Item 9A. Controls and Procedures
Item 9A. Controls and Procedures
Disclosure 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 December 31, 2025. 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 SEC’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 December 31, 2025, 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.
Management’s Annual Report on Internal Control Over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officer and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
● Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
● Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
● Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework, 2013 framework.
Based on our assessment, management concluded that, as of December 31, 2025, the Company’s internal control over financial reporting is effective based on those criteria.
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Ernst & Young LLP, the independent registered public accounting firm that audited our financial statements included elsewhere in this annual report on Form 10-K, has issued an attestation report on our internal control over financial reporting as of December 31, 2025. Please see page F-3.
Changes in Internal Control Over Financial Reporting
No change in our internal control over financial reporting occurred during the quarter ended December 31, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
Director and Officer Trading Arrangements
None of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the fourth quarter of 2025.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
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PART III
Certain information required by Part III of this Form 10-K will be contained in our definitive proxy statement pursuant to Regulation 14A (the “Proxy Statement”) which we plan to file not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, and is incorporated herein by reference.
Item 10. Directors, Executive Officers and Corporate Governance
The response to this item is contained under the caption “Information about our Executive Officers” in Part I hereof and in the Proxy Statement under the captions “CORPORATE GOVERNANCE”, “PROPOSAL 1 - ELECTION OF DIRECTORS” and, if applicable, “DELINQUENT SECTION 16(a) REPORTS” and is incorporated herein by reference.
Our board of directors has adopted a code of business conduct and ethics that applies to all of our executive officers, directors and employees. The code was approved by the nominating and corporate governance committee of our board of directors and by the full board of directors. We have posted a current copy of our code under “Corporate Governance” in the “Investor Relations” section of our website at http://www.fspreit.com. To the extent permitted by applicable rules of the NYSE American, we intend to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of the code of business conduct and ethics with respect to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, by posting such information on our website.
Item 11. Executive Compensation
The response to this item is contained in the Proxy Statement under the captions “COMPENSATION DISCUSSION AND ANALYSIS” and “DIRECTOR COMPENSATION AND STOCK OWNERSHIP GUIDELINES” and, other than the information required by Item 402(v) of Regulation S-K, is incorporated herein by reference.
The “Compensation Committee Report” contained in the Proxy Statement shall not be deemed “soliciting material” or “filed” with the SEC or otherwise subject to the liabilities of Section 18 of the Exchange Act, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act, except to the extent we specifically request that such information be treated as soliciting material or specifically incorporate such information by reference into a document filed under the Securities Act or the Exchange Act.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The response to this item is contained in the Proxy Statement under the captions “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT” and “SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS” and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The response to this item is contained in the Proxy Statement under the captions “PROPOSAL 1 - ELECTION OF DIRECTORS”, “CORPORATE GOVERNANCE” and “TRANSACTIONS WITH RELATED PERSONS” and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services
The response to this item is contained in the Proxy Statement under the caption “INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FEES AND SERVICES” and is incorporated herein by reference.
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PART IV
Item 15. Exhibits and Financial Statement Schedules.
(a) The following documents are filed as part of this report:
1. Financial Statements:
The Financial Statements listed in the accompanying Index to Consolidated Financial Statements are filed as part of this Annual Report on Form 10-K.
2. Financial Statement Schedules:
The Financial Statement Schedules listed on the accompanying Index to Consolidated Financial Statements are filed as part of this Annual Report on Form 10-K.
Schedules other than those listed are omitted as they are not applicable or the required or equivalent information has been included in the financial statements or notes thereto.
3. Exhibits:
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Table of Contents
EXHIBIT INDEX
Exhibit No.
Description
3.1 (1)
Articles of Incorporation, as amended.
3.2 (2)
Amended and Restated By-laws.
4.1 (3)
Description of Securities Registered Under Section 12 of the Exchange Act.
10.1+ (4)
2002 Stock Incentive Plan of FSP Corp.
10.2 (5)
Credit Agreement, dated February 26, 2026, among FSP Corp., Alter Domus (US) LLC and the lenders party thereto
10.3 +(6)
Form of Retention Agreement.
10.4 +(7)
Change in Control Discretionary Plan.
10.5 (8)
Cooperation Agreement, dated as of November 27, 2024, by and among FSP Corp., Converium Capital Inc., Converium Capital Master Fund LP, Converium PGEQ Multi-Strategy Fund L.P., Erez REIT Opportunities LP and Erez Asset Management LLC.
10.6 (9)
Letter Agreement, dated October 15, 2025, by and among FSP Corp., Converium Capital Inc., Converium Capital Master Fund LP and Converium PGEQ Multi-Strategy Fund L.P.
19.1 (10)
Insider Trading Policy.
21.1*
Subsidiaries of the Registrant.
23.1*
Consent of Ernst & Young LLP.
31.1*
Certification of FSP Corp.’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of FSP Corp.’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
Certification of FSP Corp.’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*
Certification of FSP Corp.’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
97+(11)
Compensation Recovery Policy.
101*
The following materials from FSP Corp.’s Annual Report on Form 10-K for the year ended December 31, 2025, formatted in iXBRL (inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Income; (iii) the Consolidated Statements of Cash Flows; (iv) the Consolidated Statements of Other Comprehensive Income; and (v) the Notes to Consolidated Financial Statements.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
(1)
Incorporated by reference to Exhibit 3.1 to FSP Corp.’s Quarterly Report on Form 10-Q filed on July 30, 2019 (File No. 001-32470).
45
Table of Contents
(2)
Incorporated by reference to Exhibit 3.1 to FSP Corp.’s Current Report on Form 8-K, filed on February 3, 2023 (File No. 001-32470).
(3)
Incorporated by reference to Exhibit 4.1 to FSP Corp.’s Annual Report on Form 10-K, filed on February 15, 2022 (File No. 001-32470).
(4)
Incorporated by reference to Exhibit 10.1 to FSP Corp.’s Annual Report on Form 10-K, filed on March 29, 2002 (File No. 001-32470).
(5)
Incorporated by reference to Exhibit 10.1 to FSP Corp.’s Current Report on Form 8-K, filed on March 4, 2026 (File No. 001-32470).
(6)
Incorporated by reference to Exhibit 10.5 to FSP Corp.’s Annual Report on Form 10-K, filed on February 24, 2006 (File No. 001-32470).
(7)
Incorporated by reference to Exhibit 99.2 to FSP Corp.’s Current Report on Form 8-K, filed on February 8, 2006 (File No. 001-32470).
(8)
Incorporated by reference to Exhibit 10.1 to FSP Corp.’s Current Report on Form 8-K, filed on November 27, 2024 (File No. 001-32470).
(9)
Incorporated by reference to Exhibit 10.2 to FSP Corp.’s Current Report on Form 8-K, filed on October 15, 2025 (File No. 001-32470).
(10)
Incorporated by reference to Exhibit 19.1 to FSP Corp.’s Annual Report on Form 10-K, filed on February 11, 2025 (File No. 001-32470)
(11)
Incorporated by reference to Exhibit 97 to FSP Corp.’s Annual Report on Form 10-K, filed on February 26, 2024 (File No. 001-32470).
+
Management contract or compensatory plan or arrangement filed as an Exhibit to this Form 10-K pursuant to Item 15(b) of Form 10-K.
*
Filed herewith.
Item 16. Form 10-K Summary
Not applicable.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf as of March 9, 2026 by the undersigned, thereunto duly authorized.
FRANKLIN STREET PROPERTIES CORP.
By:
/s/ George J. Carter
George J. Carter
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ George J. Carter
Chief Executive Officer and Director (Principal Executive Officer)
March 9, 2026
George J. Carter
/s/ John G. Demeritt
Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)
March 9, 2026
John G. Demeritt
/s/ John N. Burke
Director
March 9, 2026
John N. Burke
/s/ Dennis J. McGillicuddy
Director
March 9, 2026
Dennis J. McGillicuddy
/s/ Georgia Murray
Director
March 9, 2026
Georgia Murray
/s/ Jennifer Bitterman
Director
March 9, 2026
Jennifer Bitterman
/s/ Milton P. Wilkins Jr.
Director
March 9, 2026
Milton P. Wilkins Jr.
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Franklin Street Properties Corp.
Index to Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firm (PCAOB ID 42 )
F-2
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2025 and 202 4
F-5
Consolidated Statements of Operations for each of the three years in the period ended December 31, 202 5
F-7
Consolidated Statements of Comprehensive Income (Loss) for each of the three years in the period ended December 31, 202 5
F-8
Consolidated Statements of Stockholders’ Equity for each of the three years in the period ended December 31, 202 5
F-9
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 202 5
F-10
Notes to the Consolidated Financial Statements
F-12
Financial Statement Schedules — Schedule II and III
F-31
All other schedules for which a provision is made in the applicable accounting resolutions of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Franklin Street Properties Corp.
Opinion on Internal Control Over Financial Reporting
We have audited Franklin Street Properties Corp.’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Franklin Street Properties Corp. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2025 and the related notes and financial statement schedules listed in the index at Item 15(a)(2) and our report dated March 9, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Boston, Massachusetts
March 9, 2026
F-2
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Franklin Street Properties Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Franklin Street Properties Corp. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2025 and the related notes and financial statement schedules listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 9, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
F-3
Table of Contents
Impairment assessment of real estate assets
Description of the Matter
The Company’s real estate assets, net totaled $794 million as of December 31, 2025. As described in Note 2 to the consolidated financial statements, the Company reviews its properties to determine if their carrying amounts will be recovered from future operating cash flows when indicators of impairment are identified.
Auditing the Company's impairment assessment involved a high degree of subjectivity as estimates underlying the determination of recoverability involve management making significant judgments to derive assumptions affected by expected future market conditions and leasing activity. Assumptions included in the Company’s recoverability assessment included the rental rates and future occupancy of the Company’s real estate properties.
How We Addressed the Matter in Our Audit
We tested the design and operating effectiveness of controls over the Company’s impairment process. For example, we tested controls over management’s review of significant assumptions underlying projections used in the Company’s recoverability assessment.
Our testing of the Company’s impairment assessment included, among other procedures, evaluating the significant assumptions used to estimate the future undiscounted cash flows used in the recoverability assessment. For example, we compared future market conditions to current market data, performed a sensitivity analysis to evaluate the impact of certain assumptions on the estimate of undiscounted cash flows and recalculated management’s estimate. Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the certain assumptions for certain real estate assets.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2003.
Boston, Massachusetts
March 9, 2026
F-4
Table of Contents
Franklin Street Properties Corp.
Consolidated Balance Sheets
December 31,
(in thousands)
2025
2024
Assets:
Real estate assets:
Land (amounts related to variable interest entities ("VIEs") of $ 6,416 at December 31, 2024)
$
98,883
$
105,298
Buildings and improvements (amounts related to VIEs of $ 13,279 at December 31, 2024)
1,091,728
1,096,265
Fixtures and equipment
11,572
11,053
1,202,183
1,212,616
Less accumulated depreciation (amounts related to VIEs of $ 682 at December 31, 2024)
408,461
377,708
Real estate assets, net (amounts related to VIEs of $ 19,013 at December 31, 2024)
793,722
834,908
Acquired real estate leases, less accumulated amortization of $ 14,648 and $ 13,613 , respectively (amounts related to VIEs of $ 67 less accumulated amortization of $ 35 at December 31, 2024)
2,490
4,205
Cash, cash equivalents and restricted cash (amounts related to VIEs of $ 1,314 at December 31, 2024)
30,571
42,683
Tenant rent receivables
471
1,283
Straight-line rent receivable
38,744
37,727
Prepaid expenses and other assets
4,080
3,114
Office computers and furniture, net of accumulated depreciation of $ 1,047 and $ 1,073 , respectively
136
70
Deferred leasing commissions, net of accumulated amortization of $ 14,571 and $ 14,195 , respectively
22,670
22,941
Total assets
$
892,884
$
946,931
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Table of Contents
Franklin Street Properties Corp.
Consolidated Balance Sheets
December 31,
(in thousands, except share and par value amounts)
2025
2024
Liabilities and Stockholders’ Equity:
Liabilities:
Term loans payable, less unamortized financing costs of $ 441 and $ 2,220 , respectively
$
125,555
$
124,491
Series A & Series B Senior Notes, less unamortized financing costs of $ 236 and $ 1,191 , respectively
122,686
122,430
Accounts payable and accrued expenses (amounts related to VIEs of $ 534 at December 31, 2024)
28,724
34,067
Accrued compensation
2,394
3,097
Tenant security deposits
6,198
6,237
Lease liability
316
707
Acquired unfavorable real estate leases, less accumulated amortization of $ 56 and $ 89 , respectively
34
45
Total liabilities
285,907
291,074
Commitments and contingencies
Stockholders’ Equity:
Preferred stock, $ .0001 par value, 20,000,000 shares authorized, none issued or outstanding
—
—
Common stock, $ .0001 par value, 180,000,000 shares authorized, 103,690,340 and 103,566,715 shares issued and outstanding , respectively
10
10
Additional paid-in capital
1,335,586
1,335,361
Distributions in excess of accumulated earnings
( 728,619 )
( 679,514 )
Total stockholders’ equity
606,977
655,857
Total liabilities and stockholders’ equity
$
892,884
$
946,931
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Table of Contents
Franklin Street Properties Corp.
Consolidated Statements of Operations
For the Year Ended
December 31,
(in thousands, except per share amounts)
2025
2024
2023
Revenues:
Rental
$
107,162
$
120,080
$
145,446
Other
—
32
261
Total revenues
107,162
120,112
145,707
Expenses:
Real estate operating expenses
42,040
45,043
50,732
Real estate taxes and insurance
18,211
22,716
27,200
Depreciation and amortization
42,609
44,774
54,738
General and administrative
12,427
13,884
14,021
Interest
24,718
26,424
24,318
Total expenses
140,005
152,841
171,009
Loss on extinguishment of debt
( 12 )
( 1,042 )
( 106 )
Gain on consolidation of Sponsored REIT
—
—
394
Loss on sale of properties and impairment of assets held for sale, net
( 12,902 )
( 20,826 )
( 23,384 )
Interest income
986
2,090
567
Loss before taxes
( 44,771 )
( 52,507 )
( 47,831 )
Tax expense
189
216
279
Net loss
$
( 44,960 )
$
( 52,723 )
$
( 48,110 )
Weighted average number of shares outstanding, basic and diluted
103,640
103,510
103,357
Net loss per share, basic and diluted
$
( 0.43 )
$
( 0.51 )
$
( 0.47 )
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Table of Contents
Franklin Street Properties Corp.
Consolidated Statements of Comprehensive Income (Loss)
For the
Year Ended
December 31,
(in thousands)
2025
2024
2023
Net loss
$
( 44,960 )
$
( 52,723 )
$
( 48,110 )
Other comprehensive loss:
Unrealized gain on derivative financial instruments
—
—
177
Reclassification from accumulated other comprehensive income into interest expense
—
( 355 )
( 4,180 )
Total other comprehensive loss
—
( 355 )
( 4,003 )
Comprehensive loss
$
( 44,960 )
$
( 53,078 )
$
( 52,113 )
The accompanying notes are an integral part of these consolidated financial statements.
F-8
Table of Contents
Franklin Street Properties Corp.
Consolidated Statements of Stockholders’ Equity
Accumulated
Distributions
Additional
other
in excess of
Total
Common Stock
Paid-In
comprehensive
accumulated
Stockholders’
(in thousands)
Shares
Amount
Capital
income (loss)
earnings
Equity
Balance, December 31, 2022
103,236
$
10
$
1,334,776
$
4,358
$
( 570,408 )
$
768,736
Comprehensive income
—
—
—
( 4,003 )
( 48,110 )
( 52,113 )
Shares issued for:
Equity-based compensation
194
—
315
—
—
315
Distributions
—
—
—
—
( 4,133 )
( 4,133 )
Balance, December 31, 2023
103,430
10
1,335,091
355
( 622,651 )
712,805
Comprehensive loss
—
—
—
( 355 )
( 52,723 )
( 53,078 )
Shares issued for:
Equity-based compensation
137
—
270
—
—
270
Distributions
—
—
—
—
( 4,140 )
( 4,140 )
Balance, December 31, 2024
103,567
10
1,335,361
—
( 679,514 )
655,857
Comprehensive loss
—
—
—
—
( 44,960 )
( 44,960 )
Shares issued for:
Equity-based compensation
123
—
225
—
—
225
Distributions
—
—
—
—
( 4,145 )
( 4,145 )
Balance, December 31, 2025
103,690
$
10
$
1,335,586
$
—
$
( 728,619 )
$
606,977
The accompanying notes are an integral part of these consolidated financial statements.
F-9
Table of Contents
Franklin Street Properties Corp.
Consolidated Statements of Cash Flows
For the Year Ended December 31,
(in thousands)
2025
2024
2023
Cash flows from operating activities:
Net loss
$
( 44,960 )
$
( 52,723 )
$
( 48,110 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense
45,330
47,742
57,240
Amortization of above and below market leases
—
( 17 )
( 44 )
Shares issued as compensation
225
270
315
Amortization of other comprehensive income into interest expense
—
( 355 )
( 3,851 )
Loss on extinguishment of debt
12
1,042
106
Gain on consolidation of Sponsored REIT
—
—
( 394 )
Loss on sale of properties and impairment of assets held for sale, net
12,902
20,826
23,384
Changes in operating assets and liabilities:
Tenant rent receivables
812
908
10
Straight-line rents
147
1,970
625
Lease acquisition costs
( 1,171 )
( 666 )
( 2,007 )
Prepaid expenses and other assets
( 593 )
355
382
Accounts payable and accrued expenses
( 3,982 )
( 3,708 )
( 2,709 )
Accrued compensation
( 703 )
( 547 )
—
Tenant security deposits
( 39 )
33
494
Payment of deferred leasing commissions
( 4,227 )
( 6,143 )
( 7,575 )
Net cash provided by operating activities
3,753
8,987
17,866
Cash flows from investing activities:
Property improvements, fixtures and equipment
( 16,415 )
( 25,213 )
( 31,637 )
Consolidation of Sponsored REIT
—
—
3,048
Proceeds received from sales of properties
6,109
95,497
142,225
Net cash provided by (used in) investing activities
( 10,306 )
70,284
113,636
Cash flows from financing activities:
Distributions to stockholders
( 4,145 )
( 4,140 )
( 4,133 )
Proceeds received from termination of interest rate swap
—
—
4,206
Borrowings under Bank note payable
—
—
77,000
Repayments of Bank note payable
—
( 22,667 )
( 35,000 )
Repayments of Term loans payable
( 716 )
( 55,622 )
( 50,000 )
Repayments of Series A&B Senior Notes
( 698 )
( 76,379 )
—
Deferred financing costs
—
( 5,660 )
( 2,327 )
Net cash used in financing activities
( 5,559 )
( 164,468 )
( 10,254 )
Net increase (decrease) in cash, cash equivalents and restricted cash
( 12,112 )
( 85,197 )
121,248
Cash, cash equivalents and restricted cash , beginning of year
42,683
127,880
6,632
Cash, cash equivalents and restricted cash , end of period
$
30,571
$
42,683
$
127,880
The accompanying notes are an integral part of these consolidated financial statements.
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Franklin Street Properties Corp.
Consolidated Statements of Cash Flows
For the Year Ended December 31,
(in thousands)
2025
2024
2023
Supplemental disclosure of cash flow information:
Cash paid for:
Interest
$
21,942
$
24,068
$
25,740
Taxes on income
$
235
$
385
$
339
Non-cash investing and financing activities:
Accrued costs for purchase of real estate assets
$
763
$
2,888
$
7,566
Investment in related party mortgage loan receivable converted to real estate assets and acquired real estate leases in conjunction with variable interest entity consolidation
$
—
$
—
$
20,000
The accompanying notes are an integral part of these consolidated financial statements.
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Table of Contents
Franklin Street Properties Corp.
Notes to the Consolidated Financial Statements
1. Organization
Franklin Street Properties Corp. (“FSP Corp.” or the “Company”) holds, directly and indirectly, 100 % of the interest in FSP Investments LLC, FSP Property Management LLC , FSP Holdings LLC and FSP Protective TRS Corp . FSP Property Management LLC provides asset management and property management services.
As of December 31, 2025, the Company owned and operated a portfolio of real estate consisting of 14 operating properties. The Company may pursue, on a selective basis, the sale of its properties in order to take advantage of the value creation and demand for its properties, for geographic, property specific reasons or for other general corporate purposes.
2. Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements include all of the accounts of the Company and its majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
Estimates and Assumptions
The Company prepares its financial statements and related notes in conformity with generally accepted accounting principles in the United States of America (“GAAP”). These principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the consolidated financial statements include the allowance for credit losses, purchase price allocations and impairment considerations.
Variable Interest Entities (VIEs)
The Company determines 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 the Company holds 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. The Company makes judgments regarding the sufficiency of the equity at risk based first on a qualitative analysis, and then a quantitative analysis, if necessary.
The Company analyzes any investments in VIEs to determine if the Company is the primary beneficiary. In evaluating whether the Company is the primary beneficiary, the Company evaluates its 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.
The Company considers 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, the Company considers the rights of other investors to participate in those decisions, to replace the manager and to amend the corporate charter. The Company determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and considers that conclusion upon a reconsideration event.
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As of January 1, 2023, the Company’s relationship with FSP Monument Circle LLC, which corporation was organized to operate as a real estate investment trust (“Monument Circle” or the “Sponsored REIT”) was considered a VIE and the Company became the primary beneficiary. Upon this reconsideration event, the entity was included within the Company’s consolidated financial statements and all intercompany accounts and transactions were eliminated in consolidation. A gain on consolidation of approximately $ 0.4 million was recognized in the three months ended March 31, 2023. Cash and cash equivalents of $ 3 million held by Monument Circle was included in the Company’s cash and cash equivalents upon consolidation and is reflected as “Consolidation of Sponsored REIT” in the consolidated statement of cash flows. The cash and cash equivalents held by Monument Circle were unable to be utilized for the Company’s operational purposes. The creditors of Monument Circle’s trade payables did not have any recourse against the Company. The property held by Monument Circle was sold on June 6, 2025, and Monument Circle and the corporation that had been its sole member were dissolved on December 9, 2025 .
The consolidation value of Monument Circle was allocated to real estate investments and leases, including lease origination costs. Lease origination costs represent the value associated with acquiring an in-place lease (i.e. the market cost to execute a similar lease, including leasing commission, legal, vacancy, and other related costs). The value assigned to building approximates the replacement cost; the value assigned to land approximates its appraised value; and the value assigned to leases approximate their fair value. Other assets and liabilities are recorded at their historical costs, which approximates fair value.
The Company assessed the fair value of the acquired real estate leases based on estimated cash flow projections that utilize appropriate discount rates and available market information. Such inputs are Level 3 in the fair value hierarchy.
The following table summarizes the estimated fair value of the assets acquired at the date of consolidation, January 1, 2023:
(in thousands)
Real estate assets
$
19,695
Value of acquired real estate leases
305
Total
$
20,000
The following is quantitative information about significant unobservable inputs in the Company’s Level 3 measurement of the assets acquired in the consolidation of Monument Circle and were measured at fair value on a nonrecurring basis at January 1, 2023:
Fair Value (1) at
Significant
Range
Weighted
Description
January 1, 2023
Valuation Technique
Unobservable Input
Min
Max
Average (2)
(in thousands)
Monument Circle Consolidation
$
20,000
Discounted Cash Flows
Exit Cap Rate
7.50
%
7.50
%
7.50
%
Discount Rate
9.50
%
9.50
%
9.50
%
(1) Classified within Level 3 of the fair value hierarchy.
(2) Unobservable inputs were weighted based on the fair value of the related instrument.
The relationships and investments related to the Sponsored REIT are summarized in Note 3.
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Real Estate and Depreciation
Real estate assets are stated at cost less accumulated depreciation.
The Company allocates the value of real estate acquired among land, buildings and identified intangible assets or liabilities. Costs related to land, building and improvements are capitalized. Typical capital items include new roofs, site improvements, various exterior building improvements and major interior renovations. Costs incurred in connection with leasing (primarily tenant improvements and leasing commissions) are capitalized and amortized over the lease period. Routine replacements and ordinary maintenance and repairs that do not extend the life of the asset are expensed as incurred. Depreciation is computed using the straight-line method over the assets’ estimated useful lives as follows:
Category
Years
Commercial buildings
39
Building improvements
15
-
39
Fixtures and equipment
3
-
7
The Company reviews its properties to determine if their carrying amounts will be recovered from future operating cash flows if certain indicators of impairment are identified at those properties. These indicators may include lower or declining tenant occupancy, weak or declining tenant profitability, cash flows or liquidity, the Company’s decision to dispose of an asset before the end of its estimated useful life or legislative, economic, or market changes that permanently reduce the value of the Company’s investment. If indicators of impairment are present, the Company evaluates the carrying value of the property by comparing it to its expected future undiscounted cash flow. A property’s value is impaired only if management’s estimate of future undiscounted cash flows to be generated by the property over its estimated holding period is less than the carrying value of the property. If there are different potential outcomes for a property, the Company will take a probability weighted approach to estimating future cash flows. If the Company determines that impairment has occurred, the affected assets are reduced to their fair value. The evaluation of anticipated cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates, capital requirements, estimated holding periods and outcome probabilities that could differ materially from actual results in future periods. Since cash flows are considered on an undiscounted basis in the analysis that the Company conducts to determine whether an asset has been impaired, the Company’s strategy of holding properties over the long term directly decreases the likelihood of recording an impairment loss. If the Company’s strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized. The Company did not recognize any impairment losses on any assets classified as held and used for the years ended December 31, 2025, 2024 and 2023.
Acquired Real Estate Leases and Amortization
Acquired real estate leases represent costs associated with acquiring an in-place lease (i.e., the market cost to execute a similar lease, including leasing commission, tenant improvements, legal, vacancy and other related costs) and the value relating to leases with rents above the market rate. Amortization is computed using the straight-line method over the term of the leases, which range from 53 months to 152 months . Amortization of these combined components was approximately $ 1.7 million, $ 2.5 million and $ 3.2 million for the years ended December 31, 2025, 2024 and 2023, respectively.
Amortization related to costs associated with acquiring an in-place lease is included in depreciation and amortization on the consolidated statements of income. Amortization related to leases with rents above the market rate is offset against
the rental revenue in the consolidated statements of income. The estimated annual amortization expense for the five years and thereafter following December 31, 2025 is as follows:
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(in thousands)
December 31,
2026
$
1,631
2027
391
2028
302
2029
127
2030
27
2031 and thereafter
12
Acquired Unfavorable Real Estate Leases and Amortization
Acquired unfavorable real estate leases represent the value relating to leases with rents below the market rate. Amortization is computed using the straight-line method over the term of the leases, which range from 101 months to 151 months . Amortization expense was approximately $ 10,000 , $ 0.1 million and $ 0.1 million for the years ended December 31, 2025, 2024 and 2023, respectively.
Amortization related to leases with rents below the market rate is included with rental revenue in the consolidated statements of income. The estimated annual amortization for the five years and thereafter following December 31, 2025 is as follows:
(in thousands)
December 31,
2026
$
8
2027
7
2028
6
2029
6
2030
6
2031 and thereafter
1
Asset Held For Sale
Classification of a property as held for sale typically occurs upon the execution of a purchase and sale agreement and belief by management that the sale or disposition is probable of occurrence within one year . Upon determining that a property was held for sale, the Company discontinues depreciating the property and reflects the property in its consolidated balance sheet at the lower of its carrying amount or fair value less the cost to sell. The Company presents the property held for sale on its consolidated balance sheet as “Asset held for sale”. The Company reports the results of operations of its properties sold or held for sale (that do not represent a strategic shift that has, or will have, a major effect on financial results) in its consolidated statements of income through the date of sale.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. 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.
December 31,
December 31,
(in thousands)
2025
2024
Cash and cash equivalents (1)
$
30,571
$
41,121
Restricted cash
—
1,562
Total cash, cash equivalents and restricted cash
$
30,571
$
42,683
(1) Includes $ 0 and $ 1,314 at December 31, 2025 and 2024, respectively, pertaining to Monument Circle, which the Company is unable to utilize for its own operational purposes.
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Restricted Cash
Restricted cash consists of tenant security deposits, which are required by law in some states or by contractual agreement to be kept in a segregated account, and escrows arising from property sales. Tenant security deposits are refunded when tenants vacate, provided that the tenant has not damaged the property.
Cash held in escrow is paid based on the terms of the closing agreement for the sale. Restricted cash also may include funds segregated for specific tenant improvements per lease agreements.
Tenant Rent Receivables
Tenant rent receivables are expected to be collected within one year . The Company recognizes the effect of a change in its assessment of whether the collectability of operating lease receivables are probable as an adjustment to lease income.
Concentration of Credit Risks
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash investments, derivatives, related party mortgage loan receivable and accounts receivable. The Company maintains its cash balances principally in two banks which the Company believes to be creditworthy. The Company periodically assesses the financial condition of the banks and believes that the risk of loss is minimal. Cash balances held with various financial institutions frequently exceed the insurance limit of $ 250,000 provided by the Federal Deposit Insurance Corporation. The Company performs ongoing credit evaluations of its tenants and requires certain tenants to provide security deposits or letters of credit. Though these security deposits and letters of credit are insufficient to meet the total value of a tenant’s lease obligation, they are a measure of good faith and a source of funds to offset the economic costs associated with lost rent and the costs associated with re-tenanting the space. The Company has no single tenant which accounts for more than 10 % of its annualized rent.
Financial Instruments
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.
Straight-line Rent Receivable
Certain leases provide for fixed rent increases over the term of the lease. Rental revenue is recognized on a straight-line basis over the related lease term; however, billings by the Company are based on the lease agreements. Straight-line rent receivable, which is the cumulative revenue recognized in excess of amounts billed by the Company, was $ 38.7 million, $ 37.7 million and $ 40.4 million at December 31, 2025, 2024 and 2023, respectively.
Deferred Leasing Commissions
Deferred leasing commissions represent direct and incremental external leasing costs incurred in the leasing of commercial space. These costs are capitalized and are amortized on a straight-line basis over the terms of the related lease agreements. Amortization expense was approximately $ 4.5 million, $ 4.5 million and $ 5.9 million for the years ended December 31, 2025, 2024 and 2023, respectively.
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The estimated annual amortization for the five years and thereafter following December 31, 2025 is as follows:
(in thousands)
December 31,
2026
$
4,263
2027
3,818
2028
3,385
2029
2,834
2030
2,158
2031 and thereafter
6,212
Common Share Repurchases
The Company recognizes the gross cost of the common shares it repurchases as a reduction in stockholders’ equity using the treasury stock method. Maryland law does not recognize a separate treasury stock account but provides that shares repurchased are classified as authorized but unissued shares. Accordingly, the Company reduces common stock for the par value and the excess of the purchase price over the par value is a reduction to additional paid-in capital.
Revenue Recognition
Rental Revenue - The Company has retained substantially all of the risks and benefits of ownership of the Company’s commercial properties and accounts for its leases as operating leases. Rental revenue includes income from leases, certain reimbursable expenses, straight-line rent adjustments and other income associated with renting the property. Rental income from leases, which includes rent concessions (including free rent and other lease inducements) and scheduled increases in rental rates during the lease term, is recognized on a straight-line basis. The Company does not have any significant percentage rent arrangements with its commercial property tenants. Reimbursable expenses are included in rental income in the period earned. A summary of rental revenue is shown in the following table:
Year Ended
December 31,
(in thousands)
2025
2024
2023
Income from leases
$
75,717
$
86,563
$
103,716
Reimbursable expenses
31,592
35,469
42,311
Straight-line rent adjustment
( 147 )
( 1,970 )
( 626 )
Amortization of favorable and unfavorable leases
—
18
45
$
107,162
$
120,080
$
145,446
Related Party and Other Revenue - Property and asset management fees and other income are recognized when the related services are performed and the earnings process is complete.
Segment Reporting
The Company is a REIT focused on real estate investments primarily in the office market and currently operates in only one segment: real estate operations.
Income Taxes
Taxes on income for the years ended December 31, 2025, 2024 and 2023 represent taxes incurred by FSP Protective TRS Corp, which is a taxable REIT subsidiary, and the State of Texas franchise tax applicable to FSP Corp., which is classified as an income tax for reporting purposes.
Net Income Per Share
Basic net income per share is computed by dividing net income by the weighted average number of 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 no potential dilutive shares outstanding at
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December 31, 2025, 2024 and 2023. The denominator used for calculating basic and diluted net income per share was 103,640,000 , 103,510,000 and 103,357,000 for the years ended December 31, 2025 , 2024 and 2023 , respectively.
Derivative Instruments
The Company recognizes derivatives on the consolidated balance sheets at fair value. Derivatives that do not qualify, or are not designated as hedge relationships, must be adjusted to fair value through income. Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Cash flow hedges are accounted for by recording the fair value of the derivative instrument on the consolidated balance sheets as either an asset or liability. To the extent hedges are effective, a corresponding amount, adjusted for swap payments, is recorded in accumulated other comprehensive income within stockholders’ equity. Amounts are then reclassified from accumulated other comprehensive income to the income statement in the period or periods the hedged forecasted transaction affects earnings. Ineffectiveness, if any, is recognized in other comprehensive income (“OCI”) and reclassified into the income statement. The Company reviews the effectiveness of each hedging transaction, which involves estimating future cash flows, at least quarterly. Derivative instruments designated in a hedge relationship to mitigate exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. The Company currently has no fair value hedges outstanding. Fair values of derivatives are subject to significant variability based on changes in interest rates and counterparty credit risk. The results of such variability could be a significant increase or decrease in the Company’s derivative assets, derivative liabilities, equity, and/or earnings.
Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There is also an established fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value. Financial assets and liabilities recorded on the consolidated balance sheets at fair value are categorized based on the inputs to the valuation techniques as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which is typically based on an entity’s own assumptions, as there is little, if any, related market activity or information. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability including credit risk, which was not significant to the overall value.
These inputs (See Notes 2 and 10) were considered and applied to the Company’s Sponsored REIT purchase price allocation. Level 3 inputs were used to value assets acquired in the consolidation of the Sponsored REIT.
Subsequent Events
In preparing these consolidated financial statements the Company evaluated events that occurred through the date of issuance of these financial statements for potential recognition or disclosure.
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
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(“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 requirement 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 is permitted. The Company adopted ASU 2023-07 on January 1, 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 .
3. Related Party Transactions and Investments in Non-Consolidated Entities
Investment in Sponsored REITs
The Company held a common stock interest in the Sponsored REIT on each of December 31, 2024 and 2023. The property held by Monument Circle was sold on June 6, 2025, and Monument Circle and the corporation that had been its sole member were dissolved on December 9, 2025
Management fees and interest income from loans:
Asset management fees range from 1 % to 5 % of collected rents, and the applicable contracts are cancellable with 30 day s notice. The Company did not recognize asset management fee income from non-consolidated entities for each of the years ended December 31, 2025, 2024 and 2023.
The Company did not recognize income or fees from the Sponsored REIT Loan for each of the years ended December 31, 2025, 2024 and 2023.
On October 29, 2021, the Company agreed to amend and restate the then existing Sponsored REIT Loan to extend the maturity date from December 6, 2022 to June 30, 2023 and to advance an additional $ 3.0 million tranche of indebtedness to Monument Circle with the same June 30, 2023 maturity date, effectively increasing the aggregate principal amount of the Sponsored REIT Loan from $ 21 million to $ 24 million. In addition, the Company agreed to defer all principal and interest payments due under the Sponsored REIT Loan until the maturity date. As part of its consideration for agreeing to amend and restate the Sponsored REIT Loan, the Company obtained from the stockholders of the parent 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
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January 1, 2023. There were no commitments to lend additional funds to the Sponsored REIT. On June 26, 2023, the Sponsored REIT Loan maturity was extended to September 30, 2023. On September 26, 2023, the Sponsored REIT Loan maturity was further extended to September 30, 2024. On September 27, 2024, the Sponsored REIT Loan maturity was further extended to September 30, 2025. The Sponsored REIT Loan was extinguished on June 6, 2025, when the property securing the loan was sold. More information on the sale is included in Note 10, “Disposition of Properties and Assets Held for Sale” in these Consolidated Financial Statements.
The Company recorded a $ 4.2 million decrease in its provision for credit losses during the year ended December 31, 2023. The change in the allowance for credit losses during the year ended December 31, 2023 was due to the consolidation of Monument Circle. The following table presents a roll-forward of the Company’s allowance for credit losses.
For the Year Ended December 31,
(In thousands)
2025
2024
2023
Beginning allowance for credit losses
$
—
$
—
$
( 4,237 )
Additional increases to the allowance for credit losses
—
—
—
Reductions to the allowance for credit losses
—
—
4,237
Ending allowance for credit losses
$
—
$
—
$
—
4. Bank Note Payable, Term Note Payable and Private Placements
On February 26, 2026, the Company entered into a Credit Agreement with Alter Domus (US) LLC, as administrative agent, and the lenders from time-to-time party thereto, which provides for initial term loans in an aggregate principal amount of $ 275 million. The Company used the net proceeds of such initial term loans to refinance and retire all outstanding indebtedness under the BMO Term Loan, BofA Term Loan and the Senior Notes (each as defined below). See Note 12, Subsequent Events, of these Notes to Consolidated Financial Statements for further information on the Credit Agreement.
BMO Term Loan
As of December 31, 2025, the Company had a term loan borrowing in the aggregate principal amount of approximately $ 70.7 million (the “BMO Term Loan”) with Bank of Montreal, as administrative agent, and the other lending institutions party thereto, which would have matured on April 1, 2026. The BMO Term Loan was subject to the terms of the Second Amended and Restated Credit Agreement dated September 27, 2018 (the “Original BMO Credit Agreement”), as amended by the First Amendment to Second Amended and Restated Credit Agreement dated February 10, 2023 (the “BMO First Amendment”) and the Second Amendment to Second Amended and Restated Credit Agreement dated February 21, 2024 (the “BMO Second Amendment The Original BMO Credit Agreement, as amended by the BMO First Amendment and the BMO Second Amendment, is referred to as the “BMO Credit Agreement”.
As of December 31, 2024, the interest rate on the BMO Term Loan was 8.00 % per annum. The weighted average variable interest rate on all amounts outstanding under the BMO Term Loan was 8.34 % for the year ended December 31, 2024. 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 December 31, 2025, the interest rate on the BMO Term Loan was 9.00 % per annum. The weighted average variable interest rate on all amounts outstanding under the BMO Term Loan was 8.75 % for the year ended December 31, 2025.
The BMO Credit Agreement contained customary affirmative and negative covenants for credit facilities of this type. The BMO Credit Agreement also contained financial covenants that required the Company 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. The Company was in compliance with the BMO Term Loan financial covenants as of December 31, 2025.
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The BMO Credit Agreement provided 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).
BofA Term Loan
As of December 31, 2025, the Company had a term loan borrowing in the aggregate principal amount of approximately $ 55.3 million (the “BofA Term Loan”) with Bank of America, N.A. as administrative agent, and other lending institutions party thereto, which would have matured on April 1, 2026. The BofA Term Loan was subject to the terms of the Credit Agreement dated January 10, 2022, as amended by the First Amendment to Credit Agreement dated February 10, 2023 (the “BofA First Amendment”) and the Second Amendment to Credit Agreement dated February 21, 2024 (the “BofA Second Amendment”). The Original BofA Credit Agreement, as amended by the BofA First Amendment and the BofA Second Amendment, is referred to as the “BofA Credit Agreement”.
As of December 31, 2024, the interest rate on the BofA Term Loan was 8.00 % per annum. The weighted average variable interest rate on all amounts outstanding under the BofA Term Loan for the year ended December 31, 2024 was approximately 8.34 % per annum. Effective April 1, 2025, the interest rate on the BofA Term Loan increased from 8.00 % per annum to 9.00 % per annum. As of December 31, 2025, the interest rate on the BofA Term Loan was 9.00 % per annum. The weighted average variable interest rate on all amounts outstanding under the BofA Term Loan was 8.75 % for the year ended December 31, 2025.
The BofA Credit Agreement contained customary affirmative and negative covenants for credit facilities of this type. The BofA Credit Agreement also contained financial covenants that required the Company 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. The Company was in compliance with the BofA Term Loan financial covenants as of December 31, 2025.
The BofA Credit Agreement provided 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).
Senior Notes
As of December 31, 2025, the Company had senior notes in the aggregate principal amount of approximately $ 122.9 million (the “Senior Notes”) that mature on April 1, 2026. The Senior Notes consisted of (i) Series A Senior Notes due April 1, 2026 in an aggregate principal amount of approximately $ 71.3 million (the “Series A Notes”) and (ii) Series B Senior Notes due April 1, 2026 in the aggregate principal amount of approximately $ 51.6 million (the “Series B Notes”). The Senior Notes were subject to the terms of the Note Purchase Agreement dated October 24, 2017 (the “Original Note Purchase Agreement”), as amended by the First Amendment to Note Purchase Agreement dated February 21, 2024 (the “NPA First Amendment”). The Original Note Purchase Agreement, as amended by the NPA First Amendment, is referred to as the “Note Purchase Agreement”.
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 December 31, 2025 and December 31, 2024, the interest rate 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 contained customary affirmative and negative covenants The Note Purchase Agreement also contained financial covenants that required the Company 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. The Company was in compliance with the Note Purchase Agreement financial covenants as of December 31, 2025.
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The Note Purchase Agreement contained customary events of default, including payment defaults, cross defaults with certain other indebtedness, breaches of covenants and bankruptcy events.
5. Financial Instruments: Derivatives and Hedging
On February 20, 2019, the Company entered into interest rate swap transactions that fixed the interest rate for the period beginning August 26, 2020 and ending January 31, 2024 on the BMO Term Loan (the “2019 BMO Interest Rate Swap”). The variable rates that were fixed under the 2019 BMO Interest Rate Swap is described in Note 3. On February 8, 2023, the Company terminated the 2019 BMO Interest Rate Swap applicable to the BMO Term Loan and, on February 10, 2023, the Company received an aggregate of approximately $ 4.3 million as a result of such terminations, of which approximately $ 0.1 million related to interest receivable. There were no derivative instruments as of December 31, 2025 and December 31, 2024.
The 2019 BMO Interest Rate Swap qualified as a cash flow hedge and has 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 gain/(loss) on the 2019 BMO Interest Rate Swap that was recorded in OCI and the accompanying consolidated statements of income as a component of interest expense for the years ended December 31, 2024 and 2023, respectively, was as follows:
(in thousands)
Interest Rate Swaps in Cash Flow Hedging Relationships:
2024
2023
Amounts of gain recognized in OCI
$
—
$
177
Amounts of previously recorded gain (loss) reclassified from OCI into Interest Expense
$
355
$
4,180
Total amount of Interest Expense presented in the consolidated statements of operations
$
26,424
$
24,318
Over time, the realized gains in accumulated other comprehensive income were reclassified into earnings as a decrease to interest expense in the same periods in which the hedged interest payments affected earnings.
The Company hedged the exposure to variability in anticipated future interest payments on existing debt.
6. Stockholders’ Equity
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 2,000,000 shares of the Company’s common stock (“Awards”). All of the Company’s employees, officers, directors, consultants and advisors are eligible to be granted Awards. Awards under the Plan are made at the discretion of the Company’s Board of Directors, and have no vesting requirements. Upon granting an Award, the Company will recognize compensation cost equal to the fair value of the Company’s common stock, as determined by the Company’s Board of Directors, on the date of the grant.
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On May 30, 2025, May 31, 2024 and May 18, 2023, the Company granted shares under the Plan to non-employee directors with the compensation cost related to such grants indicated in the table below, which was recognized during the years ended December 31, 2025, 2024 and 2023, respectively, and is included in general and administrative expenses in the consolidated statements of income for such periods. Such shares were fully vested on the date of issuance.
Shares Available
Compensation
for Grant
Cost
Balance December 31, 2022
1,696,687
$
1,406,250
Shares granted 2023
( 194,439 )
314,991
Balance December 31, 2023
1,502,248
$
1,721,241
Shares granted 2024
( 136,362 )
269,997
Balance December 31, 2024
1,365,886
$
1,991,238
Shares granted 2025
( 123,625 )
224,998
Balance December 31, 2025
1,242,261
$
2,216,236
7. Federal Income Tax Reporting
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 10 % of the voting power or value of the securities of any one issuer unless the issuer is itself a REIT or a taxable REIT subsidiary (“TRS”). In the case of TRSs, the Company’s ownership of securities in all TRSs generally cannot exceed 20 % ( 25 % of taxable years beginning on or before December 31, 2017) of the value of all of the Company’s assets and, when considered together with other non-real estate assets, cannot exceed 25 % of the value of all of the Company’s assets. FSP Investments LLC and FSP Protective TRS Corp. are the Company’s taxable REIT subsidiaries operating as taxable corporations under the Code. The TRSs have gross amounts of net operating losses (“NOLs”) available to those taxable corporations of $ 5.0 million and $ 4.9 million as of December 31, 2025 and 2024, respectively. The NOLs created prior to 2018 will expire between 2030 and 2037 and the NOLs generated after 2017 will not expire. A valuation allowance is provided for the full amount of the NOLs as the realization of any tax benefits from such NOLs is not assured.
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 2022 and thereafter.
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Net operating losses
Section 382 of the Code restricts a corporation’s ability to use net operating losses (“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 Company’s prior 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 expire 20 years after the year in which they arise, and the last of the Company’s NOLs will expire in 2027. Approximately $ 0.4 million and $ 0.7 million of NOLs expired in 2024 and 2023, respectively. A valuation allowance is provided for the full amount of the gross NOLs available as the realization of any tax benefits remaining from such NOLs is not assured. The gross amount of NOLs available to the Company was approximately $ 150.8 million and $ 95.8 million as of December 31, 2025 and December 31, 2024, respectively.
Income Tax Expense
The Company recognized approximately $ 31,000 in Federal Income Tax expense related to the sale of Monument Circle for the year ended December 31, 2025. 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 $ 0.2 million, $ 0.2 million and $ 0.3 million for the years ended December 31, 2025, 2024 and 2023, respectively.
The income tax expense reflected in the consolidated statements of income relates primarily to state income taxes as a result of some states that limit the use of net operating losses, which are in Other Taxes, and to a lesser extent, the Revised Texas Franchise Tax. FSP Protective TRS Corp. provides taxable services to tenants at some of the Company’s properties.
For the Year Ended December 31,
(Dollars in thousands)
2025
2024
2023
Federal Income Tax
$
31
$
—
—
Revised Texas Franchise Tax
158
216
$
279
Other Taxes
—
—
—
Tax expense
$
189
$
216
$
279
Taxes on income are a current tax expense. No deferred income taxes were provided as there were no material temporary differences between the financial reporting basis and the tax basis of the TRSs.
At December 31, 2025, the Company’s net tax basis of its real estate assets is more than the amount set forth in the Company’s consolidated balance sheets by $ 142.1 million and at December 31, 2024, the Company’s net tax basis of its real estate assets is more than the amount set forth in the Company’s consolidated balance sheets by $ 145.6 million.
Tax Components
The following summarizes the tax components of the Company’s common distributions paid per share for the years ended December 31, 2025, 2024 and 2023:
2025
2024
2023
Per Share
%
Per Share
%
Per Share
%
Ordinary income
$
—
—
%
$
—
—
%
$
—
—
%
Capital gain
—
—
%
—
—
%
—
—
%
Return of capital
0.04
100
%
0.04
100
%
0.04
100
%
Total
$
0.04
100
%
$
0.04
100
%
$
0.04
100
%
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8. Leases
Leases as a Lessee:
The Company entered into a noncancelable contract with a third party to obtain office space that commenced on September 1, 2010. The contract was amended on October 25, 2016 to extend the contract through September 30, 2024 and amended again on February 7, 2024 to extend the contract through September 30, 2026. As of December 31, 2025 and December 31, 2024, the Company’s right-of-use asset was $ 0.3 million and $ 0.7 million, respectively, which is included in prepaid and other assets on the consolidated balance sheet. A discount rate equal to the Company’s incremental borrowing rate was applied to the future monthly contractual lease payments remaining as of December 31, 2025 to compute the lease liability. The incremental borrowing rate is the rate equal to the closest borrowing under the BofA Revolver at the time of the February 7, 2024 lease amendment.
Lease Costs
For the Year Ended December 31,
(in thousands)
2025
2024
2023
Operating lease cost
$
418
$
411
$
419
$
418
$
411
$
419
Other information
Cash paid for amounts included in the measurement of lease liabilities
$
436
$
412
$
447
Weighted average remaining lease terms in years - operating leases
0.75
1.75
0.75
Weighted average discount rate - operating leases
8.44 %
8.44 %
3.86 %
Maturity analysis for liabilities
Total
Undiscounted
(in thousands)
Cash Flows
Discount rate at commencement
8.44 %
2026
$
327
$
327
Present value lease liability
$
316
Difference between undiscounted cash flows and discounted cash flows
$
11
Leases as a Lessor:
The Company is a lessor of commercial real estate with operations that include the leasing of office 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.
For the years ended December 31, 2025, 2024 and 2023, the Company recognized the following amounts of income relating to lease payments:
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Table of Contents
Income relating to lease payments:
For the Year Ended December 31,
(in thousands)
2025
2024
2023
Income from leases (1)
$
107,309
$
122,032
$
146,027
$
107,309
$
122,032
$
146,027
Undiscounted Cash Flows
Year ending
(in thousands)
December 31,
2026
68,480
2027
60,214
2028
55,237
2029
46,683
2030
36,019
2031 and thereafter
99,271
$
365,904
(1) Includes amounts recognized from variable lease payments of $ 31,592 , $ 35,413 and $ 42,311 for the years ended December 31, 2025, 2024 and 2023, respectively.
9. Retirement Plan
In 2006, the Company established a 401(k) plan to cover eligible employees, which permitted deferral of up to $ 17,000 per year (indexed for inflation) into the 401(k) plan, subject to certain limitations imposed by the Internal Revenue Code. An employee’s elective deferrals are immediately vested upon contribution to the 401(k) plan. The Company matches employee contributions to the 401(k) plan dollar for dollar up to 3 % of each employee’s annual compensation up to $ 200,000 . In addition, we may elect to make an annual discretionary profit-sharing contribution. The Company’s total contribution under the 401(k) plan amounted to $ 0.1 million, $ 0.1 million and $ 0.1 million for the years ended December 31, 2025, 2024 and 2023, respectively.
10. Disposition of Properties and Assets Held for Sale
On April 7, 2025, Monument Circle entered into a purchase and sale agreement to sell its property located in Indianapolis, Indiana to a third party for a gross sales price of $ 6.0 million. The property was sold on June 6, 2025 at a total loss of $ 12.9 million, including an impairment loss of $ 13.3 million that was recorded during the three months ended March 31, 2025 and was decreased by $ 0.4 million for final sale adjustments during the three months ended June 30, 2025 after the sale was completed.
In October 2021, as part of its consideration for agreeing to amend and restate the Sponsored REIT Loan, the Company obtained from the stockholders of the parent 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. At March 31, 2025, the Company recorded this property at the fair value less cost to sell, which was less than the carrying value and resulted in an impairment loss of $ 13.3 million. The Company reclassified $ 5.7 million of this office property as an asset held for sale, which was comprised of $ 18.9 million in real estate assets, net of accumulated depreciation, prior to the impairment. The reclassification was a non-cash investing activity on the statement of cash flows. The Company 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 (Level 3 inputs, as there are no observable inputs).
In 2024, the Company sold an office property located in Richardson, Texas on January 26, 2024, for a gross sales price of $ 35 million. The property was classified as held for sale as of December 31, 2023, and an impairment of $ 2.1 million had been 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 three months ended June 30, 2024, the Company entered into an agreement to sell a property in Glen Allen, Virginia for a gross sales price of approximately $ 31.0 million and an expected loss of $ 13.2 million, which was recorded as an impairment. The property was sold on July 8, 2024, at
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the expected loss. During the three months ended September 30, 2024, the Company recorded an additional $ 0.7 million in costs related to the sale of properties previously sold. During the three months ended September 30, 2024, the Company entered into an agreement to sell a property in Atlanta, Georgia, which was classified as an asset held for sale during 2023. The Company increased the expected loss on this property by $ 6.6 million to $ 27.2 million when the Company entered into this new agreement to sell the property for a gross sales price of $ 34.0 million. The property sold on October 23, 2024, with a $ 0.4 million increase to loss from final sales adjustments on the date of sale.
In 2023, the Company sold one office property located in Elk Grove, Illinois on March 10, 2023, for a gross sales price of $ 29.1 million, at a gain of approximately $ 8.4 million. The Company used the proceeds of the disposition principally to repay a portion of outstanding indebtedness. The Company sold one office property located in Charlotte, North Carolina on August 9, 2023 for a gross sales price of $ 9.2 million, at a loss of $ 0.8 million. During the three months ended September 30, 2023, the Company recorded a gain on sale of $ 53,000 as a result of conveying approximately 7,826 square feet of land at the Company’s Addison, Texas property to the Town of Addison as part of a road revitalization project.
During the three months ended September 30, 2023, the Company reclassified $ 96.4 million of its office properties in Miami, Florida and Atlanta, Georgia as assets held for sale as of September 30, 2023. The Company recorded these properties at the fair value less cost to sell, which was less than the carrying value and resulted in an impairment of $ 39.7 million in the three months ended September 30, 2023. The reclassification was a non-cash investing activity on the statement of cash flows. The Company estimated the fair value of these properties, less estimated costs to sell, using the offers to purchase the properties made by third parties (Level 3 inputs, as there is no active market).
During the three months ended September 30, 2023, the Company entered into an agreement to sell a property in Plano, Texas for a gross sales price of approximately $ 48.0 million, at an expected gain of $ 10.6 million. The Company reclassified $ 36.2 million of this office property as an asset held for sale as of September 30, 2023. The reclassification was a non-cash investing activity on the statement of cash flows. On October 26, 2023, the Company completed the sale of the property located in Plano, Texas for a gross sales price of $ 48.0 million at a gain of approximately $ 10.6 million. On December 6, 2023, the Company sold another of the assets held for sale, an office property located in Miami, Florida for a sales price of $ 68.0 million at a loss of approximately $ 18.9 million.
The asset held for sale located in Atlanta, Georgia, was expected to sell for a gross sales price of $ 40.0 million at a loss of approximately $ 20.5 million, which was recorded as an impairment as of September 30, 2023, however on November 15, 2023, the Company received notice from the buyer indicating that the buyer was terminating the transaction and directing the deposit and interest be disbursed to the Company. At December 31, 2023, the office property remained classified on the consolidated balance sheet as an asset held for sale in the amount of $ 39.0 million and was comprised of $ 52.2 million of real estate assets, net of accumulated depreciation, $ 4.4 million of straight-line rents receivable, and $ 2.9 million of deferred leasing commissions, net of accumulated amortization. The Company expects the property will be sold within the next twelve months.
During the three months ended September 30, 2023, the Company entered into a purchase and sale agreement, which was subsequently amended, to sell a property located in Richardson, Texas for a gross sales price of $ 35.0 million. During the three months ended December 31, 2023, the Company recorded this property at the fair value less cost to sell, which was less than the carrying value and resulted in an impairment of $ 2.1 million. The Company reclassified $ 34.4 million of this office property as an asset held for sale, which comprised of $ 31.1 million in real estate assets, net of accumulated depreciation, $ 3.4 million in straight-line rents receivable, and $ 2.0 million in deferred leasing commissions, net of accumulated amortization.
The Company concluded the dispositions did not represent a strategic shift and reports the results of operations of its properties in its consolidated statements of operations, which includes rental income, rental operating expenses, real estate taxes and insurance and depreciation and amortization.
The operating results for the properties that the Company disposed of or classified as assets held for sale are summarized
below:
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Table of Contents
Year ended December 31,
(in thousands)
2025
2024
2023
Rental revenue
$
132
$
7,622
$
30,116
Rental operating expenses
( 213 )
( 3,681 )
( 10,476 )
Real estate taxes and insurance
( 216 )
( 727 )
( 4,738 )
Depreciation and amortization
( 91 )
( 1,228 )
( 9,162 )
(Loss) income from dispositions and assets held for sale
$
( 388 )
$
1,986
$
5,740
11. Segment Information
The Company is a REIT focused on real estate investments primarily in the office market and currently operates in one segment: real estate operations. Each of the Company’s properties qualify as an operating segment but are aggregated together because they exhibit similar economic characteristics and operating similarities.
The chief operating decision maker (CODM) of the Company is the Company’s Chief Executive Officer. The CODM measures the performance and profit or loss for the Company’s reportable segment using a measure referred to as Segment Net Operating Income (Segment NOI). The CODM utilizes Segment NOI when considering the deployment of the Company’s capital resources on a property-by-property basis. The significant expense categories which the Company’s CODM examines when measuring the segment’s performance include real estate operating expenses and real estate taxes and insurance. Asset information by segment is not reported because the Company does not use this measure to assess performance. The total assets of the Company’s reportable segment can be found on the Company’s consolidated balance sheets.
Segment 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, hedge ineffectiveness, gains or losses on the sale of assets and excludes income taxes. Segment NOI, as defined by the Company, may not be comparable to NOI reported by other REITs that define NOI differently. Segment 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 Segment NOI are shown in the following table:
Segment Net Operating Income (NOI)
Year Ended
Year Ended
Year Ended
(in thousands)
December 31, 2025
December 31, 2024
December 31, 2023
Total consolidated revenues
$
107,162
$
120,112
$
145,707
Reconciling items:
Amortization of above/below market leases
—
( 17 )
( 44 )
Less:
Real estate operating expenses
42,040
45,043
50,732
Real estate taxes and insurance
18,211
22,716
27,200
Segment NOI
$
46,911
$
52,336
$
67,731
Year Ended
Year Ended
Year Ended
Reconciliation to Net loss
December 31, 2025
December 31, 2024
December 31, 2023
Net loss
$
( 44,960 )
$
( 52,723 )
( 48,110 )
Add (deduct):
Loss on extinguishment of debt
12
1,042
106
Gain on consolidation of Sponsored REIT
—
—
( 394 )
(Gain) loss on sale of properties and impairment of assets held for sale, net
12,902
20,826
23,384
Depreciation and amortization
42,609
44,774
54,738
Amortization of above/below market leases
—
( 17 )
( 44 )
General and administrative
12,427
13,884
14,021
Interest expense
24,718
26,424
24,318
Interest income
( 986 )
( 2,090 )
( 567 )
Tax expense
189
216
279
Segment NOI
$
46,911
$
52,336
$
67,731
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Table of Contents
12. Subsequent Events
On February 26, 2026 (the “Closing Date”), the Company entered into a Credit Agreement (the “Credit Agreement”) with Alter Domus (US) LLC, as administrative agent (the “Agent”), and Silver Oak Capital LLC, an affiliate of TPG Credit (collectively, the lenders from time to time party thereto the “Lenders”). The Credit Agreement provides for a secured credit facility (the “Credit Facility”) for aggregate principal commitments of up to $ 320 million, consisting of (i) initial term loans in an aggregate principal amount of $ 275 million (the “Initial Term Loans”), and (ii) delayed draw term loans available upon the approval of the Lenders after the Closing Date in an aggregate principal amount of up to $ 45 million (the “Delayed Draw Term Loans” and together with the Initial Term Loans, the “Term Loans”). The Delayed Draw Term Loans may be used, subject to certain conditions, to fund tenant improvements, leasing commissions, building improvements and other uses approved by the Lenders.
The Term Loans are not subject to amortization and have an initial stated maturity date of February 26, 2029. The maturity date is subject to potential extension of up to one year at the option of the Company, subject to the satisfaction of certain conditions (the “Extension Option”).
Borrowings under the Credit Facility bear interest at an initial interest rate of 9.0 % per annum. The Initial Term Loans were issued with original issue discount of 6.0 % of the principal amount thereof. The Delayed Draw Term Loans, if any, will be issued with original issue discount of 6.0 % of the principal amount thereof.
If the Company exercises the Extension Option, the interest rate will increase to a rate of 13.0 % per annum. Additionally, if the Company exercises the Extension Option, the Company must pay the following extension fees multiplied by the then-outstanding principal amount of Term Loans on each applicable date:
(i) 36th month anniversary of Closing Date: 2.00 %
(ii) 39th month anniversary of Closing Date: 0.50 %
(iii) 42nd month anniversary of Closing Date: 0.50 %
(iv) 45th month anniversary of Closing Date: 0.50 %
(v) 48th month anniversary of Closing Date: 0.50 %
The Credit Agreement requires the Company to prepay outstanding Term Loans with certain proceeds of dispositions of real property. Additionally, the Company may voluntarily prepay the outstanding Term Loans at any time; provided, that if the Company prepays any Term Loans prior to the first anniversary of the Closing Date, the Company is required to pay a make‑whole payment equal to the amount of interest that would have accrued on such Term Loans to and excluding the first anniversary of the Closing Date. The Company is required to pay an exit fee of 4.0 % of the aggregate principal amount of such Term Loans upon any permitted repayment of the Term Loans prior to the applicable maturity date.
The Company must also pay customary agency fees.
The obligations under the Credit Facility are guaranteed by substantially all subsidiaries of the Company and secured by a first priority lien on substantially all of the assets of the Company and its subsidiaries, including a first priority security interest in all of the Company’s and its subsidiaries’ personal property and a first priority mortgage liens on the Company’s and its subsidiaries’ real property, in each case subject to certain exceptions.
The Credit Agreement contains customary representations and affirmative and negative covenants for credit facilities of this type, including, without limitation and subject to certain exceptions, restrictions on indebtedness, liens, investments, mergers, consolidations and other fundamental changes, dispositions of assets (including real property), capital expenditures, changes in business, certain restricted payments, transactions with affiliates, burdensome agreements, sale leaseback transactions, prepayments of other debt, corporate operating expenses and severance and retention payments.
The Credit Agreement also contains financial covenants that require the Company to maintain (i) a minimum tangible net worth $ 424,884,000 plus 70 % of the aggregate net proceeds received by the Company in connection with any offering of stock or other equity in the Company after December 31, 2025 (with a step-down based on the sale of
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mortgaged properties of the Company and its subsidiaries) and (ii) a minimum liquidity of not less than $ 5,000,000 in cash or cash equivalents.
The Credit Agreement provides for customary events of default with corresponding grace periods, including, among other things, failure to pay principal or interest when due, breaches of certain covenants, inaccuracies in representations and warranties, certain cross defaults, certain defaults under material contracts, insolvency or bankruptcy events, the entry of certain judgments, the occurrence of a change in control of the Company (as defined in the Credit Agreement) and the departure of the chairman and chief executive officer of the Company. In the event of a default by the Company, the Agent may, and at the request of the requisite number of Lenders shall, declare any commitment of the Lenders to make Term Loans terminated, declare all obligations under the Credit Agreement immediately due and payable and enforce any and all rights of the Lenders under the Credit Agreement and related documents. Certain events of default related to bankruptcy, insolvency, and receivership result in the automatic acceleration of all outstanding obligations.
The Company used the proceeds of the Initial Term Loans on the Closing Date to refinance and retire all outstanding indebtedness under the documents evidencing the BMO Term Loan, the BofA Term and the Senior Notes and to pay fees and expenses related to the Credit Agreement. The Company may use the proceeds of any Delayed Draw Term Loans funded to finance tenant improvements, leasing commissions, building improvements and other uses approved by the Lenders, subject to certain conditions, in each case as permitted under the Credit Agreement.
On January 9, 2026 , the Board of Directors of the Company declared a cash distribution of $ 0.01 per share of common stock payable on February 12, 2026 , to stockholders of record on January 23, 2026 . In March 2026, the Board of Directors determined to suspend quarterly cash dividends to reduce operating expenses and to redeploy that capital into leasing efforts intended to enhance the value of our portfolio. In addition, the Credit Agreement provides that we may not declare dividends in excess of the greater of $ 0.01 per share or such amount as is required to maintain our status as a REIT. Any future declaration and payment of dividends will be determined from time to time by the Board of Directors and will depend on, among other things, our results of operations, cash flows, liquidity, financial condition, capital requirements and other factors the Board of Directors deems relevant.
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Schedule II
Franklin Street Properties Corp.
Valuation and qualifying accounts:
Additions
(Decreases)
Balance at
charged to
Balance
(in thousands)
beginning
costs and
at end
Classification
of year
expenses
Deductions
of year
Allowance for doubtful accounts
2023
$
17
( 9 )
—
8
2024
8
( 8 )
—
—
2025
—
—
—
—
Allowance for credit losses
2023
$
4,237
( 4,237 )
—
—
2024
—
—
—
—
2025
—
—
—
—
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SCHEDULE III
FRANKLIN STREET PROPERTIES CORP.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2025
Initial Cost
Historical Cost
Costs
Capitalized
Buildings
Total Costs,
(in thousands)
Buildings
(Disposals)
Improvements
Net of
Depreciable
Date of
Encumbrances
Improvements
Subsequent to
and
Accumulated
Accumulated
Life
Year
Acquisition
Description
(1)
Land
and Equipment
Acquisition
Land
Equipment
Total (2)
Depreciation
Depreciation
Years
Built
(3)
(in thousands)
Commercial Properties:
Park Ten, Houston, TX
—
$
1,061
$
21,303
$
8,875
$
565
$
30,674
$
31,239
$
16,436
$
14,803
5
-
39
1999
2002
Addison, Addison, TX
—
4,325
48,040
15,171
4,325
63,211
67,536
33,818
33,718
5
-
39
1999
2002
Greenwood, Englewood, CO
—
3,100
30,201
13,544
3,100
43,745
46,845
22,251
24,594
5
-
39
2000
2005
Eldridge Green, Houston, TX
—
3,900
43,791
12,423
3,900
56,214
60,114
27,321
32,793
5
-
39
1999
2004
Liberty Plaza, Addison, TX
—
4,374
21,146
13,774
4,280
35,014
39,294
16,923
22,371
5
-
39
1985
2006
Park Ten II, Houston, TX
—
1,300
31,712
8,944
1,300
40,656
41,956
18,153
23,803
5
-
39
2006
2006
121 South Eight Street, Minneapolis, MN
—
4,444
15,214
30,055
4,444
45,269
49,713
18,456
31,257
5
-
39
1974
2010
801 Marquette Ave South, Minneapolis, MN
—
4,184
—
28,318
4,184
28,318
32,502
9,028
23,474
5
-
39
1923
2010
Legacy Tennyson Center, Plano, TX
—
3,067
22,064
8,127
3,067
30,191
33,258
11,179
22,079
5
-
39
2008
2011
Westchase I & II, Houston, TX
—
8,491
121,508
28,348
8,491
149,856
158,347
51,828
106,519
5
-
39
2008
2012
1999 Broadway, Denver CO
—
16,334
137,726
44,463
16,334
182,189
198,523
63,446
135,077
5
-
39
1986
2013
1001 17th Street, Denver, CO
—
17,413
165,058
43,815
17,413
208,873
226,286
67,378
158,908
5
-
39
2006
2013
Plaza Seven, Minneapolis, MN
—
6,604
54,240
15,766
6,604
70,006
76,610
21,110
55,500
5
-
39
1987
2016
600 17th Street, Denver, CO
—
20,876
99,941
19,143
20,876
119,084
139,960
31,134
108,826
5
-
39
1982
2016
Balance — Real Estate
—
$
99,473
$
811,944
$
290,766
$
98,883
$
1,103,300
$
1,202,183
$
408,461
$
793,722
(1) There are no encumbrances on the above properties.
(2) The aggregate cost for Federal Income Tax purposes is $ 1,350,341 .
(3) Original date of acquisition by Sponsored Entity.
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The following table summarizes the changes in the Company’s real estate investments and accumulated depreciation:
December 31,
(in thousands)
2025
2024
2023
Real estate investments, at cost:
Balance, beginning of year
$
1,212,616
$
1,257,173
$
1,526,665
Acquisitions
—
—
19,695
Improvements
14,197
20,535
29,194
Assets held for sale
—
—
( 118,644 )
Dispositions
( 24,630 )
( 65,092 )
( 199,737 )
Balance, end of year - Real Estate
$
1,202,183
$
1,212,616
$
1,257,173
Accumulated depreciation:
Balance, beginning of year
$
377,708
$
366,349
$
423,417
Depreciation
36,411
37,746
45,558
Assets held for sale
—
—
( 35,399 )
Dispositions
( 5,658 )
( 26,387 )
( 67,227 )
Balance, end of year - Accumulated Depreciation
$
408,461
$
377,708
$
366,349
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