What changed in this filing

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Item 1A. Risk Factors

2025-02-11 compared with 2024-02-26 · 34 added, 24 removed, 217 unchanged (21% of the section changed)

7 unchanged sentences

Our operating results and financial condition could be adversely affected if we are unable to refinance the BofA Term Loan, the BMO Term Loan, the Series A Notes or the Series B Notes.

There can be no assurance that we will be able to refinance the BofA Term Loan, the BMO Term Loan, the Series A Notes or the Series B Notes (each as defined in Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations) upon their respective maturities, or that any such refinancings would be on terms as favorable as the terms of the BofA Term Loan, the BMO Term Loan, the Series A Notes, or the Series B Notes, or that we will be able to otherwise obtain funds by selling assets or raising equity to make required payments on the BofA Term Loan, the BMO Term Loan, the Series A Notes or the Series B Notes.

If we are unable to refinance the BofA Term Loan, the BMO Term Loan, the Series A Notes or the Series B Notes at maturity or meet our payment obligations, the amount of our distributable cash flow and our financial condition would be adversely affected.

Each of the BofA Term Loan, the BMO Term Loan, the Series A Notes or the Series B Notes (each as defined in Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations) matures on April 1, 2026.

There can be no assurance that we will be able to refinance this indebtedness at maturity, or if we were able to do so, that any such refinancings would be on terms as favorable as the terms currently applicable to the BofA Term Loan, the BMO Term Loan, the Series A Notes, or the Series B Notes, and we may not be able to otherwise obtain

funds by selling assets or raising equity to make required payments on the BofA Term Loan, the BMO Term Loan, the Series A Notes or the Series B Notes.

If we are unable to refinance or repay the BofA Term Loan, the BMO Term Loan, the Series A Notes or the Series B Notes at maturity or otherwise meet our payment obligations, we would be in default under the terms of the applicable indebtedness and our operations and financial condition would be materially and adversely affected.

Failure to comply with covenants in the documents evidencing the BofA Term Loan, the BMO Term Loan, the Series A Notes or the Series B Notes could adversely affect our financial condition.

18 unchanged sentences

An increase in interest rates would increase our interest costs on variable rate debt and could adversely impact our ability to refinance existing debt or sell assets.

As of December 31, 2023 and February 21, 2024, we had $90 million and $67 million, respectively, outstanding under the BofA Term Loan.

As of each of December 31, 2024 and February 6, 2025, we had $55.6 million outstanding under the BofA Term Loan.

Interest on the BofA Term Loan bears interest at variable rates based on a spread over SOFR and includes a 5.00% floor on SOFR.

As of December 31, 2023 and February 21, 2024, we had $115 million and $86 million, respectively, outstanding under the BMO Term Loan.

As of each of December 31, 2024 and February 6, 2025, we had $71.1 million outstanding under the BMO Term Loan.

Interest on the BMO Term Loan bears interest at variable rates based on a spread over SOFR and includes a 5.00% floor on SOFR.

During 2023, the Federal Reserve raised the federal funds rate target several times, most recently increasing it by 25 basis points on July 26, 2023, to a range of 5.25% to 5.50%.

If interest rates continue to increase, then the interest costs on our unhedged variable rate debt will also increase, which could adversely affect our cash flow, our ability to pay principal and interest on our debt and our ability to make distributions to stockholders.

During 2024, the Federal Reserve lowered the federal funds rate target three times, most recently decreasing it by 25 basis points on December 18, 2024, to a range of 4.25% to 4.50%.

If interest rates increase, then the interest costs on our unhedged variable rate debt will also increase, which could adversely affect our cash flow, our ability to pay

principal and interest on our debt and our ability to make distributions to stockholders.

In addition, rising interest rates could limit our ability to incur new debt or to refinance existing debt when it matures.

7 unchanged sentences

Credit rating reductions or other negative actions by one or more rating agencies could adversely affect our access to funding sources, the cost and other terms of obtaining funding as well as our overall financial condition, operating results and cash flow.

If we do not repay a portion of our indebtedness by March 31, 2025, our interest costs will increase.

The terms of the BofA Term Loan and the BMO Term Loan 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, then 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.

The terms of the Senior Notes 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, then the per annum interest rates applicable to the Series A Notes and the Series B Notes will permanently increase by 1.00% from 8.00% per annum to 9.00% per annum.

We currently have approximately $250.3 million of indebtedness outstanding under the BMO Term Loan, the BofA Term Loan and the Senior Notes.

Therefore, if we do not repay approximately $50.3 million of our indebtedness by March 31, 2025, the interest rate on each of our BMO Term Loan, the BofA Term Loan and the Senior Rates will permanently increase by 1%.

An increase in our interest costs would adversely affect our cash flow and could adversely affect our capacity to pay principal and interest on our debt and our ability to make distributions to stockholders.

In addition, increased interest rates on our outstanding indebtedness could adversely affect our ability to incur new debt or to refinance our existing debt when it matures.

Risks Related to our Operations and Properties

5 unchanged sentences

Any ongoing negative impacts from the COVID-19 pandemic could adversely affect us and/or our tenants due to, among other factors:

the potential negative impact to the businesses of our tenants, the impact of work-from-home and return-to-work policies, the potential negative impact to leasing efforts and occupancy at our properties, uncertainty regarding future rent collection levels or requests for rent concessions from our tenants, the occurrence of a default under any of our debt agreements, the potential for increased borrowing costs, negative impacts on our ability to refinance existing indebtedness or to secure new sources of capital on favorable terms, fluctuations in our level of dividends, increased costs of operations, making more difficult our ability to complete required capital expenditures in a timely manner and on budget, decreases in values of our real estate assets, changes in law and/or regulation, and uncertainty regarding government and regulatory policy.

favorable terms, fluctuations in our level of dividends, increased costs of operations, making more difficult our ability to complete required capital expenditures in a timely manner and on budget, decreases in values of our real estate assets, changes in law and/or regulation, and uncertainty regarding government and regulatory policy.

Some of our existing tenants and potential tenants operate in businesses and industries that continue to be adversely affected by the continuing disruption to business as a result of the COVID-19 pandemic.

5 unchanged sentences

Economic conditions in the United States could have a material adverse impact on our earnings and financial condition.

Although recent indicators suggest that economic activity has expanded at a modest pace, the global economy continues to experience significant disruptions and uncertainty as a result of various factors, including geopolitical events such as the wars between Russia and Ukraine and between Israel and Hamas, a U.S.

designated Foreign Terrorist Organization, in the Gaza Strip and ongoing conflicts in various other parts of the Middle East, increasing tensions with China, the long-term impact of the COVID-19 pandemic and continuing supply chain difficulties.

Although recent indicators suggest that economic activity has expanded at a modest pace, the global economy continues to experience significant disruptions and uncertainty as a result of various factors, including geopolitical events such as the wars and conflicts in Ukraine and the Middle East, increasing tensions with China and Iran, the long-term impact of the COVID-19 pandemic and continuing supply chain difficulties.

Because economic conditions directly affect the demand for office space, our primary income producing asset, broad economic market conditions in the United States, including uncertainty over interest rates, slower growth, stock market volatility or recession fears, could have a material adverse effect on our earnings and financial condition.

2 unchanged sentences

If we are not able to collect sufficient rents from each of our owned real properties or collect interest on the Sponsored REIT Loan, we may suffer significant operating losses or a reduction in cash available for future dividends.

A substantial portion of our revenue is generated by the rental income of our real properties and the Sponsored REIT Loan.

If our properties do not provide us with a steady rental income or we do not collect interest income from the Sponsored REIT Loan, our revenues will decrease, which may cause us to incur operating losses in the future and reduce the cash available for distribution to our stockholders.

A substantial portion of our revenue is generated by the rental income of our real properties.

If our properties do not provide us with a steady rental income, our revenues will decrease, which may cause us to incur operating losses in the future.

In addition, if our properties do not provide us with rental income or we do not collect interest income from the Sponsored REIT Loan, it will reduce the cash available for distribution to our stockholders.

We may not be able to dispose of properties on acceptable terms or within the time periods we anticipate pursuant to our disposition strategy.

25 unchanged sentences

An investment in us is subject to the risks incidental to the ownership, development, redevelopment and operation of real estate-related assets.

These risks include the fact that real estate investments are generally illiquid,

which may affect our ability to vary our portfolio in response to changes in economic and other conditions, as well as the risks normally associated with:

These risks include the fact that real estate investments are generally illiquid, which may affect our ability to vary our portfolio in response to changes in economic and other conditions, as well as the risks normally associated with:

● changes in general and local economic conditions;

9 unchanged sentences

When leases expire, we may incur expenses and may not be able to re-lease the space on the same terms.

While we cannot predict when existing vacant space in properties will be leased, if existing tenants with expiring leases will renew their leases or what the terms and conditions of the lease renewals will be, we expect to renew or sign new leases at current market rates for locations in which the buildings are located, which in some cases may be below the expiring rates.

at current market rates for locations in which the buildings are located, which in some cases may be below the expiring rates.

Certain leases provide tenants the right to terminate early if they pay a fee.

2 unchanged sentences

We face risks of tenant-type concentration.

As of December 31, 2023, approximately 19% and 13% of our tenants as a percentage of the total rentable square feet operated in the energy services industry and the information technology and computer services industry, respectively.

As of December 31, 2024, approximately 25% of our tenants as a percentage of the total rentable square feet operated in the energy services industry.

An economic downturn in these or any industry in which a high concentration of our tenants operate or in which a significant number of our tenants currently or may in the future operate, could negatively impact the financial condition of such tenants and cause them to fail to make timely rental payments or default on lease obligations, fail to renew their leases or renew their leases on terms less favorable to us, become bankrupt or insolvent, or otherwise become unable to satisfy their obligations to us, which could adversely affect our financial condition and results of operations.

1 unchanged sentence

The properties in our portfolio as of December 31, 2024, by aggregate square footage, are distributed geographically as follows:

South — 41.0%, West — 37.0.%, Midwest — 16.8% and East — 5.2%.

However, within certain of those regions, we hold a larger concentration of our properties in Denver, Colorado — 37.0%, Houston, Texas — 20.6%, Dallas, Texas — 17.6%, and Minneapolis, Minnesota — 13.1%.

West — 42.6%, South — 38.0% and Midwest — 19.4%.

However, within certain of those regions, we hold a larger concentration of our properties in Denver, Colorado — 42.6%, Houston, Texas — 23.7%, Minneapolis, Minnesota — 15.1%, and Dallas, Texas — 14.3%.

We are likely to face risks to the extent that any of these areas in which we hold a larger concentration of our properties suffer deteriorating economic conditions.

28 unchanged sentences

In addition, future terrorist attacks in these markets could directly or indirectly damage our properties, both physically and financially, or cause losses that materially exceed our insurance coverage.

As a result of

the foregoing, our ability to generate revenues and the value of our properties could decline materially.

As a result of the foregoing, our ability to generate revenues and the value of our properties could decline materially.

See also “ We may lose capital investment or anticipated profits if an uninsured event occurs.

32 unchanged sentences

As a result of these fluctuations, the amount of cash available for distribution to our stockholders may fluctuate, which may result in our not being able to maintain or grow dividend levels, including special dividends, in the future.

In 2022, we adopted a variable quarterly dividend policy, which replaced our previous regularly quarterly dividend policy.

In 2022, we adopted a variable quarterly dividend policy, which replaced our previous regular quarterly dividend policy.

Under this dividend policy, our Board of Directors determines quarterly dividends based upon a variety of factors, including our estimates of our annual taxable income and the amount that we are required to distribute annually in the aggregate to enable us to continue to qualify as a REIT for federal income tax purposes.

In addition, the BofA Term Loan, the BMO Term Loan, the Series A Notes and the Series B Notes include restrictions on our ability to make quarterly dividend distributions that exceed $0.01 per share of our common stock;

provided, however, that notwithstanding such restrictions, we are permitted to make dividend distributions based on our good faith estimate of projected or estimated taxable income or otherwise as necessary to retain our status as a REIT, to meet the distribution requirements of Section 857 of the Internal Revenue Code or to eliminate any income or excise taxes to which we would otherwise be subject.

provided, however, that notwithstanding such restrictions, we are permitted to make dividend distributions based

on our good faith estimate of projected or estimated taxable income or otherwise as necessary to retain our status as a REIT, to meet the distribution requirements of Section 857 of the Internal Revenue Code or to eliminate any income or excise taxes to which we would otherwise be subject.

The real properties held by us may significantly decrease in value.

9 unchanged sentences

The market prices for our common stock may fluctuate with changes in market and economic conditions, including the market perception of real estate investment trusts, or REITs, in general, and changes in our financial condition and results of operations.

Such fluctuations may depress the market price of our common stock independent of

the financial performance of FSP Corp.

Such fluctuations may depress the market price of our common stock independent of the financial performance of FSP Corp.

The market conditions for REIT stocks generally could affect the market price of our common stock.

37 unchanged sentences

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 1A. Risk Factors