What changed in this filing

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Item 1. Financial Statements

2024-10-29 compared with 2024-07-30 · 109 added, 91 removed, 422 unchanged (32% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

September 30,

(in thousands, except share and par value amounts)

Real estate assets:

Land (amounts related to variable interest entities ("VIEs") of $ 6,416 and $ 6,416 at June 30, 2024 and December 31, 2023, respectively)

Buildings and improvements (amounts related to VIEs of $ 13,279 and $ 13,279 at June 30, 2024 and December 31, 2023, respectively)

Land (amounts related to variable interest entities ("VIEs") of $ 6,416 and $ 6,416 at September 30, 2024 and December 31, 2023, respectively)

Buildings and improvements (amounts related to VIEs of $ 13,279 and $ 13,279 at September 30, 2024 and December 31, 2023, respectively)

Fixtures and equipment

Less accumulated depreciation (amounts related to VIEs of $ 511 and $ 341 at June 30, 2024 and December 31, 2023, respectively)

Real estate assets, net (amounts related to VIEs of $ 19,184 and $ 19,354 at June 30, 2024 and December 31, 2023, respectively)

Acquired real estate leases, less accumulated amortization of $ 20,505 and $ 20,413 , respectively (amounts related to VIEs of $ 67 and $ 305 , less accumulated amortization of $ 26 and $ 222 at June 30, 2024 and December 31, 2023, respectively)

Less accumulated depreciation (amounts related to VIEs of $ 597 and $ 341 at September 30, 2024 and December 31, 2023, respectively)

Real estate assets, net (amounts related to VIEs of $ 19,098 and $ 19,354 at September 30, 2024 and December 31, 2023, respectively)

Acquired real estate leases, less accumulated amortization of $ 16,465 and $ 20,413 , respectively (amounts related to VIEs of $ 67 and $ 305 , less accumulated amortization of $ 30 and $ 222 at September 30, 2024 and December 31, 2023, respectively)

Assets held for sale

Cash, cash equivalents and restricted cash (amounts related to VIEs of $ 1,745 and $ 2,167 at June 30, 2024 and December 31, 2023, respectively)

Cash, cash equivalents and restricted cash (amounts related to VIEs of $ 1,608 and $ 2,167 at September 30, 2024 and December 31, 2023, respectively)

Tenant rent receivables

7 unchanged sentences

Series A & Series B Senior Notes, less unamortized financing costs of $ 1,585 and $ 329 , respectively

Accounts payable and accrued expenses (amounts related to VIEs of $ 540 and $ 590 at June 30, 2024 and December 31, 2023, respectively)

Accounts payable and accrued expenses (amounts related to VIEs of $ 643 and $ 590 at September 30, 2024 and December 31, 2023, respectively)

Accrued compensation

15 unchanged sentences

Consolidated Statements of Operations

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

(in thousands, except per share amounts)

7 unchanged sentences

Gain on consolidation of Sponsored REIT

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

Loss on sale of properties and impairment of assets held for sale, net

Interest income

4 unchanged sentences

Franklin Street Properties Corp.

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Comprehensive Loss

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

22 unchanged sentences

Balance, June 30, 2023

Comprehensive loss

Distributions $ 0.01 per

share of common stock

Balance, September 30, 2023

Balance, December 31, 2023

8 unchanged sentences

Balance, June 30, 2024

Comprehensive loss

Distributions $ 0.01 per

share of common stock

Balance, September 30, 2024

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

1 unchanged sentence

Consolidated Statements of Cash Flows

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

(in thousands)

7 unchanged sentences

Gain on consolidation of Sponsored REIT

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

Loss on sale of properties and impairment of assets held for sale, net

Changes in operating assets and liabilities:

7 unchanged sentences

Payment of deferred leasing commissions

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Cash flows from investing activities:

28 unchanged sentences

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 June 30, 2024, the Company owned and operated a portfolio of real estate consisting of 16 operating properties, and the Sponsored REIT, which was consolidated effective January 1, 2023.

As of September 30, 2024, the Company owned and operated a portfolio of real estate consisting of 15 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.

The following table summarizes the Company’s number of owned and consolidated properties and rentable square feet of real estate.

As of June 30,

As of September 30,

Owned and Consolidated Properties:

1 unchanged sentence

Rentable square feet

(1) Includes two properties and one property that were classified as assets held for sale as of June 30, 2024 and June 30, 2023, respectively.

(1) Includes one property and three properties that were classified as assets held for sale as of September 30, 2024 and September 30, 2023, respectively.

Basis of Presentation

6 unchanged sentences

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

Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or for any other period.

Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or for any other period.

Financial Instruments

4 unchanged sentences

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

September 30,

(in thousands)

2 unchanged sentences

Total cash, cash equivalents and restricted cash

(1) Includes $ 1,745 and $ 2,604 at June 30, 2024 and 2023, respectively, pertaining to Monument Circle, which the Company is unable to utilize for its own operational purposes.

(1) Includes $ 1,608 and $ 2,445 at September 30, 2024 and 2023, respectively, pertaining to Monument Circle, which the Company is unable to utilize for its own operational purposes.

Restricted cash consists of escrows arising from property sales.

68 unchanged sentences

Asset management fees range from 1 % to 5 % of collected rents and the applicable contracts are cancellable with 30 days notice.

Asset management fee income from non-consolidated entities amounted to approximately $ 0 and $ 0 for the six months ended June 30, 2024 and 2023, respectively.

Asset management fee income from non-consolidated entities amounted to approximately $ 0 and $ 0 for the nine months ended September 30, 2024 and 2023, respectively.

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.

8 unchanged sentences

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

The Company recognized no interest income and fees from the Sponsored REIT Loan for the six months ended June 30, 2024 and 2023, respectively.

The Company recognized no interest income and fees from the Sponsored REIT Loan for the nine months ended September 30, 2024 and 2023, respectively.

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

4 unchanged sentences

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

On September 27, 2024, the Sponsored REIT Loan maturity was extended to September 30, 2025.

The Company recorded a $ 4.2 million decrease in its provision for credit losses during the three months ended March 31, 2023.

The change in the allowance for credit losses during the three months ended March 31, 2023 was due to the consolidation of Monument Circle.

There were no adjustments during the six months ended June 30, 2024.

There were no adjustments during the nine months ended September 30, 2024.

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

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

(In thousands)

5 unchanged sentences

BMO Term Loan

As of June 30, 2024, the Company has a term loan borrowing in the aggregate principal amount of approximately $ 86.0 million (the “BMO Term Loan”) with Bank of Montreal, as administrative agent, and the other lending institutions party thereto, that matures on April 1, 2026.

As of September 30, 2024, the Company has a term loan borrowing in the aggregate principal amount of approximately $ 78.8 million (the “BMO Term Loan”) with Bank of Montreal, as administrative agent, and the other lending institutions party thereto, that matures on April 1, 2026.

On February 21, 2024, 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”).

14 unchanged sentences

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.

On July 10, 2024, the Company repaid an approximately $ 7.2 million portion of the BMO Term Loan from asset sale proceeds of a property located in Glen Allen, Virginia.

Effective February 21, 2024, upon entering into the BMO Second Amendment, the BMO Term Loan bears interest at either (i) 300 basis points over one , three or six month term SOFR, plus a corresponding adjustment of 0.11448 %, 0.26161 % or 0.42826 %, respectively, with a floor on SOFR of 5.00 % or (ii) 200 basis points over the base rate with a floor on the base rate of 6.00 %.

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

As of June 30, 2024, the interest rate on the BMO Term Loan was 8.45 % per annum.

The weighted average variable interest rate on all amounts outstanding under the BMO Term Loan was 8.45 % for the six months ended June 30, 2024.

As of September 30, 2024, the interest rate on the BMO Term Loan was 8.00 % per annum.

The weighted average variable interest rate on all amounts outstanding under the BMO Term Loan was 8.44 % for the nine months ended September 30, 2024.

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.

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 was 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.

1 unchanged sentence

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, use of net cash proceeds from the disposition of property, assets and equity issuances, mandatory prepayments, the requirement to have certain subsidiaries provide guarantees, the requirement to pledge our equity interests in certain subsidiaries as collateral, changes in business, certain restricted payments, repurchases and redemptions of the Company’s common stock, going concern qualifications to the Company’s financial statements, and transactions with affiliates.

The BMO Credit Agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations with respect to indebtedness, liens, investments, mergers and acquisitions, disposition of assets, use of net cash proceeds from the disposition of property, assets and equity issuances, mandatory prepayments, the requirement to have certain subsidiaries provide guarantees, the requirement to pledge the Company’s equity interests in certain subsidiaries as collateral, changes in business, certain restricted payments, repurchases and redemptions of the Company’s common stock, going concern qualifications to the Company’s financial statements, 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;

1 unchanged sentence

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 Company was in compliance with the BMO Term Loan financial covenants as of June 30, 2024.

The Company was in compliance with the BMO Term Loan financial covenants as of September 30, 2024.

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).

2 unchanged sentences

BofA Term Loan

As of June 30, 2024, the Company has a term loan borrowing in the aggregate principal amount of approximately $ 67.3 million (the “BofA Term Loan”) with Bank of America, N.A.

As of September 30, 2024, the Company has a term loan borrowing in the aggregate principal amount of approximately $ 61.7 million (the “BofA Term Loan”) with Bank of America, N.A.

as administrative agent, and other lending institutions party thereto that matures on April 1, 2026.

11 unchanged sentences

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;

(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;

3 unchanged sentences

On February 21, 2024, as part of the BofA Second Amendment, the Company repaid an approximately $ 22.7 million portion of the BofA Revolver.

On July 10, 2024, the Company repaid an approximately $ 5.6 million portion of the BofA Term Loan from asset sale proceeds of a property located in Glen Allen, Virginia.

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

1 unchanged sentence

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.

As of June 30, 2024, the interest rate on the BofA Term Loan was 8.45 % per annum.

The weighted average variable interest rate on all amounts outstanding under the BofA Term Loan was 8.44 % for the six months ended June 30, 2024.

As of September 30, 2024, the interest rate on the BofA Term Loan was 8.00 % per annum.

The weighted average variable interest rate on all amounts outstanding under the BofA Term Loan was 8.44 % for the nine months ended September 30, 2024.

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

4 unchanged sentences

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 minimum unsecured interest coverage.

The Company was in compliance with the BofA Term Loan financial covenants as of June 30, 2024.

The Company was in compliance with the BofA Term Loan financial covenants as of September 30, 2024.

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

1 unchanged sentence

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

As of June 30, 2024, the Company has senior notes in the aggregate principal amount of approximately $ 149.6 million (the “Senior Notes”) that mature on April 1, 2026.

The Senior Notes consist of (i) Series A Senior Notes due April 1, 2026 in an aggregate principal amount of approximately $ 86.8 million (the “Series A Notes”) and (ii) Series B Senior Notes due April 1,

2026 in the aggregate principal amount of approximately $ 62.8 million (the “Series B Notes”).

As of September 30, 2024, the Company has senior notes in the aggregate principal amount of approximately $ 137.1 million (the “Senior Notes”) that mature on April 1, 2026.

The Senior Notes consist of (i) Series A Senior Notes due April 1, 2026 in an aggregate principal amount of approximately $ 79.5 million (the “Series A Notes”) and (ii) Series B Senior Notes due April 1, 2026 in the aggregate principal amount of approximately $ 57.6 million (the “Series B Notes”).

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

14 unchanged sentences

The Original Note Purchase Agreement, as amended by the NPA First Amendment, is referred to as the Note Purchase 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.

As of June 30, 2024, approximately $ 86.8 million aggregate principal amount of the Series A Notes remained 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.

As of June 30, 2024, approximately $ 62.8 million aggregate principal amount of the Series B Notes remained outstanding.

As of June 30, 2024, the interest rate on the Series A Notes was 8.00 % per annum and the interest rate on the Series B Notes was 8.00 % per annum.

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 and an approximately $ 21.2 million portion of the Series B Notes.

On July 10, 2024, the Company repaid an approximately $ 7.2 million portion of the Series A Notes and an approximately $ 5.3 million portion of the Series B Notes from asset sale proceeds of a property located in Glen Allen, Virginia.

As of September 30, 2024, approximately $ 79.5 million aggregate principal amount of the Series A Notes remained outstanding and approximately $ 57.6 million aggregate principal amount of the Series B Notes remained outstanding.

As of September 30, 2024, the interest rate on the Series A Notes was 8.00 % per annum and the interest rate on the Series B Notes was 8.00 % per annum.

As of December 31, 2023, the interest rate on the Series A Notes was 4.49 % per annum and the interest rate on the Series B Notes was 4.76 % per annum.

3 unchanged sentences

The Note Purchase 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 Company was in compliance with the Note Purchase Agreement financial covenants as of June 30, 2024.

The Company was in compliance with the Note Purchase Agreement financial covenants as of September 30, 2024.

The Note Purchase Agreement contains customary events of default, including payment defaults, cross defaults with certain other indebtedness, breaches of covenants and bankruptcy events.

5 unchanged sentences

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.

As of June 30, 2024, there were no derivative instruments.

As of September 30, 2024, there were no derivative instruments.

The 2019 BMO Interest Rate Swap qualified as a cash flow hedge and has been recognized on the consolidated balance sheets at fair value.

1 unchanged sentence

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

The following table summarizes the notional and fair value of the Company’s derivative financial instrument at December 31, 2023 and June 30, 2024.

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

(in thousands)

June 30, 2024

December 31, 2023

2019 BMO Interest Rate Swap

(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 at December 31, 2022.

The balance was included in other assets:

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

The gain (loss) on the Company’s 2019 BMO Interest Rate Swap was recorded in other comprehensive income (loss) (OCI), and the accompanying consolidated statements of operations as a component of interest expense for the six months ended June 30, 2024 and 2023, was as follows:

The gain (loss) on the Company’s 2019 BMO Interest Rate Swap was recorded in other comprehensive income (loss) (OCI), and the accompanying consolidated statements of operations as a component of interest expense for the nine months ended September 30, 2024 and 2023, was as follows:

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Interest Rate Swaps in Cash Flow Hedging Relationships:

7 unchanged sentences

Diluted net income (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue shares were exercised or converted into shares.

There were no potential dilutive shares outstanding at each of June 30, 2024 and 2023.

There were no potential dilutive shares outstanding at each of September 30, 2024 and 2023.

Stockholders’ Equity

As of June 30, 2024, the Company had 103,566,715 shares of common stock outstanding.

As of September 30, 2024, the Company had 103,566,715 shares of common stock outstanding.

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

2 unchanged sentences

Second quarter of 2024

Third quarter of 2024

First quarter of 2023

Second quarter of 2023

Third quarter of 2023

Equity-Based Compensation

11 unchanged sentences

Shares granted 2024

Balance June 30, 2024

Balance September 30, 2024

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

3 unchanged sentences

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.

In the case of TRSs, the

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

FSP Investments LLC and FSP Protective TRS Corp.

15 unchanged sentences

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

Approximately $ 0.7 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.

Approximately $ 0.7 million of NOLs expired in 2023.

A valuation allowance is provided for the full amount of the gross NOLs available as the realization of any tax benefits remaining from such NOLs is not assured.

The gross amount of NOLs available to the Company was approximately $ 29.7 million and $ 29.7 million as of June 30, 2024 and December 31, 2023, respectively.

The gross amount of NOLs available to the Company was approximately $ 29.7 million and $ 29.7 million as of September 30, 2024 and December 31, 2023, respectively.

Income Tax Expense

2 unchanged sentences

Because the tax base on the Revised Texas Franchise Tax is derived from an income based measure, it is considered an income tax.

The Company recorded a provision for the Revised Texas Franchise Tax of $ 106,000 and $ 142,000 for the six months ended June 30, 2024 and 2023, respectively.

The Company recorded a provision for the Revised Texas Franchise Tax of $ 162,000 and $ 212,000 for the nine months ended September 30, 2024 and 2023, respectively.

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

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

(Dollars in thousands)

10 unchanged sentences

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

For the six months ended June 30, 2024 and 2023, the Company recognized the following amounts of income relating to lease payments:

For the nine months ended September 30, 2024 and 2023, the Company recognized the following amounts of income relating to lease payments:

Income relating to lease payments:

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

(in thousands)

Income from leases (1)

(1) Includes amounts recognized from variable lease payments of $ 17,462 and $ 21,382 for the six months ended June 30, 2024 and 2023, respectively.

(1) Includes amounts recognized from variable lease payments of $ 26,584 and $ 32,275 for the nine months ended September 30, 2024 and 2023, respectively.

Disposition of Properties and Assets Held for Sale

1 unchanged sentence

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

In the three months ended March 31, 2024, the Company sold one office property located in Richardson, Texas on January 26, 2024, for a sales price of $ 35.0 million at a loss of approximately $ 2.1 million, which was recorded as an impairment during the year ended December 31, 2023.

An additional $ 5,000 of costs related to the sale were recorded during the three months ended March 31, 2024.

During the three months ended September 30, 2023, the Company reclassified $ 39.0 million of an office property in Atlanta, Georgia as assets held for sale as of September 30, 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 $ 20.5 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 this property, less estimated costs to sell, using the offers to purchase the property made by third parties (Level 3 inputs, as there is no active market).

The property 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 June 30, 2024 and December 31, 2023, the office property remained classified on the consolidated balance sheet as an asset held for sale in the amount of $ 39.2 million and $ 39.0 million, respectively, and was comprised of $ 52.4 million and $ 52.2 million of real estate assets, net of accumulated depreciation, respectively, $ 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 to be sold within the next twelve months.

During the three months ended June 30, 2024, the Company entered into an agreement to sell a property in Glen Allen, Virginia for a gross sales price of approximately $ 31.0 million and an expected loss of $ 13.2 million.

The Company reclassified $ 28.6 million of its office property as an asset held for sale as of June 30, 2024, which is comprised of $ 38.0 million of real estate assets, net of accumulated depreciation, $ 1.4 million of straight-line rents receivable, and $ 2.4 million of deferred leasing commissions, net of accumulated amortization.

The Company recorded the property at the fair value less cost to sell, which was less than the carrying value and resulted in an impairment of $ 13.2 million in the three months ended June 30, 2024.

In the three months ended September 30, 2023, 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 entered into an agreement to sell a property in Miami, Florida for a gross sales price of approximately $ 68.0 million and recorded an impairment loss of $ 19.2 million.

The property was sold on December 6, 2023, at an actual loss of $ 18.9 million.

During the three months ended September 30, 2023, the Company also entered into an agreement to sell a property in Atlanta, Georgia for a gross sales price of approximately $ 40.0 million.

This property was classified as held for sale at September 30, 2023 and the Company recorded an impairment loss of $ 20.5 million in the three months ended September 30, 2023 based on the fair value less cost to sell, which was less than the carrying value.

This agreement was terminated in November 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 is a non-cash investing activity on the statement of cash flows.

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

The Company closed on the sale of the property on July 8, 2024.

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 property sold on October 26, 2023 at the expected gain of $ 10.6 million.

During the three months ended March 31, 2024, the Company sold one office property located in Richardson, Texas on January 26, 2024, for a sales price of $ 35.0 million at a loss of approximately $ 2.1 million, which was recorded as an impairment during the year ended December 31, 2023.

An additional $ 5,000 of costs related to the sale were recorded during the three months ended March 31, 2024.

During the three months ended September 30, 2024, the Company entered into a new agreement to sell the property in Atlanta, Georgia for a gross sales price of $ 34.0 million and recorded an additional impairment loss of $ 6.6 million based on the fair value less cost to sell.

At September 30, 2024 and December 31, 2023, the office property remained classified on the consolidated balance sheet as an asset held for sale in the amount of $ 32.9 million and $ 39.0 million, respectively and was comprised of $ 52.8 million and $ 52.2 million of real estate assets, net of accumulated depreciation, respectively, $ 4.4 million of straight-line rents receivable, and $ 2.9 million of deferred leasing commissions, net of accumulated depreciation.

During the three months ended September 30, 2024, the Company sold a property located in Glen Allen.

Virginia for a gross sales price of $ 31.0 million at a loss of approximately $ 13.2 million, which had previously been recorded as an impairment as of June 30, 2024.

The Company used proceeds of $ 25.3 million, or 90 % of the net proceeds from the disposition, to repay a portion of its outstanding indebtedness.

An additional $ 0.7 million in costs related to the sale of properties previously sold was recorded in the three months ended September 30, 2024.

The Company reports the results of operations of its properties that have been disposed of or classified as held for sale 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

Three months ended September 30,

Nine months ended September 30,

(in thousands)

Rental revenue

Rental operating expenses

Real estate taxes and insurance

Depreciation and amortization

Income from dispositions and assets held for sale

Subsequent Events

On July 5, 2024, the Board of Directors of the Company declared a cash distribution of $ 0.01 per share of common stock payable on August 8, 2024, to stockholders of record on July 19, 2024.

On July 8, 2024, the Company sold a property located in Glen Allen.

Virginia for a gross selling price of $ 31.0 million at a loss of approximately $ 13.2 million, which had been recorded as an impairment as of June 30, 2024.

On July 10, 2024, the Company used proceeds of $ 25.3 million, or 90 % of the net proceeds from the disposition, to repay outstanding indebtedness.

On October 4, 2024 , the Board of Directors of the Company declared a cash distribution of $ 0.01 per share of common stock payable on November 7, 2024 , to stockholders of record on October 18, 2024 .

On October 23, 2024, the Company sold a property located in Atlanta, Georgia for a gross sales price of $ 34.0 million at a loss of approximately $ 27.5 million, which had been substantially recorded as impairments as of September 30, 2024 and September 30, 2023.

On October 25, 2024, the Company used proceeds of approximately $ 27.4 million, or 90 %, of the net proceeds of the distribution, to repay a portion of its outstanding indebtedness.

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

What changed 10-Q

Item 1. Financial Statements