Franklin Street Properties Corp 10-Q for FY2020 Q1

Franklin Street Properties Corp (FSP)

10-Q 2020-04-30 For: 2020-03-31

Added on April 07, 2026

About this 10-Q

Franklin Street Properties Corp filed this 10-Q on April 30, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $62.98M; down 2.7% from $64.72M a year earlier
Net loss: $1.07M; compared with a net loss of $1.21M a year earlier

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Maryland		04-3578653
(State or other jurisdiction of incorporation		(I.R.S. Employer Identification No.)
or organization)


Title of each class:	Trading Symbol	Name of each exchange on which registered:
Common Stock, $.0001 par value per share	FSP	NYSE American


Large Accelerated Filer ☒		Accelerated Filer ☐

Non-accelerated Filer ☐		Smaller Reporting Company ☐

		Emerging Growth Company ☐


			Page
Part I.	Financial Information

	Item 1.	Financial Statements

		Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019	3

		Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019	4

		Consolidated Statements of Comprehensive Income (loss) for the three months ended March 31, 2020 and 2019	5

		Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2020 and 2019	6

		Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019	7

		Notes to Consolidated Financial Statements	8-19

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

	Item 4.	Controls and Procedures	38

Part II.	Other Information

	Item 1.	Legal Proceedings	39

	Item 1A.	Risk Factors	39

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40

	Item 3.	Defaults Upon Senior Securities	40

	Item 4.	Mine Safety Disclosures	40

	Item 5.	Other Information	41

	Item 6.	Exhibits	42

Signatures			43


	March 31,		December 31,
(in thousands, except share and par value amounts)	2020		2019
Assets:
Real estate assets:
Land	$	191,578	$	191,578
Buildings and improvements		1,941,952		1,924,664
Fixtures and equipment		11,917		11,665
		2,145,447		2,127,907
Less accumulated depreciation		506,251		490,697
Real estate assets, net		1,639,196		1,637,210
Acquired real estate leases, less accumulated amortization of $61,736 and $60,749, respectively		37,270		40,704
Cash, cash equivalents and restricted cash		17,283		9,790
Tenant rent receivables		3,609		3,851
Straight-line rent receivable		68,317		66,881
Prepaid expenses and other assets		7,486		7,246
Related party mortgage loan receivables		21,000		21,000
Other assets: derivative asset		—		3,022
Office computers and furniture, net of accumulated depreciation of $1,386 and $1,362, respectively		215		183
Deferred leasing commissions, net of accumulated amortization of $29,926 and $28,114, respectively		53,251		52,767
Total assets	$	1,847,627	$	1,842,654

Liabilities and Stockholders’ Equity:
Liabilities:
Bank note payable	$	30,000	$	—
Term loans payable, less unamortized financing costs of $3,876 and $4,267, respectively		766,124		765,733
Series A & Series B Senior Notes, less unamortized financing costs of $945 and $985, respectively		199,055		199,015
Accounts payable and accrued expenses		57,076		66,658
Accrued compensation		1,335		3,400
Tenant security deposits		9,615		9,346
Lease liability		1,803		1,890
Other liabilities: derivative liabilities		23,035		7,704
Acquired unfavorable real estate leases, less accumulated amortization of $4,794 and $4,676, respectively		2,266		2,512
Total liabilities		1,090,309		1,056,258

Commitments and contingencies

Stockholders’ Equity:
Preferred stock, $.0001 par value, 20,000,000 shares authorized, none issued or outstanding		—		—
Common stock, $.0001 par value, 180,000,000 shares authorized, 107,269,201 and 107,269,201 shares issued and outstanding, respectively		11		11
Additional paid-in capital		1,356,794		1,356,794
Accumulated other comprehensive income (loss)		(23,035)		(4,682)
Accumulated distributions in excess of accumulated earnings		(576,452)		(565,727)
Total stockholders’ equity		757,318		786,396
Total liabilities and stockholders’ equity	$	1,847,627	$	1,842,654



	For the Three Months Ended March 31,
(in thousands, except per share amounts)	2020		2019

Revenues:
Rental	$	62,567	$	63,359
Related party revenue:
Management fees and interest income from loans		403		1,352
Other		13		5
Total revenues		62,983		64,716
Expenses:
Real estate operating expenses		17,298		17,726
Real estate taxes and insurance		11,762		12,102
Depreciation and amortization		22,338		23,245
General and administrative		3,525		3,509
Interest		9,063		9,368
Total expenses		63,986		65,950

Loss before taxes		(1,003)		(1,234)
Tax expense (benefit) on income		68		(29)

Net loss	$	(1,071)	$	(1,205)

Weighted average number of shares outstanding, basic and diluted		107,269		107,231

Net loss per share, basic and diluted	$	(0.01)	$	(0.01)


	For the
	Three Months Ended
	March 31,
(in thousands)	2020		2019

Net loss	$	(1,071)	$	(1,205)

Other comprehensive income (loss):
Unrealized gain (loss) on derivative financial instruments		(18,353)		(6,791)

Total other comprehensive loss		(18,353)		(6,791)

Comprehensive loss	$	(19,424)	$	(7,996)


						Accumulated		Distributions
				Additional		other		in excess of		Total
	Common Stock			Paid-In		comprehensive		accumulated		Stockholders’
(in thousands, except per share amounts)	Shares	Amount		Capital		income (loss)		earnings		Equity

Balance, December 31, 2018	107,231	$	11	$	1,356,457	$	14,765	$	(533,599)	$	837,634
Comprehensive loss	—		—		—		(6,791)		(1,205)		(7,996)
Distributions $0.09 per share of common stock	—		—		—		—		(9,651)		(9,651)
Balance, March 31, 2019	107,231	$	11	$	1,356,457	$	7,974	$	(544,455)	$	819,987

Balance, December 31, 2019	107,269	$	11	$	1,356,794	$	(4,682)	$	(565,727)	$	786,396
Comprehensive loss	—		—		—		(18,353)		(1,071)		(19,424)
Distributions $0.09 per share of common stock	—		—		—		—		(9,654)		(9,654)
Balance, March 31, 2020	107,269	$	11	$	1,356,794	$	(23,035)	$	(576,452)	$	757,318


	As of March 31,
	2020	2019
Operating Properties:
Number of properties	32	32
Rentable square feet	9,506,513	9,495,118


	Notional		Strike		Effective	Expiration	Fair
(in thousands)	Value		Rate		Date	Date	Value

2017 Interest Rate Swap	$	400,000	1.12	%	Sep-17	Sep-21	$	(4,902)
2013 BMO Interest Rate Swap	$	220,000	2.32	%	Aug-13	Aug-20	$	(1,616)
2019 JPM Interest Rate Swap	$	100,000	2.44	%	Mar-19	Nov-21	$	(3,529)
2019 BMO Interest Rate Swap (1)	$	220,000	2.39	%	Aug-20	Jan-24	$	(12,988)

(1) The Notional Value will decrease to $165 million on November 30, 2021.


(in thousands)	Three Months Ended March 31,
Interest Rate Swaps in Cash Flow Hedging Relationships:	2020		2019

Amounts of loss recognized in OCI	$	(18,389)	$	(5,316)
Amounts of previously recorded gain/(loss) reclassified from OCI into Interest Expense	$	(36)	$	1,475

Total amount of Interest Expense presented in the consolidated statements of operations	$	9,063	$	9,368


	Dividends Per		Total
Quarter Paid	Share		Dividends

First quarter of 2020	$	0.09	$	9,654


First quarter of 2019	$	0.09	$	9,651


	Shares Available		Compensation
(in thousands)	for Grant		Cost

Balance, December 31, 2016, 2017 and 2018		1,944,428
Shares granted 2019		(38,046)	$	337,000
Balance December 31, 2019 and March 31, 2020		1,906,382	$	337,000


	For the Three Months Ended March 31,
(Dollars in thousands)	2020		2019

Revised Texas Franchise Tax	$	68	$	83
Other Taxes		—		(112)
Tax expense	$	68	$	(29)


Income relating to lease payments:
	Three Months Ended
(in thousands)	March 31, 2020		March 31, 2019
Income from leases (1)	$	61,529	$	62,107
	$	61,529	$	62,107

(1) Amount from variable lease payments $15,629 and $16,065 for the three months ended March 31, 2020 and 2019, respectively.


	Rentable
	Square
	Feet	Three Months Ended		Three Months Ended		Inc		%
(in thousands)	or RSF	31-Mar-20		31-Mar-19		(Dec)		Change
Region
East	944	$	2,664	$	3,185	$	(521)	(16.4)	%
MidWest	1,555		5,485		5,163		322	6.2	%
South	4,387		13,290		14,272		(982)	(6.9)	%
West	2,620		11,463		10,559		904	8.6	%
Property NOI* from Operating Properties	9,506		32,902		33,179		(277)	(0.8)	%
Dispositions and Redevelopment Properties	405		(28)		(205)		177	0.5	%
Property NOI*	9,911	$	32,874	$	32,974	$	(100)	(0.3)	%

Same Store		$	32,902	$	33,179	$	(277)	(0.8)	%

Less Nonrecurring
Items in NOI* (a)			26		35		(9)	0.0	%

Comparative
Same Store		$	32,876	$	33,144	$	(268)	(0.8)	%



		Three Months Ended		Three Months Ended
Reconciliation to Net Income (Loss)		31-Mar-20		31-Mar-19
Net loss		$	(1,071)	$	(1,205)
Add (deduct):
Management fee income			(478)		(677)
Depreciation and amortization			22,338		23,245
Amortization of above/below market leases			(73)		(112)
General and administrative			3,525		3,509
Interest expense			9,063		9,368
Interest income			(382)		(1,294)
Non-property specific items, net			(48)		140


Property NOI*		$	32,874	$	32,974


						Weighted
						Occupied		Weighted
			Year Built		Weighted	Percentage as of		Average
			or	Net Rentable	Occupied	March 31,		Rent per Occupied
Property Name	City	State	Renovated	Square Feet	Sq. Ft.	2020 (a)		Square Feet (b)

Meadow Point	Chantilly	VA	1999	138,537	130,308	94.1	%	$	25.72
Innsbrook	Glen Allen	VA	1999	298,183	170,680	57.2	%		18.94
Loudoun Tech Center	Dulles	VA	1999	136,658	135,209	98.9	%		19.65
Stonecroft	Chantilly	VA	2008	111,469	-	—	%		—
Emperor Boulevard	Durham	NC	2009	259,531	259,531	100.0	%		33.06
East total				944,378	695,728	73.7	%		25.61
Northwest Point	Elk Grove Village	IL	1999	177,095	177,095	100.0	%		32.19
909 Davis Street	Evanston	IL	2002	195,098	182,104	93.3	%		38.22
River Crossing	Indianapolis	IN	1998	205,729	200,442	97.4	%		24.91
Timberlake	Chesterfield	MO	1999	234,496	224,319	95.7	%		27.13
Timberlake East	Chesterfield	MO	2000	117,036	117,036	100.0	%		26.67
121 South 8th Street	Minneapolis	MN	1974	297,209	265,913	89.5	%		24.15
Plaza Seven	Minneapolis	MN	1987	328,403	288,601	87.9	%		32.03
Midwest total				1,555,066	1,455,510	93.6	%		29.22
One Overton Park	Atlanta	GA	2002	387,267	315,003	81.3	%		24.53
Park Ten	Houston	TX	1999	157,460	112,962	71.7	%		24.79
Addison Circle	Addison	TX	1999	289,302	216,571	74.9	%		33.45
Collins Crossing	Richardson	TX	1999	300,887	238,694	79.3	%		27.09
Eldridge Green	Houston	TX	1999	248,399	248,399	100.0	%		30.13
Park Ten Phase II	Houston	TX	2006	156,746	129,503	82.6	%		28.20
Liberty Plaza	Addison	TX	1985	216,827	157,004	72.4	%		23.65
Legacy Tennyson Center	Plano	TX	1999/2008	207,049	190,154	91.8	%		29.80
One Legacy Circle	Plano	TX	2008	214,110	97,399	45.5	%		35.79


						Weighted
						Occupied		Weighted
			Year Built		Weighted	Percentage as of		Average
			or	Net Rentable	Occupied	March 31,		Rent per Occupied
Property Name	City	State	Renovated	Square Feet	Sq. Ft.	2020 (a)		Square Feet (b)

One Ravinia Drive	Atlanta	GA	1985	386,602	334,140	86.4	%	$	27.64
Two Ravinia Drive	Atlanta	GA	1987	411,047	278,073	67.7	%		27.44
Westchase I & II	Houston	TX	1983/2008	629,025	357,349	56.8	%		29.88
Pershing Park Plaza	Atlanta	GA	1989	160,145	157,631	98.4	%		30.81
999 Peachtree	Atlanta	GA	1987	621,946	527,846	84.9	%		33.67
South Total				4,386,812	3,360,728	76.6	%		29.28
380 Interlocken	Broomfield	CO	2000	240,359	173,996	72.4	%		35.33
1999 Broadway	Denver	CO	1986	677,377	541,698	80.0	%		33.84
1001 17th Street	Denver	CO	1977/2006	655,420	644,409	98.3	%		37.01
600 17th Street	Denver	CO	1982	609,353	526,542	86.4	%		32.47
Greenwood Plaza	Englewood	CO	2000	196,236	196,236	100.0	%		25.18
390 Interlocken	Broomfield	CO	2002	241,512	237,141	98.2	%		34.92
West Total				2,620,257	2,320,022	88.5	%		33.90

Total Operating Properties				9,506,513	7,831,988	82.4	%		30.31

Redevelopment Properties (c)
Forest Park	Charlotte	NC	1999	62,212	—	—	%		—
Blue Lagoon Drive	Miami	FL	2002	213,182	—	—	%		—
801 Marquette Ave	Minneapolis	MN	1923/2017	129,821	48,021	37.0	%		25.88
Total Redevelopment Properties				405,215	48,021	11.9	%		25.88

Grand Total				9,911,728	7,880,009	79.5	%	$	30.28




	For the Three Months Ended
(in thousands):	2020		2019
Net loss	$	(1,071)	$	(1,205)
Depreciation and amortization		22,265		23,133
NAREIT FFO		21,194		21,928
Lease Acquisition costs		98		182

Funds From Operations	$	21,292	$	22,110


	Payment due by period
	(in thousands)
	Total		2020		2021		2022		2023		2024		Thereafter
BAML Revolver	$	30,000	$	—	$	—	$	30,000	$	—	$	—	$	—
JPM Term Loan		150,000		—		150,000		—		—		—		—
BAML Term Loan		400,000		—		—		—		400,000		—		—
BMO Term Loan Tranche A		55,000		—		55,000		—		—		—		—
BMO Term Loan Tranche B		165,000		—		—		—		—		165,000		—
Series A Notes		116,000		—		—		—		—		116,000		—
Series B Notes		84,000		—		—		—		—		—		84,000
Total	$	1,000,000	$	—	$	205,000	$	30,000	$	400,000	$	281,000	$	84,000


Exhibit No.		Description

3.1 (1)		Articles of Incorporation, as amended

3.2 (2)		Amended and Restated By-laws.

31.1*		Certification of FSP Corp.’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of FSP Corp.’s Chief Financial Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.

32.1*		Certification of FSP Corp.’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of FSP Corp.’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101*		The following materials from FSP Corp.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Cash Flows; (iv) the Consolidated Statements of Comprehensive Income (Loss); and (v) the Notes to Consolidated Financial Statements.

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


Footnotes		Description

(1)		Incorporated by reference to Exhibit 3.1 to FSP Corp.’s Quarterly Report on Form 10-Q, filed on July 30, 2019 (File No. 001-32470).

(2)		Incorporated by reference to Exhibit 3.1 to FSP Corp.’s Current Report on Form 8-K, filed on February 3, 2020 (File No. 001-32470).

*		Filed herewith.


Date	Signature	Title

Date: April 30, 2020	/s/ George J. Carter	Chief Executive Officer and Director
	George J. Carter	(Principal Executive Officer)


Date: April 30, 2020	/s/ John G. Demeritt	Chief Financial Officer
	John G. Demeritt	(Principal Financial Officer)