What changed in this filing

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Item 9A. Controls and Procedures

2024-02-26 compared with 2023-02-14 · 413 added, 261 removed, 737 unchanged (48% of the section changed)

22 unchanged sentences

Other Information

Director and Officer Trading Arrangements

None of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the fourth quarter of 2023.

Disclosure Pursuant to Item 1.01 of Form 8-K - Entry into a Material Definitive Agreement

On February 21, 2024, we entered into amendments to each of our existing term loan with Bank of Montreal, as administrative agent, and the other lending institutions party thereto, our existing revolving line of credit with Bank of America, N.A., as administrative agent, and the other lending institutions party thereto and our Series A Notes due December 20, 2024 and Series B Notes due December 20, 2027.

As a result of these amendments, we changed the maturity dates of each to April 1, 2026 and repaid an aggregate of $102 million of such debt, as further described below.

In addition, the amendment to the revolving line of credit converted the revolving loan to a term loan, as also described further below.

BMO Term Loan

On February 21, 2024, we entered into a Second Amendment to Second Amended and Restated Credit Agreement (the “BMO Second Amendment”) with Bank of Montreal, as administrative agent, and the other lending institutions party thereto to amend our existing term loan (as amended by the BMO Second Amendment, the “BMO Term Loan”).

The BMO Second Amendment amended the Second Amended and Restated Credit Agreement dated September 27, 2018 among us and the lending institutions party thereto (the “Original BMO Credit Agreement”), as amended by the First Amendment to Second Amended and Restated Credit Agreement dated February 10, 2023 (the “BMO First Amendment”) to, among other things:

(1) extend the maturity date from October 1, 2024 to April 1, 2026;

(2) change the interest rate from either 300 basis points over SOFR (Secured Overnight Financing Rate) or 200 basis points over the base rate to either 300 basis points over SOFR with a floor on SOFR of 500 basis points or 200 basis points over the base rate with a floor on the base rate of 600 basis points;

(3) provide that, if, as of March 31, 2025, the aggregate principal amount outstanding under the BMO Term Loan, the BofA Term Loan (defined below) and the Senior Notes (defined below) exceeds $200 million, the spread over SOFR or the base rate, as applicable, will permanently increase by 100 basis points, from 300 basis points to 400 basis points in the case of SOFR, and from 200 basis points to 300 basis points in the case of the base rate;

(4) require mandatory prepayments of the BMO Term Loan, the BofA Term Loan (as defined below) and the Senior Notes (as defined below) with net cash proceeds from the disposition of property, assets and equity issuances as follows:

(a) 25.55556% to the BMO Term Loan;

(b) 20.00000% to the BofA Term Loan;

and (d) the remaining 10% to be retained by us;

(5) require that, within 90 days of the February 21, 2024 effective date of the BMO Second Amendment, certain of our subsidiaries guarantee the BMO Term Loan;

(6) require that, within 90 days of the February 21, 2024 effective date of the BMO Second Amendment, we pledge our equity interests in certain of our subsidiaries as collateral for the BMO Term Loan;

(7) reduce our minimum fixed charge coverage ratio from 1.50x to 1.25x;

and (8) reduce our minimum unsecured interest coverage ratio from 1.75x to 1.25x.

We refer to the Original BMO Credit Agreement, as amended by the BMO First Amendment and the BMO Second Amendment, as the BMO Credit Agreement.

The BMO Credit Agreement initially provided for an unsecured term loan borrowing in the amount of $220 million.

The BMO Term Loan initially consisted of a $55 million tranche A term loan, which we repaid on June 4, 2021, and a $165 million tranche B term loan.

As of December 31, 2023, $115 million was outstanding under the tranche B term loan.

On February 21, 2024, as part of the BMO Second Amendment, we repaid an approximately $29.0 million portion of the tranche B term loan so that approximately $86.0 million remains outstanding.

Pursuant to the BMO Second Amendment, the BMO Term Loan bears interest at either (i) 300 basis points over one, three or six month term SOFR, plus a corresponding adjustment of 0.11448%, 0.26161% or 0.42826%, respectively, with a floor on SOFR of 5.00% or (ii) 200 basis points over the base rate with a floor on the base rate of 6.00%.

In addition, effective February 21, 2024 upon entering into the BMO Second Amendment, if, as of March 31, 2025, the aggregate principal amount outstanding under the BMO Term Loan, the BofA Term Loan and the Senior Notes exceeds $200 million, the spread over SOFR or the base rate, as applicable, will permanently increase by 100 basis points from 300 basis points to 400 basis points in the case of SOFR, and from 200 basis points to 300 basis points in the case of the base rate.

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 commercial rate”, (ii) the Federal Funds Rate plus ½ of 1% (0.50%), (iii) term SOFR for one month plus 1.00% and (iv) 6.00%.

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

Certain of the lenders party to the BMO Second Amendment, and their respective affiliates, have performed, and may in the future perform for us and our subsidiaries, various commercial banking, investment banking, underwriting and other financial advisory services, for which they have received, and will receive, customary fees and expenses.

The BMO Second Amendment is attached to this Annual Report on Form 10-K as Exhibit 10.3.

The foregoing summary of the BMO Second Amendment is qualified in its entirety by the complete text of the BMO Second Amendment.

BofA Term Loan

On February 21, 2024, we amended our revolving line of credit (the “BofA Revolver”) (now known as the “BofA Term Loan”) by entering into a Second Amendment to Credit Agreement with Bank of America, N.A., as administrative agent, and the other lending institutions party thereto (the “BofA Second Amendment”).

The BofA Second Amendment amended the Credit Agreement dated January 10, 2022 (the “Original BofA Credit Agreement”), as amended by the First Amendment to Credit Agreement dated February 10, 2023 (the “BofA First Amendment”), to, among other things:

(1) extend the maturity date from October 1, 2024 to April 1, 2026;

(2) convert borrowings from being either revolving loans or letters of credit to a term loan;

(3) change the interest rate from 300 basis points over SOFR (Secured Overnight Financing Rate) to 300 basis points over SOFR with a floor on SOFR of 500 basis points;

(4) provide that, if, as of March 31, 2025, the aggregate principal amount outstanding under the BMO Term Loan, the BofA Term Loan and the Senior Notes exceeds $200 million, the spread over SOFR will permanently increase by 100 basis points from 300 basis points to 400 basis points;

(5) require mandatory prepayments of the BMO Term Loan, the BofA Term Loan and the Senior Notes with net cash proceeds from the disposition of property, assets and equity issuances as follows:

(a) 25.55556% to the BMO Term Loan;

(b) 20.00000% to the BofA Term Loan;

and (d) the remaining 10% to be retained by us;

(6) require that, within 90 days of the February 21, 2024 effective date of the BofA Second Amendment, certain of our subsidiaries guarantee the BofA Term Loan;

(7) require that, within 90 days of the February 21, 2024 effective date of the BofA Second Amendment, we pledge our equity interests in certain of our subsidiaries as collateral for the BofA Term Loan;

(8) reduce our minimum fixed charge coverage ratio from 1.50x to 1.25x;

and (9) reduce our minimum unsecured interest coverage ratio from 1.75x to 1.25x.

We refer to the Original BofA Credit Agreement, as amended by the BofA First Amendment and the BofA Second Amendment, as the BofA Credit Agreement.

As of December 31, 2023, there were borrowings of $90 million drawn and outstanding under the BofA Revolver.

On February 21, 2024, as part of the BofA Second Amendment, we repaid an approximately $22.7 million portion of the BofA Revolver so that approximately $67.3 million remains outstanding under the BofA Term Loan.

Effective February 21, 2024 upon entering into the BofA Second Amendment, interest on the BofA Term Loan was amended to mean 300 basis points over either (i) the daily simple SOFR, plus an adjustment of 0.11448%, or (ii) one, three or six month term SOFR, plus a corresponding adjustment of 0.11448%, 0.26161% or 0.42826%, respectively, with a floor on SOFR of 5.00%.

In addition, effective February 21, 2024 upon entering into the BofA Second Amendment, under certain circumstances, such as if SOFR is not able to be determined, the BofA Term Loan bears interest at 200 basis points over the base rate with a floor on the base rate of 600 basis points.

In addition, effective February 21, 2024 upon entering into the BofA Second Amendment, if, as of March 31, 2025, the aggregate principal amount outstanding under the BMO Term Loan, the BofA Term Loan and the Senior Notes exceeds $200 million, the spread over SOFR will permanently increase by 100 basis points from 300 basis points to 400 basis points in the case of SOFR, and from 200 basis points to 300 basis points in the case of the base rate.

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) 6.00%.

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

Effective February 21, 2024 upon entering into the BofA Second Amendment, we are no longer obligated to pay an annual facility commitment fee on the unused portion of the BofA Revolver at the rate of 0.35% per annum and, if applicable, letter of credit fees.

Certain of the lenders party to the BofA Second Amendment, and their respective affiliates, have performed, and may in the future perform for us and our subsidiaries, various commercial banking, investment banking, underwriting and other financial advisory services, for which they have received, and will receive, customary fees and expenses.

The BofA Second Amendment is attached to this Annual Report on Form 10-K as Exhibit 10.2.

The foregoing summary of the BofA Second Amendment is qualified in its entirety by the complete text of the BofA Second Amendment.

On February 21, 2024, we entered into a First Amendment to Note Purchase Agreement (the “NPA First Amendment”) with the purchasers party thereto.

The NPA First Amendment amended the Note Purchase Agreement dated October 24, 2017 (the “Original Note Purchase Agreement”), to, among other things:

(1) extend the maturity date of the Series A Notes (the “Series A Notes”) from December 20, 2024 to April 1, 2026;

(2) shorten the maturity date of the Series B Notes (the “Series B Notes”) from December 20, 2027 to April 1, 2026;

(3) increase the interest rate applicable to the Series A Notes from 4.49% per annum to 8.00% per annum;

(4) increase the interest rate applicable to the Series B Notes from 4.76% per annum to 8.00% per annum;

(5) provide that, if, as of March 31, 2025, the aggregate principal amount outstanding under the BMO Term Loan, the BofA Term Loan and the Senior Notes exceeds $200 million, the per annum interest rates applicable to the Series A Note and the Series B Notes will permanently increase by 1.00% from 8.00% per annum to 9.00% per annum;

(6) require mandatory prepayments of the BMO Term Loan, the BofA Term Loan and the Senior Notes with net cash proceeds from the disposition of property, assets and equity issuances as follows:

(a) 25.55556% to the BMO Term Loan;

(b) 20.00000% to the BofA Term Loan;

and (d) the remaining 10% to be retained by us;

(7) require that, within 90 days of the February 21, 2024 effective date of the NPA First Amendment, certain of our subsidiaries guarantee the Senior Notes;

(8) require that, within 90 days of the February 21, 2024 effective date of the NPA First Amendment, we pledge our equity interests in certain of our subsidiaries as collateral for the Senior Notes;

and (9) conform all financial covenants and negative covenants in the Note Purchase Agreement with the BofA Credit Agreement and the BMO Credit Agreement.

We refer to the Original Note Purchase Agreement, as amended by the NPA First Amendment, as the Note Purchase Agreement.

On February 21, 2024, as part of the NPA First Amendment, we repaid an approximately $29.2 million portion of the Series A Notes so that approximately $86.8 million of the Series A Notes remains outstanding.

In addition, on

February 21, 2024, as part of the NPA First Amendment, we repaid an approximately $21.2 million portion of the Series B Notes so that approximately $62.8 million of the Series B Notes remains outstanding.

The NPA First Amendment is attached to this Annual Report on Form 10-K as Exhibit 10.4.

The foregoing summary of the NPA First Amendment is qualified in its entirety by the complete text of the NPA First Amendment.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

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2002 Stock Incentive Plan of FSP Corp .

Second Amendment to Credit Agreement, dated February 21, 2024, among FSP Corp., Bank of America, N.A.

and the other parties thereto

Second Amendment to Second Amended and Restated Credit Agreement, dated February 21, 2024, among FSP Corp., Bank of Montreal and the other parties thereto.

First Amendment to Note Purchase Agreement, dated February 21, 2024, among FSP Corp.

and the other parties named therein as purchasers.

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

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Second Amended and Restated Credit Agreement, dated September 27, 2018, among FSP Corp., Bank of Montreal and the other parties thereto.

Second Amended and Restated Credit Agreement, dated October 29, 2014, among FSP Corp., Bank of America, N.A.

and the other parties thereto.

First Amendment to Second Amended and Restated Credit Agreement, dated July 21, 2016, among FSP Corp., Bank of America, N.A.

and the other parties thereto.

Second Amendment to Second Amended and Restated Credit Agreement, dated October 18, 2017, among FSP Corp., Bank of America, N.A., and the other parties thereto.

Amended and Restated Credit Agreement, dated August 2, 2018, among FSP Corp., JPMorgan Chase Bank, N.A.

and the other parties thereto.

Note Purchase Agreement, dated October 24, 2017, among FSP Corp.

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Compensation Recovery Policy.

The following materials from FSP Corp.’s Annual Report on Form 10-K for the year ended December 31, 2023, formatted in iXBRL (inline eXtensible Business Reporting Language):

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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 Annual Report on Form 10-K, filed on February 15, 2022 (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 10.1 to FSP Corp.’s Current Report on Form 8-K, filed on February 10, 2023 (File No.

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Incorporated by reference to Exhibit 10.4 to FSP Corp.’s Current Report on Form 8-K, filed on October 24, 2017 (File No.

Incorporated by reference to Exhibit 10.1 to FSP Corp.’s Current Report on Form 8-K, filed on July 27, 2016 (File No.

Incorporated by reference to Exhibit 10.1 to FSP Corp.’s Current Report on Form 8-K, filed on October 24, 2017 (File No.

Incorporated by reference to Exhibit 10.1 to FSP Corp.’s Current Report on Form 8-K, filed on August 2, 2018 (File No.

Incorporated by reference to Exhibit 10.4 to FSP Corp.’s Current Report on Form 8-K, filed on October 24, 2017 (File No.

Incorporated by reference to Exhibit 10.5 to FSP Corp.’s Annual Report on Form 10-K, filed on February 24, 2006 (File No.

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Consolidated Balance Sheets as of December 31, 2023 and 2022

Consolidated Statements of Income for each of the three years in the period ended December 31, 2022

Consolidated Statements of Operations for each of the three years in the period ended December 31, 2023

Consolidated Statements of Comprehensive Income (Loss) for each of the three years in the period ended December 31, 2023

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of Franklin Street Properties Corp.:

To the Stockholders and the Board of Directors of Franklin Street Properties Corp.:

Opinion on Internal Control Over Financial Reporting

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(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, and the related consolidated statements of income, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022 and the related notes and financial statement schedules listed in the index at Item 15(a)(2) and our report dated February 14, 2023 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedules listed in the index at Item 15(a)(2) and our report dated February 26, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in Item 9A of Franklin Street Properties Corp.’s Annual Report on Form 10-K under the heading Management’s Annual Report on Internal Control Over Financial Reporting.

The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in Management’s Annual Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of Franklin Street Properties Corp.:

To the Stockholders and the Board of Directors of Franklin Street Properties Corp.:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Franklin Street Properties Corp.

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022 and the related notes and financial statement schedules listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

(the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2023 and the related notes and financial statement schedules listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Measurement of related party mortgage loan receivable

Description of the Matter

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 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 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.

For example, we compared the assumptions of expected performance of the underlying real estate to market data, performed a sensitivity analysis to evaluate the assumptions that were most significant to the estimate of value and recalculated management’s estimate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Impairment assessment of real estate assets

Description of the Matter

The Company’s real estate assets, net totaled $1.1 billion as of December 31, 2022.

As described in Note 2 to the consolidated financial statements, the Company reviews its properties to determine if their carrying amounts will be recovered from future operating cash flows if certain indicators of impairment are identified.

Auditing the Company's impairment assessment involved a high degree of subjectivity as estimates underlying the determination of recoverability were based on assumptions affected by expected future market conditions and leasing activity.

The Company’s real estate assets, net totaled $891 million as of December 31, 2023.

Auditing the Company's impairment assessment involved a high degree of subjectivity as estimates underlying the determination of recoverability involve management making significant judgments to derive assumptions affected by expected future market conditions and leasing activity.

Assumptions included in the Company’s recoverability assessment included the rental rates and future occupancy of the Company’s real estate properties.

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We tested the design and operating effectiveness of controls over the Company’s impairment process.

For example, we tested controls over management’s review of important assumptions underlying projections used in the Company’s recoverability assessment.

Our testing of the Company’s impairment assessment included, among other procedures, evaluating the significant assumptions used to estimate future undiscounted cash flows used in the recoverability assessment.

For example, we compared assumptions of future market conditions to current market data and performed a sensitivity analysis to evaluate the assumptions that were most significant to the estimate of undiscounted cash flows and recalculated management’s estimate.

For example, we tested controls over management’s review of significant assumptions underlying projections used in the Company’s recoverability assessment.

Our testing of the Company’s impairment assessment included, among other procedures, evaluating the significant assumptions used to estimate the future undiscounted cash flows used in the recoverability assessment.

For example, we compared future market conditions to current market data, performed a sensitivity analysis to evaluate the impact of certain assumptions on the estimate of undiscounted cash flows and recalculated management’s estimate.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the certain assumptions for certain real estate assets.

/s/ Ernst & Young LLP

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Real estate assets:

Buildings and improvements

Land (amounts related to variable interest entities ("VIEs") of $ 6,416 and $ 0 at December 31, 2023 and December 31, 2022, respectively)

Buildings and improvements (amounts related to VIEs of $ 13,279 and $ 0 at December 31, 2023 and December 31, 2022, respectively)

Fixtures and equipment

Less accumulated depreciation

Real estate assets, net

Acquired real estate leases, less accumulated amortization of $ 20,243 and $ 40,423 , respectively

Cash, cash equivalents and restricted cash

Less accumulated depreciation (amounts related to VIEs of $ 341 and $ 0 at December 31, 2023 and December 31, 2022, respectively)

Real estate assets, net (amounts related to VIEs of $ 19,354 and $ 0 at December 31, 2023 and December 31, 2022, respectively)

Acquired real estate leases, less accumulated amortization of $ 20,413 and $ 20,243 , respectively (amounts related to VIEs of $ 305 and $ 0 , less accumulated amortization of $ 222 and $ 0 at December 31, 2023 and December 31, 2022, respectively)

Asset held for sale

Cash, cash equivalents and restricted cash (amounts related to VIEs of $ 2,167 and $ 0 at December 31, 2023 and December 31, 2022, respectively)

Tenant rent receivables

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Series A & Series B Senior Notes, less unamortized financing costs of $ 329 and $ 494 , respectively

Accounts payable and accrued expenses

Accounts payable and accrued expenses (amounts related to VIEs of $ 590 and $ 0 at December 31, 2023 and December 31, 2022, respectively)

Accrued compensation

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Lease liability

Other liabilities:

derivative liabilities

Acquired unfavorable real estate leases, less accumulated amortization of $ 396 and $ 574 , respectively

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Additional paid-in capital

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Distributions in excess of accumulated earnings

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Franklin Street Properties Corp.

Consolidated Statements of Income

Consolidated Statements of Operations

For the Year Ended

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Loss on extinguishment of debt

Gain on consolidation of Sponsored REIT

Impairment and loan loss reserve

Gain on sale of properties, net

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

Gain (loss) on sale of properties and impairment of assets held for sale, net

Interest income

Income (loss) before taxes

Equity in income of non-consolidated REITs

Net income (loss)

Weighted average number of shares outstanding, basic and diluted

Net income per share , basic and diluted

Net income (loss) per share, basic and diluted

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

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(in thousands)

Other comprehensive income:

Unrealized gain (loss) on derivative financial instruments

Net income (loss)

Other comprehensive income (loss):

Unrealized gain on derivative financial instruments

Reclassification from accumulated other comprehensive income into interest expense

Total other comprehensive income (loss)

Comprehensive income

Comprehensive income (loss)

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, 2022

Comprehensive income

Comprehensive loss

Repurchased shares

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Cash flows from operating activities:

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

Net income (loss)

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

Depreciation and amortization expense

1 unchanged sentence

Shares issued as compensation

Amortization of other comprehensive income into interest expense

Loss on extinguishment of debt

Gain on consolidation of Sponsored REIT

Impairment and loan loss reserve

Gain on sale of properties, net

(Gain) loss on sale of properties and impairment of assets held for sale, net

Equity in income of non-consolidated REITs

Distributions from non-consolidated REITs

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

Changes in operating assets and liabilities:

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Property improvements, fixtures and equipment

Investment in related party mortgage loan receivable

Consolidation of Sponsored REIT

Proceeds received from sales of properties

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Distributions to stockholders

Proceeds received from termination of interest rate swap

Stock repurchases

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Repayments of bank note payable

Repayment of term loans payable

Repayment of term loan payable

Deferred financing costs

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Accrued costs for purchase of real estate assets

Investment in related party mortgage loan receivable converted to real estate assets and acquired real estate leases in conjunction with variable interest entity consolidation

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

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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 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.

The Company may also pursue, on a selective basis, the sale of its properties in order to take advantage of the value creation and demand for its properties, or for geographic or property specific reasons.

The Company also has a non-controlling common stock interest in the corporation that is the sole member of FSP Monument Circle LLC, which corporation was organized to operate as a real estate investment trust (“Monument Circle” or the “Sponsored REIT”).

As of December 31, 2023, the Company owned and operated a portfolio of real estate consisting of 17 operating properties, and the Sponsored REIT, which was consolidated effective January 1, 2023.

The Company may pursue, on a selective basis, the sale of its properties in order to take advantage of the value creation and demand for its properties, for geographic, property specific reasons or for other general corporate purposes.

Significant Accounting Policies

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Actual results could differ from those estimates.

Significant estimates in the consolidated financial statements include the allowance for doubtful accounts, allowance for credit losses, purchase price allocations, impairment considerations, useful lives of fixed assets and the valuation of derivatives.

Investments in non-consolidated REITs

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.

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

Under the equity method of accounting, the Company's cost basis was adjusted by its share of the Sponsored REITs' earnings or losses.

The equity investments in Sponsored REITS were reviewed for impairment each reporting period.

The Company recorded impairment charges when events or circumstances indicated a decline in the fair value below the carrying value of the investment had occurred and such decline was other-than-temporary.

Significant estimates in the consolidated financial statements include the allowance for credit losses, purchase price allocations, impairment considerations and the valuation of derivatives.

Variable Interest Entities (VIEs)

We determine whether an entity is a VIE and, if so, whether it should be consolidated by utilizing judgments and estimates that are inherently subjective.

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

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

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

In evaluating whether we are the primary beneficiary, we evaluate our direct and indirect economic interests in the entity.

The Company determines whether an entity is a VIE and, if so, whether it should be consolidated by utilizing judgments and estimates that are inherently subjective.

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

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

The Company analyzes any investments in VIEs to determine if the Company is the primary beneficiary.

In evaluating whether the Company is the primary beneficiary, the Company evaluates its direct and indirect economic interests in the entity.

Determining which reporting entity, if any, is the primary beneficiary of a VIE is primarily a qualitative approach focused on identifying which reporting entity has both (1) the power to direct the activities of a VIE that most significantly impact such entity’s economic performance and (2) the obligation to absorb losses or the right to receive benefits from such entity that could potentially be significant to such entity.

Performance of that analysis requires the exercise of judgment.

We consider a variety of factors in identifying the entity that holds the power to direct matters that most significantly impact the VIE’s economic performance including, but not limited to, the ability to direct a proposed sale of the property or merger of the company.

In addition, we consider the rights of other investors to participate in those decisions, to replace the manager and to amend the corporate charter.

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

As of 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 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.

The Company considers a variety of factors in identifying the entity that holds the power to direct matters that most significantly impact the VIE’s economic performance including, but not limited to, the ability to direct a proposed sale of the property or merger of the company.

In addition, the Company considers the rights of other investors to participate in those decisions, to replace the manager and to amend the corporate charter.

The Company determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and considers that conclusion upon a reconsideration event.

As of January 1, 2023, the Company’s relationship with the Sponsored REIT was considered a VIE and the Company became the primary beneficiary.

Upon this reconsideration event, the entity is included within the Company’s consolidated financial statements and all intercompany accounts and transactions have been eliminated in consolidation.

A gain on consolidation of approximately $ 0.4 million was recognized in the three months ended March 31, 2023.

Cash and cash equivalents of $ 3 million held by Monument Circle was included in the Company’s cash and cash equivalents upon consolidation and is reflected as “Consolidation of Sponsored REIT” in the consolidated statement of cash flows.

The cash and cash equivalents held by Monument Circle are unable to be utilized for the Company’s operational purposes.

The creditors of Monument Circle’s trade payables do not have any recourse against the Company.

The consolidation value of Monument Circle was allocated to real estate investments and leases, including lease origination costs.

Lease origination costs represent the value associated with acquiring an in-place lease (i.e.

the market cost to execute a similar lease, including leasing commission, legal, vacancy, and other related costs).

The value assigned to building approximates the replacement cost;

the value assigned to land approximates its appraised value;

and the value assigned to leases approximate their fair value.

Other assets and liabilities are recorded at their historical costs, which approximates fair value.

The Company assessed the fair value of the acquired real estate leases based on estimated cash flow projections that utilize appropriate discount rates and available market information.

Such inputs are Level 3 in the fair value hierarchy.

The following table summarizes the estimated fair value of the assets acquired at the date of consolidation, January 1, 2023:

(in thousands)

Real estate assets

Value of acquired real estate leases

The following is quantitative information about significant unobservable inputs in the Company’s Level 3 measurement of the assets acquired in the consolidation of Monument Circle and were measured at fair value on a nonrecurring basis at January 1, 2023:

Fair Value (1) at

January 1, 2023

Valuation Technique

Unobservable Input

(in thousands)

Monument Circle Consolidation

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.

Prior to January 1, 2023, the Company’s relationship with the Sponsored REIT was considered a VIE in which the Company was not the primary beneficiary.

The Company’s maximum exposure to losses associated with this VIE was limited to the principal amount outstanding under the loan from the Company to the Sponsored REIT secured by a mortgage on real estate owned by the Sponsored REIT (the “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 at December 31, 2022.

The accrued interest and exit fee receivables are included in prepaid expenses and other assets in the consolidated balance sheet and were approximately $ 2.3 million at December 31, 2022.

The relationships and investments related to the Sponsored REIT are summarized in Note 3 .

Real Estate and Depreciation

12 unchanged sentences

If indicators of impairment are present, the Company evaluates the carrying value of the property by comparing it to its expected future undiscounted cash flow.

A property’s value is impaired only if management’s estimate of future undiscounted cash flows to be generated by the property over its estimated holding period is less than the carrying value of the property.

If there are different potential outcomes for a property, the Company will take a probability weighted approach to estimating future cash flows.

If the Company determines that impairment has occurred, the affected assets are reduced to their fair value.

The evaluation of anticipated cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results in future periods.

The evaluation of anticipated cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates, capital requirements, estimated holding periods and outcome probabilities that could differ materially from actual results in future periods.

Since cash flows are considered on an undiscounted basis in the analysis that the Company conducts to determine whether an asset has been impaired, the Company’s strategy of holding properties over the long term directly decreases the likelihood of recording an impairment loss.

If the Company’s strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized.

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

The Company did not recognize any impairment losses on any assets classified as held and used for the years ended December 31, 2023, 2022 and 2021.

Acquired Real Estate Leases and Amortization

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Amortization related to costs associated with acquiring an in-place lease is included in depreciation and amortization on the consolidated statements of income.

Amortization related to leases with rents above the market rate is offset against the rental revenue in the consolidated statements of income.

Amortization related to leases with rents above the market rate is offset against

the rental revenue in the consolidated statements of income.

The estimated annual amortization expense for the five years and thereafter following December 31, 2023 is as follows:

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The Company presents the property held for sale on its consolidated balance sheet as “Asset held for sale”.

The Company reports the results of operations of its properties sold or held for sale in its consolidated statements of income through the date of sale.

The Company reports the results of operations of its properties sold or held for sale (that do not represent a strategic shift that has, or will have, a major effect on financial results) in its consolidated statements of income through the date of sale.

Cash and Cash Equivalents

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Total cash, cash equivalents and restricted cash

(1) Includes $ 2,167 at December 31, 2023, pertaining to Monument Circle, which the Company is unable to utilize for its own operational purposes.

Restricted Cash

5 unchanged sentences

Tenant rent receivables are expected to be collected within one year .

The Company provided an allowance for doubtful accounts based on collectability.

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

The Company recognizes the effect of a change in its assessment of whether the collectability of operating lease receivables are probable as an adjustment to lease income.

Related Party Mortgage Loan Receivable

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Financial Instruments

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.

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

Straight-line Rent Receivable

3 unchanged sentences

Straight-line rent receivable, which is the cumulative revenue recognized in excess of amounts billed by the Company, was $ 40.4 million, $ 52.7 million and $ 49.0 million at December 31, 2023, 2022 and 2021, respectively.

Prior to 2020, the Company provided an allowance for doubtful accounts based on collectability.

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.

Deferred Leasing Commissions

13 unchanged sentences

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.

13 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 December 31, 2022, 2021 and 2020.

There were no potential dilutive shares outstanding at

December 31, 2023, 2022 and 2021.

The denominator used for calculating basic and diluted net income per share was 103,357,000 , 103,338,000 and 106,667,000 for the years ended December 31, 2023 , 2022 and 2021 , respectively.

23 unchanged sentences

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability including credit risk, which was not significant to the overall value.

These inputs (See Notes 3 and 5) were considered and applied to the Company’s derivative instruments and Sponsored REIT Loan.

Level 2 inputs were used to value the interest rate swaps and Level 3 inputs were used to value the Sponsored REIT Loan.

These inputs (See Notes 2, 3, 5 and 10) were considered and applied to the Company’s derivative instruments, Sponsored REIT Loan, Sponsored REIT purchase price allocation, and assets held for sale.

Level 2 inputs were used to value the interest rate swaps and Level 3 inputs were used to value the Sponsored REIT Loan, assets acquired in the consolidation of the Sponsored REIT and the valuation of certain assets held for sale.

Subsequent Events

1 unchanged sentence

Recent Accounting Standards

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”).

ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts.

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

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

In October 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2023-06, Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative (“ASU 2023-06”).

ASU 2023-06 adds interim and annual disclosure requirements to GAAP at the request of the Securities and Exchange Commission.

The guidance in ASU 2023-06 is required to be applied prospectively and the GAAP requirements will be effective when the removal of the related SEC disclosure requirements is effective.

If the SEC does not act to remove its related requirement by June 30, 2027, any related FASB amendments will be removed from the Accounting Standards Codification and will not be effective.

The Company does not anticipate that the adoption of ASU 2023-06 will have a material impact on the consolidated financial statements.

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”).

ASU 2023-07 requires public entities to disclose significant segment expense and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually.

The guidance in ASU 2023-07 is applied retrospectively to all periods presented in the financial statements and is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company does not anticipate that the adoption of ASU 2023-07 will have a material impact on the consolidated financial statements.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-09”).

ASU 2023-09 enhances the transparency and decision usefulness of income tax disclosures and disclosures about income taxes paid.

The guidance in ASU 2023-09 should be applied prospectively but may be applied retrospectively for each period presented.

ASU 2023-09 is effective for public entities for fiscal years beginning after December 15, 2024.

The Company does not anticipate that the adoption of ASU 2023-09 will have a material impact on the consolidated financial statements .

Related Party Transactions and Investments in Non-Consolidated Entities

13 unchanged sentences

On September 24, 2018, the property owned by East Wacker was sold at a gain.

On October 6, 2021, the Company received a liquidating distribution of $ 0.4 million, which is included in equity in income of non-consolidated REITs on the consolidated statements of income.

On October 6, 2021, the Company received a liquidating distribution of $ 0.4 million, which is included in equity in income of non-consolidated

REITs on the consolidated statements of income.

The following table includes distributions received from non-consolidated REITs:

2 unchanged sentences

Non-consolidated REITs

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.

At December 31, 2022, the Company held a non-controlling common stock interest in one Sponsored REIT.

Management fees and interest income from loans:

1 unchanged sentence

Asset management fee income from non-consolidated entities amounted to approximately $ 0 , $ 28,000 and $ 61,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

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

The measurement of expected credit losses is based upon historical experiences, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.

The Company has elected to apply the practical expedient for financial assets secured by collateral in instances where the borrower is experiencing financial difficulty and repayment of the Sponsored REIT Loan is expected to be provided substantially through operation or sale of the collateral.

The Company uses the fair value of the collateral at the reporting date and an adjustment to the allowance for expected credit losses is recorded when the amortized cost basis of the financial asset exceeds the fair value of the collateral, less costs to sell.

The Company regularly evaluates the extent and impact of any credit deterioration that could affect performance and the value of the secured property, as well as the financial and operating capability of the borrower.

A property’s operating results and existing cash balances are considered and used to assess whether cash flows from operations are sufficient to cover the current and future operating and debt service requirements.

The Company also evaluates the borrower’s competency in managing and operating the secured property and considers the overall economic environment, real estate sector and geographic sub-market in which the secured property is located.

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

The Company anticipates 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:

(dollars in thousands, except footnotes)

Sponsored REIT

Mortgage loan secured by property

FSP Monument Circle LLC (1)

Indianapolis, IN

(1) 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 Loans of approximately $ 1.8 million, $ 1.6 million and $ 1.5 million for the years ended December 31, 2022, 2021 and 2020, 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.

In addition, the Company agreed to defer all principal and interest payments due under the Sponsored REIT Loan until the maturity date on June 30, 2023.

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.

Prior to the consolidation of Monument Circle on January 1, 2023, the Company held the Sponsored REIT Loan, which was reported in the balance sheet as a related party mortgage loan receivable.

The Company reviewed the need for an allowance under the current expected credit loss model for the Sponsored REIT Loan at each reporting period.

The measurement of expected credit losses was based upon historical experiences, current conditions, and reasonable and supportable forecasts that affected the collectability of the reported amount.

The Company had elected to apply the practical expedient for financial assets secured by collateral in instances where the borrower was experiencing financial difficulty and repayment of the Sponsored REIT Loan was expected to be provided substantially through operation or sale of the collateral.

The Company used the fair value of the collateral at the reporting date and an adjustment to the allowance for expected credit losses was recorded when the amortized cost basis of the financial asset exceeded the fair value of the collateral, less costs to sell.

The Company regularly evaluated the extent and impact of any credit deterioration that could affect performance and the value of the secured property, as well as the financial and operating capability of the borrower.

A property’s operating results and existing cash balances were considered and used to assess whether cash flows from operations were sufficient to cover the current and future operating and debt service requirements.

The Company also evaluated the borrower’s competency in managing and operating the secured property and considered the overall economic environment, real estate sector and geographic sub-market in which the secured property was located.

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

The Company recognized interest income and fees from the Sponsored REIT Loan of approximately $ 0.0 million, $ 1.8 million and $ 1.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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

In addition, the Company agreed to defer all principal and interest payments due under the Sponsored REIT Loan until the maturity date.

As part of its consideration for agreeing to amend and restate the Sponsored REIT Loan, the Company obtained from the stockholders of the parent of Monument Circle the right to vote their shares in favor of any sale of the property owned by Monument Circle any time on or after January 1, 2023.

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 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.

There were no commitments to lend additional funds to the Sponsored REIT.

On June 26, 2023, the Sponsored REIT Loan maturity was extended to September 30, 2023.

On September 26, 2023, the Sponsored REIT Loan maturity was extended to September 30, 2024.

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

The Company recorded a $ 4.2 million increase in its 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 the Company’s 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 Company recorded a $ 4.2 million decrease in its provision for credit losses during the year ended December 31, 2023.

The change in the allowance for credit losses during the year ended December 31, 2023 is due to the consolidation of Monument Circle.

The following table presents a roll-forward of the Company’s allowance for credit losses.

For the Year Ended December 31,

(Dollars in thousands)

(In thousands)

Beginning allowance for credit losses

Additional increases to the allowance for credit losses

Reductions 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:

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 at December 31, 2022:

Fair Value (1) at

19 unchanged sentences

BMO Term Loan

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

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

On February 10, 2023, the Company entered into a First Amendment to the Second Amended and Restated Credit Agreement with the lending institutions party thereto and Bank of Montreal, as administrative agent (the “BMO First Amendment”).

The BMO First Amendment amended the Second Amended and Restated Credit Agreement, dated September 27, 2018, among the Company and the lending institutions party thereto (as amended by the BMO First Amendment, the “BMO Credit Agreement”) to, among other things, extend the maturity date from January 31, 2024 to

October 1, 2024 and change the interest rate from a number of basis points over LIBOR depending on the Company’s credit rating to 300 basis points over SOFR (Secured Overnight Financing Rate).

The BMO Credit Agreement initially provided for an unsecured term loan borrowing in the amount of $ 220 million (the “BMO Term Loan”).

Subsequent to December 31, 2023, on February 21, 2024, the BMO Credit Agreement was further 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.

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:

For purposes of the BMO Term Loan, 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, 2022, the Company’s credit rating from Moody’s Investors Service was Ba1.

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

On August 26, 2013, the Company entered into an ISDA Master Agreement with Bank of Montreal that fixed the base LIBOR interest rate on the BMO Term Loan at 2.32 % per annum, which matured on August 26, 2020.

Unless otherwise indicated, all of the information in this description of the BMO Term Loan is as of December 31, 2023 and does not reflect the terms of the amendment that we entered into on February 21, 2024.

In connection with the BMO First Amendment, the Company repaid a $ 40 million portion of the remaining balance of the BMO Term Loan, so that $ 125 million principal amount remained outstanding.

On August 10, 2023, the Company repaid an additional $ 10 million of this loan, so that $ 115 million principal amount remained outstanding under the BMO Term Loan as of December 31, 2023.

On or before April 1, 2024, the Company is required to repay an additional $ 15 million of the BMO Term Loan.

The remaining balance of the BMO Term Loan matures on October 1, 2024.

Effective February 10, 2023 upon entering into the BMO First Amendment, the BMO Term Loan bears interest at either (i) 300 basis points over one , three or six month term SOFR, plus a corresponding adjustment of 0.11448 %, 0.26161 % or 0.42826 %, respectively, or (ii) 200 basis points over the base rate.

Prior to February 10, 2023, the BMO Term Loan bore 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).

As of December 31, 2023, the interest rate on the BMO Term Loan was 8.47 % per annum.

The weighted average variable interest rate on all amounts outstanding under the BMO Term Loan from February 8, 2023, which is when the Company terminated its outstanding interest rate swaps applicable to the BMO Term Loan as described below, through December 31, 2023 was approximately 8.11 % per annum.

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

On February 20, 2019, 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 December 31, 2022, the effective interest rate on the BMO Term Loan was 4.04 % per annum.

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

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

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

Accordingly, based upon the Company’s credit rating, as of both December 31, 2022 and February 8, 2023, the effective interest rate on the BMO Term Loan was 4.04 % per annum.

On February 8, 2023, the Company terminated all outstanding 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, of which approximately $ 0.1 million related to interest receivable.

The BMO Credit Agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations with respect to indebtedness, liens, investments, mergers and acquisitions, disposition of assets, changes in business, certain restricted payments and repurchases and redemptions of the Company’s common stock;

going concern qualifications to the Company’s financial statements;

and the requirement to have subsidiaries provide a guaranty in the event that they incur recourse indebtedness and transactions with affiliates.

In addition, the BMO Credit Agreement also restricts the Company’s ability to make quarterly dividend distributions that exceed $ 0.01 per share of the Company’s common stock;

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

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

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

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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.

On February 10, 2023, the Company entered into a First Amendment to 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 (the “BofA First Amendment”), for a revolving line of credit for borrowings, at the Company’s election, of up to $ 150 million (the “BofA Revolver”).

The BofA First Amendment amended the Credit Agreement, dated January 10, 2022, among the Company and the lending institutions party thereto (as amended by the BofA First Amendment, the “BofA Credit Agreement”) to, among other things, extend the maturity date from January 12, 2024 to October 1, 2024, reduce availability for borrowings, at the Company’s election, from up to $ 237.5 million to up to $ 150 million, and to change the interest rate from a number of basis points over SOFR depending on the Company’s credit rating to 300 basis points over SOFR.

Subsequent to December 31, 2023, on February 21, 2024, the BofA Credit Agreement was further 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

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.

Unless otherwise indicated, all of the information in this description of the BofA Revolver is as of December 31, 2023 and does not reflect the terms of the amendment that we entered into on February 21, 2024.

Borrowings made under the BofA Revolver may be revolving loans or letters of credit, the combined sum of which may not exceed $ 150 million outstanding at any time.

Effective October 1, 2023, availability under the BofA Revolver was reduced to $ 125 million and, effective April 1, 2024, availability under the BofA Revolver will be further reduced to $ 100 million.

As of December 31, 2023 there were borrowings of $ 90 million drawn and outstanding under the BofA Revolver, which borrowings include $ 40 million that the Company borrowed on February 10, 2023 to repay a portion of the BMO Term Loan.

Borrowings made pursuant to the BofA Revolver may be borrowed, repaid and reborrowed from time to time until the maturity date on October 1, 2024.

Effective February 10, 2023 upon entering into the BofA First Amendment, the BofA Revolver bears interest at 300 basis points over either (i) the daily simple SOFR, plus an adjustment of 0.11448 %, or (ii) one , three or six month term SOFR, plus a corresponding adjustment of 0.11448 %, 0.26161 % or 0.42826 % , respectively.

In addition, under certain circumstances, such as if SOFR was not able to be determined, the BofA Revolver will instead bear interest at 200 basis points over the base rate.

Prior to February 10, 2023, borrowings under the BofA Revolver bore interest at a margin over either (i) the daily simple SOFR, plus an adjustment of 0.11448 %, or (ii) one , three or six month term SOFR, plus a corresponding adjustment of 0.11448 %, 0.26161 % or 0.42826 %, respectively.

Prior to February 10, 2023, the margin over SOFR or, if applicable, the base rate, varied depending on the Company’s leverage ratio ( 1.750 % over SOFR and 0.750 % over the base rate at December 31, 2022).

Effective February 10, 2023 upon entering into the BofA First Amendment, the Company is also obligated to pay an annual facility fee on the unused portion of the BofA Revolver at the rate of 0.350 % per annum and, if applicable, letter of credit fees.

Prior to February 10, 2023, the Company was also obligated to pay an annual facility fee and, if applicable, letter of credit fees in amounts that were also based on the Company’s leverage ratio.

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

As of December 31, 2023, the interest rate on the BofA Revolver was 8.47 % per annum.

The weighted average variable interest rate on all amounts outstanding under the BofA Revolver through December 31, 2023 was approximately 8.05 % per annum.

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;

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, use of proceeds, the amount of cash and cash equivalents that the Company can have on its balance sheet after giving effect to an advance under the BofA Revolver, repurchases and redemptions of the Company’s common stock, going concern qualifications to the Company’s financial statements, and 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 maximum secured recourse 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 quarterly dividend distributions that exceed $ 0.01 per share of the Company’s common stock;

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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.

The Company may use the net proceeds of the BofA Revolver for permitted investments, working capital and other general business purposes, including for building improvements, tenant improvements and leasing commissions, 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.

Effective simultaneously with the closing of the BofA Credit Facility 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:

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● 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.

● The original principal amount of the Former 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 Former BofA Term Loan and incurred a loss on extinguishment of debt of $ 0.7 million related to unamortized deferred financing costs.

1 unchanged sentence

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.

The interest rate on the Former BofA Term Loan was variable through the date of repayment 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.

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

Under the Note Purchase Agreement, the Company agreed to sell to the Purchasers an aggregate principal amount of $ 200,000,000 of senior unsecured notes consisting of (i) Series A Senior Notes due December 20, 2024 in an aggregate principal amount of $ 116 million (the “Series A Notes”) and (ii) Series B Senior Notes due December 20, 2027 in an aggregate principal amount of $ 84 million (the “Series B Notes,” and, together with the Series A Notes, the “Senior Notes”).

Under the Note Purchase Agreement, the Company agreed to sell to the Purchasers an aggregate principal amount of $200 million of senior unsecured notes consisting of (i) Series A Senior Notes due December 20, 2024 in an aggregate principal amount of $ 116 million (the “Series A Notes”) and (ii) Series B Senior Notes due December 20, 2027 in an aggregate principal amount of $ 84 million (the “Series B Notes,” and, together with the Series A Notes, the “Senior Notes”).

On December 20, 2017, the Senior Notes were funded and the proceeds were used to reduce the outstanding balance of the Former BofA Revolver.

Subsequent to December 31, 2023, on February 21, 2024, the Note Purchase Agreement was further 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 Senior Notes is as of December 31, 2023 and does not reflect the terms of the amendment that we entered into on February 21, 2024.

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

As of December 31, 2021, 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 December 31, 2023, the Series A Notes bore 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.

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Derivatives and Hedging

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

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

(the “2019 JPM 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 Former BofA Term Loan (the “2017 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 2019 BMO Interest Rate Swap is described in Note 4.

On February 8, 2023, the Company terminated the 2019 BMO Interest Rate Swap applicable to the BMO Term Loan and, on February 10, 2023, the Company received an aggregate of approximately $ 4.3 million as a result of such terminations, of which approximately $ 0.1 million related to interest receivable.

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.

As of December 31, 2023, there were no derivative instruments.

On June 4, 2021, the Company paid approximately $ 1.2 million to terminate the 2019 JPM Interest Rate Swap that was scheduled to mature on November 30, 2021 and approximately $ 0.6 million to terminate a portion of the 2019 BMO Interest Rate Swap that was scheduled to mature on November 30, 2021.

1 unchanged sentence

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.

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

If a derivative qualifies as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedged asset, liability, or firm commitment through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings.

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

The following table summarizes the notional and fair value of our derivative financial instruments at December 31, 2022.

The notional value is an indication of the extent of our involvement in these instruments at that time, but does not represent exposure to credit, interest rate or market risks.

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

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.

Fair Value (1) at

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(1) 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 $ 4.4 million and a liability of approximately $ 5.2 million at December 31, 2022 and December 31, 2021, respectively.

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

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.

derivative asset in the consolidated balance sheet at December 31, 2022.

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, 2023, 2022 and 2021, respectively, was as follows:

2 unchanged sentences

Interest Rate Swaps in Cash Flow Hedging Relationships:

Amounts of gain (loss) recognized in OCI

Amounts of previously recorded loss reclassified from OCI into Interest Expense

Amounts of gain recognized in OCI

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

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

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The Company estimates that approximately $ 0.4 million of the current balance held in accumulated other comprehensive income will be reclassified into earnings within the next 12 months.

The Company is hedging the exposure to variability in anticipated future interest payments on existing debt.

The BMO Term Loan, BofA Term Loan and JPM Term Loan hedging transactions used derivative instruments that involve certain additional risks such as counterparty credit risk, the enforceability of hedging contracts and the risk that unanticipated and significant changes in interest rates will cause a significant loss of basis in either or both of the contracts.

The Company requires its derivatives contracts to be with counterparties that have investment grade ratings.

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

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

The Company hedged the exposure to variability in anticipated future interest payments on existing debt.

The BMO Term Loan, Former BofA Term Loan and JPM Term Loan hedging transactions used derivative instruments that involved certain additional risks such as counterparty credit risk, the enforceability of hedging contracts and the risk that unanticipated and significant changes in interest rates would cause a significant loss of basis in either or both of the contracts.

The Company required its derivatives contracts to be with counterparties that have investment grade ratings.

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

However, there was no assurance that the Company would be able to adequately protect against the foregoing risks or that it would ultimately realize an economic benefit that exceeded 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 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.

On May 18, 2023, May 17,2022 and May 20, 2021, 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, 2023, 2022 and 2021, 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.

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

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 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 Company did not repurchase any shares of common stock during the remainder of 2022 or in 2023.

On February 10, 2023, the Company announced it had discontinued the previous repurchase authorization made on June 23, 2021.

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

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One such restriction is that the Company generally cannot own more than 10 % of the voting power or value of the securities of any one issuer unless the issuer is itself a REIT or a taxable REIT subsidiary (“TRS”).

In the case of TRSs, the Company’s ownership of securities in all TRSs generally cannot exceed 20 % ( 25 % of taxable years beginning on or before December 31, 2017) of the value of all of the Company’s assets and, when considered together with other non-real estate assets, cannot exceed 25 % of the value of all of the Company’s assets.

real estate assets, cannot exceed 25 % of the value of all of the Company’s assets.

FSP Investments LLC and FSP Protective TRS Corp.

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Net operating losses

Section 382 of the Code restricts a corporation’s ability to use net operating losses (“NOLs”) to offset future taxable income following certain “ownership changes.” Such ownership changes occurred with past mergers and accordingly a portion of the NOLs incurred by the Sponsored REITs available for use by the Company in any particular future taxable year will be limited.

Section 382 of the Code restricts a corporation’s ability to use net operating losses (“NOLs”) to offset future taxable income following certain “ownership changes.” Such ownership changes occurred with past mergers and accordingly a portion of the NOLs incurred by the Company’s prior sponsored REITs available for use by the Company in any particular future taxable year will be limited.

To the extent that the Company does not utilize the full amount of the annual NOLs limit, the unused amount may be carried forward to offset taxable income in future years.

NOLs expire 20 years after the year in which they arise, and the last of the Company’s NOLs will expire in 2027.

Approximately $ 0.1 million of NOLs expired in 2021.

Approximately $ 0.7 million of NOLs expired in 2023 and approximately $ 0.1 million of NOLs expired 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.

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As of December 31, 2023, the Company’s right-of-use asset was $ 0.3 million, which is included in prepaid and other assets on the consolidated balance sheet as of December 31, 2023.

The Company has an option to extend the terms of its office space lease with one 5-year extension option.

As of December 31, 2022, the exercise of the extension option was not reasonably certain.

Therefore, the extension option is not recognized as part of the Company’s right-of-use asset and lease liability.

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, 2023 to compute the lease liability.

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

For the Year Ended December 31,

(in thousands)

December 31, 2022

December 31, 2021

December 31, 2020

Operating lease cost

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

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

For the years ended December 31, 2023, 2022 and 2021, the Company recognized the following amounts of income relating to lease payments:

Income relating to lease payments:

For the Year Ended December 31,

(in thousands)

December 31, 2022

December 31, 2021

December 31, 2020

Income from leases (1)

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2029 and thereafter

(1) Amounts recognized from variable lease payments were $ 49,730 , $ 54,825 and $ 61,310 for the years ended December 31, 2022, 2021 and 2020, respectively.

(1) Includes amounts recognized from variable lease payments of $ 42,311 , $ 49,730 and $ 54,825 for the years ended December 31, 2023, 2022 and 2021, respectively.

Retirement Plan

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

In 2023, the Company sold one office property located in Elk Grove, Illinois on March 10, 2023, for a sales price of $ 29.1 million, at a gain of approximately $ 8.4 million.

The Company used the proceeds of the disposition principally to repay a portion of outstanding indebtedness.

The Company sold one office property located in Charlotte, North Carolina on August 9, 2023 for a sales price of $ 9.2 million, at a loss of $ 0.8 million.

During the three months ended September 30, 2023, the Company recorded a gain on sale of $ 53,000 as a result of conveying approximately 7,826 square feet of land at the Company’s Addison, Texas property to the Town of Addison as part of a road revitalization project.

During the three months ended September 30, 2023, the Company reclassified $ 96.4 million of its office properties in Miami, Florida and Atlanta, Georgia as assets held for sale as of September 30, 2023.

The Company recorded these properties at the fair value less cost to sell, which was less than the carrying value and resulted in an impairment of $ 39.7 million in the three months ended September 30, 2023.

The reclassification was a non-cash investing activity on the statement of cash flows.

The Company estimated the fair value of these properties, less estimated costs to sell, using the offers to purchase the properties made by third parties (Level 3 inputs, as there is no active market).

During the three months ended September 30, 2023, the Company entered into an agreement to sell a property in Plano, Texas for a gross sales price of approximately $ 48.0 million at an expected gain of $ 10.6 million.

The Company reclassified $ 36.2 million of this office property as an asset held for sale as of September 30, 2023.

The reclassification was a non-cash investing activity on the statement of cash flows.

On October 26, 2023, the Company completed the sale of the property located in Plano, Texas for a sales price of $ 48.0 million at a gain of approximately $ 10.6 million.

On December 6, 2023, the Company sold another of the assets held for sale, an office property located in Miami, Florida for a sales price of $ 68.0 million at a loss of approximately $ 18.9 million.

The asset held for sale located in Atlanta, Georgia, was expected to sell for a sales price of $ 40.0 million at a loss of approximately $ 20.5 million, which was recorded as an impairment as of September 30, 2023, however on November 15, 2023, the Company received notice from the buyer indicating that the buyer was terminating the transaction and directing the deposit and interest be disbursed to the Company.

At December 31, 2023, the office property remained classified on the consolidated balance sheet as an asset held for sale in the amount of $ 39.0 million and was comprised of $ 52.2 million of real estate assets, net of accumulated depreciation, $ 4.4 million of straight-line rents receivable, and $ 2.9 million of deferred leasing commissions, net of accumulated amortization.

The Company expects the property will be sold within the next twelve months.

During the three months ended September 30, 2023, the Company entered into a purchase and sale agreement, which was subsequently amended, to sell a property located in Richardson, Texas for a sales price of $ 35.0 million.

During the three months ended December 31, 2023, the Company recorded this property at the fair value less cost to sell, which was less than the carrying value and resulted in an impairment of $ 2.1 million.

The Company reclassified $ 34.4 million of this office property as an asset held for sale, which comprised of $ 31.1 million in real estate assets, net of accumulated depreciation, $ 3.4 million in straight-line rents receivable, and $ 2.0 million in deferred leasing commissions, net of accumulated amortization.

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.

4 unchanged sentences

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.

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.

The operating results for the properties that the Company disposed of are summarized below:

For the Years Ended

The Company concluded the dispositions did not represent a strategic shift and reports the results of operations of its properties in its consolidated statements of operations, which includes rental income, rental operating expenses, real estate taxes and insurance and depreciation and amortization.

The operating results for the properties that the Company disposed of or classified as assets held for sale are summarized below:

Year ended December 31,

(in thousands)

3 unchanged sentences

Depreciation and amortization

Income from dispositions

Income from dispositions and assets held for sale

Subsequent Events

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 12, 2024, the Board of Directors of the Company declared a cash distribution of $ 0.01 per share of common stock payable on February 15, 2024 to stockholders of record on January 26, 2024.

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.

On January 26, 2024, the Company sold a property located in Richardson, Texas for $ 35 million at a loss of approximately $ 2.1 million, which was recorded as an impairment as of December 31, 2023.

On February 21, 2024, the Company amended the BofA Revolver (now known as the “BofA Term Loan”) by entering into a Second Amendment to Credit Agreement with the lending institutions party thereto (the “BofA Second Amendment”).

(1) extend the maturity date from October 1, 2024 to April 1, 2026;

(2) convert borrowings from being either revolving loans or letters of credit to a term loan;

(3) change the interest rate from 300 basis points over SOFR (Secured Overnight Financing Rate) to 300 basis points over SOFR with a floor on SOFR of 500 basis points;

(4) provide that, if, as of March 31, 2025, the aggregate principal amount outstanding under the BMO Term Loan, the BofA Term Loan and the Senior Notes exceeds $ 200 million, the spread over SOFR will permanently increase by 100 basis points from 300 basis points to 400 basis points;

(5) require mandatory prepayments of the BMO Term Loan, the BofA Term Loan and the Senior Notes with net cash proceeds from the disposition of property, assets and equity issuances as follows:

(a) 25.55556 % to the BMO Term Loan;

(b) 20.00000 % to the BofA Term Loan;

and (d) the remaining 10 % to be retained by the Company;

(6) require that, within 90 days of the February 21, 2024 effective date of the BofA Second Amendment, certain of the Company’s subsidiaries guarantee the BofA Term Loan;

(7) require that, within 90 days of the February 21, 2024 effective date of the BofA Second Amendment, the Company pledge its equity interests in certain of the Company’s subsidiaries as collateral for the BofA Term Loan;

(8) reduce the Company’s minimum fixed charge coverage ratio from 1.50 x to 1.25 x;

and (9) reduce the Company’s minimum unsecured interest coverage ratio from 1.75 x to 1.25 x.

On February 21, 2024, as part of the BofA Second Amendment, the Company repaid an approximately $ 22.7 million portion of the BofA Revolver so that approximately $ 67.3 million remains outstanding under the BofA Term Loan.

On February 21, 2024, the Company amended the BMO Term Loan by entering into a Second Amendment to Second Amended and Restated Credit Agreement with Bank of Montreal and the other lending institutions party thereto (the “BMO Second Amendment”).

The BMO Second Amendment amended the Second Amended and Restated Credit Agreement dated September 27, 2018 (the “Original BMO Credit Agreement”), as amended by the First Amendment to Second Amended and Restated Credit Agreement dated February 10, 2023 (the “BMO First Amendment”), to, among other things:

(1) extend the maturity date from October 1, 2024 to April 1, 2026;

(2) change the interest rate from either 300 basis points over SOFR or 200 basis points over the base rate to either 300 basis points over SOFR with a floor on SOFR of 500 basis points or 200 basis points over the base rate with a floor on the base rate of 600 basis points;

provide that, if, as of March 31, 2025, the aggregate principal amount outstanding under the BMO Term Loan, the BofA Term Loan and the Senior Notes exceeds $ 200 million, the spread over SOFR or the base rate, as applicable, will permanently increase by 100 basis points from 300 basis points to 400 basis points in the case of SOFR, and from 200 basis points to 300 basis points in the case of the base rate;

(4) require mandatory prepayments of the BMO Term Loan, the BofA Term Loan and the Senior Notes with net cash proceeds from the disposition of property, assets and equity issuances as follows:

(a) 25.55556 % to the BMO Term Loan;

(b) 20.00000 % to the BofA Term Loan;

and (d) the remaining 10 % to be retained by the Company;

(5) require that, within 90 days of the February 21, 2024 effective date of the BMO Second Amendment, certain of the Company’s subsidiaries guarantee the BMO Term Loan;

(6) require that, within 90 days of the February 21, 2024 effective date of the BMO Second Amendment, the Company pledge its equity interests in certain of the Company’s subsidiaries as collateral for the BMO Term Loan;

(7) reduce the Company’s minimum fixed charge coverage ratio from 1.50 x to 1.25 x;

and (8) reduce the Company’s minimum unsecured interest coverage ratio from 1.75 x to 1.25 x.

On February 21, 2024, as part of the BMO Second Amendment, the Company repaid an approximately $ 29.0 million portion of the BMO Term Loan so that approximately $ 86.0 million remains outstanding.

On February 21, 2024, the Company amended the Senior Notes by entering into a First Amendment to Note Purchase Agreement (the “NPA First Amendment”) with the purchasers party thereto.

The NPA First Amendment amended the Note Purchase Agreement dated October 24, 2017 (the “Original Note Purchase Agreement”) to, among other things:

(1) extend the maturity date of the Series A Notes from December 20, 2024 to April 1, 2026;

(2) shorten the maturity date of the Series B Notes from December 20, 2027 to April 1, 2026;

(3) increase the interest rate applicable to the Series A Notes from 4.49 % per annum to 8.00 % per annum;

(4) increase the interest rate applicable to the Series B Notes from 4.76 % per annum to 8.00 % per annum;

(5) provide that, if, as of March 31, 2025, the aggregate principal amount outstanding under the BMO Term Loan, the BofA Term Loan and the Senior Notes exceeds $ 200 million, the per annum interest rates applicable to the Series A Note and the Series B Notes will permanently increase by 1.00 % from 8.00 % per annum to 9.00 % per annum;

(6) require mandatory prepayments of the BMO Term Loan, the BofA Term Loan and the Senior Notes with net cash proceeds from the disposition of property, assets and equity issuances as follows:

(a) 25.55556 % to the BMO Term Loan;

(b) 20.00000 % to the BofA Term Loan;

and (d) the remaining 10 % to be retained by the Company;

(7) require that, within 90 days of the February 21, 2024 effective date of the NPA First Amendment, certain of the Company’s subsidiaries guarantee the Senior Notes;

(8) require that, within 90 days of the February 21, 2024 effective date of the NPA First Amendment, the Company pledge its equity interests in certain of the Company’s subsidiaries as collateral for the Senior Notes;

and (9) conform all financial covenants and negative covenants in the Note Purchase Agreement with the BofA Credit Agreement and the BMO Credit Agreement.

On February 21, 2024, as part of the NPA First Amendment, the Company repaid an approximately $ 29.2 million portion of the Series A Notes so that approximately $ 86.8 million of the Series A Notes remains outstanding.

In addition, on February 21, 2024, as part of the NPA First Amendment, the Company repaid an approximately $ 21.2 million portion of the Series B Notes so that approximately $ 62.8 million of the Series B Notes remains outstanding.

Franklin Street Properties Corp.

3 unchanged sentences

Allowance for doubtful accounts

Straight-line rent allowance for doubtful accounts

Allowance for credit losses

8 unchanged sentences

Commercial Properties:

Forest Park, Charlotte, NC

Northwest Point, Elk Grove Village, IL

Park Ten, Houston, TX

Addison, Addison, TX

Collins, Richardson, TX

Greenwood, Englewood, CO

Innsbrook, Glenn Allen, VA

Blue Lagoon, Miami, FL

Eldridge Green, Houston, TX

4 unchanged sentences

Legacy Tennyson Center, Plano, TX

One Legacy Circle, Plano, TX

Westchase I & II, Houston, TX

2 unchanged sentences

Plaza Seven, Minneapolis, MN

Pershing Plaza, Atlanta, GA

600 17th Street, Denver, CO

Monument Circle, Indianapolis, IN

Balance — Real Estate

6 unchanged sentences

Balance, beginning of year

Assets held for sale

Balance, end of year - Real Estate

1 unchanged sentence

Balance, beginning of year

Assets held for sale

Balance, end of year - Accumulated Depreciation

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