What changed in this filing

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Item 1. Financial Statements

2022-11-01 compared with 2022-08-02 · 97 added, 93 removed, 418 unchanged (31% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

September 30,

(in thousands, except share and par value amounts)

38 unchanged sentences

Consolidated Statements of Operations

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

(in thousands, except per share amounts)

10 unchanged sentences

Gain on sale of properties, net

Income (loss) before taxes

Net income (loss)

Income (loss) before taxes and equity in income of non-consolidated REITs

Equity in income of non-consolidated REITs

Weighted average number of shares outstanding , basic and diluted

Net income ( loss ) per share , basic and diluted

Net income per share , basic and diluted

The accompanying notes are an integral part of these consolidated financial statements.

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

Net income (loss)

Other comprehensive income (loss):

Other comprehensive income:

Unrealized gain on derivative financial instruments

Total other comprehensive income

Comprehensive income (loss)

Comprehensive income

The accompanying notes are an integral part of these consolidated financial statements.

16 unchanged sentences

Balance, June 30, 2021

Comprehensive income

Repurchased shares

Distributions $ 0.09 per

share of common stock

Balance, September 30, 2021

Balance, December 31, 2021

9 unchanged sentences

Balance, June 30, 2022

Comprehensive income

Distributions $ 0.01 per

share of common stock

Balance, September 30, 2022

The accompanying notes are an integral part of these consolidated financial statements.

1 unchanged sentence

Consolidated Statements of Cash Flows

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

(in thousands)

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization expense

4 unchanged sentences

Gain on sale of properties, net

Equity in income of non-consolidated REITs

Distributions from non-consolidated REITs

Changes in operating assets and liabilities:

7 unchanged sentences

Payment of deferred leasing commissions

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Cash flows from investing activities:

1 unchanged sentence

Proceeds received from sales of properties

Net cash provided by (used in) investing activities

Net cash provided by investing activities

Cash flows from financing activities:

20 unchanged sentences

FSP Property Management LLC provides asset management and property management services.

The Company also has a non-controlling common stock interest in one corporation organized to operate as a real estate investment trust (“REIT”) and held a non-controlling common stock interest in an additional REIT that was sold in June 2022.

Collectively, these two REITs are referred to as the “Sponsored REITs”.

As of June 30, 2022, the Company owned and operated a portfolio of real estate consisting of 24 operating properties, one managed Sponsored REIT and held one promissory note secured by a mortgage on real estate owned by the Sponsored REIT.

The Company also has a non-controlling common stock interest in one corporation organized to operate as a real estate investment trust (the “Sponsored REIT”).

As of September 30, 2022, the Company owned and operated a portfolio of real estate consisting of 22 operating properties, one managed Sponsored REIT and held one promissory note secured by a mortgage on real estate owned by the Sponsored REIT.

From time-to-time, the Company may acquire real estate or make additional secured loans.

1 unchanged sentence

The following table summarizes the Company’s number of operating properties, which we also refer to as our owned properties and rentable square feet of real estate.

As of June 30,

As of September 30,

Operating Properties:

9 unchanged sentences

In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair presentation of the financial statements for these interim periods have been included.

Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 or for any other period.

Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 or for any other period.

Financial Instruments

As disclosed in Note 4, the Company’s derivatives are recorded at fair value using Level 2 inputs.

maturity and the bank note and term loans payable approximate their fair values as they bear interest at variable interest rates or at rates that are at market for similar investments.

The Company estimates that the carrying values of cash and cash equivalents, restricted cash, receivables, prepaid expenses, accounts payable and accrued expenses, accrued compensation, and tenant security deposits approximate their fair values based on their short-term maturity and the bank note and term loans payable approximate their fair values as they bear interest at variable interest rates or at rates that are at market for similar investments.

Cash, Cash Equ ivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statement of cash flows.

September 30,

(in thousands)

15 unchanged sentences

We determine whether we are the primary beneficiary of a VIE at the time we become involved with a variable interest entity and reconsider that conclusion upon a reconsideration event.

As of June 30, 2022, our relationship with FSP Monument Circle LLC was considered a VIE for which we are not the primary beneficiary.

Our maximum exposure to losses associated with this VIE is limited to the outstanding Sponsored REIT Loan (as defined in Note 2) net of the allowance for credit loss, the related accrued interest receivable and an exit fee receivable, which were in aggregate approximately $ 24.2 million and $ 24.5 million at June 30, 2022 and December 31, 2021, respectively.

The accrued interest and exit fee receivables are included in prepaid expenses and other assets in the consolidated balance sheet and are approximately $ 1.4 million and $ 0.5 million at June 30, 2022 and December 31, 2021, respectively.

As of September 30, 2022, our relationship with FSP Monument Circle LLC was considered a VIE for which we are not the primary beneficiary.

Our maximum exposure to losses associated with this VIE is limited to the outstanding Sponsored REIT Loan (as defined in Note 2) net of the allowance for credit loss, the related accrued interest receivable and an exit fee receivable, which were in aggregate approximately $ 24.0 million and $ 24.5 million at September 30, 2022 and December 31, 2021, respectively.

The accrued interest and exit fee receivables are included in prepaid expenses and other assets in the consolidated balance sheet and are approximately $ 1.8 million and $ 0.5 million at September 30, 2022 and December 31, 2021, respectively.

The relationships and investments related to the entity in which we have a variable interest are summarized in Note 2.

8 unchanged sentences

Investment in Sponsored REITs:

At June 30, 2022 and December 31, 2021, the Company held a non-controlling common stock interest in one and two Sponsored REITs, respectively, in which the Company no longer shares in economic benefit or risk.

At September 30, 2022 and December 31, 2021, the Company held a non-controlling common stock interest in one and two Sponsored REITs, respectively, in which the Company no longer shares in economic benefit or risk.

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 days notice.

Asset management fee income from non-consolidated entities amounted to approximately $ 21,000 and $ 34,000 for the six months ended June 30, 2022 and 2021, respectively.

Asset management fee income from non-consolidated entities amounted to approximately $ 26,000 and $ 50,000 for the nine months ended September 30, 2022 and 2021, respectively.

From time to time the Company may make secured loans (“Sponsored REIT Loans”) to the Sponsored REIT in the form of mortgage loans or revolving lines of credit to fund construction costs, capital expenditures, leasing costs and for other purposes.

9 unchanged sentences

The outstanding Sponsored REIT Loan is secured by a mortgage on the underlying property and the balances within the borrower’s cash accounts.

The Sponsored REIT Loan has a term of approximately one year .

The following is a summary of the sole Sponsored REIT Loan outstanding as of June 30, 2022:

The Sponsored REIT Loan matures on June 30, 2023.

The following is a summary of the sole Sponsored REIT Loan outstanding as of September 30, 2022:

(dollars in thousands, except footnotes)

4 unchanged sentences

(1) The interest rate is a fixed rate and this mortgage loan includes an origination fee of $ 164,000 and an exit fee of $ 38,000 when repaid by the borrower.

The Company recognized interest income and fees from the Sponsored REIT Loan of approximately $ 906,000 and $ 793,000 for the six months ended June 30, 2022 and 2021, respectively.

The Company recognized interest income and fees from the Sponsored REIT Loan of approximately $ 1,367,000 and $ 1,196,000 for the nine months ended September 30, 2022 and 2021, respectively.

On October 29, 2021, the Company agreed to amend and restate its existing Sponsored REIT Loan to FSP Monument Circle LLC to extend the maturity date from December 6, 2022 to June 30, 2023 and to advance an additional $ 3.0 million tranche of indebtedness to FSP Monument Circle LLC 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.

1 unchanged sentence

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 FSP Monument Circle LLC the right to vote their shares in favor of any sale of the property owned by FSP Monument Circle LLC any time on or after January 1, 2023.

There were no commitments to lend additional funds to the Sponsored REIT and the loan is fully collateralized by the mortgage held on the Sponsored REIT’s property and by cash accounts, as of June 30, 2022.

As of December 31, 2021 and June 30, 2021, we did not have an allowance for credit losses recorded on our consolidated balance sheets.

We recorded a $ 1.1 million increase in our provision for credit losses during the six months ended June 30, 2022.

The change in the allowance for credit losses during the six months ended June 30, 2022 is primarily due to the deterioration within the current real estate market and changes to key assumptions applied within our financial model to reflect these market changes, such as the exit cap and the discount rate.

There were no commitments to lend additional funds to the Sponsored REIT and the loan is collateralized by the mortgage held on the Sponsored REIT’s property and by cash accounts, as of September 30, 2022.

As of December 31, 2021, we did not have an allowance for credit losses recorded on our consolidated balance sheets.

We recorded a $ 1.9 million increase in our provision for credit losses during the nine months ended September 30, 2022.

The change in the allowance for credit losses during the nine months ended September 30, 2022 is primarily due to the deterioration within the current real estate market, changes to key assumptions applied within our financial model to reflect these market changes, such as the exit cap and the discount rate, and due to an increase in the accrued interest receivable balance.

The following table presents a roll-forward of our allowance for credit losses.

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

(Dollars in thousands)

Beginning allowance for credit losses

Additional increases or decreases to the allowance for credit losses

Additional increases to the allowance for credit losses

Ending allowance for credit losses

1 unchanged sentence

Fair Value (1) at

June 30, 2022

September 30, 2022

Valuation Technique

25 unchanged sentences

The BMO Term Loan was previously evidenced by an Amended and Restated Credit Agreement, dated October 29, 2014, among the Company, BMO, as administrative agent and lender, and the other lending institutions party thereto, as amended by a First Amendment, dated July 21, 2016, and a Second Amendment, dated October 18, 2017.

The BMO Term Loan bears interest at either (i) a number of basis points over LIBOR depending on the Company’s credit rating ( 165 basis points over LIBOR at June 30, 2022) or (ii) a number of basis points over the base rate depending on the Company’s credit rating ( 65 basis points over the base rate at June 30, 2022).

The BMO Term Loan bears interest at either (i) a number of basis points over LIBOR depending on the Company’s credit rating ( 165 basis points over LIBOR at September 30, 2022) or (ii) a number of basis points over the base rate depending on the Company’s credit rating ( 65 basis points over the base rate at September 30, 2022).

Although the interest rate on the BMO Term Loan is variable under the BMO Credit Agreement, the Company fixed the base LIBOR interest rate by entering into interest rate swap transactions.

1 unchanged sentence

On February 20, 2019, the Company entered into ISDA Master Agreements with a group of banks that fixed the base LIBOR interest rate on the BMO Term Loan at 2.39 % per annum for the period beginning on August 26, 2020 and ending January 31, 2024.

Accordingly, based upon the Company’s credit rating, as of June 30, 2022, the effective interest rate on the BMO Term Loan was 4.04 % per annum.

Accordingly, based upon the Company’s credit rating, as of September 30, 2022, the effective interest rate on the BMO Term Loan was 4.04 % per annum.

On June 4, 2021, the Company paid approximately $ 0.6 million to terminate the portion of the interest rate swap on the tranche A term loan, which was scheduled to mature on November 30, 2021.

5 unchanged sentences

outstanding obligations of the Company will become immediately due and payable.

The Company was in compliance with the BMO Term Loan financial covenants as of June 30, 2022.

The Company was in compliance with the BMO Term Loan financial covenants as of September 30, 2022.

BofA Revolver

2 unchanged sentences

Borrowings made under the BofA Revolver may be revolving loans or letters of credit, the combined sum of which may not exceed $ 237.5 million outstanding at any time.

As of June 30, 2022, there were borrowings of $ 55.0 million drawn and outstanding under the BofA Revolver.

As of September 30, 2022, there were borrowings of $ 65.0 million drawn and outstanding under the BofA Revolver.

Borrowings made pursuant to the BofA Revolver may be borrowed, repaid and reborrowed from time to time until the maturity date on January 12, 2024.

3 unchanged sentences

In addition, under certain circumstances, such as if SOFR is not able to be determined, the BofA Revolver will instead bear interest at a margin over a specified base rate.

The margin over SOFR or, if applicable, the base rate varies depending on the Company’s leverage ratio ( 1.95 % over SOFR and 0.95 % over the base rate at June 30, 2022).

The margin over SOFR or, if applicable, the base rate varies depending on the Company’s leverage ratio ( 1.95 % over SOFR and 0.95 % over the base rate at September 30, 2022).

The Company is also obligated to pay an annual facility fee and, if applicable, letter of credit fees in amounts that are also based on the Company’s leverage ratio.

The facility fee is assessed against the aggregate amount of lender commitments regardless of usage ( 0.35 % at June 30, 2022).

Based upon the Company’s credit rating, as of June 30, 2022, the interest rate on the BofA Revolver was 3.75 % per annum.

The weighted average variable interest rate on all amounts outstanding under the BofA Revolver through June 30, 2022 was approximately 2.43 % per annum.

The facility fee is assessed against the aggregate amount of lender commitments regardless of usage ( 0.35 % at September 30, 2022).

Based upon the Company’s credit rating, as of September 30, 2022, the interest rate on the BofA Revolver was 5.11 % per annum.

The weighted average variable interest rate on all amounts outstanding under the BofA Revolver through September 30, 2022 was approximately 1.84 % per annum.

The BofA Credit Agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations with respect to indebtedness, liens, investments, mergers and acquisitions, disposition of assets, changes in business, certain restricted payments, the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates.

2 unchanged sentences

provided, however, that notwithstanding such restriction, the Company is permitted to make dividend distributions based on the Company’s good faith estimate of projected or estimated taxable income or otherwise as necessary to retain the Company’s status as a real estate investment trust, to meet the distribution requirements of Section 857 of the Internal Revenue Code or to eliminate any income or excise taxes to which the Company would otherwise be subject.

The Company was in compliance with the BofA Revolver financial covenants as of June 30, 2022.

The Company was in compliance with the BofA Revolver financial covenants as of September 30, 2022.

The BofA Credit Agreement provides for customary events of default with corresponding grace periods, including failure to pay any principal or interest when due, failure to comply with the provisions of the BofA Credit Agreement, certain cross defaults and a change in control of the Company (as defined in the BofA Credit Agreement).

10 unchanged sentences

On September 30, 2021, the Company repaid a $ 90 million portion and on October 25, 2021, the Company repaid a $ 200 million portion of the BofA Term Loan and incurred a loss on extinguishment of debt of $ 0.7 million related to unamortized deferred financing costs.

As of June 30, 2022, $ 110 million remained outstanding under the BofA Term Loan.

● The BofA Term Loan matures on January 12, 2023.

● The BofA Credit Facility includes an accordion feature that allows for an aggregate amount of up to $ 500 million of additional borrowing capacity applicable to the BofA Term Loan, subject to receipt of lender commitments and satisfaction of certain customary conditions.

The BofA Term Loan bears interest at either (i) a margin over LIBOR depending on the Company’s credit rating ( 1.75 % over LIBOR at June 30, 2022) or (ii) a margin over the base rate depending on the Company’s credit rating ( 0.75 % over the base rate at June 30, 2022).

The interest rate on the BofA Term Loan was variable at June 30, 2022.

On September 6, 2022, the Company prepaid the remaining $ 110 million balance of the BofA Term Loan in full and incurred a loss on extinguishment of debt of $ 0.1 million related to unamortized deferred financing costs.

As of September 30, 2022, there was no balance outstanding under the BofA Term Loan.

● If the Company had not prepaid the BofA Term Loan on September 6, 2022, the BofA Term Loan would have matured by its own terms on January 12, 2023.

The BofA Term Loan bore interest at either (i) a margin over LIBOR depending on the Company’s credit rating ( 1.75 % over LIBOR at the date of repayment on September 6, 2022) or (ii) a margin over the base rate depending on the Company’s credit rating ( 0.75 % over the base rate at the date of repayment on September 6, 2022).

The interest rate on the BofA Term Loan was variable through the date of prepayment on September 6, 2022.

Previously the Company had fixed the base LIBOR interest rate on the BofA Term Loan by entering into interest rate swap transactions.

On July 22, 2016, the Company entered into ISDA Master Agreements with a group of banks that fixed the base LIBOR interest rate on the BofA Term Loan at 1.12 % per annum for the period beginning on September 27, 2017 and ended on September 27, 2021.

Based upon the Company’s credit rating, as of June 30, 2022, the interest rate on the BofA Term Loan was 3.54 % per annum.

The weighted average variable interest rate on all amounts outstanding under the BofA Term Loan through June 30, 2022, was approximately 2.22 % per annum.

BofA Credit Facility General Information

The BofA Credit Facility contains customary affirmative and negative covenants for credit facilities of this type, including limitations with respect to indebtedness, liens, investments, mergers and acquisitions, disposition of assets, changes in business, certain restricted payments, the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates.

The BofA Credit Facility also contains financial covenants that require the Company to maintain a minimum tangible net worth, a maximum leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, a maximum unencumbered leverage ratio, and minimum unsecured interest coverage.

The BofA Credit Facility provides for customary events of default with corresponding grace periods, including failure to pay any principal or interest when due, certain cross defaults and a change in control of the Company (as defined in the BofA Credit Facility).

In the event of a default by the Company, the administrative agent may, and at the request of the requisite number of lenders shall, declare all obligations under the BofA Credit Facility immediately due and payable, terminate the lenders’ commitments to make loans under the BofA Credit Facility, and enforce any and all rights of the lenders or

administrative agent under the BofA Credit Facility and related documents.

For certain events of default related to bankruptcy, insolvency, and receivership, the commitments of lenders will be automatically terminated and all outstanding obligations of the Company will become immediately due and payable.

The Company was in compliance with the BofA Credit Facility financial covenants as of June 30, 2022.

The Company may use the proceeds of the loans under the BofA Credit Facility to finance the acquisition of real properties and for other permitted investments;

to finance investments associated with Sponsored REITs, to refinance or retire indebtedness and for working capital and other general business purposes, in each case to the extent permitted under the BofA Credit Facility.

The weighted average variable interest rate on all amounts outstanding under the BofA Term Loan through the date of repayment on September 6, 2022, was approximately 2.65 % per annum.

On October 24, 2017, the Company entered into a note purchase agreement (the “Note Purchase Agreement”) with the various purchasers named therein (the “Purchasers”) in connection with a private placement of senior unsecured notes.

2 unchanged sentences

The Senior Notes bear interest depending on the Company’s credit rating.

As of June 30, 2022, the Series A Notes bear interest at 4.49 % per annum and the Series B Notes bear interest at 4.76 % per annum.

As of September 30, 2022, the Series A Notes bear interest at 4.49 % per annum and the Series B Notes bear interest at 4.76 % per annum.

The Note Purchase Agreement contains customary financial covenants, including a maximum leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, and a maximum unencumbered leverage ratio.

6 unchanged sentences

In the case of an event of default, the Purchasers may, among other remedies, accelerate the payment of all obligations.

The Company was in compliance with the Senior Notes financial covenants as of June 30, 2022.

The Company was in compliance with the Senior Notes financial covenants as of September 30, 2022.

Financial Instruments:

1 unchanged sentence

On July 22, 2016, the Company entered into interest rate swap transactions that fixed the interest rate for the period beginning on September 27, 2017 and ended on September 27, 2021 on the BofA Term Loan (the “2017 Interest Rate Swap”).

On March 7, 2019, the Company entered into interest rate swap transactions that fixed the interest rate for the period beginning on March 29, 2019 and ended on November 30, 2021 on a $ 100 million portion of the JPM Term Loan (the “2019 JPM Interest Rate Swap”).

On March 7, 2019, the Company entered into interest rate swap transactions that fixed the interest rate for the period beginning on March 29, 2019 and ending on November 30, 2021 on a $ 100 million portion of the JPM Term Loan (the “2019 JPM Interest Rate Swap”).

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”).

6 unchanged sentences

The ineffective portion of a derivative’s change in fair value will be recognized in earnings in the same period in which the hedged interest payments affect earnings, which may increase or decrease reported net income and stockholders’ equity prospectively, depending on future levels of interest rates and other variables affecting the fair values of derivative instruments and hedged items, but will have no effect on cash flows.

The following table summarizes the notional and fair value of the Company’s derivative financial instrument at June 30, 2022 and December 31, 2021.

The following table summarizes the notional and fair value of the Company’s derivative financial instrument at September 30, 2022 and December 31, 2021.

The notional value is an indication of the extent of the Company’s involvement in this instrument at that time, but does not represent exposure to credit, interest rate or market risks.

1 unchanged sentence

(in thousands)

June 30, 2022

September 30, 2022

December 31, 2021

2 unchanged sentences

(2) Classified within Level 2 of the fair value hierarchy.

The 2019 BMO Interest Rate Swap was reported as an asset with a fair value of approximately $ 2.0 million and a liability of approximately $ 5.2 million at June 30, 2022 and December 31, 2021, respectively.

The 2019 BMO Interest Rate Swap was reported as an asset with a fair value of approximately $ 4.3 million and a liability of approximately $ 5.2 million at September 30, 2022 and December 31, 2021, respectively.

The balance is included in other assets:

derivative asset and other liabilities:

derivative liabilities in the consolidated balance sheet at June 30, 2022 and December 31, 2021, respectively.

The gain/(loss) on the Company’s Interest Rate Swaps that was recorded in other comprehensive income (loss) (OCI) and the accompanying consolidated statements of operations as a component of interest expense for the six months ended June 30, 2022 and 2021, respectively, was as follows:

derivative liabilities in the consolidated balance sheet at September 30, 2022 and December 31, 2021, respectively.

The gain/(loss) on the Company’s Interest Rate Swaps that was recorded in other comprehensive income (loss) (OCI) and the accompanying consolidated statements of operations as a component of interest expense for the nine months ended September 30, 2022 and 2021, respectively, was as follows:

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Interest Rate Swaps in Cash Flow Hedging Relationships:

18 unchanged sentences

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 each of June 30, 2022 and 2021.

There were no potential dilutive shares outstanding at each of September 30, 2022 and 2021.

Stockholders’ Equity

As of June 30, 2022, the Company had 103,235,914 shares of common stock outstanding.

As of September 30, 2022, the Company had 103,235,914 shares of common stock outstanding.

The Company declared and paid dividends as follows (in thousands, except per share amounts):

3 unchanged sentences

Second quarter of 2022

Third quarter of 2022

First quarter of 2021

Second quarter of 2021

Third quarter of 2021

Equity-Based Compensation

4 unchanged sentences

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.

On May 20, 2021 and May 17, 2022, 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 year ended December 31, 2021 and the three months ended June 30, 2022, respectively, and is included in general and administrative expenses for such periods.

On May 20, 2021 and May 17, 2022, 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 year ended December 31, 2021 and the nine months ended September 30, 2022, respectively, and is included in general and administrative expenses for such periods.

Such shares were fully vested on the date of issuance.

4 unchanged sentences

Shares granted 2022

Balance June 30, 2022

Balance September 30, 2022

Repurchase of Common Stock

3 unchanged sentences

The Company subsequently repurchased 846,739 shares of common stock during the first quarter of 2022 at an aggregate cost of approximately $ 4.8 million at an average cost of approximately $ 5.72 per share, inclusive of brokerage commissions.

The Company did not repurchase any shares of common stock during the second quarter of 2022.

The Company did not repurchase any shares of common stock during the second and third quarters of 2022.

The excess of the purchase price over the par value of the shares repurchased is applied to reduce additional paid-in capital.

6 unchanged sentences

Repurchase of shares

Balance, June 30, 2022

Balance, September 30, 2022

The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”).

23 unchanged sentences

amount of the NOLs as the realization of any tax benefits from such NOLs is not assured.

The gross amount of NOLs available to the Company was $ 1.1 million and $ 1.1 million as of June 30, 2022 and December 31, 2021, respectively.

The gross amount of NOLs available to the Company was $ 1.7 million and $ 1.1 million as of September 30, 2022 and December 31, 2021, respectively.

Income Tax Expense

2 unchanged sentences

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 $ 105,000 and $ 123,000 for the six months ended June 30, 2022 and 2021, respectively.

The Company recorded a provision for the Revised Texas Franchise Tax of $ 167,000 and $ 174,000 for the nine months ended September 30, 2022 and 2021, respectively.

The income tax expense reflected in the consolidated statements of operations relates primarily to a franchise tax on the Company’s Texas properties.

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

(Dollars in thousands)

10 unchanged sentences

The Company applies ASC 842-Leases to the combined lease and non-lease components.

For the six months ended June 30, 2022 and 2021, the Company recognized the following amounts of income relating to lease payments:

For the nine months ended September 30, 2022 and 2021, the Company recognized the following amounts of income relating to lease payments:

Income relating to lease payments:

Six Months Ended

Nine Months Ended

(in thousands)

June 30, 2022

June 30, 2021

September 30, 2022

September 30, 2021

Income from leases (1)

(1) Amounts recognized from variable lease payments were $ 24,396 and $ 28,974 for the six months ended June 30, 2022 and 2021, respectively.

(1) Amounts recognized from variable lease payments were $ 37,050 and $ 42,298 for the nine months ended September 30, 2022 and 2021, respectively.

Disposition of Properties

In furtherance of the Company’s strategy adopted in 2021 to dispose of certain properties where it believed its valuation objective has been met, the Company sold three office properties located in Atlanta, Georgia on May 27, 2021 for an aggregate sales price of approximately $ 219.5 million, at a net gain of approximately $ 22.7 million.

In furtherance of the Company’s strategy adopted in 2021 to dispose of certain properties where it believed its valuation objective has been met, the Company sold two office properties located in Broomfield, Colorado on August 31, 2022 for an aggregate sales price of $ 102.5 million, at a net gain of approximately $ 24.1 million.

In 2021, the Company sold three office properties located in Atlanta, Georgia on May 27, 2021 for an aggregate sales price of approximately $ 219.5 million, at a net gain of approximately $ 22.7 million.

The Company sold an office property in Dulles, Virginia on June 29, 2021 at a loss of $ 2.1 million.

The Company sold an office property located in Indianapolis, Indiana on August 31, 2021 with a sales price of approximately $ 35 million, at a loss of approximately $ 1.7 million.

The Company sold two office properties located in Chesterfield, Missouri on September 23, 2021 with an aggregate sales price of approximately $ 67 million, at a gain of approximately $ 10.3 million.

The Company used the proceeds of the dispositions principally to repay outstanding indebtedness.

The Company 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 during the three and six months ended June 30, 2021 are summarized below:

The operating results for the properties that the Company disposed of during the three and nine months ended September 30, 2022 and 2021, respectively, are summarized below:

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

(in thousands)

5 unchanged sentences

Subsequent Events

On July 5, 2022, the Company announced that its Board of Directors had adopted a variable quarterly dividend policy, which replaces its previous regular quarterly dividend policy.

Under the new variable quarterly dividend policy, the Company’s Board of Directors will determine quarterly dividends based upon a variety of factors, including the Company’s estimates of its annual taxable income and the amount that the Company is required to distribute annually in the aggregate to enable the Company to continue to qualify as a real estate investment trust for federal income tax purposes.

On July 5, 2022, the Board of Directors of the Company declared a cash distribution of $ 0.01 per share of common stock payable on August 11, 2022 to stockholders of record on July 19, 2022.

On July 6, 2022, the Company entered into a reinstatement of, and amendment to, a Purchase and Sale Agreement with a third-party buyer for the disposition of two properties located in Broomfield, Colorado.

Assuming satisfaction of certain customary conditions to close, the closing of the sale of the properties is expected to take place during the third quarter of 2022 .

On October 7, 2022, the Board of Directors of the Company declared a cash distribution of $ 0.01 per share of common stock payable on November 10, 2022 to stockholders of record on October 21, 2022.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements