected loss. During the three months ended September 30, 2024, an additional $0.7 million in costs related to the sale of properties previously sold were recorded.
Interest income
During the nine months ended September 30, 2025 and September 30, 2024, we invested disposition proceeds in an interest-bearing account and earned $0.8 million and $1.7 million, respectively, in interest income.
Tax expense on income
Included in income taxes is an estimate of federal income taxes of $31,000 from the sale of Monument Circle and the Revised Texas Franchise Tax, which is a tax on revenues from Texas properties, which was $137,000 during the nine months ended September 30, 2025, compared to $162,000 during the nine months ended September 30, 2024.
Net loss
Net loss for the nine months ended September 30, 2025 was $37.6 million, compared to a net loss of $44.2 million for the nine months ended September 30, 2024, 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 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:
For the
For the
Three Months Ended
Nine Months Ended
September 30,
September 30,
(in thousands):
2025
2024
2025
2024
Net loss
$
(8,326)
$
(15,622)
$
(37,637)
$
(44,197)
(Gain) loss on sale of properties and impairment of asset held for sale, net
—
7,254
12,900
20,459
Depreciation and amortization
10,550
10,907
32,000
34,002
NAREIT FFO
2,224
2,539
7,263
10,264
Lease Acquisition costs
99
126
303
315
Funds From Operations
$
2,323
$
2,665
$
7,566
$
10,579
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 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 and consolidated in the periods presented, which we call Same Store. The comparative Same Store results include properties held for the periods presented and exclude acquired properties or 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
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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:
Net Operating Income (NOI)*
Rentable
Square
Feet
Three Months Ended
Nine Months Ended
Three Months Ended
Nine Months Ended
Inc
%
(in thousands)
or RSF
31-Mar-25
30-Jun-25
30-Sep-25
30-Sep-25
31-Mar-24
30-Jun-24
30-Sep-24
30-Sep-24
(Dec)
Change
Region
MidWest
758
1,356
1,758
1,489
4,603
1,640
1,665
1,278
4,583
20
0.4
%
South
1,908
4,331
4,393
4,144
12,868
4,621
4,579
4,390
13,590
(722)
(5.3)
%
West
2,142
5,849
5,516
5,450
16,815
6,204
6,224
6,037
18,465
(1,650)
(8.9)
%
Property NOI* from Owned Properties
4,808
11,536
11,667
11,083
34,286
12,465
12,468
11,705
36,638
(2,352)
(6.4)
%
Disposition and Acquisition Properties (a)
-
(193)
(108)
9
(292)
1,443
1,280
678
3,401
(3,693)
(8.7)
%
Property NOI*
4,808
$
11,343
$
11,559
$
11,092
$
33,994
$
13,908
$
13,748
$
12,383
$
40,039
$
(6,045)
(15.1)
%
Same Store
$
11,536
$
11,667
$
11,083
$
34,286
$
12,465
$
12,468
$
11,705
$
36,638
$
(2,352)
(6.4)
%
Less Nonrecurring
Items in NOI* (b)
55
52
52
159
246
255
78
579
(420)
1.0
%
Comparative
Same Store
$
11,481
$
11,615
$
11,031
$
34,127
$
12,219
$
12,213
$
11,627
$
36,059
$
(1,932)
(5.4)
%
Three Months Ended
Nine Months Ended
Three Months Ended
Nine Months Ended
Reconciliation to Net Income (Loss)
31-Mar-25
30-Jun-25
30-Sep-25
30-Sep-25
31-Mar-24
30-Jun-24
30-Sep-24
30-Sep-24
Net loss
$
(21,435)
$
(7,876)
$
(8,326)
$
(37,637)
$
(7,552)
$
(21,023)
$
(15,622)
$
(44,197)
Add (deduct):
Loss on extinguishment of debt
2
3
7
12
137
—
477
614
(Gain) loss on sale of properties and impairment of assets held for sale, net
13,284
(384)
—
12,900
5
13,200
7,254
20,459
Management fee income
(380)
(334)
(345)
(1,059)
(462)
(443)
(422)
(1,327)
Depreciation and amortization
10,824
10,626
10,550
32,000
11,625
11,482
10,911
34,018
Amortization of above/below market leases
—
—
—
—
(6)
(6)
(5)
(17)
General and administrative
3,484
3,281
3,034
9,799
4,159
3,635
3,275
11,069
Interest expense
5,691
6,339
6,348
18,378
6,846
7,082
6,585
20,513
Interest income
(259)
(248)
(249)
(756)
(1,008)
(348)
(340)
(1,696)
Non-property specific items, net
132
152
73
357
164
169
270
603
Property NOI*
$
11,343
$
11,559
$
11,092
$
33,994
$
13,908
$
13,748
$
12,383
$
40,039
(a) We define Disposition and Acquisition Properties as properties that were sold or acquired or consolidated and 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 nine months ended September 30, 2025 for our owned properties and weighted occupancy square feet and percentages. GAAP rent includes the impact of tenant concessions and reimbursements.
Weighted
Occupied
Weighted
Year Built
Weighted
Percentage as of
Average
or
Net Rentable
Occupied
September 30,
Rent per Occupied
Property Name
City
State
Renovated
Square Feet
Sq. Ft.
2025 (a)
Square Feet (b)
121 South 8th Street
Minneapolis
MN
1974
297,744
227,625
76.5
%
$
22.32
801 Marquette Ave
Minneapolis
MN
1923/2017
129,691
119,108
91.8
%
25.61
Plaza Seven
Minneapolis
MN
1987
330,096
167,821
50.8
%
29.00
Midwest Total
757,531
514,554
67.9
%
25.26
Park Ten
Houston
TX
1999
157,609
133,069
84.4
%
27.62
Addison Circle
Addison
TX
1999
289,333
197,788
68.4
%
35.47
Eldridge Green
Houston
TX
1999
248,399
248,399
100.0
%
29.25
Park Ten Phase II
Houston
TX
2006
156,746
109,299
69.7
%
29.57
Liberty Plaza
Addison
TX
1985
217,841
149,853
68.8
%
27.00
Legacy Tennyson Center
Plano
TX
1999/2008
209,562
106,814
51.0
%
32.40
Westchase I & II
Houston
TX
1983/2008
629,025
398,299
63.3
%
27.24
South Total
1,908,515
1,343,521
70.4
%
29.44
1999 Broadway
Denver
CO
1986
682,639
334,629
49.0
%
34.73
1001 17th Street
Denver
CO
1977/2006
650,607
478,847
73.6
%
36.65
600 17th Street
Denver
CO
1982
612,135
444,655
72.6
%
34.28
Greenwood Plaza
Englewood
CO
2000
196,236
127,573
65.0
%
31.49
West Total
2,141,617
1,385,704
64.7
%
34.95
Total Owned Properties
4,807,663
3,243,779
67.5
%
$
31.13
(a) Based on weighted occupied square feet for the nine months ended September 30, 2025, including month-to-month tenants, divided by the applicable property’s net rentable square footage.
(b) Represents annualized GAAP rental revenue for the nine months ended September 30, 2025, per weighted occupied square foot.
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Liquidity and Capital Resources
As of October 28, 2025, the Company had aggregate outstanding indebtedness under three unsecured loans, the BofA Term Loan, the BMO Term Loan and the Senior Notes (each as defined and described below), totaling approximately $248.9 million and maturing on April 1, 2026, which is within 12 months of the date of issuance of the financial statements accompanying this Quarterly Report on Form 10-Q.
Management intends to engage in discussions with the Company’s lenders and/or third party financing sources to extend or refinance the Company’s existing debt and the Company also may seek to effect asset sales or other potential transactions to repay such debt prior to the applicable maturity dates. Management believes that it is more likely than not that the Company will be successful in extending the maturity date or refinancing all of its existing debt, or in effecting asset sales or other potential transactions prior to the applicable maturity dates. Accounting Standards Codification (ASC) 205-40, “Presentation of Financial Statements— Going Concern”, requires management to consider whether there is substantial doubt regarding the Company’s ability to continue as a going concern as a result of uncertainty about the maturity of the Company’s debt on April 1, 2026. Although management believes that it is more likely than not that the Company will be able to extend the maturity date or retire the existing debt through a refinancing, asset sales or other potential transactions, guidance issued under ASC 205-40 requires that management not conclude that such an outcome is “probable” if, among other factors, the outcome is not within the control of the Company. Because no such restructuring, refinancing, sale transactions or other potential transactions have closed, such outcomes are not within the control of the Company; therefore, for accounting purposes, management is unable to conclude that such an outcome is probable. Accordingly, ASC 205-40 requires management to conclude that there is substantial doubt about the Company’s ability to continue as a going concern for at least one year following the date of issuance of the financial statements accompanying this Quarterly Report on Form 10-Q.
While management believes that it is more likely than not that the Company will be able to extend the maturity dates applicable to, or retire, the BofA Term Loan, the BMO Term Loan and the Senior Notes through a refinancing, asset sales or other potential transactions, there is no assurance that the Company will be able to do so. The failure to extend the maturity dates applicable to, or retire, the BofA Term Loan, the BMO Term Loan and the Senior Notes through a refinancing, asset sales or other potential transactions could lead to events of default, which would have a material adverse effect on the Company’s financial condition.
Cash and cash equivalents were $31.6 million and $42.7 million as of September 30, 2025 and December 31, 2024, respectively. The decrease of $11.1 million is attributable to $0.1 million used in operating activities, less $6.5 million used in investing activities less $4.5 million used in financing activities. 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 and property dispositions. 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, property dispositions and our interest costs.
Operating Activities
Cash used in operating activities for the nine months ended September 30, 2025, of $0.1 million is primarily attributable to a net loss of $37.6 million, excluding $12.9 million from a loss on the sale of a property, plus the add-back of $34.2 million of non-cash expenses, less a decrease in accounts payable and accrued compensation of $4.7 million, less an increase in payment of deferred leasing commissions of $3.2 million, less an increase in lease acquisition costs of $1.1 million, less a decrease in prepaid expenses of $0.5 million and less an increase in tenant receivables of $0.1 million,.
Investing Activities
Cash used in investing activities for the nine months ended September 30, 2025, of $6.5 million is primarily attributable to purchases of other real estate assets and office equipment investments of $12.6 million less proceeds from the sale of a property of $6.1 million.
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Financing Activities
Cash used in financing activities for the nine months ended September 30, 2025 of $4.5 million is primarily attributable to payment of distributions to stockholders of $3.1 million and the repayment of $1.4 million of our debt.
Liquidity beyond the next 12 months
As of September 30, 2025, we had aggregate outstanding indebtedness of $248.9 million under the BofA Term Loan, the BMO Term Loan and the Senior Notes, each of which matures on April 1, 2026. Our ability to generate cash adequate to satisfy our debt obligations as they mature and meet our operating 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 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 in our Annual Report on Form 10-K for the year ended December 31, 2024 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 from new lenders, adding or refinancing existing debt or raising capital through public offerings or At The Market (ATM) programs of our common stock.
BMO Term Loan
As of September 30, 2025, we have a term loan borrowing in the aggregate principal amount of approximately $70.7 million, which we refer to as the BMO Term Loan, with Bank of Montreal, as administrative agent, and the other lending institutions party thereto, that matures on April 1, 2026. On February 21, 2024, we amended the BMO Term Loan by entering into a Second Amendment to Second Amended and Restated Credit Agreement with Bank of Montreal and the other lending institutions party thereto, which we refer to as the BMO Second Amendment. The BMO Second Amendment amended the Second Amended and Restated Credit Agreement dated September 27, 2018, which we refer to as the Original BMO Credit Agreement, as amended by the First Amendment to Second Amended and Restated Credit Agreement dated February 10, 2023, which we refer to as the BMO First Amendment, to, among other things: (1) extend the maturity date from October 1, 2024 to April 1, 2026; (2) change the interest rate from either 300 basis points over SOFR (Secured Overnight Financing Rate) or 200 basis points over the base rate to either 300 basis points over SOFR with a floor on SOFR of 500 basis points or 200 basis points over the base rate with a floor on the base rate of 600 basis points; (3) provide that, if, as of March 31, 2025, the aggregate principal amount outstanding under the BMO Term Loan, the BofA Term Loan (defined below) and the Senior Notes (defined below) exceeds $200 million, the spread over SOFR or the base rate, as applicable, will permanently increase by 100 basis points, from 300 basis points to 400 basis points in the case of SOFR, and from 200 basis points to 300 basis points in the case of the base rate; (4) require mandatory prepayments of the BMO Term Loan, the BofA Term Loan and the Senior Notes with net cash proceeds from the disposition of property, assets and equity issuances as follows: (a) 25.55556% to the BMO Term Loan; (b) 20.00000% to the BofA Term Loan; (c) 44.44444% to the Senior Notes; and (d) the remaining 10% to be retained by us; (5) require that, within 90 days of the February 21, 2024 effective date of the BMO Second Amendment, certain of our subsidiaries guarantee the BMO Term Loan; (6) require that, within 90 days of the February 21, 2024 effective date of the BMO Second Amendment, we pledge our equity interests in certain of our subsidiaries as collateral for the BMO Term Loan; (7) reduce our minimum fixed charge coverage ratio from 1.50x to 1.25x; and (8) reduce our minimum unsecured interest coverage ratio from 1.75x to 1.25x. We refer to the Original BMO Credit Agreement, as amended by the BMO First Amendment and the BMO Second Amendment, as the BMO Credit Agreement.
The BMO Credit Agreement initially provided for an unsecured term loan borrowing in the amount of $220 million. 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, we 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. On February 10, 2023, we repaid a
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$40 million portion of the tranche B term loan. On August 10, 2023, we repaid an additional $10 million portion of the tranche B term loan. On February 21, 2024, as part of the BMO Second Amendment, we repaid an approximately $29.0 million portion of the tranche B term loan. On July 10, 2024, we repaid an approximately $7.2 million portion of the tranche B term loan from asset sale proceeds of a property located in Glen Allen, Virginia. On October 25, 2024, we repaid an approximately $7.8 million portion of the tranche B term loan from asset sale proceeds of a property located in Atlanta, Georgia. On March 6, 2025, we repaid an approximately $43,000 portion of the tranche B term loan from an escrow collected on March 4, 2025, which had been held from the sale of a property located in Glen Allen, Virginia. On May 16, 2025, we repaid an approximately $103,000 portion of the BMO Term Loan from escrows collected on May 14, 2025, which had been held from the sale of a property located in Glen Allen, Virginia and the sale of a property located in Atlanta, Georgia. On August 1, 2025, the Company repaid an approximately $256,000 portion of the BMO Term Loan from escrows collected on July 31, 2025, which had been held from the sale of a property located in Atlanta, Georgia.
Effective February 21, 2024 upon entering into the BMO Second Amendment, the BMO Term Loan bears interest at either (i) 300 basis points over one, three or six month term SOFR, plus a corresponding adjustment of 0.11448%, 0.26161% or 0.42826%, respectively, with a floor on SOFR of 5.00% or (ii) 200 basis points over the base rate with a floor on the base rate of 6.00%. In addition, effective February 21, 2024 upon entering into the BMO Second Amendment, if, as of March 31, 2025, the aggregate principal amount outstanding under the BMO Term Loan, the BofA Term Loan and the Senior Notes exceeds $200 million, the spread over SOFR or the base rate, as applicable, will permanently increase by 100 basis points from 300 basis points to 400 basis points in the case of SOFR, and from 200 basis points to 300 basis points in the case of the base rate. Effective April 1, 2025, the spread over SOFR or the base rate, as applicable, permanently increased by 100 basis points, from 300 basis points to 400 basis points in the case of SOFR, and from 200 basis points to 300 basis points in the case of the base rate.
Effective April 1, 2025, the interest rate on the BMO Term Loan increased from 8.00% per annum to 9.00% per annum.
As of September 30, 2025 and December 31, 2024, the interest rate on the BMO Term Loan was 9.00% and 8.00% per annum, respectively. The weighted average variable interest rate on all amounts outstanding under the BMO Term Loan was 8.67% and 8.34% for the nine months ended September 30, 2025 and the year ended December 31, 2024, respectively.
Although the interest rate on the BMO Term Loan is currently variable under the BMO Credit Agreement, we previously fixed the base LIBOR interest rate that previously applied to the BMO Term Loan by entering into interest rate swap transactions. On February 20, 2019, we 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. On February 8, 2023, we terminated all remaining interest rate swaps applicable to the BMO Term Loan and, on February 10, 2023, we received an aggregate of approximately $4.3 million as a result of such terminations.
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, use of net cash proceeds from the disposition of property, assets and equity issuances, mandatory prepayments, the requirement to have certain subsidiaries provide guarantees, the requirement to pledge our equity interests in certain subsidiaries as collateral, changes in business, certain restricted payments, repurchases and redemptions of our common stock, going concern qualifications to our financial statements, and transactions with affiliates. In addition, the BMO Credit Agreement also restricts our ability to make quarterly dividend distributions that exceed $0.01 per share of our common stock; provided, however, that notwithstanding such restriction, we are permitted to make dividend distributions based on our good faith estimate of projected or estimated taxable income or otherwise as necessary to retain our 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 we would otherwise be subject. The BMO Credit Agreement also contains financial covenants that require us to maintain a minimum tangible net worth, a maximum leverage ratio, a maximum secured leverage ratio, a maximum secured recourse leverage ratio, a minimum fixed charge coverage ratio, a maximum unencumbered leverage ratio, and minimum unsecured interest coverage. We were in compliance with the BMO Term Loan financial covenants as of September 30, 2025.
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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 (as defined in the BMO Credit Agreement). In the event of a default by us, 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 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 of our outstanding obligations will become immediately due and payable.
BofA Term Loan
As of September 30, 2025, we have a term loan borrowing in the amount of approximately $55.3 million, which we refer to as the BofA Term Loan, with Bank of America, N.A. as administrative agent, and other lending institutions party thereto that matures on April 1, 2026. Prior to February 21, 2024, we referred to the BofA Term Loan as the BofA Revolver. On February 21, 2024, we amended the BofA Term Loan by entering into a Second Amendment to Credit Agreement with the lending institutions party thereto, which we refer to as the BofA Second Amendment. The BofA Second Amendment amended the Credit Agreement dated January 10, 2022, which we refer to as the Original BofA Credit Agreement, as amended by the First Amendment to Credit Agreement dated February 10, 2023, which we refer to as the BofA First Amendment, to, among other things: (1) extend the maturity date from October 1, 2024 to April 1, 2026; (2) convert borrowings from being either revolving loans or letters of credit to a term loan; (3) change the interest rate from 300 basis points over SOFR to 300 basis points over SOFR with a floor on SOFR of 500 basis points; (4) provide that, if, as of March 31, 2025, the aggregate principal amount outstanding under the BMO Term Loan, the BofA Term Loan and the Senior Notes exceeds $200 million, the spread over SOFR will permanently increase by 100 basis points from 300 basis points to 400 basis points in the case of SOFR, and from 200 basis points to 300 basis points in the case of the base rate; (5) require mandatory prepayments of the BMO Term Loan, the BofA Term Loan and the Senior Notes with net cash proceeds from the disposition of property, assets and equity issuances as follows: (a) 25.55556% to the BMO Term Loan; (b) 20.00000% to the BofA Term Loan; (c) 44.44444% to the Senior Notes; and (d) the remaining 10% to be retained by us; (6) require that, within 90 days of the February 21, 2024 effective date of the BofA Second Amendment, certain of our subsidiaries guarantee the BofA Term Loan; (7) require that, within 90 days of the February 21, 2024 effective date of the BofA Second Amendment, we pledge our equity interests in certain of our subsidiaries as collateral for the BofA Term Loan; (8) reduce our minimum fixed charge coverage ratio from 1.50x to 1.25x; and (9) reduce our minimum unsecured interest coverage ratio from 1.75x to 1.25x. We refer to the Original BofA Credit Agreement, as amended by the BofA First Amendment and the BofA Second Amendment, as the BofA Credit Agreement.
Prior to entering into the BofA Second Amendment on February 21, 2024, borrowings made under the BofA Revolver could be revolving loans or letters of credit, the combined sum of which could not exceed $150 million outstanding at any time. On February 10, 2023, we borrowed $40.0 million under the BofA Revolver to repay a portion of the BMO Term Loan. Effective October 1, 2023, availability under the BofA Revolver was reduced to $125 million. As of December 31, 2023, there were borrowings of $90 million drawn and outstanding under the BofA Revolver. On February 21, 2024, as part of the BofA Second Amendment, we repaid an approximately $22.7 million portion of the BofA Revolver. On July 10, 2024, we repaid an approximately $5.6 million portion of the BofA Term Loan from asset sale proceeds of a property located in Glen Allen, Virginia. On October 25, 2024, we repaid an approximately $6.1 million portion of the BofA Term Loan from asset sale proceeds of a property located in Atlanta, Georgia. On March 6, 2025, we repaid an approximately $34,000 portion of the BofA Term Loan from an escrow collected on March 4, 2025, which had been held from the sale of a property located in Glen Allen, Virginia. On May 16, 2025, we repaid an approximately $80,000 portion of the BofA Term Loan from escrows collected on May 14, 2025, which had been held from the sale of a property located in Glen Allen, Virginia and the sale of a property located in Atlanta, Georgia. On August 1, 2025, the Company repaid an approximately $200,000 portion of the BofA Term Loan from escrows collected on July 31, 2025, which had been held from the sale of a property located in Atlanta, Georgia.
Effective February 21, 2024 upon entering into the BofA Second Amendment, the BofA Term Loan bears interest at 300 basis points over either (i) the daily simple 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, with a floor on SOFR of 5.00%. In addition, effective February 21, 2024 upon entering into the BofA Second Amendment, under certain circumstances, such
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as if SOFR is not able to be determined, the BofA Term Loan bears interest at 200 basis points over the base rate with a floor on the base rate of 600 basis points. In addition, effective February 21, 2024 upon entering into the BofA Second Amendment, if, as of March 31, 2025, the aggregate principal amount outstanding under the BMO Term Loan, the BofA Term Loan and the Senior Notes exceeds $200 million, the spread over SOFR will permanently increase by 100 basis points from 300 basis points to 400 basis points in the case of SOFR, and from 200 basis points to 300 basis points in the case of the base rate. Effective April 1, 2025, the spread over SOFR or the base rate, as applicable, permanently increased by 100 basis points, from 300 basis points to 400 basis points in the case of SOFR, and from 200 basis points to 300 basis points in the case of the base rate.
Effective April 1, 2025, the interest rate on the BMO Term Loan increased from 8.00% per annum to 9.00% per annum.
As of September 30, 2025 and December 31, 2024, the interest rate on the BofA Term Loan was 9.00% and 8.00% per annum, respectively. The weighted average variable interest rate on all amounts outstanding under the BofA Term Loan was 8.67% and 8.34% for the nine months ended September 30, 2025 and for the year ended December 31, 2024, respectively.
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, use of net cash proceeds from the disposition of property, assets and equity issuances, mandatory prepayments, the requirement to have certain subsidiaries provide guarantees, the requirement to pledge our equity interests in certain subsidiaries as collateral, changes in business, certain restricted payments, repurchases and redemptions of our common stock, going concern qualifications to our financial statements, and transactions with affiliates. In addition, the BofA Credit Agreement also restricts our ability to make quarterly dividend distributions that exceed $0.01 per share of our common stock; provided, however, that notwithstanding such restriction, we are permitted to make dividend distributions based on our good faith estimate of projected or estimated taxable income or otherwise as necessary to retain our 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 we would otherwise be subject. The BofA Credit Agreement also contains financial covenants that require us to maintain a minimum tangible net worth, a maximum leverage ratio, a maximum secured leverage ratio, a maximum secured recourse leverage ratio, a minimum fixed charge coverage ratio, a maximum unencumbered leverage ratio, and minimum unsecured interest coverage. We were in compliance with the BofA Term Loan financial covenants as of September 30, 2025.
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 (as defined in the BofA Credit Agreement). In the event of a default by us, the 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 of our outstanding obligations will become immediately due and payable.
Senior Notes
We have senior notes in the aggregate principal amount of approximately $122.9 million as of September 30, 2025, which we refer to as the Senior Notes, that mature on April 1, 2026. The Senior Notes consist of (i) Series A Senior Notes due April 1, 2026 in an aggregate principal amount of approximately $71.3 million, which we refer to as the Series A Notes, and (ii) Series B Senior Notes due April 1, 2026 in the aggregate principal amount of approximately $51.6 million, which we refer to as the Series B Notes. On February 21, 2024, we amended the terms of the Senior Notes by entering into a First Amendment to Note Purchase Agreement, which we refer to as the NPA First Amendment, with the purchasers party thereto. The NPA First Amendment amended the Note Purchase Agreement dated October 24, 2017, which we refer to as the Original Note Purchase Agreement, to, among other things: (1) extend the maturity date of the Series A Notes from December 20, 2024 to April 1, 2026; (2) shorten the maturity date of the Series B Notes from December 20, 2027 to April 1, 2026; (3) increase the interest rate applicable to the Series A Notes from 4.49% per annum to 8.00% per annum; (4) increase the interest rate applicable to the Series B Notes from 4.76% per annum to 8.00% per annum; (5) provide that, if, as of March
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31, 2025, the aggregate principal amount outstanding under the BMO Term Loan, the BofA Term Loan and the Senior Notes exceeds $200 million, the per annum interest rates applicable to the Series A Note and the Series B Notes will permanently increase by 1.00% from 8.00% per annum to 9.00% per annum; (6) require mandatory prepayments of the BMO Term Loan, the BofA Term Loan and the Senior Notes with net cash proceeds from the disposition of property, assets and equity issuances as follows: (a) 25.55556% to the BMO Term Loan; (b) 20.00000% to the BofA Term Loan; (c) 44.44444% to the Senior Notes; and (d) the remaining 10% to be retained by us; (7) require that, within 90 days of the February 21, 2024 effective date of the NPA First Amendment, certain of our subsidiaries guarantee the Senior Notes; (8) require that, within 90 days of the February 21, 2024 effective date of the NPA First Amendment, we pledge our equity interests in certain of our subsidiaries as collateral for the Senior Notes; and (9) conform all financial covenants and negative covenants in the Note Purchase Agreement with the BofA Credit Agreement and the BMO Credit Agreement. We refer to the Original Note Purchase Agreement, as amended by the NPA First Amendment, as the Note Purchase Agreement.
On February 21, 2024, as part of the NPA First Amendment, we repaid an approximately $29.2 million portion of the Series A Notes. In addition, on February 21, 2024, as part of the NPA First Amendment, we repaid an approximately $21.2 million aggregate principal amount of the Series B Notes. On July 10, 2024, we repaid an approximately $7.2 million portion of the Series A Notes and an approximately $5.3 million portion of the Series B Notes from asset sale proceeds of a property located in Glen Allen, Virginia. On October 25, 2024, we repaid an approximately $7.8 million portion of the Series A Notes and an approximately $5.7 million portion of the Series B Notes from asset sale proceeds of a property located in Atlanta, Georgia. On March 6, 2025, we repaid an approximately $44,000 portion of the Series A Notes and an approximately $32,000 portion of the Series B Notes from an escrow collected on March 4, 2025, which had been held from the sale of a property located in Glen Allen, Virginia. On May 16, 2025, we repaid an approximately $103,000 portion of the Series A Notes and an approximately $75,000 portion of the Series B Notes from escrows collected on May 14, 2025, which had been held from the sale of a property located in Glen Allen, Virginia and the sale of a property located in Atlanta, Georgia. On August 1, 2025, we repaid an approximately $258,000 portion of the Series A Notes and an approximately $187,000 portion of the Series B Notes from escrows collected on August 1, 2025, which had been held from the sale of a property located in Atlanta, Georgia. As of September 30, 2025, approximately $71.3 million aggregate principal amount of the Series A Notes remained outstanding and approximately $51.6 million aggregate principal amount of the Series B Notes remained outstanding.
Effective April 1, 2025, the interest rates on both the Series A Notes and the Series B Notes permanently increased from 8.00% per annum to 9.00% per annum.
As of September 30, 2025 and December 31, 2024, the interest rates on both the Series A Notes and the Series B Notes was 9.00% per annum and 8.00% per annum, respectively.
The Note Purchase Agreement contains customary affirmative and negative covenants, including limitations with respect to indebtedness, liens, investments, mergers and acquisitions, disposition of assets, use of net cash proceeds from the disposition of property, assets and equity issuances, mandatory prepayments, the requirement to have certain subsidiaries provide guarantees, the requirement to pledge our equity interests in certain subsidiaries as collateral, changes in business, certain restricted payments, repurchases and redemptions of our common stock, going concern qualifications to our financial statements, transactions with affiliates, certain restrictions on severance, retention and similar arrangements applicable to our executive officers, and real estate investment trust compliance requirements. In addition, the Note Purchase Agreement also restricts our ability to make quarterly dividend distributions that exceed $0.01 per share of our common stock; provided, however, that notwithstanding such restriction, we are permitted to make dividend distributions based on our good faith estimate of projected or estimated taxable income or otherwise as necessary to retain our 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 we would otherwise be subject. The Note Purchase Agreement also contains financial covenants that require us to maintain a minimum tangible net worth, a maximum leverage ratio, a maximum secured leverage ratio, a maximum secured recourse leverage ratio, a minimum fixed charge coverage ratio, a maximum unencumbered leverage ratio, and minimum unsecured interest coverage. We were in compliance with the Note Purchase Agreement financial covenants as of September 30, 2025.
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Equity Offering
From time to time, we may issue debt securities, common stock, preferred stock or depository shares under a registration statement to fund the acquisition of additional properties, to pay down any existing debt financing and for other corporate purposes.
Contingencies
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.
Other Consideration s
We generally pay the ordinary annual operating expenses of our owned and consolidated properties from the rental revenue generated by the properties. For the three and nine months ended September 30, 2025 and 2024, respectively, the rental income exceeded the expenses for each individual property, with the exception of Monument Circle’s property for the nine months ended September 30, 2025 and for the three and nine months ended September 30, 2024. Monument Circle sold its property on June 6, 2025. Monument Circle had approximately $132,000 of rental income and $445,000 of operating expenses for the nine months ended September 30, 2025. Monument Circle had approximately $69,000 and $217,000 of rental income, and $303,000 and $832,000 of operating expenses, for the three and nine months ended September 30, 2024, respectively.
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, 2024.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.