What changed in this filing

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Item 1. Financial Statements

2025-04-29 compared with 2024-10-29 · 148 added, 198 removed, 333 unchanged (51% 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 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)

Land (amounts related to variable interest entities ("VIEs") of $ 0 and $ 6,416 at March 31, 2025 and December 31, 2024, respectively)

Buildings and improvements (amounts related to VIEs of $ 0 and $ 13,279 at March 31, 2025 and December 31, 2024, respectively)

Fixtures and equipment

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 $ 1,608 and $ 2,167 at September 30, 2024 and December 31, 2023, respectively)

Less accumulated depreciation (amounts related to VIEs of $ 0 and $ 682 at March 31, 2025 and December 31, 2024, respectively)

Real estate assets, net (amounts related to VIEs of $ 0 and $ 19,013 at March 31, 2025 and December 31, 2024, respectively)

Acquired real estate leases, less accumulated amortization of $ 14,015 and $ 13,613 , respectively (amounts related to VIEs of $ 0 and $ 67 , less accumulated amortization of $ 0 and $ 35 at March 31, 2025 and December 31, 2024, respectively)

Asset held for sale (amounts related to VIEs of $ 5,685 and $ 0 at March 31, 2025 and December 31, 2024, respectively)

Cash, cash equivalents and restricted cash (amounts related to VIEs of $ 1,218 and $ 1,314 at March 31, 2025 and December 31, 2024, respectively)

Tenant rent receivables

4 unchanged sentences

Liabilities and Stockholders’ Equity:

Bank note payable

Term loans payable, less unamortized financing costs of $ 1,773 and $ 2,220 , respectively

Series A & Series B Senior Notes, less unamortized financing costs of $ 950 and $ 1,191 , respectively

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

Accounts payable and accrued expenses (amounts related to VIEs of $ 663 and $ 534 at March 31, 2025 and December 31, 2024, respectively)

Accrued compensation

15 unchanged sentences

Consolidated Statements of Operations

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

(in thousands, except per share amounts)

6 unchanged sentences

Loss on extinguishment of debt

Gain on consolidation of Sponsored REIT

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

7 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Other comprehensive income (loss):

Unrealized gain on derivative financial instruments

Other comprehensive loss:

Reclassification from accumulated other comprehensive income into interest expense

10 unchanged sentences

Balance, December 31, 2023

Comprehensive income (loss)

Distributions $ 0.01 per

share of common stock

Balance, March 31, 2023

Comprehensive loss

Equity-based compensation

Distributions $ 0.01 per

share of common stock

Balance, June 30, 2023

Comprehensive loss

Distributions $ 0.01 per

share of common stock

Balance, September 30, 2023

Balance, March 31, 2024

Balance, December 31, 2024

3 unchanged sentences

Balance, March 31, 2025

Comprehensive loss

Equity-based compensation

Distributions $ 0.01 per

share of common stock

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 Nine Months Ended September 30,

For the Three Months Ended March 31,

(in thousands)

Cash flows from operating activities:

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

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization expense

Amortization of above and below market leases

Shares issued as compensation

Amortization of other comprehensive income into interest expense

Loss on extinguishment of debt

Gain on consolidation of Sponsored REIT

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

8 unchanged sentences

Payment of deferred leasing commissions

Net cash provided by operating activities

Net cash used in operating activities

Cash flows from investing activities:

Property improvements, fixtures and equipment

Consolidation of Sponsored REIT

Proceeds received from sales of properties

Net cash provided by investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities:

Distributions to stockholders

Proceeds received from termination of interest rate swap

Borrowings under Bank note payable

Repayments of Bank note payable

3 unchanged sentences

Net cash used in financing activities

Net increase (decrease) in cash, cash equivalents and restricted cash

Net decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash , beginning of year

4 unchanged sentences

Accrued costs for purchases 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

Accrued deferred financing costs

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

6 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 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.

As of March 31, 2025, the Company owned and operated a portfolio of real estate consisting of 14 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 September 30,

As of March 31,

Owned and Consolidated Properties:

1 unchanged sentence

Rentable square feet

(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.

(1) Includes one property that was classified as an asset held for sale as of March 31, 2025 and 2024.

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 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.

Operating results for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025 or for any other period.

Liquidity and Management’s Plan

As of April 29, 2025, the Company had aggregate outstanding indebtedness under three unsecured loans, the BofA Term Loan, the BMO Term Loan and the Senior Notes (each as defined and described in Note 2 below), totaling approximately $ 250.2 million and maturing on April 1, 2026, which is within 12 months of the date of issuance of the financial statements accompanying this Quarterly Report on Form 10-Q.

Management intends to engage in discussions with the Company’s lenders and/or third party financing sources to extend or refinance the Company’s existing debt.

Management believes that it is more likely than not that the Company will be successful in extending the maturity date or refinancing all of its existing debt.

Accounting Standards Codification (ASC) 205-40, “Presentation of Financial Statements— Going Concern”, requires management to consider whether there is substantial doubt regarding the Company’s ability to continue as a going concern as a result of uncertainty about the maturity of the Company’s debt on April 1, 2026.

Although management believes that it is more likely than not that the Company will be able to extend the maturity date or retire the existing debt through a refinancing and/or asset sales, guidance issued under ASC 205-40 requires that management not conclude that such an outcome is “probable” if, among other factors, the outcome is not within the control of the Company.

Because no such restructuring, refinancing or sale transactions have closed, such outcomes are not within the control of the Company;

therefore, for accounting purposes, management is unable to conclude that such an outcome is probable.

Accordingly, ASC 205-40 requires management to conclude that there is substantial doubt about the Company’s ability to continue as a going concern for at least one year following the date of issuance of these financial statements.

While management believes that it is more likely than not that the Company will be able to extend the maturity dates applicable to, or retire, the BofA Term Loan, the BMO Term Loan and the Senior Notes through a refinancing and/or asset sales, there is no assurance that the Company will be able to do so.

The failure to extend the maturity dates applicable to, or retire, the BofA Term Loan, the BMO Term Loan and the Senior Notes through a refinancing and/or asset sales could lead to events of default, which would have a material adverse effect on the Company’s financial condition.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.

Financial Instruments

As disclosed in Note 4, the Company’s derivatives were recorded at fair value using Level 2 inputs prior to their termination on February 8, 2023.

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

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

Cash, Cash Equ ivalents and Restricted Cash

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

September 30,

(in thousands)

2 unchanged sentences

Total cash, cash equivalents and restricted cash

(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.

(1) Includes $ 1,218 and $ 2,080 at March 31, 2025 and 2024, 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.

2 unchanged sentences

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 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.

12 unchanged sentences

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.

The relationships and investments related to the Sponsored REIT are summarized in Note 2.

Management fees and interest income from loans:

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

The Company recognized no asset management fee income from non-consolidated entities for each of the three months ended March 31, 2025 and 2024.

The Company recognized no interest income and fees from the Sponsored REIT Loan for each of the three months ended March 31, 2025 and 2024.

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 Monument Circle 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.

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 further extended to September 30, 2024.

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

Recent Accounting Standards

3 unchanged sentences

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.

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 requirements by June 30, 2027, any related FASB amendments will be removed from the Accounting Standards Codification and will not be effective.

5 unchanged sentences

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.

Early adoption was permitted.

The Company adopted ASU 2023-07 for the fiscal year ended December 31, 2024, which did not have a material impact on the consolidated financial statements.

In December 2023, the FASB issued ASU No.

4 unchanged sentences

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

The Company adopted ASU 2023-09 on January 1, 2025, which did not have a material impact on the consolidated financial statements.

In November 2024, the FASB issued ASU No.

2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses (“ASU 2024-03”).

ASU 2024-03 requires public business entities to provide disaggregated disclosures, in the notes to the financial statements, of certain categories of expenses that are included in expense line items on the face of the income statement.

The guidance in ASU 2024-03 is required to be applied prospectively and entities may apply it retrospectively.

ASU 2024-03 is effective for public entities for fiscal years beginning after December 15, 2026.

The Company does not anticipate that the adoption of ASU 2024-03 will have a material impact on the consolidated financial statements .

Related Party Transactions and Investments in Non-Consolidated Entities

Management fees and interest income from loans:

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

Asset management fee income from non-consolidated entities amounted to approximately $ 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.

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 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 fair value, 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 is 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 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 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.

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

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.

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 nine months ended September 30, 2024.

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

For the Nine Months Ended September 30,

(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

Bank Note Payable, Term Loans Payable and Senior Notes

Term Loans Payable and Senior Notes

BMO Term Loan

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.

As of March 31, 2025, the Company has a term loan borrowing in the aggregate principal amount of approximately $ 71.0 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.

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”).

9 unchanged sentences

(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;

(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;

3 unchanged sentences

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.

On October 25, 2024, the Company repaid an approximately $ 7.8 million portion of the BMO Term Loan from asset sale proceeds of a property located in Atlanta, Georgia.

On March 6, 2025, the Company repaid an approximately $ 43,000 portion of the BMO Term Loan from an escrow collected on March 4, 2025, which had been held from the sale 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 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.

Effective April 1, 2025, the spread over SOFR or the base rate, as applicable, permanently increased 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 March 31, 2025 and December 31, 2024, the interest rate on the BMO Term Loan was 8.00 % and 8.00 % per annum, respectively.

As of April 1, 2025, the interest rate on the BMO Term Loan was 9.00 % .

The weighted average variable interest rate on all amounts outstanding under the BMO Term Loan was 8.00 % and 8.34 % for the three months ended March 31, 2025 and the year ended December 31, 2024, respectively.

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.

5 unchanged sentences

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 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).

The Company was in compliance with the BMO Term Loan financial covenants as of March 31, 2025.

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.

1 unchanged sentence

BofA Term Loan

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 of March 31, 2025, the Company has a term loan borrowing in the aggregate principal amount of approximately $ 55.6 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.

4 unchanged sentences

(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 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;

(3) 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;

(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:

3 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;

4 unchanged sentences

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.

On October 25, 2024, the Company repaid an approximately $ 6.1 million portion of the BofA Term Loan from asset sale proceeds of a property located in Atlanta, Georgia.

On March 6, 2025, the Company repaid an approximately $ 34,000 portion of the BofA Term Loan from an escrow collected on March 4, 2025, which had been held from the sale 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 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.

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

As of March 31, 2025 and December 31, 2024, the interest rate on the BofA Term Loan was 8.00 % and 8.00 % per annum, respectively.

As of April 1, 2025, the interest rate on the BofA Term Loan was 9.00 % .

The weighted average variable interest rate on all amounts outstanding under the BofA Term Loan was 8.00 % and 8.34 % for the three months ended March 31, 2025 and the year ended December 31, 2024, respectively.

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, 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.

2 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 September 30, 2024.

The Company was in compliance with the BofA Term Loan financial covenants as of March 31, 2025.

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 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.

As of March 31, 2025, the Company has senior notes in the aggregate principal amount of approximately $ 123.6 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 $ 71.7 million (the “Series A Notes”) and (ii) Series B Senior Notes due April 1, 2026 in the aggregate principal amount of approximately $ 51.9 million (the “Series B Notes”).

17 unchanged sentences

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.

On October 25, 2024, the Company repaid an approximately $ 7.8 million portion of the Series A Notes and an approximately $ 5.7 million portion of the Series B Notes from asset sale proceeds of a property located in Atlanta, Georgia.

On March 6, 2025, the Company repaid an approximately $ 44,000 portion of the Series A Notes and an approximately $ 32,000 portion of the Series B Notes from an escrow collected on March 4, 2025, which had been held from the sale of a property located in Glen Allen, Virginia.

As of March 31, 2025, approximately $ 71.7 million aggregate principal amount of the Series A Notes remained outstanding and approximately $ 51.9 million aggregate principal amount of the Series B Notes remained outstanding.

As of March 31, 2025 and December 31, 2024, the interest rate on each of the Series A Notes was 8.00 % per annum and the interest rate on the Series B Notes was 8.00 % per annum, respectively.

Effective April 1, 2025, the interest rates applicable to the Series A Notes and the Series B Notes permanently increased from 8.00 % per annum to 9.00 % per annum, respectively.

The Note Purchase Agreement contains customary affirmative and negative covenants, 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, transactions with affiliates, certain restrictions on severance, retention and similar arrangements applicable to the Company’s executive officers, and real estate investment trust compliance requirements.

2 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 September 30, 2024.

The Company was in compliance with the Note Purchase Agreement financial covenants as of March 31, 2025.

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 September 30, 2024, there were no derivative instruments.

As of March 31, 2025, 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.

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 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:

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 gain (loss) on the 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 three months ended March 31, 2025 and 2024, was as follows:

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

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 September 30, 2024 and 2023.

There were no potential dilutive shares outstanding at each of March 31, 2025 and 2024.

Stockholders’ Equity

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

As of March 31, 2025, 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):

1 unchanged sentence

First quarter of 2025

Second quarter of 2024

Third quarter of 2024

First quarter of 2024

Second quarter of 2023

Third quarter of 2023

Equity-Based Compensation

4 unchanged sentences

Upon granting an Award, the Company will recognize compensation cost equal to the fair value of the Company’s common stock, as determined by the Company’s Board of Directors, on the date of the grant.

On May 31, 2024 and May 18, 2023, the Company granted shares under the Plan to non-employee directors with the compensation cost related to such grants indicated in the table below, which was recognized during the three months ended June 30, 2024 and year ended December 31, 2023, respectively, and is included in general and administrative expenses for such periods.

On May 31, 2024, the Company granted shares under the Plan to non-employee directors with the compensation cost related to such grants indicated in the table below, which was recognized during the three months ended June 30, 2024, and is included in general and administrative expenses for such period.

Such shares were fully vested on the date of issuance.

4 unchanged sentences

Shares granted 2025

Balance September 30, 2024

Balance March 31, 2025

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.

16 unchanged sentences

Approximately $ 0.4 million of NOLs expired in 2024.

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 September 30, 2024 and December 31, 2023, respectively.

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 $ 95.8 million and $ 95.8 million as of March 31, 2025 and December 31, 2024, 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 $ 162,000 and $ 212,000 for the nine months ended September 30, 2024 and 2023, respectively.

The Company recorded a provision for the Revised Texas Franchise Tax of $ 52,000 and $ 58,000 for the three months ended March 31, 2025 and 2024, 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 Nine Months Ended September 30,

For the Three Months Ended March 31,

(Dollars in thousands)

3 unchanged sentences

Leases as a Lessor:

The Company is a lessor of commercial real estate with operations that include the leasing of office and industrial properties.

The Company is a lessor of commercial real estate with operations that include the leasing of office properties.

Many of the leases with customers contain options to extend leases at a fair market rate and may also include options to terminate leases.

4 unchanged sentences

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

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

For the three months ended March 31, 2025 and 2024, the Company recognized the following amounts of income relating to lease payments:

Income relating to lease payments:

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

(in thousands)

Income from leases (1)

(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.

(1) Includes amounts recognized from variable lease payments of $ 8,107 and $ 8,707 for the three months ended March 31, 2025 and 2024, respectively.

Disposition of Properties and Assets Held for Sale

In the three months ended March 31, 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.

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 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.

On April 7, 2025, Monument Circle entered into a purchase and sale agreement to sell its property located in Indianapolis, Indiana to a third party for a gross sales price of $ 6.0 million.

In October 2021, 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.

At March 31, 2025, 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 $ 13.3 million.

The Company reclassified $ 5.7 million of this office property as an asset held for sale, which is comprised of $ 18.9 million in real estate assets, net of accumulated depreciation, prior to the impairment.

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, based on the purchase price set forth in the letter of intent to purchase the property that Monument Circle entered into with the third party (Level 3 inputs, as there are no observable inputs).

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,

Segment Information

The Company is a REIT focused on real estate investments primarily in the office market and currently operates in one segment:

real estate operations.

Each of the Company’s properties qualify as an operating segment but are aggregated together because they exhibit similar economic characteristics and operating similarities.

The chief operating decision maker (“CODM”) of the Company is the Company’s Chief Executive Officer.

The CODM measures the performance and profit or loss for the Company’s reportable segment using a measure referred to as Segment Net Operating Income (“Segment NOI”).

The CODM utilizes Segment NOI when considering the deployment of the Company’s capital resources on a property-by-property basis.

The significant expense categories which the Company’s CODM examines when measuring the segment’s performance include real estate operating expenses and real estate taxes and insurance.

Asset information by segment is not reported because the Company does not use this measure to assess performance.

The total assets of the Company’s reportable segment can be found on the Company’s consolidated balance sheets.

Segment NOI is a non-GAAP financial measure that the Company defines as net income or loss (the most directly comparable GAAP financial measure) plus selling, general and administrative expenses, depreciation and amortization, including amortization of acquired above and below market lease intangibles and impairment charges, interest expense, less equity in earnings of nonconsolidated REITs, interest income, hedge ineffectiveness, gains or losses on the sale of assets and excludes income taxes.

Segment NOI, as defined by the Company, may not be comparable to NOI reported by other REITs that define NOI differently.

Segment NOI should not be considered an alternative to net income or loss as an indication of our performance or to cash flows as a measure of the Company’s liquidity or its ability to make distributions.

The calculations of Segment NOI are shown in the following table:

(in thousands)

Rental revenue

Rental operating expenses

March 31, 2025

March 31, 2024

Total consolidated revenues

Reconciling items:

Amortization of above/below market leases

Real estate operating expenses

Real estate taxes and insurance

Reconciliation to Net loss

March 31, 2025

March 31, 2024

Add (deduct):

Loss on extinguishment of debt

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

Depreciation and amortization

Income from dispositions and assets held for sale

Amortization of above/below market leases

General and administrative

Interest expense

Interest income

Subsequent Events

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.

Effective April 1, 2025, the interest rates applicable to the BMO Term Loan, the BofA Term Loan and the Senior Notes permanently increased by 1.00 %, from 8.00 % per annum to 9.00 % per annum.

On April 7, 2025 , the Board of Directors of the Company declared a cash distribution of $ 0.01 per share of common stock payable on May 8, 2025 , to stockholders of record on April 17, 2025 .

On April 7, 2025, Monument Circle entered into a purchase and sale agreement to sell its property located in Indianapolis, Indiana for a gross sales price of $ 6.0 million.

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