What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-02-14 compared with 2022-02-15 · 192 added, 152 removed, 806 unchanged (30% of the section changed)

22 unchanged sentences

Other Information

On February 10, 2022, we entered into a Joinder and Increase Agreement (the “Joinder Agreement”) with BankUnited, N.A., (“New Lender”) and Bank of America, N.A., as administrative agent (the “Administrative Agent”), to supplement our Credit Agreement, dated as of January 10, 2022 (the “Credit Agreement”) with the lenders named therein and the Administrative Agent.

Under the Credit Agreement, we have right under an accordion feature to request an increase in borrowing capacity of the revolving line of credit to an amount not exceeding $750 million in the aggregate, subject to receipt of lender commitments and satisfaction of certain customary conditions.

The Joinder Agreement increases the commitments under the Credit Agreement by $20 million (the “Increased Commitment Amount”) and provides for New Lender to join as a lender under the Credit Agreement with its commitment equal in amount to the Increased Commitment Amount.

The Joinder Agreement is attached to this Annual Report on Form 10-K as Exhibit 10.3.

The foregoing summary of the Joinder Agreement is qualified in its entirety by the complete text of the Joinder Agreement.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

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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 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.

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2002 Stock Incentive Plan of FSP Corp .

First Amendment to Credit Agreement, dated February 10, 2023, among FSP Corp., Bank of America, N.A.

and the other parties thereto.

First Amendment to Second Amended and Restated Credit Agreement, dated February 10, 2023, among FSP Corp., Bank of Montreal and the other parties thereto.

Credit Agreement, dated January 10, 2022, among FSP Corp., Bank of America, N.A.

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Incorporated by reference to Exhibit 3.1 to FSP Corp.’s Quarterly Report on Form 10-Q filed on July 30, 2019 (File No.

Incorporated by reference to Exhibit 3.1 to FSP Corp.’s Current Report on Form 8-K, filed on April 16, 2021 (File No.

Incorporated by reference to Exhibit 10.1 to FSP Corp.’s Annual Report on Form 10-K, filed on March 29, 2002 (File No.

Incorporated by reference to Exhibit 3.1 to FSP Corp.’s Current Report on Form 8-K, filed on February 3, 2023 (File No.

Incorporaterd by reference to Exhibit 10.1 to FSP Corp.’s Annual Report on Form 10-K, filed on February 15, 2022 (File No.

Incorporaterd by reference to Exhibit 10.1 to FSP Corp.’s Annual Report on Form 10-K, filed on March 29, 2002 (File No.

Incorporated by reference to Exhibit 10.1 to FSP Corp.’s Current Report on Form 8-K, filed on February 10, 2023 (File No.

Incorporated by reference to Exhibit 10.2 to FSP Corp.’s Current Report on Form 8-K, filed on February 10, 2023 (File No.

Incorporated by reference to Exhibit 10.1 to FSP Corp.’s Current Report on Form 8-K, filed on January 12, 2022 (File No.

Incorporated by reference to Exhibit 10.3 to FSP Corp.’s Annual Report on Form 10-K, filed on February 15, 2022 (File No.

Incorporated by reference to Exhibit 10.1 to FSP Corp.’s Current Report on Form 8-K, filed on September 27, 2018 (File No.

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February 14, 2023

Kenneth Hoxsie

/s/ Dennis J.

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February 14, 2023

/s/ Milton P.

February 14, 2023

Franklin Street Properties Corp.

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Description of the Matter

The Company’s related party mortgage loan portfolio consisted of a loan totaling $24 million as of December 31, 2021.

The Company determined that no allowance for loan loss was required for this loan.

The Company’s related party mortgage loan portfolio consisted of a loan with a principal balance outstanding of $24 million as of December 31, 2022.

The Company determined that an allowance for loan loss of $4.2 million was required for this loan.

As discussed in Note 3 to the consolidated financial statements, management evaluates whether a loss has been incurred based on expected performance, cash flow and the value of underlying real estate for secured lending.

Auditing the Company’s estimate of the allowance for loan losses for mortgage loans involved a high degree of subjectivity in evaluating management’s assumptions of the valuation of underlying real estate for secured lending.

Auditing the Company’s estimate of the allowance for loan losses for mortgage loans involved a high degree of subjectivity in evaluating management’s assumptions used in the valuation of underlying real estate for secured lending.

How We Addressed the Matter in Our Audit

We tested the design and operating effectiveness of the Company’s controls over the allowance for loan loss process.

This included controls over the expected performance of the loan and the valuation of real estate collateral for secured lending.

This included controls over the valuation of real estate collateral for secured lending.

Our testing of the measurement of the related party mortgage loan receivable included, among other procedures, testing the completeness and accuracy of data used in the valuation of real estate collateral and, with the assistance of our valuation specialists, evaluating management’s assumptions used in the valuation of the underlying real estate.

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Prepaid expenses and other assets

Related party mortgage loan receivable

Other assets:

derivative asset

Related party mortgage loan receivable, less allowance for credit loss of $ 4,237 and $ 0 , respectively

Office computers and furniture, net of accumulated depreciation of $ 1,115 and $ 1,198 , respectively

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Loss on extinguishment of debt

Impairment and loan loss reserve

Gain on sale of properties, net

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(in thousands)

Other comprehensive income (loss):

Other comprehensive income:

Unrealized gain (loss) on derivative financial instruments

Total other comprehensive income (loss)

Comprehensive income (loss)

Comprehensive income

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

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Balance, December 31, 2020

Comprehensive income (loss)

Comprehensive income

Repurchased shares

Shares issued for:

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Balance, December 31, 2021

Comprehensive income (loss)

Comprehensive income

Repurchased shares

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Loss on extinguishment of debt

Impairment and loan loss reserve

Gain on sale of properties, net

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Distributions from non-consolidated REITs

Decrease in allowance for doubtful accounts

and write-off of accounts receivable

Decrease in allowance for doubtful accounts and write-off of accounts receivable

Changes in operating assets and liabilities:

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Investment in related party mortgage loan receivable

Repayment of related party mortgage loan receivable

Proceeds received from sales of properties

Proceeds received from liquidating trust

Net cash provided by (used in) investing activities

Net cash provided by investing activities

Cash flows from financing activities:

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Repayments of bank note payable

Repayment of term loan payable

Repayment of term loans payable

Deferred financing costs

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

The Company also has a non-controlling common stock interest in two corporations organized to operate as real estate investment trusts (“REIT”).

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

As of December 31, 2021, the Company owned and operated a portfolio of real estate consisting of 24 operating properties, two managed Sponsored REITs and held one promissory note secured by a mortgage on real estate owned by a Sponsored REIT.

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

The Company refers to this REIT and similarly structured past REITs collectively as the “Sponsored REIT” or the “Sponsored REITs”, as the context requires.

As of December 31, 2022, the Company owned and operated a portfolio of real estate consisting of 21 operating properties, one managed Sponsored REIT and held one promissory note secured by a mortgage on real estate owned by a Sponsored REIT.

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

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Investments in non-consolidated REITs

As of December 31, 2021, the Company has a non-controlling common stock interest in two Sponsored REITs in which the Company no longer shares in economic benefit or risk.

As of December 31, 2022, the Company has a non-controlling common stock interest in one Sponsored REIT in which the Company no longer shares in economic benefit or risk.

The Company had a non-controlling common stock interest in another Sponsored REIT and a non-controlling preferred stock interest in two additional Sponsored REITs, each of which were liquidated during 2019 or 2018.

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The determination of whether an entity in which we hold a direct or indirect variable interest is a VIE is based on several factors, including whether the entity’s total equity investment at risk upon inception is sufficient to finance the entity’s activities without additional subordinated financial support.

We make judgments regarding the sufficiency of the equity at risk based first on a qualitative analysis, and then a quantitative analysis, if necessary.

judgments regarding the sufficiency of the equity at risk based first on a qualitative analysis, and then a quantitative analysis, if necessary.

We analyze any investments in VIEs to determine if we are the primary beneficiary.

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As of December 31, 2022, our relationship with FSP Monument Circle LLC was considered a VIE for which we are not the primary beneficiary.

Our maximum exposure to losses associated with this VIE is limited to the outstanding Sponsored REIT Loan, the related accrued interest receivable and an exit fee receivable, which were in aggregate approximately $ 24.5 million at December 31, 2021.

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

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

3, Related Party Transactions and Investments in Non-Consolidated Entities.

Our maximum exposure to losses associated with this VIE is limited to the outstanding Sponsored REIT Loan net of the allowance for credit loss, the related accrued interest receivable and an exit fee receivable, which were in aggregate approximately $ 22.1 million and $ 24.5 million at December 31, 2022 and 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 $ 2.3 million and $ 0.5 million at December 31, 2022 and 2021, respectively.

The relationships and investments related to the entity in which we have a variable interest with are summarized in Note 3, Related Party Transactions and Investments in Non-Consolidated Entities.

Real Estate and Depreciation

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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 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.

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.

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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 for the years ended December 31, 2021, 2020 or 2019.

The Company did not recognize any impairment losses for the years ended December 31, 2022, 2021 and 2020.

Acquired Real Estate Leases and Amortization

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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.

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.

(in thousands)

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Tenant security deposits are refunded when tenants vacate, provided that the tenant has not damaged the property.

Cash held in escrow is paid when the related issue is resolved.

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.

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Related Party Mortgage Loan Receivable

Management monitors and evaluates the secured loans compared to the expected performance, cash flow and value of the underlying real estate and has not experienced a loss on these loans to date.

Management monitors and evaluates the secured loans compared to the expected performance, cash flow and value of the underlying real estate.

Concentration of Credit Risks

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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.

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

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The Company recognized the effect of a change in its assessment of whether the collectability of operating lease receivables are probable as an adjustment to lease income rather than bad debt expense.

The reserve was eliminated during 2020 and no changes occurred during 2019 based on such assessment.

The reserve was eliminated during 2020.

Deferred Leasing Commissions

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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.

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.

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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.

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The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur.

The Company is currently assessing the potential impact that the adoption of ASU 2020-04 may have on its consolidated financial statements.

The Company does note anticipate that the adoption of ASU 2020-04 will have a material impact on the consolidated financial statements.

Related Party Transactions and Investments in Non-Consolidated Entities

Investment in Sponsored REITs

The Company held a common stock interest in 2 Sponsored REITs at December 31, 2021, 2020 and 2019.

The Company held a common stock interest in 1 , 2 and 2 Sponsored REITs at December 31, 2022, 2021 and 2020, respectively.

The Company held a non-controlling preferred stock investment in two Sponsored REITs, FSP 303 East Wacker Drive Corp.

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The Company exercised influence over, but did not control these entities, and investments were accounted for using the equity method.

During the year ended December 31, 2019, a property owned by a Sponsored REIT, FSP Energy Tower I Corp.

(“Energy Tower”), was sold and, thereafter, liquidating distributions for its preferred shareholders were declared and issued.

The Company held a mortgage loan and secured revolving line of credit with this entity, which were secured by the property owned by Energy Tower.

The loans with Energy Tower in the aggregate principal amount of $ 51.0 million were repaid by the proceeds of the sale.

Equity in income of investment in non-consolidated REITs:

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Non-consolidated REITs

As of December 31, 2021, the Company has a non-controlling common stock interest in two Sponsored REITs in which the Company no longer shares in economic benefit or risk.

As of December 31, 2022, the Company has a non-controlling common stock interest in one Sponsored REIT 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 cancelable with 30 day notice.

Asset management fee income from non-consolidated entities amounted to approximately $ 0.1 million, $ 0.1 million and $ 0.2 million for the years ended December 31, 2021, 2020 and 2019, respectively.

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

Asset management fee income from non-consolidated entities amounted to approximately $ 28,000 , $ 61,000 and $ 71,000 for the years ended December 31, 2022, 2021 and 2020, respectively.

The Company reviews the need for an allowance under CECL for Sponsored REIT loans at each reporting period.

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The Company applies normal loan review and underwriting procedures (as may be implemented or modified from time to time) in making that judgment.

None of the Sponsored REIT loans have been impaired.

The Company anticipates that each Sponsored REIT Loan will be repaid at maturity or earlier from refinancing, long term financings of the underlying properties, cash flows from the underlying properties or some other capital event.

Each Sponsored REIT Loan is secured by a mortgage on the underlying property and has a term of approximately one to three years .

The Company anticipates that the Sponsored REIT Loan will be repaid through cash flow from property operations or sale of the underlying property, although the actual amount and timing of any repayment is uncertain and will likely depend on prevailing market conditions at the time of any such sale.

The following is a summary of the Sponsored REIT Loan outstanding as of December 31, 2022:

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The Company recognized interest income and fees from the Sponsored REIT Loans of approximately $ 1.8 million, $ 1.6 million and $ 1.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.

The financial instrument was classified within Level 3 of the fair value hierarchy and had a fair value of approximately $ 23.8 million as of December 31, 2021.

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.

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The amended and restated Sponsored REIT Loan qualified as a troubled debt restructuring.

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 December 31, 2021.

On December 6, 2020, the Company entered into a second amendment to the Sponsored REIT Loan which qualified as a troubled debt restructuring.

The amendment extended the maturity date of the loan for two years and increased the interest rate from 7.19 % to 7.51 % .

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 December 31, 2022.

As of December 31, 2021 and 2020, we did not have an allowance for credit losses recorded on our consolidated balance sheet.

We recorded a $ 4.2 million increase in our provision for credit losses during the year ended December 31, 2022.

The change in the allowance for credit losses during the year ended December 31, 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 capitalization and discount rates, 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 Year Ended December 31,

(Dollars in thousands)

Beginning allowance for credit losses

Additional increases to the allowance for credit losses

Ending allowance for credit losses

The following is quantitative information about significant unobservable inputs in our Level 3 measurement of the collateral of the Sponsored REIT Loan measured at fair value on a nonrecurring basis:

Fair Value (1) at

December 31, 2022

Valuation Technique

Unobservable Input

(in thousands)

Sponsored REIT Loan

Discounted Cash Flows

Exit Cap Rate

Discount Rate

(1) Classified within Level 3 of the fair value hierarchy.

(2) Unobservable inputs were weighted based on the fair value of the related instrument.

Bank Note Payable, Term Note Payable and Private Placements

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BMO Term Loan

On September 27, 2018, the Company entered into a Second Amended and Restated Credit Agreement with the lending institutions party thereto and Bank of Montreal (“BMO”), as administrative agent (the “BMO Credit Agreement”).

The BMO Credit Agreement provides for a single, unsecured term loan borrowing in the initial amount of $ 220 million (the “BMO Term Loan”), of which $ 165 million remains fully advanced and outstanding.

On September 27, 2018, the Company entered into a Second Amended and Restated Credit Agreement with the lending institutions party thereto and Bank of Montreal, as administrative agent (the “BMO Credit Agreement”).

Subsequent to December 31, 2022, on February 10, 2023, the BMO Credit Agreement was amended.

See Note 11 in these Consolidated Financial Statements for additional disclosure regarding the amendment.

Unless otherwise indicated, all of the information in this description of the BMO Term Loan is as of December 31, 2022.

The BMO Credit Agreement provides for a single, unsecured term loan borrowing in the initial amount of $ 220 million (the “BMO Term Loan”), of which $ 165 million remained fully advanced and outstanding as of December 31, 2022.

The BMO Term Loan initially consisted of a $ 55 million tranche A term loan and a $ 165 million tranche B term loan.

On June 4, 2021, the Company repaid the tranche A term loan that was scheduled to mature on November 30, 2021, and incurred a loss on extinguishment of debt of $ 0.1 million related to unamortized deferred financing costs.

The repayment was made with a portion of the proceeds from the May 27, 2021 sales of three properties located in Atlanta, Georgia.

The $ 165 million tranche B term loan matures on January 31, 2024.

The BMO Credit Agreement also includes an accordion feature that allows up to $ 100 million of additional loans, subject to receipt of lender commitments and satisfaction of certain customary conditions.

The BMO Term Loan 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 December 31, 2021) 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 December 31, 2021).

As of December 31, 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 December 31, 2022) or (ii) a number of basis points over the base rate depending on the Company’s credit rating ( 65 basis points over the base rate at December 31, 2022).

The margin over LIBOR rate or base rate is determined based on the Company’s credit rating pursuant to the following grid:

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

Agreement, and enforce any and all rights of the lenders or administrative agent under the BMO Credit Agreement and related documents.

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

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

The Company was in compliance with the BMO Term Loan financial covenants as of December 31, 2022.

BofA Credit Facility

On July 21, 2016, the Company entered into a First Amendment (the “BofA First Amendment”), and on October 18, 2017, the Company entered into a Second Amendment (the “BofA Second Amendment”), to the Second Amended and Restated Credit Agreement dated October 29, 2014 among the Company, the lending institutions party thereto and BofA, as administrative agent, L/C Issuer and Swing Line Lender (as amended by the BofA First Amendment and the BofA Second Amendment, the “BofA Credit Facility”) that continued an existing unsecured revolving line of credit (the “Former BofA Revolver”) and an existing term loan (the “BofA Term Loan”).

Effective simultaneously with the closing of the BofA Revolver (as defined in Note 11 to these Consolidated Financial Statements) on January 10, 2022, the Company delivered a notice to BofA terminating the aggregate lender commitments under the Former BofA Revolver in their entirety.

Former BofA Revolver Highlights

● As of December 31, 2021, there were no borrowings under the Former BofA Revolver.

● The Former BofA Revolver was for borrowings, at the Company's election, of up to $ 600 million.

Borrowings made pursuant to the Former BofA Revolver could be revolving loans, swing line loans or letters of credit, the combined sum of which could not exceed $ 600 million outstanding at any time.

As of December 31, 2021, there were no borrowings outstanding under the Former BofA Revolver.

The Former BofA Revolver bore interest at either (i) a margin over LIBOR depending on the Company’s credit rating ( 1.550 % over LIBOR at December 31, 2021) or (ii) a margin over the base rate depending on the Company’s credit rating ( 0.550 % over the base rate at December 31, 2021).

The BofA Credit Facility also obligated the Company to pay an annual facility fee in an amount that is also based on the Company’s credit rating.

The facility fee was assessed against the total amount of the Former BofA Revolver, or $ 600 million ( 0.30 % at December 31, 2021).

The amount of any applicable facility fee, and the margin over LIBOR rate or base rate was determined based on the Company’s credit rating pursuant to the following grid:

BofA Revolver

On January 10, 2022, the Company entered into a Credit Agreement (the “BofA Credit Agreement”) with Bank of America, N.A., as administrative agent, a letter of credit issuer and a lender (“BofA”), and the other lending institutions party thereto, for a new revolving line of credit for borrowings, at the Company’s election, of up to $ 217.5 (the “BofA Revolver”).

On February 10, 2022, the Company increased its BofA Revolver availability by $ 20.0 million to $ 237.5 million as part of the accordion feature that is available to increase borrowing capacity.

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

Subsequent to December 31, 2022, on February 10, 2023, the BofA Credit Agreement was amended.

See Note 11 in these Consolidated Financial Statements for additional disclosure regarding the amendment.

Unless otherwise indicated, all of the information in this description of the BofA Revolver is as of December 31, 2022.

As of December 31, 2022, there were borrowings of $ 48.0 million drawn and outstanding under the BofA Revolver.

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

The Company has the right to request an extension of the maturity date, subject to acceptance by the lenders and satisfaction of certain other customary conditions.

The BofA Revolver includes an accordion feature that allows the Company to request an increase in borrowing capacity to an amount not exceeding $ 750 million in the aggregate, subject to receipt of lender commitments and satisfaction of certain customary conditions.

As of December 31, 2022, borrowings under the BofA Revolver bear interest at a margin over either (i) the daily simple Secured Overnight Financing Rate (“SOFR”), plus an adjustment of 0.11448 % , or (ii) one , three or six month term SOFR, plus a corresponding adjustment of 0.11448 % , 0.26161 % or 0.42826 % , respectively.

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

The margin over SOFR or, if applicable, the base rate varies depending on the Company’s

leverage ratio ( 1.750 % over SOFR and 0.750 % over the base rate at December 31, 2022).

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

The facility fee is assessed against the aggregate amount of lender commitments regardless of usage ( 0.350 % at December 31, 2022).

The actual amount of the facility fee, any letter of credit fees, and the margin over SOFR or the base rate is determined based on the per annum percentages in the following grids:

Leverage Ratio

Daily SOFR Rate Loans, Term SOFR Loans and Letter of Credit Fees

Base Rate Loans

In the event that the Company is assigned an investment grade credit rating, the Company has a one -time right to elect to convert to a different, credit-based pricing grid with the following per annum percentages:

Credit Rating

For purposes of the BofA Credit Facility, base rate means, for any day, a fluctuating rate per annum equal to the highest of:

Daily SOFR Rate Loans, Term SOFR Loans and Letter of Credit Fees

Base Rate Loans

A-/A3 (or higher)

Base rate means, for any day, a fluctuating rate per annum equal to the highest of:

(i) the rate of interest in effect for such day as publicly announced from time to time by the administrative agent as its “prime rate”, (ii) the Federal Funds Rate plus 1/2 of 1% ( 0.50 %), (iii) term SOFR for one month plus 1.00 % and (iv) 1.00 %.

If the base rate is being used because SOFR is not able to be determined, base rate is the greater of clauses (i), (ii) and (iv).

Based upon the Company’s credit rating, as of December 31, 2022, the interest rate on the BofA Revolver was 6.22 % per annum.

The weighted average variable interest rate on all amounts outstanding under the BofA Revolver through December 31, 2022 was approximately 2.52 % per annum.

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

The BofA Credit Agreement also contains financial covenants that require the Company to maintain a minimum tangible net worth, a maximum leverage ratio, a maximum

secured leverage ratio, a minimum fixed charge coverage ratio, a maximum unencumbered leverage ratio and a minimum unsecured interest coverage ratio.

The BofA Credit Agreement also restricts the Company’s ability to make dividend distributions that exceed of 95 % of the Company’s good faith estimate of projected funds from operations for the applicable fiscal year;

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

The Company was in compliance with the BofA Revolver financial covenants as of December 31, 2022.

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

In the event of a default by the Company, BofA, in its capacity as administrative agent, may, and at the request of the requisite number of lenders shall, declare all obligations under the BofA Credit Agreement immediately due and payable and enforce any and all rights of the lenders or BofA under the BofA Credit Agreement and related documents.

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

The Company may use the net proceeds of the BofA Revolver to finance the acquisition of real properties and for other permitted investments;

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

Former BofA Credit Facility

On July 21, 2016, the Company entered into a First Amendment (the “BofA First Amendment”), and on October 18, 2017, the Company entered into a Second Amendment (the “BofA Second Amendment”), to the Second Amended and Restated Credit Agreement dated October 29, 2014 among the Company, the lending institutions party thereto and BofA, as administrative agent, L/C Issuer and Swing Line Lender (as amended by the BofA First Amendment and the BofA Second Amendment, the “Former BofA Credit Facility”) that continued an existing unsecured revolving line of credit (the “Former BofA Revolver”) and an existing term loan (the “Former BofA Term Loan”).

Effective simultaneously with the closing of the BofA Credit Agreement on January 10, 2022, the Company delivered a notice to BofA terminating the aggregate lender commitments under the Former BofA Revolver in their entirety.

For purposes of the Former BofA Credit Facility, base rate meant, for any day, a fluctuating rate per annum equal to the highest of:

(i) the bank’s prime rate for such day, (ii) the Federal Funds Rate for such day, plus 0.50 %, and (iii) the one month LIBOR based rate for such day plus 1.00 %.

As of December 31, 2022, the Company’s credit rating from Moody’s Investors Service was Ba1.

Based upon the Company’s credit rating, as of December 31, 2021, the interest rate on the Former BofA Revolver would have been 1.65 % per annum.

The weighted average interest rate on all amounts outstanding on the Former BofA Revolver during the year ended December 31, 2021, was approximately 1.33 % per annum.

As of December 31, 2020, there were borrowings of $ 3.5 million outstanding under the Former BofA Revolver.

As of December 31, 2021, and during 2022, there were no borrowings under the Former BofA Revolver.

The weighted average interest rate on all amounts outstanding on the Former BofA Revolver during the year ended December 31, 2021 was approximately 1.33 % per annum.

BofA Term Loan Highlights

Former BofA Term Loan Highlights

● The Former BofA Term Loan was repaid in its entirety on September 6, 2022.

● The original principal amount of the BofA Term Loan was $ 400 million.

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

As of December 31, 2021, $ 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 to the Former BofA Revolver and/or the BofA Term Loan, subject to receipt of lender commitments and satisfaction of certain customary condition s.

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 December 31, 2021) or (ii) a margin over the base rate depending on the Company’s credit rating ( 0.750 % over the base rate at December 31, 2021).

The margin over LIBOR rate or base rate is determined based on the Company’s credit rating pursuant to the following grid:

Credit Rating

For purposes of the BofA Credit Facility, base rate means, for any day, a fluctuating rate per annum equal to the highest of:

(i) the bank’s prime rate for such day, (ii) the Federal Funds Rate for such day, plus 0.50 %, and (iii) the one month LIBOR based rate for such day plus 1.00 %.

As of December 31, 2021, the Company’s credit rating from Moody’s Investors Service was Ba1.

The interest rate on the BofA Term Loan was variable at December 31, 2021.

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 December 31, 2021, the interest rate on the BofA Term Loan was 1.84 % per annum.

The weighted average variable interest rate on all amounts outstanding under the BofA Term Loan after the expiration of the interest rate swaps, on September 27, 2021, during the period from September 28 through December 31, 2021, was approximately 1.85 % 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.

We were in compliance with the BofA Credit Facility financial covenants as of December 31, 2021.

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;

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 Former BofA Term Loan and incurred a loss on extinguishment of debt of $ 0.7 million related to unamortized deferred financing costs.

On September 6, 2022, the Company prepaid the remaining $ 110 million balance of the Former 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 December 31, 2022, there was no balance outstanding under the Former BofA Term Loan.

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

The Former 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 Former 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 Former 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 Former BofA Term Loan at 1.12 % per annum for the period beginning on September 27, 2017 and ended on September 27, 2021.

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

Based upon the Company’s credit rating, as of December 31, 2021, the interest rate on the Former BofA Term Loan was 1.84 % per annum.

The weighted average variable interest rate on all amounts outstanding under the Former BofA Term Loan after the expiration of the interest rate swaps, on September 27, 2021, during the period from September 28 through December 31, 2021, was approximately 1.85 % 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.

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The Note Purchase Agreement also contains restrictive covenants that, among other things, restrict the ability of the Company and its subsidiaries to enter into transactions with affiliates, merge, consolidate, create liens, make certain restricted payments, enter into certain agreements or prepay certain indebtedness.

Such financial and restrictive covenants are substantially similar to the corresponding covenants contained in the BofA Credit Facility, the BMO Credit Agreement and the JPM Credit Agreement.

Such financial and restrictive covenants are substantially similar to the corresponding covenants contained in the BofA Credit Agreement and the BMO Credit Agreement.

The Senior Notes financial covenants require, among other things, the maintenance of a fixed charge coverage ratio of at least 1.50 ;

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Derivatives and Hedging

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

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

On February 20, 2019, the Company fixed the interest rate for the period beginning August 26, 2020 and ending January 31, 2024 on the BMO Term Loan (the “2019 BMO Interest Rate Swap”).

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 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 2017 Interest Rate Swap, the 2019 JPM Interest Rate Swap and the 2019 BMO Interest Rate Swap (collectively referred to as the “Interest Rate Swaps”) are described in Note 4.

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As a result of the terminations, approximately $ 1.9 million of the balance held in accumulated other comprehensive income (loss) was reclassified into earnings.

JPM Term Loan and a portion of the BMO Term Loan related to these interest rate swaps was also repaid on June 4, 2021, which is described in Note 4.

The JPM Term Loan and a portion of the BMO Term Loan related to these interest rate swaps was also repaid on June 4, 2021, which is described in Note 4.

The Interest Rate Swaps qualify as cash flow hedges and have been recognized on the consolidated balance sheets at fair value.

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December 31, 2021

2017 Interest Rate Swap

2019 JPM Interest Rate Swap

2019 BMO Interest Rate Swap

(1) The Notional Value decreased to $ 165 million on June 4, 2021.

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

On December 31, 2021, 2019 BMO Interest Rate Swap was reported as a liability with a fair value of approximately $ 5.2 million and are included in other liabilities:

derivative liabilities in the consolidated balance sheet at December 31, 2021.

The 2019 BMO Interest Rate Swap was reported as an asset with a fair value of approximately $ 4.4 million and a liability of approximately $ 5.2 million at December 31, 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 December 31, 2022 and December 31, 2021, respectively.

The gain/(loss) on the Company’s Interest Rate Swaps that was recorded in OCI and the accompanying consolidated statements of income as a component of interest expense for the years ended December 31, 2022, 2021 and 2020, respectively, was as follows:

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Amounts of gain (loss) recognized in OCI

Amounts of previously recorded gain/(loss) reclassified from OCI into Interest Expense

Amounts of previously recorded loss reclassified from OCI into Interest Expense

Total amount of Interest Expense presented in the consolidated statements of operations

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As a result, the Company does not anticipate that any counterparty will fail to meet its obligations.

However, there can

be no assurance that the Company will be able to adequately protect against the foregoing risks or that it will ultimately realize an economic benefit that exceeds the related amounts incurred in connection with engaging in such hedging strategies.

However, there can be no assurance that the Company will be able to adequately protect against the foregoing risks or that it will ultimately realize an economic benefit that exceeds the related amounts incurred in connection with engaging in such hedging strategies.

The fair value of the Company’s derivative instruments are determined using the net discounted cash flows of the expected cash flows of the derivative based on the market based interest rate curve and are adjusted to reflect credit or nonperformance risk.

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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 December 10, 2019, June 4, 2020 and May 20, 2021, the Company granted shares under the Plan to non-employee directors at a compensation cost of approximately $ 337,000 at each grant date, which is included in general and administrative expenses in the consolidated statements of income.

Such shares were fully vested on the date of issuance and are included in the table below.

On May 17,2022, May 20, 2021 and June 4, 2020, the Company granted shares under the Plan to non-employee directors at a compensation cost related to such grants indicated in the table below, which was recognized during the years ended December 31, 2022, 2021 and 2020, respectively, and is included in general and administrative expenses in the consolidated statements of income.

Such shares were fully vested on the date of issuance.

Shares Available

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The repurchase authorization may be suspended or discontinued at any time.

The Company subsequently repurchased 3,396,243 shares of common stock during the third and fourth quarter of 2021 at an aggregate cost of approximately $ 18.2 million at an average cost of approximately $ 5.37 per share, inclusive of brokerage commissions.

Company repurchased 3,396,243 shares of common stock during the third and fourth quarter of 2021 at an aggregate cost of approximately $ 18.2 million and at an average cost of approximately $ 5.37 per share, inclusive of brokerage commissions.

The Company repurchased 846,739 shares of common stock during the first quarter of 2022 at an aggregate cost of approximately $ 4.8 million and 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 remainder of 2022.

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

The Company did not effect any repurchases during 2020.

A summary of the repurchase of common stock by the Company is shown in the following table:

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Balance, December 31, 2021

Repurchase of shares

Balance, December 31, 2022

Federal Income Tax Reporting

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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 $ 4.8 million and $ 4.6 million as of each of December 31, 2021 and 2020, respectively.

The TRSs have gross amounts of net operating losses (“NOLs”) available to those taxable corporations of $ 4.9 million and $ 4.8 million as of December 31, 2022 and 2021, respectively.

The NOLs created prior to 2018 will expire between 2030 and 2047 and the NOLs generated after 2017 will not expire.

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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 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.

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 $ 0.1 million of NOLs expired in 2021.

The Company is expecting to use approximately $ 11.8 million of NOLs in 2021 to offset federal net taxable capital gains resulting from the sale of properties in 2021, therefore approximately $ 11.8 million of valuation allowances were reversed in 2021.

The Company used approximately $ 11.1 million of NOLs in 2021 to offset federal net taxable capital gains resulting from the sale of properties in 2021, therefore approximately $ 11.1 million of valuation allowances were reversed in 2021.

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 $ 1.1 million and $ 13.0 million as of each of December 31, 2021 and 2020, respectively with full valuation allowances.

The gross amount of NOLs available to the Company was approximately $ 1.7 million and $ 1.7 million as of December 31, 2022 and 2021, respectively with full valuation allowances.

Income Tax Expense

The income tax expense reflected in the consolidated statements of income relates primiarly 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.

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.

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Return of capital

(1) The 2019 Ordinary income amount includes a qualified distribution, which is a subset of, and included in, the ordinary income amount and is $ 0.009 per share or 2.52 % of total distributions.

Leases as a Lessee:

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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, 2022 to compute the lease liability.

The incremental borrowing rate is the rate equal to the closest borrowing under the Former BofA Revolver at the time of the Company’s adoption of ASU 2016-02.

The incremental borrowing rate is the rate equal to the closest borrowing under the BofA Revolver at the time of the Company’s adoption of ASU 2016-02.

(in thousands)

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

A minority of the Company’s leases are subject to annual changes in the Consumer Price Index (“CPI”).

Although increases in the CPI are not estimated as part of the Company’s measurement of straight-line rent revenue, to the extent

that the actual CPI is greater or less than the CPI at lease commencement, there could be changes to realized income or loss.

For the year ended December 31, 2022, 2021 and 2020, the Company recognized the following amounts of income relating to lease payments:

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In 2021, the Company determined that further debt reduction would provide greater financial flexibility and potentially increase shareholder value.

Accordingly, the Company adopted a strategy to dispose of certain properties in 2021 where it believes valuation potential has been reached.

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 $ 22.8 million.

The Company sold an office property in Dulles, Virginia on June 29, 2021 for a sales price of approximately $ 17.3 million, at a loss of $ 2.1 million.

Accordingly, the Company adopted a strategy to dispose of certain properties where it believes valuation potential has been reached.

In 2022, 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 gain of approximately $ 24.1 million.

The Company sold an office property located in Evanston, Illinois on December 28, 2022 for a sales price of $ 27.8 million, at a gain of approximately $ 3.9 million.

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

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 $ 22.8 million.

The Company also sold an office property in Dulles, Virginia on June 29, 2021 for a sales price of approximately $ 17.3 million, at a loss of $ 2.1 million.

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

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

The Company sold two office properties located in

Chesterfield, Missouri on September 23, 2021 for an aggregate sales price of approximately $ 67 million, at a gain of approximately $ 10.3 million.

The Company sold an office property in Atlanta, Georgia on October 22, 2021, for a sales price of approximately $ 223.9 million, at a gain of approximately $ 86.8 million.

The Company sold two office properties located in Chantilly, Virginia on November 16, 2021 for an aggregate sales price of $ 40 million, at a loss of $ 2.9 million.

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

The Company sold an office property located in Durham, North Carolina on December 23, 2020 for a sales price of approximately $ 89.7 million, at a gain of approximately $ 41.9 million.

In 2020, the Company sold an office property located in Durham, North Carolina on December 23, 2020 for a sales price of approximately $ 89.7 million, at a gain of approximately $ 41.9 million.

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.

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Subsequent Events

On January 10, 2022, the Company entered into a credit agreement for a new revolving line of credit for borrowings, at the Company’s election, of up to $ 217.5 million (the “BofA Revolver”), which may be borrowed, repaid and reborrowed from time to time until the maturity date on January 12, 2024.

The Company has the right to request an extension of the maturity date, subject to acceptance by the lenders and satisfaction of certain other customary conditions.

Effective simultaneously with the closing of the BofA Revolver on January 10, 2022, the Company terminated the Former BofA Revolver.

The Former BofA Revolver would have matured by its own terms on January 12, 2022.

On January 12, 2022, the Company paid a special cash distribution of $ 0.32 per share of common stock, which was declared on December 3, 2021 for shareholders of record on December 31, 2021.

As of January 1, 2023, the Company will be consolidating FSP Monument Circle LLC.

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, which triggers consolidation accounting rules as the Company now controls the entity.

On January 4, 2023, the Company entered into a purchase and sale agreement for the potential disposition of a property located in Elk Grove Village, Illinois to a third party.

The transaction is subject to customary closing conditions and is expected to close on or about February 24, 2023.

On January 13, 2023, the Board of Directors of the Company declared a cash distribution of $ 0.01 per share of common stock payable on February 16, 2023 to stockholders of record on January 27, 2023.

On February 10, 2022, the Company increased its BofA Revolver availability by $ 20.0 million to $ 237.5 million as part of the accordion feature that is available to increase borrowing capacity.

On February 8, 2023, the Company terminated all remaining interest rate swaps 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.

On February 10, 2023, the Company entered into a First Amendment (the “BMO First Amendment”) to the BMO Term Loan.

On February 10, 2023, as part of the BMO First Amendment, the Company repaid a $ 40 million portion of the BMO Term Loan, so that $ 125 million remains outstanding.

On or before April 1, 2024, the Company is required to repay an additional $ 25 million of the BMO Term Loan.

The BMO First Amendment, among other items, extended the maturity date of the BMO Term Loan from January 31, 2024 to October 1, 2024, changed the interest rate on the BMO Term Loan from a number of basis points over LIBOR depending on the Company’s credit rating to 300 basis points over SOFR, and made certain changes to conditions and covenants.

On February 10, 2023 the Company entered into a First Amendment (the “BofA First Amendment”) to the BofA Revolver.

The BofA First Amendment, among other items, extended the maturity date of the of the BofA Revolver from January 12, 2024 to October 1, 2024, reduced availability under the BofA Revolver from up to $ 237.50 million to up to $ 150 million effective February 10, 2023, with further reductions to $ 125 million effective October 1, 2023 and to $ 100 million effective April 1, 2024, changed the interest rate on the BofA Revolver from a number of basis points over SOFR depending on the Company’s credit rating to 300 basis points over SOFR, and made certain changes to conditions

and covenants.

As of February 10, 2023, there were borrowings of $ 105 million drawn and outstanding under the BofA Revolver, including a borrowing of $ 40 million used to repay a portion of the BMO Term Loan.

On February 10, 2023, the Company disclosed in a Current Report on Form 8-K that the Board of Directors of the Company had discontinued the previous authorization, made on June 23, 2021, to repurchase up to $ 50 million of the Company’s common stock from time to time in the open market, privately negotiated transactions or other manners as permitted by federal securities laws.

Franklin Street Properties Corp.

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Straight-line rent allowance for doubtful accounts

Allowance for credit losses

FRANKLIN STREET PROPERTIES CORP.

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Historical Cost

(in thousands)

Subsequent to

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Innsbrook, Glenn Allen, VA

380 Interlocken, Bloomfield, CO

Blue Lagoon, Miami, FL

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Liberty Plaza, Addison, TX

390 Interlocken, Broomfield, CO

Park Ten II, Houston, TX

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801 Marquette Ave South, Minneapolis, MN

909 Davis, Evanston, IL

Legacy Tennyson Center, Plano, TX

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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-K

Item 9A. Controls and Procedures